Document:

<PAGE>

                                                                     EXHIBIT 4.5

                                                                  EXECUTION COPY
                                                       TRANCHE A NOTES INDENTURE

                              PIONEER AMERICAS LLC,
                                   as Issuer,

                            PIONEER COMPANIES, INC.,
                          PCI CHEMICALS CANADA COMPANY,
                           IMPERIAL WEST CHEMICAL CO.,
                         KEMWATER NORTH AMERICA COMPANY,
                              PIONEER (EAST), INC.,
                        PIONEER WATER TECHNOLOGIES, INC.,
                            PIONEER LICENSING, INC.,
                                       and
                                   KWT, INC.,
                                  as Guarantors

                                       and

                WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION
                                   as Trustee

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

                                    INDENTURE

                          dated as of December 31, 2001

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

                                   $45,421,874

             Senior Secured Floating Rate Guaranteed Notes due 2006
<PAGE>
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                              Page
                                                                              ----
<S>                                                                           <C>
ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION........      2

   SECTION 101.      DEFINITIONS...........................................      2
      "Act"................................................................      2
      "Additional Amounts".................................................      3
      "Adjusted Net Assets"................................................      3
      "Administrative Agent"...............................................      3
      "Affiliate"..........................................................      3
      "Agent Members"......................................................      3
      "Allowed Other Secured Claim"........................................      3
      "Allowed Secured Tax Claim"..........................................      3
      "Asset Sale".........................................................      3
      "Attributable Indebtedness"..........................................      4
      "Average Liquidity"..................................................      5
      "Authorized Officer".................................................      5
      "Bankruptcy Code"....................................................      5
      "Bankruptcy Court"...................................................      5
      "Bankruptcy Law".....................................................      5
      "Board of Directors".................................................      5
      "Board Resolution"...................................................      5
      "Business Day".......................................................      5
      "Calendar Quarter"...................................................      6
      "Canadian Act of Bankruptcy".........................................      6
      "Canadian Bankruptcy Law"............................................      7
      "Canadian Benefits Plan".............................................      7
      "Canadian Corporate Reorganization"..................................      7
      "Canadian Secured Term and Note Claim"...............................      7
      "Canadian Security Agreements".......................................      7
      "Cancellation Date"..................................................      7
      "Capital Expenditures"...............................................      7
      "Capital Stock"......................................................      8
      "Capitalized Lease Obligation".......................................      8
      "Cash Equivalents"...................................................      8
      "Change of Control"..................................................      8
      "Chapter 11 Cases"...................................................      9
      "Claimant"...........................................................      9
      "Closing Date".......................................................      9
      "Closing Date Certificate"...........................................      9
      "Code"...............................................................      9
      "Collateral".........................................................      9
      "Collateral Agent"...................................................     10
      "Collateral Proceeds"................................................     10
      "Commission".........................................................     10
      "Common Security and Intercreditor Agreement"........................     10
      "Company"............................................................     10
      "Company Request" or "Company Order".................................     10
      "Confirmation Order".................................................     10
      "Consolidated Net Income"............................................     10
      "Consolidated Net Worth".............................................     11
      "Corporate Trust Office".............................................     11
      "Covenant Defeasance"................................................     11
</TABLE>

                                       i
<PAGE>
<TABLE>
<S>                                                                             <C>
      "Creditors' Committee Lenders".......................................     11
      "CRC Portfolio"......................................................     11
      "Cumulative Capital Expenditure Limit"...............................     11
      "Custodian"..........................................................     12
      "Custody and Disbursing Agreement"...................................     12
      "Default"............................................................     12
      "Defaulted Interest".................................................     12
      "Defeasance".........................................................     12
      "Defeasance Redemption Date".........................................     12
      "Defeased Securities"................................................     12
      "Depositary".........................................................     12
      "Direction"..........................................................     12
      "Disbursing Agent"...................................................     12
      "Disclosure Schedule"................................................     12
      "EBITDA".............................................................     12
      "Effective Plan Date"................................................     13
      "Eligible Investments"...............................................     13
      "Environmental Claim"................................................     13
      "Environmental Law"..................................................     13
      "ERISA"..............................................................     13
      "ERISA Affiliate"....................................................     14
      "ERISA Event"........................................................     14
      "Event of Default"...................................................     14
      "Excess Cash Flow"...................................................     14
      "Exchange Act".......................................................     15
      "Existing Indebtedness"..............................................     15
      "Exit Facility"......................................................     15
      "Exit Facility Agent"................................................     15
      "Exit Facility Lenders"..............................................     15
      "Fair Market Value"..................................................     15
      "Final Order"........................................................     16
      "Fiscal Quarter".....................................................     16
      "Fiscal Year"........................................................     16
      "Funding Guarantor"..................................................     16
      "GAAP"...............................................................     16
      "Global Security"....................................................     16
      "Guaranties".........................................................     16
      "Guarantors".........................................................     16
      "Guaranty"...........................................................     16
      "Guaranteed Obligations".............................................     16
      "Hazardous Materials"................................................     17
      "Hedging Obligations"................................................     17
      "Holder".............................................................     17
      "Including"..........................................................     17
      "Incur"..............................................................     17
      "Indebtedness".......................................................     17
      "Indemnified Liabilities"............................................     18
      "Indemnified Parties"................................................     18
      "Indenture"..........................................................     18
      "Indenture Documents"................................................     19
      "Indenture Obligations"..............................................     19
      "Indenture Obligors".................................................     19
      "Independent Director"...............................................     19
      "Insurance Proceeds".................................................     19
      "Intercreditor Collateral Account"...................................     19
      "Interest Accrual Period"............................................     19
</TABLE>

                                       ii
<PAGE>
<TABLE>
<S>                                                                             <C>
      "Interest Determination Date"........................................     19
      "Interest Payment Date"..............................................     19
      "Investment".........................................................     19
      "Judgment Currency"..................................................     20
      "Lenders"............................................................     20
      "Letter of Transmittals".............................................     20
      "LIBOR"..............................................................     20
      "Lien"...............................................................     20
      "Liquidity"..........................................................     21
      "Liquidity Quarterly Prepayment".....................................     21
      "Loan Documents".....................................................     23
      "London Business Day"................................................     23
      "Material Adverse Effect"............................................     23
      "Maturity"...........................................................     23
      "MEIP"...............................................................     23
      "Minimum Quarterly Prepayment".......................................     24
      "Moody's"............................................................     24
      "Mortgage"...........................................................     24
      "Mortgaged Property".................................................     24
      "Multiemployer Plan".................................................     24
      "Multiple Employer Plan".............................................     24
      "Net Award"..........................................................     25
      "Net Income".........................................................     25
      "Net Offering Proceeds"..............................................     25
      "Net Proceeds".......................................................     25
      "New Common Stock"...................................................     25
      "New Debt"...........................................................     25
      "New Other Secured Notes"............................................     25
      "New Other Secured Notes And Claims".................................     25
      "New Tranche A Term Notes"...........................................     25
      "New Tranche B Notes"................................................     25
      "New Tranche B Notes Holders"........................................     26
      "New Tranche B Notes Indenture"......................................     26
      "New Tranche B Notes Indenture Trustee"..............................     26
      "Obligor"............................................................     26
      "Obligor Subsidiary".................................................     26
      "Occupational Safety and Health Laws"................................     26
      "Officers' Certificate"..............................................     26
      "Old Debt"...........................................................     26
      "Opinion of Counsel".................................................     27
      "Opinion of Independent Counsel".....................................     27
      "Organizational Documents"...........................................     27
      "Outstanding"........................................................     27
      "Paying Agent".......................................................     28
      "PBGC"...............................................................     28
      "PCA U.S. Secured Term and Note Claim"...............................     28
      "PCI"................................................................     28
      "Permitted Investments"..............................................     28
      "Permitted Issuance".................................................     28
      "Permitted Liens"....................................................     29
      "Person".............................................................     32
      "Physical Securities"................................................     32
      "Pioneer Companies"..................................................     32
      "Pipeline"...........................................................     32
      "Plan"...............................................................     32
      "Plan of Reorganization".............................................     32
</TABLE>

                                      iii
<PAGE>
<TABLE>
<S>                                                                             <C>
      "Post Petition Interest".............................................     32
      "Power of Attorney"..................................................     32
      "Predecessor Security"...............................................     32
      "Qualified Equity Offering"..........................................     32
      "Quebec Mortgage and Security Agreement".............................     33
      "Redemption Date"....................................................     33
      "Redemption Price"...................................................     33
      "Reference Banks"....................................................     33
      "Refinancing"........................................................     33
      "Refinancing Indebtedness"...........................................     33
      "Registration Rights Agreement"......................................     33
      "Regular Record Date"................................................     33
      "Related Business"...................................................     33
      "Release"............................................................     33
      "Reserve Interest Rate"..............................................     33
      "Restoration"........................................................     33
      "Restricted Payment".................................................     34
      "Returned Payments"..................................................     34
      "Rollover Amount"....................................................     34
      "S&P"................................................................     34
      "Sale and Leaseback Transaction".....................................     34
      "Securities".........................................................     34
      "Securities Act".....................................................     34
      "Security Agreement Supplement"......................................     34
      "Security Documents".................................................     34
      "Security Register"..................................................     34
      "Security Registrar".................................................     34
      "Senior Indebtedness"................................................     34
      "Single Employer Plan"...............................................     35
      "Special Record Date"................................................     35
      "Stated Maturity"....................................................     35
      "Subordinated Indebtedness"..........................................     35
      "Subordinated Obligations"...........................................     36
      "Subsidiary".........................................................     36
      "Taxes"..............................................................     36
      "Telerate Screen Page 3750"..........................................     36
      "Term Loan Agreement"................................................     36
      "Term Loan Borrower".................................................     36
      "Tranche B Documents"................................................     36
      "Transaction Documents"..............................................     36
      "Trust Indenture Act"................................................     37
      "Trust Moneys".......................................................     37
      "Trustee"............................................................     37
      "UCC"................................................................     37
      "Unfunded Pension Liabilities".......................................     37
      "U.S. Government Obligations"........................................     37
      "Unallocated Payments"...............................................     37
      "Unallocated Securities".............................................     37
      "Voting Stock".......................................................     38
      "Wholly-Owned Subsidiary"............................................     38
      "Withdrawal Liability"...............................................     38
      "Working Capital"....................................................     38
   SECTION 102.      [INTENTIONALLY OMITTED.]..............................     38
   SECTION 103.      COMPLIANCE CERTIFICATES AND OPINIONS..................     38
   SECTION 104.      FORM OF DOCUMENTS DELIVERED TO TRUSTEE................     39
   SECTION 105.      ACTS OF HOLDERS.......................................     39
</TABLE>

                                       iv
<PAGE>
<TABLE>
<S>                                                                             <C>
   SECTION 106.      NOTICES, ETC., TO TRUSTEE, THE COMPANY AND ANY
                     INDENTURE OBLIGOR OR OBLIGOR SUBSIDIARY...............     41
   SECTION 107.      NOTICE TO HOLDERS; WAIVER.............................     42
   SECTION 108.      CONFLICT WITH TRUST INDENTURE ACT.....................     42
   SECTION 109.      EFFECT OF HEADINGS AND TABLE OF CONTENTS..............     42
   SECTION 110.      SUCCESSORS AND ASSIGNS................................     43
   SECTION 111.      SEPARABILITY CLAUSE...................................     43
   SECTION 112.      BENEFITS OF INDENTURE.................................     43
   SECTION 113.      GOVERNING LAW.........................................     43
   SECTION 114.      LEGAL HOLIDAYS........................................     43
   SECTION 115.      SCHEDULES AND EXHIBITS................................     43
   SECTION 116.      COUNTERPARTS..........................................     43
   SECTION 117.      COMMUNICATION BY HOLDERS WITH OTHER HOLDERS...........     44
   SECTION 118.      NO RECOURSE AGAINST OTHERS............................     44
   SECTION 119.      ARTICLE APPLICABLE TO PAYING AGENTS...................     44

ARTICLE TWO SECURITY FORMS.................................................     44

   SECTION 201.      FORMS GENERALLY.......................................     44
   SECTION 202.      LEGENDS...............................................     45
   SECTION 203.      FORM OF FACE OF SECURITY..............................     46
   SECTION 204.      FORM OF REVERSE OF SECURITIES.........................     48
   SECTION 205.      FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION.......     54
   SECTION 206.      FORM OF GUARANTY OF EACH OF THE GUARANTORS............     54

ARTICLE THREE THE SECURITIES...............................................     56

   SECTION 301.      TITLE AND TERMS.......................................     56
   SECTION 302.      DENOMINATIONS.........................................     57
   SECTION 303.      EXECUTION, AUTHENTICATION, DELIVERY AND DATING........     57
   SECTION 304.      TEMPORARY SECURITIES..................................     59
   SECTION 305.      REGISTRATION OF TRANSFER AND EXCHANGE.................     59
   SECTION 306.      BOOK-ENTRY PROVISIONS FOR GLOBAL SECURITY.............     61
   SECTION 307.      [INTENTIONALLY OMITTED.]..............................     62
   SECTION 308.      MUTILATED, DESTROYED, LOST AND STOLEN SECURITIES......     62
   SECTION 309.      PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED........     63
   SECTION 310.      PERSONS DEEMED OWNERS.................................     64
   SECTION 311.      CANCELLATION..........................................     64
   SECTION 312.      COMPUTATION OF INTEREST...............................     65
   SECTION 313.      DEPOSIT OF MONEYS.....................................     65
   SECTION 314.      CUSIP NUMBER..........................................     65

ARTICLE FOUR DEFEASANCE AND COVENANT DEFEASANCE............................     65

   SECTION 401.      COMPANY'S OPTION TO EFFECT DEFEASANCE OR COVENANT
                     DEFEASANCE............................................     65
   SECTION 402.      DEFEASANCE AND DISCHARGE..............................     65
   SECTION 403.      COVENANT DEFEASANCE...................................     66
   SECTION 404.      CONDITIONS TO DEFEASANCE OR COVENANT DEFEASANCE.......     66
   SECTION 405.      DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS TO
                     BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS......     68
   SECTION 406.      REINSTATEMENT.........................................     69
   SECTION 407.      REPAYMENT OF THE COMPANY..............................     69

ARTICLE FIVE REMEDIES......................................................     70

   SECTION 501.      EVENTS OF DEFAULT.....................................     70
   SECTION 502.      ACCELERATION..........................................     73
   SECTION 503.      OTHER REMEDIES........................................     74
   SECTION 504.      WAIVER OF PAST DEFAULTS...............................     74
   SECTION 505.      CONTROL BY MAJORITY...................................     75
</TABLE>

                                       v
<PAGE>
<TABLE>
<S>                                                                            <C>
   SECTION 506.      LIMITATION ON SUITS...................................     75
   SECTION 507.      RIGHTS OF HOLDERS TO RECEIVE PAYMENT..................     76
   SECTION 508.      COLLECTION SUIT BY TRUSTEE............................     76
   SECTION 509.      TRUSTEE MAY FILE PROOFS OF CLAIM......................     77
   SECTION 510.      PRIORITIES............................................     77
   SECTION 511.      UNDERTAKING FOR COSTS.................................     78
   SECTION 512.      WAIVER OF STAY, EXTENSION OR USURY LAWS...............     78

ARTICLE SIX THE TRUSTEE....................................................     78

   SECTION 601.      NOTICE OF DEFAULTS....................................     78
   SECTION 602.      CERTAIN RIGHTS OF TRUSTEE.............................     79
   SECTION 603.      TRUSTEE NOT RESPONSIBLE FOR RECITALS, DISPOSITIONS
                     OF SECURITIES OR APPLICATION OF PROCEEDS THEREOF......     80
   SECTION 604.      TRUSTEE AND AGENTS MAY HOLD SECURITIES; COLLECTIONS;
                     ETC...................................................     81
   SECTION 605.      MONEY HELD IN TRUST...................................     81
   SECTION 606.      COMPENSATION AND INDEMNIFICATION OF TRUSTEE AND ITS
                     PRIOR CLAIM...........................................     81
   SECTION 607.      CONFLICTING INTERESTS.................................     82
   SECTION 608.      CORPORATE TRUSTEE REQUIRED; ELIGIBILITY...............     82
   SECTION 609.      RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR
                     TRUSTEE...............................................     83
   SECTION 610.      ACCEPTANCE OF APPOINTMENT BY SUCCESSOR................     84
   SECTION 611.      MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO
                     BUSINESS..............................................     85
   SECTION 612.      PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.....     86
   SECTION 613.      CERTAIN DUTIES AND RESPONSIBILITIES...................     86

ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY............     87

   SECTION 701.      COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF
                     HOLDERS...............................................     87
   SECTION 702.      PRESERVATION OF INFORMATION; DISCLOSURE OF NAMES AND
                     ADDRESSES OF HOLDERS..................................     87
   SECTION 703.      REPORTS BY TRUSTEE....................................     88
   SECTION 704.      REPORTS BY COMPANY AND GUARANTORS.....................     88

ARTICLE EIGHT CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE.........     90

   SECTION 801.      WHEN INDENTURE OBLIGORS MAY MERGE, ETC................     90
   SECTION 802.      SUCCESSOR SUBSTITUTED.................................     92

ARTICLE NINE SUPPLEMENTAL INDENTURES.......................................     93

   SECTION 901.      SUPPLEMENTAL INDENTURES AND AGREEMENTS WITHOUT
                     CONSENT OF HOLDERS....................................     93
   SECTION 902.      SUPPLEMENTAL INDENTURES AND AGREEMENTS WITH CONSENT
                     OF HOLDERS............................................     95
   SECTION 903.      EXECUTION OF SUPPLEMENTAL INDENTURES AND AGREEMENTS...     96
   SECTION 904.      REVOCATION EFFECT OF SUPPLEMENTAL INDENTURES..........     97
   SECTION 905.      CONFORMITY WITH TRUST INDENTURE ACT...................     97
   SECTION 906.      REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES....     97

ARTICLE TEN COVENANTS......................................................     98

   SECTION 1001.     PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST............     98
   SECTION 1002.     MAINTENANCE OF OFFICE OR AGENCY.......................     98
   SECTION 1003.     COMPLIANCE CERTIFICATE................................     98
   SECTION 1004.     TAXES.................................................     99
   SECTION 1005.     JURISDICTION, SERVICE OF PROCESS AND VENUE IMMUNITY;
                     JUDGMENT CURRENCY.....................................     99
   SECTION 1006.     LIMITATION ON RESTRICTED PAYMENTS.....................    101
   SECTION 1007.     LIMITATIONS ON PAYMENT RESTRICTIONS AFFECTING
                     SUBSIDIARIES..........................................    102
   SECTION 1008.     LIMITATIONS ON INDEBTEDNESS...........................    103
   SECTION 1009.     ASSET SALES...........................................    105
</TABLE>

                                       vi
<PAGE>
<TABLE>
<S>                                                                            <C>
   SECTION 1010.     LIMITATION ON SALE AND LEASEBACK TRANSACTIONS.........    107
   SECTION 1011.     LIMITATION ON TRANSACTIONS WITH AFFILIATES............    107
   SECTION 1012.     LIMITATION ON LIENS...................................    109
   SECTION 1013.     CORPORATE EXISTENCE; CORPORATE SEPARATENESS...........    109
   SECTION 1014.     CHANGE OF CONTROL.....................................    109
   SECTION 1015.     MAINTENANCE OF PROPERTIES.............................    110
   SECTION 1016.     MAINTENANCE OF INSURANCE..............................    110
   SECTION 1017.     STOCK PLEDGES.........................................    110
   SECTION 1018.     MONEY FOR SECURITY PAYMENTS TO BE HELD IN TRUST.......    111
   SECTION 1019.     REDEMPTION OF SECURITIES WITH PROCEEDS OF QUALIFIED
                     EQUITY OFFERING.......................................    112
   SECTION 1020.     LIMITATION ON OWNERSHIP OF WHOLLY-OWNED SUBSIDIARY
                     STOCK.................................................    112
   SECTION 1021.     IMPAIRMENT OF SECURITY INTEREST.......................    113
   SECTION 1022.     AMENDMENT TO CERTAIN AGREEMENTS.......................    113
   SECTION 1023.     PLAN OF REORGANIZATION................................    113
   SECTION 1024.     NATURE OF BUSINESS, ORGANIZATIONAL DOCUMENTS AND
                     CAPITAL STRUCTURE AND NEW SUBSIDIARIES; BOOKS AND
                     RECORDS...............................................    114
   SECTION 1025.     COMPLIANCE WITH LAWS AND ENVIRONMENTAL AND SAFETY
                     AND HEALTH MATTERS....................................    114
   SECTION 1026.     AUTHORIZATIONS........................................    115
   SECTION 1027.     FURTHER ASSURANCES....................................    115
   SECTION 1028.     FISCAL YEAR...........................................    115
   SECTION 1029.     ADDITIONAL AMOUNTS....................................    115
   SECTION 1030.     CAPITAL EXPENDITURES..................................    117
   SECTION 1031.     WORKING CAPITAL LINE..................................    117
   SECTION 1032.     ERISA AND CANADIAN BENEFIT PLANS......................    117
   SECTION 1033.     QUALIFICATION IN FOREIGN JURISDICTION.................    119

ARTICLE ELEVEN REDEMPTION OF SECURITIES....................................    119

   SECTION 1101.     OPTIONAL AND MANDATORY RIGHTS OF REDEMPTION...........    119
   SECTION 1102.     APPLICABILITY OF ARTICLE..............................    121
   SECTION 1103.     ELECTION TO REDEEM; NOTICE TO TRUSTEE.................    121
   SECTION 1104.     SELECTION BY TRUSTEE OF SECURITIES TO BE REDEEMED.....    121
   SECTION 1105.     NOTICE OF REDEMPTION..................................    121
   SECTION 1106.     DEPOSIT OF REDEMPTION PRICE...........................    123
   SECTION 1107.     SECURITIES PAYABLE ON REDEMPTION DATE.................    123
   SECTION 1108.     SECURITIES REDEEMED OR PURCHASED IN PART..............    123
   SECTION 1109.     [INTENTIONALLY OMITTED.]..............................    124

ARTICLE TWELVE SATISFACTION AND DISCHARGE..................................    124

   SECTION 1201.     SATISFACTION AND DISCHARGE OF INDENTURE...............    124
   SECTION 1202.     APPLICATION OF TRUST MONEY............................    125

ARTICLE THIRTEEN GUARANTY..................................................    125

   SECTION 1301.     GUARANTY; LIMITATION OF LIABILITY.....................    125
   SECTION 1302.     GUARANTY ABSOLUTE.....................................    126
   SECTION 1303.     RIGHT TO DEMAND FULL PERFORMANCE......................    128
   SECTION 1304.     WAIVERS AND ACKNOWLEDGMENTS...........................    128
   SECTION 1305.     THE GUARANTORS REMAIN OBLIGATED IN EVENT THE
                     COMPANY IS NO LONGER OBLIGATED TO DISCHARGE
                     INDENTURE OBLIGATIONS.................................    129
   SECTION 1306.     SUBROGATION...........................................    129
   SECTION 1307.     SUBORDINATION.........................................    130
   SECTION 1308.     CONTINUING GUARANTY; ASSIGNMENTS......................    131
   SECTION 1309.     GUARANTY IS IN ADDITION TO OTHER SECURITY.............    131
   SECTION 1310.     CONTRIBUTION..........................................    131
   SECTION 1311.     TRUSTEE'S DUTIES; NOTICE TO TRUSTEE...................    132
</TABLE>

                                      vii
<PAGE>
<TABLE>
<S>                                                                            <C>
   SECTION 1312.     RELEASE OF GUARANTY...................................    132
   SECTION 1313.     EXECUTION OF GUARANTY.................................    132
   SECTION 1314.     PAYMENT PERMITTED BY EACH OF THE GUARANTORS IF
                     NO DEFAULT............................................    133
   SECTION 1315.     NOTICE TO TRUSTEE BY EACH OF THE GUARANTORS...........    133
   SECTION 1316.     ADDITIONAL GUARANTIES.................................    133
   SECTION 1317.     NO SUSPENSION OF REMEDIES.............................    133

ARTICLE FOURTEEN CONDITIONS TO EFFECTIVENESS OF INDENTURE AND
REPRESENTATIONS AND WARRANTIES.............................................    134

   SECTION 1401.     CONDITIONS PRECEDENT..................................    134
   SECTION 1402.     REPRESENTATIONS AND WARRANTIES........................    141

ARTICLE FIFTEEN SECURITY...................................................    149

   SECTION 1501.     SECURITY..............................................    149
   SECTION 1502.     RECORDING; PRIORITY; OPINIONS, ETC....................    150
   SECTION 1503.     RELEASE OF COLLATERAL.................................    151
   SECTION 1504.     TRUST INDENTURE ACT REQUIREMENTS......................    151
   SECTION 1505.     SUITS TO PROTECT COLLATERAL...........................    151
   SECTION 1506.     DETERMINATIONS RELATING TO COLLATERAL.................    152
   SECTION 1507.     TRUST MONEYS..........................................    152
   SECTION 1508.     POWER OF ATTORNEY FOR COLLATERAL IN QUEBEC............    153
   SECTION 1509.     ADDITIONAL INDEMNIFICATION............................    154

ARTICLE SIXTEEN UNALLOCATED SECURITIES.....................................    155

   SECTION 1601.     ESCROW OF UNALLOCATED SECURITIES AND UNALLOCATED
                     PAYMENTS..............................................    155
   SECTION 1602.     CANCELLATION OF UNALLOCATED SECURITIES AND RELEASE
                     OF UNALLOCATED PAYMENTS...............................    155

ARTICLE SEVENTEEN INDENTURE AND TERM LOAN AGREEMENT........................    156

   SECTION 1701.     ACKNOWLEDGEMENT.......................................    156
</TABLE>

SCHEDULE I            DISCLOSURE SCHEDULE

EXHIBIT A             FORMS OF MORTGAGES
EXHIBIT B             FORM OF COMMON SECURITY AND INTERCREDITOR AGREEMENT
EXHIBIT C             FORMS OF CLOSING DATE CERTIFICATES

                                      viii
<PAGE>
           Reconciliation and tie between Trust Indenture Act of 1939
                  and Indenture, dated as of December 31, 2001

<TABLE>
<CAPTION>
Trust Indenture                                                  Indenture
  Act Section                                                      Section
---------------                                            ---------------------
<S>                                                        <C>
Section 310(a)(1).....................................              608
           (a)(2).....................................              608
           (a)(3).....................................              N.A.
           (a)(4).....................................              N.A.
           (a)(5).....................................              607
           (b)........................................           607, 609
           (c)........................................              N.A.
Section 311(a)........................................              612
           (b)........................................              612
           (c)........................................              N.A.
Section 312(a)........................................           701, 702
           (b)........................................           117, 702
           (c)........................................           117, 702
Section 313(a)........................................              703
           (b)(1).....................................              703
           (b)(2).....................................              703
           (c)........................................              703
           (d)........................................              703
Section 314(a)........................................           704, 1003
           (b)........................................             1502
           (c)(1).....................................              103
           (c)(2).....................................              103
           (c)(3).....................................              N.A.
           (d)........................................     103, 1503, 1504, 1507
           (e)........................................              103
           (f)........................................              N.A.
Section 315(a)........................................         602, 613, 903
           (b)........................................         601, 602, 903
           (c)........................................           602, 903
           (d)........................................           602, 903
           (e)........................................              511
Section 316(a)(last sentence).........................              101
                                                              ("Outstanding")
           (a)(1)(A)..................................           502, 505
           (a)(1)(B)..................................              504
           (a)(2).....................................             N.A.
           (b)........................................              507
           (c)........................................              105
Section 317(a)(1).....................................              508
           (a)(2).....................................              509
           (b)........................................             1018
Section 318(a)........................................              310
</TABLE>

N.A. means not applicable.________________________________

Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of this Indenture.
<PAGE>
            INDENTURE, dated as of December 31, 2001, among Pioneer Americas
LLC, a Delaware limited liability company (the "Company"), each Guarantor (as
hereinafter defined) from time to time a party hereto (the Company and the
Guarantors party to this Indenture, and their respective assigns and affiliates,
shall be referred to herein as the "Pioneer Companies") and WELLS FARGO BANK
MINNESOTA, NATIONAL ASSOCIATION, as trustee (the "Trustee").

                             RECITALS OF THE COMPANY

      1. The Pioneer Companies are successors to the debtors that commenced the
Chapter 11 Cases (as hereinafter defined) and the initial Holders of the
Securities on the date hereof (as each such term is hereinafter defined), prior
to the effectiveness of the Plan of Reorganization (as hereinafter defined),
together beneficially hold part of the Old Debt (as hereinafter defined).

      2. Pursuant to the Plan of Reorganization and the implementation thereof
and upon the Plan of Reorganization becoming effective, the applicable Pioneer
Companies are willing and required (among other things) to remain indebted to
certain holders of the Old Debt by accepting the New Debt and to issue the New
Common Stock (as each such term is hereinafter defined) in exchange for the
cancellation and the extinguishment of the Old Debt by such holders.

      3. Such holders of the Old Debt are willing and required to accept the New
Debt and the New Common Stock upon such cancellation and extinguishment.

      4. The New Debt comprises indebtedness represented by the New Tranche B
Notes, the New Tranche A Term Notes (each as hereinafter defined) and the
Securities, and the Pioneer Companies and the Trustee, on behalf of the holders
of the Old Debt, wish to enter into this Indenture to consummate that part of
the exchange of Old Debt for New Debt that relates to the issuance by the
Company of the Securities (guaranteed by the Guarantors jointly and severally)
and to govern (for the benefit of such Holders or any other Holders) the
indebtedness assumed and incurred hereby.

      5. In accordance with the Plan of Reorganization and the implementation
thereof, the Company has duly authorized the creation of an issue of Senior
Secured Floating Rate Guaranteed Notes due 2006 (the "Securities"), of
substantially the tenor and amount hereinafter set forth, and to provide
therefor the Company has duly authorized the execution and delivery of this
Indenture and the Securities. The Securities are referred to in the Plan of
Reorganization as the "New Tranche A Indenture Notes".

      6. Each Guarantor has duly authorized the issuance of its Guaranty (as
hereinafter defined) of the Securities, of substantially the tenor hereinafter
set forth, and to provide therefor, each Guarantor has duly authorized the
execution and delivery of this Indenture and its Guaranty.
<PAGE>
      7. This Indenture is subject to, and shall be governed by, the provisions
of the Trust Indenture Act (as hereinafter defined) that are required to be part
of and to govern indentures qualified under the Trust Indenture Act.

      8. All things necessary have been done to make (i) the Securities, when
executed by the Company and authenticated and delivered hereunder and duly
issued by the Company, the valid obligations of the Company, (ii) their
respective Guaranties (as hereinafter defined), when executed and delivered by
each of the Guarantors, the valid obligation of such Guarantor, and (iii) this
Indenture a valid agreement of the Company and each of the Guarantors in
accordance with the terms of this Indenture.

            NOW, THEREFORE, THIS INDENTURE WITNESSETH:

            For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is covenanted and agreed, for the benefit
of each other and for the equal and proportionate benefit of the Holders of the
Securities issued under this Indenture, as follows:

                                  ARTICLE ONE

                       DEFINITIONS AND OTHER PROVISIONS OF
                               GENERAL APPLICATION

            Section 101. Definitions.

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

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

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

            (c) all accounting terms not otherwise defined herein have the
      meanings assigned to them in accordance with GAAP;

            (d) 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; and

            (e) all references to $, US$, dollars or United States dollars shall
      refer to the lawful currency of the United States of America.

            "Act" is defined in Section 105 hereof.

                                       2
<PAGE>
            "Additional Amounts" is defined in Section 1029 hereof.

            "Adjusted Net Assets" means, with respect to any Guarantor, at any
date, the lesser of the amount by which (x) the Fair Market Value of the
property of such Guarantor exceeds the total amount of liabilities, including,
without limitation, contingent liabilities (after giving effect to all other
fixed and contingent liabilities incurred or assumed on such date, but excluding
liabilities under the Guaranty), of such Guarantor at such date and (y) the
present Fair Market Value of assets of such Guarantor at such date exceeds the
amount that shall be required to pay the probable liability of such Guarantor on
its debts (after giving effect to all other fixed and contingent liabilities
incurred or assumed on such date but excluding debt in respect of its Guaranty),
as they become absolute and matured.

            "Administrative Agent" means Wells Fargo Bank Minnesota, National
Association, as the administrative agent under the Term Loan Agreement,
including each other Person as shall have subsequently been appointed as the
successor Administrative Agent pursuant to the Term Loan Agreement.

            "Affiliate" means, with respect to any specified Person, (i) any
other Person directly or indirectly controlling or controlled by or under direct
or indirect common control with such specified Person, (ii) any director or
controlling shareholder of such other Person, or (iii) any senior officer of
such specified Person or such other Person. For purposes of this definition,
"control" (including with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to any
Person, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of such Person, whether
through the ownership of voting securities, by agreement or otherwise; provided,
however, that beneficial ownership of 5% or more of the voting equity securities
(or of warrants or other rights to acquire such voting equity securities) of a
Person shall be deemed to be control; and provided further, that notwithstanding
the first proviso to this definition of "Affiliate", creditors of the debtors in
the Chapter 11 Cases receiving New Common Stock that beneficially own, at any
time, 20% or less of the voting securities of any Obligor or Obligor Subsidiary
shall not be "Affiliates" of such Obligor or Obligor Subsidiary.

            "Agent Members" is defined in Section 306 hereof.

            "Allowed Other Secured Claim" means any Other Secured Claim (as
defined in the Plan of Reorganization) that is also Allowed (as defined in the
Plan of Reorganization).

            "Allowed Secured Tax Claim" means any Secured Tax Claim (as defined
in the Plan of Reorganization) that is also Allowed (as defined in the Plan of
Reorganization).

            "Asset Sale" means, with respect to any Obligor or any Obligor
Subsidiary, the sale (including Sale and Leaseback Transactions), lease,
conveyance,

                                       3
<PAGE>
transfer or other disposition (including, without limitation, by way of merger
or consolidation, and whether indirectly or directly or by operation of law or
otherwise) to any Person, other than any Obligor or any Obligor Subsidiary, of
any of such Obligor's or such Obligor Subsidiary's assets (including, without
limitation, (x) any sale, lease, conveyance, transfer or other disposition of
Capital Stock of any Obligor Subsidiary, and (y) any sale, lease, conveyance,
transfer or other disposition of any non-cash consideration received by any
Obligor or any Obligor Subsidiary from any prior transaction or series of
related transactions that constituted an Asset Sale hereunder), whether owned on
the date hereof or subsequently acquired, in one transaction or a series of
related transactions; provided, however, that the following will not constitute
an Asset Sale: (i) transactions (other than transactions described in clause (y)
above), including Sale and Leaseback Transactions, in any calendar year with
aggregate cash and/or Fair Market Value of any other consideration received
(including, without limitation, the unconditional assumption of Indebtedness) of
less than $1,000,000; (ii) a transaction or series of related transactions that
results in a Change of Control; (iii) any sale of assets of any Obligor or any
Obligor Subsidiary or merger permitted pursuant to Article Eight; (iv) any sale
or other disposition of inventory, property (whether real, personal or mixed) or
equipment that has become worn out, obsolete or damaged or otherwise unsuitable
or no longer needed for use in connection with the business of any Obligor or
any Obligor Subsidiary, as the case may be, in the good faith determination of
the Boards of Directors of PCI and the Company and so certified to the Trustee
(provided that no such determination by the Board of Directors and no such
certification to the Trustee shall be required in respect of such sales or
dispositions with aggregate cash and/or fair market value of any non-cash
consideration received in respect of such sales or dispositions being equal to
or less than $100,000 individually or up to $500,000 in the aggregate in any
calendar year); (v) any sale of inventory to customers in the ordinary and
customary course of business; (vi) sales of cash and cash equivalents in the
ordinary course of business; (vii) transfers resulting from any casualty or
condemnation of property or assets; (viii) the sale or discount of overdue
accounts receivable in the ordinary course of business, in connection with the
compromise or collection thereof; and (ix) the sale of the Pioneer Technology
Centre situated at Mississauga, Ontario, Canada.

            "Attributable Indebtedness" means, with respect to any Sale and
Leaseback Transaction, as at the time of determination, the greater of (i) the
Fair Market Value of the property subject to such transaction, and (ii) the
present value (discounted at a rate equivalent to the Company's then current
weighted average cost of funds for borrowed money, compounded on a semi-annual
basis) of the total net obligations of the lessee for rental payments during the
remaining term of the lease (or the lease back in the case of a lease and
leaseback transaction) included in such arrangement (including any period for
which such lease has been extended). As used in the preceding sentence, the
"total net obligations of the lessee for rental payments" under any lease (or
any lease back in the case of a lease and leaseback transaction) for any such
period means the sum of rental and other payments required to be paid (including
any step-up in interest rate of any financing) with respect to such period by
the lessee thereunder excluding any amounts required to be paid by such lessee
on account of maintenance and repairs, insurance, taxes, assessments, water
rates or similar charges. In the case of any lease (or any lease back in the
case of a lease and leaseback transaction) which is terminable by the

                                       4
<PAGE>
lessee upon payment of a penalty, such net amount of rent also includes the
amount of such penalty, but no rent will be considered as required to be paid
under such lease subsequent to the first date upon which it may be so
terminated.

            "Average Liquidity" means, in respect of any period, the average
(arithmetical mean) Liquidity in dollars during such period, with Liquidity
being determined on each Friday of each calendar week and, accordingly, Average
Liquidity for any given period shall be determined by determining the Liquidity
for each Friday during such period (each, a "Friday Liquidity Total") and then
by dividing the sum of all the Friday Liquidity Totals for such period by the
number of Fridays during such period.

            "Authorized Officer" means, with respect to any Obligor, those of
its officers whose signatures and incumbency shall have been certified to the
Trustee and the Holders pursuant to Section 1401A(d).

            "Bankruptcy Code" means Title 11 of the United States Code, as
amended, or any similar United States federal or state law relating to
bankruptcy, insolvency, receivership, winding-up, liquidation, reorganization or
relief of debtors or any amendment to, succession to or change in any such law.

            "Bankruptcy Court" means the United States Bankruptcy Court for the
Southern District of Texas, Houston Division, having jurisdiction over the
Chapter 11 Cases, or if such court ceases to exercise jurisdiction over the
Chapter 11 Cases, such other court or adjunct thereof that exercises
jurisdiction over the Chapter 11 Cases in lieu of the United States Bankruptcy
Court for such district.

            "Bankruptcy Law" means the Bankruptcy Code, Canadian Bankruptcy Law
or any law of any other country or jurisdiction relating to bankruptcy,
insolvency, receivership, winding-up, liquidation, reorganization or relief of
debtors.

            "Board of Directors" means, in respect of any Person, its Board of
Directors or equivalent body or any committee thereof duly authorized to act on
behalf of such Board of Directors or equivalent body in respect of such matters
as are referred to herein as requiring such action on behalf of such Board of
Directors or equivalent body.

            "Board Resolution" of any corporation, limited liability company or
other entity means a copy of a resolution or limited liability company corporate
action or other equivalent action certified by the Secretary or an Assistant
Secretary or equivalent officer of such corporation, limited liability company
or other entity to have been duly adopted by the Board of Directors of such
corporation, limited liability company or other entity, as the case may be, and
to be in full force and effect on the date of such certification and delivered
to the Trustee.

            "Business Day" means any day which is neither a Saturday or Sunday
nor a legal holiday on which banking institutions and trust companies in The
City of New York or the city in which the Corporate Trust Office is located are
authorized or required by law or executive order to be closed.

                                       5
<PAGE>
            "Calendar Quarter" means each three month period ending on the last
day of each December, March, June and September, with the first such three month
period ending on the last day of March, 2002, and the last such three month
period ending on the last day in December, 2006.

            "Canadian Act of Bankruptcy" means, with respect to any Person:

            (1) an admission in writing by such Person of its inability to pay
      its debts generally as they become due;

            (2) a general assignment by such Person for the benefit of its
      creditors pursuant to the Bankruptcy and Insolvency Act (Canada);

            (3) such Person becoming subject to any bankruptcy proceedings in
      Canada which it is not contesting in good faith, diligently and by
      appropriate means or which continue undischarged, unstayed or undismissed
      for a period of 30 days;

            (4) any application under any Canadian Bankruptcy Law to any
      tribunal or authority for the purpose of suspending payment or performance
      of any of the liabilities of such Person;

            (5) a petition or application by such Person under any Canadian
      Bankruptcy Law to any tribunal or authority for the appointment of an
      administrator, receiver, trustee or intervenor for it or for any
      substantial part of such Person's property;

            (6) the commencement against such Person of any proceedings
      (including a notice of intention or a proposal under the Bankruptcy and
      Insolvency Act (Canada)) or any Canadian Bankruptcy Law, statute,
      regulation or decree whether now or hereafter in effect in Canada,
      relating to it or its debt, or to any reorganization, arrangement,
      adjustment, dissolution or liquidation involving such Person, which
      proceedings are not being contested in good faith, diligently and by
      appropriate means or which continue undischarged, unstayed or undismissed
      for a period of 30 days;

            (7) the bankruptcy of such Person within the meaning of the
      Bankruptcy and Insolvency Act (Canada), or any successor or equivalent
      legislation; or

            (8) any act by such Person signifying its consent to, approval of,
      or acquiescence in any bankruptcy, reorganization or insolvency proceeding
      in Canada under any law relating to bankruptcy, insolvency or relief of
      debtors or any proceeding for the appointment of a receiver or trustee for
      itself or for any substantial part of its property where such receiver or
      trustee remains undischarged for a period of 30 days.

                                       6
<PAGE>
            "Canadian Bankruptcy Law" means the Bankruptcy and Insolvency Act
(Canada), the Companies' Creditors Arrangement Act (Canada), the Winding-Up and
Restructuring Act (Canada), or any similar Canadian federal or provincial law
relating to bankruptcy, insolvency, receivership, winding-up, liquidation,
reorganization or relief of debtors, each as amended or changed.

            "Canadian Benefits Plan" means any plan, program, practice,
arrangement or policy, whether registered or unregistered, written or unwritten,
funded or unfunded, insured or uninsured, that is maintained, administered or
contributed to by any Obligor or any of its Obligor Subsidiaries (or under which
any Obligor or any of its Obligor Subsidiaries has or may have any obligation)
in respect of employees or former employees in Canada (or their spouses,
beneficiaries or dependents), and relating to pensions, supplemental pensions,
retirement or retirement savings, profit sharing or deferred profit sharing,
deferred or incentive compensation, bonuses, death benefits, life or disability
insurance, medical or dental insurance or benefits or other similar employee
benefits, but excluding employment insurance, health insurance, workers
compensation and pension benefits provided by statutes.

            "Canadian Corporate Reorganization" has the meaning given to it in
Section 1401H.

            "Canadian Secured Term and Note Claim" has the meaning given to such
term in the Plan of Reorganization.

            "Canadian Security Agreements" means any general security agreement
and deed of hypothec charging all of the personal and movable property of PCI
Chemicals Canada Company and any other Obligor having property, assets or any
place of business or office in Canada, including, without limitation, the Quebec
Mortgage and Security Agreement, a deed of hypothec charging all of the
immovable property of PCI Chemicals Canada Company located in the province of
Quebec and deeds of mortgage charging all the real property of PCI Chemicals
Canada Company located in the provinces of Ontario and New Brunswick.

            "Cancellation Date" has the meaning given to it in Section 1602.

            "Capital Expenditures" means, for any Person for any period, the sum
of, without duplication, (a) all expenditures made, directly or indirectly, by
such Person during such period for equipment, fixed assets, real property or
improvements, or for replacements or substitutions therefor or additions
thereto, that have been or should be, in accordance with GAAP, reflected as
additions to property, plant or equipment on a consolidated balance sheet of
such Person or have a useful life of more than one year, plus (b) the aggregate
principal amount of all Indebtedness assumed or incurred (to the extent
permitted by this Indenture) in connection with any such expenditures. For
purposes of this definition, the purchase price of equipment that is purchased
simultaneously with the trade-in of existing equipment or with insurance
proceeds shall be included in Capital Expenditures only to the extent of the
gross amount of such

                                       7
<PAGE>
purchase price less the credit granted by the seller of such equipment for the
equipment being traded in at such time or the amount of such proceeds, as the
case may be.

            "Capital Stock" means, with respect to any Person, any common stock,
preferred stock and any other capital stock of such Person and shares,
interests, participations or other ownership interest (however designated), of
any Person and any rights (other than debt securities convertible into, or
exchangeable for, capital stock or such other ownership interests), warrants,
options or other rights to purchase any of the foregoing, including each class
of common stock and preferred stock of such Person if such Person is a
corporation and each general and/or limited partnership interest of such Person
if such Person is a partnership and/or limited liability company interest of
such Person if such Person is a limited liability company.

            "Capitalized Lease Obligation" means Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP and the amount of such Indebtedness
shall be the capitalized amount of such obligations determined in accordance
with GAAP.

            "Cash Equivalents" means, (i) any evidence of Indebtedness with a
maturity of one year or less from the date of acquisition issued or directly and
fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof); (ii) certificates of deposit
or acceptances with a maturity of one year or less from the date of acquisition
of any financial institution that is a member of the Federal Reserve System
having combined capital and surplus and undivided profits of not less than
$250,000,000; (iii) commercial paper with a maturity of one year or less from
the date of acquisition issued by a corporation that is not an Affiliate of the
Company organized under the laws of any state of the United States of America or
the District of Columbia and rated at least "A-1" by S&P or at least "P-1" by
Moody's or at least an equivalent rating category of another nationally
recognized securities rating agency; (iv) any money market deposit accounts
issued or offered by a domestic commercial bank having capital and surplus in
excess of $250,000,000; and (v) repurchase agreements and reverse repurchase
agreements relating to marketable direct obligations issued or unconditionally
guaranteed by the government of the United States of America or issued by any
agency thereof and backed by the full faith and credit of the United States of
America, in each case maturing within one year from the date of acquisition;
provided that the terms of such agreements comply with the guidelines set forth
in the Federal Financial Agreements of Depository Institutions With Securities
Dealers and Others, as adopted by the Comptroller of the Currency on October 31,
1985.

            "Change of Control" means the occurrence of any of the following:
(i) a "person" or "group" (as such terms are used in Sections 14(d)(2) and
13(d)(3), respectively, of the Exchange Act) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act) of at least 35% of the
outstanding voting power of the fully diluted Voting Stock of PCI or the Company
(other than, in respect of the Company, if such "person" is PCI or an Affiliate
of PCI), (ii) the adoption of a plan relating to the liquidation or dissolution
of PCI or the Company, taken individually or on

                                       8
<PAGE>
a consolidated basis with its Subsidiaries, (iii) the merger or consolidation of
PCI or the Company with or into another corporation with the effect that the
stockholders of PCI or the Company immediately prior to such merger or
consolidation cease to be the "beneficial owners" (as defined in Rule 13d-3
under the Exchange Act) of 35% or more of the combined voting power of the
securities of the surviving corporation of such merger or the corporation
resulting from such merger or consolidation ordinarily (and apart from rights
arising under special circumstances) having the right to vote in the election of
directors outstanding immediately after such merger or consolidation, or (iv)
during any period of two consecutive calendar years, individuals who at the
beginning of such period constituted the Board of Directors of PCI (together
with any new directors whose election by the Board of Directors of PCI, or whose
nomination for election by the shareholders of PCI, was approved by a vote of a
majority of the directors then still in office who either were directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
directors of PCI then in office. Notwithstanding the foregoing, a Change of
Control shall not be deemed to have occurred under clause (iii) above solely as
a result of a merger or consolidation of the Company with or into PCI provided
that such merger or consolidation is permitted under Article Eight of this
Indenture.

            "Chapter 11 Cases" means each and all of the cases under Chapter 11
of the Bankruptcy Code commenced by Pioneer Companies, Inc., Pioneer Corporation
of America, Imperial West Chemical Co., Kemwater North America Company, PCI
Chemicals Canada Inc./PCI Chimie Canada Inc., Pioneer Americas, Inc., Pioneer
(East), Inc., Pioneer Water Technologies, Inc., Pioneer Licensing, Inc. and KWT,
Inc., and styled In re Pioneer Companies, Inc. et al, Chapter 11 Case No.
01-38259-H3-11 Jointly Administered.

            "Claimant" means a holder of an Allowed (as such term is defined in
the Plan of Reorganization) PCA U.S. Secured Term and Note Claim and/or an
Allowed (as such term is defined in the Plan of Reorganization) Canadian Secured
Term and Note Claim.

            "Closing Date" has the meaning given to it in Section 1401.

            "Closing Date Certificate" means a certificate of an Authorized
Officer of the relevant Obligor, substantially in the form of Exhibit C hereto,
delivered pursuant to Section 1401R.

            "Code" means the United States Internal Revenue Code of 1986, as
amended, reformed or otherwise modified.

            "Collateral" means all of the property and assets of each Obligor
and Obligor Subsidiary now existing or hereafter acquired which secures the
Indenture Obligations pursuant to, and as otherwise defined in, the Security
Documents.

                                       9
<PAGE>
            "Collateral Agent" means Wells Fargo Bank Minnesota, National
Association, as collateral agent under the Common Security and Intercreditor
Agreement, and any successor thereto.

            "Collateral Proceeds" has the meaning specified in Section 1009
hereof.

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

            "Common Security and Intercreditor Agreement" means the Common
Security and Intercreditor Agreement, dated as of December 31, 2001, by and
among the Indenture Obligors and others, the New Tranche B Notes Indenture
Trustee (for itself and for the benefit of the New Tranche B Notes Holders), the
Collateral Agent, the Trustee (for itself and for the benefit of the Holders of
the Securities) and the Administrative Agent (for itself and for the benefit of
the Lenders), substantially in the form of Exhibit B attached hereto, and as may
be amended, supplemented, amended and restated or otherwise modified from time
to time.

            "Company" is defined in the preamble hereto, and includes each other
successor thereto.

            "Company Request" or "Company Order" means a written request or
order signed in the name of the Company by any one of its Chairman of the Board
of Directors, its President or a Vice President (regardless of vice presidential
designation), and by any one of its Treasurer, an Assistant Treasurer, its
Secretary or an Assistant Secretary, and delivered to the Trustee.

            "Confirmation Order" means the order of the Bankruptcy Court
confirming the Plan of Reorganization pursuant to Section 1129 of the Bankruptcy
Code.

            "Consolidated Net Income" means, for any period, and as to any
Person, the aggregate Net Income of such Person and its Subsidiaries for such
period determined in accordance with GAAP; provided that (i) the Net Income of
any Person which is not a Subsidiary of such Person but which is consolidated
with such Person or is accounted for by such Person by the equity method of
accounting will be included only to the extent of the amount of cash dividends
or cash distributions paid to such Person or a Wholly-Owned Subsidiary of such
Person, (ii) the Net Income of any Subsidiary of such Person that is subject to
restrictions, direct or indirect, on the payment of dividends or the making of
distributions to such Person will be excluded to the extent of such
restrictions, (iii) the Net Income of any Subsidiary less than 80% of whose
securities having the right (apart from the right under special circumstances)
to vote in the election of directors are owned by PCI, the Company or their
respective Wholly-Owned Subsidiaries will be included only to the extent of the
amount of cash dividends or cash distributions actually paid by such Subsidiary
to PCI, the Company or a Wholly-Owned Subsidiary of the

                                       10
<PAGE>
Company or PCI, (iv) all extraordinary gains and losses, and any gain or loss
realized upon the termination of any employee pension benefit plan, in respect
of dispositions of assets other than in the ordinary course of business and any
one-time increase or decrease to Net Income which is required to be recorded
because of the adoption of new accounting policies, practices or standards
required by GAAP (together, in each case, with any provision for taxes) will be
excluded, and (v) all amounts of "other income, net" classified as such on one
or more lines of such Person's statement of operations, in accordance with GAAP,
net of applicable income taxes, will be excluded from such Person's aggregate
Net Income.

