Document:

<Page>

                                                                     Exhibit 4.3

                                                                  EXECUTION COPY

                          REGISTRATION RIGHTS AGREEMENT

                               Dated July 15, 2004

                                      among

                  STONE CONTAINER FINANCE COMPANY OF CANADA II

                           STONE CONTAINER CORPORATION

                                       and

                        MORGAN STANLEY & CO. INCORPORATED

                         BANC OF AMERICA SECURITIES LLC

                           J.P. MORGAN SECURITIES INC.

                          CITIGROUP GLOBAL MARKETS INC.

                          DEUTSCHE BANK SECURITIES INC.

                            BNY CAPITAL MARKETS, INC.

                          CALYON SECURITIES (USA) INC.

                            SCOTIA CAPITAL (USA) INC.

                           SG AMERICAS SECURITIES, LLC

<Page>

                          REGISTRATION RIGHTS AGREEMENT

          THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and
entered into on July 15, 2004, among Stone Container Finance Company of Canada
II, an unlimited company formed under the Companies Act of Nova Scotia, Canada
(the "Company"), Stone Container Corporation, a Delaware corporation and the
sole stockholder of the Company (the "Guarantor"), and Morgan Stanley & Co.
Incorporated, Banc of America Securities LLC, J.P. Morgan Securities Inc.,
Citigroup Global Markets Inc., Deutsche Bank Securities Inc., BNY Capital
Markets, Inc., Calyon Securities (USA) Inc., Scotia Capital (USA) Inc. and SG
Americas Securities, LLC (each a "Placement Agent" and, collectively, the
"Placement Agents").

          This Agreement is made pursuant to the Placement Agreement dated July
15, 2004, among the Company, the Guarantor and the Placement Agents (the
"Placement Agreement"), which provides for the sale by the Company to the
Placement Agents of an aggregate of $200,000,000 principal amount of the
Company's 7.375% Senior Notes due 2014 (the "Securities"). The obligations of
the Company under the Securities and the Indenture will be fully and
unconditionally guaranteed on a senior unsecured basis by the Guarantor pursuant
to the terms of the Indenture (the "Guarantee"). In order to induce the
Placement Agents to enter into the Placement Agreement, the Company and the
Guarantor have agreed to provide to the Placement Agents and their direct and
indirect transferees the registration rights set forth in this Agreement. The
execution of this Agreement is a condition to the closing under the Placement
Agreement.

          In consideration of the foregoing, the parties hereto agree as
follows:

          1.      DEFINITIONS.

          As used in this Agreement, the following capitalized defined terms
shall have the following meanings:

          "1933 ACT" shall mean the Securities Act of 1933, as amended from time
     to time.

          "1934 ACT" shall mean the Securities Exchange Act of 1934, as amended
     from time to time.

          "CLOSING DATE" shall mean the Closing Date as defined in the Placement
     Agreement.

          "COMPANY" shall have the meaning set forth in the preamble and shall
     also include the Company's successors.

          "EXCHANGE DATES" shall have the meaning set forth in Section 2(a)(ii)
     hereof.

          "EXCHANGE OFFER" shall mean the exchange offer by the Company of
     Exchange Securities for Registrable Securities pursuant to Section 2(a)
     hereof.

<Page>

          "EXCHANGE OFFER REGISTRATION" shall mean a registration under the 1933
     Act effected pursuant to Section 2(a) hereof.

          "EXCHANGE OFFER REGISTRATION STATEMENT" shall mean an exchange offer
     registration statement on Form S-4 (or, if applicable, on another
     appropriate form) and all amendments and supplements to such registration
     statement, in each case including the Prospectus contained therein, all
     exhibits thereto and all material incorporated by reference therein.

          "EXCHANGE SECURITIES" shall mean securities issued by the Company
     which are fully and unconditionally guaranteed on a senior unsecured basis
     by the Guarantor under the Indenture (as defined below) containing terms
     identical to the Securities, including the Guarantee (except that (i)
     interest thereon shall accrue from the last day on which interest was paid
     on the Securities, or if no such interest has been paid, from July 20,
     2004; and (ii) the Exchange Securities will not contain restrictions on
     transfer), and to be offered to Holders of Securities in exchange for
     Securities pursuant to the Exchange Offer.

          "GUARANTEE" shall have the meaning set forth in the preamble.

          "GUARANTOR" shall have the meaning set forth in the preamble and shall
     also include the Guarantor's successors.

          "HOLDER" shall mean any Placement Agent, for so long as it owns any
     Registrable Securities, and each of its successors, assigns and direct and
     indirect transferees who become registered owners of Registrable Securities
     under the Indenture; PROVIDED that for purposes of Sections 4 and 5 of this
     Agreement, the term "Holder" shall include Participating Broker-Dealers (as
     defined in Section 4(a)).

          "INDENTURE" shall mean the Indenture relating to the Securities to be
     dated as of July 20, 2004 among the Company, the Guarantor and BNY Midwest
     Trust Company, as trustee, and as the same may be amended from time to time
     in accordance with the terms thereof.

          "MAJORITY HOLDERS" shall mean the Holders of a majority of the
     aggregate principal amount of outstanding Registrable Securities; PROVIDED
     that whenever the consent or approval of Holders of a specified percentage
     of Registrable Securities is required hereunder, Registrable Securities
     held by the Company or any of its affiliates (as such term is defined in
     Rule 405 under the 1933 Act) (other than the Placement Agents or subsequent
     Holders of Registrable Securities if such subsequent holders are deemed to
     be such affiliates solely by reason of their holding of such Registrable
     Securities) shall not be counted in determining whether such consent or
     approval was given by the Holders of such required percentage or amount.

          "PERSON" shall mean an individual, partnership, limited liability
     company, corporation, trust or unincorporated organization, or a government
     or agency or political subdivision thereof.

                                        2
<Page>

          "PLACEMENT AGENT(S)" shall have the meaning set forth in the preamble.

          "PLACEMENT AGREEMENT" shall have the meaning set forth in the
     preamble.

          "PROSPECTUS" shall mean the prospectus included in a Registration
     Statement, including any preliminary prospectus, and any such prospectus as
     amended or supplemented by any prospectus supplement, including a
     prospectus supplement with respect to the terms of the offering of any
     portion of the Registrable Securities covered by a Shelf Registration
     Statement, and by all other amendments and supplements to such prospectus,
     and in each case including all material incorporated by reference therein.

          "REGISTRABLE SECURITIES" shall mean the Securities and the Guarantee;
     PROVIDED, HOWEVER, that the Securities and the Guarantee shall cease to be
     Registrable Securities (i) when a Registration Statement with respect to
     such Securities and Guarantee shall have been declared effective under the
     1933 Act and such Securities and Guarantee shall have been disposed of
     pursuant to such Registration Statement (except as provided in Section
     2(b)(iii) hereof), (ii) when such Securities and Guarantee have been sold
     to the public pursuant to Rule 144(k) (or any similar provision then in
     force, but not Rule 144A) under the 1933 Act or (iii) when such Securities
     and Guarantee shall have ceased to be outstanding.

     "REGISTRATION EXPENSES" shall mean any and all expenses incident to
     performance of or compliance by the Company and the Guarantor with this
     Agreement, including without limitation: (i) all SEC, stock exchange or
     National Association of Securities Dealers, Inc. registration and filing
     fees, (ii) all fees and expenses incurred in connection with compliance
     with state securities or blue sky laws (including reasonable fees and
     disbursements of counsel for any underwriters or Holders in connection with
     blue sky qualification of any of the Exchange Securities or Registrable
     Securities), (iii) all expenses of any Persons in preparing or assisting in
     preparing, word processing, printing and distributing any Registration
     Statement, any Prospectus, any amendments or supplements thereto, any
     underwriting agreements, securities sales agreements and other documents
     relating to the performance of and compliance with this Agreement, (iv) all
     rating agency fees, (v) all fees and disbursements relating to the
     qualification of the Indenture under applicable securities laws, (vi) the
     fees and disbursements of the Trustee and its counsel, (vii) the fees and
     disbursements of counsel for the Company and the Guarantor and, in the case
     of a Shelf Registration Statement, the fees and disbursements of one
     counsel for the Holders (which counsel shall be selected by the Majority
     Holders and which counsel may also be counsel for the Placement Agents) and
     (viii) the fees and disbursements of the independent public accountants of
     the Company and the Guarantor, including the expenses of any special audits
     or "cold comfort" letters required by or incident to such performance and
     compliance, but excluding fees and expenses of counsel to the underwriters
     (other than fees and expenses set forth in clause (ii) above) or the
     Holders and underwriting discounts and commissions and transfer taxes, if
     any, relating to the sale or disposition of Registrable Securities by a
     Holder.

          "REGISTRATION STATEMENT" shall mean any registration statement of the
     Company and the  Guarantor  that covers any of the Exchange  Securities  or
     Registrable Securities

                                        3
<Page>

     pursuant to the provisions of this Agreement and all amendments and
     supplements to any such Registration Statement, including post-effective
     amendments, in each case including the Prospectus contained therein, all
     exhibits thereto and all material incorporated by reference therein.

          "SEC" shall mean the Securities and Exchange Commission.

          "SHELF REGISTRATION" shall mean a registration effected pursuant to
     Section 2(b) hereof.

          "SHELF REGISTRATION STATEMENT" shall mean a "shelf" registration
     statement of the Company and the Guarantor pursuant to the provisions of
     Section 2(b) of this Agreement which covers all of the Registrable
     Securities (but no other securities unless approved by the Holders whose
     Registrable Securities are covered by such Shelf Registration Statement) on
     an appropriate form under Rule 415 under the 1933 Act, or any similar rule
     that may be adopted by the SEC, and all amendments and supplements to such
     registration statement, including post-effective amendments, in each case
     including the Prospectus contained therein, all exhibits thereto and all
     material incorporated by reference therein.

          "TRUSTEE" shall mean the trustee with respect to the Securities under
     the Indenture.

          "UNDERWRITER" shall have the meaning set forth in Section 3 hereof.

          "UNDERWRITTEN REGISTRATION" or "UNDERWRITTEN OFFERING" shall mean a
     registration in which Registrable Securities are sold to an Underwriter for
     reoffering to the public.

          2.      REGISTRATION UNDER THE 1933 ACT.

          (a)     To the extent not prohibited by any applicable law or
applicable interpretation of the Staff of the SEC, the Company and the Guarantor
shall use their best efforts to cause to be filed an Exchange Offer Registration
Statement covering the offer by the Company and the Guarantor to the Holders to
exchange all of the Registrable Securities for Exchange Securities and to have
such Registration Statement remain effective until the closing of the Exchange
Offer. The Company and the Guarantor shall commence the Exchange Offer promptly
after the Exchange Offer Registration Statement has been declared effective by
the SEC and use their best efforts to have the Exchange Offer consummated not
later than 60 days after such effective date. The Company and the Guarantor
shall commence the Exchange Offer by mailing the related exchange offer
Prospectus and accompanying documents to each Holder stating, in addition to
such other disclosures as are required by applicable law:

          (i)     that the Exchange Offer is being made pursuant to this
     Registration Rights Agreement and that all Registrable Securities validly
     tendered will be accepted for exchange;

          (ii)    the dates of acceptance for exchange (which shall be a period
     of at least 20 business days from the date such notice is mailed) (the
     "Exchange Dates");

                                        4
<Page>

          (iii)   that any Registrable Security not tendered will remain
     outstanding and continue to accrue interest, but will not retain any rights
     under this Registration Rights Agreement;

          (iv)    that Holders electing to have a Registrable Security exchanged
     pursuant to the Exchange Offer will be required to surrender such
     Registrable Security, together with the enclosed letters of transmittal, to
     the institution and at the address (located in the Borough of Manhattan,
     The City of New York) specified in the notice prior to the close of
     business on the last Exchange Date; and

          (v)     that Holders will be entitled to withdraw their election, not
     later than the close of business on the last Exchange Date, by sending to
     the institution and at the address (located in the Borough of Manhattan,
     The City of New York) specified in the notice a telegram, telex, facsimile
     transmission or letter setting forth the name of such Holder, the principal
     amount of Registrable Securities delivered for exchange and a statement
     that such Holder is withdrawing his election to have such Securities
     exchanged.

          As soon as practicable after the last Exchange Date, the Company and
the Guarantor shall:

          (i)     accept for exchange Registrable Securities or portions thereof
     tendered and not validly withdrawn pursuant to the Exchange Offer; and

          (ii)    deliver, or cause to be delivered, to the Trustee for
     cancellation all Registrable Securities or portions thereof so accepted for
     exchange by the Company and the Guarantor and issue, and cause the Trustee
     to promptly authenticate and mail to each Holder, an Exchange Security
     equal in principal amount to the principal amount of the Registrable
     Securities surrendered by such Holder.

The Company and the Guarantor shall use their best efforts to complete the
Exchange Offer as provided above and shall comply with the applicable
requirements of the 1933 Act, the 1934 Act and other applicable laws and
regulations in connection with the Exchange Offer. The Exchange Offer shall not
be subject to any conditions, other than that the Exchange Offer does not
violate applicable law or any applicable interpretation of the Staff of the SEC
or any order of any court of competent jurisdiction in the United States or
Canada. The Company and the Guarantor shall inform the Placement Agents of the
names and addresses of the Holders to whom the Exchange Offer is made, and the
Placement Agents shall have the right, subject to applicable law, to contact
such Holders and otherwise facilitate the tender of Registrable Securities in
the Exchange Offer.

          Each Holder participating in the Exchange Offer shall be required to
represent to the Company and the Guarantor that at the time of the consummation
of the Exchange Offer (i) any Exchange Securities received by such Holder will
be acquired in the ordinary course of business, (ii) such Holder has no
arrangement or understanding with any person to participate in the distribution
of the Securities or the Exchange Securities within the meaning of the 1933 Act,
(iii) such Holder is not an "affiliate," as defined in Rule 405 of the 1933 Act,
of the Company or the Guarantor, (iv) such Holder is not engaged in, and does
not intend to engage in, the

                                        5
<Page>

distribution of the Exchange Securities within the meaning of the 1933 Act, (v)
if such Holder is a broker-dealer, that it will receive Exchange Securities in
exchange for Securities that were acquired for its own account as a result of
market-making activities or other trading activities and that it will be
required to acknowledge that it will deliver a prospectus meeting the
requirements of the 1933 Act in connection with any resale of such Exchange
Securities and (vi) if such Holder is a broker-dealer, it did not purchase the
Securities being tendered in the Exchange Offer directly from the Company for
resale pursuant to Rule 144A under the 1933 Act or any other available exemption
from registration under the 1933 Act.

          (b)     In the event that (i) the Company and the Guarantor determine
that the Exchange Offer Registration provided for in Section 2(a) above is not
available or may not be consummated as soon as practicable after the last
Exchange Date because it would violate applicable law or the applicable
interpretations of the Staff of the SEC, (ii) the Exchange Offer is not for any
other reason consummated by April 16, 2005 or (iii) the Exchange Offer has been
completed and in the opinion of counsel for the Placement Agents a Registration
Statement must be filed and a Prospectus must be delivered by the Placement
Agents in connection with any offering or sale of Registrable Securities, the
Company and the Guarantor shall use their best efforts to cause to be filed as
soon as practicable after such determination date or notice of such opinion of
counsel is given to the Company, a Shelf Registration Statement providing for
the sale by the Holders of all of the Registrable Securities and to have such
Shelf Registration Statement declared effective by the SEC. In the event the
Company and the Guarantor are required to file a Shelf Registration Statement
solely as a result of the matters referred to in clause (iii) of the preceding
sentence, the Company and the Guarantor shall use their best efforts to file and
have declared effective by the SEC both an Exchange Offer Registration Statement
pursuant to Section 2(a) with respect to all Registrable Securities and a Shelf
Registration Statement (which may be a combined Registration Statement with the
Exchange Offer Registration Statement) with respect to offers and sales of
Registrable Securities held by the Placement Agents after completion of the
Exchange Offer. The Company and the Guarantor agree to use their best efforts to
keep the Shelf Registration Statement continuously effective until the
expiration of the period referred to in Rule 144(k) with respect to the
Registrable Securities or such shorter period that will terminate when all of
the Registrable Securities covered by the Shelf Registration Statement have been
sold pursuant to the Shelf Registration Statement. The Company and the Guarantor
further agree to supplement or amend the Shelf Registration Statement if
required by the rules, regulations or instructions applicable to the
registration form used by the Company and the Guarantor for such Shelf
Registration Statement or by the 1933 Act or by any other rules and regulations
thereunder for shelf registration or if reasonably requested by a Holder with
respect to information relating to such Holder, and to use their best efforts to
cause any such amendment to become effective and such Shelf Registration
Statement to become usable as soon as thereafter practicable. The Company and
the Guarantor agree to furnish to the Holders of Registrable Securities copies
of any such supplement or amendment promptly after its being used or filed with
the SEC.

          (c)     The Company and the Guarantor shall pay all Registration
Expenses in connection with the registration pursuant to Section 2(a) or Section
2(b). Each Holder shall pay all underwriting discounts and commissions and
transfer taxes, if any, relating to the sale or disposition of such Holder's
Registrable Securities pursuant to the Shelf Registration Statement.

                                        6
<Page>

          (d)     An Exchange Offer Registration Statement pursuant to Section
2(a) hereof or a Shelf Registration Statement pursuant to Section 2(b) hereof
will not be deemed to have become effective unless it has been declared
effective by the SEC; PROVIDED, HOWEVER, that, if, after it has been declared
effective, the offering of Registrable Securities pursuant to a Shelf
Registration Statement is interfered with by any stop order, injunction or other
order or requirement of the SEC or any United States federal or state, Canadian
federal, provincial or territorial, or any other governmental agency or court,
such Registration Statement will be deemed not to have become effective during
the period of such interference until the offering of Registrable Securities
pursuant to such Registration Statement may legally resume. As provided for in
the Indenture, in the event the Exchange Offer is not consummated and the Shelf
Registration Statement is not declared effective on or prior to April 16, 2005,
the interest rate on the Securities will be increased by 0.5% per annum until
the Exchange Offer is consummated or the Shelf Registration Statement is
declared effective by the SEC.

          (e)     Without limiting the remedies available to the Placement
Agents and the Holders, the Company and the Guarantor acknowledge that any
failure by the Company or the Guarantor to comply with its respective
obligations under Section 2(a) and Section 2(b) hereof may result in material
irreparable injury to the Placement Agents or the Holders for which there is no
adequate remedy at law, that it will not be possible to measure damages for such
injuries precisely and that, in the event of any such failure, the Placement
Agents or any Holder may obtain such relief as may be required to specifically
enforce the Company's and the Guarantor's obligations under Section 2(a) and
Section 2(b) hereof.

          3.      REGISTRATION PROCEDURES.

          In connection with the obligations of the Company and the Guarantor
with respect to the Registration Statements pursuant to Section 2(a) and Section
2(b) hereof, the Company and the Guarantor shall as expeditiously as possible:

          (a)     prepare and file with the SEC a Registration Statement on the
appropriate form under the 1933 Act, which form (x) shall be selected by the
Company and the Guarantor and (y) shall, in the case of a Shelf Registration, be
available for the sale of the Registrable Securities by the selling Holders
thereof and (z) shall comply as to form in all material respects with the
requirements of the applicable form and include all financial statements
required by the SEC to be filed therewith, and use their best efforts to cause
such Registration Statement to become effective and remain effective in
accordance with Section 2 hereof;

          (b)     prepare and file with the SEC such amendments and
post-effective amendments to each Registration Statement as may be necessary to
keep such Registration Statement effective for the applicable period and cause
each Prospectus to be supplemented by any required prospectus supplement and, as
so supplemented, to be filed pursuant to Rule 424 under the 1933 Act; to keep
each Prospectus current during the period described under Section 4(3) and Rule
174 under the 1933 Act that is applicable to transactions by brokers or dealers
with respect to the Registrable Securities or Exchange Securities;

          (c)     in the case of a Shelf Registration, furnish to each Holder of
Registrable Securities, to counsel for the Placement Agents, to counsel for the
Holders and to each

                                        7
<Page>

Underwriter of an Underwritten Offering of Registrable Securities, if any,
without charge, as many copies of each Prospectus, including each preliminary
Prospectus, and any amendment or supplement thereto and such other documents as
such Holder or Underwriter may reasonably request, in order to facilitate the
public sale or other disposition of the Registrable Securities; and the Company
and the Guarantor consent to the use of such Prospectus and any amendment or
supplement thereto in accordance with applicable law by each of the selling
Holders of Registrable Securities and any such Underwriters in connection with
the offering and sale of the Registrable Securities covered by and in the manner
described in such Prospectus or any amendment or supplement thereto in
accordance with applicable law;

          (d)     use their best efforts to (i) register or qualify the
Registrable Securities under all applicable state securities or "blue sky" laws
of such jurisdictions as any Holder of Registrable Securities covered by a
Registration Statement shall reasonably request in writing by the time the
applicable Registration Statement is declared effective by the SEC, (ii) ensure
that the Exchange Securities can be offered in a private placement in each of
the provinces of Canada where holders are resident on or prior to the
commencement of the Exchange Offer, (iii) cooperate with such Holders in
connection with any filings required to be made with the National Association of
Securities Dealers, Inc. and do any and all other acts and things which may be
reasonably necessary or advisable to enable such Holder to consummate the
disposition in each such jurisdiction of such Registrable Securities owned by
such Holder; PROVIDED, HOWEVER, that neither the Company nor the Guarantor shall
be required to (i) qualify as a foreign corporation or as a dealer in securities
in any jurisdiction where it would not otherwise be required to qualify but for
this Section 3(d), (ii) file any general consent to service of process in such
jurisdiction, (iii) subject itself to taxation in any such jurisdiction if it is
not so subject, or (iv) file a prospectus in any province or territory of Canada
to make the Exchange Securities or Registrable Securities freely tradable in
Canada;

          (e)     in the case of a Shelf Registration, notify each Holder of
Registrable Securities, counsel for the Holders and counsel for the Placement
Agents promptly and, if requested by any such Holder or counsel, confirm such
advice in writing (i) when a Registration Statement has become effective and
when any post-effective amendment thereto has been filed and becomes effective,
(ii) of any request by the SEC or any state or provincial securities authority
for amendments and supplements to a Registration Statement and Prospectus or for
additional information after the Registration Statement has become effective,
(iii) of the issuance by the SEC or any state securities authority of any stop
order suspending the effectiveness of a Registration Statement or the initiation
of any proceedings for that purpose, (iv) if, between the effective date of a
Registration Statement and the closing of any sale of Registrable Securities
covered thereby, the representations and warranties of the Company or the
Guarantor contained in any underwriting agreement, securities sales agreement or
other similar agreement, if any, relating to the offering cease to be true and
correct in all material respects or if the Company or the Guarantor receives any
notification with respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the initiation of any
proceeding for such purpose, (v) of the happening of any event during the period
a Shelf Registration Statement is effective which makes any statement made in
such Registration Statement or the related Prospectus untrue in any material
respect or which requires the making of any changes in such Registration
Statement or Prospectus in order to make the statements therein not misleading
and

                                        8
<Page>

(vi) of any determination by the Company or the Guarantor that a post-effective
amendment to a Registration Statement would be appropriate;

          (f)     make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of a Registration Statement at the earliest
possible moment and provide immediate notice to each Holder of the withdrawal of
any such order;

          (g)     in the case of a Shelf Registration, furnish to each Holder of
Registrable Securities, without charge, at least one conformed copy of each
Registration Statement and any post-effective amendment thereto (without
documents incorporated therein by reference or exhibits thereto, unless
requested);

          (h)     in the case of a Shelf Registration, cooperate with the
selling Holders of Registrable Securities to facilitate the timely preparation
and delivery of certificates representing Registrable Securities to be sold and
not bearing any restrictive legends and enable such Registrable Securities to be
in such denominations (consistent with the provisions of the Indenture) and
registered in such names as the selling Holders may reasonably request at least
one business day prior to the closing of any sale of Registrable Securities;

          (i)     in the case of a Shelf Registration, upon the occurrence of
any event contemplated by Section 3(e)(v) hereof, use their best efforts to
prepare and file with the SEC a supplement or post-effective amendment to a
Registration Statement or the related Prospectus or any document incorporated
therein by reference or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Securities, such Prospectus will
not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading. The Company and the Guarantor agree
to notify the Holders to suspend use of the Prospectus as promptly as
practicable after the occurrence of such an event, and the Holders hereby agree
to suspend use of the Prospectus until the Company and the Guarantor have
amended or supplemented the Prospectus to correct such misstatement or omission;

          (j)     a reasonable time prior to the filing of any Registration
Statement, any Prospectus, any amendment to a Registration Statement or
amendment or supplement to a Prospectus or any document which is to be
incorporated by reference into a Registration Statement or a Prospectus after
initial filing of a Registration Statement, provide copies of such document to
the Placement Agents and their counsel (and, in the case of a Shelf Registration
Statement, the Holders and their counsel) and make such of the representatives
of the Company and the Guarantor as shall be reasonably requested by the
Placement Agents or their counsel (and, in the case of a Shelf Registration
Statement, the Holders or their counsel) available for discussion of such
document, and shall not at any time file or make any amendment to the
Registration Statement, any Prospectus or any amendment of or supplement to a
Registration Statement or a Prospectus or any document which is to be
incorporated by reference into a Registration Statement or a Prospectus, of
which the Placement Agents and their counsel (and, in the case of a Shelf
Registration Statement, the Holders and their counsel) shall not have previously
been advised and furnished a copy or to which the Placement Agents or their
counsel (and, in the case of a Shelf Registration Statement, the Holders or
their counsel) shall object;

                                        9
<Page>

          (k)     obtain a CUSIP number for all Exchange Securities or
Registrable Securities, as the case may be, not later than the effective date of
a Registration Statement;

          (l)     cause the Indenture to be qualified under the Trust Indenture
Act of 1939, as amended (the "TIA"), in connection with the registration of the
Exchange Securities or Registrable Securities, as the case may be, cooperate
with the Trustee and the Holders to effect such changes to the Indenture as may
be required for the Indenture to be so qualified in accordance with the terms of
the TIA and execute, and use its best efforts to cause the Trustee to execute,
all documents as may be required to effect such changes and all other forms and
documents required to be filed with the SEC to enable the Indenture to be so
qualified in a timely manner;

          (m)     in the case of a Shelf Registration, make available for
inspection by a representative of the Holders of the Registrable Securities, any
Underwriter participating in any disposition pursuant to such Shelf Registration
Statement, and attorneys and accountants designated by the Holders, at
reasonable times and in a reasonable manner, all financial and other records,
pertinent documents and properties of the Company and the Guarantor, and cause
the respective officers, directors and employees of the Company and the
Guarantor to supply all information reasonably requested by any such
representative, Underwriter, attorney or accountant in connection with a Shelf
Registration Statement, all in a manner as is necessary and customary to provide
the Holders a due diligence;

          (n)     in the case of a Shelf Registration, use their best efforts to
cause all Registrable Securities to be listed on any securities exchange or any
automated quotation system on which similar securities issued by the Company or
the Guarantor are then listed if requested by the Majority Holders, to the
extent such Registrable Securities satisfy applicable listing requirements;

          (o)     use their best efforts to cause the Exchange Securities to
continue to be rated by two nationally recognized statistical rating
organizations (as such term is used in Rule 436(g)(2) under the 1933 Act), if
the Registrable Securities have been rated;

          (p)     if reasonably requested by any Holder of Registrable
Securities covered by a Registration Statement, (i) promptly incorporate in a
Prospectus supplement or post-effective amendment such information with respect
to such Holder as such Holder reasonably requests to be included therein and
(ii) make all required filings of such Prospectus supplement or such
post-effective amendment as soon as the Company or the Guarantor has received
notification of the matters to be incorporated in such filing; and

          (q)     in the case of a Shelf Registration, enter into such customary
agreements and take all such other actions in connection therewith (including
those requested by the Holders of a majority of the Registrable Securities being
sold) in order to expedite or facilitate the disposition of such Registrable
Securities including, but not limited to, an Underwritten Offering and in such
connection, (i) to the extent possible, make such representations and warranties
to the Holders and any Underwriters of such Registrable Securities with respect
to the business of the Company and its subsidiaries, the Registration Statement,
Prospectus and documents incorporated by reference or deemed incorporated by
reference, if any, in each case, in form,

                                       10
<Page>

substance and scope as are customarily made by issuers to underwriters in
underwritten offerings and confirm the same if and when requested, (ii) obtain
opinions of counsel to the Company and the Guarantor (which counsel and
opinions, in form, scope and substance, shall be reasonably satisfactory to the
Holders and such Underwriters and their respective counsel) addressed to each
selling Holder and Underwriter of Registrable Securities, covering the matters
customarily covered in opinions requested in underwritten offerings, (iii)
obtain "cold comfort" letters from the independent certified public accountants
of the Company and the Guarantor (and, if necessary, any other certified public
accountant of any subsidiary of the Company or the Guarantor, or of any business
acquired by the Company or the Guarantor for which financial statements and
financial data are or are required to be included in the Registration Statement)
addressed to each selling Holder and Underwriter of Registrable Securities, such
letters to be in customary form and covering matters of the type customarily
covered in "cold comfort" letters in connection with underwritten offerings, and
(iv) deliver such documents and certificates as may be reasonably requested by
the Holders of a majority in principal amount of the Registrable Securities
being sold or the Underwriters, and which are customarily delivered in
underwritten offerings, to evidence the continued validity of the
representations and warranties of the Company and the Guarantor made pursuant to
clause (i) above and to evidence compliance with any customary conditions
contained in an underwriting agreement.

          In the case of a Shelf Registration Statement, the Company and the
Guarantor may require each Holder of Registrable Securities to furnish to the
Company such information regarding the Holder and the proposed distribution by
such Holder of such Registrable Securities as the Company or the Guarantor may
from time to time reasonably request in writing.

          In the case of a Shelf Registration Statement, each Holder agrees
that, upon receipt of any notice from the Company or the Guarantor of the
happening of any event of the kind described in Section 3(e)(v) hereof, such
Holder will forthwith discontinue disposition of Registrable Securities pursuant
to a Registration Statement until such Holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 3(i) hereof, and, if
so directed by the Company, such Holder will deliver to the Company (at its
expense) all copies in its possession, other than permanent file copies then in
such Holder's possession, of the Prospectus covering such Registrable Securities
current at the time of receipt of such notice. If the Company or the Guarantor
shall give any such notice to suspend the disposition of Registrable Securities
pursuant to a Registration Statement, the Company and the Guarantor shall extend
the period during which the Registration Statement shall be maintained effective
pursuant to this Agreement by the number of days during the period from and
including the date of the giving of such notice to and including the date when
the Holders shall have received copies of the supplemented or amended Prospectus
necessary to resume such dispositions. The Company and the Guarantor may give
any such notice only twice during any 365 day period and any such suspensions
may not exceed 45 days for each suspension and there may not be more than two
suspensions in effect during any 365 day period.

          The Holders of Registrable Securities covered by a Shelf Registration
Statement who desire to do so may sell such Registrable Securities in an
Underwritten Offering. In any such Underwritten Offering, the investment banker
or investment bankers and manager or managers (the "Underwriters") that will
administer the offering will be selected by the Majority Holders of the
Registrable Securities included in such offering.

                                       11
<Page>

          4.      PARTICIPATION OF BROKER-DEALERS IN EXCHANGE OFFER.

          (a)     The Staff of the SEC has taken the position that any
broker-dealer that receives Exchange Securities for its own account in the
Exchange Offer in exchange for Securities that were acquired by such
broker-dealer as a result of market-making or other trading activities (a
"Participating Broker-Dealer"), may be deemed to be an "underwriter" within the
meaning of the 1933 Act and must deliver a prospectus meeting the requirements
of the 1933 Act in connection with any resale of such Exchange Securities.

          The Company and the Guarantor understand that it is the Staff's
position that if the Prospectus contained in the Exchange Offer Registration
Statement includes a plan of distribution containing a statement to the above
effect and the means by which Participating Broker-Dealers may resell the
Exchange Securities, without naming the Participating Broker-Dealers or
specifying the amount of Exchange Securities owned by them, such Prospectus may
be delivered by Participating Broker-Dealers to satisfy their prospectus
delivery obligation under the 1933 Act in connection with resales of Exchange
Securities for their own accounts, so long as the Prospectus otherwise meets the
requirements of the 1933 Act.

          (b)     In light of the above, notwithstanding the other provisions of
this Agreement, the Company and the Guarantor agree that the provisions of this
Agreement as they relate to a Shelf Registration shall also apply to an Exchange
Offer Registration to the extent, and with such reasonable modifications thereto
as may be, reasonably requested by the Placement Agents or by one or more
Participating Broker-Dealers, in each case as provided in clause (ii) below, in
order to expedite or facilitate the disposition of any Exchange Securities by
Participating Broker-Dealers consistent with the positions of the Staff recited
in Section 4(a) above; PROVIDED that:

          (i)     neither the Company nor the Guarantor shall be required to
     amend or supplement the Prospectus contained in the Exchange Offer
     Registration Statement, as would otherwise be contemplated by Section 3(i),
     for a period exceeding 180 days after the last Exchange Date (as such
     period may be extended pursuant to the penultimate paragraph of Section 3
     of this Agreement) and Participating Broker-Dealers shall not be authorized
     by the Company or the Guarantor to deliver and shall not deliver such
     Prospectus after such period in connection with the resales contemplated by
     this Section 4; and

          (ii)    the application of the Shelf Registration procedures set forth
     in Section 3 of this Agreement to an Exchange Offer Registration, to the
     extent not required by the positions of the Staff of the SEC or the 1933
     Act and the rules and regulations thereunder, will be in conformity with
     the reasonable request to the Company and the Guarantor by the Placement
     Agents or with the reasonable request in writing to the Company and the
     Guarantor by one or more broker-dealers who certify to the Placement
     Agents, the Company and the Guarantor in writing that they anticipate that
     they will be Participating Broker-Dealers; and PROVIDED FURTHER that, in
     connection with such application of the Shelf Registration procedures set
     forth in Section 3 to an Exchange Offer Registration, the Company and the
     Guarantor shall be obligated (x) to deal only with one entity representing
     the Participating Broker-Dealers, which shall be Morgan

                                       12
<Page>

     Stanley & Co. Incorporated unless it elects not to act as such
     representative, (y) to pay the fees and expenses of only one counsel
     representing the Participating Broker-Dealers, which shall be counsel to
     the Placement Agents unless such counsel elects not to so act and (z) to
     cause to be delivered only one, if any, "cold comfort" letter with respect
     to the Prospectus in the form existing on the last Exchange Date and with
     respect to each subsequent amendment or supplement, if any, effected during
     the period specified in clause (i) above.

          (c)     The Placement Agents shall have no liability to the Company,
the Guarantor or any Holder with respect to any request that it may make
pursuant to Section 4(b) above.

          5.      INDEMNIFICATION AND CONTRIBUTION.

          (a)     Each of the Company and the Guarantor agrees, jointly and
severally, to indemnify and hold harmless the Placement Agents, each Holder and
each Person, if any, who controls any Placement Agent or any Holder within the
meaning of either Section 15 of the 1933 Act or Section 20 of the 1934 Act, or
is under common control with, or is controlled by, any Placement Agent or any
Holder, from and against all losses, claims, damages and liabilities (including,
without limitation, any legal or other expenses reasonably incurred by any
Placement Agent, any Holder or any such controlling or affiliated Person in
connection with defending or investigating any such action or claim) caused by
any untrue statement or alleged untrue statement of a material fact contained in
any Registration Statement (or any amendment thereto) pursuant to which Exchange
Securities or Registrable Securities were registered under the 1933 Act,
including all documents incorporated therein by reference, or caused by any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
caused by any untrue statement or alleged untrue statement of a material fact
contained in any Prospectus (as amended or supplemented if the Company or the
Guarantor shall have furnished any amendments or supplements thereto), or caused
by any omission or alleged omission to state therein a material fact necessary
to make the statements therein in light of the circumstances under which they
were made not misleading, except insofar as such losses, claims, damages or
liabilities are caused by any such untrue statement or omission or alleged
untrue statement or omission based upon information relating to the Placement
Agents or any Holder furnished to the Company in writing through Morgan Stanley
& Co. Incorporated or any selling Holder expressly for use therein. In
connection with any Underwritten Offering permitted by Section 3, the Company
and the Guarantor will also indemnify the Underwriters, if any, selling brokers,
dealers and similar securities industry professionals participating in the
distribution, their officers and directors and each Person who controls such
Persons (within the meaning of the 1933 Act and the 1934 Act) to the same extent
as provided above with respect to the indemnification of the Holders, if
requested in connection with any Registration Statement.

          (b)     Each Holder agrees, severally and not jointly, to indemnify
and hold harmless the Company, the Guarantor, the Placement Agents and the other
selling Holders, and each of their respective directors and officers who sign
the Registration Statement and each Person, if any, who controls the Company,
the Guarantor, any Placement Agent and any other selling Holder within the
meaning of either Section 15 of the 1933 Act or Section 20 of the 1934

                                       13
<Page>

Act to the same extent as the foregoing indemnity from the Company and the
Guarantor to the Placement Agents and the Holders, but only with reference to
information relating to such Holder furnished to the Company in writing by such
Holder expressly for use in any Registration Statement (or any amendment
thereto) or any Prospectus (or any amendment or supplement thereto).

          (c)     In case any proceeding (including any governmental
investigation) shall be instituted involving any Person in respect of which
indemnity may be sought pursuant to either paragraph (a) or paragraph (b) above,
such Person (the "indemnified party") shall promptly notify the Person against
whom such indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for (a) the fees and expenses of more than one separate
firm (in addition to any local counsel) for the Placement Agents and all
Persons, if any, who control any Placement Agent within the meaning of either
Section 15 of the 1933 Act or Section 20 of the 1934 Act, (b) the fees and
expenses of more than one separate firm (in addition to any local counsel) for
the Company, the Guarantor, their respective directors and officers who sign the
Registration Statement and each Person, if any, who controls the Company and the
Guarantor within the meaning of either such Section and (c) the fees and
expenses of more than one separate firm (in addition to any local counsel) for
all Holders and all Persons, if any, who control any Holders within the meaning
of either such Section, and that all such fees and expenses shall be reimbursed
as they are incurred. In such case involving the Placement Agents and Persons
who control the Placement Agents, such firm shall be designated in writing by
Morgan Stanley & Co. Incorporated. In such case involving the Holders and such
Persons who control Holders, such firm shall be designated in writing by the
Majority Holders. In all other cases, such firm shall be designated by the
Company. The indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent but, if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment. Notwithstanding the
foregoing sentence, if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel as contemplated by the second and third sentences of this paragraph, the
indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by such indemnifying party of the
aforesaid request and (ii) such indemnifying party shall not have reimbursed the
indemnified party for such fees and expenses of counsel in accordance with such
request prior to the date of such settlement. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened

                                       14
<Page>

proceeding in respect of which such indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding.

          (d)     If the indemnification provided for in paragraph (a) or
paragraph (b) of this Section 5 is unavailable to an indemnified party or
insufficient in respect of any losses, claims, damages or liabilities, then each
indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities in such proportion as is appropriate to reflect the relative fault
of the indemnifying party or parties on the one hand and of the indemnified
party or parties on the other hand in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative fault of the
Company, the Guarantor and the Holders 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 relates to
information supplied by the Company or the Guarantor on the one hand, or by the
Holders on the other hand, and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
The Holders' respective obligations to contribute pursuant to this Section 5(d)
are several in proportion to the respective principal amount of Registrable
Securities of such Holder that were registered pursuant to a Registration
Statement.

          (e)     The Company, the Guarantor and each Holder agree that it would
not be just or equitable if contribution pursuant to this Section 5 were
determined by PRO RATA allocation or by any other method of allocation that does
not take account of the equitable considerations referred to in paragraph (d)
above. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages and liabilities referred to in paragraph (d) above shall
be deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 5, no Holder shall be required to indemnify or
contribute any amount in excess of the amount by which the total price at which
Registrable Securities were sold by such Holder exceeds the amount of any
damages that such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the 1933 Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation. The remedies provided for in this
Section 5 are not exclusive and shall not limit any rights or remedies which may
otherwise be available to any indemnified party at law or in equity.

          The indemnity and contribution provisions contained in this Section 5
shall remain operative and in full force and effect regardless of (i) any
termination of this Agreement, (ii) any investigation made by or on behalf of
the Placement Agents, any Holder or any Person controlling the Placement Agents
or any Holder, or by or on behalf of the Company or the Guarantor, their
respective officers or directors or any Person controlling the Company or the
Guarantor, (iii) acceptance of any of the Exchange Securities and (iv) any sale
of Registrable Securities pursuant to a Shelf Registration Statement.

                                       15
<Page>

          6.      MISCELLANEOUS.

          (a)     NO INCONSISTENT AGREEMENTS. Neither the Company nor the
Guarantor has entered into, and on or after the date of this Agreement will not
enter into, any agreement which is inconsistent with the rights granted to the
Holders of Registrable Securities in this Agreement or otherwise conflicts with
the provisions hereof. The rights granted to the Holders hereunder do not in any
way conflict with and are not inconsistent with the rights granted to the
holders of the Company's or the Guarantor's other issued and outstanding
securities under any such agreements.

          (b)     AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Company and the Guarantor have obtained the written
consent of Holders of at least a majority in aggregate principal amount of the
outstanding Registrable Securities affected by such amendment, modification,
supplement, waiver or consent; PROVIDED, HOWEVER, that no amendment,
modification, supplement, waiver or consent to any departure from the provisions
of Section 5 hereof shall be effective as against any Holder of Registrable
Securities unless consented to in writing by such Holder.

          (c)     NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery (i) if to a Holder, at the most current address given by such Holder to
the Company by means of a notice given in accordance with the provisions of this
Section 6(c), which address initially is, with respect to the Placement Agents,
the address set forth in the Placement Agreement; and (ii) if to the Company or
the Guarantor, initially at the Company's or the Guarantor's address set forth
in the Placement Agreement and thereafter at such other address, notice of which
is given in accordance with the provisions of this Section 6(c).

          All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt is acknowledged, if telecopied; and on
the next business day if timely delivered to an air courier guaranteeing
overnight delivery.

          Copies of all such notices, demands, or other communications shall be
concurrently delivered by the Person giving the same to the Trustee, at the
address specified in the Indenture.

          (d)     SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees of each
of the parties, including, without limitation and without the need for an
express assignment, subsequent Holders; PROVIDED that nothing herein shall be
deemed to permit any assignment, transfer or other disposition of Registrable
Securities in violation of the terms of the Placement Agreement. If any
transferee of any Holder shall acquire Registrable Securities, in any manner,
whether by operation of law or otherwise, such Registrable Securities shall be
held subject to all of the terms of this Agreement,

                                       16
<Page>

and by taking and holding such Registrable Securities such Person shall be
conclusively deemed to have agreed to be bound by and to perform all of the
terms and provisions of this Agreement and such Person shall be entitled to
receive the benefits hereof. Each Placement Agent (in its capacity as Placement
Agent) shall have no liability or obligation to the Company or the Guarantor
with respect to any failure by a Holder to comply with, or any breach by any
Holder of, any of the obligations of such Holder under this Agreement.

          (e)     PURCHASES AND SALES OF SECURITIES. Neither the Company nor the
Guarantor shall, and the Company and the Guarantor shall use their best efforts
to cause their respective affiliates (as defined in Rule 405 under the 1933 Act)
not to, purchase and then resell or otherwise transfer any Securities.

          (f)     THIRD PARTY BENEFICIARY. The Holders shall be third party
beneficiaries to the agreements made hereunder among the Company and the
Guarantor, on the one hand, and the Placement Agents, on the other hand, and
shall have the right to enforce such agreements directly to the extent it deems
such enforcement necessary or advisable to protect its rights or the rights of
Holders hereunder.

          (g)     COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.

          (h)     HEADINGS. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.

          (i)     GOVERNING LAW. This Agreement shall be governed by the laws of
the State of New York.

          (j)     SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.

          (k)     AGENT FOR SERVICE; SUBMISSION TO JURISDICTION; WAIVER OF
IMMUNITIES. Each of the Company and the Guarantor irrevocably (i) agree that any
action, suit or proceeding against the Company or the Guarantor brought by any
Holder, Placement Agent, agent or Underwriter or any person who controls any
Placement Agent arising out of, based upon or relating to this Agreement or any
of the transactions contemplated hereby may be instituted in any federal or
state court in New York City, (ii) waive any objection which either may now or
hereafter have to the laying of venue of any such proceeding or to the
convenience of the forum and (iii) submit to the non-exclusive jurisdiction of
any federal or state court in New York City in any such action, suit or
proceeding. Each of the Company and the Guarantor represent, warrant and agree
that, prior to the Closing Date, the Company will have designated and appointed
CT Corporation System as its authorized agent (the "Authorized Agent," which
term, as used herein, includes any successor in such capacity) upon whom process
may be served in any such action, suit or proceeding arising out of, based on or
relating to this Agreement or any

                                       17
<Page>

of the transactions contemplated hereby which may be instituted in any federal
or state court in New York City by any Holder, Placement Agent, agent or
Underwriter or any person who controls any Placement Agent, expressly consent to
the jurisdiction of any such court in respect of any such action, suit or
proceeding and waive any other requirements of or objections to personal
jurisdiction with respect thereto. Such appointment shall be irrevocable. Each
of the Company and the Guarantor represent, warrant and agree that, prior to the
Closing Date, the Authorized Agent will have agreed to act as such agent for
service of process and the Company and the Guarantor agree to take any and all
action, including the filing of any and all documents and instruments and the
payment of all fees, that may be necessary to effect and to continue such
appointment in full force and effect as aforesaid for so long as any of the
Securities shall be outstanding and until the principal of, premium, if any, and
interest on, and any and all other amounts payable under or with respect to,
this Agreement, the Securities and the Registration Rights Agreement shall have
been paid in full. Each of the Company and the Guarantor agree that service of
process upon the Authorized Agent and written notice of such service to the
Company or the Guarantor (mailed or delivered to its Secretary at the Company's
or the Guarantor's principal office at 8182 Maryland Avenue, St. Louis, MO
63105) shall be deemed, in every respect, effective service of process upon the
Company in any such action, suit or proceeding.

          In respect of any judgment or order given or made against the Company
or the Guarantor for any amount due hereunder that is expressed and paid in a
currency (the "judgment currency") other than United States dollars, the Company
or the Guarantor will indemnify each Holder, Placement Agent, agent or
underwriter and each person, if any, who controls any Placement Agent from and
against any and all loss incurred by such Holder, Placement Agent, agent,
Underwriter or controlling person, as the case may be, as a result of any
variation as between (i) the rate of exchange as of the date of such judgment or
order at which the judgment currency amount is converted into United States
dollars for the purpose of such judgment or order and (ii) the rate of exchange
as of the date of payment at which such Holder, Placement Agent, agent,
Underwriter or controlling person, as the case may be, is able to purchase
United States dollars with the amount of the judgment currency actually received
by such Holder, Placement Agent, agent, Underwriter or controlling person, as
the case may be. Each of the Company and the Guarantor agree that the foregoing
indemnity shall constitute a separate and independent obligation of the Company
and the Guarantor and shall continue in full force and effect notwithstanding
any such judgment or order as aforesaid. The term "rate of exchange" shall
include any premiums and costs of exchange payable in connection with the
purchase of or conversion into United States dollars.

          To the extent that the Company or the Guarantor or any of their
properties, assets or revenues may have or may hereafter become entitled to, or
have attributed to it, any right of immunity, on the grounds of sovereignty or
otherwise, from (i) any legal action, suit or proceeding, (ii) setoff or
counterclaim, (iii) the jurisdiction of any court, (iv) service of process, (v)
attachment upon or prior to judgment, (vi) attachment in aid of execution of
judgment, (vii) execution of judgment, or (viii) other legal process or
proceeding for the giving of any relief or for the enforcement of any judgment,
in any jurisdiction in which any action, suit or proceeding may at any time be
commenced with respect to its obligations, liabilities or any other matter under
or arising out of or in connection with this Agreement, the Company and the
Guarantor

                                       18
<Page>

hereby irrevocably and unconditionally waive, and agree not to plead or claim,
any such immunity and consent to such relief and enforcement.

               [The rest of this page is left intentionally blank]

                                       19
<Page>

          IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.

                                       STONE CONTAINER FINANCE COMPANY
                                       OF CANADA II

                                       By /s/ Jeffrey S. Beyersdorfer
                                          ----------------------------------
                                          Name:  JEFFREY S. BEYERSDORFER
                                          Title: VICE PRESIDENT AND TREASURER

                                       STONE CONTAINER CORPORATION

                                       By /s/ Jeffrey S. Beyersdorfer
                                          ----------------------------------
                                          Name:  JEFFREY S. BEYERSDORFER
                                          Title: VICE PRESIDENT AND TREASURER

Confirmed and accepted as of
  the date first above written:

MORGAN STANLEY & CO. INCORPORATED
BANC OF AMERICA SECURITIES LLC
J.P. MORGAN SECURITIES INC.
CITIGROUP GLOBAL MARKETS INC.
DEUTSCHE BANK SECURITIES INC.
BNY CAPITAL MARKETS, INC.
CALYON SECURITIES (USA) INC.
SCOTIA CAPITAL (USA) INC.
SG AMERICAS SECURITIES, LLC

By:  MORGAN STANLEY & CO. INCORPORATED

By /s/ Bryan Andrzejewski
   ------------------------------
   Name:  Bryan Andrzejewski
   Title: Executive Director

                                       20Exhibit 4.1

 

EXECUTION COPY

 

 

CELLU TISSUE HOLDINGS, INC.,

 

THE SUBSIDIARY GUARANTORS PARTIES HERETO,

 

AND

 

THE BANK OF NEW YORK,

AS TRUSTEE

 

93⁄4% Senior Secured Notes due 2010

 

 

INDENTURE

 

Dated as of March 12, 2004

 

 

 

 

Table of Contents

 

	
  ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE

  	
   

  
	
   

  	
   

  
	
  SECTION 1.1. Definitions.

  	
   

  
	
  SECTION 1.2. Other Definitions.

  	
   

  
	
  SECTION 1.3. Incorporation by
  Reference of Trust Indenture Act

  	
   

  
	
  SECTION 1.4. Rules of Construction

  	
   

  
	
   

  	
   

  
	
  ARTICLE II THE SECURITIES

  	
   

  
	
   

  	
   

  
	
  SECTION 2.1. Form, Dating and Terms.

  	
   

  
	
  SECTION 2.2. Execution and
  Authentication

  	
   

  
	
  SECTION 2.3. Registrar and Paying
  Agent

  	
   

  
	
  SECTION 2.4. Paying Agent to Hold
  Money in Trust

  	
   

  
	
  SECTION 2.5. Securityholder Lists

  	
   

  
	
  SECTION 2.6. Transfer and Exchange.

  	
   

  
	
  SECTION 2.7. Form of Certificate to be
  Delivered upon Termination of Restricted Period

  	
   

  
	
  SECTION 2.8. Form of Certificate to be
  Delivered in Connection with Transfers to Institutional Accredited Investors.

  	
   

  
	
  SECTION 2.9. Form of Certificate to be
  Delivered in Connection with Transfers Pursuant to Regulation S.

  	
   

  
	
  SECTION 2.10. Mutilated, Destroyed,
  Lost or Stolen Securities

  	
   

  
	
  SECTION 2.11. Outstanding Securities

  	
   

  
	
  SECTION 2.12. Temporary Securities

  	
   

  
	
  SECTION 2.13. Cancellation

  	
   

  
	
  SECTION 2.14. Payment of Interest;
  Defaulted Interest

  	
   

  
	
  SECTION 2.15. Computation of Interest

  	
   

  
	
  SECTION 2.16. CUSIP, Common Code and
  ISIN Numbers

  	
   

  
	
   

  	
   

  
	
  ARTICLE III COVENANTS

  	
   

  
	
   

  	
   

  
	
  SECTION 3.1. Payment of Securities

  	
   

  
	
  SECTION 3.2. Limitation on
  Indebtedness

  	
   

  
	
  SECTION 3.3. Limitation on Restricted
  Payments

  	
   

  
	
  SECTION 3.4. Limitation on
  Restrictions on Distributions from Restricted Subsidiaries

  	
   

  
	
  SECTION 3.5. Limitation on Sales of
  Assets and Subsidiary Stock

  	
   

  
	
  SECTION 3.6. Limitation on Liens

  	
   

  
	
  SECTION 3.7. Limitation on
  Sale/Leaseback Transactions

  	
   

  
	
  SECTION 3.8. Limitation on Affiliate
  Transactions

  	
   

  
	
  SECTION 3.9. Limitation on Sale of
  Capital Stock of Restricted Subsidiaries

  	
   

  
	
  SECTION 3.10. Change of Control

  	
   

  

 

i

 

	
  SECTION 3.11. SEC Reports

  	
   

  
	
  SECTION 3.12. Future Subsidiary
  Guarantors

  	
   

  
	
  SECTION 3.13. Maintenance of Office or
  Agency

  	
   

  
	
  SECTION 3.14. Corporate Existence

  	
   

  
	
  SECTION 3.15. Payment of Taxes and
  Other Claims

  	
   

  
	
  SECTION 3.16. Payments for Consent

  	
   

  
	
  SECTION 3.17. Compliance Certificate

  	
   

  
	
  SECTION 3.18. Further Instruments and
  Acts

  	
   

  
	
  SECTION 3.19. Limitation on Lines of
  Business

  	
   

  
	
  SECTION 3.20. Statement by Officers as
  to Default

  	
   

  
	
   

  	
   

  
	
  ARTICLE IV SUCCESSOR COMPANY

  	
   

  
	
   

  	
   

  
	
  SECTION 4.1. Merger and Consolidation

  	
   

  
	
   

  	
   

  
	
  ARTICLE V REDEMPTION OF SECURITIES

  	
   

  
	
   

  	
   

  
	
  SECTION 5.1. Redemption

  	
   

  
	
  SECTION 5.2. Applicability of Article

  	
   

  
	
  SECTION 5.3. Election to Redeem;
  Notice to Trustee

  	
   

  
	
  SECTION 5.4. Selection by Trustee of
  Securities to Be Redeemed

  	
   

  
	
  SECTION 5.5. Notice of Redemption

  	
   

  
	
  SECTION 5.6. Deposit of Redemption
  Price

  	
   

  
	
  SECTION 5.7. Securities Payable on
  Redemption Date

  	
   

  
	
  SECTION 5.8. Securities Redeemed in
  Part

  	
   

  
	
  SECTION 5.9. Optional Tax Redemption

  	
   

  
	
   

  	
   

  
	
  ARTICLE VI DEFAULTS AND REMEDIES

  	
   

  
	
   

  	
   

  
	
  SECTION 6.1. Events of Default

  	
   

  
	
  SECTION 6.2. Acceleration

  	
   

  
	
  SECTION 6.3. Other Remedies

  	
   

  
	
  SECTION 6.4. Waiver of Past Defaults

  	
   

  
	
  SECTION 6.5. Control by Majority

  	
   

  
	
  SECTION 6.6. Limitation on Suits

  	
   

  
	
  SECTION 6.7. Rights of Holders to
  Receive Payment

  	
   

  
	
  SECTION 6.8. Collection Suit by
  Trustee

  	
   

  
	
  SECTION 6.9. Trustee May File Proofs of
  Claim

  	
   

  
	
  SECTION 6.10. Priorities

  	
   

  
	
  SECTION 6.11. Undertaking for Costs

  	
   

  
	
   

  	
   

  
	
  ARTICLE VII TRUSTEE

  	
   

  
	
   

  	
   

  
	
  SECTION 7.1. Duties of Trustee

  	
   

  
	
  SECTION 7.2. Rights of Trustee

  	
   

  
	
  SECTION 7.3. Individual Rights of
  Trustee

  	
   

  
	
  SECTION 7.4. Trustee’s Disclaimer

  	
   

  

 

ii

 

	
  SECTION 7.5. Notice of Defaults

  	
   

  
	
  SECTION 7.6. Reports by Trustee to
  Holders

  	
   

  
	
  SECTION 7.7. Compensation and
  Indemnity

  	
   

  
	
  SECTION 7.8. Replacement of Trustee

  	
   

  
	
  SECTION 7.9. Successor Trustee by
  Merger

  	
   

  
	
  SECTION 7.10. Eligibility;
  Disqualification

  	
   

  
	
  SECTION 7.11. Preferential Collection
  of Claims Against the Company

  	
   

  
	
  SECTION 7.12. Trustee’s Application
  for Instruction from the Company

  	
   

  
	
   

  	
   

  
	
  ARTICLE VIII DISCHARGE OF INDENTURE;
  DEFEASANCE

  	
   

  
	
   

  	
   

  
	
  SECTION 8.1. Discharge of Liability on
  Securities; Defeasance

  	
   

  
	
  SECTION 8.2. Conditions to Defeasance

  	
   

  
	
  SECTION 8.3. Application of Trust
  Money

  	
   

  
	
  SECTION 8.4. Repayment to the Company

  	
   

  
	
  SECTION 8.5. Indemnity for U.S. Government
  Obligations

  	
   

  
	
  SECTION 8.6. Reinstatement

  	
   

  
	
   

  	
   

  
	
  ARTICLE IX AMENDMENTS

  	
   

  
	
   

  	
   

  
	
  SECTION 9.1. Without Consent of
  Holders

  	
   

  
	
  SECTION 9.2. With Consent of Holders

  	
   

  
	
  SECTION 9.3. Compliance with Trust Indenture
  Act

  	
   

  
	
  SECTION 9.4. Revocation and Effect of
  Consents and Waivers

  	
   

  
	
  SECTION 9.5. Notation on or Exchange
  of Securities

  	
   

  
	
  SECTION 9.6. Trustee To Sign
  Amendments

  	
   

  
	
   

  	
   

  
	
  ARTICLE X SUBSIDIARY GUARANTEE

  	
   

  
	
   

  	
   

  
	
  SECTION 10.1. Subsidiary Guarantee

  	
   

  
	
  SECTION 10.2. Limitation on Liability;
  Termination, Release and Discharge.