            "Consolidated Net Worth" means, for any Person, the total of the
amounts shown on the balance sheet of such Person and its Subsidiaries,
determined on a consolidated basis without duplication in accordance with GAAP,
as of the end of the most recent Fiscal Quarter of such Person ending at least
forty-five (45) days prior to the taking of any action for the purpose of which
the determination is being made, as (i) the amount of Capital Stock plus (ii)
the amount of surplus and retained earnings (or, in the case of a surplus or
retained earnings deficit, minus the amount of such deficit).

            "Corporate Trust Office" means the office of the Trustee or an
affiliate or agent thereof at which at any particular time the corporate trust
business for the purposes of this Indenture shall be principally administered,
which office at the date of execution of this Indenture is located at Sixth
Street and Marquette Avenue, Minneapolis, Minnesota 55479, Attention: Corporate
Trust Services.

            "Covenant Defeasance" is defined in Section 403 hereof.

            "Creditors' Committee Lenders" means the secured creditors of the
debtors in the Chapter 11 Cases appointed to the statutory committee of
unsecured creditors appointed in the Chapter 11 Cases.

            "CRC Portfolio" means those certain derivatives contracts purported
and alleged by the Colorado River Commission ("CRC") to have been entered into,
in each case before the date hereof, on behalf of the Company by the CRC in
connection with that certain (i) Contract No. P03-50, (ii) Contract No. P03-61,
(iii) Contract No. P03-65, and (iv) Contract No. P03-70.

            "Cumulative Capital Expenditures" at any given time, means the
amount in dollars that is equal to the sum of all Capital Expenditures of PCI,
the Company and their respective Subsidiaries, taken as a whole, from January 1,
2002, and up to and including December 31 of the immediately preceding Fiscal
Year of the Company.

            "Cumulative Capital Expenditure Deficit" for a Fiscal Year of the
Company is the amount in dollars equal to the greater of (a) zero, and (b) the
Rollover Amount in respect of such Fiscal Year.

            "Cumulative Capital Expenditure Limit" for a given Fiscal Year of
the Company means a dollar amount determined by reference to the following
table:

                                       11
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
                FISCAL YEAR OF COMPANY                   CUMULATIVE CAPITAL EXPENDITURE LIMIT
---------------------------------------------------------------------------------------------
<S>                                                      <C>
Beginning January 1, 2003 and ending December 31, 2003              $ 30,000,000
---------------------------------------------------------------------------------------------
Beginning January 1, 2004 and ending December 31, 2004              $ 54,000,000
---------------------------------------------------------------------------------------------
Beginning January 1, 2005 and ending December 31, 2005              $ 78,000,000
---------------------------------------------------------------------------------------------
Beginning January 1, 2006 and ending December 31, 2006              $102,000,000
---------------------------------------------------------------------------------------------
</TABLE>

            "Custodian" means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.

            "Custody and Disbursing Agreement" means that certain Custody and
Disbursing Agreement, dated effective as of December 4, 2001, between Wells
Fargo Bank Minnesota, N.A. and Pioneer Companies, Inc.

            "Default" means any Event of Default or any condition, occurrence or
event which, after notice or lapse of time or both, would, unless cured or
waived, constitute an Event of Default.

            "Defaulted Interest" is defined in Section 309 hereof.

            "Defeasance" is defined in Section 402 hereof.

            "Defeasance Redemption Date" is defined in Section 404 hereof.

            "Defeased Securities" is defined in Section 401 hereof.

            "Depositary" means The Depository Trust Company, its nominees and
their respective successors.

            "Direction" is defined in Section 105 hereof.

            "Disbursing Agent" means Wells Fargo Bank Minnesota, N.A. in its
capacity as disbursing agent under the Custody and Disbursing Agreement.

            "Disclosure Schedule" means the Disclosure Schedule attached hereto
as Schedule I, as it may be amended, supplemented or otherwise modified from
time to time by the Company with the written consent of the Trustee.

            "EBITDA" means, for any period, and for any Person, its Consolidated
Net Income for such period, before subtracting its consolidated income taxes,
interest expense, depreciation and amortization (including amortization
associated with good will, deferred debt expenses, restricted stock and option
costs and non-competition agreements), determined in accordance with GAAP.

                                       12
<PAGE>
            "Effective Plan Date" means the first Business Day on which the
conditions specified in Section 10.1 of the Plan of Reorganization have been
satisfied or waived.

            "Eligible Investments" means, (i) securities issued or directly and
fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof or Canada or any province thereof (provided that the
full faith and credit of the United States of America or Canada, as the case may
be, is pledged in support thereof) having maturities of not more than 90 days
from the date of acquisition, (ii) time deposits and certificates of deposit
with maturities of not more than 90 days from the date of acquisition of any
commercial banking institution that is a member of the Federal Reserve System or
is a Schedule 1 Canadian Bank, in either case having capital and surplus in
excess of $500,000,000 and whose debt has a rating at the time of any such
investment of at least "A-1" or the equivalent thereof by S&P or at least "P-1"
or the equivalent thereof by Moody's, or any Lender, (iii) fully secured
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clause (i) entered into with any bank or
financial institution meeting the qualifications specified in clause (ii) above,
(iv) commercial paper issued by the parent corporation of any commercial banking
institution that is a member of the Federal Reserve System or is a Schedule 1
Canadian Bank, in either case having capital and surplus in excess of
$500,000,000 and commercial paper or master notes of issuers rated at the time
of any such investment at least "A-1" or the equivalent thereof by S&P or at
least "P-1" or the equivalent thereof by Moody's, and in each case maturing
within 270 days after the date of acquisition, and (v) any shares in an open-end
mutual fund organized by a bank or financial institution having combined capital
and surplus of at least $500,000,000 investing solely in investments permitted
by the foregoing clauses (i), (ii) and (iv).

            "Environmental Claim" means any claim, assertion, demand, notice of
violation, suit, administrative or judicial proceeding, regulatory action,
investigation, information request or order involving any Hazardous Materials,
Environmental Law, noise or odor pollution or any injury or threat of injury to
human health, property or the environment.

            "Environmental Law" means all international, national, provincial,
regional, federal, state, local and municipal statutes, laws (including
principles of common and decisional law), regulations, by-laws, policies,
guidelines, directives, standards, rules, orders, decrees, judgments,
ordinances, permits, certificates, licenses, registrations, approvals, or
requirements or authorizations of any governmental or administrative authority
relating to the environment, natural resources, safety or health of humans or
other organisms, including the manufacture, distribution in commerce, and use or
Release of Hazardous Materials.

            "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA also refer to any successor sections.

                                       13
<PAGE>
            "ERISA Affiliate" means any corporation, partnership, or other trade
or business (whether or not incorporated) that is, along with any Obligor or
Obligor Subsidiary, a member of a controlled group of corporations or a
controlled group of trades or businesses, as described in Section 414(b) and
414(c), respectively, of the Code or Section 4001 of ERISA, or a member of the
same affiliated service group within the meaning of Section 414(m) of the Code.

            "ERISA Event" means (a) with respect to a Single Employer Plan, a
"reportable event", as such term is described in Section 4043 of ERISA and the
regulations issued thereunder (other than a "reportable event" with respect to
which notice to the PBGC has been waived under Section 4043 of ERISA or such
regulations) or an event described in Section 4068 of ERISA, (b) the withdrawal
of any Obligor, Obligor Subsidiary or ERISA Affiliate from a Multiple Employer
Plan during a plan year in which it was a "substantial employer", as such term
is defined in Section 4001(a)(2) of ERISA, or the incurrence of liability by any
Obligor, Obligor Subsidiary or ERISA Affiliate under Section 4064 of ERISA upon
the termination of a Multiple Employer Plan, (c) providing notice of intent to
terminate a Single Employer Plan pursuant to Section 4041(c) of ERISA or the
treatment of a Single Employer Plan amendment as a termination under Section
4041 of ERISA, (d) the institution of proceedings to terminate a Plan by the
PBGC under Section 4042 of ERISA, (e) a complete or partial withdrawal by any
Obligor, Obligor Subsidiary or ERISA Affiliate from a Multiemployer Plan, (f) a
failure by any Obligor, Obligor Subsidiary or ERISA Affiliate to make required
contributions to a Plan, (g) the adoption of an amendment to a Single Employer
Plan which would require security to be given to the Plan pursuant to Section
401(a)(29) of the Code or Section 307 of ERISA, (h) the imposition of any
liability under Title IV of ERISA, other than PBGC premiums due but not
delinquent under Section 4007 of ERISA, upon any Obligor, Obligor Subsidiary or
ERISA Affiliate, (i) an application for a funding waiver or an extension of any
amortization period pursuant to Section 412 of the Code with respect to any
Single Employer Plan, (j) the imposition of a lien upon any Obligor, Obligor
Subsidiary or ERISA Affiliate pursuant to Section 412 of the Code or Section 302
of ERISA, (k) any event or condition that results in the reorganization or
insolvency of a Multiemployer Plan under Section 4241 or 4245 of ERISA, or (l)
any Obligor, Obligor Subsidiary or ERISA Affiliate engages in a nonexempt
prohibited transaction or otherwise becomes liable with respect to a nonexempt
prohibited transaction that could reasonably be expected to have a Material
Adverse Effect.

            "Event of Default" has the meaning specified in Article Five of this
Indenture.

            "Excess Cash Flow" means, for any period, (i) the sum of (A) the
Consolidated Net Income of PCI, the Company and their respective consolidated
Subsidiaries for such period, and (B) all depreciation, amortization and other
non-cash charges of PCI, the Company and their respective consolidated
Subsidiaries for such period (including any non-cash interest expense included
in such Consolidated Net Income) to the extent included in the computation of
such Consolidated Net Income, minus (ii) the sum of (without duplication) (A)
scheduled and mandatory cash principal payments on any Indebtedness made by PCI,
the Company or any of their respective

                                       14
<PAGE>
Subsidiaries during such period to the extent such other Indebtedness is
permitted herein and such payments are permitted herein to be made, (B) Capital
Expenditures made by PCI, the Company or any of their respective Subsidiaries
during such period to the extent permitted herein, (C) cash reorganization
expenses, restructuring fees and charges actually paid in such period relating
to the reorganization and restructuring of the Debtors (as such term is defined
in the Plan of Reorganization) in connection with the Chapter 11 Cases only to
the extent such expenses, fees and charges are not deducted from the
determination of such Consolidated Net Income, (D) any cash installment required
to be paid to the holder of New Other Secured Notes and Claims, and (E) all
extraordinary cash gains or cash income received (including as a result of
transactions excluded from the definition of Asset Sales), but only to the
extent excluded from the determination of such Consolidated Net Income as a
result of clause (v) of the definition of Consolidated Net Income, plus or
minus, as the case may be, (iii) cash changes in the Working Capital of PCI, the
Company and their respective Subsidiaries during such period (in either case,
without duplication of adjustments made in respect of such Working Capital
pursuant to clause (i) or (ii) of this definition of Excess Cash Flow).

            "Exchange Act" means the United States Securities Exchange Act of
1934, as amended.

            "Existing Indebtedness" means all Indebtedness (other than the
Securities outstanding) of the Obligors existing as of the Effective Plan Date
after giving effect to the Plan of Reorganization and listed on Item 1008(iii)
("Existing Indebtedness") of the Disclosure Schedule.

            "Exit Facility" means the Loan and Security Agreement, dated as of
December 31, 2001, among the Company and PCI Chemicals Canada Company, as
borrowers, the guarantors parties thereto, the Exit Facility Lenders and the
Exit Facility Agent, and any refinancing thereof as may be permitted pursuant to
this Indenture, as may be amended, supplemented, amended and restated or
otherwise modified from time to time, and all agreements and instruments related
thereto and contemplated thereby, each dated as of December 31, 2001 (including
any security agreement entered into in connection therewith), as each such
agreement or instrument may be amended, supplemented, amended and restated or
otherwise modified from time to time and notwithstanding that there may be a
period of time between such refinancings.

            "Exit Facility Agent" means Foothill Capital Corporation and its
successors and assigns under the Exit Facility and any agent party to any
subsequent Exit Facility.

            "Exit Facility Lenders" means the lenders and any other secured
parties as are or may from time to time become parties to the Exit Facility and
their respective successors and assigns and any other lenders and secured
parties party to any subsequent Exit Facility.

            "Fair Market Value" means, with respect to any asset or property,
the price which could be negotiated in an arm's-length transaction, for cash,
between a

                                       15
<PAGE>
willing seller and a willing buyer, neither of whom is under undue pressure or
compulsion to complete the transaction. Fair Market Value will be determined by
a majority of the members of the Boards of Directors of PCI and the Company and
a majority of the disinterested members of the Boards of Directors of PCI and
the Company, if any, acting in good faith, and will be evidenced by a duly and
properly adopted resolution of such Boards of Directors.

            "Final Order" has the meaning given to it in the Plan of
Reorganization.

            "Fiscal Quarter" means any fiscal quarter of a Fiscal Year.

            "Fiscal Year" means, with respect to any Obligor, any period of
twelve consecutive months ending on December 31; references to a Fiscal Year
with a numbering corresponding to any calendar year refer to the fiscal year
ending on the 31st of December during such calendar year.

            "Funding Guarantor" is defined in Section 1310 hereof.

            "GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession, which are in effect from time to time.

            "Global Security" means a security that evidences all of the
Securities (other than Physical Securities) and bears the legend set forth in
Section 202(a) (but not the legend set forth in Section 202(b)).

            "Guaranties" means each Guaranty taken together with each other
Guaranty.

            "Guarantors" means, collectively, Pioneer Companies, Inc., a
Delaware corporation, Imperial West Chemical Co., a Nevada corporation, Kemwater
North America Company, a Delaware corporation, PCI Chemicals Canada Company, an
unlimited liability company organized and existing under the laws of Nova
Scotia, Canada, Pioneer (East), Inc., a Delaware corporation, and KWT, Inc., a
Delaware corporation, and each other guarantor of the Company that becomes a
guarantor pursuant to this Indenture, and "Guarantor" shall mean any one of such
guarantors.

            "Guaranty" means the guaranty by any Guarantor of the Company's
Indenture Obligations pursuant to a guaranty given in accordance with this
Indenture, including the Guaranties by the Guarantors included in Article
Thirteen of this Indenture and any Guaranty delivered pursuant to Section 1316
hereof.

            "Guaranteed Obligations" is defined in Section 1301 hereof.

                                       16
<PAGE>
            "Hazardous Materials" means all pollutants, contaminants, hazardous
substances, hazardous chemicals, hazardous wastes, hazardous materials, residual
hazardous materials, medical and biochemical wastes, special wastes, toxic
substances, petroleum (including crude oil) and petroleum-derived substances,
wastes and additives, asbestos, polychlorinated biphenyls, ozone-depleting
substances, methane, radioactive materials (including source, special nuclear
and by-product materials as defined by 42 U.S.C. Section 2011 et seq. (whether
or not 42 U.S.C. Section 2011 et seq. would apply in respect of any Obligor
incorporated or organized outside of the United States)) and all other
compounds, elements, materials and substances in any form or condition
(including products) regulated, restricted or addressed by or under
Environmental Laws.

            "Hedging Obligations" means the obligations of any Person or entity
pursuant to any swap or cap agreement, exchange agreement, collar agreement,
option, futures or forward hedging contract, derivative instrument or other
similar agreement or any arrangement designed to protect such Person or entity
against fluctuations in interest rates or foreign exchange rates or the price of
raw materials and other chemical products used or produced in the Company's
business or the business of any other Obligor, as the case may be.

            "Holder" means a Person in whose name a Security is registered in
the Security Register; provided that for purposes of any request, demand,
authorization, vote, direction, notice, consent, waiver or other Act given or
taken by a Holder, "Holders" shall mean the Holders and the Lenders.

            "Including" means including without limiting the generality of any
description preceding such term, and, for purposes of this Indenture, the
parties hereto agree that the rule of ejusdem generis shall not be applicable to
limit a general statement, which is followed by or referable to an enumeration
of specific matters, to matters similar to the matters specifically mentioned.

            "Incur" has the meaning given to it in Section 1008 hereof; provided
that (i) with respect to any Indebtedness of any Subsidiary of PCI or the
Company that is owing to PCI or the Company, or another such Subsidiary, any
disposition, pledge or transfer of such Indebtedness to any Person (other than
PCI or the Company or a Wholly-Owned Subsidiary of PCI or the Company) shall be
deemed to be an incurrence of such Indebtedness and, (ii) with respect to any
Indebtedness of PCI or the Company or a Subsidiary of the Company or PCI that is
owing to another such Subsidiary, any transaction pursuant to which a
Wholly-Owned Subsidiary to which such Indebtedness is owing ceases to be a
Wholly-Owned Subsidiary shall be deemed to be an incurrence of such
Indebtedness; and provided further, that any Indebtedness of a Person existing
at the time such Person becomes a Subsidiary of PCI or the Company shall be
deemed to be incurred by such Subsidiary at the time it becomes a Subsidiary.
The term "incurrence" has a corresponding meaning.

            "Indebtedness" of any Person means, without duplication, all
liabilities with respect to: (i) indebtedness for money borrowed or the deferred
purchase price of property or services or which is evidenced by a bond,
debenture, note or other similar

                                       17
<PAGE>
instrument or agreement, but excluding trade credit evidenced by any such
instrument or agreement incurred in the ordinary course of business and payable
on usual and customary terms, or Indebtedness of any partnership of which such
Person is a partner; (ii) reimbursement obligations, letters of credit and
bankers' acceptances; (iii) indebtedness with respect to Hedging Obligations;
(iv) Capitalized Lease Obligations; (v) indebtedness, secured or unsecured,
created or arising in connection with the acquisition or improvement of any
property or asset or the acquisition of any business; (vi) all indebtedness
secured by or for which the obligee has an existing right, contingent or
otherwise, to be secured by any Lien upon property owned by such Person and all
indebtedness secured in the manner specified in this clause even if such Person
has not assumed or become liable for the payment thereof; (vii) all indebtedness
of such Person created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person or
otherwise representing the deferred and unpaid balance of the purchase price of
any such property, including all indebtedness created or arising in the manner
specified in this clause even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property; (viii) guaranties, direct or indirect, of any
Indebtedness of other Persons referred to in clauses (i) through (vii) above, or
of dividends or leases, taxes or other obligations of other Persons, excluding
any guaranty arising out of the endorsement of negotiable instruments for
collection in the ordinary course of business; (ix) contingent obligations in
respect of, or to purchase or otherwise acquire or be responsible or liable for,
through the purchase of products or services, irrespective of whether such
products are delivered or such services are rendered, or otherwise, any such
indebtedness referred to in clauses (i) through (vii) above; (x) any obligation,
contingent or otherwise, arising under any surety, performance or maintenance
bond; and (xi) all preferred stock or other redeemable stock of such Person
valued at the greater of its voluntary or involuntary maximum fixed repurchase
price plus accrued and unpaid dividends. As used herein, Indebtedness with
respect to any Hedging Obligation means, with respect to any specified Person on
any date, the net amount (if any) that would be payable by such specified Person
upon the liquidation, close-out or early termination on such date of such
Hedging Obligation. For purposes of the foregoing, any settlement amount payable
upon the liquidation, close-out or early termination of a Hedging Obligation
shall be calculated by PCI and the Company in good faith and in a commercially
reasonable manner on the basis that such liquidation, close-out or early
termination results from an event of default or other similar event with respect
to such specified Person. Any reference in this definition to indebtedness shall
be deemed to include any renewals, extensions and refundings of any such
indebtedness or any indebtedness issued in exchange for such indebtedness.

            "Indemnified Liabilities" has the meaning given to it in Section
1509.

            "Indemnified Parties" has the meaning given to it in Section 1509.

            "Indenture" means, on any date, this Indenture (including each
Guaranty, the Disclosure Schedule, each other schedule hereto and all exhibits)
as originally in effect on the Closing Date and as thereafter from time to time
amended, supplemented, amended and restated, or otherwise modified and in effect
on such date.

                                       18
<PAGE>
            "Indenture Documents" means this Indenture, the Securities, the
Guaranties, the Common Security and Intercreditor Agreement, each Mortgage (upon
execution and delivery thereof), the other Security Documents and each other
agreement, document or instrument delivered in connection herewith and
therewith, whether or not specifically mentioned herein or therein each as
amended, supplemented, amended and restated or otherwise modified from time to
time.

            "Indenture Obligations" means (i) the obligations (monetary or
otherwise) of the Company and each other Obligor and their respective Obligor
Subsidiaries under this Indenture, the Securities and the other Indenture
Documents, to pay principal, premium, if any, and interest when due and payable,
and all other amounts due or to become due under or in connection with this
Indenture (including, without limitation, all sums due to the Trustee pursuant
to Section 606 hereof), the Securities and the other Indenture Documents, and
(ii) the performance of all other obligations to the Trustee and the Holders
under this Indenture, the Securities and the other Indenture Documents,
according to the terms hereof and thereof.

            "Indenture Obligors" means the Company, as issuer of the Securities,
each of the Guarantors and each other obligor under this Indenture, excluding
the Trustee.

            "Independent Director" means, in relation to any Person, a director
other than a director (i) who (apart from being a director of the Person or any
of its Subsidiaries) is an employee, insider, associate or Affiliate of the
Person or any of its Subsidiaries or has held any such position during the
previous year, or (ii) who is a director, an employee, insider, associate or
Affiliate of another party to the transaction in question.

            "Insurance Proceeds" has the meaning given to it in the Common
Security and Intercreditor Agreement.

            "Intercreditor Collateral Account" means the Collateral Account as
defined in the Common Security and Intercreditor Agreement.

            "Interest Accrual Period" means, with respect to any Interest
Payment Date, the period commencing on the prior Interest Payment Date (or the
Closing Date in the case of the first Interest Payment Date) and ending on the
calendar day preceding such Interest Payment Date.

            "Interest Determination Date" means, with respect to each Interest
Accrual Period, the second London Business Day preceding the first day of such
Interest Accrual Period (or in the case of the March 1, 2002 Interest Payment
Date, the Closing Date).

            "Interest Payment Date" means the Stated Maturity of an installment
of interest on the Securities.

            "Investment" means any direct or indirect advance, loan, other
extension of credit or capital contribution (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) to

                                       19
<PAGE>
purchase or acquire Capital Stock, bonds, notes, debentures or other securities
of, or purchase or acquire all, or a substantial part, of the business, Capital
Stock or other evidence of beneficial ownership of, or any other investment in
or guaranty of any Indebtedness of, any Person or any other item that would be
classified as an investment on a balance sheet prepared in accordance with GAAP.
Investments do not include advances to customers and suppliers in the ordinary
course of business on commercially reasonable terms. If any Obligor or any
Obligor Subsidiary sells or otherwise disposes of any Capital Stock of any
direct or indirect Subsidiary of any Obligor or Obligor Subsidiary such that,
after giving effect to any such sale or disposition, such Person is no longer
such a Subsidiary of the Obligor or Obligor Subsidiary, 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 of the Capital Stock of such Subsidiary not sold
or disposed of.

            "Judgment Currency" is defined in Section 1005 hereof.

            "Lenders" shall mean the lenders party to the Term Loan Agreement.

            "Letter of Transmittals" means those certain letters of transmittals
(including Agent's Messages for ATOPS transmitted by the Depositary) distributed
to the Claimants in connection with the implementation of the Plan of
Reorganization.

            "LIBOR" means the London interbank offered rate determined on each
Interest Determination Date by the Trustee for the next Interest Accrual Period
as follows:

      first: on the basis of offered rates for three-month United States dollar
      deposits, as this rate appears on the British Bankers' Association website
      as of 2:00 p.m. London time on such day;

      second: if the rate does not appear on the British Bankers' Association
      website as of 2:00 p.m. London time on such day, on the basis of offered
      rates for three-month United States dollar deposits, as this rate appears
      on Telerate Screen Page 3750, as of 2:00 p.m. London time on such day;

      third: if the rate does not appear on Telerate Screen Page 3750 as of 2:00
      p.m. London time on such day, LIBOR shall be the arithmetic mean of the
      offered quotations of two or more Reference Banks, rounded to the nearest
      whole multiple of 1/16%; and

      fourth: if on the Interest Determination Date fewer than two Reference
      Banks provide offered quotations, LIBOR for the Interest Accrual Period
      shall be the higher of (x) LIBOR as determined on the previous Interest
      Determination Date and (y) the Reserve Interest Rate.

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

                                       20
<PAGE>
            "Liquidity" on any day, means the aggregate dollar amount of cash
held by or on behalf of the Obligors and the Obligor Subsidiaries taken as a
whole plus the aggregate principal amount of revolving credit loans or other
facilities that may be borrowed on such day by the Company and by PCI Chemicals
Canada Company (taken together) under the Exit Facility.

            "Liquidity Quarterly Prepayment" means, for any mandatory Redemption
Date in respect of Section 1101(c)(ii) an amount in dollars equal to Excess Cash
Flow for the Calendar Quarter immediately preceding such mandatory Redemption
Date multiplied by a percentage, which percentage shall be determined by
reference to the Average Liquidity during such Calendar Quarter (the "Calendar
Quarter Average Liquidity") and the Average Liquidity during the 45 day period
immediately following the end of such Calendar Quarter (the "Forty Five Day
Average Liquidity") as follows:

                                       21
<PAGE>
                       CALENDAR QUARTER AVERAGE LIQUIDITY
                                  ($ MILLIONS)

<TABLE>
<CAPTION>

                           15 or greater       20 or greater
                          and less than 20    and less than 25      25 or greater
                          -----------------   ------------------   -----------------
<S>                       <C>                 <C>                  <C>
FORTY FIVE DAY
AVERAGE LIQUIDITY
($ MILLIONS)

10 or greater and less
than 15                         10%                  10%                 10%

15 or greater and less
than 20                         35%                  60%                 90%

20 or greater and less
than 25                         45%                  60%                 90%

25 or greater                   50%                  60%                 90%
</TABLE>

                           ----------------------------------------------------
                           PERCENTAGE OF EXCESS CASH FLOW TO BE MULTIPLIED TO
                           EXCESS CASH FLOW TO DETERMINE THE AMOUNT IN DOLLARS
                           OF THE MANDATORY REDEMPTION IN RESPECT OF SECTION
                           1101(c)(ii).
                           ----------------------------------------------------

            No such Liquidity Quarterly Payment shall be payable pursuant to
Section 1101 if the corresponding Forty Five Day Average Liquidity is less than
$10,000,000 or if the corresponding Calendar Quarter Average Liquidity is less
than $15,000,000.

            For the avoidance of doubt, and for the purposes only of
illustrating the operation of the above table, the following is a worked example
of the use of the table in determining the Liquidity Quarterly Prepayment for a
given period. If the Forty Five Day Average Liquidity immediately succeeding a
Calendar Quarter is $16,000,000 (which figure can be located on the above table
in the second row of the column marked "Forty Five Day Average Liquidity") and
the Calendar Quarter Average Liquidity for such Calendar Quarter is $21,000,000
(which figure can be located on the above table in the second column from the
right in the box marked "Calendar Quarter Average

                                       22
<PAGE>
Liquidity"), then the dollar amount of the Liquidity Quarterly Prepayment shall
be 60% of the Excess Cash Flow for the preceding Calendar Quarter (which
percentage can be located at the intersection of the row and the column
identified above).

            "Loan Documents" means collectively, the Term Loan Agreement
(including the guaranties contained therein), the New Tranche A Term Notes, the
Common Security and Intercreditor Agreement, each Mortgage (upon execution and
delivery thereof), the other Security Documents and each other agreement,
document or instrument delivered in connection therewith, whether or not
specifically mentioned herein or therein, each as amended, supplemented, amended
and restated or otherwise modified from time to time.

            "London Business Day" means any Business Day on which dealings in
U.S. dollar deposits are transacted in the London interbank Eurodollar market.

            "Material Adverse Effect" means (i) any material adverse effect on
the business, assets, debt service capacity, liabilities (including
environmental liabilities but excluding any changes in the financial condition
of the Company resulting from the application of FAS 133 to the CRC Portfolio),
financial condition, operations or prospects of the Obligors and the Obligor
Subsidiaries, taken as a whole, (ii) any material adverse effect upon the
ability of the Company or any other Obligor, taken as a whole, to timely perform
its respective material obligations under the Indenture Documents, the New
Tranche B Notes Indenture (and each of the guaranties thereunder), the New
Tranche B Notes, the Term Loan Agreement (and each of the guaranties
thereunder), the New Tranche A Term Notes or the Registration Rights Agreement,
or (iii) any impairment of the legality, validity or enforceability of this
Indenture, any other Indenture Document, the New Tranche B Notes Indenture (and
each of the guaranties thereunder), the New Tranche B Notes, the Term Loan
Agreement (and each of the guaranties thereunder), the New Tranche A Term Notes
or the Registration Rights Agreement, or any material impairment of the rights,
remedies or benefits available, as the case may be, to the Trustee, the
Collateral Agent or the Holders under this Indenture, or under any other
Indenture Document, to the Collateral Agent, the New Tranche B Notes Indenture
Trustee, the New Tranche B Notes Holders, the Administrative Agent or the
Lenders under the Security Documents, the New Tranche B Notes Indenture (and
each of the guaranties thereunder), the New Tranche B Notes, the Term Loan
Agreement (and each of the guaranties thereunder), the New Tranche A Term Notes
or the Registration Rights Agreement.

            "Maturity" when used with respect to any Security means the date on
which the principal of such Security becomes due and payable as therein provided
or as provided in this Indenture, whether at Stated Maturity or on a Redemption
Date or otherwise, and whether by declaration of acceleration, Change of
Control, call for redemption or otherwise.

            "MEIP" means an equity incentive plan which shall become effective
on the Effective Plan Date or as soon as reasonably practicable thereafter,
substantially in

                                       23
<PAGE>
the form contained in the Plan Supplement (as such term is defined in the Plan
of Reorganization).

            "Minimum Quarterly Prepayment" means, in respect of each Calendar
Quarter, the principal amount set forth in the table immediately below
determined by reference to the Company's EBITDA for such Calendar Quarter as
follows:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
COMPANY'S EBITDA FOR CALENDAR QUARTER                PRINCIPAL AMOUNT
-------------------------------------------------------------------------------
<S>                                                  <C>
less than $20,000,000                                       $0
-------------------------------------------------------------------------------
$20,000,000 or greater but less than $25,000,000        $2,500,000
-------------------------------------------------------------------------------
$25,000,000 or greater but less than $30,000,000        $5,000,000
-------------------------------------------------------------------------------
$30,000,000 or greater                                  $7,500,000
-------------------------------------------------------------------------------
</TABLE>

            "Moody's" means Moody's Investors Service, Inc. or any successor
rating agency.

            "Mortgage" means each mortgage, deed of trust, or similar security
instrument, including the Quebec Mortgage and Security Agreement, substantially
in the form of Exhibit A attached to this Indenture, which from time to time
affects any property (including real property or immovable property situated in
the United States or in any Canadian province) that secures PCI's, the Company's
or any other Obligor's obligations under this Indenture (including the
Guaranties), the Securities, the New Tranche B Notes Indenture (including the
guaranties thereunder), the New Tranche B Notes, the Term Loan Agreement
(including the guaranties thereunder), the New Tranche A Term Notes and each
other Indenture Document, as such instruments may be amended, supplemented or
otherwise modified from time to time.

            "Mortgaged Property" has the meaning given to it in the Common
Security and Intercreditor Agreement and, for the avoidance of doubt, includes
the immovable property, improvements and all other collateral subject to the
Mortgages.

            "Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA, other than a Canadian Benefits Plan, to which any
Obligor, Obligor Subsidiary or ERISA Affiliate is making or accruing an
obligation to make contributions, or with respect to which it has any liability.

            "Multiple Employer Plan" means a Single Employer Plan in respect of
which any Obligor, Obligor Subsidiary or ERISA Affiliate could have liability
under Section 4064 or 4069 of ERISA in the event such Plan has been or were to
be terminated under Section 4041(c) or 4042 of the Code.

                                       24
<PAGE>
            "Net Award" has the meaning given to it in the Common Security and
Intercreditor Agreement.

            "Net Income" means, for any period for any Person, the net income of
such Person determined in accordance with GAAP.

            "Net Offering Proceeds" means the aggregate cash proceeds of a
Qualified Equity Offering, or of one or more such Qualified Equity Offerings
together, net of the direct, reasonable and customary costs (such as reasonable
legal, accounting and underwriting discounts/sales commissions) relating to such
Qualified Equity Offering, or one or more such Qualified Equity Offerings
together.

            "Net Proceeds" means the aggregate cash proceeds received by any
Obligor or any Obligor Subsidiary in respect of any Asset Sale (including any
non-cash consideration received by any Obligor or any Obligor Subsidiary from
any Asset Sale that is converted into or sold or otherwise disposed of for cash
within 45 days after the relevant Asset Sale), net of (i) the direct costs
relating to such Asset Sale (including, without limitation, reasonable legal,
accounting and investment banking fees, sales commissions and adjustments of
severance costs), (ii) any taxes paid or payable as a result thereof, (iii) all
amounts required to be applied to the repayment of, or representing the amount
of permanent reductions in the commitments relating to, Indebtedness (other than
the Securities) secured by a Lien on the asset or assets the subject of such
Asset Sale which Lien is permitted pursuant hereto, and (iv) any reserve for
adjustment in respect of the sale price of such asset or assets required by
GAAP.

            "New Common Stock" means the common stock of PCI authorized by and
issued pursuant to the Plan of Reorganization.

            "New Debt" means the New Tranche B Notes, the New Tranche A Term
Notes and the Securities.

            "New Other Secured Notes" has the meaning given it in the Plan of
Reorganization.

            "New Other Secured Notes And Claims" means the Allowed Other Secured
Claims reinstated pursuant to the Bankruptcy Code and Plan of Reorganization and
the New Other Secured Notes.

            "New Tranche A Term Notes" means indebtedness of the Term Loan
Borrower in an aggregate principal amount of $4,578,126, as such indebtedness is
continued and incurred by the Term Loan Borrower from time to time in accordance
with the terms of the Term Loan Agreement.

            "New Tranche B Notes" means indebtedness of PCI Chemicals Canada
Company in an aggregate principal amount of $150,000,000 as evidenced by the
notes issued by PCI Chemicals Canada Company pursuant to the New Tranche B Notes
Indenture.

                                       25
<PAGE>
            "New Tranche B Notes Holders" means the holders of the New Tranche B
Notes.

            "New Tranche B Notes Indenture"means the indenture, dated as of
December 31, 2001, by and among PCI Chemicals Canada Company, as issuer, the
guarantors party thereto and Wells Fargo Bank Minnesota, National Association,
as indenture trustee, pursuant to which the New Tranche B Notes are issued, as
may be amended, supplemented, amended and restated, or otherwise modified from
time to time.

            "New Tranche B Notes Indenture Trustee" means the indenture trustee
under the New Tranche B Notes Indenture.

            "Obligor" means the Company, each of the Guarantors and any Person
(other than the Administrative Agent, New Tranche B Notes Indenture Trustee, the
Collateral Agent, the Trustee, any Lender, any New Tranche B Notes Holder or any
Holder) obligated under any Indenture Document.

            "Obligor Subsidiary" means, in respect of an Obligor or an Indenture
Obligor, any Subsidiary of such Obligor or Indenture Obligor, as the case may
be.

            "Occupational Safety and Health Laws" means all national, federal,
state, provincial, regional, municipal or local statutes, laws, ordinances,
codes, rules, regulations, by-laws, policies, guidelines, directives, judgments,
orders or decrees regulating, relating to or imposing liability or standards of
conduct concerning employee health and/or safety.

            "Officers' Certificate" means a certificate signed by the Chairman
of the Board, Vice Chairman, the President or a Vice President (regardless of
vice presidential designation), and by the Treasurer, an Assistant Treasurer,
the Secretary or an Assistant Secretary of the relevant Obligor or Obligor
Subsidiary, as the case may be, and delivered to the Trustee.

            "Old Debt" means indebtedness under (i) those certain $175,000,000
9.25% Senior Secured Guaranteed Notes due October 2007 issued by PCI Chemicals
Canada Inc. pursuant to that certain Indenture, dated as of October 30, 1997,
among PCI Chemicals Canada Inc., the Guarantors (as such term is defined
therein) and the United States Trust Company of New York ("USTC"), in its
capacity as trustee and as collateral agent, (ii) that certain Term Loan
Agreement, dated as of October 30, 1997, among Pioneer Corporation of America,
the Lenders (as such term is defined therein), certain other parties and BNY
Asset Solutions LLC, in its capacity as administrative agent, (iii) those
certain $200,000,000 9.25% Senior Secured Guaranteed Notes due June 2007 issued
by Pioneer Corporation of America pursuant to that certain Indenture, dated as
of June 17, 1997 among Pioneer Corporation of America, the Guarantors (as such
term is defined therein) and USTC, in its capacity as trustee, and (iv) that
certain Term Loan Agreement, dated as of June 17, 1997, among Pioneer
Corporation of America, the Lenders (as such term is defined therein), certain
other parties and BNY Asset Solutions LLC, in its capacity as administrative
agent.

                                       26
<PAGE>
            "Opinion of Counsel" means a written opinion of counsel in form and
substance satisfactory to the Trustee, who shall be counsel for the relevant
Obligor or Obligor Subsidiary, as the case may be, and who shall be reasonably
acceptable to the Trustee.

            "Opinion of Independent Counsel" means a written opinion of counsel
in form and substance satisfactory to the Trustee issued by someone who is not
an employee or consultant of the relevant Obligor or Obligor Subsidiary, as the
case may be, and who shall be reasonably acceptable to the Trustee.

            "Organizational Documents" means, in respect of any Obligor or other
Person, its certificate of incorporation and its by-laws (or equivalent
constitutive documents) and all shareholder agreements, voting trusts and
similar arrangements to which such Obligor or other Person is a party applicable
to any of authorized shares, or other units or forms, of its Capital Stock.

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

            (a) Securities theretofore canceled by the Trustee or delivered to
      the Trustee for cancellation;

            (b) Securities, or portions thereof, for whose payment or redemption
      money in the necessary amount has been theretofore deposited with the
      Trustee or any Paying Agent (other than the Company) in trust or set aside
      and segregated in trust by the Company (if the Company shall act as its
      own Paying Agent) for the Holders; provided that if such Securities are to
      be redeemed, notice of such redemption has been duly given pursuant to
      this Indenture or provision therefor satisfactory to the Trustee has been
      made;

            (c) Securities, except to the extent provided in Sections 402 and
      403 hereof, with respect to which the Company has effected defeasance or
      covenant defeasance as provided in Article Four; and

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

provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Securities have given any request, demand,
authorization, vote, direction, notice, consent, waiver or other Act hereunder,
(A) (i) Securities owned by the Company, any Guarantor, or any other Obligor
upon the Securities or any Affiliate of the Company, any Guarantor, or such
other Obligor, and (ii) all Unallocated Securities shall, in either case, be
disregarded and deemed not to be Outstanding, except that, in determining
whether the Trustee shall be protected in relying upon any such request,

                                       27
<PAGE>
demand, authorization, direction, notice, consent or waiver, only Securities
which the Trustee knows to be so owned shall be so disregarded (Securities so
owned which have been pledged in good faith may be regarded as Outstanding if
the pledgee establishes to the reasonable satisfaction of the Trustee the
pledgee's right so to act with respect to such Securities and that the pledgee
is not the Company, any guarantor or any other Obligor upon the Securities or
any Affiliate of the Company, any Guarantor or such other Obligor), and (B) the
Term Loans (as such term is defined in the Term Loan Agreement) shall be
included and deemed to be Outstanding Securities and the aggregate principal
amount of the Term Loans then outstanding shall be used in determining whether
such requisite principal amount shall have been satisfied.

            "Paying Agent" means any person authorized by the Company to pay the
principal of, premium, if any, or interest on any Securities on behalf of the
Company.

            "PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.

            "PCA U.S. Secured Term and Note Claim" has the meaning given to such
term in the Plan of Reorganization.

            "PCI" means Pioneer Companies, Inc., a Delaware corporation, in its
capacities as the parent of the Company and a Guarantor.

            "Permitted Investments" means (i) any Eligible Investment, (ii) any
Investment in the Company or any other Obligor, (iii) Investments in existence
on the date hereof and listed on Item 1006 ("Existing Investments") of the
Disclosure Schedule hereto, (iv) Indebtedness permitted pursuant to clause (vi)
of Section 1008 herein, (v) other investments by any Obligor after the date
hereof in joint ventures, corporations, limited liability companies,
partnerships or Obligor Subsidiaries engaged in a Related Business that do not
at any one time outstanding exceed $5,000,000, (vi) promissory notes and other
non-cash consideration received by the Obligors or the Obligor Subsidiaries in
connection with Asset Sales permitted hereunder, (vii) Investments by PCI or the
Company in Hedging Obligations permitted hereunder, (viii) investments
(including debt obligations and Capital Stock) received by the Company or its
Subsidiaries in connection with the bankruptcy or reorganization of suppliers
and customers and in settlement of delinquent obligations of, and other disputes
with customers and suppliers arising in the ordinary course of business, in each
case of the Company or its Subsidiaries, or (ix) other Investments not permitted
by the foregoing clauses (i) through (viii) (including loans and advances to
officers or employees of the Company or its Subsidiaries) in an aggregate amount
not to exceed $500,000 at any one time outstanding).

      "Permitted Issuance" means (i) the issuance by PCI of shares of Capital
Stock as dividends on issued and outstanding Capital Stock of the same class of
PCI or pursuant to any dividend reinvestment plan, (ii) the issuance by PCI of
options or other equity securities of PCI to outside directors, members of
management or employees of PCI or any Subsidiary of PCI, (iii) the issuance of
securities as interest or dividends on

                                       28
<PAGE>
pay-in-kind debt or preferred equity securities in accordance with the terms
permitted hereunder and under the other Indenture Documents, (iv) the issuance
to PCI or any of its Subsidiaries (or any director, with respect to such
director's qualifying shares) by any of PCI's Subsidiaries of any of their
respective Capital Stock, in each case with respect to this clause (iv) to the
extent such Capital Stock issued to PCI or such Subsidiary is pledged to the
Collateral Agent pursuant to the applicable Indenture Document, (v) the issuance
by PCI of shares of its Capital Stock in connection with an acquisition
permitted under this Indenture, (vi) cash payments made in lieu of fractional
shares of PCI's Capital Stock in connection with an acquisition referred to in
clause (v) above in an aggregate amount not to exceed $250,000 during the term
of this Indenture, and (vi) the issuance by PCI of additional shares of Capital
Stock of PCI to infuse additional capital into PCI and its Subsidiaries in an
aggregate amount not to exceed $5,000,000 during the term of this Indenture.

            "Permitted Liens" means as of any particular time, any one or more
of the following:

            (i) Liens for taxes, rates and assessments not yet past due or, if
      past due, the validity of which is being contested in good faith by the
      Obligors and the Obligor Subsidiaries by appropriate proceedings promptly
      instituted and diligently conducted and against which such Obligors and
      Obligor Subsidiaries have established appropriate reserves in accordance
      with GAAP;

            (ii) the Lien of any judgment rendered for an amount and for a
      period not resulting in an Event of Default which is being contested in
      good faith by the Obligors and the Obligor Subsidiaries by appropriate
      proceedings promptly instituted and diligently conducted and against which
      the Obligors and the Obligor Subsidiaries have established appropriate
      reserves in accordance with GAAP and which does not have a Material
      Adverse Effect;

            (iii) other than in connection with Indebtedness, any Lien (other
      than any Lien imposed by ERISA) arising in the ordinary course of business
      (a) to secure payments of workers' compensation, unemployment insurance,
      pension or other social security or retirement benefits, or to secure the
      performance of bids, tenders, leases, progress payments, contracts (other
      than for the payment of money) or to secure public or statutory
      obligations of any Obligor or Obligor Subsidiary, or to secure surety or
      appeal bonds to which any Obligor or Obligor Subsidiary is a party, (b)
      imposed by law dealing with materialmen's, mechanics', workmen's,
      repairmen's, warehousemen's, landlords', vendors' or carriers' Liens
      created by law, or deposits or pledges which are not yet due or, if due,
      the validity of which is being contested in good faith by the Obligors and
      the Obligor Subsidiaries by appropriate proceedings promptly instituted
      and diligently conducted and against which the Obligors and the Obligor
      Subsidiaries have established appropriate reserves in accordance with
      GAAP, and (c) rights of financial institutions to setoff and chargeback
      arising by operation of law;

                                       29
<PAGE>
            (iv) servitudes, licenses, easements, encumbrances, restrictions,
      rights-of-way and rights in the nature of easements or similar charges,
      minor title defects and irregularities which shall not in the aggregate
      materially adversely impair the use of the subject property by any Obligor
      or Obligor Subsidiary;

            (v) zoning and building by-laws and ordinances, municipal by-laws
      and regulations, and restrictive covenants, which do not materially
      interfere with the use of the subject property by any Obligor or any
      Obligor Subsidiary as such property is used as of the date hereof;

            (vi) Liens in favor of customs and revenue authorities arising as a
      matter of law to secure the payment of customs duties in connection with
      the importation of goods by the Company or its Subsidiaries;

            (vii) deposits to secure statutory obligations in the form of excise
      taxes;

            (viii) Liens arising from precautionary UCC financing statement
      filings in respect of operating leases or consignment arrangements entered
      into by the Company or its Subsidiaries with a supplier of goods in the
      ordinary course of business, which Liens are customarily filed as
      precautionary liens by such supplier of goods in the ordinary course of
      its business;

            (ix) any extension, renewal, substitution or replacement (or
      successive extensions, renewals, substitutions or replacements), as a
      whole or in part, of any of the Liens referred to in clauses (i) through
      (viii) of this definition or the Indebtedness secured thereby; provided
      that (a) such extension, renewal, substitution or replacement Lien is
      limited to that portion of the property or assets, now owned or hereafter
      acquired, that secured the Lien prior to such extension, renewal,
      substitution or replacement Lien and (b) the Indebtedness secured by such
      Lien (assuming all available amounts were borrowed) at such time is not
      increased;

            (x) Liens (a) securing obligations owed in respect of Allowed
      Secured Tax Claims and obligations owed in respect of Allowed Other
      Secured Claims reinstated in accordance with the Bankruptcy Code and
      pursuant to the Plan of Reorganization and listed in Item 1012 ("Existing
      Liens") of the Disclosure Schedule, (b) securing the Indenture
      Obligations, (c) on accounts receivable, inventory and related general
      intangibles securing obligations under the Exit Facility, (d) securing the
      obligations under the Transaction Documents, (e) securing obligations
      under New Other Secured Notes (to the extent the corresponding Allowed
      Other Secured Claims shall not have been reinstated), and (f) any other
      Lien granted by the Obligors as permitted by the Plan of Reorganization;

            (xi) Liens on assets or property of the Company, or on assets or
      property of Subsidiaries of the Company, to secure the payment of all or a
      part of the purchase price of assets or property acquired or constructed
      in the ordinary

                                       30
<PAGE>
      course of business after the Closing Date; provided, however, that (a) the
      aggregate principal amount of Indebtedness secured by such Liens does not
      exceed the original cost or purchase price of the assets or property so
      acquired (including the reasonable and customary costs associated with the
      acquisition of such acquired assets) or constructed, (b) the Indebtedness
      secured by such Liens is otherwise permitted to be incurred hereunder, (c)
      such Liens do not encumber any other assets or property of any Indenture
      Obligor or any of its Obligor Subsidiaries, and (d) the Indebtedness
      secured by such Liens may not be created more than 100 days after the
      later of the acquisition, completion of construction, repair, improvement,
      addition or commencement of full operation of the property subject to such
      Liens;

            (xii) Liens on the assets or property permitted to be acquired
      hereby by the Company or any of its Subsidiaries after the date hereof;
      provided, however, that (a) such Liens existed on the date such asset or
      property were acquired and were not incurred as a result of or in
      anticipation of such acquisition and (b) such Liens do not extend to or
      cover any property or assets of any Indenture Obligor or any of its
      Obligor Subsidiaries other than the property or assets so acquired;

            (xiii) Liens securing Indebtedness which is incurred to refinance
      Indebtedness which has been secured by a Lien permitted hereunder and
      which is permitted to be refinanced hereunder; provided, however, that
      such Liens do not extend to or cover any assets or property of any Obligor
      or any Obligor Subsidiary not securing the Indebtedness so refinanced;

            (xiv) Liens on assets or property of any Obligor or any Obligor
      Subsidiary that is subject (and only subject) to a Sale and Leaseback
      Transaction; provided, however, that the aggregate principal amount of
      Attributable Indebtedness in respect of all Sale and Leaseback
      Transactions then Outstanding shall not at the time such a Lien is
      incurred exceed $1,000,000;

            (xv) Liens arising out of conditional sale, title retention,
      consignment or similar arrangements for the sale of goods entered into by
      the Company or any of its Subsidiaries in the ordinary course of business
      in accordance with past practices of the Company or any of its
      Subsidiaries;

            (xvi) Liens arising out of barter transactions or arrangements for
      the sale or purchase of goods or services entered into by the Company or
      any of its Subsidiaries in the ordinary course of business in accordance
      with past practices of the Company or any of its Subsidiaries;

            (xvii) Liens in favor of any Indenture Obligor or its Obligor
      Subsidiaries; and

            (xviii) in addition to Liens referred to in clauses (i) through
(xvii) of this definition of "Permitted Liens", Liens securing Indebtedness of
the Obligors and Obligor Subsidiaries, taken together, in an aggregate principal
amount not to exceed $200,000 at

                                       31
<PAGE>
any one time outstanding; provided, however, that such Liens secure Indebtedness
permitted by this Indenture; and provided further, that such Indebtedness is
permitted pursuant to the terms of this Indenture to be secured by a Lien.

            "Person" means any natural person, corporation, partnership, firm,
association, trust, government, governmental agency, limited liability company
or any other entity, whether acting in an individual, fiduciary or other
capacity.

            "Physical Securities" means permanent certificated Securities in
registered form in substantially the form set forth in Article Two.

            "Pioneer Companies" is defined in the preamble of this Indenture.

            "Pipeline" has the meaning given to it in the Common Security and
Intercreditor Agreement.

            "Plan" means any Single Employer Plan or Multiemployer Plan.

            "Plan of Reorganization" means the Debtor's Amended Joint Plan of
Reorganization under Chapter 11 of the Bankruptcy Code, dated September 21,
2001, filed with the United States Bankruptcy Court, Southern District of Texas,
Houston Division, Case No. 01-38259-H3-11, on behalf of Pioneer Companies, Inc.,
Pioneer Corporation of America, Imperial West Chemical Co., Kemwater North
America Company, PCI Chemicals Canada Inc./PCI Chimie Canada Inc., Pioneer
Americas, Inc., Pioneer (East), Inc., Pioneer Water Technologies, Inc., Pioneer
Licensing, Inc., and KWT, Inc.

            "Post Petition Interest" is defined in Section 1307 hereof.

            "Power of Attorney" is defined in Section 1508 hereof.

            "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 308 hereof in exchange for a
mutilated Security or in lieu of a lost, destroyed or stolen Security shall be
deemed to evidence the same debt as the mutilated, lost, destroyed or stolen
Security.

            "Qualified Equity Offering" means an offer and sale of common stock
(which is Capital Stock) of PCI made on a primary basis by PCI pursuant to a
registration statement that has been declared effective by the Commission
pursuant to the Securities Act (other than a registration statement on Form S-8
or otherwise relating to equity securities issuable under any employee benefit
plan of any Obligor), or an offer and sale of common stock (which is Capital
Stock) of PCI which may be made pursuant to an exemption from registration under
the Securities Act, in each case, only to the extent permitted pursuant to
clause (vii) of the definition of "Permitted Issuance."

                                       32
<PAGE>
            "Quebec Mortgage and Security Agreement" means a deed of hypothec
executed by an authorized representative of PCI Chemicals Canada Company in
respect of Collateral located in Quebec, as amended, supplemented, amended and
restated or otherwise modified from time to time.

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

            "Redemption Price" when used with respect to any Security to be
redeemed pursuant to any provision in this Indenture, means the price at which
it is to be redeemed pursuant to this Indenture.

            "Reference Banks" means leading banks engaged in transactions in
Eurodollar deposits with an established place of business in London, England and
which have been designated by the Trustee.

            "Refinancing" is defined in Section 1008 hereof.

            "Refinancing Indebtedness" is defined in Section 1008 hereof.

            "Registration Rights Agreement" has the meaning given to it in the
Plan of Reorganization.

            "Regular Record Date" for the interest payable on any Interest
Payment Date means each March 15, June 15, September 15 and December 15 (whether
or not a Business Day), as the case may be, next preceding such Interest Payment
Date.

            "Related Business" means the manufacture or distribution of
chlorine, caustic soda, bleach, hydrochloric acid, and other chlorides and
aluminum sulfate, and in lines of business reasonably related thereto.

            "Release" means any release, discharge, deposit, pumping, pouring,
emptying, injecting, escaping, leaching, migrating, dumping, seepage, spill,
leak, flow, discharge, disposal or emission.

            "Reserve Interest Rate" means, with respect to any Interest
Determination Date, the rate per annum that the Trustee determines to be either
the arithmetic mean, rounded to the nearest whole multiple of 1/16%, of the
three-month U.S. dollar lending rates which leading New York City banks selected
by the Trustee are quoting on the Interest Determination Date to the principal
London offices of leading banks in the London interbank market or, in the event
that the Trustee cannot determine the arithmetic mean, the lowest three-month
U.S. dollar lending rate which such New York City banks selected by the Trustee
are quoting on the Interest Determination Date to leading European banks.

            "Restoration" has the meaning given to it in the Common Security and
Intercreditor Agreement.

                                       33
<PAGE>
            "Restricted Payment" is defined in Section 1006 hereof.

            "Returned Payments" has the meaning given to it in Section 1602.

            "Rollover Amount" for a Fiscal Year of the Company is the amount in
dollars equal to the Cumulative Capital Expenditure Limit for such Fiscal Year
minus the Cumulative Capital Expenditures.

            "S&P" means Standard & Poor's Ratings Group, a division of The
McGraw Hill Companies, Inc. or any successor rating agency.

            "Sale and Leaseback Transaction" with respect to any Person, means
any arrangement with another Person for the leasing of any real or tangible
personal property, which property has been or is to be sold or transferred or
initially leased by such Person to such other Person in contemplation of such
leasing (including a lease and leaseback transaction).

            "Securities" means any of the securities, as defined in the fifth
paragraph of the recitals hereof, that are authenticated and delivered under
this Indenture; provided, however, that for the purposes of any request, demand,
authorization, vote, direction, notice, consent, waiver or other Act given or
taken by a Holder, the term "Securities" shall be construed to, and shall be
deemed to, include the Term Loans (as such term is defined in the Term Loan
Agreement).

            "Securities Act" means the United States Securities Act of 1933, as
amended from time to time.

            "Security Agreement Supplement" means the "Security and
Intercreditor Supplement" as such term is defined in the Common Security and
Intercreditor Agreement.

            "Security Documents" means (i) each Mortgage, (ii) the Common
Security and Intercreditor Agreement, (iii) the Canadian Security Agreements,
and (iv) all security agreements, mortgages, deeds of trust, pledges, collateral
assignments, UCC filings, financing statements and registrations or any other
instrument evidencing or creating any security interest in favor of the
Collateral Agent in all or any portion of the Collateral, in each case as
amended, supplemented, amended or restated or otherwise modified from time to
time.

            "Security Register" has the meaning specified in Section 305 hereof.

            "Security Registrar" has the meaning specified in Section 305
hereof.

            "Senior Indebtedness" means Indebtedness of any Obligor or Obligor
Subsidiary permitted hereunder, unless in the case of any particular
Indebtedness, the agreement or instrument creating or evidencing the same or
pursuant to which the same is outstanding provides that such Indebtedness is
junior to or subordinated in right of payment to any Indebtedness of such
Obligor or Obligor Subsidiary; provided, however,

                                       34
<PAGE>
that Senior Indebtedness does not include (i) in the case of the obligation of
the Company in respect of each Security, the obligation of the Company in
respect of the other Securities, (ii) any liability for foreign, federal, state,
local or other taxes owed or owing by any Obligor or any Obligor Subsidiary to
the extent that such liability constitutes Indebtedness, (iii) Indebtedness of
any Obligor to any Obligor Subsidiary or of any Obligor Subsidiary to the
Company or another Obligor Subsidiary, (iv) that portion of any Indebtedness
which at the time of issuance is issued in violation of the Indenture and (v)
Indebtedness and amounts incurred in connection with obtaining goods, materials
or services in the ordinary course of business (other than such Indebtedness
which is owed to banks and other financial institutions or secured by the goods
or materials which were purchased with such Indebtedness).

            "Single Employer Plan" means a single-employer plan, as defined in
Section 4001(a)(15) of ERISA, other than a Canadian Benefits Plan, which any
Obligor, Obligor Subsidiary or ERISA Affiliate maintains, administers,
contributes to or is required to contribute to, or under which any Obligor,
Obligor Subsidiary or ERISA Affiliate has any liability.

            "Special Record Date", for the payment of any Defaulted Interest,
means a date fixed by the Trustee pursuant to Section 309 hereof.

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

            "Subordinated Indebtedness" means Indebtedness of any Obligor or
Obligor Subsidiary as to which the payment of principal of, premium, if any,
interest and other payment obligations in respect of such Indebtedness shall be
subordinate to the prior payment in full of the Securities (including the
Guaranties) to at least the following extent: (i) no payments of principal of,
premium, if any, or interest on, or otherwise due in respect of, such
Indebtedness may be permitted for so long as any default in the payment of
principal of, premium, if any, or interest on the Securities exists; (ii) in the
event that any other Default exists with respect to the Securities, upon notice
by Holders of 25% or more of the aggregate principal amount of the Securities to
the Trustee, the Trustee shall have the right to give notice to the Company and
the holders of such Indebtedness (or trustees or agents therefor) of a payment
blockage, and thereafter no payments of principal of, premium, if any, or
interest on or otherwise due in respect of such Indebtedness may be made for a
period of 179 days from the date of such notice; and (iii) such Indebtedness may
not (x) provide for payments of principal of such Indebtedness at the stated
maturity thereof or by way of a sinking fund applicable thereto or by way of any
mandatory redemption, defeasance, retirement or repurchase thereof by such
Obligor or Obligor Subsidiary (including any redemption, retirement or
repurchase which is contingent upon events of circumstances, but excluding any
retirement required by virtue of acceleration of such Indebtedness upon an event
of default thereunder), in each case prior to the final Stated Maturity of the
Securities, or (y) permit redemption or other retirement (including pursuant to
an offer to purchase made by such Obligor or

                                       35
<PAGE>
Obligor Subsidiary) of such other Indebtedness at the option of the holder
thereof prior to the final Stated Maturity of the Securities.

            "Subordinated Obligations" is defined in Section 1307 hereof.

            "Subsidiary" means, with respect to any Person, (i) any corporation
of which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors, under ordinary circumstances,
is at the time owned, directly or indirectly, by such Person and one or more of
its Subsidiaries or by one or more of such Person's Subsidiaries or (ii) any
other Person of which at least a majority of voting interest, under ordinary
circumstances, is at the time owned, directly or indirectly, by such Person and
one or more of its Subsidiaries or by one or more of such Person's Subsidiaries,
whether or not such corporation or other Person is incorporated or organized in
or under the laws of the United States of America or any state thereof.

            "Taxes" is defined in Section 1029 hereof.

            "Telerate Screen Page 3750" means the display designated on page
3750 on the Telerate Service (or such other page as may replace page 3750 on
that service for the purpose of displaying London interbank offered rates of
major banks).

            "Term Loan Agreement" means that certain Term Loan Agreement dated
as of December 31, 2001, among the Term Loan Borrower, PCI, the Guarantors party
thereto, the Lenders from time to time party thereto, and Wells Fargo Bank
Minnesota, National Association, as the Administrative Agent for the Lenders, as
amended, supplemented, amended and restated or otherwise modified from time to
time.

            "Term Loan Borrower" means Pioneer Americas LLC, as borrower under
the Term Loan Agreement or any successor as borrower thereto.

            "Tranche B Documents" means collectively, the New Tranche B Notes
Indenture (including the guaranties thereunder), the New Tranche B Notes, the
Common Security and Intercreditor Agreement, each Mortgage (upon execution and
delivery thereof), the other Security Documents and each other agreement,
document or instrument delivered in connection therewith, whether or not
specifically mentioned herein or therein, each as amended, supplemented, amended
and restated or otherwise modified from time to time.

            "Transaction Documents" means the various documents, instruments and
agreements, implementing the Plan of Reorganization other than the Indenture
Documents (except for the Security Documents which shall also be "Transaction
Documents"), including the Tranche B Documents, the Loan Documents, the Amended
PCI Certificate of Incorporation (as such term is defined in the Plan of
Reorganization), the Amended PCI Bylaws (as such term is defined in the Plan of
Reorganization), the amended by-laws and certificates of incorporation of each
of the Subsidiaries of PCI and of the Company, the Exit Facility, the MEIP, the
New Common Stock, the New Other Secured Notes and Claims, the Registration
Rights Agreement, the documents relating to the Canadian Corporate
Reorganization and all other agreements, documents,

                                       36
<PAGE>
instruments, certificates, filings, consents, approvals, Board of Directors
resolutions and opinions executed, delivered or furnished pursuant to or in
connection with the implementation of the Plan of Reorganization, each as
amended, supplemented, amended and restated or otherwise modified from time to
time.

            "Trust Indenture Act" means the United States Trust Indenture Act of
1939, as amended from time to time.

            "Trust Moneys" means all cash or Eligible Investments received by
the Collateral Agent, (i) in exchange for the release of property from the Lien
of any of the Security Documents, including the Collateral Proceeds or (ii) as
compensation for or proceeds of the sale of all or any part of the Collateral
taken by eminent domain or purchased by, or sold pursuant to any order of, a
governmental authority or otherwise disposed of including any Net Award, or
(iii) as proceeds of insurance upon any, all or part of the Collateral (other
than any liability insurance proceeds payable to the Collateral Agent for any
loss, liability or expense incurred by it) including any Insurance Proceeds, or
(iv) as proceeds of any other sale or other disposition of all or any part of
the Collateral by or on behalf of the Collateral Agent or any collection,
recovery, receipt, appropriation or other realization of or from all or any part
of the Collateral pursuant to the Security Documents or otherwise, or (v)
Returned Payments, or (vi) for application under this Indenture as provided in
this Indenture or any Security Document, or whose disposition is not otherwise
specifically provided for in this Indenture or in any Security Document, as the
case may be.

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

            "UCC" means the Uniform Commercial Code as in effect from time to
time in the State of New York.

            "Unfunded Pension Liabilities" means the excess of current liability
over the current value of assets as calculated in the most recent actuarial
valuation report with respect to a Single Employer Plan.

            "U.S. Government Obligations" means securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by, and acting as an agency or instrumentality of, the United States
of America, the payment of which is unconditionally guaranteed as a full faith
and credit obligation by the United States of America, which, in either case
under clause (i) or (ii) above, are not callable or redeemable at the option of
the issuer thereof.

            "Unallocated Payments" has the meaning given to it in Section 1601.

            "Unallocated Securities" has the meaning given to it in Section
1601.

                                       37
<PAGE>
            "Voting Stock" of any Person means Capital Stock of such Person
which ordinarily has voting power for the election of directors (or Persons
performing similar functions) of such Person, whether at all times or only so
long as no senior class of securities has such voting power by reason of any
contingency.

            "Wholly-Owned Subsidiary" means, with respect to any Person, a
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than capital stock constituting directors'
qualifying shares or interests held by directors or shares or interests required
to be held by foreign nationals, to the extent mandated by applicable law) are
owned by such Person or by one or more Wholly-Owned Subsidiaries of such Person.

            "Withdrawal Liability" has the meaning set forth under Part I of
Subtitle E of Title IV of ERISA.

            "Working Capital" means, for any period, with respect to any Person,
(i) its consolidated current assets (excluding cash and cash equivalents), minus
(ii) its consolidated current liabilities (excluding current maturities in
respect of its long term Indebtedness), determined in accordance with GAAP.

            Section 102. [Intentionally Omitted.]

            Section 103. Compliance Certificates and Opinions.

            Upon any application or request by any Indenture Obligor to the
Trustee to take any action under any provision of this Indenture, such Indenture
Obligor shall furnish to the Trustee an Officers' Certificate, in form and
substance satisfactory to the Trustee, stating that all conditions precedent, if
any, provided for in this Indenture (including any covenants compliance with
which constitutes a condition precedent) relating to the proposed action have
been complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent, if any, have been complied with, except
that, in the case of any such application or request as to which the furnishing
of such documents, certificates and/or opinions is specifically required by any
provision of this Indenture relating to such particular application or request,
no additional certificate or opinion need be furnished.

            Every certificate or Opinion of Counsel with respect to compliance
with a covenant or condition provided for in this Indenture shall include:

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

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

            (c) a statement that, in the opinion of each such individual, such
individual has made such examination or investigation as is reasonably necessary
to

                                       38
<PAGE>
enable such individual to express an informed opinion as to whether or not such
covenant or condition has been complied with; and

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

            Section 104. Form of Documents Delivered to Trustee.

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

            Any certificate or opinion of an officer of any Obligor may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows that the certificate
or opinion or representations with respect to the matters upon which his
certificate or opinion is based are erroneous. Any such certificate or opinion
of counsel may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or officers of any
Obligor stating that the information with respect to such factual matters is in
the possession of any Obligor, unless such counsel knows that the certificate or
opinion or representations with respect to such matters are erroneous. Opinions
of Counsel required to be delivered to the Trustee may have qualifications
customary for opinions of the type required and counsel delivering such Opinions
of Counsel may rely on certificates of the relevant Obligor or government or
other officials customary for opinions of the type required, including
certificates certifying as to matters of fact, including that various financial
covenants have been complied with.

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

            Section 105. Acts of Holders.

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

                                       39
<PAGE>
be sufficient for any purpose of this Indenture and conclusive in favor of the
Trustee if made in the manner provided in this Section. The fact and date of the
execution by any Person of any such instrument or writing or the authority of
the Person executing the same may also be proved in any other manner which the
Trustee deems sufficient in accordance with such reasonable rules as the Trustee
may determine.

            (b) The ownership of Securities shall be evidenced by the Security
Register.

            (c) Any request, demand, authorization, direction, notice, consent,
waiver or Act by the Holder of any Security shall bind every future Holder of
the same Security or the Holder of every Security issued upon the transfer
thereof or in exchange therefor or in lieu thereof in respect of anything done,
suffered or omitted to be done by the Trustee, any Paying Agent or any Indenture
Obligor or its respective Obligor Subsidiary in reliance thereon, whether or not
notation of such action is made upon such Security.

(d) If the Company shall solicit from the Holders any request, demand,
authorization, direction, notice, consent, waiver or other Act, the Company may,
at its option, by or pursuant to a Board Resolution, fix in advance a record
date for the determination of such Holders entitled to give, make or take such
request, demand, authorization, direction, notice, consent, waiver or other Act,
but the Company shall have no obligation to do so. Notwithstanding Section
316(c) of the Trust Indenture Act, any such record date shall be the record date
specified in or pursuant to such Board Resolution, which shall be a date not
more than 30 days prior to the first solicitation of Holders generally in
connection therewith and no later than the date such solicitation is completed.

            Without limiting the generality of the foregoing, a Holder,
including the Depositary that is a Holder of a Global Security, may make, give
or take, by a proxy, or proxies, duly appointed in writing, any request, demand,
authorization, direction, notice, consent, waiver or other action provided or
permitted in this Indenture to be made, given or taken by Holders and the
Depositary that is a Holder of a Global Security may provide its proxy or
proxies to the beneficial owners of interest in any such Global Security.

            Notwithstanding the foregoing, upon receipt by the Trustee of (i)
any notice of default pursuant to Section 704(e), (ii) any declaration of
acceleration, or any rescission and annulment of any such declaration pursuant
to Section 502 or (iii) any direction given pursuant to Section 505 (any such
notice, declaration, rescission and annulment, or direction being referred to
herein as a "Direction"), a record date shall automatically and without any
other action by any Person be set for the purpose of determining the Holders
entitled to join in such Direction, which record date shall be the close of
business on the day the Trustee receives such Direction. The Holders on such
record date (or their duly appointed agents), and only such Persons, shall be
entitled to join in such Direction whether or not such Holders remain Holders
after such record date; provided that unless such Direction shall have become
effective by virtue of Holders of a majority of the aggregate principal amount
of the Securities then Outstanding (or their

                                       40
<PAGE>
duly appointed agents) having joined therein on or prior to the 90th day after
such record date, such Direction shall automatically and without any action by
any Person be cancelled and be of no further effect. Nothing in this paragraph
shall prevent a Holder (or a duly appointed agent thereof) from giving, before
or after the expiration of such 90-day period, a Direction contrary to, or
different from, or, after the expiration of such period, identical to, a
Direction that has been canceled pursuant to the proviso to the preceding
sentence, in which event a new record date in respect thereof shall be set
pursuant to this paragraph.

            If such a record date is fixed (pursuant to the immediately
preceding paragraph), such request, demand, authorization, direction, notice,
consent, waiver or other Act may be made, given or taken before or after such
record date, but only the Holders of record at the close of business on such
record date shall be deemed to be Holders for purposes of determining whether
Holders of the requisite proportion of Securities then Outstanding have
authorized or agreed or consented to such request, demand, authorization,
direction, notice, consent, waiver or other Act, and for this purpose the
Securities then Outstanding shall be computed as of such record date; provided
that no such request, demand, authorization, direction, notice, consent, waiver
or other Act by the Holders on such record date shall be deemed effective unless
it shall become effective pursuant to the provisions of this Indenture not later
than six months after the record date.

            (e) If at any time a request, demand, authorization, direction,
notice, consent, waiver or other Act to be made, given or taken by the Holders
is required pursuant to the terms of this Indenture, the Trustee shall solicit
the direction of the Holders of such aggregate principal amount of the
Securities then Outstanding as are specified in the applicable provisions of
this Indenture and, if not so specified, the Holders of a majority of the
aggregate principal amount of the Securities then Outstanding.

            Section 106. Notices, etc., to Trustee, the Company and any
Indenture Obligor or Obligor Subsidiary.

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

            (a) the Trustee by any Holder or by any Indenture Obligor shall be
sufficient for every purpose hereunder if made, given, furnished or filed in
writing and mailed, first-class postage prepaid, telecopied, hand delivered, or
delivered by recognized overnight courier, to the Trustee at Sixth Street and
Marquette Avenue, Minneapolis, Minnesota 55479, Attention: Corporate Trust
Services; telecopy: (612) 667-9825, or at any other address previously furnished
in writing to the Holders or any Indenture Obligor by the Trustee; or

            (b) any Indenture Obligor, shall be sufficient for every purpose
hereunder if in writing (including telecopy) and mailed, first-class postage
prepaid,

                                       41
<PAGE>
telecopied, hand delivered, or delivered by recognized overnight courier, to the
Company addressed to it at c/o Pioneer Companies, Inc., 700 Louisiana Street,
Suite 4300, Houston, Texas 77002, Attention: Kent R. Stephenson, Esq., Vice
President, General Counsel and Secretary; telecopy: (713) 223-9202, or at any
other address previously furnished by the Company in writing to the Trustee.

            Any request, demand, authorization, direction, notice, consent,
election or waiver required or permitted under this Indenture shall be in the
English language, except that any published notice may be in the official
language of the country of publication.

            Section 107. Notice to Holders; Waiver.

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

            In case by reason of the suspension of regular mail service or by
reason of any other cause, it shall be impracticable to mail notice of any event
as required by any provision of this Indenture, then any method of giving such
notice as shall be reasonably satisfactory to the Trustee shall be deemed to be
a sufficient giving of such notice.

            Section 108. Conflict with Trust Indenture Act.

            If any provision hereof limits, qualifies or conflicts with any
provision of the Trust Indenture Act or another provision which is required or
deemed to be included in this Indenture by any of the provisions of the Trust
Indenture Act, the provision or requirement of the Trust Indenture Act shall
control. If any provision of this Indenture modifies or excludes any provision
of the Trust Indenture Act that may be so modified or excluded, the latter
provision shall be deemed to apply to this Indenture as so modified or to be
excluded, as the case may be.

            Section 109. Effect of Headings and Table of Contents.

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

                                       42
<PAGE>
            Section 110. Successors and Assigns.

            All covenants and agreements in this Indenture by the Company and
each of the other Indenture Obligors shall bind their respective successors and
assigns, whether so expressed or not.

            Section 111. Separability Clause.

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

            Section 112. Benefits of Indenture.

            Nothing in this Indenture or in the Securities or the Guaranties,
express or implied, shall give to any Person (other than the parties hereto,
their successors hereunder, any Paying Agent and the Holders) any benefit or any
legal or equitable right, remedy or claim under this Indenture.

            Section 113. Governing Law.

            THIS INDENTURE, THE SECURITIES AND THE GUARANTIES SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

            Section 114. Legal Holidays.

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

            Section 115. Schedules and Exhibits.

            All schedules and exhibits attached hereto are by this reference
made a part hereof with the same effect as if herein set forth in full.

            Section 116. Counterparts.

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

                                       43
<PAGE>
            Section 117. Communication by Holders with other Holders.

            Holders may communicate pursuant to Section 312(b) of the Trust
Indenture Act with other Holders with respect to their rights under this
Indenture or the Securities. Each Indenture Obligor, the Trustee, the Security
Registrar and anyone else shall have the protection of Section 312(c) of the
Trust Indenture Act.

            Section 118. No Recourse against Others.

            A director, officer, employee or stockholder (or other holder of an
ownership interest), as such, of any Obligor or Obligor Subsidiary shall not
have any liability for any obligations of the Company under the Securities or
this Indenture, or for any obligation of any Guarantor under the Guaranties or
this Indenture. By accepting a Security, each Holder shall waive and release all
such liability. The waiver and release shall be part of the consideration for
the issue of the Securities.

            Section 119. Article Applicable to Paying Agents.

            In case at any time any Paying Agent other than the Trustee shall
have been appointed by the Company and be then acting under this Indenture, the
term "Trustee" (unless the context otherwise requires) shall be construed as
extending to and including such Paying Agent within its meaning as fully, for
all intents and purposes, as if such Paying Agent were named in addition to or
in place of the Trustee; provided, however, that this Section 119 shall not
apply to the Company or any Affiliate of the Company if it or such Affiliate
acts as Paying Agent.

                                   ARTICLE TWO

                                 SECURITY FORMS

            Section 201. Forms Generally.

            The Securities, the Guaranties and the Trustee's certificate of
authentication shall be in substantially the forms set forth in this Article
Two, with such appropriate insertions, omissions, substitutions and other
variations as are required or permitted by the Indenture and may have such
letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of any
securities exchange, any Organizational Document or governing instrument or
applicable law or as may, consistently herewith, be determined by the officers
executing such Securities, as evidenced by their execution of the Securities.
Any portion of the text of any Security may be set forth on the reverse thereof,
with an appropriate reference thereto on the face of the Security.

            The Securities shall be initially issued in the form of one
permanent Global Security and certain Physical Securities, substantially in the
form set forth in this Article Two. The Global Security shall be deposited with
the Trustee, as custodian for

                                       44
<PAGE>
the Depositary, duly executed by the Company and authenticated by the Trustee as
hereinafter provided.

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

            Section 202. Legends.

            (a) Every Global Security authenticated and delivered hereunder
shall bear the following legend on the face thereof:

            UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
            THE DEPOSITORY TRUST COMPANY, TO PIONEER AMERICAS LLC OR ITS AGENT
            FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY
            ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR TO SUCH OTHER
            ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
            DEPOSITORY TRUST COMPANY OR SUCH OTHER REPRESENTATIVE OF THE
            DEPOSITORY TRUST COMPANY OR SUCH OTHER NAME AS IS REQUESTED BY AN
            AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY
            PAYMENT HEREON IS MADE TO CEDE & CO.), ANY TRANSFER, PLEDGE OR OTHER
            USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
            SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
            HEREIN.

            TRANSFER OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
            WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO., OR TO A SUCCESSOR
            THEREOF OR SUCH SUCCESSOR'S NOMINEE.

            (b) Each Security authenticated and delivered hereunder to any
Person that does not certify that it is not an underwriter (as such term is
defined in Section 1145 of the Bankruptcy Code) or, prior to such time as the
Shelf Registration Statements (as such term is defined in the Plan of
Reorganization) for the benefit of such Persons have been declared effective
under the Securities Act, to any Person receiving ten percent

                                       45
<PAGE>
(10%) or more of the outstanding New Common Stock calculated on a fully diluted
basis, shall be a Physical Security and shall bear the following legend on the
face thereof:

            THIS SECURITY MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
            TRANSFERRED TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY PERSON UNLESS
            SUCH OFFER, SALE, PLEDGE OR TRANSFER IS REGISTERED UNDER THE
            SECURITIES ACT OF 1933, AS AMENDED, AND ANY APPLICABLE STATE LAW OR
            PURSUANT TO AN APPLICABLE EXEMPTION THEREFROM.

            Section 203. Form of Face of Security.

            The form of the face of the Securities shall be substantially as
follows:

                              PIONEER AMERICAS LLC

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

             SENIOR SECURED FLOATING RATE GUARANTEED NOTES DUE 2006

CUSIP No:
No.  __________                                                      $45,421,874

            PIONEER AMERICAS LLC, a Delaware limited liability company (herein
called the "Company," which term includes any successor Person under the
Indenture hereinafter referred to), for value received, hereby promises to pay
to Cede & Co., or registered assigns, the principal sum of FORTY FIVE MILLION
FOUR HUNDRED TWENTY ONE THOUSAND EIGHT HUNDRED SEVENTY FOUR UNITED STATES
DOLLARS ($45,421,874) [or such lesser amount as is indicated from time to time
on Schedule A hereto](1) on December 31, 2006, at the office or agency of the
Company referred to below. [Schedule A hereto indicates the principal amount
outstanding on this Global Security on December 31, 2001 and shall indicate
exchanges of a part of this Global Security for an interest in another Global
Security or for Securities in certificated form and corresponding increases and
decreases in such principal amount.](2) This Security shall bear interest at the
rate of three-month LIBOR plus 3.50% per annum for each Interest Accrual Period
on the unpaid principal amount of the Security until such principal amount is
paid or duly made available for payment in accordance with such Indenture.
Interest shall be paid on March 31, 2002 and quarterly thereafter on each June
30, September 30, December 31 and March 31 of each year. For each such Interest
Payment Date, interest shall accrue beginning on the immediately preceding
Interest Payment Date (or the Closing Date, in the case of the March 31, 2002
Interest Payment Date) and ending on the calendar day immediately preceding such
Interest Payment Date. If there shall occur an Event of Default as set forth in
Section

----------
(1)   Applicable only to a Global Security.
(2)   Applicable only to a Global Security.

                                       46
<PAGE>
501(1) of such Indenture, or if there shall occur any Event of Default which
remains uncured for 10 days (without giving effect to any grace period
therefor), this Security shall bear additional interest, to the extent such
additional interest is permitted by law, at a rate per annum equal to that borne
by this Security plus 2.00% for the period such Event of Default continues or
such interest is not paid and such additional interest shall be payable as set
forth in the Indenture.

      The interest so payable, and punctually paid or duly provided for, on any
Interest Payment Date shall, as provided in such Indenture, be paid to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest, which shall be March 15, June 15, September 15 and December 15
(whether or not a Business Day), as the case may be, next preceding such
Interest Payment Date. Any such interest not so punctually paid, or duly
provided for, and interest on such defaulted interest at the interest rate borne
by the Securities, to the extent lawfully payable, shall forthwith cease to be
payable to the Holder on such Regular Record Date, and may be paid to the Person
in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on a Special Record Date for the payment of
such defaulted interest to be fixed by the Trustee, notice of which shall be
given to Holders of Securities not less than 10 days prior to such Special
Record Date, or may be paid at any time 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, all as more fully provided in said Indenture.

      Payment of the principal of, premium, if any, and interest on this
Security shall be made at the office or agency of the Company maintained for
that purpose in The City of New York, in such coin or currency of the United
States of America as at the time of payment is legal tender for payment of
public and private debts against surrender of this Security in the case of any
payment due at the Maturity of the principal thereof (other than any payment of
interest that first becomes payable on a day other than an Interest Payment
Date); provided, however, that payment of interest may be made at the option of
the Company by check mailed to the address of the Person entitled thereto as
such address shall appear on the Security Register[; provided further, that if
this Security is a Global Security, payment may be made pursuant to the rules
and procedures of the Depositary as permitted in said Indenture](3). Interest
shall be computed on the basis of a 360-day year of twelve 30-day months.

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

      This Security is entitled to the benefits of Guaranties by each of the
Guarantors of the punctual payment when due of the Indenture Obligations made in
favor of the Trustee for the benefit of the Holders. Such Guaranties shall be
senior obligations of each Guarantor, and shall rank pari passu with all
existing and future Senior

----------
(3)   Applicable only to a Global Security.

                                       47
<PAGE>
Indebtedness of such Guarantor, and senior to all Subordinated Indebtedness of
such Guarantor. Such Guaranties shall be secured by Collateral. Reference is
hereby made to Article Thirteen of the Indenture for a statement of the
respective rights, limitations of rights, duties and obligations under the
Guaranties of each of the Guarantors.

            Unless the certificate of authentication hereon has been duly
executed by the Trustee referred to on the reverse hereof or by the
authenticating agent appointed as provided in the Indenture by manual signature,
this Security shall not be entitled to any benefit under the Indenture or be
valid or obligatory for any purpose.

            IN WITNESS WHEREOF, the Company has caused this instrument to be
duly executed by the manual or facsimile signature of its authorized officers
and its corporate seal to be affixed or reproduced hereon.

Dated:                                  PIONEER AMERICAS LLC

                                        By _____________________________________
                                           Name:
                                           Title:

            Section 204. Form of Reverse of Securities.

            The form of the reverse of the Securities shall be substantially as
follows:

            The Holder, by becoming holder of this Security, shall be bound by
the terms and conditions of the Indenture.

            The Holder agrees with the Trustee and the other Holders that it
will not, without the prior consent of the Trustee and the other Holders, take
or obtain any Lien on any property of the Company to secure the obligations of
the Company hereunder, except for the benefit of the Collateral Agent or as may
otherwise be required by law.

            This Security is one of a duly authorized issue of Securities of the
Company designated as its Senior Secured Floating Rate Guaranteed Notes due
2006, limited (except as otherwise provided in the Indenture referred to below)
in aggregate principal amount to $45,421,874 which may be issued under an
indenture (the "Indenture") dated as of December 31, 2001, among the Company,
each Guarantor from time to time a party thereto, and Wells Fargo Bank
Minnesota, National Association, as trustee (herein called the "Trustee," which
term includes any successor trustee under the Indenture), to which Indenture and
all indentures supplemental thereto reference is hereby made for a statement of
the respective rights, limitations of rights, duties,

                                       48
<PAGE>
obligations and immunities thereunder of the Company, the Guarantors, the
Trustee and the Holders of the Securities, and of the terms upon which the
Securities and the Guaranties are, and are to be, authenticated and delivered.

            The Indenture contains provisions for defeasance at any time of (a)
the entire Indebtedness on the Securities, and (b) certain restrictive covenants
and related Defaults and Events of Default, in each case upon compliance or
noncompliance with certain conditions set forth therein.

            The Securities shall be senior obligations of the Company, and shall
rank pari passu with all existing and future Senior Indebtedness of the Company,
and senior to all Subordinated Indebtedness of the Company.

            The Company shall have the right, at any time and from time to time,
to redeem the Outstanding Securities, in whole or in part, in cash, in amounts
equal to $1,000,000 or any larger integral multiple of $1,000,000 or the
aggregate principal amount of all of the Outstanding Securities, in each case at
a price equal to 100% of the aggregate principal amount thereof together with
accrued and unpaid interest to the Redemption Date in respect of such
redemption.

            Upon the occurrence of a Change of Control, the Company shall
mandatorily redeem all of the Outstanding Securities as set forth in the
Indenture.

            The Company shall apply 100% of the aggregate amount of Net Proceeds
from each and every Asset Sale (or the Collateral Proceeds in respect thereof
shall be applied), subject to the provisions of the Indenture, the Term Loan
Agreement, the New Tranche B Notes Indenture and the Common Security and
Intercreditor Agreement, to mandatorily redeem all of the Outstanding Securities
(or if such Net Proceeds or Collateral Proceeds are not sufficient to redeem all
of the Securities then Outstanding, then to mandatorily redeem the then
Outstanding Securities on a pro rata basis) at a price equal to 100% of the
aggregate principal amount thereof, plus accrued and unpaid interest thereon to
the Redemption Date in respect of such redemption.

            The Company shall apply Net Offering Proceeds of Qualified Equity
Offerings in excess of $5,000,000 to mandatorily redeem all of the Outstanding
Securities (or if such Net Offering Proceeds are not sufficient to redeem all of
the Securities then Outstanding, then to mandatorily redeem the then Outstanding
Securities on a pro rata basis) at a price equal to 100% of the aggregate
principal amount thereof, plus accrued and unpaid interest thereon to the
Redemption Date in respect of such redemption.

            The Company shall mandatorily redeem all of the Outstanding
Securities (or if the amounts referred to in (i) and (ii) below shall not be
sufficient to redeem all of the then Outstanding Securities, then to mandatorily
redeem such Outstanding Securities on a pro rata basis) as follows:

                  (i) within 45 days of the end of each Calendar Quarter in the
Company's Fiscal Year 2002, the Company shall redeem a principal amount of such
Outstanding Securities in an amount equal to the Minimum Quarterly Prepayment
for

                                       49
<PAGE>
such Calendar Quarter, plus accrued and unpaid interest, and premium (if any),
thereon to the Redemption Date in respect thereof; and

                  (ii) within 60 days of the end of each Calendar Quarter in
each of the Company's Fiscal Years from and including Fiscal Year 2003 and up to
and including Fiscal Year 2006, the Company shall redeem a principal amount of
such Outstanding Securities in an amount equal to the greater of the Liquidity
Quarterly Prepayment for such date and the Minimum Quarterly Prepayment for such
Calendar Quarter, plus accrued and unpaid interest thereon to the Redemption
Date in respect thereof.

            In the case of any redemption of Securities, interest installments
whose Stated Maturity is on or prior to the Redemption Date shall be payable to
the Holders of such Securities of record as of the close of business on the
relevant record date referred to on the face hereof. Securities (or portions
thereof) for whose redemption and payment provision is made in accordance with
the Indenture shall cease to bear interest from and after the date of
redemption.

            If less than all of the Securities are to be redeemed, the Trustee
shall select the Securities to be redeemed pro rata, by lot or by any other
method that the Trustee deems fair and appropriate.

            In the event of redemption of this Security in part only, a new
Security or Securities for the unredeemed portion hereof shall be issued in the
name of the Holder hereof upon the cancellation hereof.

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

            The Indenture permits, with certain exceptions (including certain
amendments permitted without the consent of any Holders and certain amendments
permitted only with the consent of all Holders) as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Obligors and the rights of the Holders under the Indenture or the other
Indenture Documents at any time by the Obligors and the Trustee with the consent
of the Holders of a majority of aggregate principal amount of the Securities at
the time Outstanding. The Indenture also contains provisions permitting the
Holders of specified percentages in aggregate principal amount of the Securities
at the time Outstanding, on behalf of the Holders of all the Securities, (i) to
waive compliance by the Obligors with certain provisions of the Indenture, the
Guaranties or the other Indenture Documents, and (ii) to waive certain past
Defaults under the Indenture and the Guaranties and their consequences. Any such
consent or waiver by or on behalf of the Holder of this Security shall be
conclusive and binding upon such Holder and upon all future Holders of this
Security and of any Security issued upon the registration of transfer hereof or
in exchange herefor or in lieu hereof whether or not notation of such consent or
waiver is made upon this Security.

                                       50
<PAGE>
            No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of any
Indenture Obligor or any other obligor upon the Securities (in the event such
other obligor is obligated to make payments in respect of the Securities), which
is absolute and unconditional, to pay the principal of, premium, if any, and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.

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

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

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

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

            In order to secure the due and punctual payment of the principal of,
premium, if any, or interest on the Securities when and as the same shall become
due and payable, whether on an Interest Payment Date, at maturity, by
acceleration, repurchase, redemption or otherwise, and interest on the overdue
principal of and interest thereon (to the extent permitted by law), if any, on
the Securities, and performance of all other obligations of the Company to the
Holders or the Trustee under this Indenture and the Securities, the Obligors
have entered into the Security Documents with the Collateral Agent. The
Securities shall be secured by Liens on and security interests in the Collateral
subject to pari passu Liens and security interests and other permitted
encumbrances as described further in the Security Documents.

            Each Holder, by accepting a Security, agrees to all of the terms and
provisions of the Security Documents as the same may be amended from time to
time pursuant to the respective provisions thereof and of the Indenture.

                                       51
<PAGE>
            Each Holder acknowledges that a release of any of the Collateral or
any Lien strictly in accordance with the terms and provisions of the Security
Documents and the terms and provisions of the Indenture will not be deemed for
any purpose to be an impairment of the security under the Indenture.

            The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture and the Security Documents.

            [This Security is a Global Security and is subject to the provisions
of the Indenture relating to Global Securities, including the limitation in
Section 305 thereof on transfer and exchanges of Global Securities. The
principal amount of this Global Security may be reduced if and to the extent
required by Article Sixteen of the Indenture.](4)

            This Security and the Indenture shall be governed and construed in
accordance with the laws of the State of New York.

            All terms used in this Security which are defined in the Indenture
and not otherwise defined herein shall have the meanings assigned to them in the
Indenture.

----------
(4)   Applicable only to a Global Security.

                                       52
<PAGE>
                            [FORM OF TRANSFER NOTICE]

      FOR VALUE RECEIVED the undersigned registered Holder hereby sell(s),
assign(s) and transfer(s) unto

Insert Taxpayer Identification No.

________________________________________________________________________________

________________________________________________________________________________
Please print or typewrite name and address including zip code of assignee

________________________________________________________________________________
the within Security and all rights thereunder, hereby irrevocably constituting
and appointing

________________________________________________________________________________
attorney to transfer said Security on the books of the Company with full power
of substitution in the premises.

Date:_____________________

                                        ________________________________________
                                           NOTICE: The signature to this
                                           assignment must correspond with the
                                           name as written upon the face of the
                                           within-mentioned instrument in every
                                           particular, without alteration or any
                                           change whatsoever.

                                       53
<PAGE>
            Section 205. Form of Trustee's Certificate of Authentication.

                    TRUSTEE'S CERTIFICATE OF AUTHENTICATION.

            This is one of the Senior Secured Floating Rate Guaranteed Notes due
2006 referred to in the within-mentioned Indenture.

                                        WELLS FARGO BANK MINNESOTA,
                                          NATIONAL ASSOCIATION,
                                          as Trustee

                                        By _____________________________________
                                           Authorized Signatory

            Section 206. Form of Guaranty of Each of the Guarantors.

            The form of Guaranty shall be set forth on the Securities
substantially as follows:

                                   GUARANTIES

            For value received, each of the undersigned hereby unconditionally
guaranties, jointly and severally, to the Holder of this Security the payment of
the principal of, premium, if any, or interest on this Security in the amounts
and at the time when due and interest on the overdue principal and interest, if
any, of this Security, if lawful, and the payment or performance of all other
obligations of the Company under the Indenture or the Securities, to the Holder
of this Security and the Trustee, all in accordance with and subject to the
terms and limitations of this Security and Article Thirteen of the Indenture.
This Guaranty shall not become effective until the Trustee duly manually
executes the certificate of authentication on this Security.

                                        PIONEER COMPANIES, INC.

                                        By _____________________________________
                                           Name:
                                           Title:

                                       54
<PAGE>
                                        IMPERIAL WEST CHEMICAL CO.

                                        By _____________________________________
                                           Name:
                                           Title:

                                        KEMWATER NORTH AMERICA COMPANY

                                        By _____________________________________
                                           Name:
                                           Title:

                                        PCI CHEMICALS CANADA COMPANY

                                        By _____________________________________
                                           Name:
                                           Title:

                                        PIONEER (EAST), INC.

                                        By _____________________________________
                                           Name:
                                           Title:

                                        PIONEER WATER TECHNOLOGIES, INC.

                                        By _____________________________________
                                           Name:
                                           Title:

                                        PIONEER LICENSING, INC.

                                        By _____________________________________
                                           Name:
                                           Title:

                                       55
<PAGE>
                                        KWT, INC.

                                        By _____________________________________
                                           Name:
                                           Title:

                          SCHEDULE A TO GLOBAL SECURITY

1.    Principal Amount of this Global Security outstanding on December 31, 2001:
      $[ ]

2.    The following exchanges of a part of this Global Security for an interest
      in another Global Security or for Securities in certificated form have
      been made:

<TABLE>
<CAPTION>
                                                Principal Amount
              Amount of          Amount of       of this Global     Signature
             decrease in        increase in         Security           of
           Principal Amount   Principal Amount   following such    authorized
 Date of    of this Global     of this Global       decrease       officer of
Exchange       Security           Security       (or increase)       Trustee
--------       --------           --------       -------------       -------
<S>        <C>                <C>               <C>                <C>

</TABLE>

                                 ARTICLE THREE

                                 THE SECURITIES

            Section 301. Title and Terms.

            The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is limited to $45,421,874 in
principal amount of Securities, except for Securities authenticated and
delivered upon registration of transfer of, or in exchange for, or in lieu of,
other Securities pursuant to Sections 303, 304, 305, 306, 308, 906 or 1108
hereof.

            The Securities shall be known and designated as the "Senior Secured
Floating Rate Guaranteed Notes due 2006" of the Company. The Stated Maturity of
the principal amount of the Securities shall be December 31, 2006. The
Securities each shall bear interest at the rate of three-month LIBOR plus 3.50%
per annum for each Interest Accrual Period on the unpaid principal amount
thereof until such principal amount is paid or duly made available for payment
in accordance with this Indenture. Interest shall be paid on March 31, 2002 and
quarterly thereafter on each June 30, September 30, December 31 and March 31 of
each year. For each such Interest Payment Date, interest shall accrue beginning
on the immediately preceding Interest Payment Date (or the

                                       56
<PAGE>
Closing Date, in the case of the March 31, 2002 Interest Payment Date) and
ending on the calendar day immediately preceding such Interest Payment Date. If
there shall occur an Event of Default as set forth in Section 501(1) of the
Indenture or if there shall occur any Event of Default which remains uncured for
10 days (without giving effect to any grace period therefor), the Securities
shall each bear additional interest, to the extent such additional interest is
permitted by law, at a rate per annum equal to that borne by each Security plus
2.00% for so long as such Event of Default continues or such interest is not
paid and such additional interest shall be payable on the Interest Payment
Dates. On each Interest Determination Date, the Trustee shall establish LIBOR
for the next Interest Accrual Period as set forth in the definition of the term
"LIBOR" in this Indenture. The establishment of LIBOR by the Trustee in
accordance with the terms of this Indenture on each Interest Determination Date
shall, in the absence of manifest error, be final and binding upon the Company.

            The principal of, premium, if any, or interest on the Global
Security shall be payable to the Depositary or its nominee, as the case may be,
as the sole registered owner and the sole Holder of the Global Security
represented thereby. The principal of, premium, if any, or interest on the
Securities shall be payable at the office or agency of the Company maintained
for such purpose; provided, however, that at the option of the Company, interest
may be paid by check mailed to the addresses of the Persons entitled thereto as
such addresses shall appear on the Security Register.

            The Securities shall be redeemable as provided in Article Eleven and
the other provisions of this Indenture referred to therein.

            At the election of the Company, the entire Indebtedness on the
Securities or certain of the Company's obligations and covenants and certain
Events of Default thereunder may be defeased as provided in Article Four.

            Section 302. Denominations.

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

            Section 303. Execution, Authentication, Delivery and Dating.

            The Securities shall be executed on behalf of the Company by one of
its Chairman of the Board, its President or one of its Vice Presidents under its
corporate seal reproduced thereon and attested to by its Secretary or one of its
Assistant Secretaries.

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

            At any time and from time to time after the execution and delivery
of this Indenture, the Company may deliver Securities executed by the Company to
the Trustee

                                       57
<PAGE>
for authentication, together with a Company Order for the authentication and
delivery of such Securities, in compliance with Section 103 hereof, and the
Trustee, in accordance with such Company Order, shall authenticate and deliver
such Securities as provided in this Indenture and not otherwise. Each such
Company Order shall specify the amount of Securities to be authenticated and the
date on which the Securities are to be authenticated or such other information
as the Trustee shall reasonably request.

            The Trustee shall not be required to authenticate and deliver any
Securities if (i) the issue of such Securities pursuant to this Indenture will
adversely affect the Trustee's own rights, duties or immunities under the
Securities and this Indenture; (ii) the Trustee, being advised by counsel,
determines that such action may not lawfully be taken; or (iii) the Trustee in
good faith, acting by its board of directors or officers of the Trustee,
determines that such action would expose the Trustee to personal liability to
Holders of any Outstanding Securities.

            Each Security shall be dated the date of its authentication.

            No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein duly
executed by the Trustee by manual signature of an authorized signatory, and such
certificate upon any Security shall be conclusive evidence, and the only
evidence, that such Security has been duly authenticated and delivered
hereunder. Notwithstanding the foregoing, if any Security shall have been
authenticated and delivered hereunder but never issued and sold by the Company,
and the Company shall deliver such Security to the Trustee for cancellation as
provided in Section 311 and in compliance with Section 103, for all purposes of
this Indenture such Security shall be deemed never to have been authenticated
and delivered hereunder and shall never be entitled to the benefits of this
Indenture.

            In case the Company or any Guarantor, pursuant to and in accordance
with the provisions of Article Eight, shall be consolidated, merged with or into
any other Person or shall sell, assign, convey, transfer or lease substantially
all of its properties and assets to any Person, and the successor Person
resulting from such consolidation, or surviving such merger, or into which the
Company or such Guarantor shall have been merged, or the Person which shall have
received a sale, assignment, conveyance, transfer or lease as aforesaid, shall
have executed an indenture supplemental hereto with the Trustee pursuant to
Article Eight, any of the Securities authenticated or delivered prior to such
consolidation, merger, sale, assignment, conveyance, transfer or lease 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 Request of the successor Person in
compliance with Section 103, shall authenticate and deliver Securities as
specified in such request 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 in exchange or substitution for or upon registration of
transfer of any Securities, such successor Person, at the option of the

                                       58
<PAGE>
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.

            The Trustee (at the expense of the Company) may appoint an
authenticating agent reasonably acceptable to the Company to authenticate
Securities on behalf of the Trustee. Unless limited by the terms of such
appointment, an authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as any Security Registrar or Paying Agent to deal with the Company
and its Affiliates.

            Section 304. Temporary Securities.

            Pending the preparation of definitive Securities, the Company may
execute, and upon Company Order in compliance with Section 103 the Trustee, in
accordance with the terms of Section 303, shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten or otherwise
produced, in any authorized denomination, substantially of the tenor of the
definitive Securities in lieu of which they are issued and with such appropriate
insertions, omissions, substitutions and other variations as the officers
executing such Securities may determine, as conclusively evidenced by their
execution of such Securities (but which do not affect the rights or duties of
the Trustee).

            After the preparation of definitive Securities, the temporary
Securities shall be exchangeable for definitive Securities upon surrender of the
temporary Securities at the office or agency of the Company designated for such
purpose pursuant to Section 1002 hereof, 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 deliver in exchange
therefor a like principal amount of definitive Securities of authorized
denominations and of like tenor and aggregate principal amount. Until so
exchanged the temporary Securities shall in all respects be entitled to the same
benefits under this Indenture as definitive Securities.

            Section 305. Registration of Transfer and Exchange.

            The Company shall cause to be kept at the Corporate Trust Office of
the Trustee, or such other office as the Trustee may designate, a register (the
register maintained in such office and in any other office or agency designated
pursuant to Section 1002 hereof being herein sometimes referred to as the
"Security Register") in which, subject to such reasonable regulations as the
Security Registrar may prescribe, the Company shall provide for the registration
of Securities and of transfers of Securities. The Trustee or an agent thereof or
of the Company shall initially be the "Security Registrar" for the purpose of
registering Securities and transfers of Securities as herein provided.

            Upon surrender for registration of transfer of any Security at the
office or agency of the Company designated pursuant to Section 1002 hereof, the
Company shall

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<PAGE>
execute, and the Trustee, in accordance with Section 303, shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Securities of the same series of any authorized denomination or
denominations, of a like aggregate principal amount.

            Any Holder of the 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 the
Holder of such Global Security (or its agent) and that ownership of a beneficial
interest in the Security shall be required to be reflected in a book entry.

            At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denomination or denominations, of a like aggregate
principal amount, upon surrender of the Securities to be exchanged at such
office or agency. Whenever any Securities are so surrendered for exchange, the
Company shall execute, and the Trustee, in accordance with Section 303, shall
authenticate and deliver, the Securities of the same series which the Holder
making the exchange is entitled to receive.

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

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

            No service charge shall be made to a Holder for any registration of
transfer or exchange or redemption of Securities, but the Company may require
payment of a sum sufficient to pay all documentary, stamp or similar issue or
transfer taxes or other governmental charges that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 303, 304, 305, 306, 308, 906 or 1108 hereof not
involving any transfer.

            The Company shall not be required (a) to issue, register the
transfer of or exchange any Security during a period beginning at the opening of
business 15 days before the date of selection of Securities for redemption under
Section 1104 hereof and ending at the close of business on the day of the
mailing of a notice of redemption in respect of any such Securities selected for
redemption, or (b) to register the transfer of or exchange any Security so
selected for redemption in whole or in part, except the unredeemed portion of
Securities being redeemed in part.

            All Securities issued upon transfer or exchange or replacement of
Securities originally issued hereunder which bear the legend set forth in
Section 202(b) shall bear such legend unless the Company shall have delivered to
the Trustee (or the

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Security Registrar, if other than the Trustee) a Company Order which states that
the Security may be issued without such legend thereon.

            The Holder of a Physical Security may, and upon the satisfaction of
the requirements of this paragraph the Company shall issue a Company Order
directing the Trustee to, exchange such Security for a beneficial interest in
the Global Security only (i) in accordance with the rules and procedures of the
Depositary, the Security Registrar and the Trustee (if the Security Registrar is
not the Trustee or an agent thereof), and (ii) upon furnishing any information
relating to such exchange as may reasonably be requested by the Depositary, the
Security Registrar and the Trustee (if the Security Registrar is not the Trustee
or an agent thereof), including, in connection with any Physical Security that
bears the legend set forth in Section 202(b), information or certification
relating to the exchange of a Physical Security bearing such a legend for a
beneficial interest in the Global Security.

            Section 306. Book-Entry Provisions for Global Security.

            (a) The Global Security shall (i) be registered in the name of the
Depositary for such Global Security or the nominee of such Depositary, (ii) be
delivered to the Trustee as custodian for such Depositary, (iii) constitute a
single Security for all purposes of this Indenture, and (iv) bear legends as set
forth in Section 202 hereof.

            Members of, or participants in, the Depositary ("Agent Members")
shall have no rights under this Indenture with respect to any Global Security
held on their behalf by the Depositary, or the Trustee as its custodian, or
under the Global Security, and the Depositary 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 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 the Depositary or impair, as between the
Depositary and its Agent Members, the operation of customary practices governing
the exercise of the rights of a beneficial holder of any Security as if such
person were a Holder.

            (b) Transfers of the Global Security shall be limited to transfers
of such Global Security in whole, but not in part, to the Depositary, its
successors or their respective nominees. Interests of beneficial owners in the
Global Security may be transferred in accordance with the rules and procedures
of the Depositary. Beneficial owners may obtain Physical Securities in exchange
for their beneficial interests in the Global Security upon request in accordance
with the Depositary's and the Security Registrar's procedures. In addition,
Physical Securities shall be transferred to all beneficial owners in exchange
for their beneficial interests in the Global Security if (i) the Depositary
notifies the Company that it is unwilling or unable to continue as Depositary
for the Global Security and a successor depositary is not appointed by the
Company within 90 days of such notice, or (ii) an Event of Default has occurred
and is continuing and the Security Registrar has received a request from the
Depositary.