  	
   

  
	
  SECTION 10.3. Right of Contribution

  	
   

  
	
  SECTION 10.4. No Subrogation

  	
   

  
	
   

  	
   

  
	
  ARTICLE XI COLLATERAL AND SECURITY

  	
   

  
	
   

  	
   

  
	
  SECTION 11.1. The Collateral.

  	
   

  
	
  SECTION 11.2. Further Assurances.

  	
   

  
	
  SECTION 11.3. After-Acquired Property

  	
   

  
	
  SECTION 11.4. Impairment of Security
  Interest

  	
   

  
	
  SECTION 11.5. Real Estate Mortgages
  and Filings

  	
   

  
	
  SECTION 11.6. Release of Liens on the
  Collateral.

  	
   

  
	
  SECTION 11.7.
  Authorization of Actions to be Taken by the Trustee or

  the Collateral Agent Under the Collateral Documents.

  	
   

  
	
  SECTION 11.8. Collateral Accounts.

  	
   

  

 

iii

 

	
  ARTICLE XII MISCELLANEOUS

  	
   

  
	
   

  	
   

  
	
  SECTION 12.1. Trust Indenture Act
  Controls

  	
   

  
	
  SECTION 12.2. Notices

  	
   

  
	
  SECTION 12.3. Communication by Holders
  with other Holders

  	
   

  
	
  SECTION 12.4. Certificate and Opinion
  as to Conditions Precedent

  	
   

  
	
  SECTION 12.5. Statements Required in
  Certificate or Opinion

  	
   

  
	
  SECTION 12.6. When Securities
  Disregarded

  	
   

  
	
  SECTION 12.7. Rules by Trustee, Paying
  Agent and Registrar

  	
   

  
	
  SECTION 12.8. Legal Holidays

  	
   

  
	
  SECTION 12.9. GOVERNING LAW

  	
   

  
	
  SECTION 12.10. No Recourse Against
  Others

  	
   

  
	
  SECTION 12.11. Successors

  	
   

  
	
  SECTION 12.12. Multiple Originals

  	
   

  
	
  SECTION 12.13. Qualification of
  Indenture

  	
   

  
	
  SECTION 12.14. Table of Contents;
  Headings

  	
   

  
	
  SECTION 12.15. WAIVERS OF JURY TRIAL

  	
   

  
	
  SECTION 12.16. Intercreditor Agreement
  Controls

  	
   

  

 

 

	
  SCHEDULE 3.4

  
	
  SCHEDULE 3.8

  
	
   

  
	
  EXHIBIT A

  	
  Form of the Series A Note

  
	
  EXHIBIT B

  	
  Form of the Series B Note

  
	
  EXHIBIT C

  	
  Form of Indenture Supplement to Add
  Subsidiary Guarantors

  
	
  EXHIBIT D

  	
  Form of Security Agreement

  
	
  EXHIBIT E

  	
  Form of Mortgage

  
	
  EXHIBIT F

  	
  Form of Intercreditor Agreement

  

 

iv

 

CROSS-REFERENCE TABLE

 

	
  TIA

  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)

  	
   

  	
   

  	
   

  	
   

  	
  7.8; 7.10

  
	
   

  	
  (c)

  	
   

  	
   

  	
   

  	
   

  	
  7.10

  
	
  311

  	
  (a)

  	
   

  	
   

  	
   

  	
   

  	
  7.11

  
	
   

  	
  (b)

  	
   

  	
   

  	
   

  	
   

  	
  7.11

  
	
   

  	
  (c)

  	
   

  	
   

  	
   

  	
   

  	
  N.A.

  
	
  312

  	
  (a)

  	
   

  	
   

  	
   

  	
   

  	
  2.5

  
	
   

  	
  (b)

  	
   

  	
   

  	
   

  	
   

  	
  12.3

  
	
   

  	
  (c)

  	
   

  	
   

  	
   

  	
   

  	
  12.3

  
	
  313

  	
  (a)

  	
   

  	
   

  	
   

  	
   

  	
  7.6

  
	
   

  	
  (b)(1)

  	
   

  	
   

  	
   

  	
   

  	
  7.6; 11.2

  
	
   

  	
  (b)(2)

  	
   

  	
   

  	
   

  	
   

  	
  7.6; 11.2

  
	
   

  	
  (c)

  	
   

  	
   

  	
   

  	
   

  	
  7.6; 11.2

  
	
   

  	
  (d)

  	
   

  	
   

  	
   

  	
   

  	
  7.6

  
	
  314

  	
  (a)

  	
   

  	
   

  	
   

  	
   

  	
  3.11; 3.17; 12.5

  
	
   

  	
  (b)

  	
   

  	
   

  	
   

  	
   

  	
  11.2(c)

  
	
   

  	
  (c)(1)

  	
   

  	
   

  	
   

  	
   

  	
  12.4

  
	
   

  	
  (c)(2)

  	
   

  	
   

  	
   

  	
   

  	
  12.4

  
	
   

  	
  (c)(3)

  	
   

  	
   

  	
   

  	
   

  	
  N.A.

  
	
   

  	
  (d)

  	
   

  	
   

  	
   

  	
   

  	
  11.2; 11.6(b)

  
	
   

  	
  (e)

  	
   

  	
   

  	
   

  	
   

  	
  12.5

  
	
  315

  	
  (a)

  	
   

  	
   

  	
   

  	
   

  	
  7.1

  
	
   

  	
  (b)

  	
   

  	
   

  	
   

  	
   

  	
  7.5; 12.2

  
	
   

  	
  (c)

  	
   

  	
   

  	
   

  	
   

  	
  7.1

  
	
   

  	
  (d)

  	
   

  	
   

  	
   

  	
   

  	
  7.1

  
	
   

  	
  (e)

  	
   

  	
   

  	
   

  	
   

  	
  6.11

  
	
  316

  	
  (a)(last sentence)

  	
   

  	
   

  	
   

  	
   

  	
  12.6

  
	
   

  	
  (a)(1)(A)

  	
   

  	
   

  	
   

  	
   

  	
  6.5

  
	
   

  	
  (a)(1)(B)

  	
   

  	
   

  	
   

  	
   

  	
  6.4

  
	
   

  	
  (a)(2)

  	
   

  	
   

  	
   

  	
   

  	
  N.A.

  
	
   

  	
  (b)

  	
   

  	
   

  	
   

  	
   

  	
  6.7

  
	
   

  	
  (c)

  	
   

  	
   

  	
   

  	
   

  	
  6.5

  
	
  317

  	
  (a)(1)

  	
   

  	
   

  	
   

  	
   

  	
  6.8

  
	
   

  	
  (a)(2)

  	
   

  	
   

  	
   

  	
   

  	
  6.9

  
	
   

  	
  (b)

  	
   

  	
   

  	
   

  	
   

  	
  2.4

  
	
  318

  	
  (a)

  	
   

  	
   

  	
   

  	
   

  	
  12.1

  

 

N.A. means Not Applicable.

 

Note:  This Cross-Reference Table
shall not, for any purpose, be deemed to be part of this Indenture.

 

v

 

INDENTURE dated as of March 12, 2004, among CELLU TISSUE HOLDINGS,
INC., a Delaware corporation (the “Company”), THE SUBSIDIARY GUARANTORS
(as defined herein) parties hereto and THE BANK OF NEW YORK (the “Trustee”),
as Trustee.

 

Each party agrees as follows for the benefit of the other parties and
for the equal and ratable benefit of the Holders of (i) the Company’s 93⁄4%
Senior Secured Notes, Series A, due 2010, issued on the date hereof and the
guarantees thereof by certain of the Company’s subsidiaries (the “Initial
Securities”), (ii) if and when issued, an unlimited principal amount of
additional 93⁄4% Senior Secured Notes, Series A, due 2010 in a non-registered
offering or 93⁄4% Senior Secured Notes, Series B, due 2010 in a registered
offering of the Company, and the guarantees thereof by certain of the Company’s
subsidiaries that may be offered from time to time subsequent to the Issue
Date, in each case subject to Section 2.1 (the “Additional
Securities”) as provided in Section 2.1(a) and (iii) if and
when issued, the Company’s 93⁄4% Senior Secured Notes, Series B, due 2010 and the
guarantees thereof by certain of the Company’s subsidiaries that may be issued
from time to time in exchange for Initial Securities or any Additional
Securities in an offer registered under the Securities Act as provided in the
Registration Rights Agreement, as hereinafter defined, (the “Exchange
Securities,” and together with the Initial Securities and Additional
Securities, the “Securities”):

 

ARTICLE I

 

DEFINITIONS AND INCORPORATION BY REFERENCE

 

SECTION 1.1.   Definitions.

 

“Acquired Indebtedness” means Indebtedness (i) of a Person or
any of its Subsidiaries existing at the time such Person becomes a Restricted
Subsidiary or (ii) assumed in connection with the acquisition of assets from
such Person, in each case whether or not Incurred by such Person in connection
with, or in anticipation or contemplation of, such Person becoming a Restricted
Subsidiary or such acquisition.  Acquired
Indebtedness shall be deemed to have been Incurred, with respect to clause (i)
of the preceding sentence, on the date such Person becomes a Restricted
Subsidiary and, with respect to clause (ii) of the preceding sentence, on the
date of consummation of such acquisition of assets.

 

“Additional Assets” means:

 

(1) any property or assets (other than Indebtedness and Capital Stock)
to be used by the Company or a Restricted Subsidiary in a Related Business;

 

(2) the Capital Stock of a Person that becomes a Restricted Subsidiary
as a result of the acquisition of such Capital Stock by the Company or a
Restricted Subsidiary; or

 

(3) Capital Stock constituting a minority interest in any Person that
at such time is a Restricted Subsidiary;

 

 

provided, however, that, in the case of clauses (2)
and (3), such Restricted Subsidiary is primarily engaged in a Related Business.

 

“Additional Interest” means any additional interest payable by
the Company pursuant to Section 2(d) of the Registration Rights Agreement.

 

“Additional Securities” has the meaning ascribed to it in the
second introductory paragraph of this Indenture.

 

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

 

“Asset Disposition” means any direct or indirect sale, lease
(other than an operating lease entered into in the ordinary course of
business), transfer, issuance or other disposition, or a series of related
sales, leases, transfers, issuances or dispositions that are part of a common
plan, of shares of Capital Stock of a Subsidiary (other than directors’
qualifying shares), property or other assets (each referred to for the purposes
of this definition as a “disposition”) by the Company or any of its Restricted
Subsidiaries, including any disposition by means of a merger, consolidation or
similar transaction (provided
that (i) the disposition of all or substantially all of the assets of the
Company and its Restricted Subsidiaries, taken as a whole, will be governed by Section 3.10
and Section 4.1 and (ii) the disposition of all the Voting Stock of
or all or substantially all of the assets of any Subsidiary Guarantor will be
governed by Section 3.9 and Section 10.2(b),
respectively).

 

Notwithstanding the preceding, the following items shall not be deemed
to be Asset Dispositions:

 

(1)           a
disposition by a Restricted Subsidiary to the Company or by the Company or a
Restricted Subsidiary to a Restricted Subsidiary, provided that in the case of a sale by a Restricted
Subsidiary to another Restricted Subsidiary, the Company directly or indirectly
owns an equal or greater percentage of the Common Stock of the transferee than
of the transferor, and provided  further that in the case of a sale of
Collateral, the transferee shall cause such amendments, supplements or other
instruments to be executed, filed, and recorded in such jurisdictions as may be
required by applicable law to preserve and protect the Lien on the Collateral
owned by or transferred to the transferee, together with such financing
statements or comparable documents as may be required to perfect any security
interests in such Collateral which may be perfected by the filing of a financing
statement or a similar document under the Uniform Commercial Code or other
similar statute or regulation of the relevant states or jurisdictions;

 

(2)           the
sale of Cash Equivalents in the ordinary course of business;

 

2

 

(3)           a
disposition of inventory in the ordinary course of business;

 

(4)           a
disposition of obsolete or worn out equipment or equipment that is no longer
useful in the conduct of the business of the Company and its Restricted
Subsidiaries and that is disposed of in each case in the ordinary course of
business;

 

(5)           transactions
permitted under Section 4.1;

 

(6)           an
issuance of Capital Stock by a Restricted Subsidiary to the Company or to a
Wholly-Owned Subsidiary;

 

(7)           for
purposes of Section 3.5 only, the making of a Permitted Investment
or a disposition subject to Section 3.3;

 

(8)           an
Asset Swap effected in compliance with Section 3.5;

 

(9)           dispositions
of assets in a single transaction or series of related transactions with an
aggregate fair market value in any calendar year of less than $1.0 million;

 

(10)         dispositions
in connection with Permitted Liens;

 

(11)         dispositions
of receivables in connection with the compromise, settlement or collection
thereof in the ordinary course of business or in bankruptcy or similar
proceedings and exclusive of factoring or similar arrangements;

 

(12)         the
licensing or sublicensing of intellectual property or other general intangibles
and licenses, leases or subleases of other property;

 

(13)         foreclosure
on assets; and

 

(14)         the
sale of the Number 1 Paper Machine located at the Menominee, Michigan facility
and all equipment directly related thereto.

 

“Asset Swap” means concurrent purchase and sale or exchange of
Related Business Assets between the Company or any of its Restricted
Subsidiaries and another Person; provided
that any cash received must be applied in accordance with Section 3.5.

 

“Attributable Indebtedness” in respect of a Sale/Leaseback
Transaction means, as at the time of determination, the present value
(discounted at the interest rate borne by the Securities, compounded
semi-annually) of the total obligations of the lessee for rental payments
during the remaining term of the lease included in such Sale/Leaseback
Transaction (including any period for which such lease has been extended).

 

“Average Life” means, as of the date of determination, with
respect to any Indebtedness or Preferred Stock, the quotient obtained by
dividing (1) the sum of the products of the numbers of years from the date of
determination to the dates of each successive scheduled

 

3

 

principal payment of such Indebtedness or redemption or similar payment
with respect to such Preferred Stock multiplied by the amount of such payment
by (2) the sum of all such payments.

 

“Bankruptcy Law” means Title 11 of the United States Code or
similar federal or state law for the relief of debtors.

 

“Board of Directors” means, as to any Person, the board of
directors of such Person or any duly authorized committee thereof.

 

“Board Resolution” means a copy of a resolution certified by the
Secretary or an Assistant Secretary of a 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.

 

“Borrowing Base” means, as of the date of determination, an
amount equal to the sum, without duplication of (1) 85% of the net book value
of the Company’s and its Restricted Subsidiaries’ accounts receivable at such
date and (2) 65% of the net book value of the Company’s and its Restricted
Subsidiaries’ inventories at such date. 
Net book value shall be determined in accordance with GAAP and shall be
that reflected on the most recent available balance sheet (it being understood
that the accounts receivable and inventories of an acquired business may be
included if such acquisition has been completed on or prior to the date of
determination).

 

“Business Day” means each day that is not a Saturday, Sunday or other
day on which banking institutions in New York, New York are authorized or
required by law to close.

 

“Capital Stock” of any Person means any and all shares,
interests, rights to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) equity of such Person,
including any Preferred Stock, but excluding any debt securities convertible
into such equity.

 

“Capitalized Lease Obligations” means an obligation that is
required to be classified and accounted for as a capitalized lease for
financial reporting purposes in accordance with GAAP, and the amount of
Indebtedness represented by such obligation will be the capitalized amount of
such obligation at the time any determination thereof is to be made as determined
in accordance with GAAP, and the Stated Maturity thereof will be the date of
the last payment of rent or any other amount due under such lease prior to the
first date such lease may be terminated without penalty.

 

“Cash Equivalents” means:

 

(1)           securities
issued or directly and fully guaranteed or insured by the United States
Government or any agency or instrumentality of the United States (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;

 

(2)           marketable
general obligations issued by any state of the United States of America or any
political subdivision of any such state or any public instrumentality

 

4

 

thereof maturing within one year from the date of acquisition and, at
the time of acquisition, having a credit rating of “A” or better from either
Standard & Poor’s Ratings Services or Moody’s Investors Service, Inc.;

 

(3)           demand
deposits, trust accounts, certificates of deposit, time deposits, eurodollar
time deposits, overnight bank deposits or bankers’ acceptances having
maturities of not more than one year from the date of acquisition thereof
issued by any commercial bank the long-term debt of which is rated at the time
of acquisition thereof at least “A” or the equivalent thereof by Standard &
Poor’s Ratings Services, or “A” or the equivalent thereof by Moody’s Investors
Service, Inc., and having combined capital and surplus in excess of $500
million;

 

(4)           repurchase
obligations with a term of not more than seven days for underlying securities
of the types described in clauses (1), (2) and (3) entered into with any bank
meeting the qualifications specified in clause (3) above;

 

(5)           commercial
paper rated at the time of acquisition thereof at least “A-2” or the equivalent
thereof by Standard & Poor’s Ratings Services or “P-2” or the equivalent
thereof by Moody’s Investors Service, Inc., or carrying an equivalent rating by
a nationally recognized rating agency, if both of the two named rating agencies
cease publishing ratings of investments, and in any case maturing within one
year after the date of acquisition thereof; and

 

(6)           interests
in any investment company or money market fund which invests 95% or more of its
assets in instruments of the type specified in clauses (1) through (5) above.

 

“Change of Control” means:

 

(1)           prior
to the first public offering of Common Stock of the Company or Holdings, the
Permitted Holders cease to be the “beneficial owner” (as defined in Rules 13d-3
and 13d-5 under the Exchange Act), directly or indirectly, of a majority in the
aggregate of the total voting power of the Voting Stock of the Company or
Holdings, whether as a result of the issuance of securities of the Company or
Holdings, any merger, consolidation, liquidation or dissolution of the Company
or Holdings, any direct or indirect transfer of securities by any Permitted
Holder or otherwise (for purposes of this clause (1) and clause (2) below, the
Permitted Holders shall be deemed to beneficially own any Voting Stock of an
entity (the “specified entity”) held by any other entity (the “parent entity”)
so long as the Permitted Holders beneficially own (as so defined), directly or
indirectly, in the aggregate a majority of the voting power of the Voting Stock
of the parent entity); or

 

(2)           on
the date of or after the first public offering of Common Stock referred to in
clause (1), (A) any “person” or “group” of related persons (as such terms are
used in Sections 13(d) and 14(d) of the Exchange Act), other than one or more
Permitted Holders, is or becomes the beneficial owner (as defined in Rules
13d-3 and 13d-5 under the Exchange Act, except that such person or group shall
be deemed to have “beneficial

 

5

 

ownership” of all shares that any such person or group has the right to
acquire, whether such right is exercisable immediately or only after the
passage of time), directly or indirectly, of more than 35% of the total voting
power of the Voting Stock of the Company or Holdings (or its successor by
merger, consolidation or purchase of all or substantially all of its assets)
(for the purposes of this clause, such person or group shall be deemed to
beneficially own any Voting Stock of the Company or Holdings held by a parent
entity, if such person or group “beneficially owns” (as defined above),
directly or indirectly, more than 35% of the voting power of the Voting Stock
of such parent entity); and (B) the Permitted Holders “beneficially own” (as
defined in Rules 13d-3 and 13d-5 of the Exchange Act), directly or indirectly,
in the aggregate a lesser percentage of the total voting power of the Voting
Stock of the Company or Holdings, as the case may be, (or its successor by
merger, consolidation or purchase of all or substantially all of its assets)
than such other person or group and do not have the right or ability by voting
power, contract or otherwise to elect or designate for election a majority of
the board of directors of the Company or Holdings or such successor (for the
purposes of this clause, such other person or group shall be deemed to
beneficially own any Voting Stock of a specified entity held by a parent
entity, if such other person or group “beneficially owns” directly or
indirectly, more than 35% of the voting power of the Voting Stock of such
parent entity and the Permitted Holders “beneficially own” directly or
indirectly, in the aggregate a lesser percentage of the voting power of the
Voting Stock of such parent entity and do not have the right or ability by
voting power, contract or otherwise to elect or designate for election a
majority of the board of directors of such parent entity); or

 

(3)           the
first day on which a majority of the members of the Board of Directors of the
Company or Holdings are not Continuing Directors; or

 

(4)           the
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 assets of the Company or Holdings and its Restricted
Subsidiaries taken as a whole to any “person” (as such term is used in Sections
13(d) and 14(d) of the Exchange Act) other than a Permitted Holder; or

 

(5)           the
adoption by the stockholders of the Company or Holdings of a plan or proposal
for the liquidation or dissolution of the Company or Holdings.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Collateral” means all property and assets, whether now owned or
hereafter acquired, in which Liens are, from time to time, purported to be
granted to secure the Notes pursuant to the Collateral Documents, other than
the Number 1 Paper Machine located at the Menominee, Michigan facility and all
equipment directly related thereto.

 

“Collateral Accounts” means any segregated account under the
sole control of the Trustee that is free from all other Liens, including the
First Priority Collateral Account and the Second Priority Collateral Account,
and includes all cash and Cash Equivalents received by the Trustee or the
Collateral Agent from Asset Dispositions of Collateral, Recovery Events, Asset
Swaps involving the transfer of Collateral, foreclosures on or sales of
Collateral, any issuance of

 

6

 

Additional Securities or any other awards or proceeds pursuant to the
Collateral Documents, including earnings, revenues, rents, issues, profits and
income from the Collateral received pursuant to the Collateral Documents, and
interest earned thereon.

 

“Collateral Agent” means The Bank of New York, acting as the
collateral agent under the Collateral Documents.

 

“Collateral Documents” means the mortgages, deeds of trust,
deeds to secure debt, security agreements, pledge agreements, agency agreements
and other instruments and documents executed and delivered pursuant to this
Indenture or any of the foregoing, as the same may be amended, supplemented or
otherwise modified from time to time and pursuant to which Collateral is
pledged, assigned or granted to or on behalf of the Collateral Agent for the
ratable benefit of the Holders and the Trustee or notice of such pledge,
assignment or grant is given.

 

“Commodity Agreement” means any forward contract, swap, option,
hedge or other similar financial agreement or arrangement designed to protect
against fluctuations in commodity prices, including, without limitation, in
respect of energy contracts.

 

“Common Stock” means with respect to any Person, any and all
shares, interests or other participations in, and other equivalents (however
designated and whether voting or nonvoting) of such Person’s common stock
whether or not outstanding on the Issue Date, and includes, without limitation,
all series and classes of such common stock.

 

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

 

“Consolidated Coverage Ratio” means as of any date of
determination, with respect to any Person, the ratio of (x) the aggregate
amount of Consolidated EBITDA of such Person for the period of the most recent
four consecutive fiscal quarters ending prior to the date of such determination
for which financial statements are in existence to (y) Consolidated Interest
Expense for such four fiscal quarters, provided,
however, that:

 

(1)           if
the Company or any Restricted Subsidiary:

 

(a)           has Incurred any Indebtedness since the beginning
of such period that remains outstanding on such date of determination or if the
transaction giving rise to the need to calculate the Consolidated Coverage
Ratio is an Incurrence of Indebtedness, Consolidated EBITDA and Consolidated
Interest Expense for such period will be calculated after giving effect on a
pro forma basis to such Indebtedness as if such Indebtedness had been Incurred
on the first day of such period (except that in making such computation, the
amount of Indebtedness under any revolving credit facility outstanding on the
date of such calculation will be deemed to be (i) the average daily balance of
such Indebtedness during such four fiscal quarters or such shorter period for
which such facility was outstanding or (ii) if such facility was created after
the end of such four fiscal quarters,

 

7

 

the average daily balance of such Indebtedness during the period from
the date of creation of such facility to the date of such calculation) and the
discharge of any other Indebtedness repaid, repurchased, defeased or otherwise
discharged with the proceeds of such new Indebtedness as if such discharge had
occurred on the first day of such period; or

 

(b)           has repaid, repurchased, defeased or
otherwise discharged any Indebtedness since the beginning of the period that is
no longer outstanding on such date of determination or if the transaction
giving rise to the need to calculate the Consolidated Coverage Ratio involves a
discharge of Indebtedness (in each case other than Indebtedness Incurred under
any revolving credit facility unless such Indebtedness has been permanently
repaid and the related commitment terminated), Consolidated EBITDA and
Consolidated Interest Expense for such period will be calculated after giving
effect on a pro forma basis to such discharge of such Indebtedness, including
with the proceeds of such new Indebtedness, as if such discharge had occurred
on the first day of such period;

 

(2)           if
since the beginning of such period the Company or any Restricted Subsidiary
will have made any Asset Disposition or disposed of any company, division,
operating unit, segment, business, group of related assets or line of business
or if the transaction giving rise to the need to calculate the Consolidated
Coverage Ratio is such an Asset Disposition:

 

(a)           the Consolidated EBITDA for such period will
be reduced by an amount equal to the Consolidated EBITDA (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 EBITDA (if
negative) directly attributable thereto for such period; and

 

(b)           Consolidated Interest Expense for such
period will be reduced by an amount equal to the Consolidated Interest Expense
directly attributable to any Indebtedness of the Company or any Restricted
Subsidiary repaid, repurchased, defeased or otherwise discharged with respect
to the Company and its continuing Restricted Subsidiaries in connection with
such Asset Disposition for such period (or, if the Capital Stock of any
Restricted Subsidiary is sold, the Consolidated Interest Expense for such
period directly attributable to the Indebtedness of such Restricted Subsidiary
to the extent the Company and its continuing Restricted Subsidiaries are no
longer liable for such Indebtedness after such sale);

 

(3)           if
since the beginning of such period the Company or any Restricted Subsidiary (by
merger or otherwise) will have made an Investment in any Restricted Subsidiary
(or any Person which becomes a Restricted Subsidiary or is merged with or into
the Company) or an acquisition of assets, including any acquisition of assets
occurring in connection with a transaction causing a calculation to be made
hereunder, which constitutes all or substantially all of a company, division,
operating unit, segment,

 

8

 

business, group of related assets or line of business, Consolidated
EBITDA and Consolidated Interest Expense for such period will be calculated
after giving pro forma effect thereto (including the Incurrence of any
Indebtedness) as if such Investment or acquisition occurred on the first day of
such period; and

 

(4)           if
since the beginning of such period any Person (that subsequently became a
Restricted Subsidiary or was merged with or into the Company or any Restricted
Subsidiary since the beginning of such period) will have Incurred any
Indebtedness or discharged any Indebtedness, made any Asset Disposition or any
Investment or acquisition of assets that would have required an adjustment
pursuant to clause (2) or (3) above if made by the Company or a Restricted
Subsidiary during such period, Consolidated EBITDA and Consolidated Interest
Expense for such period will be calculated after giving pro forma effect
thereto as if such Asset Disposition or Investment or acquisition of assets
occurred on the first day of such period.

 

For purposes of this definition, whenever pro forma effect is to be
given to any calculation under this definition, the pro forma calculations will
be determined in good faith by a responsible financial or accounting officer of
the Company (including pro forma expense and cost reductions calculated on a
basis consistent with Regulation S-X under the Securities Act).  If any Indebtedness bears a floating rate of
interest and is being given pro forma effect, the interest expense on such
Indebtedness will 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 Interest Rate Agreement applicable to such Indebtedness if such
Interest Rate Agreement has a remaining term in excess of 12 months).  If any Indebtedness that is being given pro
forma effect bears an interest rate at the option of the Company, the interest
rate shall be calculated by applying such optional rate chosen by the Company.

 

“Consolidated EBITDA” for any period means, without duplication,
the Consolidated Net Income for such period, plus the following to the extent
deducted in calculating such Consolidated Net Income:

 

(1)           Consolidated
Interest Expense;

 

(2)           Consolidated
Income Taxes;

 

(3)           consolidated
depreciation expense;

 

(4)           consolidated
amortization expense or impairment charges recorded in connection with the application
of Financial Accounting Standard No. 142 “Goodwill and Other Intangibles”;

 

(5)           other
non-cash charges reducing Consolidated Net Income (excluding any such non-cash
charge to the extent it represents an accrual of or reserve for cash charges in
any future period or amortization of a prepaid cash expense that was paid in a
prior period not included in the calculation); and

 

(6)           reasonable
legal, accounting, financing, consulting, advisory and other out-of-pocket fees
and expenses incurred in connection with debt financings, equity

 

9

 

financings, acquisitions and/or divestitures (including, without
limitation, the offering of the Initial Securities and the closing of the
Working Capital Facility) whether or not such transactions are consummated.

 

Notwithstanding the preceding sentence, clauses (2) through (6)
relating to amounts of a Restricted Subsidiary of a Person will be added to
Consolidated Net Income to compute Consolidated EBITDA of such Person only to
the extent (and in the same proportion) that the net income (loss) of such
Restricted Subsidiary was included in calculating the Consolidated Net Income
of such Person and, to the extent the amounts set forth in clauses (2) through
(6) are in excess of those necessary to offset a net loss of such Restricted
Subsidiary or if such Restricted Subsidiary has net income for such period
included in Consolidated Net Income, only if a corresponding amount would be
permitted at the date of determination to be dividended to the Company by such
Restricted Subsidiary without prior approval (that has not been obtained),
pursuant to the terms of its charter and all agreements, instruments,
judgments, decrees, orders, statutes, rules and governmental regulations applicable
to that Restricted Subsidiary or its stockholders.

 

“Consolidated Income Taxes” means, with respect to any Person
for any period, taxes imposed upon such Person or other payments required to be
made by such Person by any governmental authority which taxes or other payments
are calculated by reference to the income or profits of such Person or such
Person and its Restricted Subsidiaries (to the extent such income or profits
were included in computing Consolidated Net Income for such period), regardless
of whether such taxes or payments are required to be remitted to any
governmental authority.

 

“Consolidated Interest Expense” means, for any period, the total
interest expense of the Company and its consolidated Restricted Subsidiaries,
whether paid or accrued, plus, to the extent not included in such interest
expense:

 

(1)           interest
expense attributable to Capitalized Lease Obligations and the interest portion
of rent expense associated with Attributable Indebtedness in respect of the
relevant lease giving rise thereto, determined as if such lease were a
capitalized lease in accordance with GAAP and the interest component of any
deferred payment obligations;

 

(2)           amortization
of debt discount and debt issuance cost (provided
that any amortization of bond premium will be credited to reduce Consolidated
Interest Expense unless, pursuant to GAAP, such amortization of bond premium
has otherwise reduced Consolidated Interest Expense);

 

(3)           non-cash
interest expense;

 

(4)           commissions,
discounts and other fees and charges owed with respect to letters of credit and
bankers’ acceptance financing;

 

(5)           the
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;

 

10

 

(6)           costs
associated with Hedging Obligations (including amortization of fees) provided, however,
that if Hedging Obligations result in net benefits rather than costs, such
benefits shall be credited to reduce Consolidated Interest Expense unless,
pursuant to GAAP, such net benefits are otherwise reflected in Consolidated Net
Income;

 

(7)           the
consolidated interest expense of such Person and its Restricted Subsidiaries
that was capitalized during such period;

 

(8)           the
product of (a) all dividends paid or payable, in cash, Cash Equivalents or
Indebtedness or accrued during such period on any series of Disqualified Stock
of such Person or on Preferred Stock of its Restricted Subsidiaries payable to
a party other than the Company or a Wholly-Owned Subsidiary, times (b) a
fraction, the numerator of which is one and the denominator of which is one
minus the then current combined federal, state, provincial and local statutory
tax rate of such Person, expressed as a decimal, in each case, on a
consolidated basis and in accordance with GAAP;

 

(9)           Receivables
Fees; and

 

(10)         the
cash contributions to any employee stock ownership plan or similar trust to the
extent such contributions are used by such plan or trust to pay interest or
fees to any Person (other than the Company) in connection with Indebtedness
Incurred by such plan or trust.

 

For the purpose of calculating the Consolidated Coverage Ratio in
connection with the Incurrence of any Indebtedness described in the final
paragraph of the definition of “Indebtedness”, the calculation of Consolidated
Interest Expense shall include all interest expense (including any amounts
described in clauses (1) through (10) above) relating to any Indebtedness of
the Company or any Restricted Subsidiary described in the final paragraph of
the definition of “Indebtedness”.

 

For purposes of the foregoing, total interest expense will be
determined (i) after giving effect to any net payments made or received by the
Company and its Subsidiaries with respect to Interest Rate Agreements and (ii)
exclusive of amounts classified as other comprehensive income in the balance
sheet of the Company.  Notwithstanding
anything to the contrary contained herein, commissions, discounts, yield and
other fees and charges Incurred in connection with any transaction pursuant to
which the Company or its Restricted Subsidiaries may sell, convey or otherwise
transfer or grant a security interest in any accounts receivable or related
assets shall be included in Consolidated Interest Expense.

 

“Consolidated Net Income” means, for any period, the net income
(loss) of the Company and its consolidated Restricted Subsidiaries determined
in accordance with GAAP; provided, however,
that there will not be included in such Consolidated Net Income:

 

(1)           any
net income (loss) of any Person if such Person is not a Restricted Subsidiary,
except that:

 

(a)           subject to the limitations contained in
clauses (3), (4) and (5) below, the Company’s equity in the net income of any
such Person for such period

 

11

 

will be included in such Consolidated Net Income up to the aggregate
amount of cash actually distributed by such Person during such period to the
Company or a Restricted Subsidiary as a dividend or other distribution
(subject, in the case of a dividend or other distribution to a Restricted
Subsidiary, to the limitations contained in clause (2) below); and

 

(b)           the Company’s equity in a net loss of any
such Person (other than an Unrestricted Subsidiary) for such period will be
included in determining such Consolidated Net Income to the extent such loss
has been funded with cash from the Company or a Restricted Subsidiary;

 

(2)           any
net income (but not loss) of any Restricted Subsidiary if such Restricted
Subsidiary is subject to restrictions, directly or indirectly, on the payment
of dividends or the making of distributions by such Restricted Subsidiary,
directly or indirectly, to the Company, except that:

 

(a)           subject to the limitations contained in
clauses (3), (4) and (5) below, the Company’s equity in the net income of any
such Restricted Subsidiary for such period will be included in such
Consolidated Net Income up to the aggregate amount of cash that could have been
distributed by such Restricted Subsidiary during such period to the Company or
another Restricted Subsidiary as a dividend (subject, in the case of a dividend
to another Restricted Subsidiary, to the limitation contained in this clause);
and

 

(b)           the Company’s equity in a net loss of any
such Restricted Subsidiary for such period will be included in determining such
Consolidated Net Income;

 

(3)           any
gain (loss) realized upon the sale or other disposition of any property, plant
or equipment of the Company or its consolidated Restricted Subsidiaries
(including pursuant to any Sale/Leaseback Transaction) which is not sold or
otherwise disposed of in the ordinary course of business and any gain (loss)
realized upon the sale or other disposition of any Capital Stock of any Person;

 

(4)           any
extraordinary gain or loss; and

 

(5)           the
cumulative effect of a change in accounting principles.

 

“Continuing Directors” means, as of any date of determination,
any member of the Board of Directors of the Company or Holdings, as the case
may be, who: (1) was a member of such Board of Directors on the date of the
Indenture; or (2) was nominated for election or elected to such Board of
Directors with the approval of a majority of the Continuing Directors who were
members of the relevant Board at the time of such nomination or election.

 

“Credit Facility” means, with respect to the Company or any
Subsidiary Guarantor, one or more debt facilities (including, without
limitation, the Working Capital Facility) or commercial paper facilities with
banks or other institutional lenders providing for

 

12

 

revolving credit loans, term loans, receivables financing (including
through the sale of receivables to such lenders or to special purpose entities
formed to borrow from such lenders against such receivables) or letters of
credit, in each case, as amended, restated, supplemented, modified, renewed,
refunded, replaced or refinanced in whole or in part from time to time (and
whether or not with the original administrative agent and lenders or another
administrative agent or agents or other lenders and whether provided under the
original Working Capital Facility or any other credit agreement or other
agreement or indenture).

 

“Currency Agreement” means in respect of a Person any foreign
exchange contract, currency swap agreement, futures contract, option contract
or other similar agreement as to which such Person is a party or a beneficiary.

 

“Custodian” means any receiver, trustee, assignee, liquidator,
custodian or similar official under any Bankruptcy Law.

 

“Default” means any event which is, or after notice or passage
of time or both would be, an Event of Default.

 

“Definitive Securities” means certificated Securities.

 

“Disqualified Stock” means, with respect to any Person, any
Capital Stock of such Person which by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable) or upon
the happening of any event:

 

(1)           matures
or is mandatorily redeemable pursuant to a sinking fund obligation or
otherwise;

 

(2)           is
convertible or exchangeable for Indebtedness or Disqualified Stock (excluding
Capital Stock which is convertible or exchangeable solely at the option of the
Company or a Restricted Subsidiary); or

 

(3)           is
redeemable at the option of the holder of the Capital Stock in whole or in
part,

 

in each case on or prior to the date that is 91 days after the earlier
of the date (a) of the Stated Maturity of the Securities or (b) on which there
are no Securities outstanding, provided
that only the portion of Capital Stock which so matures or is mandatorily
redeemable, is so convertible or exchangeable or is so redeemable at the option
of the holder thereof prior to such date will be deemed to be Disqualified
Stock; provided, further that any
Capital Stock that would constitute Disqualified Stock solely because the
holders thereof have the right to require the Company to repurchase such
Capital Stock upon the occurrence of a change of control or asset sale (each
defined in a substantially identical manner to the corresponding definitions in
this Indenture) shall not constitute Disqualified Stock if the terms of such
Capital Stock (and all such securities into which it is convertible or for
which it is ratable or exchangeable) provide that the Company may not
repurchase or redeem any such Capital Stock (and all such securities into which
it is convertible or for which it is ratable or exchangeable) pursuant to such
provision prior to compliance by the Company with the provisions of this
Indenture described under Sections 3.10 and 3.5 and such
repurchase or redemption complies with Section 3.3.

 

13

 

“DTC” means The Depository Trust Company, its nominees and their
respective successors and assigns, or such other depository institution
hereinafter appointed by the Company.

 

“Exchange Act” means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated thereunder.

 

“Exchange Securities” has the meaning ascribed to it in the
second introductory paragraph of this Indenture.

 

“First Priority Collateral” means the portion of the Collateral
as to which the Securities have a first-priority Lien.

 

“First Priority Collateral Account” has the meaning ascribed to
it in the applicable Collateral Document.

 

“Fiscal Year” means the fiscal year of the Company ending on
February 28 or 29, as applicable, of each year.

 

“Foreign Subsidiary” means any Restricted Subsidiary that is not
organized under the laws of the United States of America or any state thereof
or the District of Columbia and any Subsidiary of such Restricted Subsidiary.

 

“GAAP” means generally accepted accounting principles in the
United States of America as in effect as of the date of this Indenture,
including those 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 approved by a significant segment
of the accounting profession.  All ratios
and computations based on GAAP contained in this Indenture will be computed in
conformity with GAAP.

 

“Guarantee” means any obligation, contingent or otherwise, of
any Person directly or indirectly guaranteeing any Indebtedness of any other
Person and any obligation, direct or indirect, contingent or otherwise, of such
Person:

 

(1)           to
purchase or pay (or advance or supply funds for the purchase or payment of)
such Indebtedness of such other Person (whether arising by virtue of
partnership arrangements, or by agreement to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise); or

 

(2)           entered
into for purposes of assuring in any other manner the obligee of such
Indebtedness of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part); provided,
however, that the term “Guarantee” will not include endorsements for
collection or deposit in the ordinary course of business.  The term “Guarantee” used as a verb has a
corresponding meaning.

 

14

 

“Guarantor Subordinated Obligation” means, with respect to a
Subsidiary Guarantor, any Indebtedness of such Subsidiary Guarantor (whether
outstanding on the Issue Date or thereafter Incurred) which is expressly
subordinate in right of payment to the obligations of such Subsidiary Guarantor
under its Subsidiary Guarantee pursuant to a written agreement.

 

“Hedging Obligations” of any Person means the obligations of
such Person pursuant to any Interest Rate Agreement, Currency Agreement or
Commodity Agreement.

 

“Holder” or “Securityholder” means a Person in whose name
a Security is registered in the Securities Register.

 

“Holdings” means Cellu Paper Holdings, Inc., a Delaware
corporation, or any other direct or indirect parent of the Company that owns
directly or indirectly 100% of the Capital Stock of the Company.

 

“IAI” means an institutional “accredited investor” as described
in Rule 501(a)(1), (2), (3) or (7) under the Securities Act.

 

“Incur” means issue, create, assume, Guarantee, incur or
otherwise become liable for; provided,
however, that any Indebtedness or Capital Stock of a Person existing
at the time such Person becomes a Restricted Subsidiary (whether by merger,
consolidation, acquisition or otherwise) will be deemed to be Incurred by such
Restricted Subsidiary at the time it becomes a Restricted Subsidiary; and the
terms “Incurred” and “Incurrence” have meanings correlative to the foregoing.

 

“Indebtedness” means, with respect to any Person on any date of
determination (without duplication):

 

(1)           the
principal of and premium (if any) in respect of indebtedness of such Person for
borrowed money;

 

(2)           the
principal of and premium (if any) in respect of obligations of such Person
evidenced by bonds, debentures, notes or other similar instruments;

 

(3)           the
principal component of all obligations of such Person in respect of letters of
credit, bankers’ acceptances or other similar instruments (including
reimbursement obligations with respect thereto except to the extent such
reimbursement obligation relates to a trade payable and such obligation is
satisfied within 30 days of Incurrence);

 

(4)           the
principal component of all obligations of such Person to pay the deferred and
unpaid purchase price of property (except trade payables), which purchase price
is due more than six months after the date of placing such property in service
or taking delivery and title thereto;

 

(5)           Capitalized
Lease Obligations and all Attributable Indebtedness of such Person;

 

15

 

(6)           the
principal component or liquidation preference of all obligations of such Person
with respect to the redemption, repayment or other repurchase of any
Disqualified Stock or, with respect to any Subsidiary that is not a Subsidiary
Guarantor, any Preferred Stock;

 

(7)           the
principal component of all Indebtedness of other Persons secured by a Lien on
any asset of such Person, whether or not such Indebtedness is assumed by such
Person; provided, however, that
the amount of such Indebtedness will be the lesser of (a) the fair market value
of such asset at such date of determination and (b) the amount of such
Indebtedness of such other Persons;

 

(8)           the
principal component of Indebtedness of other Persons to the extent Guaranteed
by such Person; and

 

(9)           to
the extent not otherwise included in this definition, net obligations of such
Person under Hedging Obligations (the amount of any such obligations to be
equal at any time to the termination value of such agreement or arrangement
giving rise to such obligation that would be payable by such Person at such
time).

 

The amount of Indebtedness of any Person at any date will be the
outstanding balance at such date of all unconditional obligations as described
above and the maximum liability, upon the occurrence of the contingency giving
rise to the obligation, of any contingent obligations at such date.

 

In addition, “Indebtedness” of any Person shall include Indebtedness
described in the preceding paragraph that would not appear as a liability on
the balance sheet of such Person if:

 

(1)           such
Indebtedness is the obligation of a partnership or joint venture that is not a
Restricted Subsidiary (a “Joint Venture”);

 

(2)           such
Person or a Restricted Subsidiary of such Person is a general partner of the
Joint Venture (a “General Partner”); and

 

(3)           there
is recourse, by contract or operation of law, with respect to the payment of
such Indebtedness to property or assets of such Person or a Restricted
Subsidiary of such Person; and then such Indebtedness shall be included in an
amount not to exceed:

 

(a)           the lesser of (i) the net assets of the
General Partner and (ii) the amount of such obligations to the extent that
there is recourse, by contract or operation of law, to the property or assets
of such Person or a Restricted Subsidiary of such Person; or

 

(b)           if less than the amount determined pursuant
to clause (a) immediately above, the actual amount of such Indebtedness that is
recourse to such Person or a Restricted Subsidiary of such Person, if the
Indebtedness is evidenced by a writing and is for a determinable amount and the
related

 

16

 

interest expense shall be included in Consolidated Interest Expense to
the extent actually paid by the Company or its Restricted Subsidiaries.

 

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

 

“Initial Purchasers” means, collectively, J.P. Morgan Securities
Inc. and CIBC World Markets Corp. with respect to the Initial Securities.

 

“Initial Securities” has the meaning ascribed to it in the
second introductory paragraph of this Indenture.

 

“Intercreditor Agreement” means that certain Intercreditor
Agreement, dated as of the date of this Indenture, among the Company, the
Subsidiary Guarantors, the Collateral Agent, on behalf of itself and the
Holders, The CIT Group/Business Credit, Inc., as Bank Agent (as defined
therein) and Bank Canadian Agent (as defined therein) with respect to the
Working Capital Facility, substantially in the form attached hereto as Exhibit
F, as the same may be amended, supplemented or otherwise modified from time to
time.

 

“Interest Rate Agreement” means with respect to any Person any
interest rate protection agreement, interest rate future agreement, interest
rate option agreement, interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate hedge agreement or
other similar agreement or arrangement as to which such Person is party or a
beneficiary.

 

“Investment” means, with respect to any Person, all investments
by such Person in other Persons (including Affiliates) in the form of any
direct or indirect advance, loan (other than advances or extensions of credit
to customers in the ordinary course of business) or other extensions of credit
(including by way of Guarantee or similar arrangement, but excluding any debt
or extension of credit represented by a bank deposit other than a time deposit)
or capital contribution to (by means of any transfer of cash or other property
to others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, Indebtedness or other
similar instruments issued by, such Person and all other items that are or
would be classified as investments on a balance sheet prepared in accordance
with GAAP; provided that none of
the following will be deemed to be an Investment:

 

(1)           Hedging
Obligations entered into in the ordinary course of business and in compliance
with this Indenture; and

 

(2)           endorsements
of negotiable instruments and documents in the ordinary course of business.

 

For purposes of Section 3.3,

 

(1)           “Investment”
will include the portion (proportionate to the Company’s equity interest in a
Restricted Subsidiary to be designated as an Unrestricted Subsidiary) of the
fair market value of the net assets of such Restricted Subsidiary at the time
that such Restricted Subsidiary is designated an Unrestricted Subsidiary; provided, however, that upon a
redesignation of such Subsidiary as a Restricted Subsidiary, the Company

 

17

 

will be deemed to continue to have a permanent “Investment” in an
Unrestricted Subsidiary in an amount (if positive) equal to (a) the Company’s
“Investment” in such Subsidiary at the time of such redesignation less (b) the
portion (proportionate to the Company’s equity interest in such Subsidiary) of
the fair market value of the net assets (as conclusively determined by the
Board of Directors of the Company in good faith) of such Subsidiary at the time
that such Subsidiary is so re-designated a Restricted Subsidiary; and

 

(2)           any
property transferred to or from an Unrestricted Subsidiary will be valued at
its fair market value at the time of such transfer, in each case as determined
in good faith by the Board of Directors of the Company.  If the Company or any Restricted Subsidiary
sells or otherwise disposes of any Voting Stock of any Restricted Subsidiary
such that, after giving effect to any such sale or disposition, such entity is
no longer a Subsidiary of the Company, the Company shall be deemed to have made
an Investment on the date of any such sale or disposition equal to the fair
market value (as conclusively determined by the Board of Directors of the
Company in good faith) of the Capital Stock of such Subsidiary not sold or
disposed of.

 

“Issue Date” means March 12, 2004.

 

“Lien” means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any conditional sale or
other title retention agreement or lease in the nature thereof).

 

“Mortgages” means the mortgages, deeds of trust, deeds to secure
Indebtedness or other similar documents securing Liens on the Premises, as well
as the other Collateral secured by and described in the mortgages, deeds of
trust, deeds to secure Indebtedness or other similar documents, in each case
substantially in the form attached hereto as Exhibit E.

 

“Net Available Cash” from an Asset Disposition, Recovery Event
or Asset Swap means cash payments received (including any cash payments received
by way of deferred payment of principal pursuant to a note or installment
receivable or otherwise and net 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 assumption by the
acquiring person of Indebtedness or other obligations relating to the
properties or assets that are the subject of such Asset Disposition or received
in any other non-cash form) therefrom, in each case net of:

 

(1)           all
legal, accounting, investment banking, title and recording tax expenses,
commissions and other fees and expenses Incurred, and all Federal, state,
provincial, foreign and local taxes required to be paid or accrued as a
liability under GAAP (after taking into account any available tax credits or
deductions and any tax sharing agreements), as a consequence of such Asset
Disposition;

 

(2)           all
payments made on any Indebtedness which is secured by any assets subject to
such Asset Disposition, in accordance with the terms of any Lien upon such
assets, or which must by its terms, or in order to obtain a necessary consent
to such Asset

 

18

 

Disposition, or by applicable law be repaid out of the proceeds from
such Asset Disposition;

 

(3)           all
distributions and other payments required to be made to minority interest
holders in Subsidiaries or joint ventures as a result of such Asset
Disposition; and

 

(4)           the
deduction of appropriate amounts to be provided by the seller as a reserve, in
accordance with GAAP, against any liabilities associated with the assets
disposed of in such Asset Disposition and retained by the Company or any
Restricted Subsidiary after such Asset Disposition.

 

“Net Award” means any awards or proceeds in respect of any
condemnation or other eminent domain proceeding relating to any Collateral
deposited in the Collateral Accounts pursuant to the Collateral Documents.

 

“Net Cash Proceeds” means, with respect to any issuance or sale
of Capital Stock or Additional Securities, the cash proceeds of such issuance
or sale net of attorneys’ fees, accountants’ fees, underwriters’ or placement
agents’ fees, listing fees, discounts or commissions and brokerage, consultant
and other fees and charges actually Incurred in connection with such issuance
or sale and net of taxes paid or payable as a result of such issuance or sale
(after taking into account any available tax credit or deductions and any tax
sharing arrangements).

 

“Net Insurance Proceeds” means any awards or proceeds in respect
of any casualty insurance or title insurance claim relating to any Collateral
deposited in the Collateral Account pursuant to the Collateral Documents.

 

“Non-Recourse Debt” means Indebtedness of a Person:

 

(1)           as
to which neither the Company nor any Restricted Subsidiary (a) provides any
Guarantee or credit support of any kind (including any undertaking, guarantee,
indemnity, agreement or instrument that would constitute Indebtedness) or (b)
is directly or indirectly liable (as a guarantor or otherwise);

 

(2)           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 of the Company or any Restricted Subsidiary to declare a default
under such other Indebtedness or cause the payment thereof to be accelerated or
payable prior to its Stated Maturity; and

 

(3)           the
explicit terms of which provide there is no recourse against any of the assets
of the Company or its Restricted Subsidiaries.

 

“Non-U.S. Person” means a Person who is not a U.S. Person (as
defined in Regulation S).

 

“Offering Memorandum” means the offering memorandum, dated
March 5, 2004, relating to the offering by the Company of $162.0 million
of the 93⁄4 % Senior Secured Notes, Series A, due 2010 and any future offering
memoranda relating to Additional Securities.

 

19

 

“Officer” means the Chairman of the Board, the Chief Executive
Officer, the President, the Chief Financial Officer, any Vice President, the
Treasurer or the Secretary of the Company. 
Officer of any Subsidiary Guarantor has a correlative meaning.

 

“Officers’ Certificate” means a certificate signed by two
Officers or by an Officer and either an Assistant Treasurer or an Assistant
Secretary of the Company.

 

“Opinion of Counsel” means a written opinion from legal counsel
who is acceptable to the Trustee.  The
counsel may be an employee of or counsel to the Company.

 

“Pari Passu Indebtedness” means Indebtedness that ranks equally
in right of payment with the Securities.

 

“Permitted Holders” means Charterhouse Equity Partners III, L.P.
and any Affiliate or Related Person thereof.

 

“Permitted Investment” means an Investment by the Company or any
Restricted Subsidiary in:

 

(1)           a
Restricted Subsidiary or a Person which will, upon the making of such
Investment, become a Restricted Subsidiary; provided,
however, that the primary business of such Restricted Subsidiary is
a Related Business;

 

(2)           another
Person if as a result of such Investment such other Person is merged or
consolidated with or into, or transfers or conveys all or substantially all its
assets to, the Company or a Restricted Subsidiary; provided, however, that such Person’s primary business is a
Related Business;

 

(3)           cash
and Cash Equivalents;

 

(4)           receivables
owing to the Company or any Restricted Subsidiary created or acquired in the
ordinary course of business and payable or dischargeable in accordance with
customary trade terms; provided, however,
that such trade terms may include such concessionary trade terms as the Company
or any such Restricted Subsidiary deems reasonable under the circumstances;

 

(5)           payroll,
travel and similar advances to cover matters that are expected at the time of
such advances ultimately to be treated as expenses for accounting purposes and
that are made in the ordinary course of business;

 

(6)           loans
or advances to employees (other than executive officers) made in the ordinary
course of business consistent with past practices of the Company or such
Restricted Subsidiary;

 

(7)           Capital
Stock, obligations or securities received in settlement of debts created in the
ordinary course of business and owing to the Company or any Restricted
Subsidiary or in satisfaction of judgments or pursuant to any plan of
reorganization or similar arrangement upon the bankruptcy or insolvency of a
debtor;

 

20

 

(8)           Investments
made as a result of the receipt of non-cash consideration from an Asset
Disposition that was made pursuant to and in compliance with Section 3.5;

 

(9)           Investments
in existence on the Issue Date;

 

(10)         Hedging
Obligations Incurred in compliance with Section 3.2;

 

(11)         Investments
by the Company or any of its Restricted Subsidiaries, together with all other
Investments pursuant to this clause (11), in an aggregate amount at the time of
such Investment not to exceed $5.0 million outstanding at any one time (with
the fair market value of such Investment being measured at the time made and
without giving effect to subsequent changes in value);

 

(12)         Guarantees
issued in accordance with Section 3.2;

 

(13)         any
Asset Swap made in accordance with Section 3.5.

 

“Permitted Liens” means, with respect to any Person:

 

(1)           Liens
on any assets, real or personal, tangible or intangible, securing Indebtedness
and other obligations under any Credit Facility and related Hedging Obligations
and Liens on assets, real or personal, tangible or intangible, of Restricted
Subsidiaries or the Company securing Guarantees of Indebtedness and other
obligations under such Credit Facility, in each case permitted to be Incurred
under this Indenture pursuant to the provisions described in clause (b)(1) of Section 3.2,
provided that any such Liens on
First Priority Collateral shall be subordinated to the Liens securing the
Securities;

 

(2)           pledges
or deposits by such Person, under workmen’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 such Person is a party, or deposits to secure public or
statutory obligations of such Person or deposits of cash or United States
government bonds to secure surety or appeal bonds to which such Person is a
party, or deposits as security for contested taxes or import or customs duties
or for the payment of rent, in each case Incurred in the ordinary course of
business;

 

(3)           Liens
imposed by law, including carriers’, warehousemen’s and mechanics’ Liens, in
each case for sums not yet due or being contested in good faith by appropriate
proceedings if a reserve or other appropriate provisions, if any, as shall be
required by GAAP shall have been made in respect thereof;

 

(4)           Liens
for taxes, assessments or other governmental charges not yet delinquent or
which are being contested in good faith by appropriate proceedings, provided that appropriate reserves
required pursuant to GAAP have been made in respect thereof;

 

21

 

(5)           Liens
in favor of issuers of surety or performance bonds or letters of credit or
bankers’ acceptances issued pursuant to the request of and for the account of
such Person in the ordinary course of its business; provided, however, that such letters of credit do not
constitute Indebtedness;

 

(6)           encumbrances,
ground leases, easements or reservations of, or rights of others for, licenses,
rights of way, sewers, electric lines, telegraph and telephone lines and other
similar purposes, or zoning, building codes or other restrictions (including,
without limitation, minor defects or irregularities in title and similar
encumbrances) as to the use of real properties or Liens incidental to the
conduct of the business of such Person or to the ownership of its properties
which do not individually or in the aggregate materially adversely affect the
value of said properties or materially impair their use in the operation of the
business of such Person;

 

(7)           Liens
securing Hedging Obligations so long as the related Indebtedness is, and is
permitted to be under this Indenture, secured by a Lien on the same property
securing such Hedging Obligation;

 

(8)           leases,
licenses, subleases and sublicenses of assets (including, without limitation,
real property and intellectual property rights) which do not materially
interfere with the ordinary conduct of the business of the Company or any of
its Restricted Subsidiaries, provided
that such leases, licenses, subleases and sublicenses are subordinated to the
Liens on the Collateral that secure the Securities;

 

(9)           judgment
Liens not giving rise to an Event of Default so long as such Lien is adequately
bonded and any appropriate legal proceedings which may have been duly initiated
for the review of such judgment have not been finally terminated or the period
within which such proceedings may be initiated has not expired;

 

(10)         Liens
for the purpose of securing the payment of all or a part of the purchase price
of, or Capitalized Lease Obligations, purchase money obligations or other
payments Incurred to finance the acquisition, improvement or construction of,
assets or property acquired or constructed in the ordinary course of business; provided that:

 

(a)           the aggregate principal amount of
Indebtedness secured by such Liens pursuant to this clause (10) is otherwise
permitted to be Incurred under this Indenture, does not exceed $5.0 million at
any time outstanding and does not exceed the cost of the assets or property so
acquired or constructed; and

 

(b)           such Liens are created within 180 days of
construction or acquisition of such assets or property and do not encumber any
other assets or property of the Company or any Restricted Subsidiary other than
such assets or property and assets affixed or appurtenant thereto;

 

(11)         Liens
arising solely by virtue of any statutory or common law provisions relating to
banker’s Liens, rights of set-off or similar rights and remedies as to deposit
accounts or other funds maintained with a depositary institution; provided that:

 

22

 

(a)           such deposit account is not a dedicated cash
collateral account and is not subject to restrictions against access by the
Company in excess of those set forth by regulations promulgated by the Federal
Reserve Board; and

 

(b)           such deposit account is not intended by the
Company or any Restricted Subsidiary to provide collateral to the depository
institution;

 

(12)         Liens
arising from Uniform Commercial Code financing statement filings regarding
operating leases entered into by the Company and its Restricted Subsidiaries in
the ordinary course of business;

 

(13)         Liens
existing on the Issue Date;

 

(14)         Liens
on property or shares of stock of a Person at the time such Person becomes a
Restricted Subsidiary; provided, however,
that such Liens are not created, Incurred or assumed in connection with, or in
contemplation of, such other Person becoming a Restricted Subsidiary; provided further, however, that any such
Lien may not extend to any other property owned by the Company or any
Restricted Subsidiary;

 

(15)         Liens
on property at the time the Company or a Restricted Subsidiary acquired the
property, including any acquisition by means of a merger or consolidation with
or into the Company or any Restricted Subsidiary; provided, however, that such Liens are not created, Incurred
or assumed in connection with, or in contemplation of, such acquisition; provided further, however, that such Liens
may not extend to any other property owned by the Company or any Restricted
Subsidiary;

 

(16)         Liens
securing Indebtedness or other obligations of a Restricted Subsidiary owing to
the Company or another Restricted Subsidiary;

 

(17)         Liens
securing the Securities (and any Additional Securities issued pursuant to, and
in accordance with, the terms of this Indenture) and Subsidiary Guarantees or
any obligations owing to the Trustee or the Collateral Agent under this
Indenture, the Collateral Documents or the Intercreditor Agreement;

 

(18)         Liens
securing Refinancing Indebtedness Incurred to refinance Indebtedness that was
previously so secured, provided
that (a) any such Lien is limited to all or part of the same property or assets
(plus improvements, accessions, proceeds or dividends or distributions in
respect thereof) that secured (or, under the written arrangements under which
the original Lien arose, could secure) the Indebtedness being refinanced or is
in respect of property that is the security for a Permitted Lien hereunder and
(b) any such Lien is no less favorable to the Holders of the Securities and is
no more favorable to the lienholder with respect to such Lien than the Lien in
respect of the Indebtedness being refinanced;

 

(19)         any
interest or title of a lessor under any Capitalized Lease Obligation or
operating lease;

 

23

 

(20)         Liens
on property of the Company or any Restricted Subsidiary that are the subject of
a Sale/Leaseback Transaction securing Attributable Indebtedness Incurred in
connection with such Sale/Leaseback Transaction; provided that the Net Available Cash from such
Sale/Leaseback Transaction are applied in accordance with Section 3.5; and

 

(21)         Liens
on the water treatment facility, and related fixtures and equipment, of a
Subsidiary Guarantor located at Menominee, Michigan securing an industrial
revenue bond in an amount not to exceed $850,000.

 

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

 

“Predecessor Security” of any particular Security means every
previous Security evidencing all or a portion of the same debt as that
evidenced by such particular Security; and, for the purposes of this
definition, any Security authenticated and delivered under Section 2.10
in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall
be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen
Security.

 

“Preferred Stock”, as applied to the Capital Stock of any
corporation, means Capital Stock of any class or classes (however designated)
which is preferred as to the payment of dividends, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.

 

“Public Equity Offering” means a public offering for cash by the
Company or Holdings, as the case may be, of its Common Stock, or options,
warrants or rights with respect to its Common Stock, other than public
offerings with respect to Holdings’ or the Company’s Common Stock, or options,
warrants or rights, registered on Form S-4 or S-8.

 

A “Public Market” exists at any time with respect to the Common
Stock of the Company or Holdings, as the case may be, if:

 

(1)           the
Common Stock of the Company or Holdings, as the case may be, is then registered
with SEC pursuant to Section 12(b) or 12(g) of the Exchange Act and traded
either on a national securities exchange or in the National Association of
Securities Dealers Automated Quotation System; and

 

(2)           at
least 15% of the total issued and outstanding Common Stock of the Company or
Holdings, as the case may be, has been distributed prior to such time by means
of an effective registration statement under the Securities Act.

 

“QIB” means any “qualified institutional buyer” as such term is
defined in Rule 144A.

 

“Receivable” means a right to receive payment arising from a
sale or lease of goods or the performance of services by a Person pursuant to
an arrangement with another

 

24

 

Person pursuant to which such other Person is obligated to pay for
goods or services under terms that permit the purchase of such goods and
services on credit and shall include, in any event, any items of property that
would be classified as an “account,” “chattel paper,” “payment intangible” or
“instrument” under the Uniform Commercial Code as in effect in the State of New
York and any “supporting obligations” as so defined.

 

“Receivables Fees” means any fees or interest paid to purchasers
or lenders providing the financing in connection with a factoring agreement or
other similar agreement, including any such amounts paid by discounting the
face amount of Receivables or participations therein transferred in connection
with a factoring agreement or other similar arrangement, regardless of whether
any such transaction is structured as on-balance sheet or off-balance sheet or
through a Restricted Subsidiary or an Unrestricted Subsidiary.

 

“Recovery Event” means any event, occurrence, claim or
proceeding that results in any Net Award or Net Insurance Proceeds being
deposited into the Collateral Accounts pursuant to the Collateral Documents.

 

“Redemption Date” means, with respect to any redemption of
Securities, the date of redemption with respect thereto.

 

“Refinancing Indebtedness” means Indebtedness that is Incurred
to refund, refinance, replace, exchange, renew, repay or extend (including
pursuant to any defeasance or discharge mechanism) (collectively, “refinance,”
“refinances” and “refinanced” shall have a correlative meaning) any Indebtedness
existing on the date of this Indenture or Incurred in compliance with this
Indenture (including Indebtedness of the Company that refinances Indebtedness
of any Restricted Subsidiary and Indebtedness of any Restricted Subsidiary that
refinances Indebtedness of another Restricted Subsidiary) including
Indebtedness that refinances Refinancing Indebtedness, provided, however, that:

 

(1)           (a)
if the Stated Maturity of the Indebtedness being refinanced is earlier than the
Stated Maturity of the Securities, the Refinancing Indebtedness has a Stated
Maturity no earlier than the Stated Maturity of the Indebtedness being
refinanced or (b) if the Stated Maturity of the Indebtedness being refinanced
is later than the Stated Maturity of the Securities, the Refinancing
Indebtedness has a Stated Maturity at least 91 days later than the Stated
Maturity of the Securities;

 

(2)           the
Refinancing Indebtedness has an Average Life at the time such Refinancing
Indebtedness is Incurred that is equal to or greater than the Average Life of
the Indebtedness being refinanced;

 

(3)           such
Refinancing Indebtedness is Incurred in an aggregate principal amount (or if
issued with original issue discount, an aggregate issue price) that is equal to
or less than the sum of the aggregate principal amount (or if issued with
original issue discount, the aggregate accreted value) then outstanding or of
the Indebtedness being refinanced (plus, without duplication, any additional
Indebtedness Incurred to pay interest or premiums required by the instruments
governing such existing Indebtedness and fees Incurred in connection
therewith);

 

25

 

(4)           if
the Indebtedness being refinanced is subordinated in right of payment to the
Securities or the Subsidiary Guarantees, such Refinancing Indebtedness is
subordinated in right of payment to the Securities or the Subsidiary Guarantees
on terms at least as favorable to the Holders as those contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and

 

(5)           if
the Indebtedness being refinanced is secured, the Lien securing Refinancing
Indebtedness Incurred to refinance Indebtedness that was previously so secured
is no less favorable to the Holders of the Securities and is no more favorable
to the lienholder with respect to such Lien than the Lien in respect of the
Indebtedness being refinanced.

 

“Registration Rights Agreement” means that certain registration
rights agreement dated as of the date of this Indenture by and among the
Company, the Subsidiary Guarantors and the initial purchasers set forth therein
and any future registration rights agreements with respect to Additional
Securities.

 

“Regulation S” means Regulation S under the Securities Act.

 

“Related Business” means any business which is the same as or
related, ancillary or complementary to any of the businesses of the Company and
its Restricted Subsidiaries on the date of this Indenture.

 

“Related Business Assets” means assets used or useful in a
Related Business.

 

“Related Person” with respect to any Permitted Holder means:

 

(1)           any
controlling stockholder or a majority (or more) owned Subsidiary of such
Permitted Holder or, in the case of an individual, any spouse or immediate
family member of such Permitted Holder, any trust created for the benefit of
such individual or such individual’s estate, executor, administrator, committee
or beneficiaries; or

 

(2)           any
trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or Persons beneficially holding a majority (or
more) controlling interest of which consist of such Permitted Holder and/or
such other Persons referred to in the immediately preceding clause (1).

 

“Restoration” has the meaning ascribed to it in the applicable
Collateral Document.

 

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

 

“Restricted Securities” means Initial Securities and Additional
Securities bearing one of the restrictive legends described in Section 2.1(d).

 

“Restricted Securities Legend” means the Private Placement
Legend set forth in Section 2.1(d)(1) or the Regulation S Legend
set forth in Section 2.1(d)(2), as applicable.

 

26

 

“Restricted Subsidiary” means any Subsidiary of the Company
other than an Unrestricted Subsidiary.

 

“Rule 144A” means Rule 144A under the Securities Act.

 

“Sale/Leaseback Transaction” means an arrangement relating to
property now owned or hereafter acquired whereby the Company or a Restricted
Subsidiary transfers such property to a Person and the Company or a Restricted
Subsidiary leases it from such Person.

 

“SEC” means the United States Securities and Exchange
Commission.

 

“Second Priority Collateral” means the portion of the Collateral
as to which the Securities have a second-priority Lien.

 

“Second Priority Collateral Account” has the meaning ascribed to
it in the applicable Collateral Document.

 

 “Securities” has the
meaning ascribed to it in the second introductory paragraph of this Indenture.

 

“Securities Act” means the Securities Act of 1933 (15 U.S.C.
§§ 77a-77aa), as amended, and the rules and regulations of the SEC
promulgated thereunder.

 

“Securities Custodian” means the custodian with respect to the
Global Security (as appointed by DTC), or any successor Person thereto and
shall initially be the Trustee.

 

“Shelf Registration Statement” shall have the meaning set forth
in the Registration Rights Agreement.

 

“Significant Subsidiary” means any Restricted Subsidiary that
would be a “Significant Subsidiary” of the Company within the meaning of Rule
1-02 under Regulation S-X promulgated by the SEC.

 

“Stated Maturity” means, with respect to any security, the date
specified in such security as the fixed date on which the payment of principal
of such security is due and payable, including pursuant to any mandatory
redemption provision, but shall not include any date on which the payment of
principal of such security is due and payable as a result of any contingent
obligations to repay, redeem or repurchase any such principal prior to the date
originally scheduled for the payment thereof.

 

“Subordinated Obligation” means any Indebtedness of the Company
(whether outstanding on the Issue Date or thereafter Incurred) which is subordinate
or junior in right of payment to the Securities pursuant to a written
agreement.

 

“Subsidiary” of any Person means (a) any corporation,
association or other business entity (other than a partnership, joint venture,
limited liability company or similar entity) of which more than 50% of the
total ordinary voting power of shares of Capital Stock entitled (without regard
to the occurrence of any contingency) to vote in the election of directors,

 

27

 

managers or trustees thereof (or persons performing similar functions)
or (b) any partnership, joint venture limited liability company or similar
entity of which more than 50% of the capital accounts, distribution rights,
total equity and voting interests or general or limited partnership interests,
as applicable, is, in the case of clauses (a) and (b), at the time owned or
controlled, directly or indirectly, by (1) such Person, (2) such Person and one
or more Subsidiaries of such Person or (3) one or more Subsidiaries of such
Person.  Unless otherwise specified
herein, each reference to a Subsidiary will refer to a Subsidiary of the
Company.

 

“Subsidiary Guarantee” means, individually, any Guarantee of
payment of the Securities and the Exchange Securities issued in a registered
exchange offer pursuant to the Registration Rights Agreement by a Subsidiary
Guarantor pursuant to the terms of this Indenture and any supplemental
indenture hereto, and, collectively, all such Guarantees.  Each such Subsidiary Guarantee will be in the
form prescribed by this Indenture.

 

“Subsidiary Guarantor” means each Subsidiary of the Company in
existence on the Issue Date and any Restricted Subsidiary (other than a Foreign
Subsidiary that does not Guarantee any Indebtedness of the Company or any
Restricted Subsidiary other than Indebtedness of a Foreign Subsidiary) created
or acquired by the Company after the Issue Date.

 

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

 

“Trustee” means the party named as such in this Indenture until
a successor replaces it and, thereafter, means the successor.

 

“Trust Officer” shall mean, when used with respect to the
Trustee, any officer within the corporate trust department of the Trustee,
including any vice president, assistant vice president, secretary, assistant
treasurer, trust officer or any other officer of the Trustee who customarily
performs functions similar to those performed by the Persons who at the time
shall be such officers, respectively, or to whom any corporate trust matter is
referred because of such person’s knowledge of and familiarity with the
particular subject and who shall have direct responsibility for the
administration of this Indenture.

 

“Unrestricted Subsidiary” means:

 

(1)           any
Subsidiary of the Company that at the time of determination shall be designated
an Unrestricted Subsidiary by the Board of Directors of the Company in the
manner provided below; and

 

(2)           any
Subsidiary of an Unrestricted Subsidiary.

 

The Board of Directors of the Company may designate any Subsidiary of
the Company (including any newly acquired or newly formed Subsidiary or a
Person becoming a Subsidiary through merger or consolidation or Investment
therein) to be an Unrestricted Subsidiary only if:

 

(1)           such
Subsidiary or any of its Subsidiaries does not own any Capital Stock or
Indebtedness of or have any Investment in, or own or hold any Lien on any
property

 

28

 

of, any other Subsidiary of the Company which is not a Subsidiary of
the Subsidiary to be so designated or otherwise an Unrestricted Subsidiary;

 

(2)           all
the Indebtedness of such Subsidiary and its Subsidiaries shall, at the date of
designation, and will at all times thereafter, consist of Non-Recourse Debt;

 

(3)           such
designation and the Investment of the Company in such Subsidiary complies with Section 3.3;

 

(4)           such
Subsidiary, either alone or in the aggregate with all other Unrestricted
Subsidiaries, does not operate, directly or indirectly, all or substantially
all of the business of the Company and its Subsidiaries;

 

(5)           such
Subsidiary is a Person with respect to which neither the Company nor any of its
Restricted Subsidiaries has any direct or indirect obligation:

 

(a)           to subscribe for additional Capital Stock of
such Person; or

 

(b)           to maintain or preserve such Person’s
financial condition or to cause such Person to achieve any specified levels of
operating results; and

 

(6)           on
the date such Subsidiary is designated an Unrestricted Subsidiary, such
Subsidiary is not a party to any agreement, contract, arrangement or
understanding with the Company or any Restricted Subsidiary with terms
substantially less favorable to the Company than those that might have been
obtained from Persons who are not Affiliates of the Company.

 

Any such designation by the Board of Directors of the Company shall be
evidenced to the Trustee by filing with the Trustee a Board Resolution of the
Company giving effect to such designation and an Officers’ Certificate
certifying that such designation complies with the foregoing conditions.  If, at any time, any Unrestricted Subsidiary
would fail to meet the foregoing 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 as of such date.

 

The Board of Directors of the Company may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided
that immediately after giving effect to such designation, no Default or Event
of Default shall have occurred and be continuing or would occur as a
consequence thereof and the Company could Incur at least $1.00 of additional
Indebtedness under Section 3.2(a) on a pro forma basis taking into
account such designation.

 

“U.S. Government Obligations” means securities that are (a)
direct obligations of the United States of America for the timely payment of
which its full faith and credit is pledged or (b) obligations of a Person
controlled or supervised by and acting as an agency or instrumentality of the
United States of America the timely payment of which is unconditionally
guaranteed as a full faith and credit obligation of the United States of
America, which, in either case, are not callable or redeemable at the option of
the issuer thereof, and shall also include a depositary receipt issued by a
bank (as defined in Section 3(a)(2) of the Securities Act), as

 

29

 

custodian with respect to any such U.S. Government Obligations or a
specific payment of principal of or interest on any such U.S. Government
Obligations held by such custodian for the account of the holder of such
depositary receipt; provided that
(except as required by law) such custodian is not authorized to make any
deduction from the amount payable to the holder of such depositary receipt from
any amount received by the custodian in respect of the U.S. Government
Obligations or the specific payment of principal of or interest on the U.S.
Government Obligations evidenced by such depositary receipt.

 

“Voting Stock” of a corporation means all classes of Capital
Stock of such corporation then outstanding and normally entitled to vote in the
election of directors.

 

“Wholly-Owned Subsidiary” means a Restricted Subsidiary, all of
the Capital Stock of which (other than directors’ qualifying shares) is owned
by the Company or another Wholly-Owned Subsidiary.

 

“Working Capital Facility” means the Financing Agreement entered
into as of the date of this Indenture among Cellu Tissue Corporation-Natural
Dam, Cellu Tissue Corporation-Neenah, Cellu Tissue LLC, Coastal Paper Company
and Menominee Acquisition Corporation, as U.S. borrowers, Interlake Acquisition
Corporation, as Canadian borrower, the Company, Van Paper Company and Van
Timber Company, as guarantors, Cellu Paper Holdings, Inc., the lenders parties
thereto and The CIT Group/Business Credit, Inc., as agent (or its successor in
such capacity), as the same may be amended, supplemented, modified, renewed,
refunded, replaced or refinanced in whole or in part from time to time (and
whether or not with the original agent and lenders or another agent or agents
or other lenders).

 

SECTION 1.2.   Other Definitions.

 

	
  Term

  	
   

  	
  Defined in

  Section

  
	
   

  	
   

  	
   

  
	
  “Additional Amounts”

  	
   

  	
   

  	
  5.9(a)

  
	
   

  	
   

  	
   

  	
   

  
	
  “Additional Restricted Securities”

  	
   

  	
   

  	
  2.1(b)

  
	
   

  	
   

  	
   

  	
   

  
	
  “Affiliate Transaction”

  	
   

  	
   

  	
  3.8

  
	
   

  	
   

  	
   

  	
   

  
	
  “Agent Members”

  	
   

  	
   

  	
  2.1(e)

  
	
   

  	
   

  	
   

  	
   

  
	
  “Asset Disposition Offer Amount”

  	
   

  	
   

  	
  3.5(c)

  
	
   

  	
   

  	
   

  	
   

  
	
  “Asset Disposition Offer Period”

  	
   

  	
   

  	
  3.5(c)

  
	
   

  	
   

  	
   

  	
   

  
	
  “Asset Disposition Offer”

  	
   

  	
   

  	
  3.5(b)

  
	
   

  	
   

  	
   

  	
   

  
	
  “Asset Disposition Purchase Date”

  	
   

  	
   

  	
  3.5(c)

  
	
   

  	
   

  	
   

  	
   

  
	
  “Authenticating Agent”

  	
   

  	
   

  	
  2.2

  

 

30

 

	
  Term

  	
   

  	
  Defined in

  Section

  
	
   

  	
   

  	
   

  
	
  “Change in Tax Law”

  	
   

  	
   

  	
  5.9(b)

  
	
   

  	
   

  	
   

  	
   

  
	
  “Change of Control Offer”

  	
   

  	
   

  	
  3.10

  
	
   

  	
   

  	
   

  	
   

  
	
  “Change of Control Payment”

  	
   

  	
   

  	
  3.10

  
	
   

  	
   

  	
   

  	
   

  
	
  “Change of Control Payment Date”

  	
   

  	
   

  	
  3.10

  
	
   

  	
   

  	
   

  	
   

  
	
  “Clearstream”

  	
   

  	
   

  	
  2.1(b)

  
	
   

  	
   

  	
   

  	
   

  
	
  “Collateral Disposition Offer”

  	
   

  	
   

  	
  3.5(a)

  
	
   

  	
   

  	
   

  	
   

  
	
  “Company Order”

  	
   

  	
   

  	
  2.2

  
	
   

  	
   

  	
   

  	
   

  
	
  “covenant defeasance option”

  	
   

  	
   

  	
  8.1(b)

  
	
   

  	
   

  	
   

  	
   

  
	
  “cross acceleration provision”

  	
   

  	
   

  	
  6.1(6)(b)

  
	
   

  	
   

  	
   

  	
   

  
	
  “Defaulted Interest”

  	
   

  	
   

  	
  2.13

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  “Euroclear”

  	
   

  	
   

  	
  2.1(b)

  
	
   

  	
   

  	
   

  	
   

  
	
  “Event of Default”

  	
   

  	
   

  	
  6.1

  
	
   

  	
   

  	
   

  	
   

  
	
  “Excess Collateral Proceeds”

  	
   

  	
   

  	
  3.5(a)

  
	
   

  	
   

  	
   

  	
   

  
	
  “Excess Proceeds”

  	
   

  	
   

  	
  3.5(b)

  
	
   

  	
   

  	
   

  	
   

  
	
  “Exchange Global Note”

  	
   

  	
   

  	
  2.1(b)

  
	
   

  	
   

  	
   

  	
   

  
	
  “General Partner”

  	
   

  	
   

  	
  1.1

  
	
   

  	
   

  	
   

  	
   

  
	
  “Global Securities”

  	
   

  	
   

  	
  2.1(b)

  
	
   

  	
   

  	
   

  	
   

  
	
  “Institutional Accredited Investor Global Note”

  	
   

  	
   

  	
  2.1(b)

  
	
   

  	
   

  	
   

  	
   

  
	
  “Institutional Accredited Investor Note”

  	
   

  	
   

  	
  2.1 (b)

  
	
   

  	
   

  	
   

  	
   

  
	
  “Joint Venture”

  	
   

  	
   

  	
  1.1

  
	
   

  	
   

  	
   

  	
   

  
	
  “judgment default provision”

  	
   

  	
   

  	
  6.1(9)

  
	
   

  	
   

  	
   

  	
   

  
	
  “legal defeasance option”

  	
   

  	
   

  	
  8.1(b)

  
	
   

  	
   

  	
   

  	
   

  
	
  “Legal Holiday”

  	
   

  	
   

  	
  12.8

  

 

31

 

	
  Term

  	
   

  	
  Defined in

  Section

  
	
   

  	
   

  	
   

  
	
  “Obligations”

  	
   

  	
   

  	
  10.1

  
	
   

  	
   

  	
   

  	
   

  
	
  “Paying Agent”

  	
   

  	
   

  	
  2.3

  
	
   

  	
   

  	
   

  	
   

  
	
  “Payment Default”

  	
   

  	
   

  	
  6.1(6)(a)

  
	
   

  	
   

  	
   

  	
   

  
	
  “Payor”

  	
   

  	
   

  	
  5.9(a)

  
	
   

  	
   

  	
   

  	
   

  
	
  “Permanent Regulation S Global Note”

  	
   

  	
   

  	
  2.1(b)

  
	
   

  	
   

  	
   

  	
   

  
	
  “Premises”

  	
   

  	
   

  	
  11.5

  
	
   

  	
   

  	
   

  	
   

  
	
  “Private Placement Legend”

  	
   

  	
   

  	
  2.1(d)

  
	
   

  	
   

  	
   

  	
   

  
	
  “protected purchaser”

  	
   

  	
   

  	
  2.9

  
	
   

  	
   

  	
   

  	
   

  
	
  “Registrar”

  	
   

  	
   

  	
  2.3

  
	
   

  	
   

  	
   

  	
   

  
	
  “Regulation S Global Note”

  	
   

  	
   

  	
  2.1(b)

  
	
   

  	
   

  	
   

  	
   

  
	
  “Regulation S Legend”

  	
   

  	
   

  	
  2.1(d)

  
	
   

  	
   

  	
   

  	
   

  
	
  “Regulation S Notes”

  	
   

  	
   

  	
  2.1(b)

  
	
   

  	
   

  	
   

  	
   

  
	
  “Relevant Tax Jurisdiction”

  	
   

  	
   

  	
  5.9(a)

  
	
   

  	
   

  	
   

  	
   

  
	
  “Resale Restriction Termination Date”

  	
   

  	
   

  	
  2.6(a)

  
	
   

  	
   

  	
   

  	
   

  
	
  “Restricted Payment”

  	
   

  	
   

  	
  3.3

  
	
   

  	
   

  	
   

  	
   

  
	
  “Restricted Period”

  	
   

  	
   

  	
  2.1(b)

  
	
   

  	
   

  	
   

  	
   

  
	
  “Rule 144A Global Note”

  	
   

  	
   

  	
  2.1(b)

  
	
   

  	
   

  	
   

  	
   

  
	
  “Rule 144A Note”

  	
   

  	
   

  	
  2.1(b)

  
	
   

  	
   

  	
   

  	
   

  
	
  “Securities Register”

  	
   

  	
   

  	
  2.3

  
	
   

  	
   

  	
   

  	
   

  
	
  “Special Interest Payment Date”

  	
   

  	
   

  	
  2.13(a)

  
	
   

  	
   

  	
   

  	
   

  
	
  “Special Record Date”

  	
   

  	
   

  	
  2.13(a)

  
	
   

  	
   

  	
   

  	
   

  
	
  “substantially concurrent sale”

  	
   

  	
   

  	
  3.3(b)

  
	
   

  	
   

  	
   

  	
   

  
	
  “Successor Company”

  	
   

  	
   

  	
  4.1(1)

  

 

32

 

	
  Term

  	
   

  	
  Defined in

  Section

  
	
   

  	
   

  	
   

  
	
  “Temporary Regulation S Global Note”

  	
   

  	
   

  	
  2.1(b)

  

 

SECTION 1.3.   Incorporation by Reference of Trust
Indenture Act. 
This Indenture is subject to the mandatory provisions of the TIA which
are incorporated by reference in and made a part of this Indenture.  The following TIA terms have the following
meanings:

 

“Commission” means the SEC.

 

“indenture securities” means the Securities.

 

“indenture security holder” means a Securityholder.

 

“indenture to be qualified” means this Indenture.

 

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

 

“obligor” on the indenture securities means the Company and any other
obligor on the indenture securities.

 

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

 

SECTION 1.4.   Rules of Construction.  Unless the context otherwise requires:

 

(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)           “including”
means including without limitation;

 

(5)           words
in the singular include the plural and words in the plural include the
singular;

 

(6)           the
principal amount of any noninterest bearing or other discount security at any
date shall be the principal amount thereof that would be shown on a balance
sheet of the issuer dated such date prepared in accordance with GAAP;

 

(7)           the
principal amount of any Preferred Stock shall be (i) the maximum liquidation
value of such Preferred Stock or (ii) the maximum mandatory

 

33

 

redemption or mandatory repurchase price with respect to such Preferred
Stock, whichever is greater;

 

(8)           all
amounts expressed in this Indenture or in any of the Securities in terms of
money refer to the lawful currency of the United States of America; and

 

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

 

ARTICLE II

 

THE SECURITIES

 

SECTION 2.1.   Form, Dating and Terms.

 

(a)  The aggregate principal
amount of Securities that may be authenticated and delivered under this
Indenture is unlimited.  The Initial
Securities issued on the date hereof will be in an aggregate principal amount
of $162,000,000.  In addition, the
Company may issue, from time to time in accordance with the provisions of this
Indenture, Additional Securities
(as provided herein) and Exchange Securities. 
Furthermore, Securities may be authenticated and delivered upon
registration of transfer, exchange or in lieu of, other Securities pursuant to Section 2.2,
2.6, 2.10, 2.12, 5.8 or 9.5, in connection
with a Collateral Disposition Offer or Asset Disposition Offer pursuant to Section 3.5
or in connection with a Change of Control Offer pursuant to Section 3.10.

 

Notwithstanding anything to the contrary contained herein, the Company
may not issue any Additional Securities, unless:

 

(1)           Immediately
after giving effect to such issuance, no Default or Event of Default shall have
occurred and be continuing;

 

(2)           Immediately
after giving effect to such issuance, the Company would be able to Incur at
least an additional $1.00 of Indebtedness pursuant to Section 3.2(a);
and

 

(3)           The
Net Cash Proceeds from any such issuance shall be deposited into the First
Priority Collateral Account and invested by the Company in Additional Assets,
which Additional Assets are thereupon with their acquisition added to the First
Priority Collateral securing the Securities in accordance with Section 11.7(c);
provided that, prior to such
investment (and any related withdrawal from the First Priority Collateral
Account), the Company shall have delivered to the Trustee an Officers’
Certificate stating that the funds to be withdrawn from the First Priority
Collateral Account are to be invested in Additional Assets in compliance with
this clause (3).

 

34

 

The Initial Securities shall be known and designated as “93⁄4% Senior
Secured Notes, Series A, due 2010” of the Company.  Additional Securities issued as Restricted
Securities shall be known and designated as “93⁄4% Senior Secured Notes, Series
A, due 2010” of the Company.  Additional
Securities issued other than as Restricted Securities shall be known and
designated as “93⁄4% Senior Secured Notes, Series B, due 2010” of the Company,
and Exchange Securities shall be known and designated as “93⁄4% Senior Secured
Notes, Series B, due 2010” of the Company.

 

With respect to any Additional Securities, the Company shall set forth
in (a) a Board Resolution and (b) (i) an Officers’ Certificate or (ii) one or
more indentures supplemental hereto, the following information:

 

(1)           the
aggregate principal amount of such Additional Securities to be authenticated
and delivered pursuant to this Indenture;

 

(2)           the
issue price and the issue date of such Additional Securities, including the
date from which interest shall accrue; and

 

(3)           whether
such Additional Securities shall be Restricted Securities issued in the form of
Exhibit A hereto and/or shall be issued in the form of Exhibit B
hereto.

 

In authenticating and delivering Additional Securities, the Trustee
shall be entitled to receive and shall be fully protected in relying upon, in
addition to the Opinion of Counsel and Officers’ Certificate required by
Section 12.4, an Opinion of Counsel as to the due authorization,
execution, delivery, validity and enforceability of such Additional Securities.

 

The Initial Securities, the Additional Securities and the Exchange
Securities shall be considered collectively as a single class for all purposes
of this Indenture.  Holders of the
Initial Securities, the Additional Securities and the Exchange Securities will
vote and consent together on all matters to which such Holders are entitled to
vote or consent as one class, and none of the Holders of the Initial
Securities, the Additional Securities or the Exchange Securities shall have the
right to vote or consent as a separate class on any matter to which such
Holders are entitled to vote or consent.

 

If any of the terms of any Additional Securities are established by
action taken pursuant to Board Resolutions of the Company, a copy of an
appropriate record of such action shall be certified by the Secretary or any
Assistant Secretary of the Company and delivered to the Trustee at or prior to
the delivery of the Officers’ Certificate or the indenture supplemental hereto
setting forth the terms of the Additional Securities.

 

(b)  The Initial Securities are
being offered and sold by the Company pursuant to a Purchase Agreement, dated
March 5, 2004, among the Company, the Subsidiary Guarantors, J.P. Morgan
Securities Inc. and the other initial purchasers named therein.  The Initial Securities and any Additional
Securities (if issued as Restricted Securities) (the “Additional Restricted
Securities”) will be resold initially only to (A) QIBs in reliance on Rule
144A and (B) Non-U.S. Persons in reliance on Regulation S.  Such Initial Securities and Additional
Restricted Securities may thereafter be transferred to, among others, QIBs,
purchasers in reliance on Regulation S and IAIs in accordance with Rule 501 of
the Securities Act, in each case, in accordance with the

 

35

 

procedure
described herein.  Additional Securities
offered after the date hereof may be offered and sold by the Company from time
to time pursuant to one or more purchase agreements in accordance with
applicable law.

 

Initial Securities and Additional Restricted Securities offered and
sold to QIBs in the United States of America in reliance on Rule 144A (the “Rule
144A Notes”) shall be issued in the form of a permanent global Security
substantially in the form of Exhibit A, which is hereby incorporated by
reference and made a part of this Indenture, including appropriate legends as
set forth in Section 2.1(d) (the “Rule 144A Global Note”),
deposited with the Trustee, as custodian for DTC, duly executed by the Company
and authenticated by the Trustee as hereinafter provided.  The Rule 144A Global Note may be represented
by more than one certificate, if so required by DTC’s rules regarding the
maximum principal amount to be represented by a single certificate.  The aggregate principal amount of the Rule
144A Global Note may from time to time be increased or decreased by adjustments
made on the records of the Trustee, as custodian for DTC or its nominee, as
hereinafter provided.

 

Initial Securities and any Additional Restricted Securities offered and
sold outside the United States of America (the “Regulation S Notes”) in
reliance on Regulation S shall initially be issued in the form of a temporary
global Security (the “Temporary Regulation S Global Note”), without
interest coupons.  Beneficial interests
in the Temporary Regulation S Global Note will be exchanged for beneficial
interests in a corresponding permanent global Security, without interest
coupons, substantially in the form of Exhibit A including appropriate
legends as set forth in Section 2.1(d) (the “Permanent
Regulation S Global Note” and, together with the Temporary Regulation S
Global Note, each a “Regulation S Global Note”) within a reasonable
period after the expiration of the Restricted Period (as defined below) upon
delivery of the certification contemplated by Section 2.7.  Each Regulation S Global Note will be
deposited upon issuance with, or on behalf of, the Trustee as custodian for DTC
in the manner described in this Article II for credit to the
respective accounts of the purchasers (or to such other accounts as they may
direct), including, but not limited to, accounts at Euroclear Bank S.A./N.V. (“Euroclear”)
or Clearstream Banking, société anonyme (“Clearstream”).  Prior to the 40th day after the later of the
commencement of the offering of the Initial Securities and the Issue Date (such
period through and including such 40th day, the “Restricted Period”),
interests in the Temporary Regulation S Global Note may only be transferred to
non-U.S. persons pursuant to Regulation S, unless exchanged for interests in a
Global Security in accordance with the transfer and certification requirements
described herein.

 

Investors may hold their interests in the Regulation S Global Note
through organizations other than Euroclear or Clearstream that are participants
in DTC’s system or directly through Euroclear or Clearstream, if they are
participants in such systems, or indirectly through organizations which are
participants in such systems.  If such
interests are held through Euroclear or Clearstream, Euroclear and Clearstream
will hold such interests in the applicable Regulation S Global Note on behalf
of their participants through customers’ securities accounts in their
respective names on the books of their respective depositaries.  Such depositaries, in turn, will hold such
interests in the applicable Regulation S Global Note in customers’ securities
accounts in the depositaries’ names on the books of DTC.

 

36

 

The Regulation S Global Note may be represented by more than one
certificate, if so required by DTC’s rules regarding the maximum principal
amount to be represented by a single certificate.  The aggregate principal amount of the
Regulation S Global Note may from time to time be increased or decreased by
adjustments made on the records of the Trustee, as custodian for DTC or its
nominee, as hereinafter provided.

 

Initial Securities and Additional Restricted Securities resold to IAIs
(the “Institutional Accredited Investor Notes”) in the United States of
America shall be issued in the form of a permanent global Security
substantially in the form of Exhibit A including appropriate legends as
set forth in Section 2.1(d) (the “Institutional Accredited
Investor Global Note”) deposited with the Trustee, as custodian for DTC,
duly executed by the Company and authenticated by the Trustee as hereinafter
provided.  The Institutional Accredited
Investor Global Note may be represented by more than one certificate, if so required
by DTC’s rules regarding the maximum principal amount to be represented by a
single certificate.  The aggregate
principal amount of the Institutional Accredited Investor Global Note may from
time to time be increased or decreased by adjustments made on the records of
the Trustee, as custodian for DTC or its nominee, as hereinafter provided.

 

Exchange Securities exchanged for interests in the Rule 144A Notes, the
Regulation S Notes and the Institutional Accredited Investor Notes will be
issued in the form of a permanent global Security, substantially in the form of
Exhibit B, which is hereby incorporated by reference and made a part of
this Indenture, deposited with the Trustee as hereinafter provided, including
the appropriate legend set forth in Section 2.1(d) (the “Exchange
Global Note”).  The Exchange Global
Note will be deposited upon issuance with, or on behalf of, the Trustee as
custodian for DTC, duly executed by the Company and authenticated by the
Trustee as hereinafter provided. The Exchange Global Note may be represented by
more than one certificate, if so required by DTC’s rules regarding the maximum
principal amount to be represented by a single certificate.

 

The Rule 144A Global Note, the Regulation S Global Note, the
Institutional Accredited Investor Global Note and the Exchange Global Note are
sometimes collectively herein referred to as the “Global Securities.”

 

The principal of (and premium, if any) and interest on the Securities
shall be payable at the office or agency of the Company maintained for such
purpose in The  City  of  New  York, or at such other office or agency of
the Company as may be maintained for such purpose pursuant to Section 2.3;
provided, however, that, at the
option of the Company, each installment of interest may be paid by (i) check
mailed to addresses of the Persons entitled thereto as such addresses shall
appear on the Securities Register or (ii) wire transfer to an account located
in the United States maintained by the payee, subject to the last sentence of
this paragraph.  Payments in respect of
Securities represented by a Global Security (including principal, premium, if
any, and interest) will be made by wire transfer of immediately available funds
to the accounts specified by DTC. 
Payments in respect of Securities represented by Definitive Securities
(including principal, premium, if any, and interest) held by a Holder of at
least $1,000,000 aggregate principal amount of Securities represented by
Definitive Securities will be made by wire transfer to a U.S. dollar account
maintained by the payee with a bank in the United States if such Holder elects
payment by wire transfer by giving written notice to the Trustee or the Paying

 

1

 

Agent to such effect designating such account no later than 15 days
immediately preceding the relevant due date for payment (or such other date as
the Trustee may accept in its discretion).

 

The Securities may have notations, legends or endorsements required by
law, stock exchange rule or usage, in addition to those set forth on Exhibit
A and Exhibit B and in Section 2.1(d).  The Company shall approve any notation,
endorsement or legend on the Securities. 
Each Security shall be dated the date of its authentication.  The terms of the Securities set forth in Exhibit
A and Exhibit B are part of the terms of this Indenture and, to the
extent applicable, the Company, the Subsidiary Guarantors and the Trustee, by
their execution and delivery of this Indenture, expressly agree to be bound by
such terms.

 

(c)  Denominations.  The Securities shall be issuable only in
fully registered form, without coupons, and only in denominations of $1,000 and
any integral multiple thereof.

 

(d)  Restrictive Legends.  Unless and until (i) an Initial Security or an
Additional Security issued as a Restricted Security is sold under an effective
registration statement or (ii) an Initial Security or an Additional Security
issued as a Restricted Security is exchanged for an Exchange Security in
connection with an effective registration statement, in each case pursuant to
the Registration Rights Agreement or a similar agreement, (1) the Rule 144A
Global Note and the Institutional Accredited Investor Global Note shall bear
the following legend (the “Private Placement Legend”) on the face
thereof:

 

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION.  NEITHER THIS SECURITY NOR
ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
SUCH REGISTRATION.  THE HOLDER OF THIS
SECURITY, BY ITS ACCEPTANCE HEREOF, AGREES ON ITS OWN BEHALF AND ON BEHALF OF
ANY INVESTOR ACCOUNT FOR WHICH IT HAS PURCHASED SECURITIES, TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE “RESALE RESTRICTION
TERMINATION DATE”) THAT IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE
HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY
WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A)
TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON
IT REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND
SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN

 

2

 

THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN
INSTITUTIONAL “ACCREDITED INVESTOR” WITHIN THE MEANING OF RULE 501(a)(1), (2),
(3) OR (7) UNDER THE SECURITIES ACT THAT IS AN INSTITUTIONAL ACCREDITED
INVESTOR ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH
AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL
AMOUNT OF THE SECURITIES OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW
TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY’S AND
THE TRUSTEE’S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO
CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/ OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM.  THIS LEGEND WILL BE REMOVED UPON THE REQUEST
OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.

 

BY ITS ACQUISITION OF THIS SECURITY THE HOLDER HEREOF WILL BE DEEMED TO
HAVE REPRESENTED AND WARRANTED THAT EITHER (I) NO PORTION OF THE ASSETS USED BY
SUCH HOLDER TO ACQUIRE AND HOLD THIS SECURITY CONSTITUTES THE ASSETS OF AN
EMPLOYEE BENEFIT PLAN THAT IS SUBJECT TO TITLE I OF THE U.S. EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”), OF PLANS,
INDIVIDUAL RETIREMENT ACCOUNTS OR OTHER ARRANGEMENTS THAT ARE SUBJECT TO
SECTION 4975 OF THE U.S. INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
“CODE”), OR PROVISIONS UNDER ANY FEDERAL, STATE, LOCAL, NON-U.S. OR OTHER LAWS
OR REGULATIONS THAT ARE SIMILAR TO SUCH PROVISIONS OF ERISA OR THE CODE
(“SIMILAR LAWS”), OR OF AN ENTITY WHOSE UNDERLYING ASSETS ARE CONSIDERED TO
INCLUDE “PLAN ASSETS” OF SUCH PLANS, ACCOUNTS OR ARRANGEMENTS, OR (II) THE
PURCHASE AND HOLDING OF THIS SECURITY WILL NOT CONSTITUTE A NON-EXEMPT
PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF
THE CODE OR A SIMILAR VIOLATION UNDER ANY APPLICABLE SIMILAR LAWS.

 

(2)           the
Regulation S Global Note shall bear the following legend (the “Regulation S
Legend”) on the face thereof:

 

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED
OR SOLD WITHIN THE UNITED STATES OR TO OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE.  BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT IT IS NOT A U.S. PERSON NOR IS IT PURCHASING FOR THE ACCOUNT OF
A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN
ACCORDANCE WITH

 

3

 

REGULATION S UNDER THE SECURITIES ACT (“REGULATION S”), (2) BY ITS
ACCEPTANCE HEREOF, AGREES ON ITS OWN BEHALF AND ON BEHALF OF ANY INVESTOR
ACCOUNT FOR WHICH IT HAS PURCHASED SECURITIES TO OFFER, SELL OR OTHERWISE
TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE “RESALE RESTRICTION TERMINATION
DATE”) THAT IS 40 DAYS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND
THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE
OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE
COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON
IT REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND
SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S
UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL “ACCREDITED INVESTOR” WITHIN
THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS
AN INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT
OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE
IN A MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000, FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT,
SUBJECT TO THE COMPANY’S AND THE TRUSTEE’S RIGHT PRIOR TO ANY SUCH OFFER, SALE
OR TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH
OF THEM.  THIS LEGEND WILL BE REMOVED
AFTER 40 CONSECUTIVE DAYS BEGINNING ON AND INCLUDING THE LATER OF (A) THE DAY
ON WHICH THE SECURITIES ARE OFFERED TO PERSONS OTHER THAN DISTRIBUTORS (AS
DEFINED IN REGULATION S) AND (B) THE DATE OF THE CLOSING OF THE ORIGINAL
OFFERING.  AS USED HEREIN, THE TERMS
“OFFSHORE TRANSACTION,” “UNITED STATES” AND “U.S. PERSON” HAVE THE MEANINGS
GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.

 

BY ITS ACQUISITION OF THIS SECURITY THE HOLDER HEREOF WILL BE DEEMED TO
HAVE REPRESENTED AND WARRANTED THAT EITHER (I) NO PORTION OF THE ASSETS USED BY
SUCH HOLDER TO ACQUIRE AND HOLD THIS SECURITY CONSTITUTES THE ASSETS OF AN
EMPLOYEE BENEFIT PLAN THAT IS SUBJECT TO TITLE I OF THE U.S. EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”), OF PLANS,

 

4

 

INDIVIDUAL RETIREMENT ACCOUNTS OR OTHER ARRANGEMENTS THAT ARE SUBJECT
TO SECTION 4975 OF THE U.S. INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
“CODE”), OR PROVISIONS UNDER ANY FEDERAL, STATE, LOCAL, NON-U.S. OR OTHER LAWS
OR REGULATIONS THAT ARE SIMILAR TO SUCH PROVISIONS OF ERISA OR THE CODE
(“SIMILAR LAWS”), OR OF AN ENTITY WHOSE UNDERLYING ASSETS ARE CONSIDERED TO
INCLUDE “PLAN ASSETS” OF SUCH PLANS, ACCOUNTS OR ARRANGEMENTS, OR (II) THE
PURCHASE AND HOLDING OF THIS SECURITY WILL NOT CONSTITUTE A NON-EXEMPT
PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF
THE CODE OR A SIMILAR VIOLATION UNDER ANY APPLICABLE SIMILAR LAWS.

 

(3)           Each
Global Security, whether or not an Initial Security, shall bear the following
legend on the face thereof:

 

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), NEW YORK, NEW
YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO.
OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.

 

TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO DTC, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR’S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.

 

(e)  Book-Entry Provisions.  (i) 
This Section 2.1(e) shall apply only to Global Securities
deposited with the Trustee, as custodian for DTC.

 

(ii)           Each
Global Security initially shall (x) be registered in the name of DTC or the
nominee of DTC, (y) be delivered to the Trustee as custodian for DTC and (z)
bear legends as set forth in Section 2.1(d).

 

(iii)          Members
of, or participants in, DTC (“Agent Members”) shall have no rights under
this Indenture with respect to any Global Security held on their behalf by DTC
or by the Trustee as the custodian of DTC or under such Global Security, and
DTC may be treated by the Company, the Trustee and any agent of the Company or
the Trustee as the absolute owner of such Global Security for all purposes
whatsoever.  Notwithstanding the foregoing,
nothing herein

 

5

 

shall prevent the Company, the Trustee or any agent of the Company or
the Trustee from giving effect to any written certification, proxy or other
authorization furnished by DTC or impair, as between DTC and its Agent Members,
the operation of customary practices of DTC governing the exercise of the
rights of a Holder of a beneficial interest in any Global Security.

 

(iv)          In
connection with any transfer of a portion of the beneficial interest in a
Global Security pursuant to Section 2.1(f) to beneficial owners who
are required to hold Definitive Securities, the Securities Custodian shall
reflect on its books and records the date and a decrease in the principal
amount of such Global Security in an amount equal to the principal amount of
the beneficial interest in the Global Security to be transferred, and the
Company shall execute, and the Trustee shall authenticate and make available
for delivery, one or more Definitive Securities of like tenor and amount.

 

(v)           In
connection with the transfer of an entire Global Security to beneficial owners
pursuant to Section 2.1(f), such Global Security shall be deemed to
be surrendered to the Trustee for cancellation, and the Company shall execute,
and the Trustee shall authenticate and make available for delivery, to each
beneficial owner identified by DTC in exchange for its beneficial interest in
such Global Security, an equal aggregate principal amount of Definitive
Securities of authorized denominations.

 

(vi)          The
registered Holder of a Global Security may grant proxies and otherwise
authorize any person, including Agent Members and persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Securities.

 

(vii)         Any
Holder of a Global Security shall, by acceptance of such Global Security, agree
that transfers of beneficial interests in such Global Security may be effected
only through a book-entry system maintained by (a) the Holder of such Global
Security (or its agent) or (b) any Holder of a beneficial interest in such
Global Security, and that ownership of a beneficial interest in such Global
Security shall be required to be reflected in a book entry.

 

(f)  Definitive Securities.  (i) 
Except as provided below, owners of beneficial interests in Global
Securities will not be entitled to receive Definitive Securities.  If required to do so pursuant to any
applicable law or regulation, beneficial owners may obtain Definitive
Securities in exchange for their beneficial interests in a Global Security upon
written request in accordance with DTC’s and the Registrar’s procedures.  In addition, Definitive Securities shall be
transferred to all beneficial owners in exchange for their beneficial interests
in a Global Security if (A) DTC notifies the Company that it is unwilling or
unable to continue as depositary for such Global Security or DTC ceases to be a
clearing agency registered under the Exchange Act, at a time when DTC is required
to be so registered in order to act as depositary, and in each case a successor
depositary is not appointed by the Company within 90 days of such notice or,
(B) the Company in its sole discretion executes and delivers to the Trustee and
Registrar an Officers’ Certificate stating that such Global Security shall be
so exchangeable or (C) an Event of Default has occurred and is continuing and
the Registrar has received a request from DTC. 
In the event of the occurrence of any of the events specified in clause
(A), (B) or (C) of the preceding sentence, the Company shall promptly make
available to the Trustee a reasonable supply of Definitive Securities.

 

6

 

(ii)           Any
Definitive Security delivered in exchange for an interest in a Global Security
pursuant to Section 2.1(e)(iii) or (iv) shall, except as
otherwise provided by Section 2.6(c), bear the applicable legend
regarding transfer restrictions applicable to the Definitive Security set forth
in Section 2.1(d).

 

(iii)          In
connection with the exchange of a portion of a Definitive Security for a
beneficial interest in a Global Security, the Trustee shall cancel such
Definitive Security, and the Company shall execute, and the Trustee shall
authenticate and make available for delivery, to the transferring Holder a new
Definitive Security representing the principal amount not so transferred.

 

SECTION 2.2.   Execution and Authentication.  One Officer shall sign the Securities for the
Company by manual or facsimile signature. 
If the Officer whose signature is on a Security no longer holds that
office at the time the Trustee authenticates the Security, the Security shall
be valid nevertheless.

 

A Security shall not be valid until an authorized officer of the
Trustee manually authenticates the Security. 
The signature of the Trustee on a Security shall be conclusive evidence
that such Security has been duly and validly authenticated and issued under
this Indenture.  A Security shall be
dated the date of its authentication.

 

At any time and from time to time after the execution and delivery of
this Indenture, the Trustee shall authenticate and make available for
delivery:  (1) Initial Securities for
original issue on the Issue Date in an aggregate principal amount of $162,000,000,
(2) subject to the terms of this Indenture, Additional Securities for original
issue in an unlimited principal amount and (3) Exchange Securities for issue
only in an Exchange Offer pursuant to the Registration Rights Agreement or upon
resale under an effective Shelf Registration Statement, and only in exchange
for Initial Securities or Additional Securities of an equal principal amount,
in each case upon a written order of the Company signed by one Officer of the
Company (the “Company Order”).  Such
Company Order shall specify whether the Securities will be in the form of
Definitive Securities or Global Securities, the amount of the Securities to be
authenticated and the date on which the original issue of Securities is to be
authenticated and whether the Securities are to be Initial Securities,
Additional Securities or Exchange Securities.

 

The Trustee may appoint an agent (the “Authenticating Agent”)
reasonably acceptable to the Company to authenticate the Securities.  Any such instrument shall be evidenced by an
instrument signed by a Trust Officer, a copy of which shall be furnished to the
Company.  Unless limited by the terms of
such appointment, any such Authenticating Agent may authenticate Securities whenever
the Trustee may do so.  Each reference in
this Indenture to authentication by the Trustee includes authentication by the
Authenticating Agent.  An Authenticating
Agent has the same rights as any Registrar, Paying Agent or agent for service
of notices and demands.

 

In case the Company or any Subsidiary Guarantor, pursuant to Article IV
or Section 10.2, as applicable, shall be consolidated or merged
with or into any other Person or shall convey, transfer, lease or otherwise
dispose of its properties and assets substantially as an entirety to any
Person, and the successor Person resulting from such consolidation, or
surviving

 

7

 

such merger, or into which the Company or any Subsidiary Guarantor
shall have been merged, or the Person which shall have received a conveyance,
transfer, lease or other disposition as aforesaid, shall have executed an
indenture supplemental hereto with the Trustee pursuant to Article IV,
or Section 10.2, as applicable, any of the Securities authenticated
or delivered prior to such consolidation, merger, conveyance, transfer, lease
or other disposition may, from time to time, at the request of the successor
Person, be exchanged for other Securities executed in the name of the successor
Person with such changes in phraseology and form as may be appropriate, but
otherwise in substance of like tenor as the Securities surrendered for such
exchange and of like principal amount; and the Trustee, upon Company Order of
the successor Person, shall authenticate and make available for delivery
Securities as specified in such order for the purpose of such exchange.  If Securities shall at any time be
authenticated and delivered in any new name of a successor Person pursuant to
this Section 2.2 in exchange or substitution for or upon registration
of transfer of any Securities, such successor Person, at the option of the
Holders but without expense to them, shall provide for the exchange of all
Securities at the time outstanding for Securities authenticated and delivered
in such new name.

 

SECTION 2.3.   Registrar and Paying Agent.  The Company shall maintain in New York, New
York an office or agency where Securities may be presented for registration of
transfer or for exchange (the “Registrar”) and an office or agency where
Securities may be presented for payment (the “Paying Agent”).  The Registrar shall keep a register of the
Securities and of their transfer and exchange (the “Securities Register”).  The Company may have one or more
co-registrars and one or more additional paying agents.  The term “Paying Agent” includes any
additional paying agent and the term “Registrar” includes any co-registrar.

 

The Company shall enter into an appropriate agency agreement with any
Registrar or Paying Agent not a party to this Indenture, which shall incorporate
the terms of the TIA.  The agreement
shall implement the provisions of this Indenture that relate to such
agent.  The Company shall notify the
Trustee of the name and address of each such agent.  If the Company fails to maintain a Registrar
or Paying Agent, the Trustee shall act as such and shall be entitled to
appropriate compensation therefor pursuant to Section 7.7.  The Company or any of its wholly owned
Subsidiaries organized in the United States may act as Paying Agent, Registrar
or transfer agent.

 

The Company initially appoints the Trustee as Registrar and Paying
Agent for the Securities.  The Company
may remove any Registrar or Paying Agent upon written notice to such Registrar
or Paying Agent and to the Trustee; provided,
however, that no such removal shall become effective until (i)
acceptance of any appointment by a successor as evidenced by an appropriate
agreement entered into by the Company and such successor Registrar or Paying
Agent, as the case may be, and delivered to the Trustee or (ii) notification to
the Trustee that the Trustee shall serve as Registrar or Paying Agent until the
appointment of a successor in accordance with clause (i) above.  The Registrar or Paying Agent may resign at
any time upon written notice to the Company and the Trustee.