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<PAGE>
            (c) In connection with any transfer of a portion of the beneficial
interests in the Global Security to beneficial owners pursuant to subsection (b)
of this Section, the Security Registrar shall reflect on its books and records
the date of such transfer and a decrease in the principal amount of the 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 deliver, one or more Physical Securities of like
tenor and amount. In connection with the exchange of a Physical Security for a
beneficial interest in the Global Security in accordance with Section 305, the
Security Registrar shall reflect on its books and records the date of such
exchange and an increase in the principal amount of the Global Security in an
amount equal to the principal amount of the Physical Security to be exchanged.

            (d) In connection with the transfer of the entire Global Security to
beneficial owners pursuant to subsection (b) of this Section, the Global
Security shall be surrendered to the Trustee for cancellation, and the Company
shall execute, and the Trustee, in accordance with Section 303, shall
authenticate and deliver, to each beneficial owner identified by the Depositary
in exchange for its beneficial interest in the Global Security, an equal
aggregate principal amount of Physical Securities of authorized denominations.

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

            Section 307. [Intentionally Omitted.]

            Section 308. Mutilated, Destroyed, Lost and Stolen Securities.

            If (a) any mutilated Security is surrendered to the Trustee, or (b)
the Company and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Security, and there is delivered to the
Company, each Guarantor and the Trustee, such security or indemnity, in each
case, as may be required by them to keep each of them harmless, then, in the
absence of notice to the Company, any Guarantor or the Trustee that such
Security has been acquired by a bona fide purchaser, the Company shall execute,
and upon its written request, in compliance with Section 103, the Trustee, in
accordance with Section 303, shall authenticate and deliver, in exchange for any
such mutilated Security or in lieu of any such destroyed, lost or stolen
Security, a replacement 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 replacement Security, pay such Security.

            Upon the issuance of any replacement Securities under this Section,
the Company may require the payment of a sum sufficient to pay all documentary,
stamp or

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<PAGE>
similar issue or transfer taxes or other governmental charges that may be
imposed in relation thereof and any other expenses (including the fees and
expenses of the Trustee) connected therewith.

            Every replacement Security issued pursuant to this Section in lieu
of any destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company and the Guarantors, whether or
not the 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 309. Payment of Interest; Interest Rights Preserved.

            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 that Security is registered at the close of business on the Regular
Record Date for such interest (or, if no business is conducted by the Trustee at
its Corporate Trust Office on such Regular Record Date, at 5:00 P.M. New York
City time on such Regular Record Date).

            Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date and interest on such
defaulted interest at the then applicable interest rate borne by the Securities,
to the extent lawful (such defaulted interest and interest thereon herein
collectively called "Defaulted Interest"), shall forthwith cease to be payable
to the Holder on the Regular Record Date and such Defaulted Interest may be paid
on the next Interest Payment Date or may be paid by the Company, at its election
in each case, as provided in subsection (a) or (b) below:

            (a) the Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Securities are registered at the close of
business on a Special Record Date for the payment of such Defaulted Interest,
which date shall be fixed in the following manner. The Company shall notify the
Trustee in writing in compliance with Section 103 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, 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 on or 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
subsection provided). Thereupon the Trustee shall fix a Special Record Date for
the payment of such Defaulted Interest which shall be not more than 15 days and
not less than 10 days prior to the date of the proposed payment and not less
than 10 days after the receipt by the Trustee of the notice of the proposed
payment. The Trustee shall promptly notify the Company in

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<PAGE>
writing of such Special Record Date. 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 therefor to be mailed,
first-class postage prepaid, to each Holder at his address as it appears in the
Security Register, not less than 10 days prior to such Special Record Date.
Notice of the proposed payment of such Defaulted Interest and the Special Record
Date therefor having been so mailed, such Defaulted Interest shall be paid to
the Persons in whose names the Securities are registered on such Special Record
Date and shall no longer be payable pursuant to the following subsection (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 written notice given by the Company to the
Trustee of the proposed payment pursuant to this subsection, such 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 310. Persons Deemed Owners.

            The Company, any Guarantor, the Trustee and any agent of the Company
or the Trustee may treat the Person in whose name any Security is registered as
the owner of such Security for the purpose of receiving payment of principal of,
premium, if any, and (subject to Section 309 hereof) interest on such Security
and for all other purposes whatsoever, whether or not such Security is overdue,
and neither the Company, any Guarantor, the Trustee nor any agent of the
Company, any Guarantor or the Trustee shall be affected by notice to the
contrary.

            Section 311. Cancellation.

            All Securities surrendered for payment, purchase, redemption,
registration of transfer or exchange shall be delivered to the Trustee and, if
not already canceled, shall be promptly canceled by it. The Company and any
Guarantor may at any time deliver to the Trustee for cancellation any Securities
previously authenticated and delivered hereunder which the Company or such
Guarantor may have acquired in any manner whatsoever, and all Securities so
delivered shall be promptly canceled by the Trustee. No Securities shall be
authenticated in lieu of or in exchange for any Securities canceled as provided
in this Section except as expressly permitted by this Indenture. All canceled
Securities held by the Trustee shall be destroyed and certification of their
destruction delivered to the Company. The Trustee shall provide the Company a
list of all Securities that have been canceled from time to time as requested by
the Company.

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            Section 312. Computation of Interest.

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

            Section 313. Deposit of Moneys.

            Prior to 10:00 a.m., New York City time, on each Interest Payment
Date and at Maturity, the Company, in accordance with Section 1018, shall
deposit with the Trustee or a Paying Agent in immediately available funds money
sufficient to make cash payments, if any, due on such Interest Payment Date or
at Maturity, as the case may be, in a timely manner which permits the Trustee or
such Paying Agent to remit payment to the Holders on such Interest Payment Date
or at Maturity, as the case may be.

            Section 314. CUSIP Number.

            The Company in issuing the Securities may use a "CUSIP" number(s)
and if so used, the Trustee shall use the CUSIP number(s) in notices of
redemption or exchange as a convenience to Holders; provided that any such
notice may state that no representation is made by the Trustee as to the
correctness or accuracy of the CUSIP number(s) printed in the notice or on the
Securities and that reliance may be placed only on the other identification
numbers printed on the Securities. The Company shall promptly notify the Trustee
of any changes in the CUSIP numbers.

                                  ARTICLE FOUR

                       DEFEASANCE AND COVENANT DEFEASANCE

            Section 401. Company's Option to Effect Defeasance or Covenant
Defeasance.

            The Company may, at its and PCI's option by Board Resolution of
their respective Board of Directors, at any time, with respect to the
Securities, elect to have either Section 402 or Section 403 hereof be applied to
all of the Outstanding Securities (the "Defeased Securities"), upon compliance
with the conditions set forth below in this Article Four.

            Section 402. Defeasance and Discharge.

            Upon the Company's exercise under Section 401 hereof of the option
applicable to this Section 402, the Company, each of the Guarantors and any
other Indenture Obligor upon the Securities, if any, shall be deemed to have
been discharged from its obligations with respect to the Defeased Securities on
the date the conditions set forth below are satisfied (hereinafter,
"defeasance"). For this purpose, such defeasance means that the Company shall be
deemed to have paid and discharged the entire Indebtedness represented by the
Defeased Securities, which shall thereafter be deemed to be "Outstanding" only
for the purposes of Section 405 hereof and the other Sections of

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<PAGE>
this Indenture referred to in (a) and (b) below, and to have satisfied all its
other obligations under such Securities and this Indenture, including
obligations to the Trustee, if any (and the Trustee, at the expense of the
Company and upon written request in compliance with Section 103, shall execute
proper instruments reasonably acceptable to it in form and substance
acknowledging the same), except for the following which shall survive until
otherwise terminated or discharged hereunder: (a) the rights of Holders of
Defeased Securities to receive, solely from the trust fund described in Section
404 hereof and as more fully set forth in such Section, payments in respect of
the principal of, premium, if any, or interest on such Securities when such
payments are due, (b) the Company's obligations with respect to such Defeased
Securities under Sections 304, 305, 308, 1002 and 1018 hereof, (c) the rights,
powers, trusts, duties and immunities of the Trustee hereunder including,
without limitation, the Trustee's rights under Sections 606, 1303 and 1305
hereof and the Company's obligations to the Trustee in connection therewith, and
(d) this Article Four. Subject to compliance with this Article Four, the Company
may exercise its option under this Section 402 notwithstanding the prior
exercise of its option under Sections 403 hereof with respect to the Securities.

            Section 403. Covenant Defeasance.

            Upon the Company's exercise under Section 401 hereof of the option
applicable to this Section 403, the Company and each Guarantor shall be released
from its obligations under any covenant or provision contained or referred to in
Sections 1003, 1004, 1005, 1006, 1007, 1008, 1009, 1010, 1011, 1012, 1014, 1015,
1016, 1019, 1020, 1021, 1022, 1024, 1025, 1028, 1030, 1031, 1032 and 1316 hereof
with respect to the Defeased Securities on and after the date the conditions set
forth below are satisfied (hereinafter, "covenant defeasance"), and the Defeased
Securities shall thereafter be deemed to be not "Outstanding" for the purposes
of any direction, waiver, consent or declaration or Act of Holders (and the
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "Outstanding" for all other purposes hereunder. For this
purpose, such covenant defeasance means that, with respect to the Defeased
Securities, the Company and each Guarantor may omit to comply with and shall
have no liability in respect of any term, condition or limitation set forth in
any such Section or Article, whether directly or indirectly, by reason of any
reference elsewhere herein to any such Section or Article or by reason of any
reference in any such Section or Article to any other provision herein or in any
other document and such omission to comply shall not constitute a Default or an
Event of Default under Section 501(2) or (3) hereof but, except as specified
above, the remainder of this Indenture and such Defeased Securities shall be
unaffected thereby.

            Section 404. Conditions to Defeasance or Covenant Defeasance.

            The following shall be the conditions to the application of either
Section 402 or Section 403 hereof to the Defeased Securities:

            (1) The Company shall irrevocably have deposited or caused to be
      deposited with the Trustee (or another trustee satisfying the requirements
      of Section 608 hereof who shall agree to comply with the provisions of
      this Article

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<PAGE>
      Four applicable to it) as trust funds in trust for the purpose of making
      the following payments, specifically pledged as security for, and
      dedicated solely to, the benefit of the Holders of such Securities, (a)
      United States dollars in an amount, or (b) U.S. Government Obligations
      which through the scheduled payment of principal and interest in respect
      thereof in accordance with their terms shall provide, not later than one
      day before the due date of any payment, money in an amount, or (c) a
      combination thereof, sufficient, in the opinion of a nationally recognized
      firm of independent public accountants or a nationally recognized
      investment banking firm expressed in a written certification thereof
      delivered to the Trustee, to pay and discharge, and which shall be applied
      by the Trustee (or other qualifying trustee), to pay and discharge, the
      principal of, premium, if any, or interest on the Defeased Securities on
      the Stated Maturity of such principal or installment of principal or
      interest (such date being referred to as the "Defeasance Redemption
      Date"), if when exercising under Section 401 hereof either its option
      applicable to Section 402 hereof or its option applicable to Section 403
      hereof, the Company shall have delivered to the Trustee an irrevocable
      notice to redeem all of the Outstanding Securities on the Defeasance
      Redemption Date); provided that the Trustee shall have been irrevocably
      instructed to apply such United States dollars or the proceeds of such
      U.S. Government Obligations to said payments with respect to the
      Securities.

            (2) In the case of an election under Section 402 hereof, the Company
      shall have delivered to the Trustee an Opinion of Independent Counsel from
      the United States of America stating that (a) the Company has received a
      ruling from the Internal Revenue Service, or (b) since the date of this
      Indenture, there has been a change in the applicable federal income tax
      law, including by means of a Revenue Ruling published by the Internal
      Revenue Service, to the effect that, and based thereon such Opinion of
      Independent Counsel from the United States of America shall confirm that,
      the Holders of the Outstanding Securities will not recognize income, gain
      or loss for U.S. Federal income tax as a result of such defeasance and
      will be subject to federal income tax on the same amounts, in the same
      manner and at the same times as would have been the case if such
      defeasance had not occurred.

            (3) In the case of an election under Section 403 hereof, the Company
      shall have delivered to the Trustee an Opinion of Independent Counsel in
      the United States of America to the effect that the Holders of the
      Outstanding Securities will not recognize income, gain or loss for U.S.
      Federal income tax or certain other tax purposes as a result of such
      covenant 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 covenant defeasance had not occurred.

            (4) No Default or Event of Default shall have occurred and be
      continuing on the date of such deposit or insofar as Sections 501(10),
      (11) or (12) hereof are concerned, at any time during the period ending on
      the 91st day after the date of deposit.

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            (5) Such defeasance or covenant defeasance shall not result in a
      breach or violation of, or constitute a Default under, any material
      agreement or instrument (other than this Indenture) to which the Company
      or any Guarantor is a party or by which it is bound.

            (6) The Company shall have delivered to the Trustee an Opinion of
      Independent Counsel to the effect that after the 91st day following the
      deposit, the trust funds will not be treated as a preference under any
      applicable Bankruptcy Law.

            (7) The Company shall have delivered to the Trustee an Opinion of
      Counsel to the effect that such deposit shall not cause the Trustee or the
      trust so created to be subject to the United States Investment Company Act
      of 1940, as amended from time to time.

            (8) The Company shall have delivered to the Trustee an Officers'
      Certificate stating that the deposit was not made by the Company with the
      intent of preferring the Holders of the Securities or any Guaranty over
      the other creditors of the Company or any Guarantor with the intent of
      defeating, hindering, delaying or defrauding creditors of the Company, any
      Guarantor or others.

            (9) The Company shall have delivered to the Trustee an Officers'
      Certificate and an Opinion of Independent Counsel, each stating that all
      conditions precedent provided for relating to either the defeasance under
      Section 402 hereof or the covenant defeasance under Section 403 hereof (as
      the case may be) have been complied with as contemplated by this Section
      404.

            Opinions of Counsel or Opinions of Independent Counsel may have
qualifications customary for opinions of the type required and counsel
delivering such opinions may rely on certificates of the Company or any other
relevant Obligor or government or other officials customary for opinions of the
type required, including certificates certifying as to matters of fact,
including that various financial covenants have been complied with.

            Section 405. Deposited Money and U.S. Government Obligations to Be
Held in Trust; Other Miscellaneous Provisions.

            Subject to the provisions of the last paragraph of Section 1018
hereof, all United States dollars and U.S. Government Obligations (including the
proceeds thereof) deposited with the Trustee (or other qualifying trustee,
collectively for purposes of this Section 405, the "Trustee") pursuant to
Section 404 hereof in respect of the Defeased Securities shall be held in trust
and applied by the Trustee, in accordance with the provisions of such Securities
and this Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent), as the Trustee may
determine, to the Holders of such Securities of all sums due and to become due
thereon in respect of principal, premium, if any, and interest but such money
need not be segregated from other funds except to the extent required by law.

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<PAGE>
            The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 404 hereof or the principal and interest received
in respect thereof.

            Anything in this Article Four to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon Company
Request any United States dollars or U.S. Government Obligations held by it as
provided in Section 404 hereof which, in the unqualified opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered in form and substance satisfactory to the
Trustee, are in excess of the amount thereof which would then be required to be
deposited to effect defeasance or covenant defeasance after application of the
appropriate defeasance option.

            Section 406. Reinstatement.

            If the Trustee or Paying Agent is unable to apply any United States
dollars or U.S. Government Obligations in accordance with Section 402 or 403
hereof, as the case may be, by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's and each Guarantor's obligations under this
Indenture and the Securities (including, without limitation, the provisions of
Article Thirteen hereof) shall be revived and reinstated as though no deposit
had occurred pursuant to Section 402 or 403 hereof, as the case may be, until
such time as the Trustee or Paying Agent is permitted to apply all such United
States dollars or U.S. Government Obligations in accordance with Section 402 or
403 hereof, as the case may be; provided, however, that if the Company makes any
payment to the Trustee or Paying Agent of principal of, premium, if any, or
interest on any Security following the reinstatement of its obligations, the
Trustee or Paying Agent shall promptly pay any such amount to the Holders of the
Securities and the Company shall be subrogated to the rights of the Holders of
such Securities to receive such payment from the money held by the Trustee or
Paying Agent.

            Section 407. Repayment of the Company.

            Any money deposited with the Trustee or any Paying Agent, or then
held by the Company in trust for the payment of the principal of, premium, if
any, or interest on any Security and remaining unclaimed for two years after
such principal, interest or premium, if any, has become due and payable, shall
be paid to the Company on its written request or (if then held by the Company)
shall be discharged from such trust. The Holder of such Security shall
thereafter, as an unsecured general creditor, look only to the Company for
payment thereof and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in the New York Times and The
Wall Street Journal (national edition), notice that such money remains unclaimed
and that, after a date specified therein, which shall not be less than thirty
(30) days from the date of such notification or publication,

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any unclaimed balance of such money then remaining shall promptly be repaid to
the Company.

                                  ARTICLE FIVE

                                    REMEDIES

            Section 501. Events of Default.

            An "Event of Default" shall occur if:

            (1) (a) the Company shall default in the payment of any principal of
      any Security when the same becomes due, whether by acceleration, at
      maturity, upon redemption, in connection with a Change of Control or an
      Asset Sale, or otherwise, (b) the Company shall fail to pay any interest,
      fee or penalty on the Securities, or any other amount payable hereunder,
      within three (3) days after any such interest or other amount becomes due
      in accordance with the terms hereof, or (c) any other Obligor shall
      default (and such default shall continue unremedied for a period of three
      (3) days) in the payment when due of any fee with respect to any Security
      or any monetary Indenture Obligation (other than those covered by clauses
      (a) or (b) hereof);

            (2) any Indenture Obligor (including the Company) fails to observe
      or perform any covenant, condition or agreement on the part of such
      Indenture Obligor to be observed or performed pursuant to Section 1006,
      1007, 1008, 1009, 1010, 1011, 1012, 1013, 1014, 1019, 1020 or Article
      Eight hereof;

            (3) any Obligor (including the Company) fails to duly observe or
      perform any other covenant, condition or agreement in, to and under this
      Indenture or any other Indenture Document executed by it and such failure
      continues for a period of 30 days after notice thereof shall have been
      given to the Company by the Trustee or shall have been given by the
      Holders of at least 25% of the aggregate principal amount of the
      Securities then Outstanding to the Company and the Trustee, in either
      case, specifying such default and demanding that it be remedied;

            (4) any Obligor (including the Company) denies, disaffirms or
      repudiates its obligations under this Indenture (including the Guaranties
      of the Securities), the Securities, any other Indenture Documents, the New
      Tranche B Notes Indenture (including any guaranty thereunder), the New
      Tranche B Notes, the Term Loan Agreement (including any guaranty
      thereunder), the New Tranche A Term Notes or the Registration Rights
      Agreement, or any material provision of any Indenture Document, the New
      Tranche B Notes Indenture (including any guaranty thereunder), the New
      Tranche B Notes, the Term Loan Agreement (including any guaranty
      thereunder), the New Tranche A Term Notes or the Registration Rights
      Agreement shall cease to be valid or binding or any Obligor shall so
      assert in writing;

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            (5) a default occurs (a) in the payment when due, whether by
      acceleration or otherwise, of any amount (including principal, premium or
      interest) in respect of Indebtedness of any Obligor (including the
      Company), under the New Tranche B Notes Indenture, the New Tranche B
      Notes, the Term Loan Agreement, the New Tranche A Term Notes or in respect
      of any other Indebtedness of any Obligor (including the Company) but not
      including the Indebtedness described in and covered by clause (1) of this
      Section 501 (subject only to any applicable grace period pursuant to the
      terms of such Indebtedness), having a principal amount equal to or in
      excess of $500,000 in respect of an individual Indebtedness or having
      principal amounts equal to or in excess of $1,000,000 in the aggregate in
      respect of more than one individual Indebtedness taken as a whole, or (b)
      a default shall occur in the performance or observance of any obligation
      or condition with respect to such Indebtedness if the effect of such
      default is to accelerate the maturity of any such Indebtedness or such
      default shall continue unremedied for any applicable period of time
      sufficient to permit the holder or holders of such Indebtedness, or any
      trustee or agent for such holders, to cause such Indebtedness to become
      due and payable prior to its expressed maturity, or (c) a default or an
      event of default shall occur in the performance or observance of any
      obligation or condition of any agreement (including any Transaction
      Document) to which any Obligor is party or by which it is bound and such
      default or event of default could reasonably be expected to have a
      Material Adverse Effect;

            (6) a final judgment is, or final judgments are, entered by a court
      or courts of competent jurisdiction against any Obligor or any Obligor
      Subsidiary and such judgment or judgments remain undischarged, unbonded or
      unstayed for a period of thirty (30) days; provided that the aggregate of
      all such judgments equals or exceeds $1,000,000 or any such individual
      judgment exceeds $500,000 (other than, in each case, any judgment as to
      which and only to the extent that, a reputable insurance company has
      acknowledged, whether subject to its customary reservation of rights or
      otherwise, coverage of such claim in writing);

            (7) a warrant of attachment or execution or similar process shall be
      issued or levied against the property of any Obligor or any Obligor
      Subsidiary having an aggregate value in excess of $1,000,000 which is not
      stayed or lifted within thirty (30) days;

            (8) any representation, warranty or certification of any Obligor
      (including the Company) made or deemed to be made hereunder or in any
      other Indenture Document executed by it, or pursuant to or in respect of
      the Term Loan Agreement (or any of the guaranties thereunder), the New
      Tranche A Term Notes, the New Tranche B Notes Indenture (or any of the
      guaranties thereunder) or the New Tranche B Notes or in any other writing
      or certificate furnished by or on behalf of any Obligor (including the
      Company) for the purposes of or in connection with this Indenture, such
      other Indenture Document or pursuant to or in respect of the Term Loan
      Agreement (or any of the guaranties thereunder), the New Tranche A Term
      Notes, the New Tranche B Notes Indenture (or any of the

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      guaranties thereunder) or the New Tranche B Notes is or shall be incorrect
      when made or deemed made in any material respect;

            (9) (a) any of the Security Documents ceases to give the Collateral
      Agent a valid and perfected Lien of the priority required thereby or the
      rights, powers and privileges expressed to be created thereby (other than
      in accordance with their respective terms or if released by the Collateral
      Agent in accordance with the terms hereof), or (b) any of the Security
      Documents is declared null and void, or (c) any Obligor denies any of its
      obligations under any of the Security Documents or (d) any Collateral
      becomes subject to any Lien other than the Liens created or permitted by
      the Security Documents or the Indenture, or (e) any Collateral (or part
      thereof) is seized or taken by any governmental agency or authority, which
      taking or seizure could reasonably be expected to have a Material Adverse
      Effect;

            (10) any Obligor or any Obligor Subsidiary, pursuant to or within
      the meaning of any Bankruptcy Law:

                  (a) commences a voluntary case,

                  (b) consents to the entry of an order for relief against it in
            an involuntary case in which it is a debtor,

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

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

                  (e) admits in writing its inability to pay debts as the same
            become due;

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

                  (a) is for relief against any Obligor or any Obligor
            Subsidiary in an involuntary case in which it is a debtor,

                  (b) appoints a Custodian of any Obligor or any Obligor
            Subsidiary or for all or substantially all of their respective
            property, or

                  (c) orders the liquidation of any Obligor or any Obligor
            Subsidiary,

            and the order or decree remains unstayed and in effect for sixty
            (60) days;

            (12) any Obligor or any Obligor Subsidiary commits or suffers to
      occur a Canadian Act of Bankruptcy;

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            (13) the Guaranty of any Guarantor for any reason ceases to be, or
      is asserted by any Guarantor or the Company not to be, in full force and
      effect or enforceable in accordance with its terms, except to the extent
      contemplated in the Guaranty; or

            (14) the aggregate minimum required contribution amount for any year
      with respect to all Single Employer Plans as calculated in the applicable
      actuarial valuation reports shall exceed $5 million or one or more ERISA
      Events shall occur or exist with respect to any Plan, which could
      reasonably be expected to subject any Obligor, Obligor Subsidiary or ERISA
      Affiliate, individually or collectively, to a liability equal to or in
      excess of $500,000 in respect of a single ERISA Event or $1,000,000 in the
      aggregate in respect of more than one ERISA Event.

            Section 502. Acceleration.

            If an Event of Default (other than an Event of Default specified in
clauses (10), (11) and (12) of Section 501 hereof) occurs and is continuing for
any reason, whether voluntary or involuntary, then, subject to the provisions of
the Common Security and Intercreditor Agreement, the Trustee, by notice to the
Company, or the Holders of at least 25% of the aggregate principal amount of the
Securities then Outstanding, by written notice to the Company and the Trustee,
may declare the unpaid principal of, premium, if any, and any accrued interest
on all the Securities to be immediately due and payable. Upon such declaration,
the principal, premium, if any, and interest on the Securities shall become
automatically and immediately due and payable, without further notice, demand or
presentment. If an Event of Default specified in clause (10), (11) or (12) of
Section 501 hereof occurs, such an amount shall ipso facto automatically be and
become immediately due and payable, without any declaration or other act on the
part of the Trustee or any Holder, and such amount shall be dealt with in
accordance with, and subject to, the provisions of the Common Security and
Intercreditor Agreement. Other than in respect of (i) a continuing Default or
Event of Default in the payment of the principal of, premium, if any, or
interest on any Security held by a non-consenting Holder, or (ii) a covenant or
provision hereof which under Article Nine cannot be modified or amended without
the consent of the Holder of each Security then Outstanding, or (iii) any
continuing Default or Event of Default in respect of any matter involving the
release of Collateral (not otherwise permitted by terms of the Indenture
Documents), which shall not be waived without the consent of the Holder of each
then Outstanding Security, Holders of a majority of the aggregate principal
amount of the Securities then Outstanding by written notice to the Trustee, may
rescind an acceleration and its consequences if the rescission would not
conflict with any judgment or decree and if:

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

            (i) all sums paid or advanced by the Trustee under this Indenture
      and the reasonable compensation, expenses, disbursements and advances of
      the

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      Trustee, its agents and counsel and any other amounts due to the Trustee
      under Section 606;

            (ii) all overdue interest on all Securities;

            (iii) the principal of and premium, if any, on any Securities which
      have become due otherwise than by such declaration of acceleration and
      interest thereon at the rate borne by the Securities; and

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

            (b) all Events of Default, other than the non-payment of principal
of the Securities which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 504 hereof. No
such rescission shall affect any subsequent Default or impair any right
consequent thereon provided in Section 504 hereof.

            Section 503. Other Remedies.

            If an Event of Default occurs and is continuing, the Trustee may, in
accordance with the provisions of the Common Security and Intercreditor
Agreement, pursue any available remedy (under this Indenture or otherwise) to
collect the payment of principal, premium, if any, or interest on the Securities
or to enforce the performance of any provision of the Securities or this
Indenture.

            The Trustee may maintain a proceeding pursuant to the provisions of
the Common Security and Intercreditor Agreement 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 Holder 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.

            Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in the last paragraph
of Section 308, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy,
including such other rights and remedies of the Holders as set forth in the
Common Security and Intercreditor Agreement.

            Section 504. Waiver of Past Defaults.

            The Holders of a majority of the aggregate principal amount of the
Securities then Outstanding, by notice to the Trustee, may waive an existing
Default or

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Event of Default and its consequences, except in respect of (i) a continuing
Default or Event of Default in the payment of the principal of, premium, if any,
or interest on any Security held by a non-consenting Holder, or (ii) a covenant
or provision hereof which under Article Nine, cannot be modified or amended
without the consent of the Holder of each Security then Outstanding, or (iii)
any continuing Default or Event of Default in respect of any matter involving
the release of Collateral (not otherwise permitted by terms of the Indenture
Documents), which shall not be waived without the consent of the Holder of each
then Outstanding Security. Upon any such waiver, such Default shall cease to
exist and any Event of Default arising therefrom shall be deemed to have been
cured for every purpose of this Indenture; provided, however, that no such
waiver shall extend to any subsequent or other Default or Event of Default or
impair any right consequent thereon.

            Section 505. Control by Majority.

            The Holders of a majority of the aggregate principal amount of the
Securities then Outstanding shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee with respect to the
Securities by this Indenture or the Security Documents; provided that the
Trustee may refuse to follow any direction that conflicts with law or this
Indenture, that the Trustee determines may be unduly prejudicial to the rights
of other Holders, or that may involve the Trustee in personal liability and the
Trustee may take any other action deemed proper by the Trustee which is not
inconsistent with such direction.

            Section 506. Limitation on Suits.

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

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

            (2) the Holders of at least 25% of principal amount of the
      Securities then Outstanding make a written request to the Trustee to
      pursue the remedy;

            (3) such Holder or Holders offer and, if requested, provide to the
      Trustee indemnity satisfactory in form and substance to the Trustee
      against any loss, liability or expense;

            (4) the Trustee does not comply with the request within twenty (20)
      days after receipt of the request and the offer and, if requested, the
      provision of the indemnity; and

            (5) during such twenty (20) day period the Holders of a majority of
      the aggregate principal amount of the Securities then Outstanding do not
      give the Trustee a direction inconsistent with the request.

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<PAGE>
A Holder may not use this Indenture to affect, disturb or prejudice the rights
of another Holder or to obtain, or seek to obtain, a preference or priority over
another Holder or to enforce any right under this Indenture or under the
Securities, except in the manner herein provided and for the equal, ratable and
common benefit of all Holders of the Securities. For the protection and
enforcement of the provisions of this Section, each and every Holder and the
Trustee shall be entitled to such relief as can be given either at law or in
equity.

            Section 507. Rights of Holders to Receive Payment. Notwithstanding
any other provision of this Indenture, the right of any Holder of a Security to
receive payment of principal, or premium, if any, and interest on the Security,
on or after the respective due dates expressed in the Security (or, in the case
of redemption or repurchase, on the Redemption Date or repurchase date), 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 the Holder.

            Section 508. Collection Suit by Trustee.

            If an Event of Default specified in Section 501(1) or (2) hereof
occurs and is continuing, the Trustee is authorized to recover judgment in its
own name and as trustee of an express trust against any Obligor or any Obligor
Subsidiary for the whole amount of principal, premium, if any, and interest
remaining unpaid on the Securities and interest on overdue principal and, to the
extent lawful, premium and interest and such further amount as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, subject to Article Thirteen.

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

            If an Event of Default occurs and is continuing, the Trustee may, in
its discretion, proceed to protect and enforce its rights and the rights of the
Holders under this Indenture (including the Guaranties of the Securities) and
the Common Security and Intercreditor Agreement by such appropriate private or
judicial proceedings as the Trustee shall deem most effectual to protect and
enforce such rights, including, without limitation, seeking recourse against any
Guarantor pursuant to the terms of any Guaranty, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein or therein, or to enforce any other proper
remedy, subject however to Section 505 hereof.

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            Section 509. Trustee May File Proofs of Claim.

            The Trustee is authorized to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the claims
of the Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders allowed in any judicial proceedings relative to any Obligor or any
Obligor Subsidiary, their creditors or their property. The Trustee shall be
entitled and empowered, subject to Article Thirteen, to collect, receive and
distribute any money or other property payable or deliverable on any such claims
and any Custodian in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay to
the Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 606 hereof. To the extent that the payment
of any such compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, and any other amounts due the Trustee under Section 606
hereof out of the estate in any such proceeding shall be denied for any reason,
payment of the same shall be secured by a Lien on, and shall be paid out of, any
and all distributions, dividends, money, securities and other properties which
the Holders of the Securities may be entitled to receive in such proceeding
whether in liquidation or under any plan of reorganization or arrangement or
otherwise. Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the 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 510. Priorities.

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

            First: to (i) the Trustee, its agents and attorneys for amounts due
      under Section 606 hereof, including payment of all compensation, expenses
      and liabilities incurred, and all advances made, by the Trustee and the
      costs and expenses of collection, and (ii) the Collateral Agent, pursuant
      to the terms of the Common Security and Intercreditor Agreement;

            Second: to (i) Holders 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
      (ii) the Administrative Agent and to the New Tranche B Indenture Trustee
      for obligations under the Term Loan Agreement and the New Tranche B Notes
      Indenture and the New Tranche B Notes, including amounts of principal of,
      premium, if any, and interest on such obligations, in each case subject to
      and in accordance with the Common Security and Intercreditor Agreement;

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<PAGE>
            Third: without duplication, to Holders for any other Indenture
      Obligations owing to the Holders under this Indenture or the Securities;
      and

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

            The Trustee may fix a record date and payment date for any payment
to Holders.

            Section 511. Undertaking for Costs.

            In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken, suffered or
omitted by it as a Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section does not apply to a suit by the Trustee, a suit by a
Holder pursuant to Section 507 hereof or a suit by Holders of more than 10% of
the aggregate principal amount of the Securities then Outstanding or any suit
instituted by any Holder for the enforcement of the payment of the principal of,
premium, if any, or interest on any Security on or after the respective Stated
Maturities expressed in such Security (or, in the case of redemption or
repurchase, on or after the Redemption Date or repurchase date).

            Section 512. Waiver of Stay, Extension or Usury Laws.

            Each Indenture Obligor covenants (to the extent that it may lawfully
do so) that it shall not at any time insist upon, plead or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension law
or any usury or other law wherever enacted, now or at any time hereafter in
force, which would prohibit or forgive such Indenture Obligor from paying all or
any portion of the principal of, premium, if any, or interest on the Securities
contemplated herein or in the Securities or which may affect the covenants or
the performance of this Indenture. Each Indenture Obligor (to the extent that it
may lawfully do so) hereby expressly waives all benefit or advantage of any such
law and covenants that it shall not hinder, delay or impede the execution of any
power herein granted to the Trustee, but shall suffer and permit the execution
of every such power as though no such law had been enacted.

                                  ARTICLE SIX

                                   THE TRUSTEE

            Section 601. Notice of Defaults.

            Within thirty (30) days after the receipt of written notice from the
Company of the occurrence of any Default pursuant to Section 704(e), the Trustee
shall transmit by mail to all Holders, as their names and addresses appear in
the Security

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Register, notice of such Default hereunder known to the Trustee unless such
Default shall have been cured or waived; provided, however, that, except in the
case of a Default in the payment of principal of, premium, if any, or interest
on, any Security, the Trustee shall be protected in withholding such notice if
and so long as a trust committee of officers of the Trustee in good faith
determines that the withholding of such notice is in the interest of the
Holders.

            Section 602. Certain Rights of Trustee.

            Subject to the provisions of Sections 315(a) through 315(d) of the
Trust Indenture Act and Section 613 hereof: (a) the Trustee may rely and shall
be protected in acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of Indebtedness or other
paper or document believed by it to be genuine and to have been signed or
presented by the proper party or parties;

            (b) any request or direction of the Company mentioned herein shall
be sufficiently evidenced by a Company Request or Company Order, and, in each
case, accompanied by the documents required by Section 103, and any resolution
of the Board of Directors may be sufficiently evidenced by a Board Resolution;

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

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

            (e) the Trustee shall not be liable for any action taken or omitted
by it in good faith and believed by it to be authorized or within the
discretion, rights or powers conferred upon it by this Indenture or any Security
Document other than any liabilities arising out of the gross negligence or
willful misconduct of the Trustee as determined by a court of competent
jurisdiction pursuant to a final non-appealable judgment;

            (f) the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
approval, appraisal, bond, debenture, note, coupon, security or other paper or
document unless requested in writing to do so by the Holders of not less than a
majority of the aggregate principal amount of the Securities then Outstanding;
provided that the Trustee in its discretion may make such further

                                       79
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inquiry or investigation into such facts or matters as it may deem fit, and, if
the Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of the Company,
personally or by agent or attorney;

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

            (h) no provision of this Indenture or any Security Document shall
require the Trustee to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties hereunder or in the
exercise of any of its rights or powers;

            (i) notwithstanding anything to the contrary set forth herein or in
any Security Document, under no circumstances shall the Trustee be required to
take possession of or maintain an action to foreclose upon any Mortgaged
Property;

            (j) delivery of reports, information and documents to the Trustee
under Section 704 is for informational purposes only and the Trustee's receipt
of the foregoing shall not constitute constructive notice of any information
contained therein or determinable from information contained therein, including
the obligor's compliance with any of their covenants hereunder (as to which the
Trustee is entitled to rely exclusively on Officer's Certificates);

            (k) the Trustee shall not be deemed to have notice of any Event of
Default unless the Trustee shall have received written notice thereof at the
Corporate Trust Office of the Trustee, and such notice references this
Indentures; and

            (l) 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 each agent, custodian and other Person employed
to act hereunder.

            Section 603. Trustee Not Responsible for Recitals, Dispositions of
Securities or Application of Proceeds Thereof.

            The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company and the Trustee assumes no responsibility for their correctness. The
Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Securities, except that the Trustee represents that it is
duly authorized to execute and deliver this Indenture, authenticate the
Securities and perform its obligations hereunder and that the statements made by
it in a Statement of Eligibility on Form T-1, if any, supplied to the Company
are true and accurate in all material respects subject to the qualifications set
forth therein. The Trustee shall not be accountable for the use or application
by the Company of the Securities or the proceeds thereof.

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            Section 604. Trustee and Agents May Hold Securities; Collections;
etc.

            The Trustee, any Paying Agent, Security Registrar or any other agent
of the Company and their respective Affiliates, in its individual or any other
capacity, may become the owner or pledgee of Securities, with the same rights it
would have if it were not the Trustee, Paying Agent, Security Registrar or such
other agent or such Affiliates and, subject to Sections 310 and 311 of the Trust
Indenture Act may otherwise deal with the Company and receive, collect, hold and
retain collections from the Company with the same rights it would have if it
were not the Trustee, Paying Agent, Security Registrar or such other agent or
such Affiliate.

            Section 605. Money Held in Trust.

            All moneys received by the Trustee shall, until used or applied as
herein provided, be held in trust for the purposes for which they were received,
but need not be segregated from other funds except to the extent required by
applicable provisions of law. Except for funds or securities deposited with the
Trustee pursuant to Article Four, the Trustee may invest all moneys received by
the Trustee, until used or applied as herein provided, in Cash Equivalents in
accordance with the written directions of the Company in compliance with Section
103. The Trustee shall not be liable for any losses incurred in connection with
any investments made in accordance with this Section 605, except to the extent
that such losses are attributable to the Trustee's gross negligence, bad faith
or willful misconduct as determined by a court of competent jurisdiction
pursuant to a final non-appealable judgment. With respect to any losses on
investments made under this Section 605, the Company is liable for the full
extent of any such loss. The Trustee shall be under no liability for interest or
any money received by it hereunder except as otherwise agreed with the Company.

            Section 606. Compensation and Indemnification of Trustee and Its
Prior Claim.

            The Company covenants and agrees to pay to the Trustee from time to
time, and the Trustee shall be entitled to, reasonable compensation for all
services rendered by it hereunder (which shall not be limited by any provision
of law in regard to the compensation of a trustee of an express trust) and the
Company covenants and agrees to pay or reimburse the Trustee and each
predecessor Trustee, upon its request, for all reasonable expenses,
disbursements and advances incurred or made by or on behalf of it in accordance
with any of the provisions of this Indenture (including the reasonable
compensation and the expenses and disbursements of its counsel and of all agents
and other persons not regularly in its employ), except to the extent any such
expense, disbursement or advance arises directly from the Trustee's gross
negligence, bad faith or willful misconduct as determined by a court of
competent jurisdiction pursuant to a final non-appealable judgment. The Company
also covenants to indemnify the Trustee and each predecessor Trustee for, and to
hold it harmless against, any loss, liability, tax, assessment or other
governmental charge (other than taxes applicable to the Trustee's compensation
hereunder) or expense incurred without gross negligence or bad faith on such
Trustee's part, as determined by a court of competent jurisdiction pursuant to a
final,

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non-appealable judgment, arising out of or in connection with the acceptance or
administration of this Indenture or any Security Document or the trusts
hereunder and such Trustee's duties hereunder, including enforcement of this
Section 606 and also including any liability which the Trustee may incur as a
result of failure to withhold, pay or report any tax, assessment or other
governmental charge, and the costs and expenses of defending itself against or
investigating any claim of liability in the premises. The obligations of the
Company under this Section to compensate and indemnify the Trustee and each
predecessor Trustee and to pay or reimburse the Trustee and each predecessor
Trustee for expenses, disbursements and advances shall constitute an additional
obligation hereunder and shall survive the satisfaction and discharge of this
Indenture, or the resignation or removal of any Trustee.

            To secure the Company's payment obligations in this Section 606, the
Trustee shall have a Lien prior to the Securities on all money or property held
or collected by the Trustee, in its capacity as Trustee, except money or
property held in trust to pay principal of, premium, if any, or interest on
particular Securities.

            When the Trustee incurs expenses or renders services in connection
with an Event of Default specified in Section 501(10), (11) or (12), the
expenses and the compensation for the services shall be preferred over the
status of Holders in any proceeding under any Bankruptcy Law and are intended to
constitute expenses of administration under any Bankruptcy Law.

            Any Trustee hereunder shall not be liable for the acts or omission
of any successor Trustee hereunder.

            Section 607. Conflicting Interests.

            The Trustee shall comply with the provisions of Section 310(b) of
the Trust Indenture Act. If the Trustee has or shall acquire a conflicting
interest within the meaning of the Trust Indenture Act, the Trustee shall either
eliminate such interest or resign, to the extent and in the manner provided by,
and subject to the provisions of, the Trust Indenture Act and this Indenture.

            Section 608. Corporate Trustee Required; Eligibility.

            There shall at all times be a Trustee hereunder which shall be
eligible to act as trustee under Section 310(a)(1) of the Trust Indenture Act
and which shall have a combined capital and surplus of at least $50,000,000 or
which shall be a wholly-owned subsidiary of a company that has a combined
capital and surplus of at least $50,000,000, to the extent there is an
institution eligible and willing to serve. If the Trustee does not have an
office in The City of New York, the Trustee may appoint an agent in The City of
New York reasonably acceptable to PCI and the Company to conduct any activities
which the Trustee may be required under this Indenture to conduct in The City of
New York. If the Trustee does not have an office in The City of New York or has
not appointed an agent in The City of New York, the Trustee shall be a
participant in the Depository Trust Company and its FAST distribution systems.
If such corporation

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published reports of condition at least annually, pursuant to law or to the
requirements of federal, state, territorial or District of Columbia supervising
or examining authority, then for the purposes of this Section, the combined
capital and surplus of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. If at any time the Trustee shall cease to be eligible in accordance
with the provisions of this Section, the Trustee shall resign immediately in the
manner and with the effect hereinafter specified in this Article Six.

            Section 609. Resignation and Removal; Appointment of Successor
Trustee.

            (a) No resignation or removal of the Trustee and no appointment of a
successor trustee pursuant to this Article Six shall become effective until the
acceptance of appointment by the successor trustee under Section 610 hereof.

            (b) The Trustee, or any trustee or trustees hereafter appointed, may
at any time resign by giving written notice thereof to the Company. Upon
receiving such notice of resignation, the Company shall promptly appoint a
successor trustee by written instrument executed by authority of its Board of
Directors, a copy of which shall be delivered to the resigning Trustee and a
copy to the successor trustee. If an instrument of acceptance by a successor
trustee shall not have been delivered to the Trustee within thirty (30) days
after the giving of such notice of resignation, the resigning Trustee may, or
any Holder who has been a bona fide Holder of a Security for at least six months
may, on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the appointment of a successor trustee. Such court
may thereupon, after such notice, if any, as it may deem proper, appoint a
successor trustee.

            (c) The Trustee may be removed at any time by an Act of the Holders
of not less than a majority of the aggregate principal amount of the Outstanding
Securities, delivered to the Trustee and to the Company.

            (d) If at any time:

                  (1) the Trustee shall fail to comply with the provisions of
            Section 310(b) of the Trust Indenture Act after written request
            therefor by the Company or by any Holder who has been a bona fide
            Holder of a Security for at least six months, or

                  (2) the Trustee shall cease to be eligible under Section 608
            hereof and shall fail to resign after written request therefor by
            the Company or by any Holder who has been a bona fide Holder of a
            Security for at least six months, or

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

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then, in any case, (i) the Company by a Board Resolution of its Board of
Directors, may remove the Trustee, or (ii) subject to Section 511 hereof, the
Holder of any Security who has been a bona fide Holder of a Security for at
least six months may, on behalf of himself and all other similarly situated
Holders, petition any court of competent jurisdiction for the removal of the
Trustee and the appointment of a successor trustee. Such court may thereupon,
after such notice, if any, as it may deem proper, prescribe or remove the
Trustee and appoint a successor trustee.

            (e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution of its Board of Directors, shall promptly appoint
a successor trustee. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor trustee shall be
appointed by Act of the Holders of a majority of the aggregate principal amount
of the Securities then Outstanding, delivered to PCI, the Company and the
retiring Trustee, the successor trustee so appointed shall, forthwith upon its
acceptance of such appointment, become the successor trustee and supersede the
successor trustee appointed by the Company. If no successor trustee shall have
been so appointed by the Company or the Holders of the Securities and accepted
appointment in the manner hereinafter provided, the Holder of any Security who
has been a bona fide Holder for at least six months may, subject to Section 511
hereof, on behalf of himself and all other similarly situated Holders, petition
any court of competent jurisdiction for the appointment of a successor trustee.

            (f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor trustee by mailing
written notice of such event by first-class mail, postage prepaid, to the
Holders of Securities as their names and addresses appear in the Security
Register. Each notice shall include the name of the successor trustee and the
address of its Corporate Trust Office or agent hereunder.

            Section 610. Acceptance of Appointment by Successor.

            Every successor trustee appointed hereunder shall execute,
acknowledge and deliver to the Obligors and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee as if originally named
as Trustee hereunder; provided, however, that on the written request of the
Company in compliance with Section 103 or the successor trustee, upon payment of
its charges then unpaid, such retiring Trustee shall pay over to the successor
trustee all moneys at the time held by it hereunder and shall execute and
deliver an instrument transferring to such successor trustee all such rights,
powers, duties and obligations. Upon request of any such successor trustee, each
Indenture Obligor shall execute any and all instruments to more fully and
certainly vest in and confirm in such successor trustee all such rights and
powers. Any Trustee ceasing to act shall, nevertheless, retain a Lien upon all
property or funds held or collected by such Trustee or such successor trustee to

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secure any amounts then due such Trustee pursuant to the provisions of Section
606 hereof.

            No successor trustee with respect to the Securities shall accept
appointment as provided in this Section 610 unless at the time of such
acceptance such successor trustee shall be eligible to act as trustee under the
provisions of Section 310(a) of the Trust Indenture Act and this Article Six and
shall have a combined capital and surplus of at least $50,000,000 or which shall
be a wholly-owned subsidiary of a company that has a combined capital and
surplus of at least $50,000,000 and have a Corporate Trust Office or an agent
selected in accordance with Section 608 hereof.

            Upon acceptance of appointment by any successor trustee as provided
in this Section 610, the Company shall give notice thereof to the Holders of the
Securities, by mailing such notice to such Holders at their addresses as they
shall appear on the Security Register. If the acceptance of appointment is
substantially contemporaneous with the resignation, then the notice called for
by the preceding sentence may be combined with the notice called for by Section
609 hereof. If the Company fails to give such notice within ten (10) days after
acceptance of appointment by the successor trustee, the successor trustee shall
cause such notice to be given at the expense of the Company.

            Section 611. Merger, Conversion, Consolidation or Succession to
Business.

            Any legal Person into which the Trustee may be merged or converted
or with which it may be consolidated, or any legal Person resulting from any
merger, conversion or consolidation to which the Trustee shall be a party, or
any legal Person succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder;
provided that such legal Person shall be eligible under Section 310(a) of the
Trust Indenture Act and this Article Six and shall have a combined capital and
surplus of at least $50,000,000 or which shall be a wholly-owned subsidiary of a
company that has a combined capital and surplus of at least $50,000,000 and have
a Corporate Trust Office or an agent selected in accordance with Section 608
hereof without the execution or filing of any paper or any further act on the
part of any of the parties hereto.

            If at the time such successor 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. If at such 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
such successor trustee. In all such cases provided for under this paragraph,
such certificate shall have the full force which it has anywhere in the
Securities or in this Indenture, unless the certificate of the Trustee shall
have stipulated that the right to adopt the certificate of authentication of any
predecessor Trustee or to authenticate Securities in the name of any predecessor
Trustee shall only apply to its successor or successors by merger, conversion or
consolidation.

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            Section 612. Preferential Collection of Claims Against Company.

            If and when the Trustee shall be or become a creditor of the Company
(or other Indenture Obligor under the Guaranties and the Securities), the
Trustee shall be subject to the provisions of the Trust Indenture Act regarding
the collection of claims against the Company (or any such other obligor). A
Trustee who has resigned or been removed shall be subject to Section 311(a) of
the Trust Indenture Act to the extent indicated therein.

            Section 613. Certain Duties and Responsibilities.

            (a) Except during the continuance of an Event of Default,

                  (i) 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

                  (ii) 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 or
            opinions furnished to the Trustee and conforming to the requirements
            of this Indenture, but in the case of any such certificates or
            opinions which by any provision hereof are specifically required to
            be furnished to the Trustee, the Trustee shall be under a duty to
            examine the same to determine whether or not they conform to the
            requirements of this Indenture but shall not be required to verify
            the contents thereof.

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

            (c) Notwithstanding anything to the contrary herein contained, the
      Trustee may not be relieved from liability for its own gross negligence
      action, gross negligence failure to act, or willful misconduct, as
      determined by a court of competent jurisdiction pursuant to a final,
      non-appealable judgment, except that:

                  (i) this clause (c) does not limit the effect of clause (a) of
            this Section 613;

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

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                  (iii) the Trustee shall not be liable with respect to any
            action it takes or omits to take in good faith in accordance with a
            direction received by it pursuant to Section 502, 504 or 505.

                                 ARTICLE SEVEN

                HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY

            Section 701. Company to Furnish Trustee Names and Addresses of
Holders.

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

            (a) semiannually, not more than ten (10) days after each Regular
Record Date, a list, in such form as the Trustee may reasonably require, of the
names and addresses of the Holders as of such Regular Record Date; and

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

provided, however, that if and so long as the Trustee shall be the Security
Registrar, no such list need be furnished.

            Section 702. Preservation of Information; Disclosure of Names and
Addresses of Holders.

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

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

            (c) Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the Trustee
nor any agent of either of them shall be held accountable by reason of the
disclosure of any information as to the names and addresses of the Holders in
accordance with Section 312 of the Trust Indenture Act, regardless of the source
from which such information was derived, and that the Trustee shall not be held
accountable by reason of mailing any material pursuant to a request made under
Section 312 of the Trust Indenture Act.

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            Section 703. Reports by Trustee.

            Within sixty (60) days after May 15 of each year commencing with the
first May 15 after the Closing Date, the Trustee shall transmit by mail to all
Holders, as their names and addresses appear in the Security Register, as
provided in Section 313(c) of the Trust Indenture Act, a brief report dated as
of such May 15 in accordance with and to the extent required by Section 313(a)
of the Trust Indenture Act. The Trustee shall also comply with Section 313(b) of
the Trust Indenture Act.

            Commencing at the time this Indenture is qualified under the Trust
Indenture Act, a copy of each report at the time of its mailing to Holders shall
be filed with the Commission and each stock exchange on which the Securities are
listed of which the Company has notified the Trustee in writing. The Company
shall notify the Trustee when Securities are listed on any stock exchange.

            Section 704. Reports by Company and Guarantors.

            PCI and the Company will furnish, or will cause to be furnished, to
the Trustee (for the benefit of the Trustee and the Holders) copies of the
following financial statements, reports, notices and information and shall
perform, or cause to be performed, such other covenants as are set forth below.