 

SECTION 2.4.   Paying Agent to Hold Money in Trust.  By no later than 10:00 a.m. (New York City
time) on the date on which any principal of, premium, if any, or interest on
any Security is due and payable, the Company shall deposit with the Paying
Agent a sum sufficient in immediately available funds to pay such principal,
premium or interest when

 

8

 

due.  The Company shall require each Paying Agent
(other than the Trustee) to agree in writing that such Paying Agent shall hold
in trust for the benefit of Securityholders or the Trustee all money held by
such Paying Agent for the payment of principal of, premium, if any, or interest
on the Securities (whether such assets have been distributed to it by the
Company or other obligors on the Securities), shall notify the Trustee in
writing of any default by the Company or any Subsidiary Guarantor in making any
such payment and shall during the continuance of any default by the Company (or
any other obligor upon the Securities) in the making of any payment in respect
of the Securities, upon the written request of the Trustee, forthwith deliver
to the Trustee all sums held in trust by such Paying Agent for payment in
respect of the Securities together with a full accounting thereof.  If the Company or a Subsidiary of the Company
acts as Paying Agent, it shall segregate the money held by it as Paying Agent
and hold it as a separate trust fund. 
The Company at any time may require a Paying Agent (other than the
Trustee) to pay all money held by it to the Trustee and to account for any
funds or assets disbursed by such Paying Agent. 
Upon complying with this Section, the Paying Agent (if other than the
Company or a Subsidiary of the Company) shall have no further liability for the
money delivered to the Trustee.  Upon any
bankruptcy, reorganization or similar proceeding with respect to the Company,
the Trustee shall serve as Paying Agent for the Securities.

 

SECTION 2.5.   Securityholder 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 Securityholders and shall otherwise comply with TIA
§ 312(a).  If the Trustee is not the
Registrar, or to the extent otherwise required under the TIA, the Company, on
its own behalf and on behalf of each of the Subsidiary Guarantors, shall
furnish or cause the Registrar to furnish to the Trustee, in writing 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
Securityholders and the Company shall otherwise comply with TIA § 312(a).

 

SECTION 2.6.   Transfer and Exchange.  (a) 
The following provisions shall apply with respect to any proposed
registration of transfer of a Rule 144A Note or an Institutional Accredited
Investor Note prior to the date which is two years after the later of the date
of its original issue and the last date on which the Company or any Affiliate
of the Company was the owner of such Securities (or any predecessor thereto)
(the “Resale Restriction Termination Date”):

 

(i)            a registration of transfer of a Rule 144A
Note or an Institutional Accredited Investor Note or a beneficial interest
therein to a QIB shall be made upon the representation of the transferee in the
form as set forth on the reverse of the Security that it is purchasing for its
own account or an account with respect to which it exercises sole investment
discretion and that it and any such account is a “qualified institutional
buyer” within the meaning of Rule 144A, and is aware that the sale to it is
being made in reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as the undersigned has requested pursuant to
Rule 144A or has determined not to request such information and that it is
aware that the transferor is relying upon its foregoing representations in
order to claim the exemption from registration provided by Rule 144A;

 

9

 

(ii)           a registration of transfer of a Rule 144A
Note or an Institutional Accredited Investor Note or a beneficial interest
therein to an IAI shall be made upon receipt by the Trustee or its agent of a
certificate substantially in the form set forth in Section 2.8 from
the proposed transferee and, if requested by the Company, the delivery of an
opinion of counsel, certification and/or other information satisfactory to it;
and

 

(iii)          a registration of transfer of a Rule 144A
Note or an Institutional Accredited Investor Note or a beneficial interest
therein to a Non-U.S. Person shall be made upon receipt by the Trustee or its
agent of a certificate substantially in the form set forth in Section 2.9
from the proposed transferee and, if requested by the Company, the delivery of
an opinion of counsel, certification and/or other information satisfactory to
it.

 

(b)  The following provisions
shall apply with respect to any proposed transfer of a Regulation S Note prior
to the expiration of the Restricted Period:

 

(i)            a transfer of a Regulation S Note or a
beneficial interest therein to a QIB shall be made upon the representation of
the transferee, in the form of assignment on the reverse of the certificate,
that it is purchasing the Security for its own account or an account with
respect to which it exercises sole investment discretion and that it and any
such account is a “qualified institutional buyer” within the meaning of Rule
144A, is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon its
foregoing representations in order to claim the exemption from registration
provided by Rule 144A;

 

(ii)           a transfer of a Regulation S Note or a
beneficial interest therein to an IAI shall be made upon receipt by the Trustee
or its agent of a certificate substantially in the form set forth in Section 2.8
from the proposed transferee and, if requested by the Company or the Trustee,
the delivery of an opinion of counsel, certification and/or other information
satisfactory to each of them; and

 

(iii)          a transfer of a Regulation S Note or a
beneficial interest therein to a Non-U.S. Person shall be made upon receipt by
the Trustee or its agent of a certificate substantially in the form set forth
in Section 2.9 hereof from the proposed transferee and, if
requested by the Company, receipt by the Trustee or its agent of an opinion of
counsel, certification and/or other information satisfactory to the Company.

 

After the expiration of the Restricted Period, interests in the
Regulation S Note may be transferred in accordance with applicable law without
requiring the certification set forth in Section 2.8, Section 2.9
or any additional certification.

 

(c)  Restricted Securities
Legend.  Upon the transfer, exchange
or replacement of Securities not bearing a Restricted Securities Legend, the
Registrar shall deliver Securities that do not bear a Restricted Securities
Legend.  Upon the transfer, exchange or
replacement of Securities bearing a Restricted Securities Legend, the Registrar
shall deliver only Securities that bear a Restricted Securities Legend unless
(i) Initial Securities are being exchanged for

 

10

 

Exchange
Securities in an Exchange Offer in which case the Exchange Securities shall not
bear a Restricted Securities Legend, (ii) an Initial Security is being
transferred pursuant to the Shelf Registration Statement or other effective
registration statement or (iii) there is delivered to the Registrar an Opinion
of Counsel reasonably satisfactory to the Company and the Trustee to the effect
that neither such legend nor the related restrictions on transfer are required
in order to maintain compliance with the provisions of the Securities Act.  Any Additional Securities sold in a
registered offering shall not be required to bear the Restricted Securities
Legend.

 

(d)  The Registrar shall retain
copies of all letters, notices and other written communications received
pursuant to Section 2.1 or this Section 2.6.  The Company shall have the right to inspect
and make copies of all such letters, notices or other written communications at
any reasonable time upon the giving of reasonable prior written notice to the
Registrar.

 

(e)  Obligations with Respect
to Transfers and Exchanges of Securities.

 

(i)            To permit registrations of transfers and
exchanges, the Company shall, subject to the other terms and conditions of this
Article II, execute and the Trustee shall authenticate Definitive
Securities and Global Securities at the Registrar’s request.

 

(ii)           No service charge shall be made to a Holder
for any registration of transfer or exchange, but the Company may require the
Holder to pay a sum sufficient to cover any transfer tax assessments or similar
governmental charge payable in connection therewith (other than any such
transfer taxes, assessments or similar governmental charges payable upon
exchange or transfer pursuant to Sections 2.2, 2.6, 2.10, 2.12,
3.5, 3.10, 5.8 or 9.5).

 

(iii)          The Company (and the Registrar) shall not be
required to register the transfer of or exchange of any Security (A) for a
period beginning (1) 15 days before the mailing of a notice of an offer to
repurchase or redeem Securities and ending at the close of business on the day
of such mailing or (2) 15 days before an interest payment date and ending on
such interest payment date or (B) called for redemption, except the unredeemed
portion of any Security being redeemed in part.

 

(iv)          Prior to the due presentation for
registration of transfer of any Security, the Company, the Trustee, the Paying
Agent or the Registrar may deem and treat the person in whose name a Security
is registered as the owner of such Security for the purpose of receiving
payment of principal of, premium, if any, and (subject to paragraph 2 of the
forms of Securities attached hereto as Exhibits A and B) interest on such
Security and for all other purposes whatsoever, including without limitation
the transfer or exchange of such Security, whether or not such Security is
overdue, and none of the Company, the Trustee, the Paying Agent or the
Registrar shall be affected by notice to the contrary.

 

(v)           Any Definitive Security delivered in
exchange for an interest in a Global Security pursuant to Section 2.1(f)
shall, except as otherwise provided by Section 2.6(c), bear the
applicable legend regarding transfer restrictions applicable to the Definitive
Security set forth in Section 2.1(d).

 

11

 

(vi)          All Securities issued upon any transfer or
exchange pursuant to the terms of this Indenture shall evidence the same debt
and shall be entitled to the same benefits under this Indenture as the
Securities surrendered upon such transfer or exchange.

 

(f)  No Obligation of the
Trustee.  (i) The Trustee shall have
no responsibility or obligation to any beneficial owner of a Global Security, a
member of, or a participant in, DTC or other Person with respect to the
accuracy of the records of DTC or its nominee or of any participant or member
thereof, with respect to any ownership interest in the Securities or with
respect to the delivery to any participant, member, beneficial owner or other
Person (other than DTC) of any notice (including any notice of redemption or
purchase) or the payment of any amount or delivery of any Securities (or other
security or property) under or with respect to such Securities.  All notices and communications to be given to
the Holders and all payments to be made to Holders in respect of the Securities
shall be given or made only to or upon the order of the registered Holders
(which shall be DTC or its nominee in the case of a Global Security).  The rights of beneficial owners in any Global
Security shall be exercised only through DTC subject to the applicable rules
and procedures of DTC.  The Trustee may
rely and shall be fully protected in relying upon information furnished by DTC
with respect to its members, participants and any beneficial owners.

 

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

 

SECTION 2.7.   Form of Certificate to be Delivered upon
Termination of Restricted Period.

 

 

[Date]

 

Cellu Tissue Holdings, Inc.

c/o The Bank of New York

101 Barclay Street, Floor 8W

New York, New York 10286

Attention: Corporate Trust Administrator

 

Re:          Cellu Tissue Holdings, Inc. (the “Company”)

93⁄4% Senior Secured Notes due 2010 (the “Securities”)

 

Ladies and Gentlemen:

 

This letter relates to Securities represented by a temporary global
note (the “Temporary Regulation S Global Note”).  Pursuant to Section 2.1 of the Indenture
dated as of March 12, 2004 relating to the Securities (the “Indenture”),
we hereby certify that the persons

 

12

 

who are the beneficial owners of
$[               ]
principal amount of Securities represented by the Temporary Regulation S Global
Note are persons outside the United States to whom beneficial interests in such
Securities could be transferred in accordance with Rule 904 of Regulation S
promulgated under the Securities Act of 1933, as amended.  Accordingly, you are hereby requested to
issue a Permanent Regulation S Global Note representing the undersigned’s
interest in the principal amount of Securities represented by the Temporary
Regulation S Global Note, all in the manner provided by the Indenture.

 

You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. 
Terms used in this letter have the meanings set forth in Regulation S.

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  [Name of Transferor]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Authorized Signature

  	
   

  

 

SECTION 2.8.   Form of Certificate to be Delivered in
Connection with Transfers to Institutional Accredited Investors.

 

[Date]

 

Cellu Tissue Holdings, Inc.

c/o The Bank of New York

101 Barclay Street, Floor 8W

New York, New York 10286

Attention: Corporate Trust Administrator

 

Ladies and Gentlemen:

 

This certificate is delivered to request a transfer of
$[               ]
principal amount of the 93⁄4% Senior Secured Notes due 2010 (the “Securities”)
of Cellu Tissue Holdings, Inc. (the “Company”).

 

Upon transfer, the Securities would be registered in the name of the
new beneficial owner as follows:

 

	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Taxpayer ID Number: 

  	
   

  	
   

  
						

 

13

 

The undersigned represents and warrants to you that:

 

1.             We
are an institutional “accredited investor” (as defined in Rule 501(a)(1), (2),
(3) or (7) under the Securities Act of 1933, as amended (the “Securities Act”))
purchasing for our own account or for the account of such an institutional
“accredited investor” at least $250,000 principal amount of the Securities, and
we are acquiring the Securities not with a view to, or for offer or sale in
connection with, any distribution in violation of the Securities Act.  We have such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risk of our investment in the Securities and we invest in or purchase
securities similar to the Securities in the normal course of our business.  We and any accounts for which we are acting
are each able to bear the economic risk of our or its investment.

 

2.             We
understand that the Securities have not been registered under the Securities
Act and, unless so registered, may not be sold except as permitted in the following
sentence.  We agree on our own behalf and
on behalf of any investor account for which we are purchasing Securities to
offer, sell or otherwise transfer such Securities prior to the date that is two
years after the later of the date of original issue and the last date on which
the Company or any affiliate of the Company was the owner of such Securities
(or any predecessor thereto) (the “Resale Restriction Termination Date”)
only (a) to the Company, (b) pursuant to a registration statement which has been
declared effective under the Securities Act, (c) in a transaction complying
with the requirements of Rule 144A under the Securities Act, to a person we
reasonably believe is a “qualified institutional buyer” under Rule 144A of the
Securities Act (a “QIB”) that is purchasing for its own account or for
the account of a QIB and to whom notice is given that the transfer is being
made in reliance on Rule 144A, (d) pursuant to offers and sales that occur
outside the United States within the meaning of Regulation S under the
Securities Act, (e) to an institutional “accredited investor” within the
meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act that is
purchasing for its own account or for the account of such an institutional
“accredited investor,” in each case in a minimum principal amount of Securities
of $250,000 for investment purposes and not with a view to or for offer or sale
in connection with any distribution in violation of the Securities Act or (f)
pursuant to any other available exemption from the registration requirements of
the Securities Act, subject in each of the foregoing cases to any requirement
of law that the disposition of our property or the property of such investor
account or accounts be at all times within our or their control and in
compliance with any applicable state securities laws.  The foregoing restrictions on resale will not
apply subsequent to the Resale Restriction Termination Date.  If any resale or other transfer of the
Securities is proposed to be made pursuant to clause (e) above prior to the
Resale Restriction Termination Date, the transferor shall deliver a letter from
the transferee substantially in the form of this letter to the Company and the
Trustee, which shall provide, among other things, that the transferee is an
institutional “accredited investor” (within the meaning of Rule 501(a)(1), (2),
(3) or (7) under the Securities Act) and that it is acquiring such Securities
for investment purposes and not for distribution in violation of the Securities
Act.  Each purchaser acknowledges that
the Company and the Trustee reserve the right prior to any offer, sale or other
transfer prior to the Resale Termination Date of the Securities pursuant to
clauses (d), (e) or (f) above to require the delivery of an opinion of counsel,
certifications and/or other information satisfactory to the Company and the
Trustee.

 

	
   

  	
  TRANSFEREE:

  	
   

  	
   

  

 

14

 

	
   

  	
  BY:

  	
   

  	
   

  

 

SECTION 2.9.   Form of Certificate to be Delivered in
Connection with Transfers Pursuant to Regulation S.

 

[Date]

 

Cellu Tissue Holdings, Inc.

c/o The Bank of New York

101 Barclay Street, Floor 8W

New York, New York 10286

Attention: Corporate Trust Administrator

 

Re:          Cellu Tissue Holdings, Inc.

93⁄4% Senior Secured Notes due 2010 (the “Securities”)

 

Ladies and Gentlemen:

 

In connection with our proposed sale of
$[               ]
aggregate principal amount of the Securities, we confirm that such sale has
been effected pursuant to and in accordance with Regulation S under the United
States Securities Act of 1933, as amended (the “Securities Act”), and,
accordingly, we represent that:

 

(a)           the offer of the Securities was not made to
a person in the United States;

 

(b)           either (i) at the time the buy order was
originated, the transferee was outside the United States or we and any person
acting on our behalf reasonably believed that the transferee was outside the
United States or (ii) the transaction was executed in, on or through the
facilities of a designated off-shore securities market and neither we nor any
person acting on our behalf knows that the transaction has been pre-arranged
with a buyer in the United States;

 

(c)           no directed selling efforts have been made
in the United States in contravention of the requirements of Rule 903(a)(2) or
Rule 904(a)(2) of Regulation S, as applicable; and

 

(d)           the transaction is not part of a plan or
scheme to evade the registration requirements of the Securities Act.

 

In addition, if the sale is made during a restricted period and the
provisions of Rule 903(b)(2) or Rule 904(b)(1) of Regulation S are applicable
thereto, we confirm that such sale has been made in accordance with the
applicable provisions of Rule 903(b)(2) or Rule 904(b)(1), as the case may be.

 

You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or

 

15

 

legal proceedings or official inquiry with respect to the matters
covered hereby.  Terms used in this
certificate have the meanings set forth in Regulation S.

 

	
   

  	
  Very truly yours,

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  [Name of Transferor]

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Authorized Signature

  	
   

  
				

 

SECTION 2.10.   Mutilated, Destroyed, Lost or Stolen
Securities.  If a mutilated Security
is surrendered to the Registrar or if the Holder of a Security claims that the
Security has been lost, destroyed or wrongfully taken, the Company shall issue
and the Trustee shall authenticate a replacement Security if the requirements
of Section 8-405 of the Uniform Commercial Code are met, such that the
Securityholder (a) satisfies the Company or the Trustee that such Security has
been lost, destroyed or wrongfully taken within a reasonable time after such
Securityholder has notice of such loss, destruction or wrongful taking and the
Registrar has not registered a transfer prior to receiving such notification,
(b) makes such request to the Company or Trustee prior to the Security being
acquired by a protected purchaser as defined in Section 8-303 of the
Uniform Commercial Code (a “protected purchaser”) and (c) satisfies any
other reasonable requirements of the Trustee; provided,
however, if after the delivery of such replacement Security, a
protected purchaser of the Security for which such replacement Security was
issued presents for payment or registration such replaced Security, the Trustee
or the Company shall be entitled to recover such replacement Security from the
Person to whom it was issued and delivered or any Person taking therefrom,
except a protected purchaser, and shall be entitled to recover upon the
security or indemnity provided therefor to the extent of any loss, damage, cost
or expense incurred by the Company or the Trustee in connection therewith.  If required by the Trustee or the Company,
such Holder shall furnish an indemnity bond sufficient in the judgment of the
Company and the Trustee to protect the Company, the Trustee, the Paying Agent
and the Registrar from any loss which any of them may suffer if a Security is
replaced, and, in the absence of notice to the Company, any Subsidiary
Guarantor or the Trustee that such Security has been acquired by a protected
purchaser, the Company shall execute, and upon receipt of a Company Order the
Trustee shall authenticate and make available for delivery, in exchange for any
such mutilated Security or in lieu of any such destroyed, lost or stolen
Security, a new Security of like tenor and principal amount, bearing a number
not contemporaneously outstanding.

 

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

 

Upon the issuance of any new Security under this Section, the Company
may require that such Holder pay a sum sufficient to cover any tax or other
governmental charge that

 

16

 

may be imposed in relation thereto and any other expenses (including
the fees and expenses of counsel and of the Trustee) in connection therewith.

 

Subject to the proviso in the initial paragraph of this Section 2.10
every new Security issued pursuant to this Section in lieu of any
mutilated, destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, any Subsidiary Guarantor (if
applicable) and any other obligor upon the Securities, whether or not the
mutilated, destroyed, lost or stolen Security shall be at any time enforceable
by anyone, and shall be entitled to all benefits of this Indenture equally and
proportionately with any and all other Securities duly issued hereunder.

 

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

 

SECTION 2.11.   Outstanding Securities.  Securities outstanding at any time are all
Securities authenticated by the Trustee except for those cancelled by it, those
delivered to it for cancellation and those described in this Section as
not outstanding.  A Security does not
cease to be outstanding in the event the Company or an Affiliate of the Company
holds the Security, provided, however,
that (i) for purposes of determining which are outstanding for consent or
voting purposes hereunder, the provisions of Section 12.6 shall
apply and (ii) in determining whether the Trustee shall be protected in making
a determination whether the Holders of the requisite principal amount of
outstanding Securities are present at a meeting of Holders of Securities for
quorum purposes or have consented to or voted in favor of any request, demand,
authorization, direction, notice, consent, waiver, amendment or modification
hereunder, or relying upon any such quorum, consent or vote, only Securities
which a Trust Officer of the Trustee actually knows to be held by the Company
or an Affiliate of the Company shall not be considered outstanding.

 

If a Security is replaced pursuant to Section 2.10 (other
than a mutilated Security surrendered for replacement), it ceases to be
outstanding unless the Trustee and the Company receive proof satisfactory to
them that the replaced Security is held by a protected purchaser.  A mutilated Security ceases to be outstanding
upon surrender of such Security and replacement pursuant to Section 2.10.

 

If the Paying Agent segregates and holds in trust, in accordance with
this Indenture, on a Redemption Date or maturity date money sufficient to pay
all principal, premium, if any, and accrued interest payable on that date with
respect to the Securities (or portions thereof) to be redeemed or maturing, as
the case may be, and the Paying Agent is not prohibited from paying such money
to the Securityholders on that date pursuant to the terms of this Indenture,
then on and after that date such Securities (or portions thereof) cease to be
outstanding and interest on them ceases to accrue.

 

SECTION 2.12.   Temporary Securities.  In the event that Definitive Securities are
to be issued under the terms of this Indenture, until such Definitive
Securities are ready for delivery, the Company may prepare and the Trustee
shall authenticate temporary Securities. 
Temporary Securities shall be substantially in the form, and shall carry
all rights, of Definitive

 

17

 

Securities but
may have variations that the Company considers appropriate for temporary
Securities.  Without unreasonable delay,
the Company shall prepare and the Trustee shall authenticate Definitive
Securities.  After the preparation of
Definitive Securities, the temporary Securities shall be exchangeable for
Definitive Securities upon surrender of the temporary Securities at any office
or agency maintained by the Company for that purpose and such exchange shall be
without charge to the Holder.  Upon
surrender for cancellation of any one or more temporary Securities, the Company
shall execute, and the Trustee shall authenticate and make available for
delivery in exchange therefor, one or more Definitive Securities representing
an equal principal amount of Securities. 
Until so exchanged, the Holder of temporary Securities shall in all
respects be entitled to the same benefits under this Indenture as a Holder of
Definitive Securities.

 

SECTION 2.13.   Cancellation.  The Company at any time may deliver
Securities to the Trustee for cancellation. 
The Registrar and the Paying Agent shall forward to the Trustee any
Securities surrendered to them for registration of transfer, exchange or
payment.  The Trustee and no one else
shall cancel all Securities surrendered for registration of transfer, exchange,
payment or cancellation and dispose of such Securities in accordance with its
internal policies and customary procedures including delivery of a certificate
describing such Securities disposed (subject to the record retention
requirements of the Exchange Act) or deliver canceled Securities to the Company
pursuant to written direction by one Officer of the Company.  If the Company or any Subsidiary Guarantor
acquires any of the Securities, such acquisition shall not operate as a
redemption or satisfaction of the Indebtedness represented by such Securities
unless and until the same are surrendered to the Trustee for cancellation
pursuant to this Section 2.13. 
The Company may not issue new Securities to replace Securities it has
paid or delivered to the Trustee for cancellation for any reason other than in
connection with a transfer or exchange.

 

At such time as all beneficial interests in a Global Security have
either been exchanged for Definitive Securities, transferred, redeemed,
repurchased or canceled, such Global Security shall be returned by DTC to the
Trustee for cancellation or retained and canceled by the Trustee.  At any time prior to such cancellation, if
any beneficial interest in a Global Security is exchanged for Definitive
Securities, transferred in exchange for an interest in another Global Security,
redeemed, repurchased or canceled, the principal amount of Securities represented
by such Global Security shall be reduced and an adjustment shall be made on the
books and records of the Trustee (if it is then the Securities Custodian for
such Global Security) with respect to such Global Security, by the Trustee or
the Securities Custodian, to reflect such reduction.

 

SECTION 2.14.   Payment of Interest; Defaulted Interest.  Interest on any Security which is payable,
and is punctually paid or duly provided for, on any interest payment date shall
be paid to the Person in whose name such Security (or one or more Predecessor
Securities) is registered at the close of business on the regular record date
for such payment at the office or agency of the Company maintained for such
purpose pursuant to Section 2.3.

 

Any interest on any Security which is payable, but is not paid when the
same becomes due and payable and such nonpayment continues for a period of 30
days shall forthwith cease to be payable to the Holder on the regular record
date, and such defaulted interest and (to the extent lawful) interest on such
defaulted interest at the rate borne by the Securities (such

 

18

 

defaulted interest and interest thereon herein collectively called “Defaulted
Interest”) shall be paid by the Company, at its election in each case, as
provided in clause (a) or (b) below:

 

(a) 
The Company may elect to make payment of any Defaulted Interest to the
Persons in whose names the Securities (or their respective predecessor
Securities) are registered at the close of business on a Special Record Date
(as defined below) for the payment of such Defaulted Interest, which shall be
fixed in the following manner.  The
Company shall notify the Trustee in writing of the amount of Defaulted Interest
proposed to be paid on each Security and the date (not less than 30 days after
such notice) of the proposed payment (the “Special Interest Payment Date”),
and at the same time the Company shall deposit with the Trustee an amount of
money equal to the aggregate amount proposed to be paid in respect of such
Defaulted Interest or shall make arrangements satisfactory to the Trustee for
such deposit prior to the date of the proposed payment, such money when
deposited to be held in trust for the benefit of the Persons entitled to such Defaulted
Interest as in this clause provided. 
Thereupon the Company shall fix a record date (the “Special Record
Date”) for the payment of such Defaulted Interest, which date shall be not
more than 15 days and not less than 10 days prior to the Special Interest
Payment Date and not less than 10 days after the receipt by the Trustee of the
notice of the proposed payment.  The
Company shall promptly notify the Trustee of such Special Record Date, and in
the name and at the expense of the Company, the Trustee shall cause notice of
the proposed payment of such Defaulted Interest and the Special Record Date and
Special Interest Payment Date therefor to be given in the manner provided for
in Section 12.2, not less than 10 days prior to such Special Record
Date.  Notice of the proposed payment of
such Defaulted Interest and the Special Record Date and Special Interest
Payment Date therefor having been so given, such Defaulted Interest shall be
paid on the Special Interest Payment Date to the Persons in whose names the
Securities (or their respective predecessor Securities) are registered at the
close of business on such Special Record Date and shall no longer be payable
pursuant to the following clause (b).

 

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

 

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

 

SECTION 2.15.   Computation of Interest.  Interest on the Securities shall be computed
on the basis of a 360-day year of twelve 30-day months.

 

SECTION 2.16.   CUSIP, Common Code and ISIN Numbers.  The Company in issuing the Securities may use
“CUSIP”, “Common Code” and “ISIN” numbers and, if so, the

 

19

 

Trustee shall
use “CUSIP”, “Common Code” and “ISIN” numbers in notices of redemption or
purchase as a convenience to Holders; provided,
however, that any such notice may state that no representation is
made as to the correctness of such numbers either as printed on the Securities
or as contained in any notice of a redemption or purchase and that reliance may
be placed only on the other identification numbers printed on the Securities,
and any such redemption or purchase shall not be affected by any defect in or omission
of such CUSIP, Common Code and ISIN numbers. 
The Company shall promptly notify the Trustee in writing of any change
in the CUSIP, Common Code and ISIN numbers.

 

ARTICLE III

 

COVENANTS

 

SECTION 3.1.   Payment of Securities.  The Company shall promptly pay the principal
of, premium, if any, Additional Amounts, if any, and interest (including
Additional Interest) on the Securities on the dates and in the manner provided
in the Securities and in this Indenture. 
Principal, premium, if any, Additional Amounts, if any, and interest
(including Additional Interest) shall be considered paid on the date due if on
such date the Trustee or the Paying Agent holds in accordance with this
Indenture money sufficient to pay all principal, premium, if any, Additional Amounts,
if any, and interest (including Additional Interest) then due and the Trustee
or the Paying Agent, as the case may be, is not prohibited from paying such
money to the Securityholders on that date pursuant to the terms of this
Indenture.

 

The Company shall pay interest on overdue principal at the rate
specified therefor in the Securities, and it shall pay interest on overdue
installments of interest (including Additional Interest) at the same rate to
the extent lawful.

 

Notwithstanding anything to the contrary contained in this Indenture,
the Company may, to the extent it is required to do so by law, deduct or
withhold income or other similar taxes imposed by the United States of America
from principal or interest payments hereunder.

 

SECTION 3.2.   Limitation on Indebtedness.

 

(a)  The Company will not, and
will not permit any of its Restricted Subsidiaries to, Incur any Indebtedness
(including Acquired Indebtedness); provided,
however, that the Company and the Subsidiary Guarantors may Incur
Indebtedness if on the date thereof:

 

(1)           the
Consolidated Coverage Ratio for the Company and its Restricted Subsidiaries is
at least 2.00 to 1.00; and

 

(2)           no
Default or Event of Default will have occurred or be continuing or would occur
as a consequence of Incurring the Indebtedness or transactions relating to such
Incurrence.

 

20

 

(b)  Paragraph (a) of this Section 3.2
will not prohibit the Incurrence of the following Indebtedness:

 

(1)           Indebtedness
of the Company or any Subsidiary Guarantor Incurred pursuant to a Credit
Facility in an aggregate amount up to the greater of (a) the Borrowing Base and
(b) $35.0 million less the aggregate principal amount of repayments with the
proceeds from Asset Dispositions to the extent required by Section 3.5 to
reduce permanently the revolving commitments under a Credit Facility (and
Guarantees by the Company or its Restricted Subsidiaries in respect of the
Indebtedness Incurred pursuant to this clause (1) under a Credit Facility);

 

(2)           the
Subsidiary Guarantees and other Guarantees by the Company and the Subsidiary
Guarantors of Indebtedness Incurred in accordance with the provisions of this
Indenture; provided that in the
event such Indebtedness that is being Guaranteed is a Subordinated Obligation
or a Guarantor Subordinated Obligation, then the related Guarantee shall be
subordinated in right of payment to the Subsidiary Guarantee;

 

(3)           Indebtedness
of the Company owing to and held by any Restricted Subsidiary or Indebtedness of
a Restricted Subsidiary owing to and held by the Company or any other
Restricted Subsidiary; provided, however,

 

(A)          if the Company is the obligor on such
Indebtedness, such Indebtedness is expressly subordinated to the prior payment
in full in cash of all obligations with respect to the Securities;

 

(B)           if a Subsidiary Guarantor is the obligor on
such Indebtedness and the Company or a Subsidiary Guarantor is not the obligee,
such Indebtedness is subordinated in right of payment to the Subsidiary
Guarantees of such Subsidiary Guarantor; and

 

(C)           (i)            any
subsequent issuance or transfer of Capital Stock or any other event which
results in any such Indebtedness being beneficially held by a Person other than
the Company or a Restricted Subsidiary; and

 

(ii)           any sale or other transfer of any such
Indebtedness to a Person other than the Company or a Restricted Subsidiary

 

shall be deemed, in each case, to constitute an Incurrence of such
Indebtedness by the Company or such Subsidiary, as the case may be.

 

(4)           Indebtedness
represented by (a) the Securities issued on the Issue Date, the Subsidiary
Guarantees and the Exchange Securities and exchange guarantees issued in an
Exchange Offer pursuant to the Registration Rights Agreement, (b) any
Indebtedness (other than the Indebtedness described in clauses (1), (2), (3),
(5), (7), (8) and (9) of this Section 3.2(b)) outstanding on the
Issue Date and (c) any Refinancing Indebtedness Incurred in respect of any
Indebtedness described in this clause (4) of Section 3.2(b) or Incurred
pursuant to Section 3.2(a);

 

21

 

(5)           Hedging
Obligations that are Incurred in the ordinary course of business (and not for
speculative purposes) (A) for the purpose of fixing or hedging interest rate
risk with respect to any Indebtedness that is permitted by the terms of this
Indenture to be outstanding; (B) for the purpose of fixing or hedging currency
exchange rate risk with respect to any currency exchanges; or (C) for the
purpose of fixing or hedging commodity price risk with respect to any commodity
(including energy) purchases;

 

(6)           the
Incurrence by the Company or any of its Subsidiary Guarantors of Indebtedness
represented by Capitalized Lease Obligations, mortgage financings or purchase
money obligations with respect to assets other than Capital Stock or other
Investments, in each case Incurred for the purpose of financing all or any part
of the purchase price or cost of construction or improvements of property used
in the business of the Company or such Subsidiary Guarantor, in an aggregate
principal amount not to exceed $10.0 million at any time outstanding;

 

(7)           Indebtedness
Incurred in respect of workers’ compensation claims, self-insurance
obligations, performance, surety and similar bonds and completion guarantees
provided by the Company or a Restricted Subsidiary in the ordinary course of
business;

 

(8)           Indebtedness
arising from agreements of the Company or a Restricted Subsidiary 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 Capital Stock of a Restricted Subsidiary, provided that the maximum aggregate liability in respect of
all such Indebtedness shall at no time exceed the gross proceeds actually
received by the Company and its Restricted Subsidiaries in connection with such
disposition;

 

(9)           Indebtedness
arising from the honoring by a bank or other financial institution of a check,
draft or similar instrument (except in the case of daylight overdrafts) drawn
against insufficient funds in the ordinary course of business, provided, however, that such Indebtedness
is extinguished within five Business Days of Incurrence;

 

(10)         Indebtedness
evidenced by promissory notes constituting Subordinated Obligations issued in
connection with a Restricted Payment permitted pursuant to
Section 3.3(b)(7)(A); and

 

(11)         in
addition to the items referred to in clauses (1) through (10) above of this Section 3.2(b),
Indebtedness of the Company and the Subsidiary Guarantors in an aggregate
outstanding principal amount which, when taken together with the principal
amount of all other Indebtedness Incurred pursuant to this clause (11) of Section 3.2(b)
and then outstanding, will not exceed $10.0 million at any time outstanding.

 

The Company will not Incur any Indebtedness under this Section 3.2(b)
if the proceeds thereof are used, directly or indirectly, to refinance any
Subordinated Obligations of the Company unless such Indebtedness will be
subordinated to the Securities to at least the same extent as such Subordinated
Obligations.  No Subsidiary Guarantor
will Incur any Indebtedness if the proceeds thereof are used, directly or
indirectly, to refinance any Guarantor Subordinated

 

22

 

Obligations of such Subsidiary Guarantor unless such Indebtedness will
be subordinated to the obligations of such Subsidiary Guarantor under its
Subsidiary Guarantee to at least the same extent as such Guarantor Subordinated
Obligations.  No Restricted Subsidiary
may Incur any Indebtedness if the proceeds are used to refinance Indebtedness
of the Company.

 

(c)  For purposes of determining
compliance with, and the outstanding principal amount of any particular
Indebtedness Incurred pursuant to and in compliance with, this Section 3.2:

 

(1)           in
the event that Indebtedness meets the criteria of more than one of the types of
Indebtedness described in clauses (a) and (b) of this Section 3.2,
the Company, in its sole discretion, will classify such item of Indebtedness on
the date of Incurrence and only be required to include the amount and type of
such Indebtedness in one of such clauses;

 

(2)           all
Indebtedness outstanding on the date of this Indenture under the Working
Capital Facility shall be deemed initially Incurred on the Issue Date under Section 3.2(b)(1)
and not Section 3.2(a) or Section 3.2(b)(4);

 

(3)           Guarantees
of, or obligations in respect of letters of credit relating to, Indebtedness
which is otherwise included in the determination of a particular amount of
Indebtedness shall not be included;

 

(4)           if
obligations in respect of letters of credit are Incurred pursuant to a Credit
Facility and are being treated as Incurred pursuant to Section 3.2(b)(1)
and the letters of credit relate to other Indebtedness, then such other
Indebtedness shall not be included;

 

(5)           the
principal amount of any Disqualified Stock of the Company or a Subsidiary
Guarantor, or Preferred Stock of a Restricted Subsidiary that is not a Subsidiary
Guarantor, will be equal to the greater of the maximum mandatory redemption or
repurchase price (not including, in either case, any redemption or repurchase
premium) or the liquidation preference thereof;

 

(6)           Indebtedness
permitted by this Section 3.2 need not be permitted solely by
reference to one provision permitting such Indebtedness but may be permitted in
part by one such provision and in part by one or more other provisions of this Section 3.2
permitting such Indebtedness; and

 

(7)           the
amount of Indebtedness issued at a price that is less than the principal amount
thereof will be equal to the amount of the liability in respect thereof
determined in accordance with GAAP.

 

Accrual of interest, accrual of dividends, the accretion of accreted value,
the payment of interest in the form of additional Indebtedness and the payment
of dividends in the form of additional shares of Preferred Stock or
Disqualified Stock will not be deemed to be an Incurrence of Indebtedness for
purposes of this Section 3.2. 
The amount of any Indebtedness outstanding as of any date shall be (i)
the accreted value thereof in the case of any Indebtedness

 

23

 

issued with original issue discount and (ii) the principal amount or
liquidation preference thereof, together with any interest thereon that is more
than 30 days past due, in the case of any other Indebtedness.

 

In addition, the Company will not permit any of its Unrestricted
Subsidiaries to Incur any Indebtedness or issue any shares of Disqualified
Stock, other than Non-Recourse Debt.  If
at any time an Unrestricted Subsidiary becomes a Restricted Subsidiary, any
Indebtedness of such Subsidiary shall be deemed to be Incurred by a Restricted
Subsidiary as of such date (and, if such Indebtedness is not permitted to be
Incurred as of such date under this Section 3.2, the Company shall
be in Default under this Section 3.2).

 

For purposes of determining compliance with any U.S. dollar-denominated
restriction on the Incurrence of Indebtedness, the U.S. dollar-equivalent
principal amount of Indebtedness denominated in a foreign currency shall be
calculated based on the relevant currency exchange rate in effect on the date
such Indebtedness was Incurred, in the case of term Indebtedness, or first
committed, in the case of revolving credit Indebtedness; provided that if such Indebtedness is
Incurred to refinance other Indebtedness denominated in a foreign currency, and
such refinancing would cause the applicable U.S. dollar-dominated restriction
to be exceeded if calculated at the relevant currency exchange rate in effect
on the date of such refinancing, such U.S. dollar-dominated restriction shall
be deemed not to have been exceeded so long as the principal amount of such
refinancing Indebtedness does not exceed the principal amount of such
Indebtedness being refinanced. 
Notwithstanding any other provision of this Section 3.2, the
maximum amount of Indebtedness that the Company may Incur pursuant to this Section 3.2
shall not be deemed to be exceeded solely as a result of fluctuations in the
exchange rate of currencies.  The
principal amount of any Indebtedness Incurred to refinance other Indebtedness,
if Incurred in a different currency from the Indebtedness being refinanced,
shall be calculated based on the currency exchange rate applicable to the
currencies in which such Refinancing Indebtedness is denominated that is in
effect on the date of such refinancing.

 

SECTION 3.3.   Limitation on Restricted Payments.  (a) 
The Company will not, and will not permit any of its Restricted
Subsidiaries, directly or indirectly, to:

 

(1)           declare
or pay any dividend or make any distribution on or in respect of its Capital
Stock (including any payment in connection with any merger or consolidation
involving the Company or any of its Restricted Subsidiaries) except:

 

(A)          dividends or distributions payable in Capital
Stock of the Company (other than Disqualified Stock) or in options, warrants or
other rights to purchase such Capital Stock of the Company; and

 

(B)           dividends or distributions payable to the
Company or a Restricted Subsidiary (and if such Restricted Subsidiary is not a
Wholly-Owned Subsidiary, to its other holders of common Capital Stock on a pro
rata basis);

 

(2)           purchase,
redeem, retire or otherwise acquire for value any Capital Stock of the Company
or any direct or indirect parent of the Company held by Persons other

 

24

 

than the Company or a Restricted Subsidiary (other than in exchange for
Capital Stock of the Company (other than Disqualified Stock));

 

(3)           purchase,
repurchase, redeem, defease or otherwise acquire or retire for value, prior to
scheduled maturity, scheduled repayment or scheduled sinking fund payment, any
Subordinated Obligations or Guarantor Subordinated Obligations (other than the
purchase, repurchase, redemption, defeasance or other acquisition or retirement
of Subordinated Obligations or Guarantor Subordinated Obligations purchased in
anticipation of satisfying a sinking fund obligation, principal installment or
final maturity, in each case due within one year of the date of purchase,
repurchase, redemption, defeasance or other acquisition or retirement); or

 

(4)           make
any Restricted Investment in any Person;

 

(any such dividend, distribution, purchase, redemption, repurchase,
defeasance, other acquisition, retirement or Restricted Investment referred to
in clauses (1) through (4) shall be referred to herein as a “Restricted
Payment”), if at the time the Company or such Restricted Subsidiary makes
such Restricted Payment:

 

(a)           a Default shall have occurred and be
continuing (or would result therefrom); or

 

(b)           the Company is not able to Incur an
additional $1.00 of Indebtedness pursuant to Section 3.2(a) after
giving effect, on a pro forma basis, to such Restricted Payment; or

 

(c)           the aggregate amount of such Restricted
Payment and all other Restricted Payments declared or made subsequent to the
Issue Date would exceed the sum of:

 

(i)            50% of Consolidated Net Income for the
period (treated as one accounting period) from the Issue Date to the end of the
most recent fiscal quarter ending prior to the date of such Restricted Payment
for which financial statements are in existence (or, in case such Consolidated
Net Income is a deficit, minus 100% of such deficit);

 

(ii)           100% of the aggregate Net Cash Proceeds
received by the Company from the issue or sale of its Capital Stock (other than
Disqualified Stock) or other capital contributions subsequent to the Issue Date
(other than Net Cash Proceeds received from an issuance or sale of such Capital
Stock to a Subsidiary of the Company or an employee stock ownership plan,
option plan or similar trust to the extent such sale to an employee stock
ownership plan or similar trust is financed by loans from or Guaranteed by the
Company or any Restricted Subsidiary unless such loans have been repaid with
cash on or prior to the date of determination);

 

25

 

(iii)          the amount by which Indebtedness of the
Company or its Restricted Subsidiaries is reduced on the Company’s balance
sheet upon the conversion or exchange (other than by a Subsidiary of the
Company) subsequent to the Issue Date of any Indebtedness of the Company or its
Restricted Subsidiaries convertible or exchangeable for Capital Stock (other
than Disqualified Stock) of the Company or Holdings (less the amount of any
cash, or the fair market value of any other property, distributed by the
Company upon such conversion or exchange);

 

(iv)          the amount by which the Disqualified Stock of
the Company or its Restricted Subsidiaries is reduced on the Company’s balance
sheet upon the conversion or exchange (other than by a Subsidiary of the
Company) subsequent to the Issue Date of any Disqualified Stock of the Company
or its Restricted Subsidiaries convertible or exchangeable for Capital Stock
(other than Disqualified Stock) of the Company or Holdings (less the amount of
any cash, or the fair market value of any other property, distributed by the Company
upon such conversion or exchange); and

 

(v)           the amount equal to the net reduction in
Restricted Investments made by the Company or any of its Restricted
Subsidiaries in any Person resulting from:

 

(A)          repurchases or redemptions of such Restricted
Investments by such Person, proceeds realized upon the sale of such Restricted
Investment to an unaffiliated purchaser, repayments of loans or advances or
other transfers of assets (including by way of dividend or distribution) by
such Person to the Company or any Restricted Subsidiary; or

 

(B)           the redesignation of Unrestricted
Subsidiaries as Restricted Subsidiaries (valued in each case as provided in the
definition of “Investment”) not to exceed, in the case of any Unrestricted
Subsidiary, the amount of Investments previously made by the Company or any
Restricted Subsidiary in such Unrestricted Subsidiary,

 

which amount in each case under this clause (v) was included in the
calculation of the amount of Restricted Payments; provided, however, that no amount will be included under
this clause (v) to the extent it is already included in Consolidated Net
Income.

 

(b)  The provisions of the
preceding paragraph (a) will not prohibit:

 

(1)           a
one-time distribution to Holdings in an aggregate amount of up to $101.0 million
to purchase the Capital Stock of Holdings as described in the “Use of

 

26

 

proceeds” section of the Offering Memorandum; provided that such distribution will be
excluded in subsequent calculations of the amount of Restricted Payments;

 

(2)           any
purchase, repurchase, redemption, defeasance or other acquisition or retirement
of Capital Stock, Disqualified Stock or Subordinated Obligations of the Company
or Guarantor Subordinated Obligations of any Subsidiary Guarantor made by
exchange for, or out of the proceeds of the substantially concurrent sale of,
Capital Stock of the Company or Holdings (to the extent that Holdings
contributes the proceeds of such substantially concurrent sale to the Company
as common equity capital) (other than Disqualified Stock and other than Capital
Stock issued or sold to a Subsidiary or an employee stock ownership plan or
similar trust to the extent such sale to an employee stock ownership plan or
similar trust is financed by loans from or Guaranteed by the Company or any
Restricted Subsidiary unless such loans have been repaid with cash on or prior
to the date of determination); provided,
however, that (a) such purchase, repurchase, redemption, defeasance,
acquisition or retirement will be excluded in subsequent calculations of the
amount of Restricted Payments and (b) the Net Cash Proceeds from such sale of
Capital Stock will be excluded from clause (c)(ii) of the preceding paragraph;

 

(3)           any
purchase, repurchase, redemption, defeasance or other acquisition or retirement
of Subordinated Obligations of the Company or Guarantor Subordinated
Obligations of any Subsidiary Guarantor made by exchange for, or out of the
proceeds of the substantially concurrent sale of, Subordinated Obligations of
the Company or any purchase, repurchase, redemption, defeasance or other
acquisition or retirement of Guarantor Subordinated Obligations made by
exchange for, or out of the proceeds of the substantially concurrent sale of,
Guarantor Subordinated Obligations that, in each case, is permitted to be
Incurred pursuant to Section 3.2 and that in each case constitutes
Refinancing Indebtedness; provided, however,
that such purchase, repurchase, redemption, defeasance, acquisition
or retirement will be excluded in subsequent calculations of the amount of
Restricted Payments;

 

(4)           any
purchase, repurchase, redemption, defeasance or other acquisition or retirement
of Disqualified Stock of the Company or a Restricted Subsidiary made by
exchange for, or out of the proceeds of the substantially concurrent sale of,
Disqualified Stock of the Company or such Restricted Subsidiary, as the case
may be, that, in each case, is permitted to be Incurred pursuant to Section 3.2
and that in each case constitutes Refinancing Indebtedness; provided, however, that such purchase,
repurchase, redemption, defeasance, acquisition or retirement will be excluded
in subsequent calculations of the amount of Restricted Payments;

 

(5)           so
long as no Default or Event of Default has occurred and is continuing, any
purchase or redemption of Subordinated Obligations or Guarantor Subordinated
Obligations of a Subsidiary Guarantor from Net Available Cash to the extent
permitted under Section 3.5 below; provided,
however, that such purchase or redemption will be excluded in
subsequent calculations of the amount of Restricted Payments;

 

27

 

(6)           dividends
paid within 60 days after the date of declaration if at such date of
declaration such dividend would have complied with this provision; provided, however, that such dividends
will be included in subsequent calculations of the amount of Restricted
Payments;

 

(7)           so
long as no Default or Event of Default has occurred and is continuing,

 

(A)          the purchase, redemption or other
acquisition, cancellation or retirement for value of Capital Stock, or options,
warrants, equity appreciation rights or other rights to purchase or acquire
Capital Stock of the Company or any Restricted Subsidiary or any parent of the
Company held by any existing or former employees or management of the Company
or Holdings or any Subsidiary of the Company or their assigns, estates or heirs
or cash dividends distributed to Holdings for the purpose of consummating such
purchase, redemption or other acquisition, cancellation or retirement for
value, in each case in connection with the repurchase provisions under employee
stock option or stock purchase agreements or other agreements to compensate
management employees; provided that
such redemptions or repurchases pursuant to this clause will not exceed (x)
$1.5 million in cash in the aggregate during any calendar year, less any cash
used to prepay promissory notes pursuant to clause (y), and (y) $1.5 million in
the aggregate during any calendar year represented by promissory notes
constituting Subordinated Obligations with a Stated Maturity after the date
that is 91 days after the date that is the Stated Maturity of the Securities,
which promissory notes may be prepaid in an aggregate amount during any
calendar year up to any cash amount not used pursuant to clause (x) in such
calendar year; provided, however, that
the amount of any such repurchase or redemption will be included in subsequent
calculations of the amount of Restricted Payments; and

 

(B)           to the extent permitted by applicable law,
loans or advances to employees or directors of the Company or Holdings or any
Subsidiary of the Company, the proceeds of which are used to purchase Capital
Stock of the Company or Holdings, in an aggregate amount not in excess of $1.0
million at any one time outstanding; provided,
however, that the amount of such loans and advances will be included
in subsequent calculations of the amount of Restricted Payments;

 

(8)           so
long as no Default or Event of Default has occurred and is continuing, the
declaration and payment of dividends to holders of any class or series of
Disqualified Stock of the Company issued in accordance with the terms of this
Indenture to the extent such dividends are included in the definition of
“Consolidated Interest Expense”; provided that
the payment of such dividends will be excluded from the calculation of
Restricted Payments;

 

(9)           repurchases
of Capital Stock deemed to occur upon the exercise of stock options, warrants
or other convertible securities if such Capital Stock represents a portion

 

28

 

of the exercise price thereof; provided,
however, that such repurchases will be excluded in subsequent
calculations of the amount of Restricted Payments;

 

(10)         so
long as no Default or Event of Default shall have occurred and be continuing,
cash dividends to Holdings in an amount sufficient to enable Holdings to make
payments of cash interest required to be made in respect of Indebtedness of Holdings
that has been Guaranteed by the Company in accordance with the terms of this
Indenture, provided that the net
cash proceeds of such Indebtedness were contributed to the Company and such
Indebtedness is considered Indebtedness of the Company for all purposes,
including for purposes of calculating Consolidated Interest Expense, and
Holdings is otherwise unable to pay such interest and such dividends are
applied directly to the payment of such interest; and provided, further,
that such payments will be excluded in subsequent calculations of the amount of
Restricted Payments;

 

(11)         cash
dividends or loans to Holdings in amounts equal to:

 

(a)           the amounts required for Holdings to pay any
foreign, Federal, state or local income taxes to the extent that such income
taxes are directly attributable to the income of the Company and its Restricted
Subsidiaries;

 

(b)           the amounts required for Holdings to pay
franchise taxes and other fees required to maintain its legal existence;

 

(c)           an amount not to exceed $1.0 million in any
fiscal year to permit Holdings to pay its corporate overhead expenses Incurred
in the ordinary course of business, and to pay salaries or other compensation
of employees who perform services for both Holdings and the Company;

 

provided, that such
dividends or loans will be excluded in subsequent calculations of the amount of
Restricted Payments;

 

(12)         the
purchase, repurchase, redemption, defeasance, or other acquisition or
retirement for value of any Subordinated Obligation (i) at a purchase price not
greater than 101% of the principal amount of such Subordinated Obligation in
the event of a Change of Control in accordance with provisions similar to Section 3.10
or (ii) at a purchase price not greater than 100% of the principal amount
thereof in accordance with provisions similar to Section 3.5; provided that, prior to or simultaneously
with such purchase, repurchase, redemption, defeasance or other acquisition or
retirement, the Company has made the Change of Control Offer, Collateral
Disposition Offer or Asset Disposition Offer, as applicable, as provided in
such Section 3.5 or 3.10 with respect to the Securities and
has completed the repurchase or redemption of all Securities validly tendered
for payment in connection with such Change of Control Offer, Collateral
Disposition Offer or Asset Disposition Offer provided,
further, that such purchase,
repurchase, redemption, defeasance or other acquisition or retirement for value
will be included in subsequent calculations of the amount of Restricted
Payments;

 

(13)         a
Restricted Investment either (i) solely in exchange for shares of Capital Stock
(other than Disqualified Stock) of the Company or (ii) through the application
of

 

29

 

the Net Cash Proceeds of the substantially concurrent sale of Capital
Stock (other than Disqualified Stock) of the Company or Holdings (to the extent
that Holdings contributes the proceeds of such substantially concurrent sale to
the Company as common equity capital); provided,
that (a) such Restricted Investment will be excluded in subsequent calculations
of the amount of Restricted Payments and (b) the Net Cash Proceeds from such
sale of Capital Stock will be excluded from clause (c)(ii) of the preceding
paragraph;

 

(14)         so
long as no Default or Event of Default shall have occurred and be continuing or
would exist after giving effect thereto, the declaration or payment of
dividends on the Company’s Common Stock (or dividends, distributions or
advances to Holdings to allow Holdings to pay dividends on Holdings’ Common
Stock) following the first public offering of the Company’s Common Stock (or of
Holdings’ Common Stock, as the case may be) after the Issue Date, of, whichever
is earlier, (i) in the case of the first public offering of the Company’s
Common Stock, up to 6% per annum of the Net Cash Proceeds received by the
Company in such public offering or (ii) in the case of the first public
offering of Holdings’ Common Stock, up to 6% per annum of the amount
contributed by Holdings to the Company from the Net Cash Proceeds received by
Holdings in such public offering, in each case, other than public offerings of
the Company or Holdings’ Common Stock registered on Form S-4 or Form S-8; provided, however,
that such declaration or payment will be included in subsequent calculations of
the amount of Restricted Payments; and

 

(15)         so
long as no Default or Event of Default shall have occurred and be continuing or
would exist after giving effect thereto, Restricted Payments in an amount not
to exceed $5.0 million in the aggregate since the Issue Date; provided, however, that such Restricted
Payments will be included in subsequent calculations of the amount of
Restricted Payments.

 

Notwithstanding the foregoing, except as permitted by clauses (1), (7),
(8), (9), (10) or (11) of the previous paragraph, until the second anniversary
of the Issue Date, the Company will not, and will not permit any of its
Restricted Subsidiaries, directly or indirectly, to (a) declare or pay any
dividend or make any distribution on or in respect of its Capital Stock to any
holder of Capital Stock or (b) purchase, redeem, retire or otherwise acquire
for value any Capital Stock of the Company or any direct or indirect parent of
the Company held by any holder of Capital Stock.  Following the second anniversary of the Issue
Date, the Company may, and may permit its Restricted Subsidiaries to, make such
declarations, distributions, payments, purchases, redemptions, retirements or
acquisitions, provided that the
Consolidated Coverage Ratio for the Company and its Restricted Subsidiaries is
at least 2.50 to 1.00.

 

The amount of all Restricted Payments (other than cash) shall be the
fair market value on the date of such Restricted Payment of the asset(s) or
securities proposed to be paid, transferred or issued by the Company or such
Restricted Subsidiary, as the case may be, pursuant to such Restricted
Payment.  The fair market value of any
cash Restricted Payment shall be its face amount and any non-cash Restricted
Payment shall be determined conclusively by the Board of Directors of the
Company acting in good faith whose resolution with respect thereto shall be
delivered to the Trustee, such determination to be based upon an opinion or
appraisal

 

30

 

issued by an accounting, appraisal or investment banking firm of
national standing if such fair market value is estimated in good faith by the
Board of Directors of the Company to exceed $5.0 million.  Not later than the date of making any
Restricted Payment, the Company shall deliver to the Trustee an Officers’
Certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by this Section 3.3
were computed, together with a copy of any fairness opinion or appraisal
required by this Indenture.

 

As used herein, “substantially concurrent sale” shall mean any sale
within 45 days prior to the specified event

 

SECTION 3.4.   Limitation on Restrictions on
Distributions from Restricted Subsidiaries. 
The Company will not, and will not permit any Restricted Subsidiary to,
create or otherwise cause or permit to exist or become effective any consensual
encumbrance or consensual restriction on the ability of any Restricted Subsidiary
to:

 

(1)           pay
dividends or make any other distributions on its Capital Stock or pay any
Indebtedness or other obligations owed to the Company or any Restricted
Subsidiary (it being understood that the priority of any Preferred Stock in
receiving dividends or liquidating distributions prior to dividends or
liquidating distributions being paid on Common Stock shall not be deemed a
restriction on the ability to make distributions on Capital Stock);

 

(2)           make
any loans or advances to the Company or any Restricted Subsidiary (it being
understood that the subordination of loans or advances made to the Company or
any Restricted Subsidiary to other Indebtedness Incurred by the Company or any
Restricted Subsidiary shall not be deemed a restriction on the ability to make
loans or advances); or

 

(3)           transfer
any of its property or assets to the Company or any Restricted Subsidiary.