            (a) Within ninety (90) days after each Fiscal Year, a copy of the
annual audited financial statements of PCI, the Company and their respective
Subsidiaries, as well as of any of the Guarantors as are required to file their
annual audited financial statements with the Commission pursuant to the
Securities Act or the Exchange Act and the rules and regulations thereunder,
prepared on a consolidated basis and in conformity with GAAP and certified by an
independent certified public accountant who shall be satisfactory to the
Trustee, together with (i) a certificate from such accountant to the effect
that, in making the examination necessary for the signing of such annual audit
report, such accountant has not become aware of any Default that has occurred
and is continuing and that relates to financial or other accounting matters or
the covenants set forth in Article Ten or, if such accountant has become aware
of any such event, describing it, and (ii) if prepared in connection with the
annual audit report, the annual operating statements of PCI, the Company and
such Subsidiaries prepared on a consolidating basis and in conformity with GAAP
applied in a manner consistent with the audit report referred to in preceding
clause (a)(i) of this Section 704, signed by PCI's, the Company's and such other
Guarantor's chief financial officer or assistant treasurer.

            (b) Within forty-five (45) days after the end of each Fiscal
Quarter, a copy of the unaudited financial statements of PCI, the Company and
their respective Subsidiaries, as well as of any Guarantors as are required to
file their quarterly financial statements with the Commission pursuant to the
Securities Act or the Exchange Act, and the rules and regulations thereunder,
prepared on a consolidating and consolidated basis and in conformity with GAAP
(subject to normal year-end audit adjustments) and applied in a manner
consistent with the audit report referred to in preceding clause (a)(i) of this
Section 704, signed by PCI's, the Company's and such other Guarantor's chief
financial

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officer and consisting of at least a balance sheet as at the close of such
Fiscal Quarter and an income statement and cash flow statement for such Fiscal
Quarter compared, in each case, to the actual results for the same period during
the prior Fiscal Year and to the Company's budget delivered pursuant to clause
(c) below for the current Fiscal Year.

            (c) Within thirty (30) days after the end of each Fiscal Year of PCI
and the Company, a copy of an annual budget of PCI, the Company and their
respective Subsidiaries for the current Fiscal Year, prepared on a consolidated
basis applied in a manner consistent with the prior Fiscal Year's financial
statements, signed by PCI's and the Company's chief financial officer or
assistant treasurer and consisting of at least a balance sheet, an income
statement and a cash flow statement, each calculated on a quarter by quarter
basis.

            (d) (i) File, or caused to be filed, all applicable periodic reports
and other reports and documents pursuant to Section 13 or 15(d) of the Exchange
Act, and the rules and regulations thereunder, within the time limits or periods
specified therein, and remain, and cause each other applicable Obligor and
applicable Obligor Subsidiary to remain, a company reporting to the Commission
under Section 13 or 15(d) of the Exchange Act and such rules and regulations or
part of a group of consolidated companies, one or more whom reports or report to
the Commission in such manner, and (ii) within five (5) days of such filing or
report having been made, (x) transmit by mail to Holders of Securities, as their
names and addresses appear in the Security Register, without cost to such
Holders, and (y) file with the Trustee copies of each filing and report made by
any Obligor or any Obligor Subsidiary, or any third party with respect to any
Obligor or Obligor Subsidiary with or to any securities exchange or the
Commission or any Securities Commission in Canada, including any registration
statements and all amendments thereto filed with respect to the Securities, or
as required pursuant to this Indenture or any other document relating thereto.

            (e) Prompt notice of the occurrence of (i) a Default or (ii) a
default (or of any default of the nature specified in Section 501(1), whether or
not in respect of any Indebtedness incurred hereunder or permitted hereby) by
any Obligor or any Obligor Subsidiary under any material note, indenture, loan
agreement, mortgage, lease or other material similar agreement to which any
Obligor or any Obligor Subsidiary, as the case may be, is a party or by which it
is bound (including any of the Indenture Documents or Transaction Documents), in
each case, together with an Officers' Certificate specifying such Default or
such other default or event of default and what action the Company is taking or
proposes to take with respect thereto.

            (f) Notice of the entry of any judgment or decree, or judgments or
decrees, against any Obligor or any Obligor Subsidiary, if the amount of such
individual judgment or decree equals or exceeds $500,000 or the aggregate amount
of all such judgments and decrees equals or exceeds $1,000,000.

            (g) Subject to Section 1008, copies of any material amendments,
waivers or consents, notices of breach or default, notices relating to the
exercise or nonexercise of any remedy available to any Person, notices of
indemnity or other material

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claims, and written materials relating to the exercise of any rights derived
from or arising in connection with, any material Indebtedness of any Obligor or
any Obligor Subsidiary and other written communications of a material nature,
including any communications by any Obligor or Obligor Subsidiary in connection
with the Indenture Documents other than any such notice or other written
materials already sent to the Holders or the Trustee pursuant to any other
Section of this Indenture (in each case such copies shall be furnished
promptly).

            (h) Any statement, report, notice and/or information required to be
delivered to the Collateral Agent pursuant to any of the Security Documents at
the same time as delivery thereof to the Collateral Agent.

            (i) Any information required to be provided pursuant to other
provisions of this Indenture, and such other reports or information from time to
time requested by the Trustee, the Collateral Agent or any Holder.

Notwithstanding anything herein to the contrary, any of the financial
statements, reports, notices or other information required to be furnished
pursuant to Section 7.04(e)(ii), Section 704(g) (in respect of Indebtedness
other than that pursuant to this Indenture) or Section 704(i) which contain or
contains non-public information, as reasonably determined by PCI and the
Company, shall be identified in writing as non-public information by PCI and the
Company to the Trustee upon delivery thereof to the Trustee and the Trustee
shall not disclose such non-public information to any Holder without such Holder
having entered into a confidentiality agreement on customary terms with the
Trustee (which terms shall be satisfactory to the Trustee) in respect of such
non-public information pursuant to which agreement such Holder shall be required
to keep such information confidential for so long as such information shall not
be public. The Trustee has no duty to review any financial or other reports for
purposes of determining compliance with this or any other provisions of this
Indenture.

                                 ARTICLE EIGHT

                             CONSOLIDATION, MERGER,
                          CONVEYANCE, TRANSFER OR LEASE

            Section 801. When Indenture Obligors May Merge, Etc.

            No Indenture Obligor shall, nor shall it cause or permit any of its
Obligor Subsidiaries to, consolidate with or merge into, or sell, assign,
convey, lease or transfer all or substantially all of its assets or those of its
Subsidiaries to, any Person (except that any Indenture Obligor (other than PCI
or the Company) or any Obligor Subsidiary of such Indenture Obligor (other than
the Company) may be merged with or into (x) the Company, if the Company shall be
the surviving corporation, or (y) any other such Obligor Subsidiary), unless
either:

            (i) such merger or consolidation is of the Company with or into such
      other Person and such other Person is another Obligor or a Wholly-Owned

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      Subsidiary of PCI (whether or not such other Person shall exist on the
      date hereof; provided that any such Subsidiary created after the date
      hereof shall not have as its assets those that are acquired from entities
      other than one or more of the Obligors), the resulting, surviving or
      transferee Person (if not the Company) expressly assumes all the
      obligations of the Company under this Indenture, the Securities, each
      other Indenture Document and the Transaction Documents pursuant to
      amendments in form and substance satisfactory to Trustee (without
      prejudice, in the case of the Transaction Documents, to the terms thereof)
      and such merger or consolidation is consummated on or before March 31,
      2002; or

            (ii) each of the following conditions in this Section 801 is
      satisfied:

            (1) the resulting, surviving or transferee Person (if not the
      Company) expressly assumes all the obligations of such Indenture Obligor
      or of the relevant Obligor Subsidiary under this Indenture and each other
      Indenture Document to which such Indenture Obligor or Obligor Subsidiary
      is a party pursuant to amendments thereto in form and substance reasonably
      satisfactory to the Trustee;

            (2) such resulting, surviving or transferee Person is organized and
      existing under the laws of the United States of America, a state thereof
      or the District of Columbia or, in the case of an assignee or transferee
      of the assets of PCI Chemicals Canada Company, under the laws of Canada or
      one of Canada's provinces or territories;

            (3) at the time of the occurrence of such transaction and after
      giving effect to such transaction on a pro forma basis, such Person could
      incur $1.00 of additional Indebtedness (assuming a market rate of interest
      with respect to such additional Indebtedness);

            (4) (x) at the time of the occurrence of such transaction and after
      giving effect to such transaction on a pro forma basis, the Consolidated
      Net Worth of such Person is greater than the Consolidated Net Worth of the
      Obligors and the Obligor Subsidiaries, taken together, immediately prior
      to such transaction, and (y) Administrative Agent, the Lenders, the New
      Tranche B Notes Indenture Trustee, the New Tranche B Notes Holders, the
      Trustee and the Holders of the Securities shall have received an opinion
      of a nationally recognized investment banking firm not affiliated to any
      Person involved in any such merger or consolidation relating to fairness
      and confirming that the position of the Lenders, the New Tranche B Notes
      Holders and the Holders of the Securities will not in any way be less
      favorable than it was immediately prior to any such merger or
      consolidation as a result of such merger or consolidation;

            (5) each Guarantor, to the extent applicable, will acknowledge and
      confirm in writing that its Guaranty hereunder will apply to such Person's
      obligations under this Indenture, the Securities, each other Indenture
      Document and its guaranty under the Term Loan Agreement and in respect of
      the New Tranche A Term Notes, the New Tranche B Notes Indenture and in
      respect of the

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      New Tranche B Notes will apply to such Person's obligations under the Term
      Loan Agreement, the New Tranche A Term Notes, the New Tranche B Notes
      Indenture and the New Tranche B Notes; and

            (6) immediately before and immediately after giving effect to such
      transaction and treating any Indebtedness which becomes an obligation of
      any Obligor or Obligor Subsidiary or of such Person as a result of such
      transaction as having been incurred by such Obligor or such Obligor
      Subsidiary or such Person, as the case may be, at the time of such
      transaction, no Default shall have occurred and be continuing.

      The Company shall deliver to the Trustee, prior to the consummation of any
proposed transaction pursuant to this Section 801, an Officers' Certificate to
the foregoing effect and an Opinion of Counsel, stating that the proposed
transaction and such amendments comply with this Indenture. The provisions of
this Section 801 will not apply to any transaction (including any Asset Sale
made in accordance with Section 1009 with respect to any Guarantor) if the
Guaranty of such Guarantor is released in connection with such transaction in
accordance with the applicable provisions of this Indenture and the other
Indenture Documents.

            Section 802. Successor Substituted.

            Upon any consolidation or merger, or any sale, assignment,
conveyance, transfer or disposition of all or substantially all of the
properties and assets of any Obligor or Obligor Subsidiary in accordance with
Section 801 hereof, the successor Person formed by such consolidation or into
which such Obligor or Obligor Subsidiary is merged or the successor Person to
which such sale, assignment, conveyance, transfer, lease or disposition is made
shall succeed to, and be substituted for, and may exercise every right and power
of, PCI, the Company or a Guarantor, as the case may be, under this Indenture,
the Securities, its Guaranty, and/or the other Indenture Documents, as the case
may be, with the same effect as if such successor had been named as PCI, the
Company or a Guarantor, as the case may be, herein, in the Securities, the
Guaranty, and such other Indenture Documents, as the case may be. When a
successor assumes all the obligations of its predecessor under this Indenture,
the Securities, a Guaranty, and/or other Indenture Documents, as the case may
be, the predecessor shall be released from those obligations; provided that in
the case of a transfer by lease, the predecessor shall not be released from the
principal of, premium, if any, or interest on the Securities or any other
Indenture Obligations relating to, this Indenture, the Securities, each
Guaranty, or the other Indenture Documents, as the case may be.

            Notwithstanding anything in the foregoing, any consolidation or
merger, or any sale, assignment, conveyance, transfer or disposition of
properties or assets under this Article Eight shall be subject to the provisions
of Section 1014 hereof.

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                                  ARTICLE NINE

                             SUPPLEMENTAL INDENTURES

            Section 901. Supplemental Indentures and Agreements without Consent
of Holders.

            (a) Without the consent of any Holders, the Indenture Obligors and
their respective Obligor Subsidiaries (if a party to the applicable document or
instrument), when authorized by Board Resolutions of such Obligor's or Obligor
Subsidiary's Board of Directors, and the Trustee, subject to Section 903 hereof,
at any time and from time to time, may enter into one or more indentures
supplemental hereto or agreements or other instruments with respect to any
Guaranty, in form and substance satisfactory to the Trustee, for any of the
following purposes:

            (i) to cure any ambiguity, defect or inconsistency herein or
      therein;

            (ii) to provide for the assumption pursuant to Article Eight of the
      Company's and/or a Guarantor's obligations to the Holders in the case of a
      merger, consolidation or sale of assets;

            (iii) to provide for uncertificated Securities in addition to or in
      place of certificated Securities;

            (iv) to make any change herein or therein that does not adversely
      affect the rights hereunder or thereunder of any Holder;

            (v) to comply with requirements of the Commission in order to effect
      or maintain the qualification of this Indenture under the Trust Indenture
      Act;

            (vi) to add a Guarantor pursuant to the requirements of Section 1316
      hereof;

            (vii) to evidence and provide the acceptance of the appointment of a
      successor trustee hereunder;

            (viii) to provide additional collateral for the Securities or the
      Guaranties or other Indebtedness permitted to be secured by the
      Collateral, and in connection therewith (and only in such limited
      respect), to modify covenants, to provide additional indemnity to the
      Trustee, and to modify other provisions of this Indenture, the Securities
      and the Guaranties that relate solely to such additional collateral or
      that will or may be impacted by the providing of such collateral, and to
      enter into agreements, documents or other instruments to effect the
      foregoing, including, without limitation, intercreditor and collateral
      agency agreements relating to Liens on such collateral on a pari passu
      basis in favor of the Trustee for the benefit of the Holders;

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            (ix) to add to the covenants of any Indenture Obligor or any other
      obligor upon the Securities for the benefit of the Holders, or to
      surrender any right or power herein or therein conferred upon such
      Indenture Obligor or any other obligor upon the Securities herein or
      therein, in the Securities or in any Guaranty; or

            (x) to add any additional Events of Default for the benefit of the
      Holders of all Securities.

            (b) Without the consent of any Holders, the Trustee, on behalf of
the Holders, at any time and from time to time, may enter, subject to the
provisions of the relevant Indenture Documents (other than the Indenture), into
one or more amendments, supplements or other modifications to such other
Indenture Document, in form and substance satisfactory to the Trustee for any of
the following purposes:

            (i) to cure any ambiguity, defect or inconsistency therein;

            (ii) to provide for the assumption pursuant to Article Eight of the
      Company's and/or a Guarantor's obligations to the Holders in the case of a
      merger, consolidation or sale of assets;

            (iii) to make any change therein that does not adversely affect the
      rights hereunder or thereunder of any Holder;

            (iv) to effectuate and evidence the succession of another entity to
      any Obligor and the assumption by any successor of the covenants of such
      Obligor, under the Indenture Documents to which such Obligor is a party;

            (v) to evidence and provide the acceptance of the appointment of a
      successor trustee hereunder;

            (vi) to provide additional collateral for the Securities or the
      Guaranties or other Indebtedness permitted to be secured by the
      Collateral, and in connection therewith (and only in such limited
      respect), to modify covenants, to provide additional indemnity to the
      Trustee, and to modify other provisions of this Indenture, the Securities
      and the Guaranties that relate solely to such additional collateral or
      that will or may be impacted by the providing of such additional
      collateral, and to enter into agreements, documents or other instruments
      to effect the foregoing, including, without limitation, intercreditor and
      collateral agency agreements relating to Liens on such collateral on a
      pari passu basis in favor of the Trustee for the benefit of the Holders;

            (vii) to add to the covenants of any Obligor or any other obligor
      upon the Securities for the benefit of the Holders, or to surrender any
      right or power therein conferred upon such Obligor or any other obligor
      upon the Securities therein;

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            (viii) to add any additional Events of Default for the benefit of
      the Holders of all Securities; or

            (ix) to provide for uncertificated securities in addition to or in
      place of certificated securities.

            Section 902. Supplemental Indentures and Agreements with Consent of
Holders.

            With the consent of the Holders of not less than a majority of the
aggregate principal amount of the Securities then Outstanding, by Act of said
Holders delivered to the Company and the Trustee, each Indenture Obligor and
each of its respective Obligor Subsidiaries (if a party thereto), when
authorized by Board Resolutions of such Indenture Obligor's or such Obligor
Subsidiary's Board of Directors, and the Trustee may enter into an indenture or
indentures supplemental hereto or agreements or other instruments with respect
to any Guaranty or any other Indenture Documents (subject, in the case of such
other Indenture Documents to the applicable provisions of such Indenture
Documents) in form and substance satisfactory to the Trustee for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of modifying in any manner the rights of the
Holders under this Indenture, the Securities, any Guaranty or any other
Indenture Documents, as the case may be; provided, however, that no such
supplemental indenture, agreement or instrument shall, without the consent of
the Holder of each Outstanding Security affected thereby:

            (i) reduce the percentage of the aggregate principal amount of
      Securities, the consent of whose Holders is required for any amendment,
      supplement or waiver (or compliance with certain provisions of this
      Indenture or certain defaults hereunder and their consequences) provided
      for in this Indenture and/or such other Indenture Document, as applicable;

            (ii) reduce the rate of, or change the time for payment of, any
      premium, if any, or interest (including Defaulted Interest), payable on
      any Security, or change the place of payment where, or the coin or
      currency in which, any Security or any premium, if any, or interest
      thereon is payable, or impair the right to institute suit for the
      enforcement of any such payment on or after the Stated Maturity thereof
      (or, in the case of redemption, on or after the Redemption Date);

            (iii) reduce the principal of or change the Stated Maturity of any
      Security, or alter the redemption provisions, or alter the price at which
      the Company shall redeem such Securities pursuant to Article Eleven and
      the other terms of this Indenture referred to therein;

            (iv) make any Security payable in money other than that stated in
      the Security;

            (v) make any change in Sections 504 or 507 hereof;

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            (vi) waive a Default or Event of Default in the payment of principal
      of, premium, if any, or interest on the Securities, including any such
      obligation arising under Sections 1009 or 1014 hereof (except a rescission
      of acceleration of the Securities pursuant to Section 502 hereof by the
      Holders of at least a majority of the aggregate principal amount of the
      Securities then Outstanding and a waiver of the payment default that
      resulted from such acceleration);

            (vii) waive a payment under Article Thirteen hereof with respect to
      any Security;

            (viii) affect the ranking of the Securities;

            (ix) affect adversely the interests, rights or obligations of the
      Trustee or the Collateral Agent, unless consented to by the Trustee or the
      Collateral Agent, as applicable;

            (x) release (x) any Guarantor from its obligations under its
      Guaranty, or (y) any Collateral other than pursuant to the terms of the
      Indenture, such Guaranty or the applicable Security Document; or

            (xi) make any change in the provisions of this Section 902.

            Further, no such supplemental indenture shall, without the consent
of the Holders of all of the Securities then Outstanding, permit the creation of
any Lien prior to or pari passu with the Lien of the Security Documents with
respect to any of the Collateral, or terminate the Liens of the Security
Documents, on any Collateral or deprive any Holder of the security afforded by
the Lien of the Security Documents, except to the extent expressly permitted by
this Indenture, the Common Security and Intercreditor Agreement or any of the
Security Documents.

            Upon the written request of the Indenture Obligors and their
respective Obligor Subsidiaries (if parties thereto), accompanied by a copy of
Board Resolutions of their respective Boards of Directors, authorizing the
execution of any such supplemental indenture, Guaranty or Indenture Document,
and upon the filing with the Trustee of evidence satisfactory to the Trustee of
the consent of Holders as aforesaid, the Trustee shall, subject to Section 903
hereof, join with the Indenture Obligors and such Obligor Subsidiaries in the
execution of such supplemental indenture, Guaranty or Indenture Document.

            It shall not be necessary for any Act of Holders under this Section
to approve the particular form of any proposed supplemental indenture or
Guaranty or agreement or instrument relating to any Guaranty or any other
Indenture Document, but it shall be sufficient if such Act shall approve the
substance thereof.

            Section 903. Execution of Supplemental Indentures and Agreements.

            In executing, or accepting the additional trusts created by, any
supplemental indenture, agreement or instrument permitted by this Article Nine
or the

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modifications thereby of the trusts created by this Indenture, the Trustee shall
be entitled to receive, and (subject to Sections 315(a) through 315(d) of the
Trust Indenture Act and Section 602 hereof) shall be fully protected in relying
upon, an Opinion of Counsel and an Officers' Certificate stating that the
execution of such supplemental indenture, agreement or instrument is authorized
or permitted by this Indenture, that no consent is required or that all
requisite consents have been received and that such supplemental indenture,
agreement or instrument constitutes the legal, valid and binding obligation of
the Indenture Obligors and Obligor Subsidiaries or their respective successors,
as the case may be, enforceable against such entity in accordance with its
terms, subject to customary exceptions. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture, agreement or
instrument which affects the Trustee's own rights, duties or immunities under
this Indenture, any Guaranty or otherwise.

            Section 904. Revocation Effect of Supplemental Indentures.

            Until a supplemental indenture, amendment or waiver becomes
effective, a consent to it by a Holder of a Security is a continuing consent by
the Holder and every subsequent Holder of a Security or portion of a Security
that evidences the same debt as the consenting Holder's Security, even if
notation of consent is not made on any Security.

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

            Section 905. Conformity with Trust Indenture Act.

            Every supplemental indenture executed pursuant to this Article Nine
shall conform to the requirements of the Trust Indenture Act as then in effect.

            Section 906. Reference in Securities to Supplemental Indentures.

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

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                                   ARTICLE TEN

                                    COVENANTS

            Section 1001. Payment of Principal, Premium and Interest.

            The Company shall duly and punctually pay the principal of, premium,
if any, and interest on the Securities in accordance with the terms of the
Securities and this Indenture.

            Section 1002. Maintenance of Office or Agency.

            The Company shall maintain (or cause to be maintained) an office or
agency where Securities may be presented or surrendered for payment. The Company
also shall maintain (or cause to be maintained) in The City of New York, State
of New York an office or agency where Securities may be surrendered for
registration or transfer, redemption or exchange and where notices and demands
to or upon the Company in respect of the Securities and this Indenture may be
served. Such office or agency shall be initially at the Corporate Trust Office.
This office or agency shall accept delivery of Securities as described in
Section 201, Section 305 and Section 309 hereof. The Company shall give prompt
written notice to the Trustee of the location and any change in the location of
any such offices or agencies. If at any time the Company shall fail to maintain
(or cause to be maintained) any such required offices or agencies 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 described above and the Company hereby appoints the Trustee as its agent
to receive all such presentations, surrenders, notices and demands.

            The Company may from time to time designate one or more additional
offices or agencies (in or outside of The City of New York) where the Securities
may be presented or surrendered for any or all such purposes, and may from time
to time rescind such designation. The Company shall give prompt written notice
to the Trustee of any such designation or rescission and any change in the
location of any such office or agency.

            Section 1003. Compliance Certificate.

            (a) Each of PCI and the Company shall deliver to the Trustee, within
ninety (90) days after the end of each fiscal year of PCI and the Company, an
Officers' Certificate stating that a review of the activities of each Obligor
and each Obligor Subsidiary during the period in respect of which the financial
statements have been furnished pursuant to Section 704(a) hereof, and the
preceding fiscal year has been made under the supervision of the signing
officers with a view to determining whether each has kept, observed, performed
and fulfilled its Indenture Obligations under this Indenture and the other
Indenture Documents, and further stating, as to each such officer signing such
certificate, that to the best of his or her knowledge each has kept, observed,
performed and fulfilled each and every covenant contained in this Indenture and
the other Indenture

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Documents to which it is a party and is not in default in the performance or
observance of any of the terms, provisions and conditions hereof or thereof (or,
if a Default shall have occurred, describing all such Defaults of which he or
she may have knowledge and what action each is taking or proposes to take with
respect thereto).

            (b) Each of PCI and the Company shall deliver to the Trustee, within
forty-five (45) days after the end of the first three quarters of each fiscal
year, an Officers' Certificate stating that a review of the activities of each
Obligor and each Obligor Subsidiary during the period in respect of which the
financial statements have been furnished pursuant to Section 704(b) hereof, and
the preceding Fiscal Quarter has been made under the supervision of the signing
officers with a view to determining whether each has kept, observed, performed
and fulfilled its Indenture Obligations under this Indenture and the other
Indenture Documents, and further stating, as to each such officer signing such
certificate, that to the best of his or her knowledge each has kept, observed,
performed and fulfilled each and every covenant contained in this Indenture and
the other Indenture Documents to which it is a party and is not in default in
the performance or observance of any of the terms, provisions and conditions
hereof or thereof (or, if a Default shall have occurred, describing all such
Defaults of which he or she may have knowledge and what action each is taking or
proposes to take with respect thereto).

            Section 1004. Taxes.

            Each Indenture Obligor shall, and shall cause each of its Obligor
Subsidiaries to, pay and discharge prior to delinquency (a) all federal, state,
foreign, provincial and other material Taxes, assessments and governmental
charges or levies imposed upon it, its income and its properties, except, in
each case, as are being contested in good faith and by appropriate proceedings
diligently conducted by the Indenture Obligors and in respect of which
appropriate reserves are being maintained in accordance with GAAP, and (b) all
lawful claims for labor, materials and supplies which, if unpaid, might by law
become a lien upon the property of the Indenture Obligor or any of its Obligor
Subsidiaries, except, in each case, as are being contested in good faith by
appropriate proceedings diligently conducted by the Indenture Obligors and in
respect of which appropriate reserves are being maintained in accordance with
GAAP.

            Section 1005. Jurisdiction, Service of Process and Venue Immunity;
Judgment Currency.

            (a) Each Indenture Obligor irrevocably agrees that any suit, action
or proceeding with respect to this Indenture or any other Indenture Document or
any judgment entered by any court in respect thereof may be brought in the
United States District Court for the Southern District of New York, in the
Supreme Court of the State of New York sitting in New York County (including its
Appellate Division), or in any other appellate court in the State of New York,
as the party commencing such suit, action or proceeding may elect in its sole
discretion, and each Indenture Obligor hereby irrevocably submits to the
exclusive jurisdiction of such courts for the purpose of any such suit, action,
proceeding or judgment. Each Indenture Obligor further submits, for

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the purpose of any suit, action, proceeding or judgment brought or rendered
against any Collateral or other property, to the appropriate courts of the
jurisdiction where such Collateral or other property may be found.

            (b) Each Indenture Obligor agrees that service of all writs, process
and summonses in any such suit, action or proceeding brought in any Federal or
state court located in The City of New York may be made upon CT Corporation,
presently located at 111 Eight Avenue, 13th Floor, New York, New York 10011,
U.S.A. (the "U.S. Process Agent"), and each Indenture Obligor hereby confirms
and agrees that the U.S. Process Agent has been duly and irrevocably appointed
as its agent and true and lawful attorney-in-fact in its name, place and stead
to accept such service of any and all such writs, process and summonses, and
agrees that the failure of the U.S. Process Agent to give any notice of any such
service of process to the applicable Indenture Obligor shall not impair or
affect the validity of such service or of any judgment based thereon. Each
Indenture Obligor hereby further irrevocably consents to the service of process
in any suit, action or proceeding in such courts by the mailing thereof by
registered or certified mail, postage prepaid, at its address set forth in
Section 106 hereof or by personal service within or without the jurisdiction of
its domicile.

            (c) Nothing herein shall in any way be deemed to limit the ability
of the Trustee or the Holders to serve any such writs, process or summonses in
any other manner permitted by applicable law or to obtain jurisdiction over any
Indenture Obligor in such other jurisdictions, and in such manner, as may be
permitted by applicable law.

            (d) Each Indenture Obligor hereby irrevocably waives, to the fullest
extent permitted by applicable law, any objection that it may now or hereafter
have to the laying of the venue of any suit, action or proceeding arising out of
or relating to this Indenture or any other Indenture Document brought in the
Supreme Court of the State of New York, County of New York, in the United States
District Court for the Southern District of New York or in the courts of the
jurisdiction of its domicile or in the courts of the jurisdiction where any
Collateral or other property of such Person may be found, and hereby further
irrevocably waives, to the fullest extent permitted by applicable law, any claim
that any such suit, action or proceeding brought in any such court has been
brought in an inconvenient forum.

            (e) To the extent that any Indenture Obligor may be or become
entitled, in any judicial proceeding which may at any time be commenced with
respect to this Indenture or any other Indenture Document, to claim for itself
or the Collateral or its other property or revenues any immunity from suit,
court jurisdiction, attachment prior to judgment, attachment in aid of execution
of a judgment, execution of a judgment or from any other legal process or remedy
relating to its obligations under this Indenture or any other Indenture
Document, and to the extent that there may be attributed such an immunity
(whether or not claimed), such Indenture Obligor hereby irrevocably agrees not
to claim and hereby irrevocably waives such immunity to the fullest extent
permitted by the laws of the state of New York.

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            (f) This is an international debt transaction in which the
specification of United States dollars and payment in The City of New York is of
the essence, and the obligation of the Indenture Obligors under this Indenture
and the other Indenture Documents to make payment to (or for the account of) the
Trustee and the Holders in dollars shall not be discharged or satisfied by any
tender or recovery pursuant to any judgment expressed in or converted into any
other currency or in another place except to the extent that such tender or
recovery results in the effective receipt by the Trustee and the Holders in The
City of New York of the full amounts of dollars payable to the Trustee and the
Holders under this Indenture and the other Indenture Documents. If for the
purpose of obtaining judgment in any court it is necessary to convert a sum due
hereunder in dollars into another currency (in this Section 1005 called the
"judgment currency"), the rate of exchange that shall be applied shall be that
at which in accordance with normal banking procedures dollars could be purchased
in The City of New York with the judgment currency on the Business Day next
preceding the day on which such judgment is rendered. The obligation of each
Indenture Obligor in respect of any such sum due from it to the Trustee and the
Holders under this Indenture or any other Indenture Document shall,
notwithstanding the rate of exchange actually applied in rendering such
judgment, be discharged only to the extent that on the Business Day following
receipt by the Trustee or the Holders, as the case may be, of any sum adjudged
to be due under this Indenture or any other Indenture Document, as the case may
be, in the judgment currency the Trustee or the Holders, as the case may be, may
in accordance with normal banking procedures purchase and transfer dollars to
The City of New York with the amount of the judgment currency so adjudged to be
due, and each Indenture Obligor hereby, as a separate obligation and
notwithstanding any such judgment, agrees to indemnify the Trustee and the
Holders against, and to pay the Trustee and the Holders on demand, in dollars,
the amount (if any) by which the sum adjudged to be due to the Trustee or the
Holders, as the case may be, in dollars under this Indenture or any other
Indenture Document exceeds the amount of the dollars so purchased and
transferred.

            Section 1006. Limitation on Restricted Payments.

            No Indenture Obligor will, nor will it cause, permit or suffer any
of its Obligor Subsidiaries to, (a) declare or pay any dividends or make any
other distributions (including through mergers, liquidations or other
transactions but excluding, for the avoidance of doubt, the issuance of New
Common Stock pursuant to the Plan of Reorganization) on any class of Capital
Stock of any Indenture Obligor or its Obligor Subsidiaries (other than dividends
or distributions payable to PCI or by a Wholly-Owned Subsidiary of PCI or of the
Company on account of its Capital Stock held by PCI or the Company or another
Subsidiary of PCI or the Company or payable or paid in shares of Capital Stock
of the Company other than preferred stock or redeemable stock), (b) make any
payment on account of, or set apart money for a sinking or other analogous fund
for, the purchase, redemption or other retirement of such Capital Stock, (c)
purchase, defease, redeem or otherwise retire any Subordinated Indebtedness
(other than with the proceeds of the issuance of Capital Stock of PCI which is
permitted to be issued pursuant to the terms of this Indenture), or (d) make any
Investment, either directly or indirectly, whether in cash or property or in
obligations of any Indenture Obligor or its Obligor Subsidiaries (all of the
foregoing being called "Restricted Payments"). Notwithstanding the

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foregoing, any Obligor may make (i) Permitted Issuances, (ii) Restricted
Payments made pursuant to the Transaction Documents, and (iii) Permitted
Investments.

            Section 1007. Limitations on Payment Restrictions Affecting
Subsidiaries.

            No Indenture Obligor shall, nor shall it permit any of its Obligor
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction of any kind
on the ability of any such Obligor Subsidiary to (a) pay dividends or make any
other distribution to any Indenture Obligor or its Obligor Subsidiaries on its
Capital Stock, (b) pay any Indebtedness owed to any Indenture Obligor or such
other Subsidiary, (c) make loans or advances to any Indenture Obligor or such
other Subsidiary, or (d) transfer any of its property or assets to any Indenture
Obligor or such other Subsidiary, except:

            (i) consensual encumbrances or restrictions contained in or created
      pursuant to any Indenture Documents or the Transaction Documents;

            (ii) any restriction, with respect to a Subsidiary of any Indenture
      Obligor that is not a Subsidiary of such Indenture Obligor on the Closing
      Date, in existence at the time such entity becomes a Subsidiary of such
      Indenture Obligor; provided that such encumbrance or restriction is not
      created in anticipation of or in connection with such entity becoming a
      Subsidiary of the Company and is not applicable to any Person or the
      properties or assets of any Person other than a Person that becomes a
      Subsidiary;

            (iii) encumbrances or restrictions contained in any other
      Indebtedness permitted to be incurred subsequent to the Closing Date
      pursuant to the provisions of Section 1008 hereof; provided that any such
      encumbrances or restrictions (except pursuant to the Exit Facility) are
      not more restrictive taken individually and as a whole than the most
      restrictive of those provided for in the Indebtedness referred to in
      clause (i) of this Section 1007;

            (iv) any such encumbrance or restriction consisting of customary
      nonassignment provisions in leases governing leasehold interests to the
      extent such provisions restrict the transfer of the lease;

            (v) any restriction with respect to such a Subsidiary imposed
      pursuant to an agreement entered into for the sale or disposition of all
      or substantially all of the Capital Stock or assets of such Subsidiary in
      compliance with the Indenture pending the closing of such sale or
      disposition; or

            (vi) any encumbrance or restriction required or mandated by
      applicable law.

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            Section 1008. Limitations on Indebtedness.

            No Indenture Obligor shall, nor shall it permit its Obligor
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guaranty
or otherwise become liable with respect to, or become responsible for the
payment of, contingently or otherwise ("incur"), any Indebtedness.
Notwithstanding the foregoing limitations, the limitations of this Section 1008
shall not apply to the incurrence of the following Indebtedness:

            (i) Indebtedness of the Company evidenced by the Securities,
      Indebtedness of any Guarantor in respect of the Guaranties with respect
      thereto and Indebtedness of the Obligors in respect of all other Indenture
      Obligations and Indenture Documents;

            (ii) Indebtedness of the Company evidenced by the New Tranche A Term
      Notes or under or in respect of the Term Loan Agreement, and all other
      obligations continued or incurred thereunder, Indebtedness of any
      guarantor in respect of the guaranties of the obligations under the Term
      Loan Agreement or the New Tranche A Term Notes, Indebtedness of PCI
      Chemicals Canada Company evidenced by the New Tranche B Notes,
      Indebtedness of any guarantor in respect of the guaranties of the
      obligations under the New Tranche B Notes Indenture or the New Tranche B
      Notes and Indebtedness in respect of all other Transaction Documents and
      all other obligations incurred thereunder;

            (iii) Indebtedness of any Indenture Obligor or Obligor Subsidiaries
      constituting Existing Indebtedness and any extension, deferral, renewal,
      refinancing or refunding thereof, without increasing the aggregate
      principal amount of such Indebtedness then outstanding and covered
      thereby;

            (iv) Indebtedness of any Obligor or Obligor Subsidiaries in respect
      of and in accordance with the terms of, the Exit Facility; provided that
      notwithstanding the terms of the Exit Facility, the aggregate principal
      amount of Indebtedness at any time outstanding under the Exit Facility
      shall not exceed $65,000,000;

            (v) Capitalized Lease Obligations of any Indenture Obligor or its
      Obligor Subsidiaries, including Indebtedness in respect of Capitalized
      Lease Obligations of any Indenture Obligor or its Obligor Subsidiary
      secured by Liens that secure the payment of all or part of the purchase
      price of assets or property acquired or constructed in the ordinary course
      of business after the date hereof; provided, however, that the aggregate
      principal amount of such Capitalized Lease Obligations, including such
      Indebtedness in respect of Capitalized Lease Obligations of Indenture
      Obligors and all of their respective Obligors Subsidiaries, does not
      exceed $10,000,000 in the aggregate outstanding at any time;

            (vi) Indebtedness of PCI or the Company to any of their respective
      Subsidiaries or of any such Subsidiary to PCI, the Company or another such

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      Subsidiary (but only so long as such Indebtedness is held by PCI, the
      Company or such Subsidiary);

            (vii) Indebtedness incurred in connection with the CRC Portfolio and
      other Indebtedness, not secured by or subject to any Lien, under Hedging
      Obligations incurred in the ordinary course of PCI's or the Company's
      business or entered into by the Company (or any other Person on behalf of
      the Company with the express authority of the Company to bind the Company
      with respect thereto) for the sole purpose of offsetting any open position
      with respect to the CRC Portfolio and otherwise mitigating any exposure in
      respect of the CRC Portfolio; provided, however, that in the case of
      foreign currency exchange or similar agreements which relate to other
      Indebtedness, such agreements do not increase the Indebtedness of any
      Indenture Obligor or its Obligor Subsidiaries outstanding other than as a
      result of fluctuations in foreign currency exchange rates, and in the case
      of interest rate protection agreements, only if the notional principal
      amount of such interest rate protection agreement does not exceed the
      principal amount of the Indebtedness to which such interest rate
      protection agreement relates;

            (viii) Indebtedness, not secured by or subject to any Lien (except
      as shall, in the ordinary course of business, be backed by cash or cash
      equivalents), in respect of performance, completion, guaranty, surety and
      similar bonds, banker's acceptances, bills of exchange or letters of
      credit provided or endorsed by PCI, the Company or any of their respective
      Subsidiaries in the ordinary course of business;

            (ix) Indebtedness, not secured by or subject to any Lien, in respect
      of (i) any guaranty (not otherwise referred to above) provided by PCI, the
      Company or any of their respective Subsidiaries in respect of any other
      Indebtedness permitted to be incurred hereunder; provided, however, that
      if such Indebtedness guaranteed is (x) subordinated in right of payment to
      any other Indebtedness of the Indenture Obligor thereof, then such
      guaranty shall be subordinated to Indebtedness of such guarantor to the
      same extent, and (y) secured by a Lien otherwise permitted pursuant to
      Section 1012, then such guaranty may be so secured, (ii) indemnities in
      favor of Persons issuing title insurance policies, (iii) indemnifications
      in the Transaction Documents and in any agreements contemplated thereunder
      or thereby, (iv) indemnities in the Organizational Documents of PCI and
      its Subsidiaries, and (v) customary indemnities given to a purchaser of
      assets from the Company; provided that the sale of such assets by the
      Company is permitted pursuant to the terms hereof;

            (x) Indebtedness subject to Liens permitted by Section 1012
      (including purchase money Indebtedness and Attributable Indebtedness in
      respect of Sale and Leaseback Transactions);

            (xi) Indebtedness incurred in respect of New Other Secured Notes and
      Claims;

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            (xii) any refinancing, refunding, deferral, renewal or extension
      (each, a "Refinancing") of any Indebtedness of any Obligor or any Obligor
      Subsidiary permitted by subsections (ii), (iii), (iv), (x) and (xi) (the
      "Refinancing Indebtedness"); provided, however, that (a) such Refinancing
      Indebtedness does not exceed the aggregate principal amount of the
      Indebtedness so refinanced, plus the amount of any premium required to be
      paid in connection with such Refinancing in accordance with the terms of
      such Indebtedness or the amount of any premium reasonably determined by
      such Obligor or Obligor Subsidiary as necessary to accomplish such
      Refinancing, plus the amount of reasonable and customary out-of-pocket
      fees and expenses payable in connection therewith, (b) the Refinancing
      Indebtedness does not provide for any mandatory redemption, amortization
      or sinking fund requirement in an amount greater than or at a time prior
      to the amounts and times specified in the Indebtedness being refinanced,
      refunded, deferred, renewed or extended and (c) if the Indebtedness being
      refinanced, refunded, deferred, renewed or extended is subordinated to the
      Indebtedness of the Obligor or Obligor Subsidiaries under the Securities,
      the Refinancing Indebtedness incurred to refinance, refund, defer, renew
      or extend such Indebtedness is subordinated in right of payment to the
      Obligations on terms at least as favorable to the Holders as those
      contained in the documentation governing the Indebtedness being so
      refinanced, refunded, deferred, renewed or extended; or

            (xiii) in addition to Indebtedness permitted by clauses (i) through
      (xi) of this Section 1008, Indebtedness of such Obligors and Obligor
      Subsidiaries, taken together, in an aggregate principal amount not to
      exceed $200,000 at any time outstanding;

provided, however, that no Indebtedness permitted to be incurred pursuant to
this Section 1008 (except for the Exit Facility) shall contain any terms that
are more restrictive on or to the obligor of such Indebtedness than those set
forth in this Indenture, whether taken individually or as a whole.

            Section 1009. Asset Sales.

            (a) No Indenture Obligor shall, nor shall it permit any of its
Obligor Subsidiaries to, make any Asset Sale (other than to another Indenture
Obligor or such other Subsidiary) unless (i) such Indenture Obligor or such
Subsidiary receives consideration at the time of such Asset Sale at least equal
to the Fair Market Value of the assets sold or otherwise disposed of, and at
least 85% of the consideration received by such Indenture Obligor or such
Subsidiary from such Asset Sale is in the form of cash (in Dollars) and no
portion thereof shall consist of inventory or accounts receivable or other
property that would become subject to a Lien held by any other creditor of such
Indenture Obligor or of any such Subsidiary other than the Lenders, New Tranche
B Notes Holders or the Holders of the Securities; provided, however, that the
amount of any cash equivalent or note or other obligation received by such
Indenture Obligor or such Subsidiary from the transferee in any such transaction
that is converted within 45 days by such Indenture Obligor or such Subsidiary
into cash shall be deemed upon such

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conversion to be cash for purposes of this provision; (ii) to the extent such
Asset Sale involves Collateral, PCI or the Company shall cause the aggregate
cash proceeds received by such Indenture Obligor or such Subsidiary in respect
of such Asset Sale which are allocated to the Collateral, net of the items set
forth in clauses (i) through (iii) of the definition of Net Proceeds (the
"Collateral Proceeds"), to be deposited with the Collateral Agent in the
Intercreditor Collateral Account as and when received by such Indenture Obligor
or any such Subsidiary for application in accordance with the Common Security
and Intercreditor Agreement and this Indenture; and (iii) the Net Proceeds
received by such Indenture Obligor or such Subsidiary from any Asset Sale are
applied in accordance with the following paragraphs.

            (b) The Company shall apply 100% of the aggregate amount of Net
Proceeds or the Collateral Proceeds, as the case may be, from each and every
Asset Sale, subject to the provisions, if applicable, of the Common Security and
Intercreditor Agreement, to mandatorily redeem all of the Outstanding Securities
(and if such proceeds are not sufficient to redeem all of the Securities then
Outstanding, then to mandatorily redeem the then Outstanding Securities on a pro
rata basis) at a price equal to 100% of the principal amount thereof, plus
accrued and unpaid interest, and premium, if any, to the Redemption Date in
respect thereof and the appropriate provisions of Article Eleven shall apply to
such redemption.

            (c) Until such time, if any, as the Net Proceeds from any Asset Sale
are applied in accordance with this covenant, such Net Proceeds shall be
segregated from the other assets of each Indenture Obligor and each of its
Obligor Subsidiaries and invested in cash or Eligible Investments.

            (d) No Indenture Obligor shall, nor shall it not permit any of its
Obligor Subsidiaries to, create or permit to exist or become effective any
consensual restriction, other than restrictions not more restrictive taken as a
whole (as determined in good faith by the Board of Directors of PCI) than those
in effect under the Exit Facility or any other Indebtedness permitted by Section
1008, that would materially impair the ability of any Indenture Obligor or any
of its Obligor Subsidiaries to comply with the provisions of this Section 1009.

            (e) If at any time any non-cash consideration permitted by this
Section 1009 (other than any such consideration consisting of inventory,
accounts receivable and certain related assets securing or permitted to secure
the Exit Facility) is received by any Indenture Obligor or any Obligor
Subsidiary, as the case may be, in connection with any Asset Sale of assets
permitted by this Section 1009 which includes Collateral, such non-cash
consideration shall be made subject to the Lien of the Security Documents in the
manner contemplated in the Common Security and Intercreditor Agreement to the
extent of the purchase price allocated to the Collateral. If and when any such
non-cash consideration received from any Asset Sale (whether or not relating to
Collateral) is converted into or sold or otherwise disposed of for cash, then
such conversion or disposition shall be deemed to constitute an Asset Sale
hereunder and the Net Proceeds or Collateral Proceeds thereof shall be applied
in accordance with this Section 1009 and this Indenture.

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            (f) All Insurance Proceeds and all Net Awards required to be
delivered to the Collateral Agent pursuant to any Security Document shall
constitute Trust Moneys and shall be delivered, or caused to be delivered by
each Indenture Obligor or any of its Obligor Subsidiaries, as the case may be,
to the Collateral Agent promptly after receipt by any Indenture Obligor or any
of its Obligor Subsidiaries and be deposited into the appropriate Intercreditor
Collateral Account and applied in accordance with the applicable provisions of
the Common Security and Intercreditor Agreement. Insurance Proceeds and Net
Awards so deposited that may be applied by each Indenture Obligor or any of its
Obligor Subsidiaries to effect a Restoration of the affected Collateral under
the applicable Security Document may be withdrawn from the Intercreditor
Collateral Account only in accordance with the applicable provisions of the
Common Security and Intercreditor Agreement. Insurance Proceeds and Net Awards
so deposited that are not applied to effect a Restoration of the affected
Collateral under the applicable Security Document may only be withdrawn in
accordance with applicable provisions of the Common Security and Intercreditor
Agreement.

            Section 1010. Limitation on Sale and Leaseback Transactions.

            No Indenture Obligor shall, nor shall it permit any of its Obligor
Subsidiaries to, enter into any Sale and Leaseback Transaction unless (a) at the
time of the occurrence of such transaction and after giving effect to such
transaction and (x) in the case of a Sale and Leaseback Transaction which is a
Capitalized Lease Obligation, giving effect to the Indebtedness in respect
thereof, the Indenture Obligor and any of its Obligor Subsidiaries entering into
such transaction will remain in compliance with the clause (v) of Section 1008
and (y) in the case of any other Sale and Leaseback Transaction, giving effect
to the Attributable Indebtedness in respect thereof, the aggregate Attributed
Indebtedness of the Indenture Obligors and their Obligor Subsidiaries, taken as
a whole, does not exceed $1,000,000, (b) at the time of the occurrence of such
transaction, such Indenture Obligor or its Obligor Subsidiaries could incur
Indebtedness secured by a Lien on property in a principal amount equal to or
exceeding the Attributable Indebtedness in respect of such Sale and Leaseback
Transaction pursuant to Section 1012 hereof, and (c) the transfer of assets in
such Sale and Leaseback Transaction is permitted by, and the Company shall apply
the proceeds of such transaction in compliance with, Section 1009 hereof.

            Section 1011. Limitation on Transactions With Affiliates.

            (a) No Indenture Obligor shall, nor shall it permit any of its
Obligor Subsidiaries to, directly or indirectly, enter into any transaction, or
series of related transactions, with or for the benefit of any of their
respective Affiliates, except on an arm's-length basis and if (x)(i) in the case
of any such transaction other than with any Indenture Obligor or Obligor
Subsidiary in which the aggregate rental value, remuneration or other
consideration (including the value of a loan), together with the aggregate
rental value, remuneration or other consideration (including the value of a
loan) of all such other transactions consummated in the year during which such
transaction is proposed to be consummated, is less than or equal to $750,000,
PCI and the Company shall deliver Board Resolutions of their respective Boards
of Directors to the

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Trustee evidencing that the Board of Directors and the Independent Directors of
each of PCI and the Company that are disinterested each, acting together in the
first instance and separately in second, have (by a majority vote) determined in
good faith that the aggregate rental value, remuneration or other consideration
(including the value of any loan) inuring to the benefit of such Affiliate from
any such transaction is not greater than that which would be charged to or
extended by such Indenture Obligor or any of its Obligor Subsidiaries, as the
case may be, on an arm's-length basis for similar properties, assets, rights,
goods or services by or to a Person not affiliated with any Indenture Obligor or
any of its Obligor Subsidiaries, as the case may be, and (ii) in the case of any
such transaction in which the aggregate rental value, remuneration or other
consideration (including the value of any loan), together with the aggregate
rental value, remuneration or other consideration (including the value of any
loan) of all such other transactions consummated in the year during which such
transactions are proposed to be consummated, exceeds $750,000, PCI and the
Company shall deliver to the Trustee Board Resolutions of their respective
Boards of Directors as described in clause (a)(x)(i) of this Section 1011 and an
opinion of a nationally recognized investment banking firm, not affiliated with
any Indenture Obligor or any of its Obligor Subsidiaries or the Affiliate which
is party to such transaction, to the effect that the aggregate rental price,
remuneration or other consideration (including the value of a loan) inuring to
the benefit of such Affiliate from any such transaction is not greater than that
which would be charged to or extended by such Indenture Obligor or any of its
Obligor Subsidiaries, as the case may be, on an arm's-length basis for similar
properties, assets, rights, goods or services by or to a Person not affiliated
with such Indenture Obligor or any of its Obligor Subsidiaries, as the case may
be, and (y) all such transactions referred to in clauses (a)(x)(i) and
(a)(x)(ii) of this Section 1011 are entered into in good faith.

            (b) The provisions of the preceding paragraph do not prohibit (i)
the execution and delivery of the Indenture Documents and the Transaction
Documents and the consummation of the transactions contemplated herein or
therein or the implementation of the Plan of Reorganization, (ii) any permitted
payment on, or with respect to, Capital Stock of PCI held by creditors of any
Indenture Obligor, (iii) any issuance of securities, or other payments, awards
or grants in cash, securities or otherwise pursuant to, or the funding of,
employment arrangements, stock options and stock ownership plans approved by the
Board of Directors of PCI and the Company pursuant and consistent with the MEIP,
(iv) loans or advances to employees in the ordinary course of business
consistent with past practices, which together with such other Investments as
are referred to in clause (ix) of the definition of Permitted Investments, do
not exceed $500,000 in the aggregate at any one time outstanding, (v) the
payment of fees and compensation paid to, and indemnity provided on behalf of,
officers, directors, employees or consultants of PCI, the Company or any of
their respective Subsidiaries, as determined by the Board of Directors of PCI,
the Company or any of their respective Subsidiaries in good faith, (vi)
employment agreements entered into in the ordinary course of business and on an
arm's-length basis, and (vii) transactions permitted pursuant to Section 1006.

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            Section 1012. Limitation on Liens.

            No Indenture Obligor shall, nor shall it permit any of its Obligor
Subsidiaries to, create, incur, assume or suffer to exist any Lien upon any of
their respective assets or properties now owned or acquired after the Closing
Date, or any income or profits therefrom other than Permitted Liens.

            Section 1013. Corporate Existence; Corporate Separateness.

            Subject to Article Eight, each Indenture Obligor shall do or cause
to be done all things necessary to preserve and keep in full force and effect
(a) its corporate existence and the corporate existence of each of its Obligor
Subsidiaries, in each case in accordance with their respective Organizational
Documents (as the same may, subject to Section 1024, be amended from time to
time) and (b) its (and its Subsidiaries) rights (charter and statutory),
licenses and franchises necessary or desirable in the normal course of its
business; provided, however, that no Indenture Obligor shall be required to
preserve such corporate existence or such licenses, permits or approvals if the
failure to preserve the same could not reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect.

            Each Indenture Obligor will, and will cause each of its Obligor
Subsidiaries to, satisfy customary corporate formalities, including the holding
of regular Board of Directors' and shareholders' meetings and the maintenance of
corporate offices and records. No Indenture Obligor nor any of its Subsidiaries
shall take any action, or conduct its affairs in a manner, which is likely to
result in the corporate existence of any such Subsidiary being ignored by any
court of competent jurisdiction.

            Section 1014. Change of Control.

            (a) Each Indenture Obligor will, and will cause each of its Obligor
Subsidiaries to, give reasonable notice to the Trustee and the Holders of any
proposed Change of Control prior to consummating, or permitting the consummation
of, such Change of Control.

            (b) Upon the occurrence of a Change of Control, the Company shall
mandatorily redeem all of the Outstanding Securities at a price equal to 100% of
the aggregate principal thereof plus accrued and unpaid interest to the
Redemption Date in respect thereof and the applicable provisions of Article
Eleven shall apply in respect of such redemption.

            (c) No Indenture Obligor shall, nor shall it permit any of its
Subsidiaries to, create or permit to exist or become effective any restriction
(other than restrictions not more restrictive taken as a whole (as determined in
good faith by the Board of Directors of such Indenture Obligor) than those in
effect under Indebtedness hereunder, the Term Loan Agreement and the New Tranche
B Notes Indenture) that would impair the ability of such Indenture Obligor to
comply with the provisions of this Section.

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            Section 1015. Maintenance of Properties.

            Each Indenture Obligor shall, and shall cause each of its Obligor
Subsidiaries to, maintain its properties and assets in normal working order and
condition as of the date hereof (reasonable wear and tear excepted) and make all
repairs, renewals, replacements, additions, betterments and improvements
thereto, as shall be reasonably necessary for the proper conduct of the business
of Indenture Obligors and the Obligor Subsidiaries taken as a whole; provided
that nothing herein shall prevent any Indenture Obligor or any Obligor
Subsidiary from discontinuing any maintenance of any such properties if such
discontinuance could not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect.

            Section 1016. Maintenance of Insurance.

            Each Indenture Obligor shall, and shall cause each of its Obligor
Subsidiaries to, maintain property, liability, casualty, directors' and officers
(D&O) and other insurance (subject to the customary deductibles and retentions)
with reputable insurance companies in such amounts and against such risks as is
customarily carried by responsible companies engaged in similar businesses and
owning similar assets in the general areas in which the Indenture Obligors and
its Obligor Subsidiaries operate (which may include self-insurance in comparable
form to that maintained by such responsible companies) and each Indenture
Obligor shall, and shall cause each of its respective Subsidiaries to, have the
Trustee, for its benefit and for the benefit of Holders, named as loss payee or
additional insured, as the case may be, by endorsement to the policies for such
insurance. Without limiting the foregoing, all such endorsements shall provide
that such policies may not be cancelled or terminated without providing thirty
(30) days' prior written notice to the Trustee.

            Section 1017. Stock Pledges.

            Each Indenture Obligor and each of its Obligor Subsidiaries in
existence as of the Closing Date (except for any such Obligor Subsidiary which
has no Subsidiaries shall pledge the Capital Stock of its Subsidiaries owned by
it to secure the Indenture Obligations pro rata (and as further provided for in
the Common Security and Intercreditor Agreement) and each Indenture Obligor
will, and will cause each existing Subsidiary to, pledge such Capital Stock of
any Subsidiary of any Indenture Obligor or such existing Obligor Subsidiary
formed after the Closing Date to secure the Indenture Obligations and will
execute and deliver to the Trustee and the Collateral Agent one or more
agreements pledging Capital Stock substantially in the form of the Security
Agreement Supplement providing, among other things, for the pledge to the
Collateral Agent for the benefit of the Collateral Agent and, as applicable, of
(x) the New Tranche B Notes Indenture Trustee (for itself and the New Tranche B
Notes Holders), (y) the Trustee (for itself and the Holders of the Securities),
and (z) the Administrative Agent (for itself and the Lenders) of all the Capital
Stock of such newly formed Subsidiary held by such Indenture Obligor or such
existing Obligor Subsidiary, as the case may be, and deliver to the Collateral
Agent stock certificates (or other certificates if the Capital Stock does not
take the form of shares) evidencing such Capital Stock (together with undated

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stock powers (or other appropriate powers if the Capital Stock does not take the
form of shares) executed in blank), which Capital Stock and stock powers will
become "Collateral" for purposes of the Security Documents. This Section 1017
shall apply mutatis mutandis to any such newly formed Subsidiary.

            Section 1018. Money for Security Payments to be Held in Trust.

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

            If the Company is not acting as Paying Agent, the Company shall,
before 10:00 a.m. New York City time on each due date of the principal of,
premium, if any, or interest, on any Securities, deposit with a Paying Agent a
sum in same day funds sufficient to pay the principal, premium, if any, or
interest so becoming due, such sum to be held in trust for the benefit of the
Persons entitled to such principal, premium, or interest and (unless such Paying
Agent is the Trustee) the Company shall promptly notify the Trustee of such
action or any failure so to act.

            If the Company is not acting as Paying Agent, the Company shall
cause each Paying Agent other than the Trustee to execute and deliver to the
Trustee an instrument in which such Paying Agent shall agree with the Trustee,
subject to the provisions of this Section, that such Paying Agent shall:

            (a) hold all sums held by it for the payment of the principal of,
premium, if any, or interest on Securities in trust for the benefit of the
Persons entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided;

            (b) give the Trustee notice of any Default by the Company or any
Guarantor (or any other Indenture Obligor upon the Securities) in the making of
any payment of principal, premium, if any, or interest;

            (c) at any time during the continuance of any such Default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so held in
trust by such Paying Agent; and

            (d) acknowledge, accept and agree to comply in all aspects with the
provisions of this Indenture relating to the duties, rights and disabilities of
such Paying Agent.

            The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order in compliance with Section 103 direct any Paying Agent to pay,
to the Trustee all sums held in trust by the Company or such Paying Agent, such
sums to be held by the

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Trustee upon the same terms as those upon which such sums were held by the
Company or such Paying Agent; and, upon such payment by any Paying Agent to the
Trustee, such Paying Agent shall be released from all further liability with
respect to such money.

            Any money deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the principal of, premium, if
any, or interest on any Security and remaining unclaimed for two years after
such principal, premium, if any, or interest has become due and payable shall
promptly be paid to the Company on Company Request, or (if then held by the
Company) shall be discharged from such trust. The Holder of such Security shall
thereafter, as an unsecured general creditor, look only to the Company for
payment thereof and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in the New York Times and The
Wall Street Journal (national edition), notice that such money remains unclaimed
and that, after a date specified therein, which shall not be less than thirty
(30) days from the date of such notification or publication, any unclaimed
balance of such money then remaining shall promptly be repaid to the Company.

            Section 1019. Redemption of Securities with proceeds of Qualified
Equity Offering.

            PCI may, but shall not be obliged to, make and consummate one or
more Qualified Equity Offerings. If the Net Offering Proceeds of a consummated
Qualified Equity Offering, or of one or more such Qualified Equity Offerings
together, are greater than $5,000,000, then PCI and the Company shall cause the
Net Offering Proceeds of such Qualified Equity Offering, or one or more such
Qualified Equity Offerings, that are in excess of $5,000,000 to be applied to
mandatorily redeem, subject to and in accordance with the terms of the Common
Security and Intercreditor Agreement, all of the Outstanding Securities (and if
such proceeds are not sufficient to redeem all of the Securities then
Outstanding, then to redeem the then Outstanding Securities on a pro rata basis)
at a price equal to 100% of the aggregate principal amount thereof plus accrued
and unpaid interest, and premium (if any), to the Redemption Date in respect
thereof and the applicable provisions of Article Eleven shall apply in respect
of such redemption.

            Section 1020. Limitation on Ownership of Wholly-Owned Subsidiary
Stock.

            No Indenture Obligor and no Obligor Subsidiary (a) shall, nor shall
it permit any of its Wholly-Owned Subsidiaries to, transfer, convey, sell or
otherwise dispose of any Capital Stock of such Wholly-Owned Subsidiary to any
Person (other than to any Indenture Obligor, any of its Obligor Subsidiaries or
another such Wholly-Owned Subsidiary), unless (i) such transfer, conveyance,
sale or other disposition is of all the Capital Stock of such Wholly-Owned
Subsidiary and (ii) the Net Proceeds from such transfer, conveyance, sale, lease
or other disposition are applied in accordance with Section 1009 hereof (unless
such disposition does not constitute an Asset Sale

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hereunder), and (b) shall permit any Wholly-Owned Subsidiary of any Indenture
Obligor or any of its Obligor Subsidiaries to issue any of its Capital Stock
(other than, if necessary, Capital Stock constituting directors' qualifying
shares or interests held by directors or shares or interests required to be held
by foreign nationals, to the extent mandated by applicable law) to any Person
other than to any Indenture Obligor or a Wholly-Owned Subsidiary of any
Indenture Obligor.

            Section 1021. Impairment of Security Interest.

            No Indenture Obligor shall, nor shall it cause or permit any of its
Obligor Subsidiaries to, take or omit to take any action which action or
omission might or would have the result of affecting or impairing the Liens and
security interest in favor of the Collateral Agent for the benefit of the
Holders with respect to the Collateral and no Indenture Obligor shall grant, nor
shall it cause or permit any of its Obligor Subsidiaries to grant, to any
Person, or suffer any Person to have any interest whatsoever in the Collateral,
in each case other than as otherwise permitted by this Indenture, the Term Loan
Agreement, the New Tranche B Notes Indenture, the New Tranche B Notes, the New
Tranche A Term Notes, the Securities and the Security Documents.

            No Indenture Obligor shall, nor shall it cause or permit any of its
Obligor Subsidiaries to, enter into any agreement or instrument that by its
terms requires that the proceeds received from any sale of Collateral be applied
to repay, redeem, defease or otherwise acquire or retire any Indebtedness of any
Person, other than pursuant to this Indenture, the Term Loan Agreement, the New
Tranche B Notes Indenture, the New Tranche B Notes, the New Tranche A Term
Notes, the Securities and the Security Documents or any instrument governing
Indebtedness permitted to be secured by a Lien on the Collateral pursuant to
Section 1012 hereof.

            Section 1022. Amendment to Certain Agreements.

            Except as expressly provided for in the Transaction Documents, no
Indenture Obligor shall, nor shall it permit any of its Obligor Subsidiaries to,
amend, modify or supplement, or permit or consent to any amendment, modification
or supplement of, the Exit Facility, the New Other Secured Notes And Claims and
the Transaction Documents, except in each case to the extent such amendment,
modification or supplement could not reasonably be expected to have a Material
Adverse Effect.

            Section 1023. Plan of Reorganization.

            Each Indenture Obligor shall, and shall cause each of its Obligor
Subsidiaries to, take all such steps and actions and to consummate all
transactions necessary to implement the Plan of Reorganization to the extent
such steps, actions and transactions are contemplated in the Plan of
Reorganization as occurring after the Closing Date and to the extent the Plan of
Reorganization contemplates that any Indenture Obligor or any Obligor Subsidiary
shall take such steps and actions or consummate such transactions.

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            Section 1024. Nature of Business, Organizational Documents and
Capital Structure and New Subsidiaries; Books and Records.

            (a) No Indenture Obligor shall, nor shall it cause or permit any of
its Obligor Subsidiaries to, (i) engage directly or indirectly in any business
activity other than in a Related Business, (ii) amend or modify any provision of
its Organizational Documents except to the extent such amendment could not
reasonably be expected to have a Material Adverse Effect, or (iii) change its
legal or capital structure other than as otherwise permitted under Article
Eight.

            (b) Each Indenture Obligor shall, and shall cause each of its
Obligor Subsidiaries to, keep books and records which accurately reflect in all
material respects all of its business affairs and transactions and permit the
Trustee or its representatives at all times during normal business hours, or
such other reasonable times, and upon reasonable notice (unless a Default has
occurred or the Trustee reasonably suspects that a Default has occurred, in
which case no prior notice shall be required), to visit all of its or their
offices, to inspect the properties of each Indenture Obligor and each of its
Obligor Subsidiaries, to inspect the Collateral, to discuss its financial
matters, its business, its assets, its liabilities and its prospects with its
officers and with its independent public accountants (and each Indenture Obligor
and each of its Obligor Subsidiaries hereby authorizes such independent public
accountants to discuss all such matters with the Trustee or such representatives
whether or not any representative of any Indenture Obligor or its Obligor
Subsidiaries is present and, so long as there shall not have occurred and be
continuing a Default, the Company shall be given a reasonable opportunity to be
present) and to examine, and photocopy extracts from, any of its books or other
corporate records including management letters prepared by independent
accountants, in each case for the purposes of monitoring each Indenture
Obligor's compliance with its obligations under the Indenture Documents to which
it is a party. So long as there shall not have occurred and be continuing a
Default, the cost and expense of each such visit shall be borne by the Trustee,
except that the Trustee may make one such visit each Fiscal Year of the Company
at the cost and expense of the Company. If there shall have occurred and be
continuing a Default, and so long as the same shall be continuing, such costs
and expenses for all such visits shall be borne by the Company.

            Section 1025. Compliance with Laws and Environmental and Safety and
Health Matters.

            Each Indenture Obligor shall, and shall cause each of its Obligor
Subsidiaries to, (a) comply, in all material respects with all applicable laws,
statutes, rules, regulations, by-laws, policies, guidelines, directives,
decrees, opinions or agency requirements or orders (including, without
limitation, Environmental Laws and Occupational Safety and Health Laws), and (b)
notify the Trustee promptly after becoming aware of any Environmental Claim, or
any fact or circumstance that could reasonably be expected to result in an
Environmental Claim or a violation of, or liability under, any laws, statutes,
rules, regulations, by-laws, policies, guidelines, directives, decrees, opinions
or agency requirements or orders, including Environmental Laws and

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Occupational Safety and Health Laws, that could reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.

            Section 1026. Authorizations.

            Each Indenture Obligor shall, and shall cause each of its Obligor
Subsidiaries to, make and keep in full force and effect all authorizations from
and registrations with governmental authorities and agencies required for the
validity or enforceability of the Indenture Documents.

            Section 1027. Further Assurances.

            (a) Promptly upon the request of the Trustee, the Collateral Agent
or any Holder through the Trustee, each Indenture Obligor shall correct, and
shall cause each of its Obligor Subsidiaries promptly to correct, any material
defect or error that may be discovered in the execution, acknowledgment, filing
or recordation of any Indenture Document, and (b) promptly upon the request by
the Trustee or Collateral Agent or any Holder through the Trustee or Collateral
Agent, each Indenture Obligor shall, and shall cause its Obligor Subsidiaries
to, execute, acknowledge, deliver, record, re-record, file, re-file, register
and re-register any and all such further acts, deeds, conveyances, pledge
agreements, mortgages, deeds of trusts, trust deeds, assignments, financing
statements and continuations thereof, termination statements, notices of
assignment, transfers, certificates, assurances and other instruments as the
Trustee or Collateral Agent or any Holder through the Trustee or Collateral
Agent, may reasonably require from time to time in order to (i) carry out more
effectively the purposes of the Indenture Documents, (ii) to the fullest extent
permitted by applicable law, subject any Indenture Obligor's or any of its
Obligor Subsidiaries' properties, assets, rights or interests intended to be
Collateral to the Liens now or hereafter intended to be covered by any of the
Security Documents, (iii) perfect and maintain the validity, effectiveness and
priority of any of the Security Documents and any of the Liens intended to be
created thereunder, and (iv) assure, convey, grant, assign, transfer, preserve,
protect and confirm more effectively unto the Holders the rights granted or now
or hereafter intended to be granted to the Holders under any Indenture Document
or under any other instrument executed in connection with any Indenture Document
to which any Indenture Obligor or any of its Obligor Subsidiaries is or is to be
a party.

            Section 1028. Fiscal Year.

Each of PCI and the Company will not change its Fiscal Year.

            Section 1029. Additional Amounts.

            (a) Any and all payments by the Company to or for the account of any
Holder hereunder shall be made free and clear of, and without deduction, for any
and all present or future income, excise, stamp or franchise taxes and other
taxes, fees, duties, levies, imposts, deductions, charges or withholdings and
all liabilities with respect thereto of any nature whatsoever imposed by any
taxing authority, including, without limitation, any penalties, interest or
additions to tax with respect thereto, excluding, in the case of

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each Holder, taxes imposed on its net income, receipts or franchise taxes
imposed in lieu of a tax on net income by the jurisdiction under the laws of
which a Holder is organized or maintained or any political subdivision thereof
(all such nonexcluded taxes, duties, levies, imposts, deductions, charges,
withholdings, and liabilities being hereinafter referred to as "Taxes"). If the
Company is required by law to withhold or deduct any amount for or on account of
Taxes from any payment made under or with respect to the Securities, the Company
shall pay such additional amounts ("Additional Amounts") as may be necessary so
that the net amount received by each Holder (including Additional Amounts) after
such withholding or deduction will not be less than the amount the Holder would
have received if such Taxes had not been withheld or deducted.

            (b) The Company shall furnish to the Holders, within 30 calendar
days after the date the payment of any Taxes is due pursuant to the applicable
law, certified copies of tax receipts evidencing such payment by the Company.
The Company shall upon written request of each Holder, reimburse each such
Holder for the amount of (i) any Taxes so levied or imposed and paid by such
Holder as a result of payments made under or with respect to the Securities, and
(ii) any Taxes so levied or imposed with respect to any reimbursement under
foregoing clause (i) so that the net amount received by such Holder (net of
payments made under or with respect to the Securities) after such reimbursement
will not be less than the net amount the Holder would have received if Taxes on
such reimbursement had not been imposed; provided, however, no reimbursement
shall be made in respect of Taxes for which no Additional Amounts would be
payable by reason of clause (i) or (ii) of the second preceding sentence of
Section 1029(a).

            (c) In addition, the Company agrees to pay any and all present or
future stamp or documentary taxes and any other excise or property taxes or
charges or similar levies which arise from any payment made under this
Indenture.

            (d) At least 30 calendar days prior to each date on which any
payment under or with respect to the Securities is due and payable, if the
Company will be obligated to pay Additional Amounts with respect to such
payment, the Company will deliver to the Trustee an Officers' Certificate
stating the fact that such Additional Amounts will be payable and the amounts so
payable and will set forth such other information necessary to enable the
Trustee to pay such Additional Amounts to Holders on the payment date. Whenever
in this Indenture there is mentioned, in any context, the payment of principal,
premium, if any, or interest, or any other amount payable under or with respect
to any Securities, such mention shall be deemed to include mention of the
payment of Additional Amounts to the extent that, in such context, Additional
Amounts are, were or would be payable in respect thereof. The Holders, by
acceptance of a Note, and the Company agree that the payment of any Additional
Amounts by the Company shall be treated as payments of interest.

            (e) If the Company fails to pay any Taxes when due to the
appropriate taxing authority or fails to remit the required receipts or other
required documentary evidence, the Company shall indemnify the Holders for any
incremental Taxes, interest or penalties that may become payable by any Holder
as a result of any such failure.

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            Section 1030. Capital Expenditures.

            Each of PCI and the Company shall not, and shall cause each of its
Subsidiaries not to, permit Capital Expenditures for PCI, the Company and their
respective Subsidiaries, taken as a whole to exceed:

            (a) $30,000,000 for the Company's Fiscal Year commencing January 1,
2002 and ending on December 31, 2002; and

            (b) for each subsequent Fiscal Year of the Company up to and
including the Fiscal Year of the Company ending on December 31, 2006,
$30,000,000 plus the Cumulative Capital Expenditure Deficit for such Fiscal Year
of the Company.

            Section 1031. Working Capital Line.

            Subject to the terms of this Indenture, the Company shall use its
best efforts to maintain a revolving credit facility or similar arrangement,
with the Company and PCI Chemicals Canada Company as the borrowers thereunder,
as provided for in the effective Plan of Reorganization, to the extent it deems
necessary based on its cash position and cash flows needed to fund the
foreseeable capital expenditure and working capital requirements of the Company
and PCI Chemicals Canada Company and their respective Subsidiaries, taken as a
whole.

            Section 1032. ERISA and Canadian Benefit Plans.(a) (a) Each
Indenture Obligor shall, and shall cause each of its Obligor Subsidiaries and
ERISA Affiliates to, furnish to the Trustee:

            (i) as soon as possible, and in any event within ten days after such
      Obligor or any such Obligor Subsidiary or ERISA Affiliate knows or has
      reason to know that any ERISA Event has occurred or exists with respect to
      any Plan, or that the aggregate minimum required contribution amount for
      any year with respect to all Single Employer Plans as calculated in the
      applicable actuarial valuation reports exceeds $5 million, a statement of
      a senior financial officer of such Obligor or Obligor Subsidiary setting
      forth details respecting such ERISA Event or minimum required contribution
      amount and the action, if any, which such Obligor, Obligor Subsidiary or
      ERISA Affiliate, as the case may be, proposes to take with respect
      thereto;

            (ii) promptly and in any event within ten days after receipt thereof
      by such Obligor or any such Obligor Subsidiary or ERISA Affiliate from the
      PBGC, copies of each notice received by such Obligor, Obligor Subsidiary
      or ERISA Affiliate, as the case may be, of the PBGC's intention to
      terminate any Single Employer Plan or to have a trustee appointed to
      administer such Plan;

            (iii) promptly and in any event within 30 days after the filing
      thereof with the IRS, copies of each Schedule B (Actuarial Information) to
      the annual report (Form 5500 Series) with respect to each Single Employer
      Plan;

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            (iv) promptly and in any event within 30 days after receipt thereof,
      copies of each actuarial valuation report with respect to each Single
      Employer Plan;

            (v) within ten days after notice is given or required to be given to
      the PBGC under Section 302(f)(4)(A) of ERISA of the failure of such
      Obligor or any such Obligor Subsidiary or ERISA Affiliate to make timely
      payments to a Single Employer Plan, a copy of any such notice filed and a
      statement of a senior financial officer of such Obligor setting forth (A)
      sufficient information necessary to determine the amount of the lien under
      Section 302(f)(3) of ERISA, (B) the reason for the failure to make the
      required payments and (C) the action, if any, which such Obligor, Obligor
      Subsidiary or ERISA Affiliate, as the case may be, proposes to take with
      respect thereto; and

            (vi) promptly and in any event within ten days after receipt thereof
      by such Obligor or any such Obligor Subsidiary or ERISA Affiliate from a
      Multiemployer Plan sponsor, a copy of each notice received by such
      Obligor, such Obligor Subsidiary or ERISA Affiliate, as the case may be,
      concerning (A) the imposition of Withdrawal Liability by a Multiemployer
      Plan, (B) the determination that a Multiemployer Plan is, or is expected
      to be, in reorganization or insolvent within the meaning of Title IV of
      ERISA, (C) the termination of a Multiemployer Plan within the meaning of
      Title IV of ERISA, or (D) the amount of liability incurred, or which may
      be incurred, by such Obligor, such Obligor Subsidiary or ERISA Affiliate
      in connection with any event described in clause (A), (B) or (C) above.

            (b) Each Indenture Obligor shall, and shall cause each of its
Obligor Subsidiaries to, as soon as possible, and in any event within ten days
after any such Obligor or any of its Obligor Subsidiaries knows or has reason to
believe that any of the events or conditions specified below with respect to any
Canadian Benefit Plan has occurred or exists, furnish a statement signed by the
chief financial officer of PCI and of the Company setting forth details
respecting such event or condition and the action, if any, such Obligor or such
Obligor Subsidiary proposes to take with respect thereto (and a copy of any
notice required to be filed with or given to any governmental authority in
Canada by such Obligor or such Obligor Subsidiary with respect to such event or
condition):

            (i) any Indenture Obligor or any of its Obligor Subsidiaries
      declares, or any governmental authority orders, or indicates in writing
      that it proposes to order, a full or partial termination or wind up of a
      Canadian Benefit Plan;

            (ii) a failure by any Indenture Obligor or any of its Obligor
      Subsidiaries to make a contribution to a Canadian Benefit Plan in
      accordance with the terms thereof (but excluding contribution holidays
      pursuant to such terms), any collective bargaining agreement or under
      applicable federal or provincial laws, which failure has not been remedied
      within 30 days after such Obligor or

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      such Obligor Subsidiary is notified of such event and which failure could
      reasonably be expected to have a Material Adverse Effect;

            (iii) the adoption of any amendment to any Canadian Benefit Plan
      that would result in a loss of tax exempt status of the Canadian Benefit
      Plan or the trust or other funding medium maintained in respect of such
      Canadian Benefit Plan, or, except for amendments required under relevant
      legislation, that increases the funding obligations under any Canadian
      Benefit Plan, which increase could reasonably be expected to have a
      Material Adverse Effect;

            (iv) the institution of any proceeding, action, suit or claim (other
      than routine claims for payment of benefits) involving any Canadian
      Benefit Plan or its assets; or

            (v) any event occurring with respect to any Canadian Benefit Plan
      that has resulted or could result in any Canadian Benefit Plan having its
      registration revoked or refused or being placed under the administration
      of any governmental or regulatory authority (or their representatives).

            Section 1033. Qualification in Foreign Jurisdiction. PCI shall cause
the Company to be, and the Company shall be, in good standing and duly qualified
to do business in each jurisdiction where, because of the nature of its business
or properties, such qualification is required by no later than January 31, 2002,
except to the extent such failure to qualify could not reasonably be expected to
have a Material Adverse Effect.

                                 ARTICLE ELEVEN

                            REDEMPTION OF SECURITIES

            Section 1101. Optional and Mandatory Rights of Redemption.

            (a) Subject to the Common Security and Intercreditor Agreement and
Section 11.16 of the Term Loan Agreement, the Company shall have the right at
any time and from time to time to redeem the Outstanding Securities, in whole or
in part, in cash, in amounts equal to $1,000,000 or any larger integral multiple
of $1,000,000 or the aggregate principal amount of all of the Outstanding
Securities, in each case at a price equal to 100% of the aggregate principal
amount thereof together with accrued and unpaid interest thereon to the
Redemption Date in respect of such redemption. If less than all of the
Securities are to be redeemed, the Trustee shall select the Securities to be
redeemed pro rata, by lot or by any other method the Trustee shall deem fair and
appropriate. Any redemption pursuant to this Section 1101(a) shall be made
pursuant to the provisions of Sections 1102 through 1108 hereof and shall be
without prejudice to the right of any Holder to receive interest on an Interest
Payment Date.

            (b) The Company shall mandatorily redeem the Outstanding Securities,
in whole or in part, as the case may be, and in cash, as follows:

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            (i) on account of Net Proceeds or Collateral Proceeds in accordance
      with Section 1009;

            (ii) in accordance with Section 1014 upon the occurrence of a Change
      of Control; and

            (iii) on account of the Net Offering Proceeds in accordance with
      Section 1019.

            Any redemption pursuant to this Section 1101(b) shall be made
pursuant to the provisions of Sections 1102 through 1108 hereof and shall be
without prejudice to the right of any Holder to receive interest on an Interest
Payment Date.

            (c) The Company shall mandatorily redeem all of the Outstanding
Securities (or if the amounts referred to in Sections 1101(c)(i) or (ii) shall
not be sufficient to redeem all of the then Outstanding Securities, then to
mandatorily redeem such Outstanding Securities on a pro rata basis) on account
of Minimum Quarterly Prepayments or Liquidity Quarterly Prepayments, as the case
may be, and the Company shall comply with the other covenants set forth in this
Section 1101(c) as follows:

            (i) within 45 days of the end of each Calendar Quarter in the
      Company's Fiscal Year 2001 and 2002, the Company shall redeem a principal
      amount of such Outstanding Securities in an amount equal to the Minimum
      Quarterly Prepayment for such Calendar Quarter plus accrued and unpaid
      interest, and premium (if any), thereon to the Redemption Date in respect
      thereof;

            (ii) within 60 days of the end of each Calendar Quarter in each of
      the Company's Fiscal Years from and including Fiscal Year 2003 and up to
      and including Fiscal Year 2006, the Company shall redeem a principal
      amount of such Outstanding Securities in an amount equal to the greater of
      the Liquidity Quarterly Prepayment for such date and the Minimum Quarterly
      Prepayment for such Calendar Quarter plus accrued and unpaid interest
      thereon to the Redemption Date in respect thereof; and

            (iii) in respect of any redemption made by or on behalf of the
      Company pursuant to Section 1101(c)(i) or Section 1101(c)(ii), the Company
      shall provide to the Trustee a certificate of the chief financial officer
      of the Company certifying the amount of the Minimum Quarterly Prepayment
      or the Liquidity Quarterly Prepayment and setting out in reasonable detail
      the calculation and methods used in determining the Minimum Quarterly
      Prepayment and/or the Liquidity Quarterly Prepayment, as the case may be,
      and such other information as the Trustee may reasonably request.

            Such amounts as are referred to in Sections 1101(c)(i) and
1101(c)(ii) shall be paid by the Company to the Trustee within the time periods
set forth above and the Trustee shall forward amounts owing to each Holder in
respect of such redemption as soon as reasonably practicable thereafter
(together with a copy of the certificate referred to in Section 1101(c)(iii)).
Any such redemption shall be without prejudice to the right of

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any Holder to receive interest on an Interest Payment Date and Sections 1103
through 1108 shall not apply in respect of any such redemption. If Securities
are to be redeemed in part, but not in whole, pursuant to any redemption under
Section 1101(c), the Trustee shall select the Securities to be redeemed pro
rata, by lot or by any other method the Trustee shall deem fair and appropriate.

            Section 1102. Applicability of Article.

            Redemption of Securities at the election of the Company or otherwise
as permitted or required by any provision of this Indenture (including any
mandatory redemption referred to in Sections 1101(b)), shall be made in
accordance with such provision and this Article Eleven.

            Section 1103. Election to Redeem; Notice to Trustee.

            The election of the Company to redeem any Securities pursuant to
Section 1101 hereof shall be evidenced by a Company Order and an Officers'
Certificate in compliance with Section 103. In case of any redemption at the
election of the Company, the Company shall, not less than forty-five (45) nor
more than sixty (60) days prior to the Redemption Date fixed by the Company for
such redemption (unless a shorter notice period shall be satisfactory to the
Trustee), notify the Trustee in writing of such Redemption Date, the Redemption
Price and of the principal amount of Securities to be redeemed.

            Section 1104. Selection by Trustee of Securities to Be Redeemed.

            If less than all the Securities are to be redeemed, the particular
Securities or portions thereof to be redeemed shall be selected not more than
thirty (30) days prior to the Redemption Date by the Trustee, from the
Outstanding Securities not previously called for redemption, pro rata, by lot or
such other method as the Trustee shall deem fair and appropriate and the amounts
to be redeemed may, subject to Section 1101, be equal to $1 or any larger
integral multiple thereof.

            The Trustee shall promptly notify the Company and the Security
Registrar (if other than the Company or the Trustee) in writing of the
Securities selected for redemption and, in the case of any Securities selected
for partial redemption, 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 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 1105. Notice of Redemption.

            Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than thirty (30) nor more than sixty (60) days prior to
the Redemption

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Date to each Holder of Securities to be redeemed at his address appearing in the
Security Register.

            All notices of redemption shall state:

            (a) the Redemption Date;

            (b) the Redemption Price;

            (c) if less than all Outstanding Securities are to be redeemed, the
identification of the particular Securities to be redeemed;

            (d) in the case of a Security to be redeemed in part, the principal
amount of such Security to be redeemed and that after the Redemption Date upon
surrender of such Security, a new Security or new Securities in the aggregate
principal amount equal to the unredeemed portion thereof will be issued;

            (e) that Securities called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price;

            (f) that on the Redemption Date the Redemption Price will become due
and payable upon each such Security or portion thereof, and that (unless the
Company shall default in payment of the Redemption Price) interest, and premium,
if any, thereon shall cease to accrue on and after said date;

            (g) the place or places where such Securities are to be surrendered
for payment of the Redemption Price;

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

            (i) the CUSIP number, if any, relating to such Securities (as to the
accuracy of which the Trustee shall make no representation).

            Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's written request
in compliance with Section 103, by the Trustee in the name and at the expense of
PCI and the Company.

            The notice, if mailed in the manner herein provided, shall be
conclusively presumed to have been given, whether or not the Holder receives
such notice. In any case, failure to mail such notice, or any defect in any
notice so mailed, to any particular Holder of any Security designated for
redemption as a whole or in part shall not affect the validity of the
proceedings for the redemption of any other Security.

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            Section 1106. Deposit of Redemption Price.

            On or prior to 10:00 a.m., New York City time, on any Redemption
Date and in accordance with Section 313, the Company shall deposit with the
Trustee or with a Paying Agent (or if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1018 hereof) an amount
of money in same day funds sufficient to pay the Redemption Price of and (except
if the Redemption Date shall be an Interest Payment Date) accrued interest on
all the Securities or portions thereof which are to be redeemed on that date.
When the Redemption Date falls on an Interest Payment Date, payments of interest
due on such date are to be paid as provided hereunder as if no such redemption
were occurring.

            Section 1107. Securities Payable on Redemption Date.

            Notice of redemption having been given as aforesaid, the Securities
so to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified 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. Upon surrender of any
such Security for redemption in accordance with said notice, such Security shall
be paid for by the Company at the Redemption Price together with accrued
interest to the Redemption Date; provided, however, that installments of
interest whose Stated Maturity is on or prior to the Redemption Date shall be
payable to the Holders of such Securities, or one or more Predecessor
Securities, registered as such on the relevant Regular Record Dates according to
the terms and the provisions of Section 309 hereof.

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

            Section 1108. Securities Redeemed or Purchased in Part.

            Any Security which is to be redeemed or purchased only in part shall
be surrendered to the Company at the office or agency maintained for such
purpose pursuant to Section 1002 hereof (with, if the Company, the Security
Registrar or the Trustee so requires, due endorsement by, or a written
instrument of transfer in form satisfactory to the Company, the Security
Registrar or 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 in accordance with Section 303 and deliver to the
Holder of such Security without service charge, 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 portion of the principal of
the Security so surrendered that is not redeemed or purchased.

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            Section 1109. [Intentionally Omitted.]

                                 ARTICLE TWELVE

                           SATISFACTION AND DISCHARGE

            Section 1201. Satisfaction and Discharge of Indenture.

            This Indenture shall cease to be of further effect (except as to
surviving rights of registration of transfer or exchange of Securities herein
expressly provided for) and the Trustee, upon receipt of written demand, in
compliance with Section 103, and at the expense of the Company, shall execute
proper instruments acknowledging satisfaction and discharge of this Indenture,
when each of the following are satisfied:

            (a) either

                  (1) all the Securities theretofore authenticated and delivered
            (other than (i) Securities which have been destroyed, lost or stolen
            and which have been replaced or paid as provided in Section 308
            hereof, or (ii) all Securities for whose payment United States
            dollars have theretofore been deposited in trust or segregated and
            held in trust by the Company and thereafter repaid to the Company or
            discharged from such trust, as provided in Section 1018 hereof) have
            been delivered to the Trustee for cancellation; or

                  (2) all such Securities not theretofore delivered to the
            Trustee for cancellation (i) have become due and payable, (ii) shall
            become due and payable at their Stated Maturity within one year, or
            (iii) are to be called for redemption within one year under
            arrangements satisfactory to the Trustee for the giving of notice of
            redemption by the Trustee in the name, and at the expense, of the
            Company, and the Company or any Guarantor, in the case of (2)(i),
            (ii) or (iii) above, has irrevocably deposited or caused to be
            deposited with the Trustee as trust funds in trust for the purpose
            an amount in United States dollars sufficient, in the opinion of a
            nationally recognized firm of independent public accountants, to pay
            and discharge the entire Indebtedness on the Securities not
            theretofore delivered to the Trustee for cancellation, for the
            principal, premium, if any, and accrued interest at such Stated
            Maturity or Redemption Date;

            (b) the Company or any other Indenture Obligor has paid or caused to
be paid all other sums payable hereunder by the Company and such other Indenture
Obligor, and has satisfied and/or paid in full all Indenture Obligations
hereunder; and

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

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(ii) such satisfaction and discharge shall not result in a breach or violation
of or constitute a default under, this Indenture or any other material agreement
or instrument to which the Company or any Indenture Obligor is a party or by
which the Company or any Indenture Obligor is bound.

            Opinions of Counsel required to be delivered under this Section may
have qualifications customary for opinions of the type required and counsel
delivering such Opinions of Counsel may rely on certificates of the Company or
government or other officials customary for opinions of the type required,
including certificates certifying as to matters of fact, including that various
financial covenants have been complied with.

            Notwithstanding the satisfaction and discharge of this Indenture,
the obligations of the Company to the Trustee under Section 606 hereof, the
obligations of the Guarantors to the Trustee under Section 1303 and Section 1305
and, if United States dollars shall have been deposited with the Trustee
pursuant to subclause (2) of subsection (a) of this Section, the obligations of
the Trustee under Section 1202 and the last paragraph of Section 1018 hereof
shall survive.

            Section 1202. Application of Trust Money.

            Subject to the provisions of the last paragraph of Section 1018
hereof, all United States dollars deposited with the Trustee pursuant to Section
1201 hereof shall be held in trust and applied by it, in accordance with the
provisions of the Securities and this Indenture, to the payment, either directly
or through any Paying Agent (including the Company acting as its own Paying
Agent) as the Trustee may determine, to the Persons entitled thereto, of the
principal of, premium, if any, and interest on the Securities for whose payment
such United States dollars have been deposited with the Trustee.

            The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the United States dollars or U.S.
Government Obligations deposited pursuant to Section 1201 or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of all Outstanding
Securities.

                                ARTICLE THIRTEEN

                                    GUARANTY

            Section 1301. Guaranty; Limitation of Liability.

            (a) Each Guarantor, jointly and severally, hereby absolutely,
unconditionally and irrevocably guaranties the punctual payment when due,
whether at scheduled maturity or on any date of a required or optional
prepayment or redemption or by acceleration, demand or otherwise, of all
Indenture Obligations of the Company now or hereafter existing under or in
respect of the Indenture Documents (including, without limitation, any
extensions, modifications, substitutions, amendments or renewals of any or all
of the foregoing Indenture Obligations), whether direct or indirect, absolute or

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contingent, and whether for principal, interest, premiums, fees, indemnities,
contract causes of action, costs, expenses or otherwise (such Indenture
Obligations being the "Guaranteed Obligations"), and agrees to pay any and all
expenses (including, without limitation, reasonable fees and expenses of counsel
incurred by the Trustee, the Collateral Agent or the Holders in enforcing any
rights under each Guaranty or any other Indenture Document. Without limiting the
generality of the foregoing, each Guarantor's liability shall extend to all
amounts that constitute part of the Guaranteed Obligations and would be owed by
the Company to the Trustee, the Collateral Agent and the Holders under or in
respect of the Indenture Documents but for the fact that they are unenforceable
or not allowable due to the existence of a bankruptcy, reorganization or similar
proceeding involving the Company.

            (b) Each Guarantor, and by its acceptance of this Guaranty, the
Trustee, the Collateral Agent and each Holder, hereby confirms that it is the
intention of all such Persons that this Guaranty and the Indenture Obligations
of each Guarantor hereunder not constitute a fraudulent transfer or conveyance
for purposes of the Bankruptcy Code, the Uniform Fraudulent Conveyance Act, the
Uniform Fraudulent Transfer Act or any similar foreign, federal or state law to
the extent applicable to this Guaranty and the Indenture Obligations of each
Guarantor hereunder. To effectuate the foregoing intention, the Trustee, the
Collateral Agent, the Holders and the Guarantors hereby irrevocably agree that
the Indenture Obligations of each Guarantor under this Guaranty at any time
shall be limited to the maximum amount as will result in the Indenture
Obligations of such Guarantor under this Guaranty not constituting a fraudulent
transfer or conveyance.

            (c) Each Guarantor hereby unconditionally and irrevocably agrees
that in the event any payment shall be required to be made to the Trustee, the
Collateral Agent or any Holder under this Guaranty or any other guaranty, such
Guarantor will contribute, to the maximum extent permitted by law, such amounts
to each other Guarantor and any other guarantor or surety so as to maximize the
aggregate amount paid to the Trustee, the Collateral Agent and the Holders under
or in respect of the Indenture Documents.

            (d) It is specifically acknowledged and agreed that this Guaranty
has been delivered by each Guarantor free of any conditions whatsoever and that
no representations, warranties or promises have been made to any Guarantor
affecting its liabilities hereunder, and that the Trustee shall not be bound by
any representations, warranties or promises now or at any time hereafter made by
the Company to any Guarantor.

            Section 1302. Guaranty Absolute.

            Each Guarantor guaranties that the Guaranteed Obligations will be
paid strictly in accordance with the terms of the Indenture Documents,
regardless of any law, regulation or order now or hereafter in effect in any
jurisdiction affecting any of such terms or the rights of the Trustee, the
Collateral Agent or any Holder with respect thereto. The obligations of each
Guarantor under or in respect of this Guaranty are independent of the Guaranteed
Obligations or any other Obligations of any other Indenture Obligor

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under or in respect of the Indenture Documents, and a separate action or actions
may be brought and prosecuted against each Guarantor to enforce this Guaranty,
irrespective of whether any action is brought against the Company, any other
Guarantor or any of their respective Subsidiaries or whether the Company, any
other Guarantor or any of their respective Subsidiaries is joined in any such
action or actions. The liability of each Guarantor under this Guaranty shall be
irrevocable, absolute and unconditional irrespective of, and each Guarantor
hereby irrevocably waives any defenses it may now have or hereafter acquire in
any way relating to, any or all of the following:

      (i) any lack of validity or enforceability of any Indenture Document or
any agreement or instrument relating thereto;

      (ii) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Guaranteed Obligations or any other Indenture
Obligations of any other Obligor under or in respect of the Indenture Documents,
or any other amendment or waiver of, or any consent to departure from, any
Indenture Document, including, without limitation, any increase in the
Guaranteed Obligations resulting from the extension of additional credit to any
Obligor or any of its Subsidiaries or otherwise;

      (iii) any taking, exchange, release or non-perfection of any Collateral or
any other collateral, or any taking, release or amendment or waiver of, or
consent to departure from, any other guaranty, for all or any of the Guaranteed
Obligations;

      (iv) any manner of application of Collateral or any other collateral, or
proceeds thereof, to all or any of the Guaranteed Obligations, or any manner of
sale or other disposition of any Collateral or any other collateral for all or
any of the Guaranteed Obligations or any other Indenture Obligations of any
Obligor under the Indenture Documents or any other assets of any Obligor or any
of its Subsidiaries;

      (v) any change, restructuring or termination of the corporate structure or
existence of any Obligor or any of its Subsidiaries;

      (vi) any failure of any of the Trustee, the Collateral Agent or any Holder
to disclose to any Obligor any information relating to the business, condition
(financial or otherwise), operations, performance, properties or prospects of
any other Obligor now or hereafter known to the Trustee, the Collateral Agent or
any Holder (each Guarantor waiving any duty on the part of the Trustee, the
Collateral Agent or any Holder to disclose such information);

      (vii) the failure of any other Person to execute or deliver this Guaranty,
any Guaranty Supplement or any other guaranty or agreement or the release or
reduction of liability of any Guarantor or other guarantor or surety with
respect to the Guaranteed Obligations; or

      (viii) any other circumstance (including, without limitation, any statute
of limitations) or any existence of or reliance on any representation by the
Trustee, the Collateral Agent or any Holder that might otherwise constitute a
defense available to, or a discharge of, any Obligor or any other guarantor or
surety.

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            This Guaranty shall continue to be effective or be reinstated, as
the case may be, if at any time any payment of any of the Guaranteed Obligations
is rescinded or must otherwise be returned by the Trustee, the Collateral Agent,
or any Holder or any other Person upon the insolvency, bankruptcy or
reorganization of the Company or any other Indenture Obligor or otherwise, all
as though such payment had not been made.

            Section 1303. Right to Demand Full Performance.

            In the event of any demand for payment or performance by the Trustee
from any Guarantor hereunder, the Trustee or the Holders shall have the right to
demand its full claim and to receive all payments in respect thereof until the
Indenture Obligations have been paid in full and the Guarantors shall continue
to be jointly and severally liable hereunder for any balance which may be owing
to the Trustee or the Holders by the Company under this Indenture and the
Securities. The retention by the Trustee or the Holders of any security, prior
to the realization by the Trustee or the Holders of their rights to such
security upon foreclosure thereon, shall not, as between the Trustee and any
Guarantor, be considered as a purchase of such security, or as payment,
satisfaction or reduction of the Indenture Obligations due to the Trustee or the
Holders by the Company or any part thereof.

            Section 1304. Waivers and Acknowledgments.

            (a) Each Guarantor hereby unconditionally and irrevocably waives
promptness, diligence, notice of acceptance, presentment, demand for
performance, notice of nonperformance, default, acceleration, protest or
dishonor and any other notice with respect to any of the Guaranteed Obligations
and this Guaranty and any requirement that the Trustee, the Collateral Agent, or
any Holder protect, secure, perfect or insure any Lien or any property subject
thereto or exhaust any right or take any action against any Obligor or any
Person or any Collateral.

            (b) Each Guarantor hereby unconditionally and irrevocably waives any
right to revoke this Guaranty and acknowledges that this Guaranty is continuing
in nature and applies to all Guaranteed Obligations, whether existing now or in
the future.

            (c) Each Guarantor hereby unconditionally and irrevocably waives, to
the extent permitted by law, (i) any defense arising by reason of any claim or
defense based upon an election of remedies by the Trustee, the Collateral Agent,
or any Holders that in any manner impairs, reduces, releases or otherwise
adversely affects the subrogation, reimbursement, exoneration, contribution or
indemnification rights of such Guarantor or other rights of such Guarantor to
proceed against any of the other Indenture Obligors, any other guarantor or
surety or any other Person or any Collateral, and (ii) any defense based on any
right of set-off or counterclaim against or in respect of the Indenture
Obligations of such Guarantor hereunder.

            (d) Each Guarantor acknowledges that the Trustee or the Collateral
Agent may, without notice to or demand upon such Guarantor and without affecting
the liability of such Guarantor under this Guaranty, foreclose under any
mortgage or other

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security interest by nonjudicial sale, and each Guarantor hereby waives any
defense to the recovery by the Trustee, the Collateral Agent or the Holders
against such Guarantor of any deficiency after such nonjudicial sale and any
defense or benefits that may be afforded by applicable law.

            (e) Each Guarantor hereby unconditionally and irrevocably waives any
duty on the part of the Trustee, the Collateral Agent, or any Holder to disclose
to such Guarantor any matter, fact or thing relating to the business, condition
(financial or otherwise), operations, performance, properties or prospects of
any other Obligor or any of its Subsidiaries now or hereafter known by the
Trustee, the Collateral Agent, or any Holder.

            (f) Each Guarantor acknowledges that it will receive substantial
direct and indirect benefits from the financing arrangements contemplated by the
Indenture Documents and that the waivers set forth in Section 1302 and this
Section 1304 are knowingly made in contemplation of such benefits.

            Section 1305. The Guarantors Remain Obligated in Event the Company
is No Longer Obligated to Discharge Indenture Obligations.

            It is the express intention of the Trustee and the Guarantors that
if for any reason the Company has no legal existence, is or becomes under no
legal obligation to discharge the Indenture Obligations owing to the Trustee or
the Holders by the Company or if any of the Indenture Obligations owing by the
Company to the Trustee or the Holders become irrecoverable from the Company by
operation of law or for any reason whatsoever, this Guaranty and the covenants,
agreements and obligations of the Guarantors contained in this Article Thirteen
shall nevertheless be binding upon the Guarantors, as principal debtor, until
such time as all such Indenture Obligations have been paid in full to the
Trustee and all Indenture Obligations owing to the Trustee or the Holders by the
Company have been discharged, or such earlier time as Section 402 hereof shall
apply to the Securities and the Guarantors shall be responsible for the payment
thereof to the Trustee or the Holders upon demand.

            Section 1306. Subrogation.

            Each Guarantor hereby unconditionally and irrevocably agrees not to
exercise any rights that it may now have or hereafter acquire against the
Company, any other Obligor or any other insider guarantor that arise from the
existence, payment, performance or enforcement of such Guarantor's Obligations
under or in respect of this Guaranty or any other Indenture Document, including,
without limitation, any right of subrogation, reimbursement, exoneration,
contribution or indemnification and any right to participate in any claim or
remedy of the Trustee, the Collateral Agent, or any Holder against the Company,
any other Obligor or any other insider guarantor or any Collateral, whether or
not such claim, remedy or right arises in equity or under contract, statute or
common law, including, without limitation, the right to take or receive from the
Company, any other Obligor or any other insider guarantor, directly or
indirectly, in cash or other property or by set-off or in any other manner,
payment or security on account of

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such claim, remedy or right, unless and until all of the Guaranteed Obligations
and all other amounts payable under this Guaranty shall have been paid in full
in cash. If any amount shall be paid to any Guarantor in violation of the
immediately preceding sentence at any time prior to the latest of (a) the
payment in full in cash of the Guaranteed Obligations and all other amounts
payable under this Guaranty, and (b) the full and complete payment and
performance of the Indenture Obligations, such amount shall be received and held
in trust for the benefit of the Trustee, the Collateral Agent, and the Holders,
shall be segregated from other property and funds of such Guarantor and shall
forthwith be paid or delivered to the Trustee in the same form as so received
(with any necessary endorsement or assignment) to be credited and applied to the
Guaranteed Obligations and all other amounts payable under this Guaranty,
whether matured or unmatured, in accordance with the terms of the Indenture
Documents, or to be held as Collateral for any Guaranteed Obligations or other
amounts payable under this Guaranty thereafter arising. If (i) any Guarantor
shall make payment to the Trustee, the Collateral Agent or any Holder of all or
any part of the Guaranteed Obligations, (ii) all of the Guaranteed Obligations
and all other amounts payable under this Guaranty shall have been paid in full
in cash, and (iii) the Indenture Obligations shall have been paid and performed
completely and fully, the Trustee, the Collateral Agent, and the Holders will,
at such Guarantor's request and expense, execute and deliver to such Guarantor
appropriate documents, without recourse and without representation or warranty,
necessary to evidence the transfer by subrogation to such Guarantor of an
interest in the Guaranteed Obligations resulting from such payment made by such
Guarantor pursuant to this Guaranty.

            Section 1307. Subordination.

            Each Guarantor hereby subordinates any and all debts, liabilities
and other obligations owed to such Guarantor by each other Obligor (the
"Subordinated Obligations") to the Guaranteed Obligations to the extent and in
the manner hereinafter set forth in this Section 1307.

            (a) Prohibited Payments, Etc. Except during the continuance of any
Event of Default (including the commencement and continuation of any proceeding
under any Bankruptcy Law relating to any other Obligor), each Guarantor may
receive regularly scheduled payments from any other Obligor on account of the
Subordinated Obligations. After the occurrence and during the continuance of any
Event of Default (including the commencement and continuation of any proceeding
under any Bankruptcy Law relating to any other Obligor), unless the Holders of a
majority of the aggregate principal amount of the Securities then Outstanding
otherwise agree, no Guarantor shall demand, accept or take any action to collect
any payment on account of the Subordinated Obligations.

            (b) Prior Payment of Guaranteed Obligations. In any proceeding under
any Bankruptcy Law relating to any other Obligor, each Guarantor agrees that the
Trustee, the Collateral Agent, and the Holders shall be entitled to receive
payment in full in cash of all Guaranteed Obligations (including all interest
and expenses accruing after the commencement of a proceeding under any
Bankruptcy Law, whether or not

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constituting an allowed claim in such proceeding ("Post Petition Interest"))
before such Guarantor receives payment of any Subordinated Obligations.

            (c) Turn-Over. After the occurrence and during the continuance of
any Event of Default (including the commencement and continuation of any
proceeding under any Bankruptcy Law relating to any other Obligor), each
Guarantor shall, if the Trustee so requests, collect, enforce and receive
payments on account of the Subordinated Obligations as trustee for the Trustee,
the Collateral Agent, and the Holders and deliver such payments to the Trustee
on account of the Guaranteed Obligations (including all Post Petition Interest
as referred to in Section 1307(b)), together with any necessary endorsements or
other instruments of transfer, but without reducing or affecting in any manner
the liability of such Guarantor under the other provisions of this Guaranty.