 

The preceding provisions will not prohibit:

 

(i)            any encumbrance or restriction pursuant to
an agreement in effect at or entered into on the date of this Indenture and
identified in Schedule 3.4 to this Indenture, including, without
limitation, this Indenture, the Collateral Documents and the Working Capital
Facility in effect on such date;

 

(ii)           any encumbrance or restriction with respect
to a Restricted Subsidiary pursuant to an agreement relating to any Capital
Stock or Indebtedness Incurred by a Restricted Subsidiary on or before the date
on which such Restricted Subsidiary was acquired by the Company (other than
Capital Stock or Indebtedness Incurred as consideration in, or to provide all
or any portion of the funds utilized to consummate, the transaction or series
of related transactions pursuant to which such Restricted Subsidiary became a
Restricted Subsidiary or was acquired by the Company or in

 

31

 

contemplation of the transaction) and outstanding on such date; provided, that any such encumbrance or
restriction shall not extend to any assets or property of the Company or any
other Restricted Subsidiary other than the assets and property so acquired;

 

(iii)          any encumbrance or restriction with respect
to a Restricted Subsidiary pursuant to an agreement effecting a refunding,
replacement or refinancing of Indebtedness Incurred pursuant to an agreement
referred to in clause (i) or (ii) of this paragraph or this clause (iii) or
contained in any amendment to an agreement referred to in clause (i) or (ii) of
this paragraph or this clause (iii); provided,
however, that the encumbrances and restrictions with respect to such
Restricted Subsidiary contained in any such agreement are no less favorable in
any material respect to the Holders of the Securities than the encumbrances and
restrictions contained in such agreements referred to in clauses (i) or (ii) of
this paragraph on the Issue Date or the date such Restricted Subsidiary became
a Restricted Subsidiary, whichever is applicable;

 

(iv)          in the case of Section 3.4(3),
any encumbrance or restriction:

 

(a)    that restricts in a customary manner the
subletting, assignment or transfer of any property or asset that is subject to
a lease, license or similar contract, or the assignment or transfer of any such
lease, license or other contract;

 

(b)    contained in mortgages, pledges or other security
agreements permitted under this Indenture securing Indebtedness of the Company
or a Restricted Subsidiary to the extent such encumbrances or restrictions
restrict the transfer of the property subject to such mortgages, pledges or
other security agreements; or

 

(c)    pursuant to customary provisions restricting
dispositions of real property interests set forth in any reciprocal easement
agreements of the Company or any Restricted Subsidiary;

 

(v)           (a) 
purchase money obligations for property acquired in the ordinary course
of business and (b) Capitalized Lease Obligations permitted under this
Indenture, in each case, that impose encumbrances or restrictions of the nature
described in Section 3.4(3) on the property so acquired;

 

(vi)          any restriction with respect to a Restricted
Subsidiary (or any of its property or assets) imposed pursuant to an agreement
entered into for the direct or indirect sale or disposition of all or
substantially all the Capital Stock or assets of such Restricted Subsidiary (or
the

 

32

 

property or assets that are subject to such restriction) pending the
closing of such sale or disposition;

 

(vii)         any customary provisions in joint venture
agreements relating to joint ventures that are not Restricted Subsidiaries and
other similar agreements entered into in the ordinary course of business;

 

(viii)        net worth provisions in leases and other
agreements entered into by the Company or any Restricted Subsidiary in the
ordinary course of business; and

 

(ix)           encumbrances or restrictions arising or
existing by reason of applicable law or any applicable rule, regulation or
order.

 

SECTION 3.5.   Limitation on Sales of Assets and
Subsidiary Stock.  (a) The Company
will not, and will not permit any of its Restricted Subsidiaries to, make any
Asset Disposition of Collateral unless:

 

(1)           the
Company or such Restricted Subsidiary, as the case may be, receives
consideration at least equal to the fair market value (such fair market value
to be determined on the date of contractually agreeing to such Asset
Disposition), as determined in good faith by the Board of Directors (including
as to the value of all non-cash consideration), of the Collateral subject to
such Asset Disposition;

 

(2)           at
least 80% of the consideration from such Asset Disposition received by the
Company or such Restricted Subsidiary, as the case may be, is in the form of
cash or Cash Equivalents and 100% of the Net Available Cash therefrom is
deposited directly by the Company into the Collateral Account; and

 

(3)           the
remaining consideration from such Asset Disposition that is not in the form of
cash or Cash Equivalents is thereupon with its acquisition pledged as First
Priority Collateral to secure the Securities, in the case of an Asset
Disposition of First Priority Collateral, or as Second Priority Collateral, in
the case of an Asset Disposition of Second Priority Collateral.

 

Any Net Available Cash deposited into the Collateral Account from any
Asset Dispositions of First Priority Collateral, Recovery Events (as described
below) or Asset Swaps involving the transfer of Collateral (as described in Section 3.5(d)
below) may be withdrawn by the Company to be invested by the Company in
Additional Assets within 360 days of the date of such Asset Disposition, Recovery
Event or Asset Swap, which Additional Assets are thereupon with their
acquisition added to the First Priority Collateral securing the
Securities.  In the case of an Asset
Disposition of Second Priority Collateral, any Net Available Cash will be deposited
in accordance with the Intercreditor Agreement.

 

All of the Net Available Cash received by the Company or such
Restricted Subsidiary, as the case may be, from any Recovery Event shall be
deposited directly into the Collateral Account and may be withdrawn by the
Company or such Restricted Subsidiary to be invested in Additional Assets
(which may include performance of a Restoration of the affected

 

33

 

Collateral) in accordance with the preceding paragraph within 360 days
of the date of such Recovery Event.

 

Any Net Available Cash from Asset Dispositions of Collateral, Asset
Swaps involving the transfer of Collateral or Recovery Events that are not
applied or invested as provided in this Section 3.5(a) or in accordance
with the Collateral Documents will be deemed to constitute “Excess
Collateral Proceeds.”  On the 361st
day after an Asset Disposition, Asset Swap or Recovery Event pursuant to this
Section 3.5(a), if the aggregate amount of Excess Collateral Proceeds
exceeds $8.0 million, the Company will be required to make an offer (“Collateral
Disposition Offer”) to all Holders of Securities to purchase the maximum
principal amount of Securities to which the Collateral Disposition Offer
applies that may be purchased out of the Excess Collateral Proceeds, at an
offer price in cash in an amount equal to 100% of the principal amount of the
Securities plus accrued and unpaid interest to the date of purchase, in
accordance with the procedures set forth in this Indenture in integral
multiples of $1,000; provided, however, that to the extent the Excess
Collateral Proceeds relate to Asset Dispositions of Second Priority Collateral,
the Company may, prior to making a Collateral Disposition Offer, make a
mandatory prepayment with respect to the maximum principal amount of
Indebtedness that is secured by such Collateral on a first-priority basis that
may be prepaid out of such Excess Collateral Proceeds, at a price in cash in an
amount equal to 100% of the principal amount of such Indebtedness, plus accrued
and unpaid interest to the date of prepayment, with any Excess Collateral
Proceeds not used to prepay such Indebtedness offered to Holders of Securities
in accordance with this paragraph. To the extent that the aggregate amount of
Securities (and such other Indebtedness in the case of an Asset Disposition of
Second Priority Collateral) so validly tendered and not properly withdrawn
pursuant to a Collateral Disposition Offer is less than the Excess Collateral
Proceeds, the Company may use any remaining Excess Collateral Proceeds for
general corporate purposes, subject to other covenants contained in this
Indenture.   If the aggregate principal
amount of Securities surrendered by Holders thereof exceeds the amount of Excess
Collateral Proceeds as set forth in an Officers’ Certificate, the Trustee shall
select the Securities to be purchased on a pro rata basis on the basis of the
aggregate principal amount of tendered Securities.  Upon completion of such Collateral Disposition
Offer, the amount of Excess Collateral Proceeds shall be reset at zero.

 

(b)  The Company will not, and
will not permit any of its Restricted Subsidiaries to, make any Asset
Disposition (other than an Asset Disposition of Collateral) unless:

 

(1)           the
Company or such Restricted Subsidiary, as the case may be, receives
consideration at least equal to the fair market value (such fair market value
to be determined on the date of contractually agreeing to such Asset
Disposition), as determined in good faith by the Board of Directors (including
as to the value of all non-cash consideration), of the shares and assets
subject to such Asset Disposition;

 

(2)           at
least 80% of the consideration from such Asset Disposition received by the
Company or such Restricted Subsidiary, as the case may be, is in the form of
cash or Cash Equivalents; and

 

34

 

(3)           an
amount equal to 100% of the Net Available Cash from such Asset Disposition is
applied by the Company or such Restricted Subsidiary, as the case may be:

 

(A)        first,
to the extent the Company or any Restricted Subsidiary, as the case may be,
elects (or is required by the terms of any Indebtedness), to prepay, repay,
purchase, repurchase, redeem, retire, defease or otherwise acquire Indebtedness
of the Company (other than any Disqualified Stock or Subordinated Obligations)
or Indebtedness of a Restricted Subsidiary (other than any Disqualified Stock
or Guarantor Subordinated Obligations) (in each case other than Indebtedness
owed to the Company or an Affiliate of the Company) within 360 days of the date
of such Asset Disposition; provided, however,
that, in connection with any prepayment, repayment, purchase, repurchase,
redemption, retirement, defeasance or other acquisition of Indebtedness
pursuant to this clause (A), the Company or such Restricted Subsidiary will
retire such Indebtedness and will cause the related commitment (if any) to be
permanently reduced in an amount equal to the principal amount so prepaid,
repaid, purchased, repurchased, redeemed, retired, defeased or otherwise
acquired; and

 

(B)         second,
to the extent of the balance of such Net Available Cash after application in
accordance with clause (A), to the extent the Company or such Restricted
Subsidiary elects, to invest in Additional Assets within 360 days of the date
of such Asset Disposition;

 

provided that
pending the final application of any such Net Available Cash in accordance with
clause (A) or clause (B) above, the Company and its Restricted Subsidiaries may
temporarily reduce Indebtedness or otherwise invest such Net Available Cash in
any manner not prohibited by this Indenture.

 

Any Net Available Cash from Asset Dispositions (other than Asset
Dispositions of Collateral) that are not applied or invested as provided in
this Section 3.5(b) will be deemed to constitute “Excess Proceeds.”  On the 361st day after such an Asset
Disposition, if the aggregate amount of Excess Proceeds exceeds $8.0 million,
the Company will be required to make an offer (“Asset Disposition Offer”)
to all Holders of Securities and, to the extent required by the terms of other
Pari Passu Indebtedness, to all holders of other Pari Passu Indebtedness
outstanding with similar provisions requiring the Company to make an offer to
purchase such Pari Passu Indebtedness with the proceeds from any such Asset
Disposition, to purchase the maximum principal amount of Securities and any
such Pari Passu Indebtedness to which the Asset Disposition Offer applies 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 the Securities and Pari Passu
Indebtedness plus accrued and unpaid interest to the date of purchase, in
accordance with the procedures set forth in this Indenture or the agreements
governing the Pari Passu Indebtedness, as applicable, in each case in integral
multiples of $1,000.  To the extent that
the aggregate

 

35

 

amount of Securities and Pari Passu Indebtedness, if applicable, so
validly tendered and not properly withdrawn pursuant to an Asset Disposition
Offer is less than the Excess Proceeds, the Company may use any remaining
Excess Proceeds for general corporate purposes, subject to other covenants
contained in this Indenture.  If the
aggregate principal amount of Securities surrendered by Holders thereof and
other Pari Passu Indebtedness surrendered by holders or lenders, collectively,
exceeds the amount of Excess Proceeds as set forth in an Officers’ Certificate,
the Trustee shall select the Securities to be purchased on a pro rata basis on
the basis of the aggregate principal amount of tendered Securities (with such
adjustments as may be deemed appropriate by the Trustee so that only Securities
in denominations of $1,000 or integral 
multiples thereof shall be purchased) and the agent for the Pari Passu
Indebtedness shall select the Pari Passu Indebtedness to be purchased on a pro
rata basis on the basis of the aggregate principal amount of tendered Pari Passu
Indebtedness.  Upon completion of such
Asset Disposition Offer, the amount of Excess Proceeds shall be reset at zero.

 

(c)  The Collateral Disposition
Offer or Asset Disposition Offer will remain open for a period of 20 Business
Days following its commencement, except to the extent that a longer period is
required by applicable law (the “Asset Disposition Offer Period”).  No later than five Business Days after the
termination of the Asset Disposition Offer Period (the “Asset Disposition
Purchase Date”), the Company will purchase the principal amount of
Securities (and other Indebtedness required to be purchased pursuant to the
last paragraph of Section 3.5(a)) and Pari Passu Indebtedness required to
be purchased pursuant to this Section 3.5 (the “Asset Disposition
Offer Amount”) or, if less than the Asset Disposition Offer Amount has been
so validly tendered, all Securities (and other Indebtedness required to be
purchased pursuant to the last paragraph of Section 3.5(a)) and Pari Passu
Indebtedness, if applicable, validly tendered in response to the Collateral
Disposition Offer or Asset Disposition Offer, as applicable.

 

Upon the commencement of a Collateral Disposition Offer or Asset
Disposition Offer, as applicable, the Company will send, by first class mail, a
notice to the Trustee and each of the Holders of the Securities.  The notice will contain all instructions and
materials necessary to enable such Holders to tender Securities pursuant to the
Collateral Disposition Offer or Asset Disposition Offer, as applicable.  The notice, which will govern the terms of
the Collateral Disposition Offer or Asset Disposition Offer, as applicable,
will state:

 

(1)           that
the Collateral Disposition Offer or Asset Disposition Offer is being made
pursuant to this Section 3.5 and the length of time the Collateral
Disposition Offer or Asset Disposition Offer will remain open;

 

(2)           the
Asset Disposition Offer Amount, the purchase price and the Asset Disposition
Purchase Date;

 

(3)           that
any Security not tendered or accepted for payment will continue to accrue
interest;

 

(4)           that,
unless the Company defaults in making such payment, any Security accepted for
payment pursuant to the Collateral Disposition Offer or Asset Disposition Offer
will cease to accrue interest after the Asset Disposition Purchase Date;

 

36

 

(5)           that
Holders electing to have a Security purchased pursuant to a Collateral
Disposition Offer or Asset Disposition Offer, as applicable, may elect to have
Securities purchased in integral multiples of $1,000 only;

 

(6)           that
Holders electing to have a Security purchased pursuant to any Collateral
Disposition Offer or Asset Disposition Offer, as applicable, will be required
to surrender the Security, with the form entitled “Option of Holder to Elect
Purchase” attached to the Security completed, or transfer its interest in such
Security by book-entry transfer, to the Company or a Paying Agent at the
address specified in the notice at least three Business Days before the Asset
Disposition Purchase Date;

 

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

 

(8)           that,
if the aggregate principal amount of Securities and, if applicable, other Pari
Passu Indebtedness surrendered by the Holders thereof exceeds the Asset
Disposition Offer Amount, the Company will select the Securities and, if
applicable, other  Pari Passu
Indebtedness to be purchased on a pro rata basis based on the principal amount
of Securities and such other Pari Passu Indebtedness surrendered (with such
adjustments as may be deemed appropriate so that only Securities in
denominations of $1,000, or integral multiples thereof, will be purchased); and

 

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

 

If the Asset Disposition Purchase Date is on or after an interest
record date and on or before the related interest payment date, any accrued and
unpaid interest will be paid on such Asset Disposition Purchase Date to the
Person in whose name a Security is registered at the close of business on such
record date, and no additional interest will be payable to Holders who tender
Securities pursuant to the Collateral Disposition Offer or Asset Disposition
Offer.

 

On or before the Asset Disposition Purchase Date, the Company will, to
the extent lawful, accept for payment, on a pro rata basis to the extent
necessary, Asset Disposition Offer Amount of Securities (and other Indebtedness
required to be purchased pursuant to the last paragraph of Section 3.5(a))
and Pari Passu Indebtedness or portions of Securities (and other Indebtedness
required to be purchased pursuant to the last paragraph of Section 3.5(a))
and Pari Passu Indebtedness so validly tendered and not properly withdrawn
pursuant to the Collateral Disposition Offer or Asset Disposition Offer, or if
less than the Asset Disposition Offer Amount has been validly tendered and not
properly withdrawn, all Securities (and other Indebtedness required to be
purchased pursuant to the last paragraph of Section 3.5(a)) and Pari Passu
Indebtedness so validly tendered and not properly withdrawn, in each case in
integral multiples of $1,000. The Company will deliver to the Trustee an
Officers’ Certificate stating that such

 

37

 

Securities or portions thereof were accepted for payment by the Company
in accordance with the terms of this Section 3.5 and, in addition,
the Company will deliver all certificates and notes required, if any, by the
agreements governing the other Indebtedness required to be purchased pursuant
to the last paragraph of Section 3.5(a) and the Pari Passu
Indebtedness.  The Company or the Paying
Agent, as the case may be, will promptly (but in any case not later than five
Business Days after termination of the Asset Disposition Offer Period) mail or
deliver to each tendering Holder of Securities or holder or lender of such
other Indebtedness or Pari Passu Indebtedness, as the case may be, an amount
equal to the purchase price of the Securities, such other Indebtedness or Pari
Passu Indebtedness so validly tendered and not properly withdrawn by such
holder or lender, as the case may be, and accepted by the Company for purchase,
and the Company will promptly issue a new Security, and the Trustee, upon
delivery of an Officers’ Certificate from the Company, will authenticate and
mail or deliver such new Security to such Holder, in a principal amount equal
to any unpurchased portion of the Security surrendered; provided that each such new Security will
be in a principal amount of $1,000 or an integral multiple of $1,000.  In addition, the Company will take any and
all other actions required by the agreements governing the other Indebtedness
required to be purchased pursuant to the last paragraph of Section 3.5(a)
and the Pari Passu Indebtedness.  Any
Security not so accepted will be promptly mailed or delivered by the Company to
the Holder thereof.  The Company will
publicly announce the results of the Collateral Disposition Offer or Asset
Disposition Offer, as applicable, on the Asset Disposition Purchase Date.

 

For the purposes of this Section 3.5, securities, notes or
other obligations received by the Company or any Restricted Subsidiary from the
transferee that are promptly converted by the Company or such Restricted
Subsidiary into cash shall be deemed to be cash.

 

(d)  The Company will not, and
will not permit any Restricted Subsidiary to, engage in any Asset Swaps, unless:

 

(1)           at
the time of entering into such Asset Swap and immediately after giving effect
to such Asset Swap, no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;

 

(2)           in
the event such Asset Swap involves the transfer by the Company or any
Restricted Subsidiary of assets having an aggregate fair market value, as
determined by the Board of Directors of the Company in good faith, in excess of
$2.5 million, the terms of such Asset Swap have been approved by a majority of
the members of the Board of Directors of the Company;

 

(3)           in
the event such Asset Swap involves the transfer by the Company or any
Restricted Subsidiary of assets having an aggregate fair market value, as
determined by the Board of Directors of the Company in good faith, in excess of
$5.0 million, the Company has received a written opinion from an independent
investment banking firm of nationally recognized standing that such Asset Swap
is fair to the Company or such Restricted Subsidiary, as the case may be, from
a financial point of view; and

 

(4)           in
the event such Asset Swap involves the transfer by the Company or any
Restricted Subsidiary of Collateral, (A) any Related Business Assets received
by the

 

38

 

Company or any Restricted Subsidiary shall be pledged as First Priority
Collateral securing the Securities, in the case of an Asset Swap involving
First Priority Collateral, or as Second Priority Collateral, in the case of an
Asset Swap involving Second Priority Collateral, and (B) any Net Available Cash
received by the Company or any Restricted Subsidiary shall be deposited
directly into the Collateral Account and may be withdrawn by the Company or
such Restricted Subsidiary to be invested in Additional Assets in the manner
set forth under Section 3.5(a) above.

 

(e)  The Company will comply, to
the extent applicable, with the requirements of Section 14(e) of the
Exchange Act and any other securities laws or regulations in connection with
the repurchase of Securities pursuant to this Indenture.  To the extent that the provisions of any
securities laws or regulations conflict with provisions of this Section 3.5,
the Company will comply with the applicable securities laws and regulations and
will not be deemed to have breached its obligations under this Indenture by
virtue of any conflict.

 

SECTION 3.6.   Limitation on Liens.  The Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, create, Incur or
suffer to exist any Lien (other than Permitted Liens) upon any of its property
or assets (including Capital Stock of Restricted Subsidiaries), whether owned
on the date of this Indenture or acquired after that date, which Lien is
securing any Indebtedness.

 

SECTION 3.7.   Limitation on Sale/Leaseback Transactions.  The Company will not, and will not permit any
of its Restricted Subsidiaries to, enter into any Sale/Leaseback Transaction unless:

 

(1)           the
Company or such Restricted Subsidiary could have Incurred Indebtedness in an
amount equal to the Attributable Indebtedness in respect of such Sale/Leaseback
Transaction pursuant to Section 3.2;

 

(2)           the
Company or such Restricted Subsidiary would be permitted to create a Lien on
the property subject to such Sale/Leaseback Transaction securing such
Attributable Indebtedness without securing the Securities pursuant to Section 3.6;
and

 

(3)           the
Sale/Leaseback Transaction is treated as an Asset Disposition and all of the
conditions of this Indenture described under Section 3.5 (including
the provisions concerning the application of Net Available Cash) are satisfied
with respect to such Sale/Leaseback Transaction, treating all of the
consideration received in such Sale/Leaseback Transaction as Net Available Cash
for purposes of such Section.

 

SECTION 3.8.   Limitation on Affiliate Transactions.  The Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, enter into or
conduct any transaction (including the purchase, sale, lease or exchange of any
property or the rendering of any service) with any Affiliate of the Company (an
“Affiliate Transaction”) unless:

 

(1)           the
terms of such Affiliate Transaction are no less favorable to the Company or
such Restricted Subsidiary, as the case may be, than those that could be
obtained in a comparable transaction at the time of such transaction in
arm’s-length dealings with a Person who is not such an Affiliate;

 

39

 

(2)           in
the event such Affiliate Transaction involves an aggregate consideration in
excess of $1.0 million, the terms of such transaction have been approved by a
majority of the members of the Board of Directors of the Company and by a
majority of the members of such Board having no personal stake in such
transaction, if any (and such majority or majorities, as the case may be, determines
that such Affiliate Transaction satisfies the criteria in clause (1) above);
and

 

(3)           in
the event such Affiliate Transaction involves an aggregate consideration in
excess of $2.5 million, the Company has received a written opinion from an
independent investment banking, accounting or appraisal firm of nationally
recognized standing that such Affiliate Transaction is not materially less
favorable than those that might reasonably have been obtained in a comparable
transaction at such time on an arm’s-length basis from a Person that is not an
Affiliate.

 

The preceding paragraph will not apply to:

 

(1)           any
Restricted Payment (other than a Restricted Investment) permitted to be made
pursuant to Section 3.3;

 

(2)           any
issuance of securities, or other payments, awards or grants in cash, securities
or otherwise pursuant to, or the funding of, employment agreements and other
compensation arrangements, options to purchase Capital Stock of the Company,
restricted stock plans, long-term incentive plans, stock appreciation rights
plans, participation plans or similar employee benefits plans and/or indemnity
provided on behalf of officers and employees approved by the Board of
Directors;

 

(3)           to
the extent permitted by law, loans or advances to employees, officers or
directors in the ordinary course of business of the Company or any of its
Restricted Subsidiaries but in any event not to exceed $1.0 million in the
aggregate outstanding at any one time with respect to all loans or advances
made since the Issue Date;

 

(4)           any
transaction between the Company and a Restricted Subsidiary or between
Restricted Subsidiaries;

 

(5)           Guarantees
issued by the Company or a Restricted Subsidiary for the benefit of the Company
or a Restricted Subsidiary, as the case may be, in accordance with Section 3.2;

 

(6)           the
payment of reasonable and customary fees paid to, and indemnity provided on
behalf of, directors of Holdings, the Company or any Restricted Subsidiary;

 

(7)           the
performance of obligations of the Company or any of its Restricted Subsidiaries
under the terms of any agreement to which the Company or any of its Restricted
Subsidiaries is a party as of or on the Issue Date and identified on
Schedule 3.8 to this Indenture on the Issue Date, as these agreements may
be amended, modified, supplemented, extended or renewed from time to time; provided, however, that any future
amendment, modification, supplement, extension or renewal entered into after
the Issue

 

40

 

Date will be permitted to the extent that its terms are not more
disadvantageous to the Holders of the Securities than the terms of the
agreements in effect on the Issue Date; and

 

(8)           so
long as no Default or Event of Default shall have occurred and be continuing,
up to $450,000 of consulting and management fees payable annually to
Charterhouse Group, Inc. or any of its Affiliates.

 

SECTION 3.9.   Limitation on Sale of Capital Stock of
Restricted Subsidiaries.  The Company
will not, and will not permit any Restricted Subsidiary to, transfer, convey,
sell, lease or otherwise dispose of any Voting Stock of any Restricted
Subsidiary or to issue any of the Voting Stock of a Restricted Subsidiary
(other than, if necessary, shares of its Voting Stock constituting directors’
qualifying shares) to any Person except:

 

(1)           to
the Company or a Wholly-Owned Subsidiary; or

 

(2)           in
compliance with Section 3.5 and immediately after giving effect to
such issuance or sale, such Restricted Subsidiary continues to be a Restricted
Subsidiary.

 

Notwithstanding the preceding paragraph, the Company or any Restricted
Subsidiary may sell all the Voting Stock of a Restricted Subsidiary as long as
the Company complies with the terms of Section 3.5.  In that case, such Restricted Subsidiary, if
a Subsidiary Guarantor, will be automatically released from all its obligations
under this Indenture, its Subsidiary Guarantee, the Registration Rights
Agreement, the Collateral Documents and the Intercreditor Agreement and the
Liens, if any, on the Collateral pledged by such Subsidiary Guarantor pursuant
to the Collateral Documents shall be released with respect to the Securities if
all the obligations of such Subsidiary Guarantor under its Guarantee under the
Working Capital Facility and related documentation and any other agreements
relating to any other Indebtedness of the Company or its Restricted
Subsidiaries terminate upon consummation of such sale.

 

SECTION 3.10.   Change of Control.  If a Change of Control occurs, unless the
Company has exercised its right to redeem all of the Securities pursuant to Section 5.1,
each Holder will have the right to require the Company to repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of such Holder’s
Securities at a purchase price in cash equal to 101% of the principal amount of
the Securities plus accrued and unpaid interest, if any, to the date of
purchase (subject to the right of Holders of record on the relevant record date
to receive interest due on the relevant interest payment date).

 

Within 30 days following any Change of Control, unless the Company has
exercised its right to redeem all of the Securities pursuant to Section 5.1,
the Company will mail a notice (the “Change of Control Offer”) to each
Holder, with a copy to the Trustee, stating:

 

(1)           that
a Change of Control has occurred and that such Holder has the right to require
the Company to purchase such Holder’s Securities at a purchase price in cash
equal to 101% of the principal amount of such Securities plus accrued and
unpaid interest, if any, to the date of purchase (subject to the right of
Holders of record on a record date to receive interest on the relevant interest
payment date) (the “Change of Control Payment”);

 

41

 

(2)           the
repurchase date (which shall be no earlier than 30 days nor later than 60 days
from the date such notice is mailed) (the “Change of Control Payment Date”);

 

(3)           that
any Security not tendered or accepted for payment will continue to accrue
interest;

 

(4)           that,
unless the Company defaults in making such payment, any Security accepted for
payment pursuant to the Change of Control Offer will cease to accrue interest
after the Change of Control Payment Date;

 

(5)           that
Holders electing to have a Security purchased pursuant to a Change of Control
Offer may elect to have Securities purchased in integral multiples of $1,000
only;

 

(6)           that
Holders electing to have a Security purchased pursuant to any Change of Control
Offer will be required to surrender the Security, with the form entitled
“Option of Holder to Elect Purchase” attached to the Security completed, or
transfer its interest in such Security by book-entry transfer, to the Company
or a Paying Agent at the address specified in the notice at least three
Business Days before the Change of Control Payment Date;

 

(7)           that
Holders will be entitled to withdraw their election if the Company or the
Paying Agent, as the case may be, receives, by not later than the expiration of
the Change of Control Offer, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of the
Security the Holder delivered for purchase and a statement that such Holder is
withdrawing his election to have such Security purchased; and

 

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

 

On the Change of Control Payment Date, the Company will, to the extent
lawful:

 

(1)           accept
for payment all Securities or portions of Securities (in integral multiples of
$1,000) properly tendered pursuant to the Change of Control Offer;

 

(2)           deposit
with the Paying Agent an amount equal to the Change of Control Payment in
respect of all Securities or portions of Securities so tendered; and

 

(3)           deliver
or cause to be delivered to the Trustee the Securities so accepted together
with an Officers’ Certificate stating the aggregate principal amount of
Securities or portions of Securities being purchased by the Company.

 

The Paying Agent will promptly mail to each Holder of Securities so
tendered the Change of Control Payment for such Securities, and the Trustee
will promptly authenticate and mail (or cause to be transferred by book entry)
to each Holder a new Security equal in principal amount to any unpurchased
portion of the Securities surrendered, if any;
provided that each such new Security will be in a principal amount
of $1,000 or an integral multiple thereof.

 

42

 

If the Change of Control Payment Date is on or after an interest record
date and on or before the related interest payment date, any accrued and unpaid
interest, if any, will be paid on such Change of Control Payment Date to the
Person in whose name a Security is registered at the close of business on such
record date, and no additional interest will be payable to Holders who tender
pursuant to the Change of Control Offer.

 

Prior to mailing a Change of Control Offer, and as a condition to such
mailing, (i) the requisite holders of each issue of Indebtedness issued under
an indenture or other agreement that may be violated by such payment shall have
consented to such Change of Control Offer being made and waived the event of
default, if any, caused under such indenture or other agreement by the Change
of Control, (ii) the Company shall have repaid, or cause to have been repaid,
all outstanding Indebtedness issued under an indenture or other agreement that may
be violated by a payment to the Holders of Securities under a Change of Control
Offer or (iii) the Company must have offered to repay all such Indebtedness,
made payment to the holders of such Indebtedness that accept such offer and
obtained waivers of any event of default from the remaining holders of such
Indebtedness.

 

The Company covenants to effect such repayment or obtain such consent
and/or waiver within 30 days following any Change of Control, it being a
Default of this Section 3.10 if the Company fails to comply with such
covenant.

 

The Company will not be required to make a Change of Control Offer upon
a Change of Control if a third party makes the Change of Control Offer 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 made by the
Company and purchases all Securities validly tendered and not withdrawn under
such Change of Control Offer.

 

The Company will comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act and any other securities laws or
regulations in connection with the repurchase of Securities pursuant to this Section 3.10.  To the extent that the provisions of any
securities laws or regulations conflict with provisions of this Indenture, the
Company will comply with the applicable securities laws and regulations and
will not be deemed to have breached its obligations described in this Indenture
by virtue of the conflict.

 

SECTION 3.11.   SEC Reports.  Notwithstanding that Holdings or the Company
may not be subject to the reporting requirements of Section 13 or 15(d) of
the Exchange Act, to the extent permitted by the Exchange Act, Holdings or the
Company will file with the SEC, and make available to the Trustee and the
registered Holders of the Securities, the annual reports and the information,
documents and other reports (or copies of such portions of any of the foregoing
as the SEC may by rules and regulations prescribe) that are specified in
Sections 13 and 15(d) of the Exchange Act within the time periods specified
therein.  In the event that Holdings or
the Company, as the case may be, is not permitted to file such reports,
documents and information with the SEC pursuant to the Exchange Act, Holdings
or the Company, as the case may be, will nevertheless make available such
Exchange Act information to the Trustee and to the Holders of the Securities as
if Holdings or the Company, as the case may be, were subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act within the time
periods specified therein.  The financial
information filed with the SEC or delivered to Holders pursuant to this

 

43

 

Section 3.11
shall include consolidated financial statements for the Company, the Subsidiary
Guarantors and Subsidiaries that are not Subsidiary Guarantors in the form
prescribed by the SEC.

 

If the Company 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 to the
financial statements and in Management’s Discussion and Analysis of Results of
Operations and Financial Condition, of the financial condition and results of
operations of the Company and its Restricted Subsidiaries separate from the
financial condition and results of operations of Unrestricted Subsidiaries.

 

SECTION 3.12.   Future
Subsidiary Guarantors.  After the
Issue Date, the Company will cause each Restricted Subsidiary (other than a
Foreign Subsidiary that does not Guarantee any Indebtedness of the Company or
any Restricted Subsidiary) created, designated or acquired by the Company or
one or more of its Restricted Subsidiaries or Holdings, in the event that
Holdings Guarantees any Indebtedness of the Company or any of its Restricted
Subsidiaries, to execute and deliver to the Trustee a Guarantee, in the form of
a supplemental indenture substantially in the form of Exhibit C hereto,
pursuant to which such Subsidiary (or Holdings, if applicable) will
unconditionally Guarantee, on a joint and several basis with the other
Subsidiary Guarantors, the full and prompt payment of the principal of,
premium, if any, and interest on the Securities on a senior secured basis.  In addition, the Company will cause such
Restricted Subsidiary (or Holdings, if applicable) to become a party to the
Collateral Documents and the Intercreditor Agreement and take such actions
necessary or advisable to grant to the Collateral Agent, for the benefit of
itself and the Holders of the Securities, a perfected security interest in any
Collateral held by such Restricted Subsidiary (or Holdings, if applicable),
subject to Permitted Liens.

 

SECTION 3.13.   Maintenance of Office or Agency.  The Company will maintain an office or agency
where the Securities may be presented or surrendered for payment, where, if
applicable, the Securities may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Company in respect of the
Securities and this Indenture may be served. 
The corporate trust office of the Trustee, which initially shall be
located at 101 Barclay Street, New York, New York 10286, shall be such office
or agency of the Company, unless the Company shall designate and maintain some
other office or agency for one or more of such purposes.  The Company will give prompt written notice
to the Trustee of any change in the location of any such office or agency.  If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the
Trustee with the address thereof, such presentations, surrenders, notices and
demands may be made or served at the corporate trust office of the Trustee, and
the Company hereby appoints the Trustee as its agent to receive all such
presentations, surrenders, notices and demands.

 

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

 

44

 

SECTION 3.14.   Corporate Existence.  Except as otherwise provided in this Article III,
Article IV and Section 10.2(b), the Company will do or
cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence and the corporate, partnership, limited
liability company or other existence of each Restricted Subsidiary and the
rights (charter and statutory), licenses and franchises of the Company and each
Restricted Subsidiary; provided, however,
that the Company shall not be required to preserve any such right, license or
franchise or the corporate, partnership, limited liability company or other
existence of any Restricted Subsidiary if the Board of Directors of the Company
shall determine that the preservation thereof is no longer desirable in the
conduct of the business of the Company and each of its Restricted Subsidiaries,
taken as a whole, and that the loss thereof is not, and will not be,
disadvantageous in any material respect to the Holders.

 

SECTION 3.15.   Payment of Taxes and Other Claims.  The Company shall pay or discharge or cause
to be paid or discharged, before the same shall become delinquent, (i) all
material taxes, assessments and governmental charges levied or imposed upon the
Company or any Subsidiary or upon the income, profits or property of the
Company or any Subsidiary and (ii) all lawful claims for labor, materials and
supplies, which, if unpaid, might by law become a material liability or lien
upon the property of the Company or any Subsidiary; provided, however, that the Company shall not be required to
pay or discharge or cause to be paid or discharged any such tax, assessment,
charge or claim the amount, applicability or validity of which is being
contested in good faith by appropriate proceedings and for which appropriate
reserves, if necessary (in the good faith judgment of management of the
Company), are being maintained in accordance with GAAP or where the failure to
effect such payment will not be disadvantageous to the Holders.

 

SECTION 3.16.   Payments for Consent.  None of Holdings, the Company or any of its
Restricted Subsidiaries will, directly or indirectly, pay or cause to be paid
any consideration, whether by way of interest, fees or otherwise, to any Holder
of any Securities for or as an inducement to any consent, waiver or amendment
of any of the terms or provisions of this Indenture, the Securities, the
Subsidiary Guarantees, the Collateral Documents or the Intercreditor Agreement
unless such consideration is offered to be paid or is paid to all Holders of
the Securities that consent, waive or agree to amend in the time frame set
forth in the solicitation documents relating to such consent, waiver or
amendment.

 

SECTION 3.17.   Compliance Certificate.  The Company shall deliver to the Trustee
within 120 days after the end of each Fiscal Year of the Company an Officers’
Certificate stating that in the course of the performance by the signers of
their duties as Officers of the Company they would normally have knowledge of
any Default or Event of Default and whether or not the signers know of any
Default or Event of Default that occurred during the previous Fiscal Year.  If they do, the certificate shall describe
the Default or Event of Default, its status and the action the Company is
taking or proposes to take with respect thereto.  The Company also shall comply with TIA
§ 314(a)(4).

 

SECTION 3.18.   Further Instruments and Acts.  Upon request of the Trustee, the Company will
execute and deliver such further instruments and do such further acts as may be
reasonably necessary or proper to carry out more effectively the purpose of
this Indenture, including, without limitation, the filing, in a timely manner,
of all necessary terminations and

 

45

 

releases with
respect to any outstanding trademark registrations in favor of parties other
than the Collateral Agent, the Bank Agent (as defined in the Intercreditor
Agreement) or the Bank Canadian Agent (as defined in the Intercreditor
Agreement).

 

SECTION 3.19.   Limitation on Lines of Business.  The Company will not, and will not permit any
Restricted Subsidiary to, engage in any business other than a Related Business.

 

SECTION 3.20.   Statement by Officers as to Default.  The Company shall deliver to the Trustee, as
soon as possible and in any event within 10 days after the Company becomes
aware of the occurrence of any Event of Default or an event which, with notice
or the lapse of time or both, would constitute an Event of Default, an
Officers’ Certificate setting forth the details of such Event of Default or
default, its status and the actions which the Company is taking or propose to
take with respect thereto.

 

ARTICLE IV

 

SUCCESSOR COMPANY 

 

SECTION 4.1.   Merger and Consolidation.  The Company will not consolidate with or
merge with or into, or convey, transfer or lease all of or substantially all
its assets to, any Person, unless:

 

(1)           the
resulting, surviving or transferee Person (the “Successor Company”) will
be a corporation, partnership, trust or limited liability company organized and
existing under the laws of the United States of America, any State of the
United States or the District of Columbia and the Successor Company (if not the
Company) will expressly assume, by supplemental indenture, executed and
delivered to the Trustee, in form satisfactory to the Trustee, all the
obligations of the Company under the Securities, this Indenture, the
Registration Rights Agreement, the Collateral Documents (as applicable) and the
Intercreditor Agreement and shall cause such amendments, supplements or other
instruments to be executed, filed, and recorded in such jurisdictions as may be
required by applicable law to preserve and protect the Lien on the Collateral
owned by or transferred to the Successor Company, together with such financing
statements or comparable documents as may be required to perfect any security
interests in such Collateral which may be perfected by the filing of a
financing statement or a similar document under the Uniform Commercial Code or
other similar statute or regulation of the relevant states or jurisdictions;

 

(2)           immediately
after giving effect to such transaction (and treating any Indebtedness that
becomes an obligation of the Successor Company or any Subsidiary of the
Successor Company as a result of such transaction as having been Incurred by
the Successor Company or such Subsidiary at the time of such transaction), no
Default or Event of Default shall have occurred and be continuing;

 

46

 

(3)           immediately
after giving effect to such transaction, the Successor Company would be able to
Incur at least an additional $1.00 of Indebtedness pursuant to Section 3.2(a);

 

(4)           each
Subsidiary Guarantor (unless it is the other party to the transactions above,
in which case clause (1) shall apply) shall have by supplemental indenture
confirmed that its Subsidiary Guarantee shall apply to such Person’s
obligations in respect of this Indenture and the Securities and its obligations
under the Registration Rights Agreement, the Collateral Documents and the
Intercreditor Agreement shall continue to be in effect and shall cause such
amendments, supplements or other instruments to be executed, filed, and
recorded in such jurisdictions as may be required by applicable law to preserve
and protect the Lien on the Collateral owned by such Subsidiary Guarantor,
together with such financing statements or comparable documents as may be
required to perfect any security interests in such Collateral which may be
perfected by the filing of a financing statement or a similar document under
the Uniform Commercial Code or other similar statute or regulation of the
relevant states or jurisdictions; and

 

(5)           the
Company shall have delivered to the Trustee an Officers’ Certificate and an
Opinion of Counsel, each stating that such consolidation, merger or transfer
and such supplemental indenture (if any) comply with this Indenture.

 

For purposes of this Section 4.1, the sale, lease,
conveyance, assignment, transfer, or other disposition of all or substantially
all of the properties and assets of one or more Subsidiaries of the Company, in
a single or a series of related transactions, which properties and assets, if
held by the Company instead of such Subsidiaries, would constitute all or
substantially all of the properties and assets of the Company on a consolidated
basis, shall be deemed to be the transfer of all or substantially all of the
properties and assets of the Company.

 

The Successor Company will succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Indenture, the
Collateral Documents and the Intercreditor Agreement, but, in the case of a
lease of all or substantially all its assets, the predecessor Company will not
be released from the obligation to pay the principal of and interest on the
Securities.

 

Notwithstanding the preceeding clause (3), (x) any Restricted
Subsidiary may consolidate with, merge into or transfer all or part of its
properties and assets to the Company and (y) the Company may merge with an
Affiliate incorporated solely for the purpose of reincorporating the Company in
another jurisdiction to realize tax benefits; provided
that, in the case of a Restricted Subsidiary that merges into the Company, the
Company will not be required to comply with the preceding clause (5).

 

47

 

ARTICLE V

 

REDEMPTION OF SECURITIES

 

SECTION 5.1.   Redemption.  The Securities may be redeemed (a) as a whole
or from time to time in part, subject to the conditions and at the redemption
prices specified in paragraph 5 of the form of Securities set forth in Exhibit
A and Exhibit B hereto, which are hereby incorporated by reference
and made a part of this Indenture, or (b) as a whole, and not less than as a
whole, subject to the conditions and at the redemption price specified in
Section 5.9(b), in each case together with accrued and unpaid interest
(including Additional Interest) to the Redemption Date.

 

SECTION 5.2.   Applicability of Article.  Redemption of Securities at the election of
the Company or otherwise, as permitted or required by any provision of this
Indenture, shall be made in accordance with such provision and this Article.

 

SECTION 5.3.   Election to Redeem; Notice to Trustee.  The election of the Company to redeem any
Securities pursuant to Section 5.1 shall be evidenced by a Board
Resolution of the Company.  In case of
any redemption at the election of the Company, the Company shall, upon not
later than 45 days prior to the Redemption Date fixed by the Company (unless a
shorter notice shall be satisfactory to the Trustee), notify the Trustee of
such Redemption Date and of the principal amount of Securities to be redeemed
and shall deliver to the Trustee such documentation and records as shall enable
the Trustee to select the Securities to be redeemed pursuant to Section 5.4.  Any such notice may be cancelled at any time
prior to notice of such redemption being mailed to any Holder and shall thereby
be void and of no effect.

 

SECTION 5.4.   Selection by Trustee of Securities to Be
Redeemed.  If less than all the
Securities are to be redeemed at any time pursuant to an optional redemption,
the particular Securities to be redeemed shall be selected not more than 60
days prior to the Redemption Date by the Trustee, from the outstanding
Securities not previously called for redemption, in compliance with the
requirements, as set forth in an Officers’ Certificate delivered by the Company
to the Trustee, of the principal securities exchange, if any, on which such
Securities are listed, or, if such Securities are not so listed, on a pro  rata
basis among the Securities, by lot or by such other method as the Trustee shall
deem fair and appropriate (and in such manner as complies with applicable legal
requirements) and which may provide for the selection for redemption of
portions of the principal of the Securities in denominations of $1,000 or
integral multiples thereof; provided,
however, that no such partial redemption shall reduce the portion of
the principal amount of a Security not redeemed to less than $1,000.

 

The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption and, in the case of any Securities selected
for partial redemption, the method it has chosen for the selection of
Securities and the principal amount thereof to be redeemed.

 

For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to redemption of Securities shall relate, in
the case of any Security redeemed

 

1

 

or to be redeemed only in part, to the portion of the principal amount
of such Security which has been or is to be redeemed.

 

SECTION 5.5.   Notice of Redemption.  Notice of redemption shall be given in the
manner provided for in Section 12.2 not less than 30 nor more than
60 days prior to the Redemption Date, to each Holder of Securities to be
redeemed.  At the Company’s request, the
Trustee shall give notice of redemption in the Company’s name and at the
Company’s expense; provided, however,
that the Company shall deliver to the Trustee, at least 45 days prior to the
Redemption Date, an Officers’ Certificate requesting that the Trustee give such
notice at the Company’s expense and setting forth the information to be stated
in such notice as provided in the following items.

 

All notices of redemption shall state:

 

(1)  the Redemption Date,

 

(2)  the redemption price and the
amount of accrued interest (including Additional Interest) to the Redemption
Date payable as provided in Section 5.7, if any,

 

(3)  if less than all outstanding
Securities are to be redeemed, the identification of the particular Securities
(or portion thereof) to be redeemed, as well as the aggregate principal amount
of Securities to be redeemed and the aggregate principal amount of Securities
to be outstanding after such partial redemption,

 

(4)  in case any Security is to
be redeemed in part only, the notice which relates to such Security shall state
that on and after the Redemption Date, upon surrender of such Security, the
Holder will receive, without charge, a new Security or Securities of authorized
denominations for the principal amount thereof remaining unredeemed,

 

(5)  that on the Redemption Date
the redemption price (and accrued interest (including Additional Interest), if
any, to the Redemption Date payable as provided in Section 5.7)
will become due and payable upon each such Security, or the portion thereof, to
be redeemed, and, unless the Company defaults in making the redemption payment,
that interest on Securities called for redemption (or the portion thereof) will
cease to accrue on and after said date,

 

(6)  the place or places where
such Securities are to be surrendered for payment of the redemption price and
accrued interest, if any,

 

(7)  the name and address of the
Paying Agent,

 

(8)  that Securities called for
redemption must be surrendered to the Paying Agent to collect the redemption
price,

 

(9)  the CUSIP, Common Code and
ISIN numbers, if applicable, and that no representation is made as to the
accuracy or correctness of the CUSIP, Common Code and ISIN numbers, if
applicable, if any, listed in such notice or printed on the Securities, and

 

2

 

(10)  the paragraph of the
Securities pursuant to which the Securities are to be redeemed.

 

SECTION 5.6.   Deposit of Redemption Price.  Prior to 10:00 a.m., New York City time, on
any Redemption Date, the Company shall deposit with the Trustee or with a
Paying Agent (or, if the Company or any of the Company’s Subsidiaries is acting
as its own Paying Agent, segregate and hold in trust as provided in Section 2.4)
an amount of money sufficient to pay the redemption price of, Additional
Amounts, if any, and accrued interest (including Additional Interest) on, all
the Securities which are to be redeemed on that date, other than Securities or
portions of Securities called for redemption that are beneficially owned by the
Company and have been delivered by the Company to the Trustee for cancellation.

 

SECTION 5.7.   Securities Payable on Redemption Date.  Notice of redemption having been given as
aforesaid, the Securities or portions of Securities so to be redeemed shall, on
the Redemption Date, become due and payable at the redemption price therein
specified (together with accrued interest, if any, to the Redemption Date), and
from and after such date (unless the Company shall default in the payment of
the redemption price and accrued interest) such Securities shall cease to bear
interest and the only right of the Holders thereof will be to receive payment
of the redemption price and, subject to the next sentence, unpaid interest on
such Securities to the Redemption Date. 
Upon surrender of any such Security for redemption in accordance with
said notice, such Security shall be paid by the Company at the redemption
price, together with accrued interest, if any, to the Redemption Date.

 

If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the unpaid principal (and premium, if any)
shall, until paid, bear interest from the Redemption Date at the rate borne by
the Securities.

 

SECTION 5.8.   Securities Redeemed in Part.  Any Security which is to be redeemed only in
part (pursuant to the provisions of this Article) shall be surrendered at the
office or agency of the Company maintained for such purpose pursuant to Section 3.13
(with, if the Company or the Trustee so require, due endorsement by, or a
written instrument of transfer in form satisfactory to the Company and the
Trustee duly executed by, the Holder thereof or such Holder’s attorney duly
authorized in writing), and the Company shall execute, and the Trustee shall
authenticate and make available for delivery to the Holder of such Security at
the expense of the Company, a new Security or Securities, of any authorized
denomination as requested by such Holder, in an aggregate principal amount
equal to and in exchange for the unredeemed portion of the principal of the
Security so surrendered, provided,
that each such new Security will be in a principal amount of $1,000 or integral
multiple thereof.

 

SECTION 5.9.   Optional Tax Redemption.  (a)  If
any taxes, assessments or other governmental charges are imposed by any
jurisdiction where the Company, a Subsidiary Guarantor or a successor of either
(a “Payor”) is organized or otherwise considered by a taxing authority
to be a resident for tax purposes, any jurisdiction from or through which the
Payor makes a payment on the Securities, or, in each case, any political
organization or governmental authority thereof or therein having the power to
tax (the “Relevant Tax Jurisdiction”) in respect of any payments under
the Securities, the Payor will pay to each Holder of a Security, to the extent
it may lawfully do so, such additional amounts (“Additional Amounts”) as
may be

 

3

 

necessary in
order that the net amounts paid to such Holder will be not less than the amount
specified in such Security to which such Holder is entitled; provided, however,
the Payor will not be required to make any payment of Additional Amounts for or
on account of:

 

(1)           any tax, assessment or other governmental
charge which would not have been imposed but for (A) the existence of any
present or former connection between such Holder (or between a fiduciary,
settlor, beneficiary, member or shareholder of, or possessor of a power over,
such Holder, if such Holder is an estate, trust, partnership, limited liability
company or corporation) and the Relevant Tax Jurisdiction other than solely by
the holding of Securities or by the receipt of principal or interest in respect
of the Securities (including, without limitation, such Holder (or such
fiduciary, settlor, beneficiary, member, shareholder or possessor) being or
having been a citizen or resident thereof or being or having been present or engaged
in trade or business therein or having or having had a permanent establishment
therein) or (B) the presentation of a Security (where presentation is required)
for payment on a date more than 30 days after (x) the date on which such
payment became due and payable or (y) the date on which payment thereof is duly
provided for and notice of the availability of the funds has been given,
whichever occurs later (in either case (x) or (y), except to the extent that
the Holder would have been entitled to Additional Amounts had the Security been
presented during such 30-day period);

 

(2)           any estate, inheritance, gift, sales,
transfer, personal property or similar tax, assessment or other governmental
charge;

 

(3)           any tax, assessment or other governmental
charge that is imposed or withheld by reason of the failure by the Holder or
the beneficial owner of the Security to comply with a reasonable and timely
request of the Payor addressed to the Holder to provide information, documents
or other evidence concerning the nationality, residence or identity of the
Holder or such beneficial owner which is required by a statute, treaty,
regulation or administrative practice of the taxing jurisdiction as a
precondition to exemption from all or part of such tax, assessment or other
governmental charge; or

 

(4)           any combination of the above;

 

nor will Additional Amounts be paid with respect to any payment of the
principal of, or any premium or interest (including Additional Interest) on,
any Security to any Holder who is a fiduciary or partnership or limited
liability company or other than the sole beneficial owner of such payment to
the extent that a beneficiary or settlor with respect to such fiduciary or a
member of such partnership, limited liability company or beneficial owner would
not have been entitled to such Additional Amounts had it been the Holder of
such Security.

 

The Payor will provide the Trustee with the official acknowledgment of
the Relevant Tax Authority (or, if such acknowledgment is not available, a
certified copy thereof) evidencing the payment of the withholding taxes by the
Payor.  Copies of such documentation

 

4

 

will be made available to the Holders of the Securities or the Paying
Agent, as applicable, upon request therefor.

 

The Company and the Subsidiary Guarantors will pay any present or
future stamp, court or documentary taxes, or any other excise or property
taxes, charges or similar levies which arise in any jurisdiction from the
execution, delivery or registration of the Securities or any other document or
instrument referred to therein (other than a transfer of the Securities), or
the receipt of any payments with respect to the Securities, excluding any such
taxes, charges or similar levies imposed by any jurisdiction outside the United
States of America or Canada or any jurisdiction in which a paying agent is
located, other than those resulting from, or required to be paid in connection
with, the enforcement of the Securities or any other such document or
instrument following the occurrence of any Event of Default with respect to the
Securities.

 

All references in this Indenture to principal of, premium, if any, and
interest on the Securities will include any Additional Interest and any
Additional Amounts payable by the Payor in respect of such principal, such
premium, if any, and such interest.

 

(b)  The Payor will be entitled
to redeem all, but not less than all, of the Securities if as a result of any
change in or amendment to the laws, regulations or rulings of any Relevant Tax
Jurisdiction or any change in the official application or interpretation of
such laws, regulations or rulings, or any change in the official application or
interpretation of, or any execution of or amendment to, any treaty or treaties
affecting taxation to which such Relevant Tax Jurisdiction is a party (a “Change
in Tax Law”) the Payor is or would be required on the next succeeding
interest payment date to pay Additional Amounts with respect to the Securities
as described under Section 5.9(a) and the Payor delivers to the Trustee an
Officers’ Certificate stating that the payment of such Additional Amounts
cannot be avoided by the use of any reasonable measures available to the Payor
and that the Payor is entitled to redeem the Securities pursuant to their
terms.  The Change in Tax Law must become
effective on or after the Issue Date. 
Further, the Payor must deliver to the Trustee at least 30 days before the
redemption date an opinion of counsel of recognized standing to the effect that
the Payor has or will become obligated to pay Additional Amounts as a result of
such Change in Tax Law.  The Payor must
also provide the Holders with notice of the intended redemption at least 30
days and no more than 60 days before the redemption date and shall comply with
all provisions of this Article V. 
The redemption price will equal the principal amount of the Securities
plus accrued and unpaid interest thereon (including Additional Interest), if
any to the redemption date, premium, if any, and Additional Amounts, if any,
then due and which otherwise would be payable.