            Section 1308. Continuing Guaranty; Assignments.

            This Guaranty is a continuing guaranty and shall (a) remain in full
force and effect until the latest of (i) the payment in full in cash of the
Guaranteed Obligations and all other amounts payable under this Guaranty, and
(ii) the payment and performance in full of all the Indenture Obligations of all
the Obligors under any Indenture Document, (b) be binding upon each Guarantor,
its successors and assigns permitted by this Indenture, and (c) inure to the
benefit of and be enforceable by the Trustee, the Collateral Agent, and the
Holders and their respective successors, transferees and assigns. Without
limiting the generality of clause (c) of the immediately preceding sentence, the
Trustee, the Collateral Agent or any Holder may assign or otherwise transfer all
or any portion of its rights under this Guaranty (including, without limitation,
all or any portion of its Securities held by it) to any other Person, and such
other Person shall thereupon become vested with all the benefits in respect
thereof granted to the Trustee, the Collateral Agent, or such Holder herein or
otherwise, in each case as and to the extent provided in this Indenture. No
Guarantor shall have the right to assign its rights hereunder or any interest
herein without the prior written consent of the Trustee, the Collateral Agent
and each of the Holders.

            Section 1309. Guaranty Is in Addition to Other Security.

            This Guaranty shall be in addition to and not in substitution for
any other guaranties or other security which the Trustee may now or hereafter
hold in respect of the Indenture Obligations owing to the Trustee or the Holders
by the Company and (except as may be required by law) the Trustee shall be under
no obligation to marshal in favor of each of the Guarantors any other guaranties
or other security or any moneys or other assets which the Trustee may be
entitled to receive or upon which the Trustee or the Holders may have a claim.

            Section 1310. Contribution.

            In order to provide for just and equitable contribution among the
Guarantors, the Guarantors agree, inter se, that in the event any payment or
distribution is made by any Guarantor (a "Funding Guarantor") under its
Guaranty, such Funding

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Guarantor shall be entitled to a contribution from all other Guarantors in a pro
rata amount based on the Adjusted Net Assets of each Guarantor (including the
Funding Guarantor) for all payments, damages and expenses incurred by that
Funding Guarantor in discharging the Company's obligations with respect to the
Securities or any other Guarantor's obligation with respect to its Guaranty.

            Section 1311. Trustee's Duties; Notice to Trustee.

            (a) Any provision in this Article Thirteen or elsewhere in this
Indenture allowing the Trustee to request any information or to take any action
authorized by, or on behalf of any Guarantor, shall be subject to Section 602(d)
and shall be permissive and shall not be obligatory on the Trustee except as the
Holders may direct in accordance with the provisions of this Indenture or where
the failure of the Trustee to request any such information or to take any such
action arises from the Trustee's gross negligence, bad faith or willful
misconduct, as determined by a court of competent jurisdiction pursuant to a
final, non-appealable judgment.

            (b) The Trustee shall not be required to inquire into the existence,
powers or capacities of the Company or any Guarantor or the officers, directors
or agents acting or purporting to act on their respective behalf.

            Section 1312. Release of Guaranty.

            Concurrently with the payment in full of all of the Indenture
Obligations, the Guarantors shall be released from and relieved of their
obligations under this Article Thirteen, except that this Section 1312 shall
survive such release of the Guarantors and the termination of this Indenture.
Upon the delivery by the Company to the Trustee of an Officers' Certificate and,
if requested by the Trustee, an Opinion of Counsel to the effect that the
transaction giving rise to the release of this Guaranty was made by the Company
in accordance with the provisions of this Indenture and the Securities, the
Trustee shall execute any documents reasonably required in order to evidence the
release of the Guarantors from their obligations under this Guaranty. If any of
the Indenture Obligations are revived and reinstated after the termination of
this Guaranty, then all of the obligations of the Guarantors under this Guaranty
shall be revived and reinstated as if this Guaranty had not been terminated
until such time as the Indenture Obligations are paid in full and each Guarantor
shall enter into an amendment to this Guaranty, reasonably satisfactory to the
Trustee, evidencing such revival and reinstatement.

            Section 1313. Execution of Guaranty.

            To evidence the Guaranty, each Guarantor hereby agrees to execute
the guaranty substantially in the form set forth in Section 206 hereof, to be
endorsed on each Security authenticated and delivered by the Trustee and that
this Indenture shall be executed on behalf of each Guarantor by its Chairman of
the Board, its President, or one of its Vice Presidents, under its corporate
seal reproduced thereon attested by its Secretary or one of its Assistant
Secretaries. The signature of any of these officers on the Securities may be
manual or facsimile.

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            If an officer whose signature is on this Indenture no longer holds
that office at the time the Trustee authenticates a Security on which a Guaranty
is endorsed, such Guaranty shall be valid nevertheless.

            Section 1314. Payment Permitted by Each of the Guarantors if no
Default.

            Nothing contained in this Article Thirteen, elsewhere in this
Indenture or in any of the Securities shall affect the obligation of any
Guarantor to make, or prevent any Guarantor from making at any time, payments
pursuant to the Securities.

            Section 1315. Notice to Trustee by Each of the Guarantors.

            Each Guarantor shall give prompt written notice to the Trustee of
any fact known to such Guarantor which would prohibit the making of any payment
to or by the Trustee in respect of the Guaranty. Notwithstanding the provisions
of this Article Thirteen or any provision of this Indenture, the Trustee shall
not be charged with knowledge of the existence of any facts which would prohibit
the making of any payment to or by the Trustee in respect of the Securities,
unless and until the Trustee shall have received written notice thereof from any
Guarantor. Prior to the receipt of any such written notice, the Trustee shall be
entitled in all respects to assume that no such facts exist.

            Section 1316. Additional Guaranties.

            Each Subsidiary of an Indenture Obligor shall be a Guarantor and,
accordingly, if any Subsidiary of any Indenture Obligor shall be formed after
the Closing Date, such Indenture Obligor shall cause such Subsidiary to execute
and deliver to the Trustee a duly executed supplemental indenture, pursuant to
which such Subsidiary shall unconditionally guaranty, in accordance with Article
Thirteen hereof, all of PCI and the Company's obligations under the Indenture
and the Securities on the same terms as the other Guarantors, and such guaranty
shall rank pari passu with the senior Indebtedness of such Subsidiary.

            Section 1317. No Suspension of Remedies.

            Nothing contained in this Article Thirteen shall limit the right of
the Trustee or the Holders of Securities to take any action to accelerate the
maturity of the Securities pursuant to the provisions described under Article
Five and as set forth in this Indenture or to pursue any rights or remedies
hereunder or under applicable law.

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                                ARTICLE FOURTEEN

                    CONDITIONS TO EFFECTIVENESS OF INDENTURE
                       AND REPRESENTATIONS AND WARRANTIES

            Section 1401. Conditions Precedent.

            Each Holder's obligation to exchange Old Debt for New Debt
(including the Securities), and the effectiveness of this Indenture and the
issuance of the Securities, shall be subject to the prior or concurrent
satisfaction of each of the conditions precedent set forth in Section 1401A
through to Section 1401T (the latest date upon which all such conditions
precedent are satisfied, the "Closing Date"). The Closing Date shall be no later
than December 31, 2001, shall be specified in an Officer's Certificate of PCI
and the Company and shall be agreed to by the Creditors' Committee Lenders and
the Trustee.

            Section 1401A. Resolutions Etc.

            The Trustee (for the benefit of the Trustee and the Holders) shall
have received from each Obligor a certificate, dated the Closing Date, of its
secretary or assistant secretary (a) stating that attached thereto is a true and
complete copy of such Obligor's by-laws or equivalent organizational document as
in effect on the Closing Date and at all times since the date of the resolutions
described in clause (b) of this Section 1401A, (b) stating that attached thereto
is a true and complete copy of resolutions duly adopted by its Board of
Directors authorizing the execution, delivery and performance of each Indenture
Document to be executed by it and that such resolutions have not been modified,
rescinded or amended and are in full force and effect, (c) stating that the
certificate of incorporation or equivalent constitutive document of such Obligor
has not been amended since the date of the last amendment thereto shown on the
certificate of good standing furnished pursuant to Section 1401B hereof, and (d)
as to the incumbency and signatures of those of its officers authorized to act
with respect to each Indenture Document executed by it, upon which certificate
the Trustee (for the benefit of the Trustee and the Holders) may conclusively
rely until it shall have received a further certificate of the secretary or
assistant secretary of such Obligor canceling or amending such prior
certificate.

            Section 1401B. Secretary of States' Certificates.

            The Trustee (for the benefit of the Trustee and the Holders) shall
have received a copy of the certificate of incorporation or other equivalent
constitutive document of each Obligor, as in effect on the Closing Date,
certified by the Secretary of State of its jurisdiction of incorporation or
organization, and a certificate from such Secretary of State as to the good
standing of such Obligor, in each case as of a date reasonably close to the
Closing Date.

            Section 1401C. Indenture Documents.

            The Trustee (for the benefit of the Trustee and the Holders) shall
have received this Indenture, duly executed and delivered by each of the
Trustee, the

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Company, PCI and the other Guarantors, the Securities shall have been executed,
authenticated and delivered in accordance with the terms hereof and the Trustee
(for the benefit of the Trustee and the Holders) shall have received each other
Indenture Document duly executed and delivered by each of the parties thereto.

            Section 1401D. Mortgages of Real Property Situated in the United
States.

            PCI or the Company shall have caused to be delivered to the Trustee
(for the benefit of the Trustee and the Holders), with copies to the Collateral
Agent, the following documents and instruments with regard to each Mortgaged
Property located in Henderson, Nevada, St. Gabriel, Louisiana (including the
Pipeline), Tacoma, Washington, Antioch, California, and Pittsburg, California,
providing for first priority mortgages:

            (a) a Mortgage, duly executed by the owner of the applicable
Mortgaged Property, and dated as of the Closing Date, together with evidence of
the due recordation thereof in the appropriate recording office of the political
subdivision where such Mortgaged Property is situated (or evidence reasonably
satisfactory to the Creditors' Committee Lenders that each Mortgage, as
appropriate, has been delivered to a nationally-recognized title insurance
company for recording and that all fees, taxes and other expenses associated
with such recording have been paid);

            (b) a mortgagee policy of title insurance (or endorsement thereto,
as appropriate) in favor of the Collateral Agent, issued by such title insurance
company, in such amounts, with such endorsements, affirmative coverages, and
reinsurance agreements as the Creditors' Committee Lenders shall reasonably
require, and otherwise in form and substance reasonably satisfactory to the
Creditors' Committee Lenders, insuring each Mortgage as a first lien on the
property and interests covered thereby subject only to such other matters as are
acceptable to the Collateral Agent, together with evidence that all premiums in
respect of such policies have been paid in full and true and complete copies of
all documents referred to therein;

            (c) certified perimeter surveys of the real property covered by each
Mortgage by registered surveyors as of a date and in form and substance
acceptable to the Creditors' Committee Lenders, bearing legal descriptions
conforming exactly to those contained in the title insurance policy referred to
in the immediately preceding clause (b); indicating the length of exterior
boundary lines of the Mortgaged Property, locations of all buildings, utility or
other easements, showing the location of all easements of record, encroachments,
if any, and means of access to the real property from a public way; and the
surveyor's original certification to the Collateral Agent and the title
insurance company issuing the policies described in the preceding clause (b) of
this Section 1401D and in the case of surveys with respect to the Mortgaged
Properties in Henderson, Nevada, and St. Gabriel, Louisiana, such "affidavits of
no change" as may be required by such title companies to omit the standard
survey exception from such title insurance policies or endorsements;

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            (d) evidence reasonably satisfactory to the Creditors' Committee
Lenders of all filings of financing statements under the UCC necessary or
desirable to perfect the lien granted by each Mortgage, together with such
searches of UCC, judgment and tax lien records as the Creditors' Committee
Lenders shall reasonably require;

            (e) policies or certificates of insurance with respect to the
insurance required to be maintained in respect of the property covered by each
Mortgage pursuant to the terms of the Common Security and Intercreditor
Agreement, naming the Collateral Agent as loss payee or additional named
insured, as appropriate;

            (f) a non-disturbance and attornment agreement among Saguaro Power
Company, a Limited Partnership and the Collateral Agent with respect to the
first priority lien Nevada Mortgage, each in form and substance acceptable to
the Creditors' Committee Lenders;

            (g) a Waiver of the Nevada "One-Action Rule" by the Guarantors with
respect to this Indenture, the Term Loan Agreement and the New Tranche B Notes
Indenture, each in form and substance acceptable to the Creditors' Committee
Lenders; and

            (h) such other agreements, instruments, approvals, consents,
opinions, or documents as the Administrative Agent, New Tranche B Notes
Indenture Trustee, the Trustee, the Collateral Agent, the Holders or their
respective counsel may reasonably request. Notwithstanding the foregoing
Sections 1401D(b) and (c), the survey and title opinion (or title insurance)
requirements with respect to the Pipeline are set forth in the Common Security
and Intercreditor Agreement.

            Section 1401E. Mortgages of Real or Immovable Property Situated in
Canada.

            PCI or the Company shall have caused to be delivered to the Trustee
(for the benefit of the Trustee and the Holders), with copies to the Collateral
Agent, the following documents and instruments with regard to each Mortgaged
Property located in Dalhousie, New Brunswick, Mississauga and Cornwall, Ontario:

            (a) a Mortgage (which for Mortgaged Property located in the province
of Quebec shall be the Quebec Mortgage and Security Agreement), duly executed by
PCI Chemicals Canada Company and dated as of the Closing Date, together with
evidence of the due registration thereof in the appropriate recording office of
the registration division where such Mortgaged Property is situated;

            (b) certificates of location, surveyors reports or other certified
perimeter surveys of the Mortgaged Property covered by each such Mortgage
prepared by registered surveyors as of a date and in form and substance
acceptable to the Creditors' Committee Lenders, bearing legal descriptions
conforming exactly to those contained in the relevant Mortgage indicating the
length of exterior boundary lines of the Mortgaged Property, locations of all
buildings, utility or other easements, showing the location of all

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easements of record, encroachments, if any, and means of access to the real
property from a public way; and the surveyor's original certification to the
Collateral Agent;

            (c) title opinions rendered in form and substance satisfactory to
the Creditors' Committee Lenders respecting the title of PCI Chemicals Canada
Company to such Mortgaged Property;

            (d) evidence reasonably satisfactory to the Creditors' Committee
Lenders of all registrations necessary or desirable to perfect the lien granted
by each Mortgage, together with such reports on movable and personal property
searches, judgment and tax lien records as the Creditors' Committee Lenders
shall reasonably require;

            (e) policies or certificates of insurance with respect to the
insurance required to be maintained in respect of the property covered by each
Mortgage pursuant to the terms of the Common Security and Intercreditor
Agreement, naming the Collateral Agent as loss payee pursuant to an acceptable
mortgage endorsement;

            (f) such other agreements, instruments, approvals, consents,
opinions, or documents as the New Tranche B Notes Indenture Trustee, the
Trustee, the Collateral Agent, the Administrative Agent, the Holders or their
respective counsel may reasonably request.

            Section 1401F. Security Documents.

            PCI or the Company shall have caused to be delivered to the Trustee
(for the benefit of the Trustee and the Holders), with copies to the Collateral
Agent, each of the Security Documents (including the Quebec Mortgage and
Security Agreement but not including the other Mortgages), duly executed and
delivered by each party thereto, together with:

            (a) duly executed UCC-1 financing statements or other financing
      statements or registration documents under the provisions of the UCC or
      any other applicable state or provincial law in proper form for filing in
      each office where such filing is necessary or appropriate to grant to the
      Collateral Agent the Liens of the character and priority contemplated by
      such Security Documents;

            (b) share certificates (or other certificates representing Capital
      Stock that is not in the form of shares) representing all Pledged Shares
      (as defined in the Common Security and Intercreditor Agreement) and
      undated stock powers (or other appropriate powers in respect of Capital
      Stock that is not in the form of shares) for such certificates executed
      and endorsed in blank; and

            (c) evidence that all other actions necessary to perfect and protect
      and set-up against third persons the Liens created by such Security
      Documents have been taken.

            Section 1401G. Transaction Documents.

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            The Trustee (for the benefit of the Trustee and the Holders), shall
have received executed and delivered copies of all other Transaction Documents,
certified to be true and complete copies thereof by an Authorized Officer of PCI
and the Company, and the Creditors' Committee Lenders shall, as provided for in
the Plan of Reorganization, be reasonably satisfied with the form of each
Transaction Document.

            Section 1401H. Canadian Corporate Reorganization.

            PCI Chemicals Canada Inc./PCI Chimie Canada Inc. shall have been
duly continued under the laws of the province of Nova Scotia, shall have
incorporated a Nova Scotia unlimited liability company as a wholly-owned
subsidiary and shall have amalgamated with such subsidiary, such that the
resulting company is (a) an unlimited liability company duly and validly
subsisting under the laws of the province of Nova Scotia, and (b) a disregarded
entity for U.S. Federal income tax purposes (the "Canadian Corporate
Reorganization").

            Section 1401I. Confirmation Orders.

            The Trustee (for the benefit of the Trustee and the Holders) shall
have received a certificate of the secretary or assistant secretary of PCI and
the Company, dated as of the Closing Date, certifying:

            (a) that attached thereto are true, correct and complete copies of
each of the Confirmation Orders (including the Plan of Reorganization attached
to such Confirmation Orders) and;

            (b) that no appeal or motion for rehearing has been filed in
connection with such Confirmation Orders.

            Section 1401J. Plan of Reorganization.

            The terms and conditions of the Plan of Reorganization shall not
have been amended or modified from the form of the Plan of Reorganization
attached to the Confirmation Orders without the prior approval of the Holders;
provided, however, that modifications which in the judgment of the Creditors'
Committee Lenders do not impair or adversely affect the rights of the Holders
may be implemented without such approval.

            Section 1401K. Conditions Precedent to the Effectiveness of the Plan
of Reorganization, etc.

            All conditions precedent to the effectiveness of the Plan of
Reorganization shall have been satisfied or waived in accordance with the terms
of the Plan of Reorganization, the Confirmation Order shall have become a Final
Order and the Effective Plan Date shall have occurred.

            Section 1401L. Implementation of Plan of Reorganization.

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            The transactions contemplated by the Plan of Reorganization to have
been consummated on or before the Closing Date shall have been consummated on or
before the Closing Date in accordance with terms of the Plan of Reorganization,
including the issuance of the New Common Stock, the New Tranche B Notes, the
execution and delivery of the Term Loan Agreement and the New Tranche A Term
Notes and the granting of Liens securing the Collateral.

            Section 1401M. [Intentionally Omitted.]

            Section 1401N. [Intentionally Omitted.]

            Section 1401O. Litigation.

            There shall exist no pending or threatened material litigation,
proceedings or investigations with respect to any of the Obligors which could
reasonably be expected to have a Material Adverse Effect.

            Section 1401P. Consents and Approvals, etc.

            All governmental, judicial and third party approvals necessary or
advisable in connection with each aspect of the Indenture Documents and the
Transaction Documents, and the transactions contemplated therein, and the
continuing operations of each Obligor and each Obligor Subsidiary shall have
been obtained and be in full force and effect or waived, and all applicable
waiting periods shall have expired without any action being taken or threatened
by any competent authority which would restrain, prevent or otherwise impose
adverse conditions on any aspect of the Indenture Documents and the Transaction
Documents, or the transactions contemplated therein.

            Section 1401Q. Opinions of Counsel.

            The Trustee, the Collateral Agent and the Holders shall have
received favorable opinions, dated the Closing Date and addressed to the
Trustee, the Collateral Agent and the Holders from:

            (a) Weil Gotshal & Manges, special New York counsel and tax counsel
to each Obligor, in form and substance satisfactory to the counsel to the
Creditors' Committee Lenders and counsel to the Trustee,

            (b) McNamara, Dodge, Ney, Beatty, Slattery & Pfalzer LLP, special
California counsel to each Obligor regarding matters of California law, in form
and substance satisfactory to the counsel to the Creditors' Committee Lenders
and counsel to the Trustee,

            (c) Jones Vargas, special Nevada counsel to each Obligor, in form
and substance satisfactory to the counsel to the Creditors' Committee Lenders
and counsel to the Trustee,

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            (d) Kean, Miller, Hawthorne, D'Armond, McCowan & Jarman, L.L.P.,
special Louisiana counsel to each Obligor, in form and substance satisfactory to
the counsel to the Creditors' Committee Lenders and counsel to the Trustee,

            (e) Preston, Gates & Ellis LLP, special Washington counsel to each
Obligor, in form and substance satisfactory to the counsel to the Creditors'
Committee Lenders and counsel to the Trustee,

            (f) Stikeman Elliott, special Canadian, Ontario and Quebec counsel
to each Obligor, in form and substance satisfactory to the counsel to the
Creditors' Committee Lenders and counsel to the Trustee, and

            (g) Stewart McKelvey Stirling Scales, special Nova Scotia and New
Brunswick counsel to each Obligor, in form and substance satisfactory to the
counsel to the Creditors' Committee Lenders and counsel to the Trustee.

            Section 1401R. No Default, Compliance with Representations and
Warranties and Closing Date Certificates.

On the Closing Date,

            (a) the representations and warranties set forth in Section 1402A
through Section 1402Z hereof and in each other Indenture Document shall, in each
case, be true and correct as if made on the Closing Date, except to the extent
they relate to an earlier date, in which case they shall be true and correct as
of such earlier date, and no Default shall have occurred and be continuing; and

            (b) the Trustee (for the benefit of the Trustee and the Holders)
shall have received the Closing Date Certificates, dated the Closing Date, and
duly executed and delivered by the chief executive or financial (or equivalent)
Authorized Officer of the Company and of each other Obligor certifying as to the
matters set forth in Section 1401R(a).

            Section 1401S. Closing Fees, Expenses, etc.

            The Trustee and the Collateral Agent shall have received, each for
its own respective account, as the case may be, all fees, costs and expenses due
and payable pursuant to any Indenture Document or Transaction Document if such
fees shall have by then been invoiced.

            Section 1401T. Satisfactory Legal Form.

            All documents executed or submitted pursuant hereto by or on behalf
of the Company, any other Obligor or any Obligor Subsidiary shall be
satisfactory in form and substance to the Creditors' Committee Lenders and their
counsel; the Creditors' Committee Lenders and their counsel shall have received
all other information, approvals, opinions, documents or instruments as the
Creditors' Committee Lenders and their counsel may reasonably request.

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            Section 1402. Representations and Warranties.

            In order to induce, among other things, the Holders to exchange the
Old Debt for the New Debt (including the Securities) and to hold their
respective Securities hereunder, each Indenture Obligor represents and warrants
unto the Trustee and each Holder as set forth in Section 1402A through Section
1402Z.

            Section 1402A. Organization, etc.

            Each Obligor and each Obligor Subsidiary is a corporation or entity
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its respective incorporation or organization. Each Obligor and
each Obligor Subsidiary is in good standing and is duly qualified to do business
in each jurisdiction where, because of the nature of its activities or
properties, such qualification is required, except for those states in which its
failure to qualify to do business could not be reasonably expected to have a
Material Adverse Effect and except for the Company, which is not qualified to do
business in any such jurisdiction other than the State of Delaware. Set forth in
Item 1402A of the Disclosure Schedule is a complete and accurate list of the
chief executive office and registered address of each Obligor as of the date
hereof (collectively, the "Organizational Matters").

            Section 1402B. Due Authorization, Non-Contravention, etc.

            Each Obligor and each Obligor Subsidiary is duly authorized to
execute and deliver this Indenture (including in the case of each Guarantor, the
Guaranty of such Guarantor), the Securities, and each other Indenture Document
to be executed by it and is duly authorized to assume or incur indebtedness
hereunder and to perform its obligations under this Indenture, the Securities
and each other Indenture Document to be executed by it. The execution, delivery
and performance by each Obligor and each Obligor Subsidiary of this Indenture
(including, with respect to each Guarantor, its Guaranty), the Securities and
each other Indenture Document to which it is a party do not and will not require
any consent, filing or notice with or approval of any governmental agency or
authority, except for such consents or approvals which have been obtained and
such filings or notices which have been made or given, as the case may be or
filings required to perfect the security interests created by the Indenture
Documents.

            Section 1402C. No Conflicts.

            The execution, delivery and performance by each Obligor and each
Obligor Subsidiary of each Indenture Document to which it is a party, do not and
will not conflict with (a) any provision of law, (b) its Organizational
Documents, (c) any agreement binding upon any Obligor or any Obligor Subsidiary,
which conflict could reasonably be expected to have a Material Adverse Effect,
or (d) any court or administrative order or decree applicable to any Obligor or
any Obligor Subsidiary, and in each case do not and will not require, or result
in, the creation or imposition of any Lien on the Collateral or on any other
asset of any Obligor or any Obligor Subsidiary,

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other than Liens created under or pursuant to the Security Documents or
otherwise permitted by the Security Documents.

            Section 1402D. Validity and Binding Effect.

            This Indenture, the Securities and each other Indenture Document,
when duly executed and delivered, will be legal, valid and binding obligations
of each Obligor party hereto or thereto, as applicable, enforceable against each
such Obligor in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors' rights generally and principles of equity.

            Section 1402E. No Default.

            Other than as set forth in Item 1402E ("Defaults") of the Disclosure
Schedule, no Obligor or Obligor Subsidiary is in default under any agreement or
instrument to which it is a party or by which any of its respective properties
or assets is bound or affected, except to the extent that any liability of the
Obligors or Obligor Subsidiaries as a result, or in respect, of all such
defaults, taken together, could not reasonably be expected to exceed $200,000.
No Default has occurred and is continuing.

            Section 1402F. [Intentionally Omitted.]

            Section 1402G. Insurance.

            Item 1402G ("Insurance") of the Disclosure Schedule is a complete
and accurate summary of the property and casualty insurance program carried by
each Obligor and each Obligor Subsidiary on the date hereof. Such Item 1402G
includes names of insurer(s), policy number(s), expiration date(s), amounts of
coverage, types of coverage, the annual premium(s), deductibles and self-insured
retention and describes any retrospective rating plan, fronting arrangement or
any other self-insurance or risk assumption agreed to by any Obligor or any
Obligor Subsidiary or imposed upon any Obligor or any Obligor Subsidiary by any
such insurer. This summary also includes any self-insurance program that is in
effect.

            Section 1402H. Litigation; Contingent Liabilities.

            (a) As of the date hereof, except for those referred to in Item
1402H ("Litigation") of the Disclosure Schedule, there are no claims,
litigation, arbitration proceedings, including Environmental Claims, or
governmental proceedings pending or threatened against or affecting any Obligor
or any Obligor Subsidiary or any related party of any Obligor or Obligor
Subsidiary.

            (b) As of the date hereof, other than any liability incident to the
claims, litigation or proceedings disclosed in Item 1402H of the Disclosure
Schedule or provided for or disclosed in the financial statements referred to in
Section 1402F, neither any Obligor nor any Obligor Subsidiary has any contingent
liabilities.

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            Section 1402I. Liens. None of the Collateral or other property,
revenues or assets of any Obligor or any Obligor Subsidiary is subject to any
Lien except Liens permitted by Section 1012.

            Section 1402J. Subsidiaries.

            Item 1402J ("Subsidiaries") lists each Obligor Subsidiary as of the
date hereof. Item 1402J of the Disclosure Schedule sets forth, for each Obligor
Subsidiary, a complete and accurate statement of (a) the relevant Obligor's
percentage ownership of each of such Subsidiary, (b) the state or other
jurisdiction of formation or incorporation of each such Subsidiary, and (c) each
state or other jurisdiction in which each such Subsidiary is qualified to do
business. Each Obligor Subsidiary has executed and delivered its Guaranty.

            Section 1402K. Partnerships; Joint Ventures.

            As of the date hereof, neither any Obligor nor any Obligor
Subsidiary is a partner or joint venturer in any partnership or joint venture
other than the partnerships and joint ventures listed in Item 1402K
("Partnerships and Joint Ventures") of the Disclosure Schedule. Item 1402K of
the Disclosure Schedule sets forth, for each such partnership or joint venture,
a complete and accurate statement of (a) each Obligor's or each Obligor
Subsidiary's percentage ownership of each such partnership or joint venture, (b)
the state or other jurisdiction of formation or incorporation, as appropriate,
of each such partnership or joint venture, and (c) each state or other
jurisdiction in which each such partnership or joint venture is qualified to do
business.

            Section 1402L. Transaction Documents.

            The New Tranche B Notes, the New Tranche A Term Notes and the New
Other Secured Notes have been issued in accordance with and in compliance with
all applicable laws, including Bankruptcy Laws, the Securities Act, the
Securities Acts of each of Canada's provinces, and all other applicable federal,
state and provincial securities laws, each as amended. The issuance of the New
Tranche B Notes, the New Tranche A Term Notes and the New Other Secured Notes
and the execution and delivery by each Obligor and each Obligor Subsidiary of
the other Transaction Documents to which it is a party, the performance by each
Obligor and each Obligor Subsidiary of its obligations thereunder, and the
consummation of all transactions implementing the Plan of Reorganization (a)
have been duly authorized by all necessary corporate and other actions on the
part of each Obligor and each Obligor Subsidiary, (b) will not require any
consent or approval of any governmental agency or authority that has not been
obtained prior to the date hereof, (c) do not conflict with (i) any provision of
law, (ii) the Organizational Documents of any Obligor or Obligor Subsidiary,
(iii) any agreement binding upon any Obligor or Obligor Subsidiary, the conflict
with which could reasonably be expected to have a Material Adverse Effect or
(iv) any court or administrative order or decree applicable to any Obligor or
Obligor Subsidiary, and (d) do not and will not require, or result in, the
creation or imposition of any Lien on the

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Collateral or any other asset of any Obligor or Obligor Subsidiary (other than
the Liens created under the Security Documents or permitted thereunder).

            Section 1402M. Intellectual Property.

            Each Obligor and Obligor Subsidiary possess adequate licenses,
patents, patent applications, copyrights, trademarks, trademark applications,
trade styles, and tradenames to conduct its business as proposed to be conducted
following the implementation of the Plan of Reorganization, other than those
which the failure to possess could not reasonably be expected to have a Material
Adverse Effect, and all such licenses, patents, patent applications, copyrights,
trademarks, trademark applications, trade styles, and tradenames existing on the
date hereof of each Obligor and each Obligor Subsidiary are listed in Item 1402M
("Intellectual Property") of the Disclosure Schedule.

            Section 1402N. Solvency.

            Each Obligor and each Obligor Subsidiary, immediately after giving
effect to the implementation of the Plan of Reorganization and on the Closing
Date, will be Solvent. As used herein, the term "Solvent" means, with respect to
any such entity on a particular date (a) the fair value of the property of such
entity is greater than the total amount of liabilities (including contingent
liabilities) of such entity, (b) the present fair saleable value of the assets
of such entity is greater than the probable liability of such entity on its
total existing debts (including contingent liabilities) as they become absolute
and matured, (c) such entity will be able to pay its debts and liabilities as
they mature and (d) such entity will not have unreasonably small capital for the
business in which it is engaged, as now conducted and as proposed to be
conducted following the implementation of the Plan of Reorganization.

            Section 1402O. Contracts; Labor Matters.

            Except as disclosed in Item 1402O ("Contracts and Labor Matters") of
the Disclosure Schedule: (a) neither any Obligor nor any Obligor Subsidiary is a
party to any contract or agreement, or is subject to any charge, corporate
restriction, judgment, decree or order, which could reasonably be expected to
have a Material Adverse Effect; (b) as of the date hereof, no labor contract to
which any Obligor or any Obligor Subsidiary is a party or is otherwise subject
is scheduled to expire prior to the Stated Maturity Date; (c) on the date of
this Agreement (i) neither any Obligor nor any Obligor Subsidiary is a party to
any labor dispute with any union or group of employees, and (ii) there are no
strikes or walkouts relating to any labor contracts to which any Obligor or any
Obligor Subsidiary is a party or is otherwise subject, which, individually or in
the aggregate, could reasonably be expected to have a Material Adverse Effect.

            Section 1402P. Employee Benefit Plans.

            (a) Each Single Employer Plan has been and is being maintained in
accordance with its terms and in compliance with all provisions of ERISA and the
Code applicable thereto, except where any failure could not reasonably be
expected to have a Material Adverse Effect. Except as listed in Item 1402P1
("ERISA Events") of the

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Disclosure Schedule, no ERISA Event has occurred nor has any other event
occurred that may result in an ERISA Event. Each Single Employer Plan has been
determined by the United States Internal Revenue Service to qualify under
Section 401 of the Code, and the trusts created thereunder have been determined
to be exempt from tax under the provisions of Section 501 of the Code, and to
the best knowledge of the Obligor nothing has occurred which would cause the
loss of such qualification or tax-exempt status. The aggregate amount of
Unfunded Pension Liabilities of all Single Employer Plans as of the date hereof
does not exceed $ 6.6 million. Except as listed in Item 1402P2 ("Employee
Benefit Plans") of the Disclosure Schedule, neither any Obligor, Obligor
Subsidiary nor ERISA Affiliate has any liability to pay any welfare benefits
under any Plan or any employee welfare benefit plan within the meaning of
section 3(1) of ERISA to former employees thereof or to current employees with
respect to claims incurred after the termination of their employment other than
as required by section 4980B of the Code or Part 6 of Subtitle B of Title 1 of
ERISA. Each Obligor, Obligor Subsidiary and ERISA Affiliate have complied in all
respects with the notice and continuation coverage requirements of Section 4980B
of the Code except as could reasonable by expected to have a Material Adverse
Effect. As of the date hereof, except as listed in Item 1402P3 ("Employee
Benefit Litigation") of the Disclosure Schedule, there are no pending or, to the
best knowledge of the Obligor, threatened claims, actions or lawsuits, other
than routine claims for benefits in the usual and ordinary course, with respect
to any Single Employer Plan for which any Obligor, Obligor Subsidiary or ERISA
Affiliate may be directly or indirectly liable, through indemnification
obligations or otherwise. Neither the Obligor nor any Obligor Subsidiary or
ERISA Affiliate has transferred any Unfunded Pension Liability to an entity
other than an ERISA Affiliate or otherwise engaged in a transaction that could
be subject to Section 4069 or 4212(c) of ERISA. No condition exists or event or
transaction has occurred in connection with any Plan that could, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect; and

            (a) Each Canadian Benefit Plan is and has been in all material
respects, established, qualified, registered (when required), administered and
invested in compliance with all applicable federal and provincial laws
(including, without limitation, the Income Tax Act (Canada) and the Supplemental
Pension Plans Act (Quebec)) and any applicable collective bargaining agreements,
and no event or condition has occurred and is continuing as to which any Obligor
or any Obligor Subsidiary would be under an obligation to furnish a report under
Section 1032 hereof. All material obligations of the Obligors under each
Canadian Benefit Plan, including contribution obligations, have been satisfied
and there are no outstanding defaults or violations in respect thereof.

            Section 1402Q. Compliance.

            Each Obligor and each Obligor Subsidiary, and/or each property,
operation and facility that each owns, operates or controls, is in compliance
with all international, federal, national, state, provincial, regional, local
and municipal statutes, laws, rules, regulations, by-laws, guidelines,
directives, standards, orders, decrees, judgments, ordinances, permits,
certifications, licenses, registrations, approvals,

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requirements and other authorizations applicable to it, the noncompliance with
which could reasonably be expected to have a Material Adverse Effect.

            Section 1402R. Taxes.

            Each Obligor and each Obligor Subsidiary has filed, or caused to be
filed, all federal, state, provincial and foreign and other material tax returns
which are required to have been filed (or has timely filed extensions) and,
after giving effect to the Plan of Reorganization and the Final Order, has paid,
or made adequate provisions for the payment of, all of its Taxes which are due
and payable (including interest and penalties), except such Taxes, if any, as
are being contested in good faith and by appropriate proceedings and as to which
such reserves or other appropriate provisions as may be required by GAAP have
been maintained. The federal income tax liability of each Obligor and each
Obligor Subsidiary has been audited by the Internal Revenue Service and has been
finally determined and satisfied (or the time for audit has expired) for all tax
years up to and including the tax year ended 1997. No Obligor and no Obligor
Subsidiary is aware of any proposed assessment against any Obligor or any
Obligor Subsidiary for additional Taxes (or any basis for any such assessment).

            Section 1402S. Investment Company Act Representation.

            No Obligor and no Obligor Subsidiary is an "investment company" or a
company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.

            Section 1402T. Public Utility Holding Company Act Representation.

            No Obligor and no Obligor Subsidiary is a "holding company" or a
"subsidiary company" of a "holding company" or an "affiliate" of a "holding
company" within the meaning of the Public Utility Holding Company Act of 1935,
as amended.

            Section 1402U. Environmental and Safety and Health Matters.

            Except as disclosed on Item 1402U ("Environmental Matters") of the
Disclosure Schedule or as to matters that individually or in the aggregate could
not reasonably be expected to have a Material Adverse Effect, each Obligor and
each Obligor Subsidiary and/or each property, operation and facility that each
owns, operates or controls:

            (a) complies, and at all times has complied, in all respects with
(i) all applicable Environmental Laws, and (ii) all applicable Occupational
Safety and Health Laws;

            (b) is not subject to any pending judicial or administrative
proceeding alleging any violation of, or liability under, any Environmental Law
or Occupational Safety and Health Law;

                                      146
<PAGE>
            (c) has not received any notice which remains outstanding (i) that
it may be in violation of, or liable under, any Environmental Law or
Occupational Safety and Health Law, (ii) threatening the commencement of any
proceeding under any Environmental Law or Occupational Safety and Health Law, or
(iii) alleging that it is or may be responsible for any response, cleanup, or
corrective action (including any remedial investigation/feasibility studies) at
any location under any Environmental Law or Occupational Safety and Health Law;

            (d) has not (in the case of each Obligor or each Obligor
Subsidiary), and its directors, officers and employees have not, been declared
guilty of committing an offence for a violation of Environmental Laws or
Occupational Safety and Health Laws in connection with their affiliation with
any Obligor or Obligor Subsidiary, and has not, and its directors, officers and
employees have not, ever been fined in respect of or otherwise settled, such a
prosecution;

            (e) to the knowledge of the Company, is not the subject of any
pending federal, state, provincial, regional, municipal or local investigation,
including evaluating whether any investigation, remedial action or other
response is needed to respond to (i) a Release or threatened Release into the
environment of any Hazardous Material, or (ii) any allegedly unsafe or unhealthy
condition regulated under any Environmental Law or Occupational Safety and
Health Law;

            (f) has not filed any notice under or relating to any Environmental
Law or Occupational Safety and Health Law indicating or reporting (i) any past
or present Release or threatened Release into the environment of, or treatment,
storage or disposal of, any Hazardous Material, or (ii) any potentially unsafe
or unhealthy condition and there exists no basis for such notice irrespective of
whether such notice was actually filed;

            (g) has no contingent liability in connection with any Release or
threatened Release into the environment of, or otherwise with respect to, any
Hazardous Material, whether on any premises owned or occupied by any Obligor or
any Obligor Subsidiary or on any other premises, and has not been denied
insurance coverage by reason of Hazardous Materials on, under, around or about
such premises; and

            (h) is not subject to, or the subject of, any outstanding order,
decree, injunction or other arrangement with any governmental authority relating
to compliance with, or liability under, any Environmental Law or Occupational
Safety and Health Law.

There are no circumstances or conditions, including any Hazardous Materials on,
in or under any property or facilities currently or formerly owned, operated or
controlled by any Obligor or any Obligor Subsidiary (including such Hazardous
Materials that may be contained in underground storage tanks) which could
reasonably be expected to result in claims, liability, investigation, or cost
pursuant to any Environmental Law or Occupational Safety and Health Law, or
which could reasonably be expected to have a Material Adverse Effect.

                                      147
<PAGE>
            Section 1402V. Related Agreements and Transaction Documents.

            As of the date hereof, all representations and warranties of each
Obligor contained in any Indenture Document (including each of the Security
Documents) and all representations and warranties of any Obligor and any Obligor
Subsidiary made pursuant to or in respect of the Term Loan Agreement (and each
of the guaranties therein) and the New Tranche A Term Notes, the New Tranche B
Notes Indenture (and each of the guaranties therein) and the New Tranche B Notes
(whether such representations and warranties were made to the Trustee or any
Holder or to another Person) are true and correct as if made on the date hereof
(except for those representations and warranties which are expressly made as of
another specified date) and each Obligor party to this Indenture hereby adopts
and affirms all such representations and warranties, which each such Obligor
agrees shall be incorporated by reference herein and made a part hereof. All
such representations and warranties shall survive the implementation of the Plan
of Reorganization, the execution and delivery of the Indenture Documents and the
Transaction Documents and the consummation of the transactions contemplated
herein and therein.

            Section 1402W. Holding Companies.

            PCI is a holding company without material assets, operations or
business other than the stock of its Subsidiaries. As of the date hereof, no
Obligor or Obligor Subsidiary has any Indebtedness other than: Indebtedness in
respect of the Securities, the Exit Facility, the New Other Secured Notes And
Claims, the New Tranche B Notes, the Term Loan Agreement and the New Tranche A
Term Notes.

            Section 1402X. Security Interests and Priority.

            As of the Closing Date, the Collateral Agent, for the ratable
benefit of the Holders, the Lenders and the New Tranche B Notes Holders, shall
have first priority perfected Liens on all the Collateral except for Secondary
Collateral (as such term is defined in the Common Security and Intercreditor
Agreement) and assets subject to the Liens of the New Other Secured Notes And
Claims (in respect of each of which the Collateral Agent shall have second
priority perfected Liens). The rights of the Holders, the Lenders and the New
Tranche B Notes Holders rank senior in right of payment to all Indebtedness and
obligations of each Obligor and each Obligor Subsidiary (except with respect to
the Exit Facility, in relation to which such rights rank pari passu).

            Section 1402Y. Related Business.

            No Obligor and no Obligor Subsidiary intends to engage, after the
Closing Date, in any business other than the Related Business.

            Section 1402Z. Plan of Reorganization.

            On or before the Closing Date, the Confirmation Orders became Final
Orders, the conditions precedent to the effectiveness of the Plan of
Reorganization were satisfied, the Effective Plan Date occurred and each Obligor
was and is authorized to,

                                      148
<PAGE>
among other things, enter into the Indenture Documents and the Transaction
Documents to which it is a party in order to implement the Plan of
Reorganization. All transactions, steps and actions contemplated in the Plan of
Reorganization as having been (or deemed to have been) taken, completed or
consummated on or before the Closing Date have been so taken, completed or
consummated, in each case, in furtherance of the implementation of the Plan of
Reorganization.

                                ARTICLE FIFTEEN

                                    SECURITY

            Section 1501. Security.

            (a) In order to secure the due and punctual payment of principal of,
premium, if any, and interest on the Indenture Obligations when and as the same
shall become due and payable, whether on an Interest Payment Date, at maturity,
by acceleration, repurchase, redemption, in connection with an Change of Control
or Asset Sale, or otherwise, and interest on the overdue principal of, interest
(to the extent permitted by law), and premium, if any, on the Securities, and
performance of all other obligations of the Company to the Trustee or the
Holders under this Indenture and each other Indenture Document and of all
obligations of the Guarantors under the Guaranty and each other Indenture
Document, the Company and the other Obligors have entered into the applicable
Security Documents to which each is a party. Each Indenture Obligor hereby
acknowledges and agrees with each other Indenture Obligor, the Trustee, and the
Holders that such Indenture Obligor has secured valuable and fair consideration
and corporate and other benefit for entering into each Security Document to
which it is a party.

            (b) Each Holder, by accepting a Security, consents and agrees to all
of the terms and provisions of the Security Documents and the Common Security
and Intercreditor Agreement, as the same may be amended from time to time in
accordance with the provisions of the Security Documents, the Common Security
and Intercreditor Agreement and this Indenture, and authorizes and directs the
Collateral Agent to act as mortgagee or secured party with respect thereto or to
act as collateral agent pursuant to the Common Security and Intercreditor
Agreement.

            (c) As set forth in and governed by the Security Documents, as among
the Holders, the Collateral as now or hereafter constituted shall be held for
the equal and ratable benefit of the Holders without preference, priority or
distinction of any thereof over any other by reason of difference in time of
issuance, sale or otherwise, as security for the Securities.

            (d) The Company shall deliver to the Trustee copies of all documents
delivered to the Collateral Agent pursuant to the Security Documents, and shall
do or cause to be done all such acts and things as may be necessary or proper,
or as may be required by the provisions of the Security Documents, to assure and
confirm to the

                                      149
<PAGE>
Trustee and the Collateral Agent the security interest in the Collateral
contemplated hereby, by the Security Documents or any part thereof, as from time
to time constituted, so as to render the same available for the security and
benefit of this Indenture and of the Securities secured thereby, according to
the intent and purposes herein and therein expressed.

            Section 1502. Recording; Priority; Opinions, Etc.

            (a) Each Indenture Obligor will, and will cause each of its Obligor
Subsidiaries to, perform at its sole cost and expense any and all acts and
execute any and all documents (including, without limitation, the execution,
amendment or supplementation of any financing statement, continuation statement,
charge, registration or other statement) for filing under the provisions of the
UCC and the rules and regulations thereunder, applicable Canadian federal or
provincial statutes (including the Civil Code of Quebec) and the rules and
regulations thereunder, or any other statute, rule or regulation of any
applicable federal, state, provincial or local jurisdiction, including any
filings in local real estate land record offices, which are necessary or
advisable and shall do such other acts and execute such other documents as may
be required under any of the Security Documents to which it is a party, from
time to time, in order to grant and maintain valid and perfected Liens on the
Collateral relating to it in favor of the Collateral Agent in the priorities
expressed to be created by the Security Documents, subject only to Liens
permitted under the Security Documents to be senior or pari passu to the Liens
of the Collateral Agent, and to fully preserve and protect, and set-up against
third persons, the rights of the Trustee, the Collateral Agent and the Holder
under this Indenture and the other Indenture Documents. Each relevant Indenture
Obligor will, and will cause each of its Obligor Subsidiaries to, pay and
satisfy promptly all mortgage and financing and continuation statement recording
and/or filing fees or registration fees, charges and taxes relating to this
Indenture, the Security Documents and the other Indenture Documents, any
amendments thereto and any other instruments of further assurance.

            (b) The Company shall, as soon as practicable after the Closing Date
and on each anniversary of the Closing Date beginning in the year 2002 and upon
each delivery of a Security Agreement Supplement pursuant to Section 1017,
furnish to the Trustee an Opinion of Counsel, dated as of such date, either (a)
to the effect that, in the opinion of such counsel, such action has been taken
with respect to the recordings, registerings, filings, re-recordings,
re-registerings and refilings of all financing statements, continuation
statements or other instruments of further assurance as is necessary to maintain
the Lien of each of the Security Documents and reciting with respect to such
Liens the details of such action or referencing prior Opinions of Counsel in
which such details are given, and stating that all financing statements and
continuation statements and other filings or registrations have been executed
and filed that are necessary as of such date, and during the succeeding twelve
months, fully to preserve and protect, and set-up against third persons, the
rights of the Collateral Agent, the Holders and the Trustee hereunder and under
each of the Security Documents with respect to the Liens, or (b) to the effect
that, in the opinion of such counsel, no such action is necessary to maintain
the effectiveness of such Liens.

                                      150
<PAGE>
            Section 1503. Release of Collateral.

            The Trustee shall not direct the Collateral Agent to release
Collateral from the Lien of the Security Documents unless such release is in
accordance with the provisions of the Security Documents and Section 314(d) of
the Trust Indenture Act.

            Section 1504. Trust Indenture Act Requirements.

            The release of any Collateral from any of the Security Documents or
the release of, in whole or in part, the Liens created by any of the Security
Documents, will not be deemed to impair the Lien of the Security Documents in
contravention of the provisions hereof if and to the extent the Collateral or
Liens are released pursuant to the terms of the Security Documents. The Trustee
and each of the Holders acknowledge that a release of Collateral or Liens
strictly in accordance with the terms of the Security Documents and the terms
hereof will not be deemed for any purpose to be an impairment of the Liens
created pursuant to the Security Documents in contravention of the terms of this
Indenture. Without limitation, the Company and each other Indenture Obligor on
the Securities shall cause Section 314(d) of the Trust Indenture Act relating to
the release of property or securities from the Liens of the Security Documents
to be complied with. Any certificate or opinion required by Section 314(d) of
the Trust Indenture Act may be made by an officer of PCI, the Company or any
Guarantor, as the case may be, except in cases where Section 314(d) of the Trust
Indenture Act requires that such certificate or opinion be made by an
independent person.

            Section 1505. Suits to Protect Collateral.

            Subject to the provisions of the Common Security and Intercreditor
Agreement, the Trustee, acting at the written direction of Holders of a majority
of the aggregate principal amount of the Securities then Outstanding, shall have
power to institute and to maintain, or direct the Collateral Agent to institute
and maintain, such suits and proceedings as the Trustee may deem expedient to
prevent any impairment of the Collateral by any acts which may be unlawful or in
violation of any of the Security Documents or this Indenture, and such suits and
proceedings as the Trustee may deem expedient to preserve or protect its
interests 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 Liens of each
Collateral Agent in the Collateral or be prejudicial to the interests of the
Holders or the Trustee). Nothing in this Section 1505 shall prohibit, restrict
or prevent the Holders or the Lenders, upon the vote or consent of the Holders
of a majority of the aggregate principal amount of the Securities then
Outstanding, to institute such suits or proceedings independently of the Trustee
and/or the Collateral Agent.

                                      151
<PAGE>
            Section 1506. Determinations Relating to Collateral.

            In the event (a) the Trustee shall receive any written request in
compliance with Section 103 from PCI, the Company or any Guarantor under any
Security Document for consent or approval with respect to any matter or thing
relating to any Collateral or any Obligor's obligations with respect thereto, or
(b) there shall be due to or from the Trustee under the provisions of any
Security Document, any performance or the delivery of any instrument, or (c) the
Trustee shall become aware of any nonperformance by any Obligor of any covenant
or any breach of any representation or warranty of PCI, the Company or any
Guarantor set forth in any Security Document, then, in each such event, the
Trustee may, in its sole discretion and without the consent of the Holders,
direct, on behalf of the Holders, the Collateral Agent to take all actions it
deems necessary or appropriate in order to (x) enforce any of the terms of the
Security Documents, and (y) collect and receive any and all amounts payable in
respect of the obligations of the Obligors hereunder. The Trustee shall have
power to institute and maintain such suits and proceedings as it may deem
expedient to preserve or protect its interests and the interests of the Holders
in the Collateral (including the power to institute and maintain suits and
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 to the Trustee). The Trustee shall be entitled,
at the expense of the Company and subject to Section 602 hereof, to hire
experts, consultants, agents and attorneys (including internal counsel) to
advise the Trustee on the manner in which the Trustee should respond to such
request or render any requested performance or response to such nonperformance
or breach. The Trustee shall be fully protected in the taking of any action
recommended or approved by any such expert, consultant, agent or attorney
(including internal counsel) or agreed to by the Holders of a majority of the
aggregate principal amount of the Securities then Outstanding pursuant to
Section 505 hereof.

            Section 1507. Trust Moneys.

            To the extent Trust Moneys consist of insurance proceeds or
condemnation or other taking awards, any such moneys which may be used, pursuant
to the terms of the Common Security and Intercreditor Agreement, to effect a
restoration of the affected Collateral shall be permitted to be withdrawn by the
Company and paid by the Collateral Agent in accordance with the Common Security
and Intercreditor Agreement. The Company shall deliver (a) an Officers'
Certificate certifying as to expenditures made or costs incurred, the necessity
or desirability in the conduct of the Company's business of the repaired,
rebuilt, or replaced property, and the Fair Market Value of such property as of
the date of the expenditures, (b) an Opinion of Counsel as to the validity and
perfection of the Collateral Agent's lien on the repaired or replaced Collateral
and (c) an architect's certificate as to the costs of such restoration and
compliance with law, all in accordance with the Common Security and
Intercreditor Agreement.