 

ARTICLE VI

 

DEFAULTS AND REMEDIES

 

SECTION 6.1.   Events of Default.  Each of the following is an “Event of
Default”:

 

5

 

(1)  default in any payment of
interest, Additional Interest or Additional Amounts on any Security when the
same becomes due and payable, and such default continues for a period of 30
days;

 

(2)  default in the payment of
principal of or premium, if any, on any Security when the same becomes due and
payable at its Stated Maturity, upon optional redemption, upon required
repurchase, upon declaration or otherwise;

 

(3)  failure by the Company or
any Subsidiary Guarantor to comply with its obligations under Article IV
or Section 10.2;

 

(4)  (a)  failure by the Company to comply for 30 days
after the notice specified below with any of its obligations under Section 3.2,
Section 3.3, Section 3.4, Section 3.5, Section 3.6,
Section 3.7, Section 3.8, Section 3.9, Section 3.10,
Section 3.11, Section 3.12, Section 3.16 or
Section 3.19 (in each case, other than a failure to purchase
Securities when required under this Indenture, which failure shall constitute
an Event of Default under Section 6.1(2)) or (b) failure by the
Company or any Subsidiary Guarantor to comply for 30 days after the notice
specified below with any of its obligations under the Collateral Documents;

 

(5)  failure by the Company or
any Subsidiary Guarantor to comply with any of its other agreements contained in
this Indenture or under the Securities (other than those referred to in (1),
(2), (3) or (4) above) and such default continues for 60 days after the notice
specified below;

 

(6)  default 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 the Company or
any of its Restricted Subsidiaries (or the payment of which is guaranteed by
the Company or any of its Restricted Subsidiaries), other than Indebtedness
owed to the Company or a Restricted Subsidiary, whether such Indebtedness or
guarantee now exists, or is created after the date of this Indenture, which
default:

 

(a)           is caused by a failure to pay principal of,
or interest or premium, if any, on such Indebtedness at maturity prior to the
expiration of the grace period provided in such Indebtedness (“Payment
Default”) or

 

(b)           results in the acceleration of such
Indebtedness prior to its maturity (the “cross acceleration provision”);

 

and, in each case, the principal amount of any 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 $5.0 million or more;

 

(7)  the Company or a Significant
Subsidiary or group of Restricted Subsidiaries that, taken together (as of the
latest audited consolidated financial statements for the Company and its
Restricted Subsidiaries), would constitute a Significant Subsidiary:

 

6

 

(a)           commences a voluntary case or proceeding;

 

(b)           consents to the entry of judgment, decree or
order for relief against it in an involuntary case or proceeding;

 

(c)           consents to the appointment of a Custodian
of it or for any substantial part of its property;

 

(d)           makes a general assignment for the benefit
of its creditors;

 

(e)           consents to or acquiesces in the institution
of a bankruptcy or an insolvency proceeding against it;

 

(f)            takes any corporate action to authorize or
effect any of the foregoing; or

 

(g)           takes any comparable action under any
foreign laws relating to insolvency;

 

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

 

(a)           is for relief in an involuntary case against
the Company or a Significant Subsidiary or group of Restricted Subsidiaries
that, taken together (as of the latest audited consolidated financial
statements for the Company and its Restricted Subsidiaries), would constitute a
Significant Subsidiary;

 

(b)           appoints a Custodian for all or
substantially all of the property of the Company or a Significant Subsidiary or
group of Restricted Subsidiaries that, taken together (as of the latest audited
consolidated financial statements for the Company and its Restricted
Subsidiaries), would constitute a Significant Subsidiary; or

 

(c)           orders the winding up or liquidation of the
Company or a Significant Subsidiary or group of Restricted Subsidiaries that,
taken together (as of the latest audited consolidated financial statements for
the Company and its Restricted Subsidiaries), would constitute a Significant
Subsidiary; and

 

in each case the order, decree or relief remains unstayed and in effect
for 90 days;

 

(9)  failure by the Company or
any Significant Subsidiary or group of Restricted Subsidiaries that, taken
together (as of the latest audited consolidated financial statements for the
Company and its Restricted Subsidiaries), would constitute a Significant
Subsidiary to pay final judgments aggregating in excess of $5.0 million (net of
any amounts that a reputable and creditworthy insurance company has
acknowledged liability for in writing), which judgments are not paid,
discharged or stayed for a period of 60 days (the “judgment default
provision”);

 

(10)  any Subsidiary Guarantee or
Collateral Document ceases to be in full force and effect (except as
contemplated by the terms of this Indenture) or is declared

 

7

 

null and void in a judicial proceeding or any of Holdings, the Company
or any Subsidiary Guarantor denies or disaffirms its obligations under this
Indenture, any Subsidiary Guarantee or any Collateral Document to which it is a
party; or

 

(11)  with respect to any
Collateral having a fair market value in excess of $5.0 million, individually
or in the aggregate, (A) the security interest under the Collateral Documents,
at any time, ceases to be in full force and effect for any reason other than in
accordance with their terms and the terms of this Indenture and other than the
satisfaction in full of all obligations under this Indenture and discharge of
this Indenture, (B) any security interest created thereunder or under this
Indenture is declared invalid or unenforceable or (C) Holdings, the Company or
any Subsidiary Guarantor asserts, in any pleading in any court of competent
jurisdiction, that any such security interest is invalid or unenforceable.

 

The foregoing will constitute Events of Default whatever the reason for
any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of
any court or any order, rule or regulation of any administrative or
governmental body.

 

Notwithstanding the foregoing, a Default under clauses (4) or (5) of
this Section 6.1 will not constitute an Event of Default until the
Trustee or the Holders of 25% or more in principal amount of the outstanding
Securities notify the Company of the Default (and the Trustee in case of a
notice from Holders), in writing, which notice shall specify that it
constitutes a notice of Default, and the Company does not cure such Default
within the time specified in clauses (4) or (5) of this Section 6.1
after receipt of such notice.

 

The Company shall deliver to the Trustee, within 10 days after the
occurrence thereof, written notice in the form of an Officers’ Certificate of
any Default or Event of Default under clauses (3), (4), (5), (6), (7), (8),
(9), (10) or (11) of this Section 6.1, which notice shall contain the
status thereof and a description of the action being taken or proposed to be
taken by the Company in respect thereof.

 

SECTION 6.2.   Acceleration.  If an Event of Default (other than an Event
of Default described in clause (7) or (8) of Section 6.1) occurs
and is continuing, the Trustee by notice to the Company, or the Holders of at
least 25% in principal amount of the outstanding Securities by notice to the
Company and the Trustee, may, and the Trustee at the request of such Holders
shall, declare the principal of, premium, if any, Additional Amounts, if any,
and accrued and unpaid interest (including Additional Interest), if any, on all
the Securities to be due and payable. 
Upon such a declaration, such principal, premium, Additional Amounts and
accrued and unpaid interest shall be due and payable immediately.

 

In the event of a declaration of acceleration of the Securities because
an Event of Default described in clause (6) of Section 6.1 has
occurred and is continuing, the declaration of acceleration of the Securities
shall be automatically annulled if (1) the event of default or payment default
triggering such Event of Default pursuant to clause (6) shall be remedied or
cured by the Company or a Restricted Subsidiary or waived by the holders of the
relevant Indebtedness within 20 days after the declaration of acceleration with
respect thereto, (2) the

 

8

 

annulment of the acceleration of the Securities would not conflict with
any judgment or decree of a court of competent jurisdiction and (3) all
existing Events of Default, except nonpayment of principal, premium or interest
on the Securities that became due solely because of the acceleration of the
Securities, have been cured or waived.

 

If an Event of Default described in clause (7) or (8) of Section 6.1
occurs and is continuing, the principal of, premium, if any, Additional
Amounts, if any, and accrued and unpaid interest (including Additional
Interest) on all the Securities will become and be immediately due and payable
without any declaration or other act on the part of the Trustee or any Holders.

 

SECTION 6.3.   Other Remedies.  If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy by proceeding at law or
in equity to collect the payment of principal of (or premium or Additional
Amounts, if any) or interest (including Additional Interest) on the Securities
or to enforce the performance of any provision of the Securities, this
Indenture, the Subsidiary Guarantees, the Collateral Documents or the
Intercreditor Agreement.

 

The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding.  A delay or omission by the Trustee or any
Securityholder 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.  No
remedy is exclusive of any other remedy. 
All available remedies are cumulative.

 

SECTION 6.4.   Waiver of Past Defaults.  The Holders of a majority in principal amount
of the outstanding Securities by notice to the Trustee (with a copy to the
Company, but the applicable waiver or recission shall be effective when the
notice is given to the Trustee) may (a) waive, by their consent (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, Securities), an existing Default or Event
of Default and its consequences except (i) a Default or Event of Default in the
payment of the principal of, or premium, if any, Additional Amounts, if any, or
interest (including Additional Interest) on a Security or (ii) a Default or
Event of Default in respect of a provision that under Section 9.2
cannot be amended without the consent of each Securityholder affected and (b)
rescind any acceleration with respect to the Securities and its consequences if
(1) such rescission would not conflict with any judgment or decree of a court
of competent jurisdiction and (2) all existing Events of Default, other than
the nonpayment of the principal of, premium, if any, Additional Amounts, if
any, and interest (including Additional Interest) on the Securities that have
become due solely by such declaration of acceleration, have been cured or
waived.  When a Default or Event of
Default is waived, it is deemed cured, but no such waiver shall extend to any
subsequent or other Default or Event of Default or impair any consequent right.

 

SECTION 6.5.   Control by Majority.  The Holders of a majority in principal amount
of the outstanding Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee.  However, the Trustee may refuse to follow any
direction that conflicts with law or this Indenture, the Securities, the
Subsidiary Guarantees, the Collateral Documents or the

 

9

 

Intercreditor
Agreement or, subject to Sections 7.1 and 7.2, that the Trustee
determines is unduly prejudicial to the rights of other Securityholders or
would involve the Trustee in personal liability; provided, however, that the Trustee may take any other
action deemed proper by the Trustee that is not inconsistent with such
direction.  Prior to taking any such
action hereunder, the Trustee shall be entitled to indemnification satisfactory
to it in its sole discretion against all losses and expenses caused by taking
or not taking such action.

 

SECTION 6.6.   Limitation on Suits.  Subject to Section 6.7, a
Securityholder may not pursue any remedy with respect to this Indenture or the
Securities unless:

 

(1)           such
Holder has previously given to the Trustee written notice stating that an Event
of Default is continuing;

 

(2)           Holders
of at least 25% in principal amount of the outstanding Securities have
requested that the Trustee to pursue the remedy;

 

(3)           such
Holders have offered to the Trustee reasonable security or indemnity against
any loss, liability or expense;

 

(4)           the
Trustee has not complied with such request within 60 days after receipt of the
request and the offer of security or indemnity; and

 

(5)           the
Holders of a majority in principal amount of the outstanding Securities have
not given the Trustee a direction that, in the opinion of the Trustee, is
inconsistent with such request during such 60-day period.

 

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

 

SECTION 6.7.   Rights of Holders to Receive Payment.  Notwithstanding any other provision of this
Indenture (including, without limitation, Section 6.6), the right
of any Holder to receive payment of principal of, premium (if any), Additional
Amounts (if any) or interest (including Additional Interest) on the Securities
held by such Holder, on or after the respective due dates expressed or provided
for in the Securities, 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 6.8.   Collection Suit by Trustee.  If an Event of Default specified in clauses
(1) or (2) of Section 6.1 occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company for the whole amount then due and owing (together with interest on any
unpaid interest to the extent lawful) and the amounts provided for in Section 7.7.

 

SECTION 6.9.   Trustee May File Proofs of Claim.  The Trustee may 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 Securityholders allowed in any judicial proceedings relative to the
Company, its Subsidiaries or its or their

 

10

 

respective creditors
or properties and, unless prohibited by law or applicable regulations, may be
entitled and empowered to participate as a member of any official committee of
creditors appointed in such matter and may vote on behalf of the Holders in any
election of a trustee in bankruptcy or other Person performing similar
functions, and any Custodian in any such judicial proceeding is hereby
authorized by each Holder to make payments to the Trustee and, in the event
that the Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and its counsel, and any other amounts due the Trustee under Section 7.7.

 

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

 

SECTION 6.10.   Priorities.  (a)  
With respect to the First Priority Collateral, if the Trustee collects
any money or property pursuant to this Article VI, or pursuant to
the foreclosure or other remedial provisions contained in the Collateral
Documents or the Intercreditor Agreement (including any money or property
deposited into the First Priority Collateral Account in connection therewith),
it shall pay out the money or property in the following order:

 

FIRST: 
to the Trustee for amounts due to it under Section 7.7 and
to the Collateral Agent for fees and expenses incurred under the Collateral
Documents or the Intercreditor Agreement;

 

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

 

THIRD: 
to the administrative agent under the Working Capital Facility for
amounts due and unpaid under the Working Capital Facility until the obligations
thereunder are paid in full; and

 

FOURTH: 
to the Company or, to the extent the Trustee collects any amount for any
Subsidiary Guarantor, to such Subsidiary Guarantor.

 

(b)  With respect to the Second
Priority Collateral, if the Trustee collects any money or property pursuant to
this Article VI, or pursuant to the foreclosure or other remedial
provisions contained in the Collateral Documents or the Intercreditor Agreement
(including any money or property deposited into the Second Priority Collateral
Account in connection therewith), it shall pay out the money or property in the
following order:

 

11

 

FIRST: 
to the Trustee for amounts due to it under Section 7.7 and
to the Collateral Agent for fees and expenses incurred under the Collateral
Documents or the Intercreditor Agreement;

 

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

 

THIRD: 
to the Company or, to the extent the Trustee collects any amount for any
Subsidiary Guarantor, to such Subsidiary Guarantor;

 

provided, however, that the payments set forth above
shall be made only after the satisfaction and discharge in full of the security
interest and lien of the administrative agent under the Working Capital
Facility with respect to the Second Priority Collateral pursuant to the Working
Capital Facility and related documents.

 

(c)   The Trustee may fix a
record date and payment date for any payment to Securityholders pursuant to
this Section.  At least 15 days before
such record date, the Company shall mail to each Securityholder and the Trustee
a notice that states the record date, the payment date and amount to be paid.

 

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 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 does not apply to a suit by the Trustee, a suit by the Company, a
suit by a Holder pursuant to Section 6.7 or a suit by Holders of
more than 10% in outstanding principal amount of the Securities.

 

ARTICLE VII

 

TRUSTEE

 

SECTION 7.1.   Duties of Trustee.  (a)  If
an Event of Default has occurred and is continuing, the Trustee or the
Collateral Agent shall exercise the rights and powers vested in it by this Indenture
and use the same degree of care and skill in their exercise as a prudent Person
would exercise or use under the circumstances in the conduct of such person’s
own affairs; provided that the
Trustee or the Collateral Agent will be under no obligation to exercise any of
the rights or powers under this Indenture, the Securities, the Subsidiary
Guarantees, the Collateral Documents or the Intercreditor Agreement at the
request or direction of any of the Holders unless such Holders have offered the
Trustee or the Collateral Agent indemnity or security satisfactory to each of
them against loss, liability or expense.

 

12

 

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

 

(1)           the Trustee
undertakes to perform such duties and only such duties as are specifically set
forth in this Indenture and no implied covenants or obligations shall be read
into this Indenture against the Trustee; and

 

(2)           in the absence of
bad faith 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, opinions or orders furnished to the Trustee and conforming to the
requirements of this Indenture, the Securities, the Subsidiary Guarantees, the
Collateral Documents or the Intercreditor Agreement, as applicable.  However, in the case of any such certificates
or opinions which by any provisions hereof are specifically required to be
furnished to the Trustee, the Trustee shall examine such certificates and
opinions to determine whether or not they conform to the requirements of this
Indenture, the Securities, the Subsidiary Guarantees, the Collateral Documents
or the Intercreditor Agreement, as the case may be (but need not confirm or investigate
the accuracy of mathematical calculations or other facts stated therein).

 

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

 

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

 

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

 

(3)           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 6.5;
and

 

(4)           No provision of this
Indenture, the Securities, the Subsidiary Guarantees, the Collateral Documents
or the Intercreditor Agreement shall require the Trustee to expend or risk its
own funds or otherwise incur financial liability in the performance of any of
its duties hereunder or thereunder or in the exercise of any of its rights or
powers, if it shall have reasonable grounds to believe that repayment of such
funds or adequate indemnity against such risk or liability is not reasonably
assured to it.

 

(d)  Every provision of this Indenture that in any
way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this
Section.

 

(e)  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.

 

(f)  Money held in trust by the Trustee need not
be segregated from other funds except to the extent required by law, the
Collateral Documents, the Intercreditor Agreement or by Section 11.8.

 

13

 

(g)  Every provision of this Indenture relating to
the conduct or affecting the liability of or affording protection to the
Trustee shall be subject to the provisions of this Section and to the
provisions of the TIA.

 

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

 

SECTION 7.2.  
Rights of Trustee.  Subject
to Section 7.1:

 

(a)  The Trustee may conclusively rely on any
document (whether in its original or facsimile form) reasonably 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 the document.  The
Trustee shall receive and retain financial reports and statements of the
Company as provided herein, but shall have no duty to review or analyze such
reports or statements to determine compliance with covenants or other
obligations of the Company.

 

(b)  Before the Trustee acts or refrains from
acting, it may require an Officers’ Certificate and/or an Opinion of
Counsel.  The Trustee shall not be liable
for any action it takes or omits to take in good faith in reliance on an
Officers’ Certificate or Opinion of Counsel.

 

(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 which it believes to be
authorized or within its rights or powers, unless the Trustee’s conduct
constitutes willful misconduct or negligence.

 

(e)  The Trustee may consult with counsel of its
selection, and the advice or opinion of counsel with respect to legal matters
relating to this Indenture, the Securities, the Subsidiary Guarantees, the
Collateral Documents or the Intercreditor Agreement shall be full and complete
authorization and protection from liability in respect of any action taken,
omitted or suffered by it hereunder or under the Securities, the Subsidiary
Guarantees, the Collateral Documents or the Intercreditor Agreement in good
faith and in accordance with the advice or opinion of such counsel.

 

(f)  The Trustee shall not be deemed to have
notice of any Default or Event of Default or whether any entity or group of
entities constitutes a Significant Subsidiary unless a Trust Officer of the
Trustee has actual knowledge thereof or unless written notice of any event
which is in fact such a Default or of any such Significant Subsidiary is
received by the Trustee at the corporate trust office of the Trustee specified
in Section 12.2, and such notice references the Securities and this
Indenture.

 

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

 

97

 

(h)  The Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Indenture, the
Securities, the Subsidiary Guarantees, the Collateral Documents or the
Intercreditor Agreement at the request, order or direction of any of the
Holders pursuant to the provisions of this Indenture, unless such Holders shall
have offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which may be incurred therein or thereby.

 

(i)  The Trustee shall not be deemed to have
knowledge of any fact or matter unless such fact or matter is known to a Trust
Officer of the Trustee.

 

(j)  Whenever in the administration of this
Indenture, the Securities, the Subsidiary Guarantees, the Collateral Documents
or the Intercreditor Agreement the Trustee shall deem it desirable that a
matter be proved or established prior to taking, suffering or omitting any
action hereunder or thereunder, the Trustee (unless other evidence be herein
specifically prescribed) may request, and in the absence of bad faith or
willful misconduct on its part, rely upon an Officers’ Certificate.

 

SECTION 7.3.  
Individual Rights of Trustee. 
The Trustee in its individual or any other capacity may become the owner
or pledgee of Securities and may otherwise deal with the Company, Subsidiary
Guarantors or their Affiliates with the same rights it would have if it were
not Trustee.  Any Paying Agent,
Registrar, co-registrar or co-paying agent may do the same with like rights.  However, the Trustee must comply with Sections
7.10 and 7.11.  In addition,
the Trustee shall be permitted to engage in transactions with the Company; provided, however, that if the Trustee
acquires any conflicting interest under the TIA the Trustee must (i) eliminate
such conflict within 90 days of acquiring such conflicting interest, (ii) apply
to the SEC for permission to continue acting as Trustee or (iii) resign.

 

SECTION 7.4.  
Trustee’s Disclaimer.  The
Trustee shall not be responsible for and makes no representation as to the
validity or adequacy of this Indenture, the Subsidiary Guarantees, the
Collateral Documents, the Intercreditor Agreement or the Securities, shall not
be accountable for the Company’s use of the proceeds from the sale of the
Securities, shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee or any money paid to the
Company pursuant to the terms of this Indenture and shall not be responsible
for any statement of the Company in this Indenture or in any document issued in
connection with the sale of the Securities or in the Securities other than the
Trustee’s certificate of authentication.

 

SECTION 7.5.  
Notice of Defaults.  If a
Default or Event of Default occurs and is continuing and if a Trust Officer has
actual knowledge thereof, the Trustee shall mail by first class mail to each
Securityholder at the address set forth in the Securities Register notice of
the Default or Event of Default within 90 days after it is actually known to a
Trust Officer. Except in the case of a Default or Event of Default in payment
of principal of, premium (if any), or interest on any Security (including
payments pursuant to the optional redemption or required repurchase provisions
of such Security, if any), the Trustee may withhold the notice if and so long
as its board of directors, a committee of its board of directors or a committee
of its Trust Officers in good faith determines that withholding the notice is
in the interests of Securityholders.

 

98

 

SECTION 7.6.  
Reports by Trustee to Holders. 
Within 60 days after each January 15 beginning January 15, 2005, the
Trustee shall mail to each Securityholder a brief report dated as of such
January 15 that complies with TIA § 313(a) if and to the extent required
thereby.  The Trustee also shall comply
with TIA § 313(b) and TIA § 313(c).

 

A copy of each
report at the time of its mailing to Securityholders shall be filed with the
SEC and each stock exchange (if any) on which the Securities are listed.  The Company agrees to notify promptly the
Trustee whenever the Securities become listed on any stock exchange and of any
delisting thereof and the Trustee shall comply with TIA § 313(d).

 

SECTION 7.7.  
Compensation and Indemnity. 
The Company shall pay to the Trustee from time to time reasonable
compensation for its services hereunder and under the Securities, the
Subsidiary Guarantees, the Collateral Documents and the Intercreditor Agreement
as the Company and the Trustee shall from time to time agree in writing.  The 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 upon
request for all reasonable out-of-pocket expenses incurred or made by it, including,
but not limited to, costs of collection, costs of preparing reports,
certificates and other documents, costs of preparation and mailing of notices
to Securityholders.  Such expenses shall
include the reasonable compensation and expenses, disbursements and advances of
the Trustee’s agents, counsel, accountants and experts.  The Company shall indemnify the Trustee
against any and all loss, liability, damages, claims or expense (including
reasonable attorneys’ fees and expenses) incurred by it without willful
misconduct, negligence or bad faith on its part in connection with the
administration of this trust and the performance of its duties hereunder and
under the Securities, the Subsidiary Guarantees, the Collateral Documents and
the Intercreditor Agreement, including the costs and expenses of enforcing this
Indenture (including this Section 7.7), the Securities, the Subsidiary
Guarantees, the Collateral Documents and the Intercreditor Agreement and of
defending itself against any claims (whether asserted by any Securityholder,
the Company or otherwise).  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 provide reasonable cooperation at the Company’s
expense in the defense.  The Trustee may
have separate counsel and the Company shall pay the fees and expenses of such
counsel, provided that the
Company shall not be required to pay the fees and expenses of such separate
counsel if it assumes the Trustee’s defense, and, in the reasonable judgment of
outside counsel to the Trustee, there is no conflict of interest between the
Company and the Trustee in connection with such defense.

 

To secure the
Company’s payment obligations in this Section, the Trustee shall have a lien
prior to the Securities 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 Securities.  Such
lien shall survive the satisfaction and discharge of this Indenture.  The Trustee’s right to receive payment of any
amounts due under this Section 7.7 shall not be subordinate to any other
liability or Indebtedness of the Company.

 

The Company’s
payment obligations pursuant to this Section shall survive the discharge of
this Indenture.  Without prejudice to any
other rights available to the Trustee under applicable law, when the Trustee
incurs expenses after the occurrence of a Default specified in

 

99

 

clause (7) or clause (8) of Section
6.1, the expenses are intended to constitute expenses of administration
under any Bankruptcy Law.

 

SECTION 7.8.  
Replacement of Trustee. 
The Trustee may resign at any time by so notifying the Company in
writing.  The Holders of a majority in
principal amount of the Securities may remove the Trustee by so notifying the
removed Trustee in writing and may appoint a successor Trustee with the
Company’s written consent, which consent will not be unreasonably
withheld.  The Company shall remove the
Trustee if:

 

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

 

(2)   the
Trustee is adjudged bankrupt or insolvent;

 

(3)   a
receiver or other public officer takes charge of the Trustee or its property;
or

 

(4)   the
Trustee otherwise becomes incapable of acting.

 

If the Trustee
resigns or is removed by the Company or by the Holders of a majority in
principal amount of the Securities and such Holders do not reasonably promptly
appoint a successor Trustee as described in the preceding paragraph, or if a
vacancy exists in the office of the Trustee for any reason (the Trustee in such
event being referred to herein as the retiring Trustee), the Company shall
promptly appoint 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 Securityholders.  The retiring Trustee shall promptly transfer
all property held by it as Trustee to the successor Trustee, subject to the
lien provided for in Section 7.7.

 

If a successor
Trustee does not take office within 60 days after the retiring Trustee resigns
or is removed, the retiring Trustee or the Holders of at least 10% in principal
amount of the Securities may petition, at the Company’s expense, any court of
competent jurisdiction for the appointment of a successor Trustee.

 

If the Trustee
fails to comply with Section 7.10, unless the Trustee’s duty to resign
is stayed as provided in TIA § 310(b), any Securityholder, who has been a bona
fide holder of a Security for at least six months, may petition any court of
competent jurisdiction for the removal of the Trustee and the appointment of a
successor Trustee.

 

Notwithstanding
the replacement of the Trustee pursuant to this Section, the Company’s
obligations under Section 7.7 shall continue for the benefit of the
retiring Trustee.

 

SECTION 7.9.  
Successor Trustee by Merger. 
If the Trustee consolidates with, merges or converts into, or transfers
all or substantially all its corporate trust business or assets to, another
corporation or banking association, the resulting, surviving or transferee
corporation without any further act shall be the successor Trustee.

 

100

 

In case at the
time such successor or successors by merger, conversion or consolidation to the
Trustee shall succeed to the trusts created by this Indenture, any of the
Securities shall have been authenticated but not delivered, any such successor
to the Trustee may adopt the certificate of authentication of any predecessor
trustee, and deliver such Securities so authenticated; and in case at that time
any of the Securities shall not have been authenticated, any successor to the
Trustee may authenticate such Securities either in the name of any predecessor
hereunder or in the name of the successor to the Trustee; provided that the right to adopt the
certificate of authentication of any predecessor Trustee or authenticate
Securities in the name of any predecessor Trustee shall only apply to its
successor or successors by merger, consolidation or conversion.

 

SECTION 7.10.  
Eligibility; Disqualification. 
This Indenture shall always have a Trustee that satisfies the requirements
of TIA § 310(a)(1), (2) and (5) in every respect.  The Trustee shall have a combined capital and
surplus of at least $100 million as set forth in its most recent published
annual report of condition.  The Trustee
shall comply with TIA § 310(b); provided,
however, that there shall be excluded from the operation of TIA §
310(b)(1) any indenture or indentures under which other securities or
certificates of interest or participation in other securities of the Company
are outstanding if the requirements for such exclusion set forth in TIA §
310(b)(1) are met.

 

SECTION 7.11.  
Preferential Collection of Claims Against the Company.  The Trustee shall comply with 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.

 

SECTION 7.12.  
Trustee’s Application for Instruction from the Company.  Any application by the Trustee for written
instructions from the Company may, at the option of the Trustee, set forth in
writing any action proposed to be taken or omitted by the Trustee under this
Indenture and the date on and/or after which such action shall be taken or such
omission shall be effective.  The Trustee
shall not be liable for any action taken by, or omission of, the Trustee in
accordance with a proposal included in such application on or after the date
specified in such application (which date shall not be less than three Business
Days after the date any Officer of the Company actually receives such
application, unless any such Officer shall have consented in writing to any
earlier date) unless prior to taking any such action (or the effective date in
the case of an omission), the Trustee shall have received written instructions
in response to such application specifying the action to be taken or omitted.

 

ARTICLE VIII

DISCHARGE OF INDENTURE; DEFEASANCE

 

SECTION 8.1.  
Discharge of Liability on Securities; Defeasance.  (a)  
Subject to Section 8.1(c), when (i)(x) the Company delivers to the
Trustee all outstanding Securities (other than Securities replaced or paid
pursuant to Section 2.10) for cancellation or (y) all outstanding
Securities not theretofore delivered for cancellation have become due and
payable, whether at

 

101

 

maturity or upon redemption or
will become due and payable within one year or are to be called for redemption
within one year under arrangements satisfactory to the Trustee for the giving
of notice of redemption pursuant to Article V hereof and the Company or
any Subsidiary Guarantor irrevocably deposits or causes to be deposited with
the Trustee as trust funds in trust solely for the benefit of the Holders money
in U.S. dollars in an amount, non-callable U.S. Government Obligations, which
through the scheduled payment of principal and interest in respect thereof in
accordance with their terms will provide, not later than the due date of any
payment, money in an amount, or a combination of U.S. dollars and such U.S. Government
Obligations, sufficient without consideration of any reinvestment of interest
to pay and discharge the entire indebtedness on such Securities not theretofore
delivered to the Trustee for cancellation for principal, premium, if any, and
accrued interest to the date of maturity or redemption; (ii) no Default or
Event of Default shall have occurred and be continuing on the date of such
deposit or shall occur as a result of such deposit and such deposit will not
result in a breach or violation of, or constitute a default under, any other
instrument to which the Company or any Subsidiary Guarantor is a party or by
which the Company or any Subsidiary Guarantor is bound; (iii) the Company or
any Subsidiary Guarantor have paid or caused to be paid all sums payable under
this Indenture, the Securities, the Subsidiary Guarantees, the Collateral
Documents and the Intercreditor Agreement; and (iv) the Company has delivered
irrevocable instructions to the Trustee under this Indenture to apply the
deposited money toward the payment of such Securities at maturity or the
Redemption Date, as the case may be, then the Trustee shall acknowledge
satisfaction and discharge of this Indenture and release of all Liens on the
Collateral with respect to the Securities on demand of the Company (accompanied
by an Officers’ Certificate and an Opinion of Counsel stating that all
conditions precedent specified herein relating to the satisfaction and
discharge of this Indenture have been complied with) and at the cost and
expense of the Company.  If U.S.
Government Obligations shall have been deposited in connection with such
satisfaction and discharge, then as a further condition to such satisfaction
and discharge, the Trustee shall have received a certificate from a nationally
recognized firm of independent accountants to the effect set forth in Section
8.2(2).

 

(b)  Subject to Sections 8.1(c) and 8.2,
the Company at any time may terminate (i) all its obligations under the
Securities, this Indenture, the Collateral Documents and the Intercreditor
Agreement (including all Liens on the Collateral) (“legal defeasance option”),
and after giving effect to such legal defeasance, any omission to comply with
such obligations shall no longer constitute a Default or Event of Default or
(ii) its obligations under Section 3.2, Section 3.3, Section
3.4, Section 3.5, Section 3.6, Section 3.7, Section
3.8, Section 3.9, Section 3.10, Section 3.11, Section
3.12, Section 3.16, Section 3.19 and Section 4.1(3),
and 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 with such
covenants shall no longer constitute a Default or an Event of Default under Section
6.1(4) and the operation of Section 6.1(5) (to the extent applicable
to such defeased covenants), Section 6.1(6), Section 6.1(7) (with
respect to Significant Subsidiaries), Section 6.1(8) (with respect to
Significant Subsidiaries), Section 6.1(9), Section 6.1(10) and Section
6.1(11), and the events specified in such Sections shall no longer
constitute an Event of Default (clause (ii) being referred to as the “covenant
defeasance option”), but except as specified above, the remainder of this
Indenture, the Securities, the Collateral Documents and the

 

102

 

Intercreditor Agreement shall
be unaffected thereby.  The Company may
exercise its legal defeasance option notwithstanding its prior exercise of its
covenant defeasance option.  If the
Company exercises its legal defeasance option, the Subsidiary Guarantees in
effect at such time shall terminate and the Liens on the Collateral shall
terminate and shall be released with respect to the Securities.

 

If the Company
exercises its legal defeasance option, payment of the Securities may not be
accelerated because of an Event of Default. 
If the Company exercises its covenant defeasance option, payment of the
Securities may not be accelerated because of an Event of Default specified in Section
6.1(4) (as such Section relates to Section 3.2, Section 3.3, Section
3.4, Section 3.5, Section 3.6, Section 3.7, Section
3.8, Section 3.9, Section 3.10, Section 3.11, Section
3.12, Section 3.16 and Section 3.19), Section 6.1(5)
(to the extent applicable to such defeased covenants), Section 6.1(6), Section
6.1(7) (with respect only to Significant Subsidiaries), Section 6.1(8)
(with respect only to Significant Subsidiaries), Section 6.1(9), Section
6.1(10) and Section 6.1(11), or because of the failure of the
Company to comply with Section 4.1(3).

 

Upon
satisfaction of the conditions set forth herein and upon request and expense of
the Company, the Trustee shall acknowledge in writing the discharge of those
obligations that the Company terminates.

 

(c)  Notwithstanding the provisions of Sections
8.1(a) and (b) to the extent relating to a legal defeasance, the
Company’s obligations in Sections  2.2, 2.3, 2.4, 2.5,
2.6, 2.10, 2.11, 2.12, 2.13, 3.13, 3.14,
3.15, 3.17, 3.18, 6.7, 7.7 and 7.8
and in this Article VIII shall survive until the Securities have been
paid in full.  Thereafter, the Company’s
obligations in Sections 7.7, 8.4 and 8.5 shall survive.

 

SECTION 8.2.  
Conditions to Defeasance. 
The Company may exercise its legal defeasance option or its covenant
defeasance option only if:

 

(1)   the Company irrevocably
deposits in trust with the Trustee for the benefit of the Holders money in U.S.
dollars in an amount, or U.S. Government Obligations, which through the
scheduled payment of principal and interest in respect thereof in accordance
with their terms will provide, not later than the due date of any payment,
money in an amount, or a combination of U.S. dollars or such U.S. Government
Obligations, sufficient without consideration of any reinvestment of interest,
to pay and discharge the principal, premium, if any, and interest on the
Securities to maturity or redemption, as the case may be;

 

(2)   the Company delivers to the
Trustee a certificate from a nationally recognized firm of independent
accountants expressing their opinion that the payments of principal and interest
when due and without reinvestment on the deposited U.S. Government Obligations
plus any deposited money without investment will provide cash at such times and
in such amounts as will be sufficient to pay principal, premium, if any, and
interest when due on all the Securities to maturity or redemption, as the case
may be;

 

103

 

(3)   no Default or Event of
Default shall have occurred and be continuing on the date of such deposit or,
with respect to Events of Default under Sections 6.1(7) and (8),
on the later of (i) the 91st day after such date of deposit or (ii) the day
ending on the day following the expiration of the longest preference period
under any bankruptcy law applicable to the Company in respect of such deposit;

 

(4)   such deposit shall not
result in a breach or violation of, or constitute a Default under, this
Indenture, the Securities, the Subsidiary Guarantees, the Collateral Documents,
the Intercreditor Agreement or any other agreement or instrument to which the
Company or any of its Subsidiaries is a party or by which the Company or any of
its Subsidiaries is bound;

 

(5)   the Company shall have
delivered to the Trustee an Opinion of Counsel (subject to customary
assumptions and exclusions) to the effect that (A) the Securities and (B)
assuming no intervening bankruptcy of the Company between the date of deposit
and the 91st day following the deposit and that no Holder of the Securities is
an insider of the Company, 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’ right
generally;

 

(6)   the Company delivers to the
Trustee an Opinion of Counsel (subject to customary assumptions and exclusions)
to the effect that the trust resulting from the deposit does not constitute, or
is qualified as, a regulated investment company under the Investment Company
Act of 1940;

 

(7)   the Company shall have
delivered to the Trustee an Opinion of Counsel (subject to customary
assumptions and exclusions) stating that (i) the Securityholders will not
recognize income, gain or loss for U.S. Federal income tax purposes as a result
of such deposit and defeasance and will be subject to U.S. Federal income tax
on the same amounts, in the same manner and at the same times as would have
been the case if such deposit and defeasance had not occurred and (ii) in the
case of the legal defeasance option, such Opinion of Counsel must be based on a
ruling by the Internal Revenue Service or other change in the applicable U.S.
law;

 

(8)   If the Securities are to be
redeemed prior to Stated Maturity, notice of such redemption shall have been
duly given pursuant to this Indenture or provision therefor satisfactory to the
Trustee shall have been made; and

 

(9)   the Company delivers to the
Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that
all conditions precedent provided for herein relating to either the legal
defeasance option or covenant defeasance option, as the case may be, as
contemplated by this Article VIII have been complied with.

 

SECTION 8.3.  
Application of Trust Money. 
The Trustee shall hold in trust all money or U.S. Government Obligations
(including proceeds thereof) deposited with it pursuant to this Article VIII.  It shall apply the deposited money and the
money from U.S. Government Obligations through the Paying Agent and in
accordance with this Indenture and the Securities to

 

104

 

the Holders of the Securities
of all sums due in respect of the payment of principal of, premium, if any, and
accrued interest on the Securities.

 

SECTION 8.4.  
Repayment to the Company. 
The Trustee and the Paying Agent shall promptly turn over to the Company
upon request any excess money, U.S. Government Obligations or securities held
by them upon payment of all the obligations under this Indenture.

 

Subject to any
applicable abandoned property law, the Trustee and the Paying Agent shall pay
to the Company upon request any money held by them for the payment of principal
of or premium, if any, or interest on the Securities that remains unclaimed by
the Holders thereof for two years, and, thereafter, Securityholders entitled to
the money must look to the Company for payment as unsecured general creditors
and the Trustee and the Paying Agent shall have no further liability with
respect to such money.

 

SECTION 8.5.  
Indemnity for U.S. Government Obligations.  The Company shall pay and shall indemnify the
Trustee against any tax, fee or other charge imposed on or assessed against
deposited U.S. Government Obligations or the principal and interest received on
such U.S. Government Obligations.

 

SECTION 8.6.  
Reinstatement.  If the
Trustee or Paying Agent is unable to apply any money or U.S. Government
Obligations in accordance with this Article VIII by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, the
obligations of the Company and each Subsidiary Guarantor under this Indenture,
the Securities, the Subsidiary Guarantees, the Collateral Documents and the
Intercreditor Agreement shall be revived and reinstated as though no deposit had
occurred pursuant to this Article VIII until such time as the Trustee or
Paying Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with this Article VIII; provided, however, that, if the Company or
the Subsidiary Guarantors have made any payment of principal, premium, if any,
Additional Amounts, if any, or interest (including Additional Interest) on any
Securities because of the reinstatement of their obligations, the Company or
Subsidiary Guarantors, as the case may be, shall be subrogated to the rights of
the Holders of such Securities to receive such payment from the money or U.S.
Government Obligations held by the Trustee or Paying Agent.

 

The Trustee’s
rights under this Article VIII shall survive termination of this
Indenture.

 

ARTICLE IX

AMENDMENTS

 

SECTION 9.1.  
Without Consent of Holders. 
The Company, the Subsidiary Guarantors and the Trustee may amend or
supplement this Indenture, the Securities, the Subsidiary Guarantees, the
Collateral Documents and the Intercreditor Agreement without notice to or
consent of any Securityholder:

 

105

 

(1)   to cure any ambiguity,
omission, defect or inconsistency;

 

(2)   to comply with (i) Article
IV in respect of the assumption by a Successor Company of the obligations
of the Company under this Indenture, the Securities, the Registration Rights
Agreement, the Collateral Documents and the Intercreditor Agreement and (ii) Article
X in respect of the assumption by a Person of the obligations of a
Subsidiary Guarantor under its Subsidiary Guarantee, this Indenture, the
Registration Rights Agreement, the Collateral Documents and the Intercreditor
Agreement;

 

(3)   to provide for
uncertificated Securities in addition to or in place of certificated
Securities; provided, however,
that the uncertificated Securities are issued in registered form for purposes
of Section 163(f) of the Code or in a manner such that the uncertificated
Securities are described in Section 163(f)(2)(B) of the Code;

 

(4)   to add Guarantees with
respect to the Securities or release a Subsidiary Guarantor from its Subsidiary
Guarantee upon its designation as an Unrestricted Subsidiary, in each case as
provided in accordance with this Indenture;

 

(5)   to pledge or grant a security
interest in favor of the Collateral Agent as additional security for the
payment and performance of the Company’s and Subsidiary Guarantors’ obligations
with respect to the Securities and the Subsidiary Guarantees thereof, in any
property or assets, including any that are required to be mortgaged, pledged or
hypothecated or in which a security interest is required to be granted, to the
Collateral Agent pursuant to the Collateral Documents or otherwise;

 

(6)   to release Liens in favor of
the Collateral Agent in the Collateral as provided in accordance with Section
11.6;

 

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

 

(8)   to make any change that does
not adversely affect the rights of any Securityholder or, in the case of the
Intercreditor Agreement, that does not adversely affect the rights of any
Securityholder in any material respect;

 

(9)   to comply with any
requirement of the SEC in connection with the qualification of this Indenture
under the TIA; or

 

(10) to provide for the issuance
of the Exchange Securities, which will have terms substantially identical in
all respects to the Initial Securities or the Additional Securities, as the
case may be (except that the transfer restrictions contained in the Initial
Securities or the Additional Securities, if any, will be modified or
eliminated, as appropriate), and which will be treated, together with any
outstanding Initial Securities or Additional Securities, as a single class of
securities.

 

After an
amendment or supplement under this Section becomes effective, the Company shall
mail to Securityholders a notice briefly describing such amendment or

 

106

 

supplement.  The failure to give such notice to all
Securityholders, or any defect therein, shall not impair or affect the validity
of an amendment or supplement under this Section.

 

SECTION 9.2.  
With Consent of Holders. 
The Company, the Subsidiary Guarantors and the Trustee may amend or
supplement this Indenture, the Securities, the Subsidiary Guarantees, the
Collateral Documents and the Intercreditor Agreement without notice to any
Securityholder but with the written consent of the Holders of at least a majority
in principal amount of the Securities then outstanding (including, without
limitation, consents obtained in connection with a purchase of, or tender offer
or exchange offer for, Securities).  Any
past default or compliance with the provisions of this Indenture, the
Securities, the Subsidiary Guarantees, the Collateral Documents or the
Intercreditor Agreement may be waived with the written consent of the Holders
of at least a majority in principal amount of the Securities then outstanding
(including, without limitation, consents obtained in connection with a purchase
of, or tender offer or exchange offer for, Securities).  However, without the consent of each
Securityholder affected, an amendment, supplement or waiver may not:

 

(1)   reduce the amount of Securities
whose Holders must consent to an amendment;

 

(2)   reduce the stated rate of or
extend the stated time for payment of interest, Additional Interest or
Additional Amounts on any Security;

 

(3)   reduce the principal of or
extend the Stated Maturity of any Security;

 

(4)   reduce the premium payable
upon the redemption or repurchase of any Security or change the time at which
any Security may or shall be redeemed or repurchased as described under Section
3.5, Section 3.10 (including an amendment to the definition of
“Change of Control”) or Article V or any similar provision, whether
through an amendment or waiver of Section 3.5, Section 3.10 or Article
V, definitions or otherwise;

 

(5)   make any Security payable in
money other than that stated in the Security;

 

(6)   impair the right of any
Holder to receive payment of principal of, premium, if any, Additional Amounts,
if any, and interest (including Additional Interest) on such Holder’s
Securities on or after the due dates therefor or to institute suit for the enforcement
of any payment on or with respect to such Holder’s Securities;

 

(7)   make any change to this Section
9.2;

 

(8)   modify the Subsidiary
Guarantees in any manner adverse to the Holders;

 

(9)   modify any Collateral
Document or the provisions in this Indenture dealing with Collateral Documents
or application of trust moneys in any manner adverse to the Holders of the
Securities or otherwise release any Collateral other than in accordance with
this Indenture, the Collateral Documents and the Intercreditor Agreement; or

 

107

 

(10) modify
the Intercreditor Agreement in any manner adverse to the Holders of the
Securities in any material respect other than in accordance with the terms of
the Indenture, the Collateral Documents and the Intercreditor Agreement.

 

It shall not
be necessary for the consent of the Holders under this Section to approve the
particular form of any proposed amendment, supplement or waiver, but it shall
be sufficient if such consent approves the substance thereof.  A consent to any amendment, supplement or
waiver under this Indenture by any Holder of the Securities given in connection
with a tender or exchange of such Holder’s Securities will not be rendered
invalid by such tender or exchange.

 

After an
amendment or supplement under this Section becomes effective, the Company shall
mail to Securityholders a notice briefly describing such amendment.  The failure to give such notice to all
Securityholders, or any defect therein, shall not impair or affect the validity
of an amendment under this Section.

 

SECTION 9.3.  
Compliance with Trust Indenture Act.  Every amendment or supplement to this
Indenture, the Securities, the Subsidiary Guarantees, the Collateral Documents
or the Intercreditor Agreement shall comply with the TIA as then in effect.

 

SECTION 9.4.  
Revocation and Effect of Consents and Waivers.  A consent to an amendment, supplement or a
waiver by a Holder of a Security shall bind the Holder and every subsequent
Holder of that Security or portion of the Security that evidences the same debt
as the consenting Holder’s Security, even if notation of the consent or waiver
is not made on the Security.  Any such
Holder or subsequent Holder may revoke the consent or waiver as to such Holder’s
Security or portion of the Security if the Trustee receives the notice of
revocation before the date the amendment, supplement or waiver becomes
effective or otherwise in accordance with any related solicitation documents.  After an amendment, supplement or waiver
becomes effective, it shall bind every Securityholder unless it makes a change
described in any of clauses (1) through (9) of Section 9.2, in that case
the amendment, supplement, waiver or other action shall bind each
Securityholder who has consented to it and every subsequent Securityholder that
evidences the same debt as the consenting Holder’s Securities.  An amendment, supplement or waiver shall
become effective upon receipt by the Trustee of the requisite number of written
consents under Section 9.1 or 9.2 as applicable.

 

The Company
may, but shall not be obligated to, fix a record date for the purpose of
determining the Securityholders entitled to give their consent or take any
other action described above or required or permitted to be taken pursuant to
this Indenture.  If a record date is
fixed, then notwithstanding the immediately preceding paragraph, those Persons
who were Securityholders at such record date (or their duly designated
proxies), and only those Persons, shall be entitled to give such consent or to
revoke any consent previously given or to take any such action, whether or not
such Persons continue to be Holders after such record date.  No such consent shall become valid or
effective more than 120 days after such record date.

 

SECTION 9.5.  
Notation on or Exchange of Securities.  If an amendment, supplement or waiver changes
the terms of a Security, the Trustee may require the Holder of the Security to
deliver it to the Trustee.  The Trustee
may place an appropriate notation on the

 

108

 

Security regarding the changed
terms and return it to the Holder. 
Alternatively, if the Company or the Trustee so determine, the Company
in exchange for the Security shall issue and the Trustee shall authenticate a
new Security that reflects the changed terms. 
Failure to make the appropriate notation or to issue a new Security
shall not affect the validity of such amendment.

 

SECTION 9.6.  
Trustee To Sign Amendments. 
The Trustee shall sign any amendment, supplement or waiver authorized
pursuant to this Article IX if the amendment, supplement or waiver does
not adversely affect the rights, duties, liabilities or immunities of the
Trustee.  If it does, the Trustee may but
need not sign it.  In signing any
amendment, supplement or waiver the Trustee shall be entitled to receive
indemnity reasonably satisfactory to it and to receive, and (subject to Sections
7.1 and 7.2) shall be fully protected in relying upon an Officers’
Certificate and an Opinion of Counsel stating that such amendment, supplement
or waiver is authorized or permitted by this Indenture and that such amendment,
supplement or waiver is the legal, valid and binding obligation of the Company
and any Subsidiary Guarantors, enforceable against them in accordance with its
terms, subject to customary exceptions, and complies with the provisions hereof
(including Section 9.3).

 

ARTICLE X

SUBSIDIARY GUARANTEE

 

SECTION 10.1.  
Subsidiary Guarantee. 
Subject to the provisions of this Article X, each Subsidiary
Guarantor hereby fully, unconditionally and irrevocably guarantees, as primary
obligor and not merely as surety, jointly and severally with each other
Subsidiary Guarantor, to each Holder of the Securities, to the extent lawful,
and the Trustee the full and punctual payment when due, whether at maturity, by
acceleration, by redemption or otherwise, of the principal of, premium, if any,
Additional Amounts, if any, and interest (including Additional Interest) on the
Securities and all other obligations and liabilities of the Company under this
Indenture (including without limitation interest (including Additional
Interest) accruing after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding, relating to
the Company or any Subsidiary Guarantor whether or not a claim for post-filing
or post-petition interest is allowed in such proceeding and the obligations
under Section 7.7), the Registration Rights Agreement, the Collateral
Documents and the Intercreditor Agreement (all the foregoing being hereinafter
collectively called the “Obligations”). 
Each Subsidiary Guarantor agrees that the Obligations will rank equally
in right of payment with other Indebtedness of such Subsidiary Guarantor,
except to the extent such other Indebtedness is subordinate to the
Obligations.  Each Subsidiary Guarantor
further agrees (to the extent permitted by law) that the Obligations may be
extended or renewed, in whole or in part, without notice or further assent from
it, and that it will remain bound under this Article X notwithstanding
any extension or renewal of any Obligation.

 

Each
Subsidiary Guarantor waives presentation to, demand of payment from and protest
to the Company of any of the Obligations and also waives notice of protest for
nonpayment.  Each Subsidiary Guarantor
waives notice of any default under the Securities or the Obligations.

 

109

 

Each
Subsidiary Guarantor further agrees that its Subsidiary Guarantee herein
constitutes a Guarantee of payment when due (and not a Guarantee of collection)
and waives any right to require that any resort be had by any Holder to any
security held for payment of the Obligations.

 

Except as set
forth in Section 10.2, the obligations of each Subsidiary Guarantor
hereunder shall not be subject to any reduction, limitation, impairment or
termination for any reason (other than payment of the Obligations in full),
including any claim of waiver, release, surrender, alteration or compromise,
and shall not be subject to any defense of setoff, counterclaim, recoupment or
termination whatsoever or by reason of the invalidity, illegality or
unenforceability of the Obligations or otherwise.  Without limiting the generality of the
foregoing, the obligations of each Subsidiary Guarantor herein shall not be
discharged or impaired or otherwise affected by (a) the failure of any Holder
to assert any claim or demand or to enforce any right or remedy against the
Company or any other person under this Indenture, the Securities or any other
agreement or otherwise; (b) any extension or renewal of any thereof; (c) any
rescission, waiver, amendment or modification of any of the terms or provisions
of this Indenture, the Securities or any other agreement; (d) the release of
any security held by any Holder or the Collateral Agent for the Obligations or
any of them; (e) the failure of any Holder to exercise any right or remedy
against any other Subsidiary Guarantor; (f) any change in the ownership of the
Company; (g) any default, failure or delay, willful or otherwise, in the
performance of the Obligations, or (h) any other act or thing or omission or
delay to do any other act or thing which may or might in any manner or to any
extent vary the risk of any Subsidiary Guarantor or would otherwise operate as
a discharge of such Subsidiary Guarantor as a matter of law or equity.

 

Each
Subsidiary Guarantor agrees that its Subsidiary Guarantee herein shall remain
in full force and effect until payment in full of all the Obligations or such
Subsidiary Guarantor is released from its Subsidiary Guarantee upon the merger
or the sale of all the Capital Stock or assets of the Subsidiary Guarantor or
otherwise in compliance with Section 10.2 or Article VIII.  Each Subsidiary Guarantor further agrees that
its Subsidiary Guarantee herein shall continue to be effective or be
reinstated, as the case may be, if at any time payment, or any part thereof, of
principal of, premium, if any, or interest on any of the Obligations is
rescinded or must otherwise be restored by any Holder upon the bankruptcy or
reorganization of the Company or otherwise.

 

In furtherance
of the foregoing and not in limitation of any other right which any Holder has
at law or in equity against any Subsidiary Guarantor by virtue hereof, upon the
failure of the Company to pay any of the Obligations when and as the same shall
become due, whether at maturity, by acceleration, by redemption or otherwise,
each Subsidiary Guarantor hereby promises to and will, upon receipt of written
demand by the Trustee, forthwith pay, or cause to be paid, in cash, to the
Trustee or the Trustee on behalf of the Holders an amount equal to the sum of
(i) the unpaid amount of such Obligations then due and owing and (ii) accrued
and unpaid interest (including Additional Interest) on such Obligations then
due and owing (but only to the extent not prohibited by law).

 

Each
Subsidiary Guarantor further agrees that, as between such Subsidiary Guarantor,
on the one hand, and the Holders, on the other hand, (x) the maturity of the

 

110

 

Obligations guaranteed hereby
may be accelerated as provided in this Indenture for the purposes of its
Subsidiary Guarantee herein, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the Obligations
guaranteed hereby and (y) in the event of any such declaration of acceleration
of such Obligations, such Obligations (whether or not due and payable) shall forthwith
become due and payable by the Subsidiary Guarantor for the purposes of this
Subsidiary Guarantee.

 

Each
Subsidiary Guarantor also agrees to pay any and all reasonable costs and
expenses (including reasonable attorneys’ fees) incurred by the Trustee or the
Holders in enforcing any rights under this Section.

 

Neither the
Company nor the Subsidiary Guarantors shall be required to make a notation on
the Securities to reflect any Subsidiary Guarantee or any release, termination
or discharge thereof and any such notation shall not be a condition to the
validity of any Subsidiary Guarantee.

 

SECTION 10.2.  
Limitation on Liability; Termination, Release and Discharge.

 

(a)    Any term or provision of this Indenture to
the contrary notwithstanding, the obligations of each Subsidiary Guarantor
hereunder will be limited to the maximum amount as will, after giving effect to
all other contingent and fixed liabilities of such Subsidiary Guarantor
(including, without limitation, any guarantees under the Working Capital
Facility) and after giving effect to any collections from or payments made by
or on behalf of any other Subsidiary Guarantor in respect of the obligations of
such other Subsidiary Guarantor under its Subsidiary Guarantee or pursuant to
its contribution obligations under this Indenture, result in the obligations of
such Subsidiary Guarantor under its Subsidiary Guarantee not constituting a
fraudulent conveyance or fraudulent transfer under federal or state law and not
otherwise being void or voidable under any similar laws affecting the rights of
creditors generally.

 

(b)    The Company will not permit any Subsidiary
Guarantor to consolidate with or merge with or into any Person (other than the
Company or another Subsidiary Guarantor), or convey, transfer or lease all or
substantially all of the assets of any Subsidiary Guarantor (other than to the
Company or another Subsidiary Guarantor), unless:

 

(1)           (A)  the resulting, surviving or transferee Person
will be a corporation, partnership, trust or limited liability company
organized or formed and existing under the laws of the United States of
America, any State of the United States or the District of Columbia (or Canada,
in the case of a Subsidiary Guarantor organized in Canada) and such Person (if
not such Subsidiary Guarantor) will expressly assume, by supplemental
indenture, executed and delivered to the Trustee, in form satisfactory to the
Trustee, all the obligations of such Subsidiary Guarantor under its Subsidiary
Guarantee, this Indenture, the Registration Rights Agreement, the related
Collateral Documents and the Intercreditor Agreement and shall cause such
amendments, supplements or other instruments to be executed, filed, and
recorded in such jurisdictions as may be required by applicable law to preserve
and protect the Lien on the Collateral owned by or transferred to the surviving
entity, together with such financing statements or comparable documents as may
be required to perfect any security interests in such Collateral which

 

111

 

may be
perfected by the filing of a financing statement or a similar document under
the Uniform Commercial Code or other similar statute or regulation of the
relevant states or jurisdictions; (B) immediately after giving effect to such
transaction (and treating any Indebtedness that becomes an obligation of the
resulting, surviving or transferee Person or any Restricted Subsidiary as a
result of such transaction as having been Incurred by such Person or such
Restricted Subsidiary at the time of such transaction), no Default of Event of
Default shall have occurred and be continuing; and (C) the Company will have
delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel,
each stating that such consolidation, merger or transfer and such supplemental
indenture (if any) comply with this Indenture; or

 

(2)           the transaction is
made in compliance with Section 3.5 and Section 3.9.

 

Upon the sale
or disposition of a Subsidiary Guarantor (by merger, consolidation, the sale of
its Capital Stock or the sale of all or substantially all of its assets) and
whether or not the Subsidiary Guarantor is the surviving corporation in such
transaction, to a Person which is not the Company or a Restricted Subsidiary,
which sale or disposition is otherwise in compliance with this Indenture, such
Subsidiary Guarantor will be automatically released from all its obligations
under this Indenture and its Subsidiary Guarantee, the Registration Rights
Agreement, the Collateral Documents to which it is a party and the
Intercreditor Agreement, such Subsidiary Guarantee will terminate and the
Liens, if any, on the Collateral pledged by such Subsidiary Guarantor pursuant
to the Collateral Documents shall be released with respect to the Securities if
all the obligations of such Subsidiary Guarantor under the Working Capital
Facility and related documentation and any other agreements relating to any
other Indebtedness of the Company or its Restricted Subsidiaries terminate upon
consummation of such transaction.

 

(c)  Each Subsidiary Guarantor will be deemed
released from all its obligations under this Indenture, its Subsidiary
Guarantee, the Registration Rights Agreement, the Collateral Documents to which
it is a party and the Intercreditor Agreement, and such Subsidiary Guarantee
will terminate, upon the legal defeasance of the Securities pursuant to the
provisions of Article VIII hereof.

 

(d)  Each Subsidiary Guarantor will be released
from its obligations under this Indenture, its Subsidiary Guarantee, the
Registration Rights Agreement, the Collateral Documents to which it is a party
and the Intercreditor Agreement if the Company designates such Subsidiary
Guarantor as an Unrestricted Subsidiary and such designation complies with the
other applicable provisions of this Indenture.

 

SECTION 10.3.  
Right of Contribution. 
Each Subsidiary Guarantor hereby agrees that to the extent that any
Subsidiary Guarantor shall have paid more than its proportionate share of any
payment made on the obligations under the Subsidiary Guarantees, such
Subsidiary Guarantor shall be entitled to seek and receive contribution from
and against the Company or any other Subsidiary Guarantor who has not paid its
proportionate share of such payment.  The
provisions of this Section 10.3 shall in no respect limit the
obligations and liabilities of each Subsidiary Guarantor to the Trustee and the
Holders and each Subsidiary Guarantor shall remain liable to the Trustee and
the Holders for the full amount guaranteed by such Subsidiary Guarantor
hereunder.

 

112

 

SECTION 10.4.  
No Subrogation. 
Notwithstanding any payment or payments made by each Subsidiary
Guarantor hereunder, no Subsidiary Guarantor shall be entitled to be subrogated
to any of the rights of the Trustee or any Holder against the Company or any
other Subsidiary Guarantor or any collateral security or guarantee or right of
offset held by the Trustee or any Holder for the payment of the Obligations,
nor shall any Subsidiary Guarantor seek or be entitled to seek any contribution
or reimbursement from the Company or any other Subsidiary Guarantor in respect
of payments made by such Subsidiary Guarantor hereunder, until all amounts
owing to the Trustee and the Holders by the Company on account of the
Obligations are paid in full.  If any
amount shall be paid to any Subsidiary Guarantor on account of such subrogation
rights at any time when all of the Obligations shall not have been paid in full,
such amount shall be held by such Subsidiary Guarantor in trust for the Trustee
and the Holders, segregated from other funds of such Subsidiary Guarantor, and
shall, forthwith upon receipt by such Subsidiary Guarantor, be turned over to
the Trustee in the exact form received by such Subsidiary Guarantor (duly
indorsed by such Subsidiary Guarantor to the Trustee, if required), to be
applied against the Obligations.

 

ARTICLE XI

COLLATERAL AND SECURITY

 

SECTION 11.1.  
The Collateral.

 

(a)  The due and punctual payment of the principal
of, premium, if any, Additional Amounts, if any, and interest (including
Additional Interest) on the Securities and the Guarantees thereof when and as
the same shall be due and payable, whether on an interest payment date, at
maturity, by acceleration, repurchase, redemption or otherwise, interest on the
overdue principal of and interest (to the extent permitted by law), if any, on
the Securities and the Guarantees thereof and performance of all other
obligations under this Indenture, including, without limitation, the
obligations of the Company set forth in Section 7.7 and Section 8.5
herein, and the Securities and the Guarantees thereof and the Collateral
Documents, shall be secured by (i) first-priority Liens and security interests
and (ii) second-priority Liens and security interests, in each case subject to
Permitted Liens as provided in the Collateral Documents which the Company and
the Subsidiary Guarantors, as the case may be, have entered into simultaneously
with the execution of this Indenture and will be secured by all Collateral
Documents hereafter delivered as required or permitted by this Indenture, the
Collateral Documents and the Intercreditor Agreement.  The Company and the Subsidiary Guarantors
hereby agree that the Collateral Agent shall hold the Collateral in trust for
the benefit of all of the Holders and the Trustee, in each case pursuant to the
terms of the Collateral Documents and the Intercreditor Agreement and the
Collateral Agent is hereby authorized to execute and deliver the Collateral Documents
and the Intercreditor Agreement.

 

(b)  Each Holder, by its acceptance of any
Securities and the Guarantees thereof, consents and agrees to the terms of the
Collateral Documents and the Intercreditor Agreement (including, without
limitation, the provisions providing for foreclosure) as the same may be in

 

113

 

effect or may be amended from
time to time in accordance with their terms and authorizes and directs the
Collateral Agent to perform its obligations and exercise its rights under the
Collateral Documents in accordance therewith.

 

(c)  The Trustee and each Holder, by accepting the
Securities and the Guarantees thereof, acknowledges that, as more fully set
forth in the Collateral Documents and the Intercreditor Agreement, the
Collateral as now or hereafter constituted shall be held for the benefit of all
the Holders and the Trustee, and that the Lien of this Indenture and the
Collateral Documents in respect of the Trustee and the Holders is subject to
and qualified and limited in all respects by the Collateral Documents and the
Intercreditor Agreement and actions that may be taken thereunder.

 

SECTION 11.2.  
Further Assurances.

 

(a)  The Company will, and will cause each
Subsidiary Guarantor to, at their sole expense, do or cause to be done all acts
and things which may be required, or which the Trustee from time to time may
request, which request the Trustee shall not be obligated to make, to assure
and confirm that the Collateral Agent holds, for the benefit of the Holders of
the Securities and the Guarantees thereof and the Trustee, duly created,
enforceable and perfected first or second priority Liens and security
interests, as applicable, in the Collateral (subject to Permitted Liens) as
contemplated by the Collateral Documents and the Intercreditor Agreement.

 

(b)  As necessary, or upon request of the Trustee,
which request the Trustee shall not be obligated to make, the Company will, and
will cause each Subsidiary Guarantor to, at their sole expense, promptly
execute, acknowledge and deliver such Collateral Documents, the Intercreditor
Agreement, instruments, certificates, notices and other documents and take such
other actions as shall be required or which the Trustee may reasonably request
to create, perfect, protect, assure, transfer, confirm or enforce the Liens and
benefits intended to be conferred as contemplated by this Indenture, the
Collateral Documents and the Intercreditor Agreement for the benefit of the
Holders of the Securities and the Guarantees thereof and the Trustee, including
with respect to after acquired Collateral. 
If the Company or such Subsidiary fails to do so, the Trustee is hereby
irrevocably authorized and empowered, with full power of substitution, to
execute, acknowledge and deliver such Collateral Documents, the Intercreditor
Agreement, instruments, certificates, notices and other documents and, subject
to the provisions of the Collateral Documents and the Intercreditor Agreement,
take such other actions in the name, place and stead of the Company or such
Subsidiary, but the Trustee will have no obligation to do so and no liability
for any action taken or omitted by it in good faith in connection therewith.

 

(c)  The Company will otherwise comply with the
provisions of TIA §314(b).  Promptly
after the effectiveness of this Indenture, to the extent required by the TIA,
the Company shall deliver the opinion(s) required by Section 314(b)(1) of the
TIA.  Subsequent to the execution and
delivery of this Indenture, to the extent required by the TIA, the Company
shall furnish to the Trustee on or prior to each anniversary of the Issue Date,
an Opinion of Counsel, dated as of such date, stating either that (i) in the
opinion of such counsel, all action has been taken with respect to any filing,
re-filing, recording or re-recording with respect to the Collateral as is
necessary to maintain the Lien on the Collateral in favor of the Holders or
(ii) in the opinion of such counsel, that no such action is necessary to
maintain such Lien.

 

114

 

(d)  To the extent applicable, the Company will
cause TIA §313(b), relating to reports, and TIA §314(d), relating to the
release of property and the substitution therefor of any property to be pledged
as Collateral for the Securities and the Guarantees therefor, to be complied
with. Any certificate or opinion required by TIA §314(d) may be made by an
Officer of the Company except in cases where TIA §314(d) requires that such
certificate or opinion be made by an independent Person, which Person will be
an independent engineer, appraiser or other expert reasonably satisfactory to
the Trustee. Notwithstanding anything to the contrary in this paragraph, the
Company will not be required to comply with all or any portion of TIA §314(d)
if it determines, in good faith based on advice of counsel, that under the
terms of TIA §314(d) and/or any interpretation or guidance as to the meaning
thereof of the SEC and its staff, including “no action” letters or exemptive
orders, all or any portion of TIA §314(d) is inapplicable to one or a series of
released Collateral.

 

SECTION 11.3.  
After-Acquired Property. 
Upon the acquisition by the Company or any Subsidiary Guarantor after
the Issue Date of (1) any assets, including, but not limited to, any
after-acquired real property or any equipment or fixtures which constitute
accretions, additions or technological upgrades to the equipment or fixtures
that form part of the First Priority Collateral or Second Priority Collateral,
as applicable, or (2) any Additional Assets out of the Net Cash Proceeds from
any issuance of Additional Securities or in compliance with Section 3.5,
the Company or such Subsidiary Guarantor shall execute and deliver such
mortgages, deeds of trust, security instruments, financing statements,
certificates and Opinions of Counsel as may be necessary to vest in the
Collateral Agent a perfected security interest, subject only to Permitted
Liens, in such after-acquired property and to have such after-acquired property
added to the Collateral, and thereupon all provisions of this Indenture
relating to the Collateral shall be deemed to relate to such after-acquired
property to the same extent and with the same force and effect.

 

SECTION 11.4.  
Impairment of Security Interest. 
Neither the Company nor any of its Restricted Subsidiaries shall take or
omit to take any action which would materially adversely affect or impair the
Liens in favor of the Collateral Agent and the Holders of the Securities with
respect to the Collateral. Neither the Company nor any of its Restricted
Subsidiaries shall grant to any Person, or permit any Person to retain (other
than the Collateral Agent), any interest whatsoever in the Collateral, other
than Permitted Liens. Neither the Company nor any of its Restricted
Subsidiaries shall enter into any agreement that requires the proceeds received
from any sale of Collateral to be applied to repay, redeem, defease or
otherwise acquire or retire any Indebtedness of any Person, other than as
permitted by this Indenture, the Securities, the Subsidiary Guarantees, the
Collateral Documents and the Intercreditor Agreement. The Company shall, and
shall cause each Subsidiary Guarantor to, at its sole cost and expense, execute
and deliver all such agreements and instruments as necessary or as the Trustee
shall reasonably request to more fully or accurately describe the assets and
property intended to be Collateral or the obligations intended to be secured by
the Collateral Documents.

 

SECTION 11.5. 
 Real Estate Mortgages and
Filings.  With respect to any fee
interest in any real property (individually and collectively, the “Premises”)
owned by the Company or a Subsidiary Guarantor on the Issue Date or acquired by
the Company or a Subsidiary Guarantor after the Issue Date:

 

115

 

(1)  the Company shall deliver to
the Collateral Agent, as mortgagee or beneficiary, as applicable, fully
executed counterparts of Mortgages, each dated as of the Issue Date or the date
of acquisition of such property, as the case may be, duly executed by the
Company or the applicable Subsidiary Guarantor, together with evidence of the
completion (or satisfactory arrangements for the completion) of all recordings
and filings of such Mortgage (and payment of any taxes or fees in connection
therewith) as may be necessary to create a valid, perfected Lien, subject to
Permitted Liens, against the properties purported to be covered thereby;

 

(2)  the Collateral Agent shall
have received mortgagee’s title insurance policies in favor of the Collateral
Agent, as mortgagee for the ratable benefit of itself and the Holders of the
Securities in the amounts and in the form necessary, with respect to the
property purported to be covered by such Mortgage, to insure that title to such
property is marketable and that the interests created by the Mortgage
constitute valid Liens thereon free and clear of all Liens, defects and
encumbrances, other than Permitted Liens, and such policies shall also include,
to the extent available, such other necessary endorsements and shall be
accompanied by evidence of the payment in full of all premiums thereon; and

 

(3)  the Company shall, or shall
cause its Subsidiary Guarantors to, deliver to the Collateral Agent (x) with
respect to each of the covered Premises owned on the Issue Date, such filings,
surveys (or any updates or affidavits that the title company may reasonably
require in connection therewith), local counsel opinions and fixture filings,
along with such other documents, instruments, certificates and agreements, as
the Initial Purchasers and their counsel shall reasonably request, and (y) with
respect to each of the covered Premises acquired after the Issue Date, such
filings, surveys, instruments, certificates, agreements and/or other documents
necessary to comply with clauses (1) and (2) above and to perfect the
Collateral Agent’s security interest in such acquired covered Premises,
together with such local counsel opinions as the Collateral Agent and its
counsel shall reasonably request.

 

SECTION 11.6.  
Release of Liens on the Collateral.

 

(a)  The Liens on the Collateral will be released with respect to the Securities:

 

(1)   in
whole, upon payment in full of the
principal of, accrued and unpaid interest (including Additional
Interest, if any), premium, if any, and Additional
Amounts, if any, on the Securities;

 

(2)   in
whole, upon satisfaction and discharge of this Indenture as set forth in Section
8.1(a) hereof;

 

(3)   in
whole, upon a legal defeasance as set forth in Section 8.1(b) hereof;

 

(4)   in
part, as to any property constituting Collateral (A) that is sold or otherwise
disposed of by the Company or any of its Restricted Subsidiaries in a
transaction permitted by Section 3.5 or the Collateral Documents, to the
extent of the interest sold or disposed of, (B) that is cash or Net Available
Cash withdrawn from the Collateral

 

116

 

Account
for any one or more purposes permitted by Section 3.5(a); (C) that is of the
nature described in clause (3), clause (4), clause (8), clause (9), clause (10)
or clause (11) of the proviso in the definition of “Asset Disposition,” and is
subject to a disposition as therein provided, (D) that constitute Excess
Collateral Proceeds that remain unexpended after the conclusion of a Collateral
Disposition Offer conducted in accordance with this Indenture, (E) that is
owned or at any time acquired by a Subsidiary of the Company that has been
released from its Subsidiary Guarantee in accordance with this Indenture,
concurrently with the release thereof, (F) that is Capital Stock of a
Subsidiary of the Company to the extent necessary for such
Subsidiary not to be subject to any requirement pursuant to Rule 3-16 or Rule
3-10 of Regulation S-X under the Securities Act, due to the fact that such
Subsidiary’s Capital Stock secures the Securities, to file separate financial
statements with the SEC (or any other governmental agency) or (G) otherwise in accordance with, and as expressly
provided for under, this Indenture, including, without limitation, Article X;
and

 

(5)   with the consent of each Holder affected thereby (including, without
limitation, consents obtained in connection with a tender offer or exchange
offer for, or purchase of, Securities);

 

provided, that, in the case of any release in
whole pursuant to this Section 11.6(a), all amounts owing to the Trustee
under this Indenture, the Securities, the Subsidiary Guarantees, the
Registration Rights Agreement, the Collateral Documents and the Intercreditor
Agreement have been paid.

 

(b)  To the extent applicable, the Company and
each Subsidiary Guarantor will furnish to the Trustee, prior to each proposed
release of Collateral pursuant to the Collateral Documents and this Indenture:

 

(1)   an Officers’ Certificate
requesting such release;

 

(2)   an Officers’ Certificate and
an Opinion of Counsel to the effect that all conditions precedent provided for
in this Indenture and the Collateral Documents to such release have been
complied with;

 

(3)   a form of such release
(which release shall be in form reasonably satisfactory to the Trustee and
shall provide that the requested release is without recourse or warranty to the
Trustee);

 

(4)   all documents required by
TIA §314(d), this Indenture, the Collateral Documents and the Intercreditor
Agreement; and

 

(5)   an Opinion of Counsel to the
effect that such accompanying documents constitute all documents required by
TIA §314(d), this Indenture, the Collateral Documents and the Intercreditor
Agreement.

 

Upon
compliance by the Company or the Subsidiary Guarantors, as the case may be,
with the conditions precedent set forth above, and upon delivery by the Company
or such Subsidiary Guarantor to the Trustee of an Opinion of Counsel to the
effect that such conditions

 

117

 

precedent have been complied
with, the Trustee or the Collateral Agent shall promptly cause to be released
and reconveyed to the Company, or the Subsidiary Guarantors, as the case may
be, the released Collateral.

 

(c)  For purposes of the TIA, the release of any
Collateral from the terms of the Collateral Documents will not be deemed to
impair the security under this Indenture in contravention of the provisions
hereof or affect the Lien of this Indenture or the Collateral Documents if and
to the extent the Collateral is released pursuant to this Indenture, the
Collateral Documents or the Intercreditor Agreement or upon the termination of
this Indenture.

 

SECTION 11.7.  
Authorization of Actions to be Taken by the Trustee or the Collateral
Agent Under the Collateral Documents.

 

(a)  Subject to the provisions of the Collateral
Documents and the Intercreditor Agreement, each of the Trustee or the
Collateral Agent may, in its sole discretion and without the consent of the
Holders, on behalf of the Holders, take all actions it deems necessary or
appropriate in order to (a) enforce any of its rights or any of the rights of
the Holders under the Collateral Documents and the Intercreditor Agreement and
(b) collect and receive any and all amounts payable in respect of the
Collateral in respect of the obligations of the Company and the Subsidiaries
hereunder and thereunder.  Subject to the
provisions of the Collateral Documents and the Intercreditor Agreement, the
Trustee or the Collateral Agent shall have the power to institute and to
maintain such suits and proceedings as it may deem expedient to prevent any
impairment of the Collateral by any acts that may be unlawful or in violation
of the Collateral Documents, the Intercreditor Agreement or this Indenture, and
such suits and proceedings as the Trustee or the Collateral Agent may deem
expedient to preserve or protect its interest and the interests of the Holders
in the Collateral (including power to institute and maintain suits or
proceedings to restrain the enforcement of or compliance with any legislative
or other governmental enactment, rule or order that may be unconstitutional or
otherwise invalid if the enforcement of, or compliance with, such enactment, rule
or order would impair the security interest hereunder or be prejudicial to the
interests of the Holders or the Trustee).

 

(b)  The Trustee or the Collateral Agent shall not
be responsible for the existence, genuineness or value of any of the Collateral
or for the validity, perfection, priority or enforceability of the Liens in any
of the Collateral, whether impaired by operation of law or by reason of any
action or omission to act on its part hereunder, except to the extent such
action or omission constitutes negligence, bad faith or willful misconduct on
the part of the Trustee or the Collateral Agent, for the validity or
sufficiency of the Collateral or any agreement or assignment contained therein,
for the validity of the title of the Company to the Collateral, for insuring
the Collateral or for the payment of taxes, charges, assessments or Liens upon
the Collateral or otherwise as to the maintenance of the Collateral. The
Trustee or the Collateral Agent shall have no responsibility for recording, filing,
re-recording or refiling any financing statement, continuation statement,
document, instrument or other notice in any public office at any time or times
or to otherwise take any action to perfect or maintain the perfection of any
security interest granted to it under the Collateral Documents or otherwise.

 

118

 

(c)  Where any provision of this Indenture
requires that additional property or assets be added to the Collateral, the
Company and each Subsidiary Guarantor shall deliver to the Trustee or the
Collateral Agent the following:

 

(i)            a request from the
Company that such Collateral be added;

 

(ii)           the form of
instrument adding such Collateral, which, based on the type and location of the
property subject thereto, shall be in substantially the form of the applicable
Collateral Documents entered into on the date of this Indenture, with such
changes thereto as the Company shall consider appropriate, or in such other
form as the Company shall deem proper, provided
that any such changes or such form are administratively satisfactory to the
Trustee or the Collateral Agent;

 

(iii)          an Officers’
Certificate to the effect that the Collateral being added is in the form,
consists of the assets and is in the amount or otherwise has the fair market
value required by this Indenture;

 

(iv)          an Officers’
Certificate and Opinion of Counsel to the effect that all conditions precedent
provided for in this Indenture to the addition of such Collateral have been
complied with, which Opinion of Counsel shall also opine as to the creation and
perfection of the Collateral Agent’s Lien on such Collateral and as to the due
authorization, execution, delivery, validity and enforceability of the
Collateral Document being entered into; and

 

(v)           such financing
statements, if any, as the Company shall deem necessary to perfect the
Collateral Agent’s security interest in such Collateral.

 

(d)  The Trustee or the Collateral Agent, in
giving any consent or approval under the Collateral Documents or the
Intercreditor Agreement, shall be entitled to receive, as a condition to such
consent or approval, an Officers’ Certificate and an Opinion of Counsel to the
effect that the action or omission for which consent or approval is to be given
does not adversely affect the interests of the Holders or impair the security
of the Holders in contravention of the provisions of this Indenture, the
Collateral Documents and the Intercreditor Agreement, and the Trustee or the
Collateral Agent shall be fully protected in giving such consent or approval on
the basis of such Officers’ Certificate and Opinion of Counsel.

 

SECTION 11.8.  
Collateral Accounts.

 

(a)  The Trustee is authorized to receive any
funds for the benefit of the Holders distributed under the Collateral
Documents, and to make further distributions of such funds to the Holders
according to the provisions of this Indenture, the Collateral Documents and the
Intercreditor Agreement.

 

119

 

(b)  Prior to the Issue Date, the Trustee shall
have established the Collateral Accounts, which shall at all times hereafter
until this Indenture shall have terminated, be maintained with, and under the
sole control of, the Trustee.  The
Collateral Accounts shall be trust accounts and shall be established and
maintained by the Trustee at one of its corporate trust offices (which may
include the New York corporate trust office) and all Collateral shall be
credited thereto.  All cash and Cash
Equivalents received by the Trustee from Asset Dispositions of Collateral,
Recovery Events, Asset Swaps involving the transfer of Collateral, foreclosures
of or sales of the Collateral, issuances of Additional Securities and other
awards or proceeds pursuant to the Collateral Documents, including earnings,
revenues, rents, issues, profits and income from the Collateral received
pursuant to the Collateral Documents, shall be deposited in the First Priority
Collateral Account, in the case of proceeds from First Priority Collateral, or
in the Second Priority Collateral Account, in the case of proceeds from Second
Priority Collateral, and thereafter shall be held, applied and/or disbursed by
the Trustee in accordance with the terms of this Indenture (including, without
limitation, Section 2.1(a), Section 3.5, Section 6.10 and Section
11.8(a).  In connection with any and
all deposits to be made into the Collateral Accounts under this Indenture, the
Collateral Documents or the Intercreditor Agreement, the Trustee and/or the
Collateral Agent, as applicable, shall receive an Officers’ Certificate
identifying which Collateral Account shall receive such deposit and directing
the Trustee and/or the Collateral Agent to make such deposit.

 

(c)  Pending the distribution of funds in the
Collateral Account in accordance with the provisions hereof and provided that
no Event of Default shall have occurred and be continuing, the Company may
direct the Trustee to invest such funds in Cash Equivalents specified in such
direction, such investments to mature by the times such funds are needed
hereunder, such direction to certify that such funds constitute Cash
Equivalents and that no Event of Default shall have occurred and be
continuing.  Provided that no Event of Default shall have occurred and be
continuing, the Company may direct the Trustee to sell, liquidate or cause the
redemption of any such investments, such direction to certify that no Event of
Default shall have occurred and be continuing. Any gain or income on any
investment of funds in the Collateral Account shall be credited to the
Collateral Account. The Trustee shall have no liability for any loss incurred
in connection with any investment or any sale, liquidation or redemption
thereof made in accordance with the provisions of this Section 11.8(c).

 

ARTICLE XII

MISCELLANEOUS

 

SECTION 12.1.  
Trust Indenture Act Controls. 
If and to the extent that any provision of this Indenture limits,
qualifies or conflicts with another provision which is required to be included
in this Indenture by the TIA, the provision required by the TIA shall
control.  Each Subsidiary Guarantor in
addition to performing its obligations under its Subsidiary Guarantee shall
perform such other obligations as may be imposed upon it with respect to this
Indenture under the TIA.

 

120

 

SECTION 12.2.  
Notices.  Any notice or
communication shall be in writing and delivered in person, sent by facsimile,
delivered by commercial courier service or mailed by first-class mail, postage
prepaid, addressed as follows:

 

	
   

  	
  if to the
  Company or to any Subsidiary

  Guarantor:

  
	
   

  	
   

  
	
   

  	
  Cellu Tissue
  Holdings Inc.

  3440 Francis Road, Suite C

  Alpharetta, Georgia 30004

  Attention:  Dianne M. Scheu

  Telecopy:  (678) 393-2657

  
	
   

  	
   

  
	
   

  	
  with a copy
  to:

  
	
   

  	
   

  
	
   

  	
  Proskauer
  Rose LLP

  1585 Broadway

  New York, New York 10036

  Attention:  Allan R. Williams

  Telecopy:  (212) 969-2900

  
	
   

  	
   

  
	
   

  	
  if to the
  Trustee, at its corporate trust office,

  which corporate trust office for purposes of this

  Indenture is at the date hereof located at:

  
	
   

  	
   

  
	
   

  	
  The Bank of
  New York

  101 Barclay Street, Floor 8W

  New York, New York 10286

  Attention: Corporate Trust Administration

  Telecopy:  (212) 815-5707

  

 

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

 

Any notice or
communication to the Company or the Subsidiary Guarantors shall be deemed to
have been given or made as of the date so delivered if personally delivered;
when answered back, if telexed; when receipt is acknowledged, if telecopied;
and five calendar days after mailing if sent by registered or certified mail,
postage prepaid (except that a notice of change of address shall not be deemed
to have been given until actually received by the addressee).  Any notice or communication to the Trustee
shall be deemed delivered upon receipt.

 

Any notice or
communication mailed to a Securityholder shall be mailed to the Securityholder
at the Securityholder’s address as it appears in the Securities Register and
shall be sufficiently given if so mailed within the time prescribed.

 

Failure to
mail a notice or communication to a Securityholder or any defect in it shall
not affect its sufficiency with respect to other Securityholders.  If a notice or

 

121

 

communication is mailed in the
manner provided above, it is duly given, whether or not the addressee receives
it, except that notices to the Trustee shall be effective only upon receipt.

 

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

 

SECTION 12.3.  
Communication by Holders with other Holders.  Securityholders may communicate pursuant to
TIA § 312(b) with other Securityholders with respect to their rights under this
Indenture or the Securities.  The
Company, the Trustee, the Registrar and anyone else shall have the protection
of TIA § 312(c).

 

SECTION 12.4.  
Certificate and Opinion as to Conditions Precedent.  Upon any request or application by the
Company to the Trustee to take or refrain from taking any action under this
Indenture, the Collateral Documents or the Intercreditor Agreement (except in
connection with the original issuance of Securities on the date hereof), the
Company shall furnish to the Trustee:

 

(1)   an Officers’ Certificate in
form reasonably satisfactory to the Trustee stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Indenture, the
Collateral Documents and the Intercreditor Agreement relating to the proposed
action have been complied with; and

 

(2)   an Opinion of Counsel in
form reasonably satisfactory to the Trustee stating that, in the opinion of
such counsel, all such conditions precedent have been complied with.

 

SECTION 12.5.  
Statements Required in Certificate or Opinion.  Each certificate or opinion with respect to
compliance with a covenant or condition provided for in this Indenture shall
include:

 

(1)   a statement that the
individual making such certificate or opinion has read such covenant or
condition;

 

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

 

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

 

(4)   a statement as to whether or
not, in the opinion of such individual, such covenant or condition has been
complied with.

 

In giving such
Opinion of Counsel, counsel may rely as to factual matters on an Officers’
Certificate or on certificates of public officials.

 

122

 

SECTION 12.6.  
When Securities Disregarded. 
In determining whether the Holders of the required aggregate principal
amount of Securities have concurred in any direction, waiver or consent,
Securities owned by the Company, any Subsidiary Guarantor or any Affiliate of
them shall be disregarded and deemed not to be outstanding, except that, for
the purpose of determining whether the Trustee shall be protected in relying on
any such direction, waiver or consent, only Securities which the Trustee
actually knows are so owned shall be so disregarded.  Also, subject to the foregoing, only
Securities outstanding at the time shall be considered in any such
determination.

 

SECTION 12.7.  
Rules by Trustee, Paying Agent and Registrar.  The Trustee may make reasonable rules for
action by, or at meetings of, Securityholders. 
The Registrar and the Paying Agent may make reasonable rules for their
functions.

 

SECTION 12.8.  
Legal Holidays.  A “Legal
Holiday” is a Saturday, a Sunday or other day on which commercial banking
institutions are authorized or required to be closed in New York, New
York.  If a payment date is a Legal
Holiday, payment shall be made on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period.  If a regular record date is a Legal Holiday,
the record date shall not be affected.

 

SECTION 12.9.  
GOVERNING LAW.  THIS
INDENTURE, THE SECURITIES AND THE SUBSIDIARY GUARANTEES SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.  EACH OF THE PARTIES HERETO AGREES TO SUBMIT
TO THE JURISDICTION OF THE STATE COURTS OF, AND THE FEDERAL COURTS LOCATED IN,
THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS INDENTURE, THE SECURITIES OR THE SUBSIDIARY GUARANTEES.

 

SECTION 12.10.   No Recourse Against Others.  An incorporator, director, officer, employee
or stockholder of the Company or any Subsidiary Guarantor, solely by reason of
this status, shall not have any liability for any obligations of the Company or
any Subsidiary Guarantor under the Securities, this Indenture, the Collateral
Documents, the Intercreditor Agreement or the Subsidiary Guarantees or for any
claim based on, in respect of or by reason of such obligations or their
creation.  By accepting a Security, each
Securityholder waives and releases all such liability.  The waiver and release are a part of the
consideration for the issuance of the Securities.

 

SECTION 12.11.   Successors.  All agreements of the Company and each
Subsidiary Guarantor in this Indenture and the Securities shall bind their
respective successors.  All agreements of
the Trustee in this Indenture shall bind its successors.

 

SECTION 12.12.   Multiple 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.  One signed copy is enough to prove this
Indenture.

 

SECTION 12.13.   Qualification of Indenture.  The Company has agreed to qualify this
Indenture under the TIA in accordance with the terms and conditions of the
Registration Rights Agreement and to pay all reasonable costs and expenses
(including

 

123

 

attorneys’ fees and expenses
for the Company, the Trustee and the Holders) incurred in connection therewith,
including, but not limited to, costs and expenses of qualification of this
Indenture and the Securities and printing this Indenture and the
Securities.  The Trustee shall be
entitled to receive from the Company any such Officers’ Certificates, Opinions
of Counsel or other documentation as it may reasonably request in connection
with any such qualification of this Indenture under the TIA.

 

SECTION 12.14.   Table of Contents; Headings.  The table of contents, cross-reference sheet
and headings of the Articles and Sections of this Indenture have been inserted
for convenience of reference only, are not intended to be considered a part
hereof and shall not modify or restrict any of the terms or provisions hereof.

 

SECTION
12.15.   WAIVERS
OF JURY TRIAL.  THE COMPANY, THE SUBSIDIARY GUARANTORS AND
THE TRUSTEE HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY
LEGAL ACTION OR PROCEEDING RELATING TO THIS INDENTURE, THE SECURITIES, THE
SUBSIDIARY GUARANTEES, ANY COLLATERAL DOCUMENT OR THE INTERCREDITOR AGREEMENT
AND FOR ANY COUNTERCLAIM THEREIN.

 

SECTION 12.16.   Intercreditor Agreement Controls.  Notwithstanding any contrary provision in
this Indenture, the Indenture is subject to the provisions of the Intercreditor
Agreement.  The Company, the Subsidiary
Guarantors and the Trustee acknowledge and agree to be bound by the provisions
of the Intercreditor Agreement.

 

124

 

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

 

	
   

  	
  CELLU TISSUE
  HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CELLU TISSUE CORPORATION - NATURAL

  DAM

  
	
   

  	
  CELLU TISSUE
  CORPORATION - NEENAH

  
	
   

  	
  CELLU TISSUE
  LLC

  
	
   

  	
  INTERLAKE ACQUISITION CORPORATION

  LIMITED

  
	
   

  	
  MENOMINEE
  ACQUISITION CORPORATION

  
	
   

  	
  VAN PAPER
  COMPANY

  
	
   

  	
  VAN TIMBER
  COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  COASTAL
  PAPER COMPANY

  
	
   

  	
   

  
	
   

  	
  By: Van
  Paper Company, its managing partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
					

 

 

	
   

  	
  THE BANK OF
  NEW YORK, as Trustee

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

EXHIBIT A

 

[FORM
OF FACE OF NOTE]

 

[Applicable
Restricted Securities Legend]

[Depository Legend, if applicable]

 

	
  No.
  [       ]

  	
  Principal Amount
  $[                    ]

  
	
   

  	
  CUSIP NO. 

  

 

CELLU
TISSUE HOLDINGS, INC.

 

 

93⁄4%
Senior Secured Note, Series A, due 2010

 

Cellu Tissue Holdings Inc.,
a Delaware corporation, promises to pay to [Cede & Co.],* or its registered
assigns, the principal sum of
                             
Dollars, [as revised by the Schedule of Increases and Decreases in Global
Security attached hereto],*  on March 15, 2010.

 

Interest Payment Dates:  March 15 and September 15

Record Dates:  March 1 and September 1

 

Additional provisions of
this Security are set forth on the other side of this Security.

 

	
   

  	
  CELLU TISSUE HOLDINGS,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

*              Insert
in Global Securities only

 

A-1

 

	
  TRUSTEE’S CERTIFICATE OF

  AUTHENTICATION

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  THE BANK OF NEW YORK,

  	
   

  	
   

  
	
  as Trustee, certifies

  	
   

  	
   

  
	
  that this is one of

  	
   

  	
   

  
	
  the Securities referred

  	
   

  	
   

  
	
  to in the
  Indenture.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Authorized Officer

  	
   

  	
  Date:

  	
   

  	
  , 2004

  	
   

  
							

 

A-2

 

[FORM
OF REVERSE SIDE OF NOTE]

CELLU TISSUE HOLDINGS, INC.

 

93⁄4%
Senior Secured Note, Series A, due 2010

 

1.   Interest

 

Cellu Tissue Holdings Inc.,
a Delaware corporation (such corporation, and its successors and assigns under
the Indenture hereinafter referred to, being herein called the “Company”),
promises to pay interest on the principal amount of this Security at the rate
per annum shown above.

 

The Company will pay
interest semiannually on March 15 and September 15 of each year commencing
September 15, 2004.  Interest on the
Securities will accrue from the most recent date to which interest has been
paid on the Securities or, if no interest has been paid, from March 12,
2004.  The Company shall pay interest on
overdue principal, and on overdue premium or Additional Amounts, if any (plus
interest on such interest to the extent lawful), at the rate borne by the
Securities to the extent lawful. 
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.

 

If an exchange offer (the “Exchange
Offer”) registered under the Securities Act is not consummated or a shelf
registration statement (the “Shelf Registration Statement”) under the
Securities Act with respect to resales of the Securities is not declared
effective by the SEC on or before the date that is 270 days after the Issue
Date (the “Target Registration Date”) in accordance with the terms of
the Registration Rights Agreement, dated as of March 12, 2004 (the “Registration
Rights Agreement”), among the Company, the Subsidiary Guarantors and the
initial purchasers named therein, the annual interest rate borne by the
Securities shall be increased from the rate shown above by 1.00% per annum, in
each case until the Exchange Offer is completed or the Shelf Registration
Statement, if required hereby, is declared effective by the SEC or the
Securities become freely tradable under the Securities Act.  The Holder of this Note is entitled to the
benefits of such Registration Rights Agreement. 
Additional Interest shall be paid to the same Persons, in the same
manner and at the same times as regular interest.

 

2.   Method of Payment

 

By no later than 10:00 a.m.
(New York City time) on the date on which any principal of, premium, if any, or
interest on any Security is due and payable, the Company shall irrevocably
deposit with the Trustee or the Paying Agent money sufficient to pay such
principal, premium, if any, Additional Amounts, if any, and/or interest
(including Additional Interest).  The
Company will pay interest (except Defaulted Interest) to the Persons who are
registered Holders of Securities at the close of business on the March 1 or
September 1 next preceding the interest payment date even if Securities are
cancelled, repurchased or redeemed after the record date and on or before the
interest payment date.  Holders must
surrender Securities to a Paying Agent to collect principal payments.  The Company will pay principal, premium, if
any, and interest in money of the United States that at the time of payment is
legal tender for payment of public and private debts. Payments in respect of
Securities represented by a Global Security (including

 

A-3

 

principal, premium, if
any, and interest) will be made by the transfer of immediately available funds
to the accounts specified by The Depository Trust Company or any successor
depository. The Company will make all payments in respect of a Definitive
Security (including principal, premium, if any, and interest) by mailing a
check to the registered address of each Holder thereof; provided, however, that payments on the
Securities may also be made, in the case of a Holder of at least $1,000,000
aggregate principal amount of Securities, by wire transfer to a U.S. dollar
account maintained by the payee with a bank in the United States if such Holder
elects payment by wire transfer by giving written notice to the Trustee or the
Paying Agent to such effect designating such account no later than 15 days
immediately preceding the relevant due date for payment (or such other date as
the Trustee may accept in its discretion).

 

3.   Paying Agent and Registrar

 

Initially, The Bank of New
York (the “Trustee”) will act as Trustee, Paying Agent and
Registrar.  The Company may appoint and
change any Paying Agent, Registrar or co-registrar without notice to any
Securityholder.  The Company or any of
its domestically organized, wholly owned Subsidiaries may act as Paying Agent,
Registrar or co-registrar.

 

4.   Indenture

 

The Company issued the
Securities under an Indenture dated as of March 12, 2004 (as it may be amended
or supplemented from time to time in accordance with the terms thereof, the “Indenture”),
among the Company, the Subsidiary Guarantors and the Trustee.  The terms of the Securities include those
stated in the Indenture and those made part of the Indenture by reference to
the Trust Indenture Act of 1939 (15 U.S.C. §§ 77aaa-77bbbb) as in effect
on the date of the Indenture (the “Act”).  Capitalized terms used herein and not defined
herein have the meanings ascribed thereto in the Indenture.  The Securities are subject to all terms and
provisions of the Indenture, and Securityholders are
referred to the Indenture and the Act for a statement of those terms.

 

The Securities are secured
senior obligations of the Company.  The
aggregate principal amount of Securities that may be authenticated and
delivered under the Indenture is unlimited, provided
that the Net Cash Proceeds from any issuance of Additional Securities are
invested in Additional Assets in accordance with the Indenture.  This Security is one of the 93⁄4% Senior
Secured Notes, Series A, due 2010 referred to in the Indenture.  The Securities include (i) $162,000,000
aggregate principal amount of the Company’s 93⁄4% Senior Secured Notes, Series A,
due 2010 issued under the Indenture on March 12, 2004 (herein called “Initial
Securities”), (ii) if and when issued, additional 93⁄4% Senior Secured Notes,
Series A, due 2010 or 93⁄4% Senior Secured Notes, Series B, due 2010 of the
Company that may be issued from time to time under the Indenture subsequent to
March 12, 2004 (herein called “Additional Securities”) as provided in Section
2.1(a) of the Indenture and (iii) if and when issued, the Company’s 93⁄4%
Senior Secured Notes, Series B, due 2010 that may be issued from time to time
under the Indenture in exchange for Initial Securities or Additional Securities
in an offer registered under the Securities Act as provided in the Registration
Rights Agreement (herein called “Exchange Securities”).  The Initial Securities, Additional Securities
and Exchange Securities are treated as a single class of securities under the
Indenture and shall be secured by first and second priority Liens and security
interests, subject to Permitted Liens, in the Collateral.  The Indenture imposes

 

A-4

 

certain limitations on the incurrence of
indebtedness, the making of restricted payments, the sale of assets and
subsidiary stock, the incurrence of certain liens, sale-leaseback transactions,
the sale of capital stock of restricted subsidiaries, the making of payments
for consents, the entering into of agreements that restrict distribution from
restricted subsidiaries and the consummation of mergers and
consolidations.  The Indenture also
imposes requirements with respect to the provision of financial information and
the provision of guarantees of the Securities by certain subsidiaries.

 

To guarantee the due and
punctual payment of the principal, premium, if any, and interest (including
post-filing or post-petition interest) on the Securities and all other amounts
payable by the Company under the Indenture, the Securities, the Registration
Rights Agreement, the Collateral Documents and the Intercreditor Agreement when
and as the same shall be due and payable, whether at maturity, by acceleration
or otherwise, according to the terms of the Securities and the Indenture, the
Subsidiary Guarantors have unconditionally guaranteed (and future guarantors,
together with the Subsidiary Guarantors, will unconditionally Guarantee),
jointly and severally, such obligations on a senior, secured basis pursuant to
the terms of the Indenture.

 

5.   Redemption

 

Except as set forth below,
the Securities will not be redeemable at the option of the Company prior to
March 15, 2007.  On and after such date,
the Securities will be redeemable, at the Company’s option, in whole or in
part, at any time upon not less than 30 nor more than 60 days prior notice
mailed by first-class mail to each Holder’s registered address, at the
following redemption prices (expressed in percentages of principal amount),
plus accrued and unpaid interest (including Additional Interest) to the
applicable 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):

 

If redeemed during the
12-month period commencing on March 15 of the years set forth below:

 

	
  Period

  	
   

  	
  Redemption

  Price

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  2007

  	
   

  	
  107.313

  	
  %

  
	
  2008

  	
   

  	
  103.656

  	
  %

  
	
  2009 and thereafter

  	
   

  	
  100.000

  	
  %

  

 

In addition, at any time and
from time to time prior to March 15, 2007, the Company may redeem in the
aggregate up to 35% of the original principal amount of the Securities with the
Net Cash Proceeds of one or more Public Equity Offerings by the Company or with
the Net Cash Proceeds of one or more Public Equity Offerings by Holdings that
are contributed to the Company as common equity capital at a redemption price
(expressed as a percentage of principal amount) of 109.750% of the principal
amount thereof, plus accrued and

 

A-5

 

unpaid interest
(including Additional Interest), if any, 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); provided,
that:

 

(1)           there is a Public Market at the
time of such redemption;

 

(2)           at least 65% of the original
principal amount of the Securities must remain outstanding after each such
redemption; and

 

(3)           each such redemption occurs
within 60 days of the date of closing of such Public Equity Offering.

 

If the optional redemption date
is on or after an interest record date and on or before the related interest
payment date, the accrued and unpaid interest (including Additional Interest),
if any, will be paid on the optional redemption date to the Person in whose
name the Security is registered at the close of business on such record date,
and no additional interest will be payable to Holders whose Securities will be
subject to redemption by the Company.

 

In the case of any partial
redemption, selection of the Securities for redemption will be made by the
Trustee in compliance with the requirements of the principal national
securities exchange, if any, on which the Securities are listed or, if the
Securities are not listed, then on a pro rata basis, by lot or by such other
method as the Trustee in its sole discretion shall deem to be fair and
appropriate, although no Security of $1,000 in original principal amount or
less will be redeemed in part.  If any
Security is to be redeemed in part only, the notice of redemption relating to
such Security shall state the portion of the principal amount thereof to be
redeemed. A new Security in principal amount equal to the unredeemed portion
thereof will be issued in the name of the Holder thereof upon cancellation of
the original Security.  On and after the
redemption date, interest will cease to accrue on Securities or portions
thereof called for redemption as long as the Company has deposited with the
Paying Agent funds in satisfaction of the applicable redemption price pursuant
to the Indenture.

 

Prior to the mailing of any
notice of redemption of the Securities, the Company shall deliver to the
Trustee an Officers’ Certificate stating that the Company is entitled to effect
such redemption, accompanied by an opinion of counsel satisfactory to the
Trustee, acting reasonably, that the conditions precedent to the right of
redemption have occurred.  Any such
notice to the Trustee may be cancelled at any time prior to notice of such
redemption being mailed to any Holder and shall thereby be void and of no
effect.  The Company will be bound to
redeem the Securities on the date fixed for redemption.

 

The Company is not required
to make any mandatory redemption payments or sinking fund payments with respect
to the Securities.

 

6.   Optional Tax Redemption

 

If any taxes, assessments or
other governmental charges are imposed by any jurisdiction where the Company, a
Subsidiary Guarantor or a successor of either (a “Payor”) is organized
or otherwise considered by a taxing authority to be a resident for tax purposes,
any jurisdiction from or through which the Payor makes a payment on the
Securities, or, in each case,

 

A-6

 

any political organization or governmental
authority thereof or therein having the power to tax (the “Relevant Tax
Jurisdiction”) in respect of any payments under the Securities, the Payor
will pay to each Holder of a Security, to the extent it may lawfully do so,
such additional amounts (“Additional Amounts”) as may be necessary in
order that the net amounts paid to such Holder will be not less than the amount
specified in such Security to which such Holder is entitled; provided, however,
the Payor will not be required to make any payment of Additional Amounts for or
on account of:

 

(1)           any tax, assessment or other
governmental charge which would not have been imposed but for (A) the existence
of any present or former connection between such Holder (or between a
fiduciary, settlor, beneficiary, member or shareholder of, or possessor of a
power over, such Holder, if such Holder is an estate, trust, partnership,
limited liability company or corporation) and the Relevant Tax Jurisdiction
other than solely by the holding of Securities or by the receipt of principal
or interest in respect of the Securities (including, without limitation, such
Holder (or such fiduciary, settlor, beneficiary, member, shareholder or
possessor) being or having been a citizen or resident thereof or being or
having been present or engaged in trade or business therein or having or having
had a permanent establishment therein) or (B) the presentation of a Security
(where presentation is required) for payment on a date more than 30 days after
(x) the date on which such payment became due and payable or (y) the date on
which payment thereof is duly provided for and notice of the availability of
the funds has been given, whichever occurs later (in either case (x) or (y),
except to the extent that the Holder would have been entitled to Additional
Amounts had the Security been presented during such 30-day period);

 

(2)           any estate,
inheritance, gift, sales, transfer, personal property or similar tax,
assessment or other governmental charge;

 

(3)           any tax, assessment or other
governmental charge that is imposed or withheld by reason of the failure by the
Holder or the beneficial owner of the Security to comply with a reasonable and
timely request of the Payor addressed to the Holder to provide information,
documents or other evidence concerning the nationality, residence or identity
of the Holder or such beneficial owner which is required by a statute, treaty,
regulation or administrative practice of the taxing jurisdiction as a
precondition to exemption from all or part of such tax, assessment or other
governmental charge; or

 

(4)           any
combination of the above;

 

nor will Additional Amounts be paid with
respect to any payment of the principal of, or any premium or interest
(including Additional Interest) on, any Security to any Holder who is a
fiduciary or partnership or limited liability company or other than the sole
beneficial owner of such payment to the extent that a beneficiary or settlor
with respect to such fiduciary or a member of such partnership, limited
liability company or beneficial owner would not have been entitled to such
Additional Amounts had it been the Holder of such Security.

 

A-7

 

The
Payor will provide the Trustee with the official acknowledgment of the Relevant
Tax Authority (or, if such acknowledgment is not available, a certified copy
thereof) evidencing the payment of the withholding taxes by the Payor.  Copies of such documentation will be made
available to the Holders of the Securities or the Paying Agent, as applicable,
upon request therefor.

 

The
Company and the Subsidiary Guarantors will pay any present or future stamp,
court or documentary taxes, or any other excise or property taxes, charges or
similar levies which arise in any jurisdiction from the execution, delivery or
registration of the Securities or any other document or instrument referred to
therein (other than a transfer of the Securities), or the receipt of any
payments with respect to the Securities, excluding any such taxes, charges or
similar levies imposed by any jurisdiction outside the United States of America
or Canada or any jurisdiction in which a paying agent is located, other than those
resulting from, or required to be paid in connection with, the enforcement of
the Securities or any other such document or instrument following the
occurrence of any Event of Default with respect to the Securities.

 

All references in the
Indenture to principal of, premium, if any, and interest on the Securities will
include any Additional Interest and any Additional Amounts payable by the Payor
in respect of such principal, such premium, if any, and such interest.

 

The Payor will be entitled
to redeem all, but not less than all, of the Securities if as a result of any
change in or amendment to the laws, regulations or rulings of any Relevant Tax
Jurisdiction or any change in the official application or interpretation of
such laws, regulations or rulings, or any change in the official application or
interpretation of, or any execution of or amendment to, any treaty or treaties
affecting taxation to which such Relevant Tax Jurisdiction is a party (a “Change
in Tax Law”) the Payor is or would be required on the next succeeding
interest payment date to pay Additional Amounts with respect to the Securities
as described under Section 5.9(a) of the Indenture and the Payor delivers to
the Trustee an Officers’ Certificate stating that the payment of such Additional
Amounts cannot be avoided by the use of any reasonable measures available to
the Payor and that the Payor is entitled to redeem the Securities pursuant to
their terms.  The Change in Tax Law must
become effective on or after the Issue Date. 
Further, the Payor must deliver to the Trustee at least 30 days before
the redemption date an opinion of counsel of recognized standing to the effect
that the Payor has or will become obligated to pay Additional Amounts as a
result of such Change in Tax Law.  The
Payor must also provide the Holders with notice of the intended redemption at
least 30 days and no more than 60 days before the redemption date and shall
comply with all provisions of Article V of the Indenture.  The redemption price will equal the principal
amount of the Securities plus accrued and unpaid interest thereon (including
Additional Interest), if any to the redemption date, premium, if any, and
Additional Amounts, if any, then due and which otherwise would be payable.

 

7.   Repurchase Provisions

 

If a Change of Control
occurs, unless the Company has exercised its right to redeem all of the
Securities as described under paragraph 5 of the Securities, each Holder will
have the right to require the Company to repurchase from each Holder all or any
part (equal to $1,000 or an integral multiple thereof) of such Holder’s
Securities at a purchase price in cash equal to 101% of the principal amount
thereof, plus accrued and unpaid interest, if any, to the

 

A-8

 

date of purchase
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date) as provided in, and
subject to the terms of, the Indenture.

 

8.   Denominations; Transfer; Exchange

 

The Securities are in
registered form without coupons in denominations of principal amount of $1,000
and whole multiples of $1,000.  A Holder
may transfer or exchange Securities in accordance with the Indenture.  The Registrar may require a Holder, among
other things, to furnish appropriate endorsements or transfer documents and to
pay a sum sufficient to cover any taxes and fees required by law or permitted
by the Indenture.  The Registrar need not
register the transfer of or exchange of any Security (A) for a period beginning
(1) 15 days before the mailing of a notice of an offer to repurchase or redeem
Securities and ending at the close of business on the day of such mailing or
(2) 15 days before an interest payment date and ending on such interest payment
date or (B) called for redemption, except the unredeemed portion of any
Security being redeemed in part.

 

9.   Persons Deemed Owners

 

The registered Holder of
this Security may be treated as the owner of it for all purposes.

 

10.   Unclaimed Money

 

If money for the payment of
principal, premium, if any, or interest remains unclaimed for two years, the
Trustee or Paying Agent shall pay the money back to the Company at its request
unless an abandoned property law designates another Person.  After any such payment, Holders entitled to
the money must look only to the Company for payment as general creditors unless
an abandoned property law designates another person and not to the Trustee for
payment.

 

11.   Defeasance

 

Subject to certain
exceptions and conditions set forth in the Indenture, the Company at any time
may terminate some or all of its obligations under the Securities, the
Indenture, the Collateral Documents and the Intercreditor Agreement if the
Company deposits with the Trustee money or U.S. Government Obligations for the
payment of principal, premium, if any, and interest on the Securities to
redemption or maturity, as the case may be.

 

12.   Amendment, Supplement, Waiver

 

Subject to certain
exceptions set forth in the Indenture, (i) the Indenture, the Securities, the
Subsidiary Guarantees, the Collateral Documents or the Intercreditor Agreement
may be amended or supplemented by the Company, Subsidiary Guarantors and
Trustee with the written consent of the Holders of at least a majority in
principal amount of the then outstanding Securities and (ii) any default (other
than with respect to nonpayment or in respect of a provision that cannot be
amended without the written consent of each Securityholder affected) or
noncompliance with any provision may be waived with the written consent of the
Holders of a

 

A-9

 

majority in principal
amount of the then outstanding Securities. 
Subject to certain exceptions set forth in the Indenture, without the
consent of any Securityholder, the Company, Subsidiary Guarantors and the
Trustee may amend or supplement the Indenture, the Securities, the Subsidiary
Guarantees, the Collateral Documents or the Intercreditor Agreement to cure any
ambiguity, omission, defect or inconsistency, to comply with Article IV or
Article X of the Indenture, to provide for uncertificated Securities in
addition to, or in place of, certificated Securities, to add Guarantees with
respect to the Securities, to release Subsidiary Guarantors upon their
designation as Unrestricted Subsidiaries or otherwise in accordance with the
Indenture, to secure the Securities, to release Liens in favor of the
Collateral Agent in the Collateral as provided under the collateral release
provisions, to add additional covenants of the Company, to surrender rights and
powers conferred on the Company, to comply with any requirement of the SEC in
connection with qualifying the Indenture under the Act, to make any change that
does not adversely affect the rights of any Securityholder or, in the case of
the Intercreditor Agreement, that does not adversely affect the rights of any
Securityholder in any material respect, or to provide for the issuance of
Exchange Securities.

 

13.   Defaults and Remedies

 

Under the Indenture, Events
of Default include (each of which is described in greater detail in the
Indenture) (i) default for 30 days in payment of interest, Additional Interest
or Additional Amounts when due on the Securities; (ii) default in payment of
principal or premium, if any, on the Securities at Stated Maturity, upon
required repurchase or upon optional redemption pursuant to paragraph 5 of the
Securities, upon declaration or otherwise; (iii) the failure by the Company or
any Subsidiary Guarantor to comply with its obligations under Article IV or
Section 10.2 of the Indenture; (iv) failure by the Company to comply for 30
days after written notice with any of its obligations under the covenants
described under Sections 3.2 through 3.12 inclusive, Section 3.16 or Section
3.19 of the Indenture (in each case, other than a failure to purchase
Securities when required under the Indenture, which failure shall constitute an
Event of Default under clause (ii) above) or failure by the Company or any
Subsidiary Guarantor to comply for 30 days after written notice with any of its
obligations under the Collateral Documents; (v) the failure by the Company to
comply for 60 days after written notice with its other agreements contained in
the Indenture or under the Securities (other than those referred to in clause
(i), (ii), (iii) or (iv) above); (vi) default 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 the Company or any of its
Restricted Subsidiaries (or the payment of which is guaranteed by the Company
or any of its Restricted Subsidiaries), other than Indebtedness owed to the
Company or a Restricted Subsidiary, whether such Indebtedness or guarantee now
exists, or is created after the date of the Indenture, which default (a) is
caused by a failure to pay principal of, or interest or premium, if any, on
such Indebtedness at maturity prior to the expiration of the grace period
provided in such Indebtedness (“payment default”) or (b) results in the
acceleration of such Indebtedness prior to its maturity (the “cross acceleration
provision”) and, in each case, the principal amount of any 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 $5.0 million or more; (vii) certain events of
bankruptcy, insolvency or reorganization of the Company or a Significant
Subsidiary or group of Restricted Subsidiaries that, taken together (as of the
latest audited consolidated financial statements for the Company and its
Restricted Subsidiaries), would constitute a

 

A-10

 

Significant Subsidiary (the “bankruptcy
provisions”); (viii) failure by the Company or any Significant Subsidiary
or group of Restricted Subsidiaries that, taken together (as of the latest
audited consolidated financial statements for the Company and its Restricted
Subsidiaries), would constitute a Significant Subsidiary to pay final judgments
aggregating in excess of $5.0 million (net of any amounts that a reputable and
creditworthy insurance company has acknowledged liability for in writing),
which judgments are not paid, discharged, waived or stayed for a period of 60
days (the “judgment default provision”); (ix) any Subsidiary Guarantee
or Collateral Document ceases to be in full force and effect (except as
contemplated by the terms of the Indenture) or is declared null and void in a
judicial proceeding or any of Holdings, the Company or any Subsidiary Guarantor
denies or disaffirms its obligations under the Indenture, any Subsidiary
Guarantee, any Collateral Document to which it is a party or the Intercreditor
Agreement; or (x) with respect to any Collateral having a fair market value in
excess of $5.0 million, individually or in the aggregate, (A) the security
interest under the Collateral Documents, at any time, ceases to be in full
force and effect for any reason other than in accordance with their terms and
the terms of the Indenture and other than the satisfaction in full of all
obligations under the Indenture and discharge of the Indenture, (B) any
security interest created thereunder or under the Indenture is declared invalid
or unenforceable or (C) Holdings, the Company or any Subsidiary Guarantor
asserts, in any pleading in any court of competent jurisdiction, that any such security
interest is invalid or unenforceable. 
However, a default under clause (iv) or (v) will not constitute an Event
of Default until the Trustee or the Holders of at least 25% in principal amount
of the outstanding Securities notify the Company of the Default and the Company
does not cure such Default within the time specified in clause (iv) or (v)
hereof after receipt of such notice.

 

If an Event of Default
(other than an Event of Default described in (vii) hereof) occurs and is
continuing, the Trustee by notice to the Company, or the Holders of at least
25% in principal amount of the outstanding Securities by notice to the Company
and the Trustee, may, and the Trustee at the request of such Holders shall,
declare all the Securities to be due and payable immediately.  If an Event of Default described in clause
(vii) hereof occurs and is continuing, the principal of, premium, if any, and
accrued and unpaid interest on all the Securities will become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holders.

 

Securityholders may not
enforce the Indenture or the Securities except as provided in the
Indenture.  The Trustee may refuse to
enforce the Indenture or the Securities unless it receives reasonable indemnity
or security.  Subject to certain
limitations, Holders of a majority in principal amount of the Securities may
direct the Trustee in its exercise of any trust or power.  The Trustee may withhold from Securityholders
notice of any continuing Default or Event of Default (except a Default or Event
of Default in payment of principal or interest) if it determines that
withholding notice is in their interest.

 

14.   Trustee Dealings with the Company

 

Subject to certain
limitations set forth in the Indenture, the Trustee under the Indenture, in its
individual or any other capacity, may become the owner or pledgee of Securities
and may otherwise deal with and collect obligations owed to it by the Company
or their

 

A-11

 

Affiliates and may otherwise deal with the
Company or its Affiliates with the same rights it would have if it were not
Trustee.

 

15.   No Recourse Against
Others

 

An incorporator, director,
officer, employee or stockholder of each of the Company or any Subsidiary
Guarantor, solely by reason of this status, shall not have any liability for
any obligations of the Company or any Subsidiary Guarantor under the
Securities, the Indenture, the Collateral Documents, the Intercreditor
Agreement, any Subsidiary Guarantees or for any claim based on, in respect of
or by reason of such obligations or their creation.  By accepting a Security, each Securityholder
waives and releases all such liability. 
The waiver and release are part of the consideration for the issue of
the Securities.

 

16.   Authentication

 

This Security shall not be
valid until an authorized officer of the Trustee (or an authenticating agent
acting on its behalf) manually signs the certificate of authentication on the
other side of this Security.

 

17.   Abbreviations

 

Customary abbreviations may
be used in the name of a Securityholder or an assignee, such as TEN COM (=
tenants in common), TEN ENT (= tenants by the entirety), JT TEN (= joint
tenants with rights of survivorship and not as tenants in common), CUST (=
custodian) and U/G/M/A (= Uniform Gift to Minors Act).

 

18.   CUSIP, Common Code and ISIN Numbers

 

The Company has caused
CUSIP, Common Code and ISIN numbers, if applicable, to be printed on the
Securities and has directed the Trustee to use CUSIP, Common Code and ISIN
numbers, if applicable, in notices of redemption or purchase as a convenience
to Securityholders.  No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption or purchase and reliance may be placed
only on the other identification numbers placed thereon.

 

19.   Governing Law

 

This Security shall be
governed by, and construed in accordance with, the laws of the State of New
York.

 

The Company will furnish to
any Securityholder upon written request and without charge to the
Securityholder a copy of the Indenture, which has in it the text of this
Security in larger type.  Requests may be
made to:

 

Cellu Tissue Holdings Inc.

3440 Francis Road, Suite C

Alpharetta, Georgia 30004

Attention:  Dianne M. Scheu

 

A-12

 

ASSIGNMENT
FORM

 

To assign this Security,
fill in the form below:

 

I or we assign and transfer
this Security to:

 

 

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

 

 

(Insert
assignee’s social security or tax I.D. No.)

 

and irrevocably
appoint
                    
agent to transfer this Security on the books of the Company.  The agent may substitute another to act for
him.

 

 

	
  Date:

  	
   

  	
   

  	
  Your Signature:

  	
   

  	
   

  
	
   

  
	
  Signature Guarantee:

  	
   

  
	
   

  	
  (Signature
  must be guaranteed)

  
	
   

  
	
   

  
	
  Sign exactly as your name
  appears on the other side of this Security.

  
							

 

The signature(s) should be guaranteed by an
eligible guarantor institution (banks, stockbrokers, savings and loan
associations and credit unions with membership in an approved signature
guarantee medallion program), pursuant to S.E.C. Rule 17Ad-15.

 

In connection with any
transfer or exchange of any of the Securities evidenced by this certificate
occurring prior to the date that is two years after the later of the date of
original issuance of such Securities and the last date, if any, on which such
Securities were owned by the Company or any Affiliate of the Company, the
undersigned confirms that such Securities are being:

 

CHECK ONE BOX BELOW:

 

	
   

  	
  (1)

  	
  o

  	
  acquired for the
  undersigned’s own account, without transfer; or

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (2)

  	
  o

  	
  transferred to the
  Company; or

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (3)

  	
  o

  	
  transferred pursuant to
  and in compliance with Rule 144A under the Securities Act of 1933, as amended
  (the “Securities Act”); or

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (4)

  	
  o

  	
  transferred pursuant to an
  effective registration statement under the Securities Act; or

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (5)

  	
  o

  	
  transferred pursuant to
  and in compliance with Regulation S under the Securities Act; or

  

 

A-13

 

	
   

  	
  (6)

  	
  o

  	
  transferred to an
  institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3)
  or (7) under the Securities Act), that has furnished to the Trustee a signed
  letter containing certain representations and agreements (the form of which
  letter appears as Section 2.8 of the Indenture); or

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (7)

  	
  o

  	
  transferred pursuant to
  another available exemption from the registration requirements of the
  Securities Act of 1933, as amended.

  

 

Unless one of the boxes is checked, the
Trustee will refuse to register any of the Securities evidenced by this
certificate in the name of any person other than the registered Holder thereof;
provided, however, that if box
(5), (6) or (7) is checked, the Company may require, prior to registering any
such transfer of the Securities, in its sole discretion, such legal opinions,
certifications and other information as the Company may reasonably request to
confirm that such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act
of 1933, as amended, such as the exemption provided by Rule 144 under such Act.

 

	
   

  	
   

  	
   

  
	
   

  	
  Signature

  
	
  Signature Guarantee:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (Signature must be
  guaranteed)

  	
  Signature

  
				

 

The signature(s) should be guaranteed by an
eligible guarantor institution (banks, stockbrokers, savings and loan
associations and credit unions with membership in an approved signature
guarantee medallion program), pursuant to S.E.C. Rule 17Ad-15.

 

TO BE COMPLETED BY PURCHASER IF BOX (1) OR
(3) ABOVE IS CHECKED.

 

The undersigned represents
and warrants that it is purchasing this Security for its own account or an
account with respect to which it exercises sole investment discretion and that
it and any such account is a “qualified institutional buyer” within the meaning
of Rule 144A under the Securities Act of 1933, as amended, and is aware that
the sale to it is being made in reliance on Rule 144A and acknowledges that it
has received such information regarding the Company as the undersigned has
requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon the
undersigned’s foregoing representations in order to claim the exemption from
registration provided by Rule 144A.

 

	
   

  	
   

  	
   

  
	
   

  	
  Dated:

  

 

A-14

 

[TO
BE ATTACHED TO GLOBAL SECURITIES]

 

SCHEDULE
OF INCREASES OR DECREASES IN GLOBAL SECURITY

 

The following increases or
decreases in this Global Security have been made:

 

	
  Date
  of

  Exchange

  	
   

  	
  Amount of decrease in Principal

  Amount of this Global Security

  	
   

  	
  Amount of increase in Principal

  Amount of this Global Security

  	
   

  	
  Principal Amount of this Global

  Security following such

  decrease or increase

  	
   

  	
  Signature of authorized

  signatory of Trustee or

  Securities Custodian

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

A-15

 

OPTION
OF HOLDER TO ELECT PURCHASE

 

If you elect to have this
Security purchased by the Company pursuant to Section 3.5 or 3.10 of the
Indenture, check either box:

 

	
   

  	
  o

  	
   

  	
  o

  	
   

  
	
   

  	
  3.5

  	
   

  	
  3.10

  	
   

  

 

If you want to elect to have
only part of this Security purchased by the Company pursuant to Section 3.5 or
Section 3.10 of the Indenture, state the amount in principal amount (must be
integral multiple of $1,000): 
$                                                                                      
and specify the denomination or denominations (which shall not be less than the
minimum authorized denomination) of the Securities to be issued to the Holder
for the portion of the within Security not being repurchased (in the absence of
any such specification, one such Security will be issued for the portion not
being repurchased):                                   .

 

	
  Date:

  	
   

  	
   

  	
  Your Signature 

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  (Sign exactly as your name
  appears on the other side of the Security)

  
	
   

  
	
  Signature Guarantee: 

  	
   

  
	
   

  	
  (Signature must be
  guaranteed)

  
						

 

The signature(s) should be guaranteed by an
eligible guarantor institution (banks, stockbrokers, savings and loan
associations and credit unions with membership in an approved signature
guarantee medallion program), pursuant to S.E.C. Rule 17Ad-15.

 

A-16

 

SUBSIDIARY
GUARANTEE

 

Pursuant to the Indenture
(the “Indenture”) dated as of March 12, 2004  among Cellu Tissue Holdings, Inc., the Subsidiary
Guarantors party thereto (each a “Subsidiary Guarantor” and collectively
the “Subsidiary Guarantors”) and The Bank of New York, as trustee (the “Trustee”),
each Subsidiary Guarantor, subject to the provisions of Article X of the
Indenture, hereby fully, unconditionally and irrevocably guarantees, as primary
obligor and not merely as surety, jointly and severally with each other
Subsidiary Guarantor, to each Holder of the Securities, to the extent lawful,
and the Trustee the full and punctual payment when due, whether at maturity, by
acceleration, by redemption or otherwise, of the principal of, premium, if any,
Additional Amounts, if any, and interest (including Additional Interest) on the
Securities and all other obligations and liabilities of the Company under the
Indenture (including without limitation interest (including Additional
Interest) accruing after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding, relating to
the Company or any Subsidiary Guarantor whether or not a claim for post-filing
or post-petition interest is allowed in such proceeding and the obligations
under Section 7.7 of the Indenture), the Registration Rights Agreement,
the Collateral Documents and the Intercreditor Agreement (all the foregoing
being hereinafter collectively called the “Obligations”).  Each Subsidiary Guarantor agrees that the
Obligations will rank equally in right of payment with other Indebtedness of
such Subsidiary Guarantor, except to the extent such other Indebtedness is
subordinate to the Obligations.  Each
Subsidiary Guarantor further agrees (to the extent permitted by law) that the
Obligations may be extended or renewed, in whole or in part, without notice or
further assent from it, and that it will remain bound under this Subsidiary
Guarantee notwithstanding any extension or renewal of any Obligation.

 

Each Subsidiary Guarantor
waives presentation to, demand of payment from and protest to the Company of
any of the Obligations and also waives notice of protest for nonpayment.  Each Subsidiary Guarantor waives notice of
any default under the Securities or the Obligations.

 

Each Subsidiary Guarantor
further agrees that its Subsidiary Guarantee herein constitutes a Guarantee of
payment when due (and not a Guarantee of collection) and waives any right to
require that any resort be had by any Holder to any security held for payment
of the Obligations.

 

Except as set forth in Section
10.2 of the Indenture, the obligations of each Subsidiary Guarantor
hereunder shall not be subject to any reduction, limitation, impairment or
termination for any reason (other than payment of the Obligations in full),
including any claim of waiver, release, surrender, alteration or compromise,
and shall not be subject to any defense of setoff, counterclaim, recoupment or
termination whatsoever or by reason of the invalidity, illegality or
unenforceability of the Obligations or otherwise.  Without limiting the generality of the foregoing,
the obligations of each Subsidiary Guarantor herein shall not be discharged or
impaired or otherwise affected by (a) the failure of any Holder to assert any
claim or demand or to enforce any right or remedy against the Company or any
other person under the Indenture, the Securities or any other agreement or
otherwise; (b) any extension or renewal of any thereof; (c) any rescission,
waiver, amendment or modification of any of the terms or provisions of the
Indenture, the Securities or any other agreement; (d) the release of any
security held by any

 

A-17

 

Holder or the Collateral Agent for the
Obligations or any of them; (e) the failure of any Holder to exercise any right
or remedy against any other Subsidiary Guarantor; (f) any change in the ownership
of the Company; (g) any default, failure or delay, willful or otherwise, in the
performance of the Obligations, or (h) any other act or thing or omission or
delay to do any other act or thing which may or might in any manner or to any
extent vary the risk of any Subsidiary Guarantor or would otherwise operate as
a discharge of such Subsidiary Guarantor as a matter of law or equity.

 

Each Subsidiary Guarantor
agrees that its Subsidiary Guarantee herein shall remain in full force and
effect until payment in full of all the Obligations or such Subsidiary
Guarantor is released from its Subsidiary Guarantee upon the merger or the sale
of all the Capital Stock or assets of the Subsidiary Guarantor or otherwise in
compliance with Section 10.2 or Article VIII of the
Indenture.  Each Subsidiary Guarantor
further agrees that its Subsidiary Guarantee herein shall continue to be
effective or be reinstated, as the case may be, if at any time payment, or any
part thereof, of principal of, premium, if any, or interest on any of the
Obligations is rescinded or must otherwise be restored by any Holder upon the
bankruptcy or reorganization of the Company or otherwise.

 

In furtherance of the
foregoing and not in limitation of any other right which any Holder has at law
or in equity against any Subsidiary Guarantor by virtue hereof, upon the
failure of the Company to pay any of the Obligations when and as the same shall
become due, whether at maturity, by acceleration, by redemption or otherwise,
each Subsidiary Guarantor hereby promises to and will, upon receipt of written
demand by the Trustee, forthwith pay, or cause to be paid, in cash, to the
Trustee or the Trustee on behalf of the Holders an amount equal to the sum of
(i) the unpaid amount of such Obligations then due and owing and (ii) accrued
and unpaid interest (including Additional Interest) on such Obligations then
due and owing (but only to the extent not prohibited by law).

 

Each Subsidiary Guarantor
further agrees that, as between such Subsidiary Guarantor, on the one hand, and
the Holders, on the other hand, (x) the maturity of the Obligations guaranteed
hereby may be accelerated as provided in the Indenture for the purposes of its
Subsidiary Guarantee herein, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the Obligations
guaranteed hereby and (y) in the event of any such declaration of acceleration
of such Obligations, such Obligations (whether or not due and payable) shall
forthwith become due and payable by the Subsidiary Guarantor for the purposes
of this Subsidiary Guarantee.

 

Each Subsidiary Guarantor
also agrees to pay any and all reasonable costs and expenses (including
reasonable attorneys’ fees) incurred by the Trustee or the Holders in enforcing
any rights under this Subsidiary Guarantee.

 

A-18

 

	
   

  	
  CELLU
  TISSUE CORPORATION — NATURAL

  DAM

  
	
   

  	
  CELLU TISSUE CORPORATION —
  NEENAH

  
	
   

  	
  CELLU TISSUE LLC

  
	
   

  	
  INTERLAKE
  ACQUISITION CORPORATION

  LIMITED

  
	
   

  	
  MENOMINEE ACQUISITION
  CORPORATION

  
	
   

  	
  VAN PAPER COMPANY

  
	
   

  	
  VAN
  TIMBER COMPANY,

  as Subsidiary Guarantors

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  COASTAL
  PAPER COMPANY,

  as a Subsidiary Guarantor

  
	
   

  	
   

  
	
   

  	
  By:  Van Paper Company, its managing partner

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
						

 

A-19

 

EXHIBIT B

 

[FORM
OF FACE OF SERIES B NOTE]

 

[Depository
Legend, if applicable]

 

	
  No.
  [       ]

  	
  Principal Amount
  $[                    ]

  
	
   

  	
  CUSIP NO. 

  

 

CELLU
TISSUE HOLDINGS, INC.

 

93⁄4%
Senior Secured Note, Series B, due 2010

 

Cellu Tissue Holdings Inc.,
a Delaware corporation, promises to pay to [Cede & Co.],* or its registered
assigns, the principal sum of
[                           ]
Dollars[, as revised by the Schedule of Increases and
Decreases in Global Security attached hereto],* on March 15, 2010.

 

Interest Payment Dates:  March 15 and September 15

 

Record Dates:  March 1 and September 1

 

Additional provisions of
this Security are set forth on the other side of this Security.

 

	
   

  	
  CELLU TISSUE HOLDINGS,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

*              Insert
in Global Securities only

 

B-1

 

	
  TRUSTEE’S CERTIFICATE OF

  AUTHENTICATION

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  THE BANK OF NEW YORK,

  	
   

  	
   

  
	
  as Trustee, certifies

  	
   

  	
   

  
	
  that this is one of

  	
   

  	
   

  
	
  the Securities referred

  	
   

  	
   

  
	
  to in the
  Indenture.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Authorized Officer

  	
   

  	
  Date:

  	
   

  	
  , 2004

  	
   

  
							

 

B-2

 

[FORM
OF REVERSE SIDE OF SERIES B NOTE]

CELLU TISSUE HOLDINGS, INC.

 

93⁄4
% Senior Secured Note, Series B, due 2010

 

1.   Interest

 

Cellu Tissue Holdings Inc.,
a Delaware corporation (such corporation, and its successors and assigns under
the Indenture hereinafter referred to, being herein called the “Company”),
promises to pay interest on the principal amount of this Security at the rate
per annum shown above.

 

The Company will pay
interest semiannually on March 15 and September 15 of each year commencing
September 15, 2004.  Interest on the
Securities will accrue from the most recent date to which interest has been
paid on the Securities or, if no interest has been paid, from March 12,
2004.  The Company shall pay interest on
overdue principal, and on overdue premium, if any (plus interest on such
interest to the extent lawful), at the rate borne by the Securities to the
extent lawful.  Interest will be computed
on the basis of a 360-day year of twelve 30-day months.

 

2.   Method of Payment

 

By no later than 10:00 a.m.
(New York City time) on the date on which any principal of, premium, if any, or
interest on any Security is due and payable, the Company shall irrevocably
deposit with the Trustee or the Paying Agent money sufficient to pay such
principal, premium, if any, and/or interest. 
The Company will pay interest (except Defaulted Interest) to the Persons
who are registered Holders of Securities at the close of business on the March
1 or September 1 next preceding the interest payment date even if Securities
are cancelled, repurchased or redeemed after the record date and on or before
the interest payment date.  Holders must
surrender Securities to a Paying Agent to collect principal payments.  The Company will pay principal, premium, if
any, and interest in money of the United States that at the time of payment is
legal tender for payment of public and private debts. Payments in respect of
Securities represented by a Global Security (including principal, premium, if
any, and interest) will be made by the transfer of immediately available funds
to the accounts specified by The Depository Trust Company or any successor
depository. The Company will make all payments in respect of a Definitive
Security (including principal, premium, if any, and interest) by mailing a
check to the registered address of each Holder thereof; provided, however, that payments on the
Securities may also be made, in the case of a Holder of at least $1,000,000
aggregate principal amount of Securities, by wire transfer to a U.S. dollar
account maintained by the payee with a bank in the United States if such Holder
elects payment by wire transfer by giving written notice to the Trustee or the
Paying Agent to such effect designating such account no later than 15 days
immediately preceding the relevant due date for payment (or such other date as
the Trustee may accept in its discretion).

 

B-3

 

3.   Paying Agent and Registrar

 

Initially, The Bank of New
York (the “Trustee”) will act as Trustee, Paying Agent and
Registrar.  The Company may appoint and
change any Paying Agent, Registrar or co-registrar without notice to any
Securityholder.  The Company or any of
its domestically organized, wholly owned Subsidiaries may act as Paying Agent,
Registrar or co-registrar.

 

4.   Indenture

 

The Company issued the
Securities under an Indenture dated as of March 12, 2004 (as it may be amended
or supplemented from time to time in accordance with the terms thereof, the “Indenture”),
among the Company, the Subsidiary Guarantors and the Trustee.  The terms of the Securities include those
stated in the Indenture and those made part of the Indenture by reference to
the Trust Indenture Act of 1939 (15 U.S.C. §§ 77aaa-77bbbb) as in effect
on the date of the Indenture (the “Act”).  Capitalized terms used herein and not defined
herein have the meanings ascribed thereto in the Indenture.  The Securities are subject to all terms and
provisions of the Indenture, and Securityholders are
referred to the Indenture and the Act for a statement of those terms.

 

The Securities are secured
senior obligations of the Company.  The
aggregate principal amount of Securities that may be authenticated and
delivered under the Indenture is unlimited, provided
that at least the Net Cash Proceeds from any issuance of Additional Securities
are invested in Additional Assets in accordance with the Indenture.  This Security is one of the 93⁄4% Senior
Secured Notes, Series A, due 2010 referred to in the Indenture.  The Securities include (i) $162,000,000
aggregate principal amount of the Company’s 93⁄4% Senior Secured Notes, Series A,
due 2010 issued under the Indenture on March 12, 2004 (herein called “Initial
Securities”), (ii) if and when issued, additional 93⁄4% Senior Secured Notes,
Series A, due 2010 or 93⁄4% Senior Secured Notes, Series B, due 2010 of the
Company that may be issued from time to time under the Indenture subsequent to
March 12, 2004 (herein called “Additional Securities”) as provided in Section
2.1(a) of the Indenture and (iii) if and when issued, the Company’s 93⁄4%
Senior Secured Notes, Series B, due 2010 that may be issued from time to time
under the Indenture in exchange for Initial Securities or Additional Securities
in an offer registered under the Securities Act as provided in the Registration
Rights Agreement (herein called “Exchange Securities”).  The Initial Securities, Additional Securities
and Exchange Securities are treated as a single class of securities under the
Indenture and shall be secured by first and second priority Liens and security
interests, subject to Permitted Liens, in the Collateral.  The Indenture imposes certain limitations on
the incurrence of indebtedness, the making of restricted payments, the sale of
assets and subsidiary stock, the incurrence of certain liens, sale-leaseback
transactions, the sale of capital stock of restricted subsidiaries, the making
of payments for consents, the entering into of agreements that restrict
distribution from restricted subsidiaries and the consummation of mergers and
consolidations.  The Indenture also imposes
requirements with respect to the provision of financial information and the
provision of guarantees of the Securities by certain subsidiaries.

 

To guarantee the due and
punctual payment of the principal, premium, if any, and interest (including
post-filing or post-petition interest) on the Securities and all other amounts
payable by the Company under the Indenture, the Securities, the Registration
Rights Agreement,

 

B-4

 

the Collateral Documents and the
Intercreditor Agreement when and as the same shall be due and payable, whether
at maturity, by acceleration or otherwise, according to the terms of the
Securities and the Indenture, the Subsidiary Guarantors have unconditionally
guaranteed (and future guarantors, together with the Subsidiary Guarantors,
will unconditionally Guarantee), jointly and severally, such obligations on a
senior, secured basis pursuant to the terms of the Indenture.

 

5.   Redemption

 

Except as set forth below,
the Securities will not be redeemable at the option of the Company prior to
March 15, 2007.  On and after such date,
the Securities will be redeemable, at the Company’s option, in whole or in
part, at any time upon not less than 30 nor more than 60 days prior notice
mailed by first-class mail to each Holder’s registered address, at the
following redemption prices (expressed in percentages of principal amount),
plus accrued and unpaid interest (including Additional Interest) to the
applicable 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):

 

If redeemed during the
12-month period commencing on March 15 of the years set forth below:

 

	
  Period

  	
   

  	
  Redemption Price

  	
   

  
	
  2007

  	
   

  	
  107.313

  	
  %

  
	
  2008

  	
   

  	
  103.656

  	
  %

  
	
  2009 and thereafter

  	
   

  	
  100.000

  	
  %

  

 

In addition, at any time and
from time to time prior to March 15, 2007, the Company may redeem in the
aggregate up to 35% of the original principal amount of the Securities with the
Net Cash Proceeds of one or more Public Equity Offerings by the Company or with
the Net Cash Proceeds of one or more Public Equity Offerings by Holdings that
are contributed to the Company as common equity capital at a redemption price
(expressed as a percentage of principal amount) of 109.750% of the principal
amount thereof, plus accrued and unpaid interest (including Additional
Interest), if any, 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); provided, that:

 

(1)           there is a Public Market at the
time of such redemption;

 

(2)           at least 65% of the original
principal amount of the Securities must remain outstanding after each such
redemption; and

 

(3)           each such redemption occurs
within 60 days of the date of closing of such Public Equity Offering.

 

B-5

 

If the optional redemption
date is on or after an interest record date and on or before the related
interest payment date, the accrued and unpaid interest (including Additional
Interest), if any, will be paid on the optional redemption date to the Person
in whose name the Security is registered at the close of business on such
record date, and no additional interest will be payable to Holders whose
Securities will be subject to redemption by the Company.

 

In the case of any partial
redemption, selection of the Securities for redemption will be made by the
Trustee in compliance with the requirements of the principal national
securities exchange, if any, on which the Securities are listed or, if the
Securities are not listed, then on a pro rata basis, by lot or by such other
method as the Trustee in its sole discretion shall deem to be fair and
appropriate, although no Security of $1,000 in original principal amount or
less will be redeemed in part.  If any
Security is to be redeemed in part only, the notice of redemption relating to
such Security shall state the portion of the principal amount thereof to be
redeemed. A new Security in principal amount equal to the unredeemed portion
thereof will be issued in the name of the Holder thereof upon cancellation of
the original Security.  On and after the
redemption date, interest will cease to accrue on Securities or portions
thereof called for redemption as long as the Company has deposited with the
Paying Agent funds in satisfaction of the applicable redemption price pursuant
to the Indenture.

 

Prior to the mailing of any
notice of redemption of the Securities, the Company shall deliver to the
Trustee an Officers’ Certificate stating that the Company is entitled to effect
such redemption, accompanied by an opinion of counsel satisfactory to the
Trustee, acting reasonably, that the conditions precedent to the right of
redemption have occurred.  Any such
notice to the Trustee may be cancelled at any time prior to notice of such
redemption being mailed to any Holder and shall thereby be void and of no
effect.  The Company will be bound to
redeem the Securities on the date fixed for redemption.

 

The Company is not required
to make any mandatory redemption payments or sinking fund payments with respect
to the Securities.

 

6.   Optional Tax Redemption

 

If any taxes, assessments or
other governmental charges are imposed by any jurisdiction where the Company, a
Subsidiary Guarantor or a successor of either (a “Payor”) is organized
or otherwise considered by a taxing authority to be a resident for tax
purposes, any jurisdiction from or through which the Payor makes a payment on
the Securities, or, in each case, any political organization or governmental
authority thereof or therein having the power to tax (the “Relevant Tax
Jurisdiction”) in respect of any payments under the Securities, the Payor
will pay to each Holder of a Security, to the extent it may lawfully do so,
such additional amounts (“Additional Amounts”) as may be necessary in
order that the net amounts paid to such Holder will be not less than the amount
specified in such Security to which such Holder is entitled; provided, however,
the Payor will not be required to make any payment of Additional Amounts for or
on account of:

 

(1)           any tax,
assessment or other governmental charge which would not have been imposed but
for (A) the existence of any present or former connection between such Holder
(or between a fiduciary, settlor, beneficiary, member or shareholder

 

B-6

 

of, or possessor of a power
over, such Holder, if such Holder is an estate, trust, partnership, limited
liability company or corporation) and the Relevant Tax Jurisdiction other than
solely by the holding of Securities or by the receipt of principal or interest
in respect of the Securities (including, without limitation, such Holder (or
such fiduciary, settlor, beneficiary, member, shareholder or possessor) being
or having been a citizen or resident thereof or being or having been present or
engaged in trade or business therein or having or having had a permanent
establishment therein) or (B) the presentation of a Security (where
presentation is required) for payment on a date more than 30 days after (x) the
date on which such payment became due and payable or (y) the date on which
payment thereof is duly provided for and notice of the availability of the
funds has been given, whichever occurs later (in either case (x) or (y), except
to the extent that the Holder would have been entitled to Additional Amounts
had the Security been presented during such 30-day period);

 

(2)           any estate,
inheritance, gift, sales, transfer, personal property or similar tax,
assessment or other governmental charge;

 

(3)           any tax, assessment or other
governmental charge that is imposed or withheld by reason of the failure by the
Holder or the beneficial owner of the Security to comply with a reasonable and
timely request of the Payor addressed to the Holder to provide information,
documents or other evidence concerning the nationality, residence or identity
of the Holder or such beneficial owner which is required by a statute, treaty,
regulation or administrative practice of the taxing jurisdiction as a
precondition to exemption from all or part of such tax, assessment or other
governmental charge; or

 

(4)           any
combination of the above;

 

nor will Additional Amounts be paid with
respect to any payment of the principal of, or any premium or interest
(including Additional Interest) on, any Security to any Holder who is a
fiduciary or partnership or limited liability company or other than the sole
beneficial owner of such payment to the extent that a beneficiary or settlor
with respect to such fiduciary or a member of such partnership, limited
liability company or beneficial owner would not have been entitled to such
Additional Amounts had it been the Holder of such Security.

 

The
Payor will provide the Trustee with the official acknowledgment of the Relevant
Tax Authority (or, if such acknowledgment is not available, a certified copy
thereof) evidencing the payment of the withholding taxes by the Payor.  Copies of such documentation will be made
available to the Holders of the Securities or the Paying Agent, as applicable,
upon request therefor.

 

The
Company and the Subsidiary Guarantors will pay any present or future stamp,
court or documentary taxes, or any other excise or property taxes, charges or
similar levies which arise in any jurisdiction from the execution, delivery or
registration of the Securities or any other document or instrument referred to
therein (other than a transfer of the Securities), or the receipt of any
payments with respect to the Securities, excluding any such taxes, charges or
similar levies imposed by any jurisdiction outside the United States of America
or Canada any

 

B-7

 

jurisdiction in which a paying agent is located,
other than those resulting from, or required to be paid in connection with, the
enforcement of the Securities or any other such document or instrument
following the occurrence of any Event of Default with respect to the
Securities.

 

All references in the
Indenture to principal of, premium, if any, and interest on the Securities will
include any Additional Interest and any Additional Amounts payable by the Payor
in respect of such principal, such premium, if any, and such interest.

 

The Payor will be entitled
to redeem all, but not less than all, of the Securities if as a result of any
change in or amendment to the laws, regulations or rulings of any Relevant Tax
Jurisdiction or any change in the official application or interpretation of
such laws, regulations or rulings, or any change in the official application or
interpretation of, or any execution of or amendment to, any treaty or treaties
affecting taxation to which such Relevant Tax Jurisdiction is a party (a “Change
in Tax Law”) the Payor is or would be required on the next succeeding
interest payment date to pay Additional Amounts with respect to the Securities
as described under Section 5.9(a) of the Indenture and the Payor delivers to
the Trustee an Officers’ Certificate stating that the payment of such
Additional Amounts cannot be avoided by the use of any reasonable measures
available to the Payor and that the Payor is entitled to redeem the Securities
pursuant to their terms.  The Change in
Tax Law must become effective on or after the Issue Date.  Further, the Payor must deliver to the
Trustee at least 30 days before the redemption date an opinion of counsel of
recognized standing to the effect that the Payor has or will become obligated
to pay Additional Amounts as a result of such Change in Tax Law.  The Payor must also provide the Holders with
notice of the intended redemption at least 30 days and no more than 60 days
before the redemption date and shall comply with all provisions of Article V of
the Indenture.  The redemption price will
equal the principal amount of the Securities plus accrued and unpaid interest
thereon (including Additional Interest), if any to the redemption date,
premium, if any, and Additional Amounts, if any, then due and which otherwise
would be payable.

 

7.   Repurchase Provisions

 

If a Change of Control
occurs, unless the Company has exercised its right to redeem all of the
Securities as described under paragraph 5 of the Securities, each Holder will
have the right to require the Company to repurchase from each Holder all or any
part (equal to $1,000 or an integral multiple thereof) of such Holder’s
Securities at a purchase price in cash equal to 101% of the principal amount
thereof, plus accrued and unpaid interest, if any, to the date of purchase
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date) as provided in, and
subject to the terms of, the Indenture.

 

8.   Denominations; Transfer; Exchange

 

The Securities are in
registered form without coupons in denominations of principal amount of $1,000
and whole multiples of $1,000.  A Holder
may transfer or exchange Securities in accordance with the Indenture.  The Registrar may require a Holder, among
other things, to furnish appropriate endorsements or transfer documents and to
pay a sum sufficient to cover any taxes and fees required by law or permitted
by the Indenture.  The Registrar need not
register the transfer of or exchange of any Security (A) for a period beginning
(1) 15 days before

 

B-8

 

the mailing of a
notice of an offer to repurchase or redeem Securities and ending at the close
of business on the day of such mailing or (2) 15 days before an interest
payment date and ending on such interest payment date or (B) called for
redemption, except the unredeemed portion of any Security being redeemed in
part.

 

9.   Persons Deemed Owners

 

The registered Holder of
this Security may be treated as the owner of it for all purposes.

 

10.   Unclaimed Money

 

If money for the payment of
principal premium, if any, or interest remains unclaimed for two years, the
Trustee or Paying Agent shall pay the money back to the Company at its request
unless an abandoned property law designates another Person.  After any such payment, Holders entitled to
the money must look only to the Company for payment as general creditors unless
an abandoned property law designates another person and not to the Trustee for
payment.

 

11.   Defeasance

 

Subject to certain
exceptions and conditions set forth in the Indenture, the Company at any time
may terminate some or all of its obligations under the Securities, the
Indenture, the Collateral Documents and the Intercreditor Agreement if the
Company deposits with the Trustee money or U.S. Government Obligations for the
payment of principal, premium, if any, and interest on the Securities to
redemption or maturity, as the case may be.

 

12.   Amendment, Supplement, Waiver

 

Subject to certain
exceptions set forth in the Indenture, (i) the Indenture, the Securities, the
Subsidiary Guarantees, the Collateral Documents or the Intercreditor Agreement
may be amended or supplemented by the Company, Subsidiary Guarantors and
Trustee with the written consent of the Holders of at least a majority in
principal amount of the then outstanding Securities and (ii) any default (other
than with respect to nonpayment or in respect of a provision that cannot be
amended without the written consent of each Securityholder affected) or
noncompliance with any provision may be waived with the written consent of the
Holders of a majority in principal amount of the then outstanding
Securities.  Subject to certain
exceptions set forth in the Indenture, without the consent of any
Securityholder, the Company, Subsidiary Guarantors and the Trustee may amend or
supplement the Indenture, the Securities, the Subsidiary Guarantees, the
Collateral Documents or the Intercreditor Agreement to cure any ambiguity,
omission, defect or inconsistency, to comply with Article IV or Article X of
the Indenture, to provide for uncertificated Securities in addition to, or in
place of, certificated Securities, to add Guarantees with respect to the
Securities, to release Subsidiary Guarantors upon their designation as
Unrestricted Subsidiaries or otherwise in accordance with the Indenture, to
secure the Securities, to release Liens in favor of the Collateral Agent in the
Collateral as provided under the collateral release provisions, to add
additional covenants of the Company, to surrender rights and powers conferred
on the Company, to comply with any requirement of the SEC in connection with
qualifying the Indenture under the Act, to make any

 

B-9

 

change that does not adversely affect the
rights of any Securityholder or, in the case of the Intercreditor Agreement,
that does not adversely affect the rights of any Securityholder in any material
respect, or to provide for the issuance of Exchange Securities.

 

13.   Defaults and Remedies

 

Under the Indenture, Events
of Default include (each of which is described in greater detail in the Indenture)
(i) default for 30 days in payment of interest, Additional Interest or
Additional Amounts when due on the Securities; (ii) default in payment of
principal or premium, if any, on the Securities at Stated Maturity, upon
required repurchase or upon optional redemption pursuant to paragraph 5 of the
Securities, upon declaration or otherwise; (iii) the failure by the Company or
any Subsidiary Guarantor to comply with its obligations under Article IV or
Section 10.2 of the Indenture; (iv) failure by the Company to comply for 30
days after written notice with any of its obligations under the covenants
described under Sections 3.2 through 3.12 inclusive, Section 3.16 or Section
3.19 of the Indenture (in each case, other than a failure to purchase Securities
when required under the Indenture, which failure shall constitute an Event of
Default under clause (ii) above) or failure by the Company or any Subsidiary
Guarantor to comply for 30 days after written notice with any of its
obligations under the Collateral Documents; (v) the failure by the Company to
comply for 60 days after written notice with its other agreements contained in
the Indenture or under the Securities (other than those referred to in clause
(i), (ii), (iii) or (iv) above); (vi) default 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 the Company or any of its
Restricted Subsidiaries (or the payment of which is guaranteed by the Company
or any of its Restricted Subsidiaries), other than Indebtedness owed to the
Company or a Restricted Subsidiary, whether such Indebtedness or guarantee now
exists, or is created after the date of the Indenture, which default (a) is
caused by a failure to pay principal of, or interest or premium, if any, on
such Indebtedness at maturity prior to the expiration of the grace period
provided in such Indebtedness (“payment default”) or (b) results in the
acceleration of such Indebtedness prior to its final maturity (the “cross
acceleration provision”) and, in each case, the principal amount of any
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 $5.0 million or more; (vii) certain
events of bankruptcy, insolvency or reorganization of the Company or a
Significant Subsidiary or group of Restricted Subsidiaries that, taken together
(as of the latest audited consolidated financial statements for the Company and
its Restricted Subsidiaries), would constitute a Significant Subsidiary (the “bankruptcy
provisions”); (viii) failure by the Company or any Significant Subsidiary
or group of Restricted Subsidiaries that, taken together (as of the latest
audited consolidated financial statements for the Company and its Restricted
Subsidiaries), would constitute a Significant Subsidiary to pay final judgments
aggregating in excess of $5.0 million (net of any amounts that a reputable and
creditworthy insurance company has acknowledged liability for in writing),
which judgments are not paid, discharged, waived or stayed for a period of 60
days (the “judgment default provision”); (ix) any Subsidiary Guarantee
or Collateral Document ceases to be in full force and effect (except as
contemplated by the terms of the Indenture) or is declared null and void in a
judicial proceeding or any of Holdings, the Company or any Subsidiary Guarantor
denies or disaffirms its obligations under the Indenture, any Subsidiary
Guarantee, any Collateral Document to which it is a party or the Intercreditor
Agreement; or (x) with respect to any Collateral having a fair market value in
excess of $5.0 million,

 

B-10

 

individually or in the aggregate, (A) the
security interest under the Collateral Documents, at any time, ceases to be in
full force and effect for any reason other than in accordance with their terms
and the terms of the Indenture and other than the satisfaction in full of all
obligations under the Indenture and discharge of the Indenture, (B) any
security interest created thereunder or under the Indenture is declared invalid
or unenforceable or (C) Holdings, the Company or any Subsidiary Guarantor
asserts, in any pleading in any court of competent jurisdiction, that any such
security interest is invalid or unenforceable. 
However, a default under clause (iv) or (v) will not constitute an Event
of Default until the Trustee or the Holders of at least 25% in principal amount
of the outstanding Securities notify the Company of the Default and the Company
does not cure such Default within the time specified in clause (iv) or (v)
hereof after receipt of such notice.

 

If an Event of Default
(other than an Event of Default described in (vii) hereof) occurs and is continuing,
the Trustee by notice to the Company, or the Holders of at least 25% in
principal amount of the outstanding Securities by notice to the Company and the
Trustee, may, and the Trustee at the request of such Holders shall, declare all
the Securities to be due and payable immediately.  If an Event of Default described in clause
(vii) hereof occurs and is continuing, the principal of, premium, if any, and
accrued and unpaid interest on all the Securities will become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holders.

 

Securityholders may not
enforce the Indenture or the Securities except as provided in the
Indenture.  The Trustee may refuse to
enforce the Indenture or the Securities unless it receives reasonable indemnity
or security.  Subject to certain
limitations, Holders of a majority in principal amount of the Securities may
direct the Trustee in its exercise of any trust or power.  The Trustee may withhold from Securityholders
notice of any continuing Default or Event of Default (except a Default or Event
of Default in payment of principal or interest) if it determines that
withholding notice is in their interest.

 

14.   Trustee Dealings with the Company

 

Subject to certain
limitations set forth in the Indenture, the Trustee under the Indenture, in its
individual or any other capacity, may become the owner or pledgee of Securities
and may otherwise deal with and collect obligations owed to it by the Company
or its Affiliates and may otherwise deal with the Company or its Affiliates
with the same rights it would have if it were not Trustee.

 

15.   No Recourse Against
Others

 

An incorporator, director,
officer, employee or stockholder of each of the Company or any Subsidiary
Guarantor, solely by reason of this status, shall not have any liability for
any obligations of the Company or any Subsidiary Guarantor under the
Securities, the Indenture, the Collateral Documents, the Intercreditor
Agreement, any Subsidiary Guarantees or for any claim based on, in respect of
or by reason of such obligations or their creation.  By accepting a Security, each Securityholder
waives and releases all such liability. 
The waiver and release are part of the consideration for the issue of
the Securities.

 

B-11

 

16.   Authentication

 

This Security shall not be
valid until an authorized officer of the Trustee (or an authenticating agent
acting on its behalf) manually signs the certificate of authentication on the
other side of this Security.

 

17.   Abbreviations

 

Customary abbreviations may
be used in the name of a Securityholder or an assignee, such as TEN COM (=
tenants in common), TEN ENT (= tenants by the entirety), JT TEN (= joint
tenants with rights of survivorship and not as tenants in common), CUST (= custodian)
and U/G/M/A (= Uniform Gift to Minors Act).

 

18.   CUSIP, Common Code and ISIN Numbers

 

The Company has caused
CUSIP, Common Code and ISIN numbers, if applicable, to be printed on the
Securities and has directed the Trustee to use CUSIP, Common Code and ISIN
numbers, if applicable, in notices of redemption or purchase a convenience to
Securityholders.  No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption or purchase and reliance may be placed
only on the other identification numbers placed thereon.

 

19.   Governing Law

 

This Security shall be
governed by, and construed in accordance with, the laws of the State of New
York.

 

The Company will furnish to
any Securityholder upon written request and without charge to the
Securityholder a copy of the Indenture which has in it the text of this
Security in larger type.  Requests may be
made to:

 

Cellu Tissue Holdings Inc.

3440 Francis Road, Suite C

Alpharetta, Georgia 30004

Attention:  Dianne M. Scheu

 

B-12

 

ASSIGNMENT
FORM

 

To assign this Security, fill in the form
below:

 

I or we assign and transfer this Security to:

 

 

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

 

 

(Insert
assignee’s social security or tax I.D. No.)

 

and irrevocably
appoint
                        
agent to transfer this Security on the books of the Company.  The agent may substitute another to act for
him.

 

 

	
  Date:

  	
   

  	
   

  	
  Your Signature

  	
   

  	
   

  
	
   

  
	
  Signature Guarantee:

  	
   

  
	
   

  	
  (Signature
  must be guaranteed)

  
	
   

  
	
   

  
	
  Sign exactly as your name
  appears on the other side of this Security.

  
							

 

The signature(s) should be guaranteed by an
eligible guarantor institution (banks, stockbrokers, savings and loan
associations and credit unions with membership in an approved signature
guarantee medallion program), pursuant to S.E.C. Rule 17Ad-15.

 

B-13

 

[TO
BE ATTACHED TO GLOBAL SECURITIES]

 

SCHEDULE
OF INCREASES OR DECREASES IN GLOBAL SECURITY

 

The following increases or
decreases in this Global Security have been made:

 

	
  Date
  of

  Exchange

  	
   

  	
  Amount of decrease in Principal

  Amount of this Global Security

  	
   

  	
  Amount of increase in Principal

  Amount of this Global Security

  	
   

  	
  Principal Amount of this Global

  Security following such

  decrease or increase

  	
   

  	
  Signature of authorized

  signatory of Trustee or

  Securities Custodian

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

B-14

 

OPTION
OF HOLDER TO ELECT PURCHASE

 

If you elect to have this
Security purchased by the Company pursuant to Section 3.5 or 3.10 of the
Indenture, check either box:

 

	
   

  	
  o

  	
   

  	
  o

  	
   

  
	
   

  	
  3.5

  	
   

  	
  3.10

  	
   

  

 

If you want to elect to have
only part of this Security purchased by the Company pursuant to Section 3.5 or
Section 3.10 of the Indenture, state the amount in principal amount (must be
integral multiple of $1,000): $                                                                               
and specify the denomination or denominations (which shall not be less than the
minimum authorized denomination) of the Securities to be issued to the Holder
for the portion of the within Security not being repurchased (in the absence of
any such specification, one such Security will be issued for the portion not
being repurchased): 
                              .

 

	
  Date:

  	
   

  	
   

  	
  Your
  Signature: 

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  (Sign exactly as your name
  appears on the other side of the Security)

  
	
   

  
	
  Signature Guarantee: 

  	
   

  
	
   

  	
  (Signature must be
  guaranteed)

  
						

 

The signature(s) should be guaranteed by an
eligible guarantor institution (banks, stockbrokers, savings and loan
associations and credit unions with membership in an approved signature
guarantee medallion program), pursuant to S.E.C. Rule 17Ad-15.

 

B-15

 

SUBSIDIARY
GUARANTEE

 

Pursuant to the Indenture
(the “Indenture”) dated as of March 12, 2004  among Cellu Tissue Holdings, Inc., the Subsidiary
Guarantors party thereto (each a “Subsidiary Guarantor” and collectively
the “Subsidiary Guarantors”) and The Bank of New York, as trustee (the “Trustee”),
each Subsidiary Guarantor, subject to the provisions of Article X of the
Indenture, hereby fully, unconditionally and irrevocably guarantees, as primary
obligor and not merely as surety, jointly and severally with each other
Subsidiary Guarantor, to each Holder of the Securities, to the extent lawful,
and the Trustee the full and punctual payment when due, whether at maturity, by
acceleration, by redemption or otherwise, of the principal of, premium, if any,
Additional Amounts, if any, and interest (including Additional Interest) on the
Securities and all other obligations and liabilities of the Company under the
Indenture (including without limitation interest (including Additional
Interest) accruing after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding, relating to
the Company or any Subsidiary Guarantor whether or not a claim for post-filing
or post-petition interest is allowed in such proceeding and the obligations
under Section 7.7 of the Indenture), the Registration Rights Agreement,
the Collateral Documents and the Intercreditor Agreement (all the foregoing
being hereinafter collectively called the “Obligations”).  Each Subsidiary Guarantor agrees that the
Obligations will rank equally in right of payment with other Indebtedness of
such Subsidiary Guarantor, except to the extent such other Indebtedness is
subordinate to the Obligations.  Each
Subsidiary Guarantor further agrees (to the extent permitted by law) that the
Obligations may be extended or renewed, in whole or in part, without notice or
further assent from it, and that it will remain bound under this Subsidiary
Guarantee notwithstanding any extension or renewal of any Obligation.

 

Each Subsidiary Guarantor
waives presentation to, demand of payment from and protest to the Company of
any of the Obligations and also waives notice of protest for nonpayment.  Each Subsidiary Guarantor waives notice of
any default under the Securities or the Obligations.

 

Each Subsidiary Guarantor
further agrees that its Subsidiary Guarantee herein constitutes a Guarantee of
payment when due (and not a Guarantee of collection) and waives any right to
require that any resort be had by any Holder to any security held for payment
of the Obligations.

 

Except as set forth in Section
10.2 of the Indenture, the obligations of each Subsidiary Guarantor
hereunder shall not be subject to any reduction, limitation, impairment or
termination for any reason (other than payment of the Obligations in full),
including any claim of waiver, release, surrender, alteration or compromise,
and shall not be subject to any defense of setoff, counterclaim, recoupment or
termination whatsoever or by reason of the invalidity, illegality or
unenforceability of the Obligations or otherwise.  Without limiting the generality of the
foregoing, the obligations of each Subsidiary Guarantor herein shall not be discharged
or impaired or otherwise affected by (a) the failure of any Holder to assert
any claim or demand or to enforce any right or remedy against the Company or
any other person under the Indenture, the Securities or any other agreement or
otherwise; (b) any extension or renewal of any thereof; (c) any rescission,
waiver, amendment or modification of any of the terms or provisions of the
Indenture, the Securities or any other agreement; (d) the release of any
security held by any

 

B-16

 

Holder or the Collateral Agent for the
Obligations or any of them; (e) the failure of any Holder to exercise any right
or remedy against any other Subsidiary Guarantor; (f) any change in the
ownership of the Company; (g) any default, failure or delay, willful or
otherwise, in the performance of the Obligations, or (h) any other act or thing
or omission or delay to do any other act or thing which may or might in any
manner or to any extent vary the risk of any Subsidiary Guarantor or would
otherwise operate as a discharge of such Subsidiary Guarantor as a matter of
law or equity.

 

Each Subsidiary Guarantor
agrees that its Subsidiary Guarantee herein shall remain in full force and
effect until payment in full of all the Obligations or such Subsidiary
Guarantor is released from its Subsidiary Guarantee upon the merger or the sale
of all the Capital Stock or assets of the Subsidiary Guarantor or otherwise in
compliance with Section 10.2 or Article VIII of the
Indenture.  Each Subsidiary Guarantor
further agrees that its Subsidiary Guarantee herein shall continue to be
effective or be reinstated, as the case may be, if at any time payment, or any
part thereof, of principal of, premium, if any, or interest on any of the
Obligations is rescinded or must otherwise be restored by any Holder upon the
bankruptcy or reorganization of the Company or otherwise.

 

In furtherance of the
foregoing and not in limitation of any other right which any Holder has at law
or in equity against any Subsidiary Guarantor by virtue hereof, upon the
failure of the Company to pay any of the Obligations when and as the same shall
become due, whether at maturity, by acceleration, by redemption or otherwise,
each Subsidiary Guarantor hereby promises to and will, upon receipt of written
demand by the Trustee, forthwith pay, or cause to be paid, in cash, to the
Trustee or the Trustee on behalf of the Holders an amount equal to the sum of
(i) the unpaid amount of such Obligations then due and owing and (ii) accrued
and unpaid interest (including Additional Interest) on such Obligations then
due and owing (but only to the extent not prohibited by law).

 

Each Subsidiary Guarantor
further agrees that, as between such Subsidiary Guarantor, on the one hand, and
the Holders, on the other hand, (x) the maturity of the Obligations guaranteed
hereby may be accelerated as provided in the Indenture for the purposes of its
Subsidiary Guarantee herein, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the Obligations
guaranteed hereby and (y) in the event of any such declaration of acceleration
of such Obligations, such Obligations (whether or not due and payable) shall
forthwith become due and payable by the Subsidiary Guarantor for the purposes
of this Subsidiary Guarantee.

 

Each Subsidiary Guarantor
also agrees to pay any and all reasonable costs and expenses (including
reasonable attorneys’ fees) incurred by the Trustee or the Holders in enforcing
any rights under this Subsidiary Guarantee.

 

B-17

 

	
   

  	
  CELLU
  TISSUE CORPORATION — NATURAL

  DAM

  
	
   

  	
  CELLU TISSUE CORPORATION —
  NEENAH

  
	
   

  	
  CELLU TISSUE LLC

  
	
   

  	
  INTERLAKE
  ACQUISITION CORPORATION

  LIMITED

  
	
   

  	
  MENOMINEE ACQUISITION
  CORPORATION

  
	
   

  	
  VAN PAPER COMPANY

  
	
   

  	
  VAN
  TIMBER COMPANY,

  as Subsidiary Guarantors

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  COASTAL
  PAPER COMPANY,

  as a Subsidiary Guarantor

  
	
   

  	
   

  
	
   

  	
  By:  Van Paper Company, its managing partner

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
						

 

B-18

 

EXHIBIT C

 

FORM
OF INDENTURE SUPPLEMENT TO ADD SUBSIDIARY GUARANTORS

 

This Supplemental Indenture,
dated as of
[             
    ], 20    (this “Supplemental
Indenture” or “Guarantee”), among [name
of future Guarantor] (the “Guarantor”), Cellu Tissue
Holdings, Inc. (together with its successors and assigns, the “Company”),
each other then existing Subsidiary Guarantor under the Indenture referred to
below, and The Bank of New York, as Trustee under the Indenture referred to
below.

 

W
I T N E S S E T H:

 

WHEREAS, the Company, the
Subsidiary Guarantors and the Trustee have heretofore executed and delivered an
Indenture, dated as of March 12, 2004 (as amended, supplemented, waived or
otherwise modified, the “Indenture”), providing for the issuance of an
aggregate principal amount of $162.0 million of 93⁄4% Senior Secured Notes due
2010 of the Company (the “Securities”);

 

WHEREAS, Section 3.12
of the Indenture provides that after the Issue Date the Company is required to
cause each Restricted Subsidiary (other than a Foreign Subsidiary that does not
Guarantee any Indebtedness of the Company or any Restricted Subsidiary) created
or acquired by the Company or one or more Restricted Subsidiaries or Holdings,
in the event that Holdings Guarantees any Indebtedness of the Company or any of
its Restricted Subsidiaries, to execute and deliver to the Trustee a
supplemental indenture pursuant to which such Subsidiary (or Holdings, if
applicable) will unconditionally Guarantee, on a joint and several basis with
the other Subsidiary Guarantors, the full and prompt payment of the principal
of, premium, if any, and interest on the Securities on a secured basis; and

 

WHEREAS, pursuant to Section
9.1 of the Indenture, the Trustee and the Company are authorized to execute
and deliver this Supplemental Indenture to amend or supplement the Indenture,
without the consent of any Securityholder;

 

NOW, THEREFORE, in
consideration of the foregoing and for other good and valuable consideration,
the receipt of which is hereby acknowledged, the Guarantor, the Company, the
other Subsidiary Guarantors and the Trustee mutually covenant and agree for the
equal and ratable benefit of the Holders of the Securities as follows:

 

ARTICLE
I

 

Definitions

 

SECTION 1.1  Defined Terms.  As used in this Supplemental Indenture, terms
defined in the Indenture or in the preamble or recital hereto are used herein
as therein defined.

 

C-1

 

The words “herein,” “hereof” and “hereby” and
other words of similar import used in this Supplemental Indenture refer to this
Supplemental Indenture as a whole and not to any particular section hereof.

 

ARTICLE
II

 

Agreement
to be Bound; Guarantee

 

SECTION 2.1  Agreement to be Bound.  The Guarantor hereby becomes a party to the
Indenture as a Subsidiary Guarantor and as such will have all of the rights and
be subject to all of the obligations and agreements of a Subsidiary Guarantor
under the Indenture.  The Guarantor
agrees to be bound by all of the provisions of the Indenture, the Collateral
Documents and the Intercreditor Agreement applicable to a Subsidiary Guarantor
and to perform all of the obligations and agreements of a Subsidiary Guarantor
under the Indenture, the Collateral Documents and the Intercreditor Agreement.

 

SECTION 2.2   Guarantee.  The Guarantor agrees, on a joint and several basis with all the existing Subsidiary Guarantors, to fully,
unconditionally and irrevocably Guarantee to each Holder of the Securities and
the Trustee the Obligations pursuant to Article X of the Indenture on a
secured basis.

 

ARTICLE
III

 

Miscellaneous

 

SECTION 3.1   Notices.  All notices and other communications to the
Guarantor shall be given as provided in the Indenture to the Guarantor, at its
address set forth below, with a copy to the Company as provided in the
Indenture for notices to the Company.

 

SECTION 3.2   Parties.  Nothing expressed or mentioned herein is
intended or shall be construed to give any Person, firm or corporation, other
than the Holders and the Trustee, any legal or equitable right, remedy or claim
under or in respect of this Supplemental Indenture or the Indenture or any
provision herein or therein contained.

 

SECTION 3.3   Governing Law.  This Supplemental Indenture shall be governed
by, and construed in accordance with, the laws of the State of New York.

 

SECTION 3.4   Severability Clause.  In case any provision in this Supplemental
Indenture shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby and such provision shall be ineffective only to the extent
of such invalidity, illegality or unenforceability.

 

SECTION
3.5   Ratification of Indenture;
Supplemental Indentures Part of Indenture.  Except as expressly amended hereby, the
Indenture is in all respects ratified and

 

C-2

 

confirmed and all the
terms, conditions and provisions thereof shall remain in full force and
effect.  This Supplemental Indenture
shall form a part of the Indenture for all purposes, and every Holder of
Securities heretofore or hereafter authenticated and delivered shall be bound
hereby.  The Trustee makes no
representation or warranty as to the validity or sufficiency of this Supplemental
Indenture or with respect to the recitals contained herein, all of which
recitals are made solely by the other parties hereto.

 

SECTION 3.6   Counterparts.  The parties hereto may sign one or more
copies of this Supplemental Indenture in counterparts, all of which together
shall constitute one and the same agreement.

 

SECTION 3.7   Headings.  The headings of the Articles and the sections
in this Guarantee are for convenience of reference only and shall not be deemed
to alter or affect the meaning or interpretation of any provisions hereof.

 

C-3

 

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

 

	
   

  	
  [SUBSIDIARY GUARANTOR],

  
	
   

  	
  as a Guarantor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  [Address]

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  THE BANK OF NEW YORK, as
  Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CELLU TISSUE HOLDINGS,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

 

EXHIBIT D

 

Form
of Security Agreement

 

 

EXHIBIT E

 

Form
of Mortgage

 

 

EXHIBIT F

 

Form
of Intercreditor Agreement

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00071-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00071-of-00352.parquet"}]]