                                      152
<PAGE>
            Subject to the terms of the Common Security and Intercreditor
Agreement, Trust Moneys shall be permitted to be applied from time to time (x)
to the payment of principal, premium, if any, and interest on the Securities, or
(y) to the extent otherwise permitted by the Indenture, to redeem Securities,
including, without limitation, pursuant to a Change of Control or (to the extent
such Trust Moneys constitute proceeds from Asset Sales) an Asset Sale, or (z) at
the direction of PCI, the Company and each Guarantor, to pay any other
Indebtedness secured by liens in the Collateral (but only to the extent such
Trust Moneys constitute Collateral Proceeds). In each case the Trustee and each
Collateral Agent shall receive (a) resolutions of the Boards of Directors of the
PCI, the Company and each Guarantor directing such application, (b) an Officers'
Certificate, and (c) an Opinion of Counsel, and the Collateral Agent shall
receive cash equaling the accrued interest, if any, required to be paid in
connection with such payment or purchase. Trust Moneys received by each
Collateral Agent or the Trustee pursuant to an Asset Sale remaining after the
completion of such Asset Sale shall be permitted to be withdrawn by the Company
upon request of the Company in compliance with Section 103 and delivery of an
Officers' Certificate and an Opinion of Counsel, all in accordance with, and
subject to, the Common Security and Intercreditor Agreement.

            Any release of Collateral, including Trust Moneys, will be subject
to the provisions of Section 314(d) of the Trust Indenture Act relating to,
among other things, the delivery of a certificate or an opinion of an engineer,
appraiser or other expert as to the Fair Market Value of Collateral being
released from the Liens of the Security Documents.

            Section 1508. Power of Attorney for Collateral in Quebec.

            For the purposes of the security on the Collateral located in
Quebec, the validity, publication or perfection of which is governed by the laws
of the province of Quebec, each of the Trustee and the Holders hereby
irrevocably grants to the Collateral Agent, for the purposes of holding, on
behalf of and for the benefit of all present and future Trustees and Holders,
the security constituted by PCI Chemicals Canada Company under the Quebec
Mortgage and Security Agreement, a power of attorney within the meaning of the
Civil Code of Quebec (the "Power of Attorney") for all present and future
Trustees and Holders. The Collateral Agent hereby accepts such Power of Attorney
for the purposes of holding such security created under the Quebec Mortgage and
Security Agreement on behalf of and for the benefit of all present and future
Trustees and Holders. To the extent that any such Person becomes a Trustee under
this Indenture or a Holder by accepting, purchasing or acquiring a Security
becomes bound by the terms and conditions of this Indenture, whether by
assignment or otherwise, such Person shall be automatically deemed to have
ratified and consented to the irrevocable granting by the Trustee and the
Holders to the Collateral Agent of the Power of Attorney constituted hereunder.
Each Holder agrees (i) with the other Holders that it will not, without the
prior consent of the Trustee and the other Holders, take or obtain any Lien on
any property of PCI Chemicals Canada Company to secure the Indenture Obligations
of PCI Chemicals Canada Company hereunder or under the Securities, except for
the benefit of the Collateral Agent for and on behalf of, the Trustee and the
Holders, or as may otherwise be required by law; and (ii) that, notwithstanding
the provisions of Section 32 of An Act respecting the

                                      153
<PAGE>
Special Powers of Legal Persons (Quebec), the Collateral Agent may, as a Person
holding the Power of Attorney of the Trustee and the Holders, acquire any title
to indebtedness secured by any hypothec in its favor related to this Indenture
or the Securities or any other document contemplated hereunder.

            Section 1509. Additional Indemnification.

            To the extent not already provided for in the other terms of this
Indenture, PCI and the Company hereby jointly and severally, to the fullest
extent permitted under applicable law, indemnify, exonerate and hold the Trustee
and each of its Affiliates, and each of their respective partners, officers,
directors, employees and agents, and each other Person controlling any of the
foregoing within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act (collectively, the "Indemnified Parties"), free
and harmless from and against any and all actions, causes of action (including
negligence and strict or absolute liability), suits, losses, costs, liabilities
and damages, and expenses incurred in connection therewith (irrespective of
whether any such Indemnified Party is a party to the action for which
indemnification hereunder is sought), including attorneys' fees and
disbursements (including those of internal counsel) (collectively, the
"Indemnified Liabilities") including as incurred by the Indemnified Parties or
any of them as a result of, or arising out of, or relating to:

            (a) the entering into and performance of this Indenture or any other
Indenture Document by any of the Indemnified Parties or any other document or
instrument contemplated by any Indenture Document, the performance of the
parties thereto of their respective obligations under any Indenture Document,
the consummation of the transactions contemplated by any Indenture Document or
the use of the proceeds of the Securities;

            (b) any investigation, litigation or proceeding related to any
environmental cleanup, audit or compliance or the issuance of any order, demand
or directive or any other matter relating to Environmental Laws, Occupational
Safety and Health Laws, the protection of the environment or the Release or
threatened Release by any Obligor or any Obligor Subsidiary of any Hazardous
Material; or

            (c) the presence on or under, or the escape, seepage, leakage,
spillage, discharge, emission, discharging or releases from, any real property
owned, controlled or operated by any Obligor or Obligor Subsidiary of any
Hazardous Material (including any losses, liabilities, damages, injuries, costs,
expenses or claims asserted or arising under any Environmental Law), regardless
of whether caused by, or within the control of, any Obligor or any Obligor
Subsidiary;

except for any such Indemnified Liabilities arising for the account of a
particular Indemnified Party by reason of the relevant Indemnified Party's gross
negligence or willful misconduct to the extent a court of competent jurisdiction
shall have so determined by a final non-appealable judgment. If and to the
extent that the foregoing undertaking may be unenforceable for any reason, PCI
and the Company hereby jointly

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<PAGE>
and severally agree to make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law.

                                ARTICLE SIXTEEN

                             UNALLOCATED SECURITIES

            Section 1601. Escrow of Unallocated Securities and Unallocated
Payments.

            Until such time as a Claimant has claimed its pro rata distribution
of the Securities in accordance with the terms of the Plan of Reorganization,
and as described in the Letters of Transmittals, the Securities issuable to such
Claimant ("Unallocated Securities") shall be held in escrow by the Disbursing
Agent for the benefit of the Claimants, pursuant to the terms of the Custody and
Disbursing Agreement. Any payments of interest, principal, premium or other
amounts that become due and payable with respect to such Unallocated Securities
("Unallocated Payments") shall be paid into an account maintained by the
Disbursing Agent pursuant to the terms of the Custody and Disbursing Agreement.

            Section 1602. Cancellation of Unallocated Securities and Release of
Unallocated Payments.

            In accordance with the terms of the Plan of Reorganization, all
Unallocated Securities shall be cancelled at the close of business on December
31, 2002 (the "Cancellation Date"). The certificates, if any, evidencing the
Securities to be cancelled shall be returned to the Company for cancellation. In
the event the Securities to be cancelled are evidenced by the Global Security,
the Trustee shall take such actions as may be necessary to cause such
cancellation to be reflected in the position in the Securities maintained by the
Depositary. All Unallocated Payments held by the Disbursing Agent at the close
of business on the Cancellation Date, together with the interest earned on the
investment of such Unallocated Payments by the Disbursing Agent in accordance
with the Custody and Disbursing Agreement, in each case net of all fees and
expenses (collectively the "Returned Payments") shall deposited with the
Collateral Agent in the Intercreditor Collateral Account for application in
accordance with the Common Security and Intercreditor Agreement. The above to
the contrary notwithstanding, Returned Payments will be deposited with the
Collateral Agent only in the event the aggregate of all Returned Payments
exceeds $150,000. Returned Payments not deposited with the Collateral Agent
pursuant to this Section 1602 will be released to the Company for the Company's
account.

                                      155
<PAGE>
                               ARTICLE SEVENTEEN

                        INDENTURE AND TERM LOAN AGREEMENT

            Section 1701. Acknowledgement.

            Notwithstanding anything contained herein to the contrary, the
Holders hereby acknowledge that (i) any and all redemptions of Securities
(whether mandatory or optional) shall be made pro rata between the Holders
hereunder and the Lenders in accordance with the terms of the Common Security
and Intercreditor Agreement, and (ii) holders of PCA U.S. Secured Term and Note
Claims that are Allowed (as such term is defined in the Plan of Reorganization)
and PCA Canadian Secured Term and Note Claims (as such term is defined in the
Plan of Reorganization) that are Allowed were given the option, as a matter of
convenience for certain such holders, of taking either New Tranche A Term Notes
or Securities, and in that regard, there is to be no economic or legal
distinction between the treatment of Holders and Lenders (other than with
respect to the nature of the debt obligation held by such Person).

                            [SIGNATURE PAGES FOLLOW]

                                      156
<PAGE>
            IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, all as of the day and year first above written.

                                     PIONEER AMERICAS LLC,
                                         as Issuer

                                     By:
                                         -------------------------------------
                                          Name:  Philip J. Ablove
                                          Title: Executive Vice President and
                                                 Chief Financial Officer

                                     PIONEER COMPANIES, INC.,
                                         as Parent of the Issuer

                                     By:
                                         -------------------------------------
Attest                                   Name:  Philip J. Ablove
       ---------------------------       Title: Executive Vice President and
       Name:  Kent R. Stephenson                Chief Financial Officer
       Title: Vice President,
              General Counsel
              and Secretary

GUARANTORS:                          PIONEER COMPANIES, INC.,
                                     PCI CHEMICALS CANADA COMPANY,
                                     IMPERIAL WEST CHEMICAL CO.,
                                     KEMWATER NORTH AMERICA
                                     COMPANY,
                                     PIONEER WATER TECHNOLOGIES, INC.,
                                     KWT, INC.

                                     By:
                                         -------------------------------------
                                         Name:  Philip J. Ablove
                                         Title: Executive Vice President and
                                                Chief Financial Officer
<PAGE>
                                     PIONEER LICENSING, INC.,

                                     PIONEER (EAST), INC.

                                     By:
                                         -------------------------------------
                                         Name:  Kent R. Stephenson
                                         Title: President and Secretary
<PAGE>
TRUSTEE:                             WELLS FARGO BANK MINNESOTA,
                                        NATIONAL ASSOCIATION,
                                        as Trustee

                                     By:
                                         -------------------------------------
                                         Name:
                                         Title:
<PAGE>
                                                             DISCLOSURE SCHEDULE
<PAGE>
                                                                       EXHIBIT A

                               FORMS OF MORTGAGES
<PAGE>
                                                                       EXHIBIT B

               FORM OF COMMON SECURITY AND INTERCREDITOR AGREEMENT
<PAGE>
                                                                       EXHIBIT C

                       FORMS OF CLOSING DATE CERTIFICATES<PAGE>
                                                                     EXHIBIT 4.6

================================================================================

                           LOAN AND SECURITY AGREEMENT

                                  BY AND AMONG

                          PCI CHEMICALS CANADA COMPANY

                                       AND

                              PIONEER AMERICAS LLC

                                  AS BORROWERS,

                     THE LENDERS THAT ARE SIGNATORIES HERETO

                                 AS THE LENDERS,

                                       AND

                          FOOTHILL CAPITAL CORPORATION

                    AS THE ARRANGER AND ADMINISTRATIVE AGENT

                          DATED AS OF DECEMBER 31, 2001

================================================================================
<PAGE>
                                TABLE OF CONTENTS
<TABLE>
<S>                                                                                             <C>
1. DEFINITIONS AND CONSTRUCTION..............................................................    1
   1.1      Definitions......................................................................    1
   1.2      Accounting Terms.................................................................   30
   1.3      Code.............................................................................   30
   1.4      Construction.....................................................................   30
   1.5      Schedules and Exhibits...........................................................   30

2. LOAN AND TERMS OF PAYMENT.................................................................   31
   2.1      Revolver Advances................................................................   31
   2.2      Intentionally Deleted............................................................   33
   2.3      Borrowing Procedures and Settlements.............................................   33
   2.4      Payments.........................................................................   40
   2.5      Overadvances.....................................................................   46
   2.6      Interest Rates and Letter of Credit Fee:  Rates, Payments, and Calculations......   46
   2.7      Cash Management..................................................................   49
   2.8      Crediting Payments; Float Charge.................................................   50
   2.9      Designated Accounts..............................................................   51
   2.10     Maintenance of Loan Account; Statements of Obligations...........................   51
   2.11     Fees.............................................................................   51
   2.12     Letters of Credit................................................................   52
   2.13     LIBOR Option.....................................................................   55
   2.14     Capital Requirements.............................................................   58
   2.15     Joint and Several Liability of Borrowers.........................................   59
   2.16     Noteless Agreement...............................................................   61
   2.17     Currency Indemnity...............................................................   62

3. CONDITIONS; TERM OF AGREEMENT.............................................................   62
   3.1      Conditions Precedent to the Initial Extension of Credit..........................   62
   3.2      Conditions Subsequent to the Initial Extension of Credit.........................   66
   3.3      Conditions Precedent to all Extensions of Credit.................................   67
   3.4      Extension of Credit in Excess of $30,000,000.00..................................   67
   3.5      Term.............................................................................   67
   3.6      Effect of Termination............................................................   67
   3.7      Early Termination by Borrowers...................................................   68

4. CREATION OF SECURITY INTEREST.............................................................   69
   4.1      Grant of Security Interest.......................................................   69
   4.2      Negotiable Collateral............................................................   69
   4.3      Collection of Accounts, General Intangibles, and Negotiable Collateral...........   69
   4.4      Delivery of Additional Documentation Required....................................   69
   4.5      Power of Attorney................................................................   70
</TABLE>

                                      -1-
<PAGE>
<TABLE>
<S>                                                                                             <C>
   4.6      Right to Inspect.................................................................   70
   4.7      Control Agreements...............................................................   70

5. REPRESENTATIONS AND WARRANTIES............................................................   70
   5.1      No Encumbrances..................................................................   71
   5.2      Eligible Accounts................................................................   71
   5.3      Eligible Inventory...............................................................   71
   5.4      Equipment........................................................................   71
   5.5      Location of Inventory............................................................   71
   5.6      Inventory Records................................................................   71
   5.7      Location of Chief Executive Office; FEIN.........................................   71
   5.8      Due Organization and Qualification; Subsidiaries.................................   72
   5.9      Due Authorization; No Conflict...................................................   73
   5.10     Litigation.......................................................................   74
   5.11     No Material Adverse Change.......................................................   74
   5.12     Fraudulent Transfer..............................................................   74
   5.13     Employee Benefits................................................................   74
   5.14     Environmental Condition..........................................................   74
   5.15     Brokerage Fees...................................................................   75
   5.16     Intellectual Property............................................................   75
   5.17     Leases...........................................................................   75
   5.18     DDAs.............................................................................   75
   5.19     Complete Disclosure..............................................................   75
   5.20     Indebtedness.....................................................................   75
   5.21     Taxes............................................................................   75
   5.22     Indenture Documents..............................................................   76

6. AFFIRMATIVE COVENANTS.....................................................................   76
   6.1      Accounting System................................................................   76
   6.2      Collateral Reporting.............................................................   76
   6.3      Financial Statements, Reports, Certificates......................................   77
   6.4      Guarantor Reports................................................................   80
   6.5      Return...........................................................................   80
   6.6      Maintenance of Properties........................................................   80
   6.7      Taxes............................................................................   80
   6.8      Insurance........................................................................   80
   6.9      Location of Inventory............................................................   81
   6.10     Compliance with Laws.............................................................   81
   6.11     Leases...........................................................................   82
   6.12     Brokerage Commissions............................................................   82
   6.13     Existence........................................................................   82
   6.14     Environmental....................................................................   82
   6.15     Disclosure Updates...............................................................   82
   6.16     Intentionally Deleted............................................................   82
   6.17     Obligation to Pay................................................................   83
</TABLE>

                                      -2-
<PAGE>
<TABLE>
<S>                                                                                            <C>
   6.18     Indenture Documents..............................................................   83
   6.19     Parent Taxes.....................................................................   83

7. NEGATIVE COVENANTS........................................................................   83
   7.1      Indebtedness.....................................................................   83
   7.2      Liens............................................................................   84
   7.3      Restrictions on Fundamental Changes..............................................   84
   7.4      Disposal of Assets...............................................................   84
   7.5      Change Name......................................................................   84
   7.6      Guarantee........................................................................   84
   7.7      Nature of Business...............................................................   85
   7.8      Prepayments and Amendments.......................................................   85
   7.9      Change of Control................................................................   85
   7.10     Consignments.....................................................................   85
   7.11     Distributions....................................................................   85
   7.12     Accounting Methods...............................................................   85
   7.13     Investments......................................................................   86
   7.14     Transactions with Affiliates.....................................................   86
   7.15     Suspension.......................................................................   86
   7.16     Intentionally Deleted............................................................   86
   7.17     Use of Proceeds..................................................................   86
   7.18     Change in Location of Chief Executive Office; Inventory with Bailees.............   87
   7.19     Securities Accounts..............................................................   87
   7.20     Financial Covenants..............................................................   87
   7.21     Amendments.......................................................................   88

8. EVENTS OF DEFAULT.........................................................................   88

9. THE LENDER GROUP'S RIGHTS AND REMEDIES....................................................   90
   9.1      Rights and Remedies..............................................................   90
   9.2      Remedies Cumulative..............................................................   92

10. TAXES AND EXPENSES.......................................................................   92

11. WAIVERS; INDEMNIFICATION.................................................................   93
    11.1    Demand; Protest; etc.............................................................   93
    11.2    The Lender Group's Liability for Collateral......................................   93
    11.3    Indemnification..................................................................   93

12. NOTICES..................................................................................   94

13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER...............................................   95

14. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS...............................................   96
    14.1    Assignments and Participations...................................................   96
    14.2    Successors.......................................................................   98
</TABLE>

                                      -3-
<PAGE>
<TABLE>
<S>                                                                                            <C>
15. AMENDMENTS; WAIVERS......................................................................   99
    15.1     Amendments and Waivers..........................................................   99
    15.2     Replacement of Holdout Lender...................................................  100
    15.3     No Waivers; Cumulative Remedies.................................................  100

16. AGENT; THE LENDER GROUP..................................................................  101
    16.1     Appointment and Authorization of Agent..........................................  101
    16.2     Delegation of Duties............................................................  101
    16.3     Liability of Agent..............................................................  102
    16.4     Reliance by Agent...............................................................  102
    16.5     Notice of Default or Event of Default...........................................  102
    16.6     Credit Decision.................................................................  103
    16.7     Costs and Expenses; Indemnification.............................................  103
    16.8     Agent in Individual Capacity....................................................  104
    16.9     Successor Agent.................................................................  104
    16.10    Lender in Individual Capacity...................................................  105
    16.11    Intentionally Deleted...........................................................  105
    16.12    Collateral Matters..............................................................  105
    16.13    Restrictions on Actions by Lenders; Sharing of Payments.........................  106
    16.14    Agency for Perfection...........................................................  107
    16.15    Payments by Agent to the Lenders................................................  107
    16.16    Concerning the Collateral and Related Loan Documents............................  107
    16.17    Field Audits and Examination Reports; Confidentiality; Disclaimers
             by Lenders; Other Reports and Information.......................................  107
    16.18    Several Obligations; No Liability...............................................  108
    16.19    Legal Representation of Agent...................................................  109

17. GENERAL PROVISIONS.......................................................................  109
    17.1     Effectiveness...................................................................  109
    17.2     Section Headings................................................................  109
    17.3     Interpretation..................................................................  109
    17.4     Severability of Provisions......................................................  109
    17.5     Amendments in Writing...........................................................  109
    17.6     Counterparts; Telefacsimile Execution...........................................  110
    17.7     Revival and Reinstatement of Obligations........................................  110
    17.8     Integration.....................................................................  110
</TABLE>

                                      -4-
<PAGE>
                             EXHIBITS AND SCHEDULES

Exhibit A-1                            Form of Assignment and Acceptance
Exhibit C-1                            Form of Compliance Certificate
Exhibit L-1                            Form of LIBOR Notice

Schedule A-1                           Agent's Account
Schedule C-1                           Commitments
Schedule D-1                           Designated Account
Schedule E-1                           Eligible Inventory Locations
Schedule P-1                           Permitted Liens
[Schedule R-1                          Real Property Collateral]
Schedule 2.8(a)                        Cash Management Banks
Schedule 5.5                           Locations of Inventory and Equipment
Schedule 5.7                           Chief Executive Office; FEIN
Schedule 5.8(b)                        Capitalization of Borrowers
Schedule 5.8(c)                        Capitalization of Borrowers' Subsidiaries
Schedule 5.10                          Litigation
Schedule 5.14                          Environmental Matters
Schedule 5.16                          Intellectual Property
Schedule 5.18                          Demand Deposit Accounts
Schedule 5.20                          Permitted Indebtedness

                                      -5-
<PAGE>
                           LOAN AND SECURITY AGREEMENT

            THIS LOAN AND SECURITY AGREEMENT (this "Agreement"), is entered into
as of December 31, 2001, between and among, on the one hand, the lenders
identified on the signature pages hereof (such lenders, together with their
respective successors and assigns, are referred to hereinafter each individually
as a "Lender" and collectively as the "Lenders"), FOOTHILL CAPITAL CORPORATION,
a California corporation, as the arranger and administrative agent for the
Lenders ("Agent"), and, on the other hand, PCI CHEMICALS CANADA COMPANY, A NOVA
SCOTIA UNLIMITED LIABILITY COMPANY, AND PIONEER AMERICAS LLC, A DELAWARE LIMITED
LIABILITY COMPANY (hereinafter each individually is referred to as a "Borrower",
and individually and collectively, jointly and severally, is referred to as the
"Borrowers").

      The parties agree as follows:

1. DEFINITIONS AND CONSTRUCTION.

      1.1 DEFINITIONS. As used in this Agreement, the following terms shall have
the following definitions:

            "Account Debtor" means any Person who is or who may become obligated
under, with respect to, or on account of, an Account, chattel paper, or a
General Intangible.

            "Accounts" means all of each Borrower's now owned or hereafter
acquired right, title, and interest with respect to "accounts" (as that term is
defined in the Code), and any and all supporting obligations in respect thereof,
including, without limitation, (a) (i) rights to payment for Inventory or other
goods sold or services rendered by such Borrower, including all accounts arising
from sales or rendition of services made under any of such Borrower's trade
names or styles or through any of such Borrower's divisions, regardless of how
such right is evidenced, whether secured or unsecured (and whether or not
specifically listed on schedules furnished to the Agent), and (ii) other
accounts; (b) unpaid seller's rights (including rights or rescission, replevin,
reclamation and stoppage in transit) relating to the foregoing or arising
therefrom; (c) rights to any goods (including Inventory) represented by any of
the foregoing, including rights to returned or repossessed goods (including
Inventory); (d) reserves and credit balances arising under any of the foregoing;
(e) guarantees, letters of credit, collateral or other supporting obligations
supporting or securing any of the foregoing; and (f) insurance policies or
rights relating to any of the foregoing.

            "ACH Transactions" means any cash management or related services
(including the Automated Clearing House processing of electronic funds transfers
through the direct Federal Reserve Fedline system) provided by Wells Fargo or
its Affiliates for the account of any Borrower or its Subsidiaries.

            "Additional Documents" has the meaning set forth in Section 4.4.

                                      -1-
<PAGE>
            "Advances" has the meaning set forth in Section 2.1.

            "Affiliate" means, as applied to any Person, any other Person who,
directly or indirectly, controls, is controlled by, or is under common control
with, such Person. For purposes of this definition, "control" means the
possession, directly or indirectly, of the power to direct the management and
policies of a Person, whether through the ownership of Stock, by contract, or
otherwise; provided, however, that, for purposes of the definition of Eligible
Accounts and Section 7.14 hereof: (a) any Person which owns directly or
indirectly 10% or more of the securities having ordinary voting power for the
election of directors or other members of the governing body of a Person or 10%
or more of the partnership or other ownership interests of a Person (other than
as a limited partner of such Person) shall be deemed to control such Person; (b)
each director (or comparable manager) of a Person shall be deemed to be an
Affiliate of such Person; and (c) each partnership or joint venture in which a
Person is a partner or joint venturer shall be deemed to be an Affiliate of such
Person.

            "Agent" means Foothill, solely in its capacity as agent for the
Lenders hereunder, and any successor thereto.

            "Agent's Account" means the account identified on Schedule A-1.

            "Agent Advances" has the meaning set forth in Section 2.3(e)(i).

            "Agent's Liens" means the Liens granted by Borrowers to Agent for
the benefit of the Lender Group under this Agreement or the other Loan
Documents.

            "Agent-Related Persons" means Agent together with its Affiliates,
officers, directors, employees, and agents.

            "Agreement" has the meaning set forth in the preamble hereto.

            "Applicable Law" means all applicable international, foreign,
federal, state, provincial and local statutes, treaties, rules, guidelines,
regulations, ordinances, codes, and administrative or judicial precedents or
authorities, including the interpretation or administration thereof by any
Governmental Authority charged with the enforcement, interpretation or
administration thereof, and all applicable administrative orders, directed
duties, requests, licenses, authorizations and permits of, and agreements with,
any Governmental Authority.

            "Applicable Margin" means, on any day, and with respect to any
Advance, the applicable per annum percentage set forth at the appropriate
intersection in the table shown below, based on the average Excess Availability
for the immediately preceding month:

                                      -2-
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
AVERAGE EXCESS                        MARGIN OVER                 MARGIN OVER
 AVAILABILITY                         U.S. PRIME                     LIBOR
--------------------------------------------------------------------------------
<S>                                   <C>                         <C>
$20MM +                                   .50%                       2.75%
--------------------------------------------------------------------------------
$10MM <= $20MM                            .75%                       3.00%
--------------------------------------------------------------------------------
$5MM  <= $10MM                           1.00%                       3.25%
--------------------------------------------------------------------------------
$0MM  <= $5MM                            1.25%                       3.50%
--------------------------------------------------------------------------------
</TABLE>

            It is understood and agreed that for the period from and after the
date of the first Advance until the date of the initial calculation of average
Excess Availability, the Applicable Margin shall be calculated as if the Average
Excess Availability were $10MM <= $20MM.

            "Applicable Prepayment Premium" means, as of any date of
determination, an amount equal to (a) during the period of time from and after
the date of the execution and delivery of this Agreement up to the date that is
the first anniversary of the Closing Date, three percent (3%) of the Maximum
Revolver Amount on the date immediately prior to the date of determination, (b)
during the period of time from and including the date that is the first
anniversary of the Closing Date up to the date that is the second anniversary of
the Closing Date, two percent (2%) of the Maximum Revolver Amount on the date
immediately prior to the date of determination, and (c) during the period of
time from and including the date that is the second anniversary of the Closing
Date up to the Maturity Date, one percent (1%) of the Maximum Revolver Amount on
the date immediately prior to the date of determination.

            "Approved CRC Portfolio" means the following derivative transactions
entered into by the CRC on behalf of Pioneer Americas:

                  (a) A forward purchase commitment for 365,200 megawatt-hours
of electric power at $46.50 per megawatt-hour from Duke Energy Trading &
Marketing, LLC during the period from 1/1/2002 through 12/31/2006, executed by
CRC on 3/14/2001, and confirmed by Pioneer America on 5/1/2001.

                  (b) A daily put option for 614,000 megawatt-hours of electric
power at a strike price of $50.00 per megawatt-hour with Duke Energy Trading &
Marketing, LLC during the period 1/1//2002 through 12/31/2006, executed by CRC
on 2/28/2001, and confirmed by Pioneer America on 5/1/2001.

                  (c) A forward purchase commitment for 481,600 megawatt-hours
of electric power at $55.00 per megawatt-hour from Duke Energy Trading &
Marketing, LLC during the period from 1/1/2002 through 12/31/2006, executed by
CRC on 3/28/01, and confirmed by Pioneer America on 5/1/2001.

                                      -3-
<PAGE>
                  (d) A forward sale commitment for 60,800 megawatt-hours of
electric power at $44.00 per megawatt-hour to Idacorp, during the period from
1/1/2002 through 3/31/2002, executed by CRC on 8/7/2001, and confirmed by
Pioneer America on 8/7/2001.

                  (e) A one-time call option for 61,600 megawatt-hours of
electric power at a strike price of $50.00 per megawatt-hour with El Paso,
exercisable on 3/22/2002, effective 4/1/2002 through 6/30/2002, executed by CRC
on 8/3/2001, and confirmed by Pioneer America on 8/7/2001.

                  (f) A forward sale commitment for 61,600 megawatt-hours of
electric power at $44.00 per megawatt-hour to Idacorp during the period from
4/1/2002 through 6/30/2002, executed by CRC on 8/7/2001, and confirmed by
Pioneer America on 8/7/2001.

                  (g) A forward sale commitment for 96,200 megawatt-hours of
electric power at $32.00 per megawatt-hour to Idacorp during the period from
1/1/2002 through 12/31/2002, executed by CRC on 8/7/2001, and confirmed by
Pioneer America on 8/7/2001.

            "Assignee" has the meaning set forth in Section 14.1.

            "Assignment and Acceptance" means an Assignment and Acceptance in
the form of Exhibit A-1.

            "Authorized Person" means any officer or other employee of
Borrowers.

            "Availability" means, as of any date of determination, if such date
is a Business Day, and determined at the close of business on the immediately
preceding Business Day, if such date of determination is not a Business Day, the
amount that Borrowers are entitled to borrow as Advances under Section 2.1
(after giving effect to all then outstanding Obligations (other than Bank
Products Obligations) and all sublimits and reserves applicable hereunder).

            "Bank Product Agreements" means those certain cash management
service agreements entered into from time to time by Borrowers in connection
with any of the Bank Products.

            "Bank Product Obligations" means all obligations, liabilities,
contingent reimbursement obligations, fees, and expenses owing by Borrowers to
Wells Fargo or its Affiliates pursuant to or evidenced by the Bank Product
Agreements and irrespective of whether for the payment of money, whether direct
or indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, and including all such amounts that Borrowers are obligated
to reimburse to Agent or any member of the Lender Group as a result of Agent or
such member of the Lender Group purchasing participations or executing
indemnities or reimbursement obligations with respect to the Bank Products
provided to Borrowers pursuant to the Bank Product Agreements.

                                      -4-
<PAGE>
            "Bank Products" means any service or facility extended to Borrowers
by Wells Fargo or any Affiliate of Wells Fargo including: (a) credit cards, (b)
credit card processing services, (c) debit cards, (d) purchase cards, (e) ACH
Transactions, (f) cash management, including controlled disbursement, accounts
or services, or (g) Hedge Agreements.

            "Bank Product Reserves" means, as of any date of determination, the
amount of reserves that Agent has established (based upon Wells Fargo's or its
Affiliate's reasonable determination of the credit exposure in respect of then
extant Bank Products) for Bank Products then provided or outstanding.

            "Bankruptcy Code" means Title 11 of the United States Bankruptcy
Code, as amended, or any similar United States federal or state law relating to
bankruptcy, insolvency, receivership, winding-up, liquidation, reorganization or
relief of debtors or any amendment to, succession to or change in such law.

            "Bankruptcy Courts" means the United States Bankruptcy Court for the
Southern District of Texas, Houston Division and the Superior Court of Quebec.

            "Bankruptcy Law" means the Bankruptcy Code, Canadian Bankruptcy Law
or any law of any other country or jurisdiction relating to bankruptcy,
insolvency, receivership, winding-up, liquidation, reorganization, or relief of
debtors.

            "Base LIBOR Rate" means the rate per annum, determined by Agent in
accordance with its customary procedures, and utilizing such electronic or other
quotation sources as it considers appropriate (rounded upwards, if necessary, to
the next 1/16%), on the basis of the rates at which Dollar deposits are offered
to major banks in the London interbank market on or about 11:00 a.m. (California
time) 2 Business Days prior to the commencement of the applicable Interest
Period, for a term and in amounts comparable to the Interest Period and amount
of the LIBOR Rate Loan requested by Borrowers in accordance with this Agreement,
which determination shall be conclusive in the absence of manifest error.

            "Base Rate" means, the rate of interest announced within Wells Fargo
at its principal office in San Francisco as its "prime rate", with the
understanding that the "prime rate" is one of Wells Fargo's base rates (not
necessarily the lowest of such rates) and serves as the basis upon which
effective rates of interest are calculated for those loans making reference
thereto and is evidenced by the recording thereof after its announcement in such
internal publication or publications as Wells Fargo may designate.

            "Base Rate Loan" means each portion of an Advance that bears
interest at a rate determined by reference to the Base Rate.

            "Benefit Plan" means a "defined benefit plan" (as defined in Section
3(35) of ERISA) for which any Borrower or ERISA Affiliate of any Borrower has
been an "employer" (as defined in Section 3(5) of ERISA) within the past six
years.

                                      -5-
<PAGE>
            "Board of Directors" means the board of directors (or comparable
managers) of each Borrower or any committee thereof duly authorized to act on
behalf thereof.

            "Books" means all of each Borrower's now owned or hereafter acquired
books and records (including all of its Records indicating, summarizing, or
evidencing its assets (including the Collateral) or liabilities, all of each
Borrower's Records relating to its business operations or financial condition,
and all of its goods or General Intangibles related to such information).

            "Borrower" and "Borrowers" have the respective meanings set forth in
the preamble to this Agreement.

            "Borrowing" means a borrowing hereunder consisting of Advances made
on the same day by the Lenders (or Agent on behalf thereof), or by Swing Lender
in the event of a Swing Loan, or by Agent in the case of an Agent Advance, in
each case, to Borrowers.

            "Borrowing Base" has the meaning set forth in Section 2.1.

            "Borrowing Base Certificate" means a certificate in the form of
Exhibit B-1.

            "Business Day" means (a) in connection with any Advances or L/C's
made or provided to PCI Chemicals, or other matters related exclusively to PCI
Chemicals, any day other than a Saturday, Sunday or other day on which
commercial banks are authorized or required to close under the laws of the State
of California, the State of Texas or the Province of Ontario and (b) in
connection with any Advances or L/C's made or provided to Pioneer Americas or as
such term is used herein except as otherwise provided in clause (a)(i) of this
definition, any day other than a Saturday, Sunday, or other day on which
commercial banks are authorized or required to close under the laws of the State
of Texas or the State of California; provided, that, in any case (whether under
clause (a) or (b) of this definition or otherwise), if a determination of a
Business Day shall relate to any LIBOR Loans, the term Business Day shall also
exclude any day on which banks are closed for dealings in Dollar deposits in the
London interbank market or other applicable LIBOR Rate market.

            "C$" means lawful money of Canada.

            "Canadian Bankruptcy Law" means the Bankruptcy and Insolvency Act
(Canada), the Companies Creditors Arrangement Act (Canada), the Winding-Up and
Restructuring Act (Canada), or any similar Canadian or provincial law relating
to bankruptcy, insolvency, receivership, winding-up, liquidation,
reorganization, or relief of debtors, each as amended or changed.

            "Canadian Designated Account" means that certain DDA of PCI
Chemicals identified as the Canadian Designated Account on Schedule D-1.

            "Canadian Eligible Accounts" means Eligible Accounts owing to PCI
Chemicals.

                                      -6-
<PAGE>
            "Canadian Eligible Collateral" means Canadian Eligible Accounts and
Canadian Eligible Inventory.

            "Canadian Eligible Finished Goods Inventory" means Eligible Finished
Goods Inventory owned by PCI Chemicals and located at one of the locations in
Canada specified in Schedule E-1.

            "Canadian Eligible Inventory" means Canadian Eligible Finished Goods
Inventory and Canadian Eligible Raw Materials Inventory.

            "Canadian Eligible Raw Materials Inventory" means Eligible Raw
Materials Inventory owned by PCI Chemicals and located in Canada at one of the
locations specified in Schedule E-1.

            "Canadian Security Documents" means any and all general security
agreements, deed or deeds of hypothec, assignments of insurance, registrations
and other documents and agreements necessary to create in favor of Agent valid,
perfected, first priority security interests and charges in the Collateral
located in the provinces of New Brunswick, Nova Scotia, Ontario and Quebec,
Canada.

            "Capital Lease" means a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP.

            "Capitalized Lease Obligation" means any Indebtedness represented by
obligations under a Capital Lease.

            "Cash Equivalents" means (a) marketable direct obligations issued or
unconditionally guaranteed by the United States or issued by any agency thereof
and backed by the full faith and credit of the United States, in each case
maturing within 1 year from the date of acquisition thereof, (b) marketable
direct obligations issued by any state of the United States or any political
subdivision of any such state or any public instrumentality thereof maturing
within 1 year from the date of acquisition thereof and, at the time of
acquisition, having the highest rating obtainable from either S&P or Moody's,
(c) commercial paper maturing no more than 270 days from the date of acquisition
thereof and, at the time of acquisition, having a rating of A-1 or P-1, or
better, from S&P or Moody's, and (d) certificates of deposit or bankers'
acceptances maturing within 1 year from the date of acquisition thereof either
(i) issued by any bank organized under the laws of the United States or any
state thereof which bank has a rating of A or A2, or better, from S&P or
Moody's, or (ii) certificates of deposit less than or equal to $100,000 in the
aggregate issued by any other bank insured by the Federal Deposit Insurance
Corporation.

            "Cash Management Bank" has the meaning set forth in Section 2.7(a).

            "Cash Management Account" has the meaning set forth in Section
2.7(a).

                                      -7-
<PAGE>
            "Cash Management Agreements" means those certain cash management
service agreements, in form and substance satisfactory to Agent, each of which
is among Borrowers, Agent, and one of the Cash Management Banks.

            "Change of Control" means (a) any "person" or "group" (within the
meaning of Sections 13(d) and 14(d) of the Exchange Act) becomes the beneficial
owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of 10%, or more, of the Stock of any Borrower having the right to vote for the
election of members of the Board of Directors, or (b) a majority of the members
of the Board of Directors do not constitute Continuing Directors, or (c) any
Borrower ceases to directly own and control 100% of the outstanding capital
Stock of each of its Subsidiaries extant as of the Closing Date.

            "Chapter 11 Bankruptcy Proceeding" means the bankruptcy proceedings
filed in the Bankruptcy Courts on or about July 31, 2001 regarding the
reorganization of Pioneer Companies, Inc. and its subsidiaries.

            "Closing Date" means the date of the making of the initial Advance
(or other extension of credit) hereunder or the date on which Agent sends
Borrowers a written notice that each of the conditions precedent set forth in
Section 3.1 either have been satisfied or have been waived.

            "Closing Date Business Plan" means the set of Projections of
Borrowers for the 3 year period following the Closing Date (on a year by year
basis, and for the 1 year period following the Closing Date, on a month by month
basis), in form and substance (including as to scope and underlying assumptions)
satisfactory to Agent.

            "Code" means the Uniform Commercial Code, as adopted by the State of
Texas.

            "Collateral" means all of each Borrower's now owned or hereafter
acquired right, title, and interest in and to each of the following:

                  (a) Accounts,

                  (b) Books,

                  (c) Inventory,

                  (d) General Intangibles relating to Accounts and Inventory,

                  (e) Intercompany Notes,

                  (f) money or other assets of each such Borrower that now or
hereafter come into the possession, custody, or control of any member of the
Lender Group, and

                  (g) the proceeds and products, whether tangible or intangible,
of any of the foregoing, including proceeds of insurance covering any or all of
the foregoing, and any

                                      -8-
<PAGE>
and all Accounts, Books, General Intangibles, Inventory, Investment Property,
Negotiable Collateral, money, deposit accounts, or other tangible or intangible
property resulting from the sale, exchange, collection, or other disposition of
any of the foregoing, or any portion thereof or interest therein, and the
proceeds thereof.

            "Collateral Access Agreement" means a landlord waiver, bailee
letter, or acknowledgement agreement of any lessor, warehouseman, processor,
consignee, or other Person in possession of, having a Lien upon, or having
rights or interests in the Inventory, in each case, in form and substance
satisfactory to Agent.

            "Collections" means all cash, checks, notes, instruments, and other
items of payment (including insurance proceeds, proceeds of cash sales, rental
proceeds, and tax refunds) of Borrowers.

            "Commitment" means, with respect to each Lender, its Revolver
Commitment or its Total Commitment, as the context requires, and, with respect
to all Lenders, their Revolver Commitments or their Total Commitments, as the
context requires, in each case as such Dollar amounts are set forth beside such
Lender's name under the applicable heading on Schedule C-1 or on the signature
page of the Assignment and Acceptance pursuant to which such Lender became a
Lender hereunder in accordance with the provisions of Section 14.1.

            "Compliance Certificate" means a certificate substantially in the
form of Exhibit C-1 delivered by the chief financial officer of each Borrower to
Agent.

            "Continuing Director" means (a) any member of the Board of Directors
who was a director (or comparable manager) of any Borrower on the Closing Date,
and (b) any individual who becomes a member of the Board of Directors after the
Closing Date if such individual was appointed or nominated for election to the
Board of Directors by a majority of the Continuing Directors, but excluding any
such individual originally proposed for election in opposition to the Board of
Directors in office at the Closing Date in an actual or threatened election
contest relating to the election of the directors (or comparable managers) of a
Borrower (as such terms are used in Rule 14a-11 under the Exchange Act) and
whose initial assumption of office resulted from such contest or the settlement
thereof.

            "Control Agreement" means a control agreement, in form and substance
satisfactory to Agent, executed and delivered by the applicable Borrower, Agent,
and the applicable securities intermediary with respect to a Securities Account
or a bank with respect to a deposit account.

            "CRC" means the Colorado River Commission created by and existing
pursuant to the laws of the State of Nevada.

            "CRC Contracts" means Contract Nos. P03-50, P03-65, P03-70, and
P03-61 by and between Pioneer Americas and CRC, as the same may be amended or
supplemented from time to time.

                                      -9-
<PAGE>
            "CRC Portfolio" means the Approved CRC Portfolio and the Disputed
CRC Portfolio.

            "Currency Due" has the meaning set forth in Section 2.17.

            "Daily Balance" means, with respect to each day during the term of
this Agreement, the amount of an Obligation owed at the close of business of
such day.

            "DDA" means any checking or other demand deposit account maintained
by any Borrower.

            "Default" means an event, condition, or default that, with the
giving of notice, the passage of time, or both, would be an Event of Default.

            "Defaulting Lender" means any Lender that fails to make any Advance
(or other extension of credit) that it is required to make hereunder on the date
that it is required to do so hereunder.

            "Defaulting Lender Rate" means (a) the Base Rate for the first 3
days from and after the date the relevant payment is due, and (b) thereafter, at
the interest rate then applicable to Advances that are Base Rate Loans
(inclusive of the Applicable Margin applicable thereto.

            "Designated Accounts" means the Canadian Designated Account and the
U.S. Designated Account.

            "Dilution" means, as of any date of determination, a percentage,
based upon the experience of the immediately prior ninety (90) days, that is the
result of dividing the Dollar amount of (a) bad debt write-downs, discounts,
advertising allowances, credits, or other dilutive items with respect to the
Accounts during such period, by (b) Borrowers' Collections with respect to
Accounts during such period (excluding extraordinary items) plus the Dollar
amount of clause (a).

            "Dilution Reserve" means, as of any date of determination, an amount
sufficient to reduce the advance rate against Eligible Accounts by one
percentage point for each percentage point by which Dilution is in excess of 5%.

            "Disbursement Letter" means an instructional letter executed and
delivered by Borrowers to Agent regarding the extensions of credit to be made on
the Closing Date, the form and substance of which is reasonably satisfactory to
Agent.

            "Disputed CRC Portfolio" means all the derivative transactions
purportedly entered into by CRC on behalf of Pioneer Americas, other than the
Approved CRC Portfolio.

            "Dollar Equivalent" means on any date of determination, with respect
to any amount expressed in C$, the amount of Dollars that may be purchased with
such amount of C$ at the Spot Exchange Rate.

                                      -10-
<PAGE>
            "Dollars" or $ means lawful money of the United States of America.

            "EBITDA" means, with respect to any fiscal period, Parent and its
Subsidiaries consolidated net earnings (or loss), minus extraordinary gains,
plus interest expense, income taxes, and depreciation and amortization for such
period, as determined in accordance with GAAP.

            "Eligible Accounts" means, as to each Borrower, the Dollar
Equivalent of those Accounts created by such Borrower in the ordinary course of
its business, that arise out of its sale of goods or rendition of services, that
comply with each of the representations and warranties respecting Eligible
Accounts made by Borrowers under the Loan Documents, and that are not excluded
as ineligible by virtue of one or more of the criteria set forth below;
provided, however, that such criteria may be fixed and revised from time to time
by Agent in Agent's Permitted Discretion to address the results of any audit
performed by Agent from time to time after the Closing Date. In determining the
amount to be included, Eligible Accounts shall be calculated net of customer
deposits and unapplied cash remitted to Borrowers. Eligible Accounts shall not
include the following:

                  (a) Accounts that the Account Debtor has failed to pay within
ninety (90) days of original invoice date or Accounts with selling terms of more
than sixty (60) days,

                  (b) Accounts owed by an Account Debtor (or its Affiliates)
where 50% or more of all Accounts owed by that Account Debtor (or its
Affiliates) are deemed ineligible under clause (a) above,

                  (c) Accounts with respect to which the Account Debtor is an
employee, Affiliate, or agent of any Borrower,

                  (d) Accounts arising in a transaction wherein goods are placed
on consignment or are sold pursuant to a guaranteed sale, a sale or return, a
sale on approval, a bill and hold, or any other terms by reason of which the
payment by the Account Debtor may be conditional,

                  (e) Accounts that are not payable in Dollars or C$,

                  (f) Accounts with respect to which the Account Debtor either
(i) does not maintain its chief executive office in the United States or Canada,
or (ii) is not organized under the laws of the United States or any state
thereof or under the laws of Canada or any province thereof, or (iii) is the
government of any foreign country or sovereign state, or of any state, province,
municipality, or other political subdivision thereof, or of any department,
agency, public corporation, or other instrumentality thereof, unless (y) the
Account is supported by an irrevocable letter of credit reasonably satisfactory
to Agent (as to form, substance, and issuer or United States or Canadian
confirming bank) that has been delivered to Agent and is directly drawable by
Agent, or (z) the Account is covered by

                                      -11-
<PAGE>
credit insurance in form, substance, and amount, and by an insurer, reasonably
satisfactory to Agent,

                  (g) Accounts with respect to which the Account Debtor is
either (i) the United States or any department, agency, or instrumentality of
the United States (exclusive, however, of Accounts with respect to which the
applicable Borrower has complied, to the reasonable satisfaction of Agent, with
the Assignment of Claims Act, 31 USC ss. 3727), or (ii) any state of the United
States (exclusive, however, of (y) Accounts owed by any state that does not have
a statutory counterpart to the Assignment of Claims Act or (z) Accounts owed by
any state that does have a statutory counterpart to the Assignment of Claims Act
as to which the applicable Borrower has complied to Agent's satisfaction),

                  (h) Accounts with respect to which the Account Debtor is a
creditor of any Borrower, has or has asserted a right of setoff, has disputed
its liability, or has made any claim with respect to its obligation to pay the
Account, to the extent of such claim, right of setoff, or dispute,

                  (i) Accounts with respect to an Account Debtor whose total
obligations owing to Borrowers exceed 10% (such percentage as applied to a
particular Account Debtor being subject to reduction by Agent in its Permitted
Discretion if the creditworthiness of such Account Debtor deteriorates) of all
Eligible Accounts, to the extent of the obligations owing by such Account Debtor
in excess of such percentage,

                  (j) Accounts with respect to which the Account Debtor is
subject to an Insolvency Proceeding, is not Solvent, has gone out of business,
or as to which a Borrower has received notice of an imminent Insolvency
Proceeding or a material impairment of the financial condition of such Account
Debtor,

                  (k) Accounts with respect to which the Account Debtor is
located in the states of New Jersey, Minnesota, or West Virginia (or any other
state that requires a creditor to file a business activity report or similar
document in order to bring suit or otherwise enforce its remedies against such
Account Debtor in the courts or through any judicial process of such state),
unless the applicable Borrower has qualified to do business in New Jersey,
Minnesota, West Virginia, or such other states, or has filed a business
activities report with the applicable division of taxation, the department of
revenue, or with such other state offices, as appropriate, for the then-current
year, or is exempt from such filing requirement,

                  (l) Accounts, the collection of which, Agent, in its Permitted
Discretion, believes to be doubtful by reason of the Account Debtor's financial
condition,

                  (m) Accounts that are not subject to a valid and perfected
first priority Agent's Lien,

                                      -12-
<PAGE>
                  (n) Accounts with respect to which (i) the goods giving rise
to such Account have not been shipped and billed to the Account Debtor, or (ii)
the services giving rise to such Account have not been performed and billed to
the Account Debtor, or

                  (o) Accounts that represent the right to receive progress
payments or other advance billings that are due prior to the completion of
performance by the applicable Borrower of the subject contract for goods or
services.

            "Eligible Finished Goods Inventory" means, as to each Borrower,
Inventory of such Borrower consisting of first quality finished goods held for
sale in the ordinary course of such Borrower's business located at one of the
business locations of such Borrower set forth on Schedule E-1 (or in-transit
between any such locations), that complies with each of the representations and
warranties respecting Eligible Inventory made by Borrowers in the Loan
Documents, and that is not excluded as ineligible by virtue of the one or more
of the criteria set forth below; provided, however, that such criteria may be
fixed and revised from time to time by Agent in Agent's Permitted Discretion to
address the results of any audit or appraisal performed by Agent from time to
time after the Closing Date. Eligible Finished Goods Inventory shall not include
any item included in Eligible Raw Materials Inventory. Canadian Eligible
Finished Goods Inventory shall not include any item included in U.S. Eligible
Finished Goods Inventory, and U.S. Eligible Finished Goods Inventory shall not
include any item included in Canadian Eligible Finished Goods Inventory. In
determining the amount to be so included, Inventory consisting of finished goods
shall be valued at the lower of cost or market on a basis consistent with
Borrowers' historical accounting practices. An item shall not be included in
Eligible Finished Goods Inventory if:

                  (a) a Borrower does not have good, valid, and marketable title
thereto,

                  (b) it is not located at one of the locations in the United
States or in the Provinces of Quebec, Ontario, Nova Scotia, or New Brunswick,
Canada set forth on Schedule E-1 or in transit from one such location to another
such location,

                  (c) it is located on real property leased by a Borrower or in
a contract warehouse, in each case, unless it is subject to a Collateral Access
Agreement executed by the lessor, warehouseman, or other third party, as the
case may be, and unless it is segregated or otherwise separately identifiable
from goods of others, if any, stored on the premises,

                  (d) it is not subject to a valid and perfected first priority
security Agent's Lien,

                  (e) it consists of goods returned or rejected by a Borrower's
customers, or

                  (f) it consists of goods that are obsolete or slow moving,
restrictive or custom items, work-in-process, raw materials, or goods that
constitute spare parts,

                                      -13-
<PAGE>
packaging and shipping materials, supplies used or consumed in a Borrower's
business, bill and hold goods, defective goods, "seconds," or Inventory acquired
on consignment.

            "Eligible Inventory" means, as to each Borrower, the Eligible
Finished Goods Inventory and Eligible Raw Materials Inventory of such Borrower.

            "Eligible Raw Materials Inventory" means, as to each Borrower,
Inventory of such Borrower consisting of raw materials and work in process
located at one of the business locations of such Borrower set forth on Schedule
E-1 (or in-transit between any such locations), that complies with each of the
representations and warranties respecting Eligible Inventory made by Borrowers
in the Loan Documents, and that is not excluded as ineligible by virtue of the
one or more of the criteria set forth below; provided, however, that such
criteria may be fixed and revised from time to time by Agent in Agent's
Permitted Discretion to address the results of any audit or appraisal performed
by Agent from time to time after the Closing Date. Eligible Raw Materials
Inventory shall not include any item included in Eligible Finished Goods
Inventory. Canadian Eligible Raw Materials Inventory shall not include any item
included in U.S. Eligible Raw Materials Inventory, and U.S. Eligible Raw
Materials Inventory shall not include any item included in Canadian Eligible Raw
Materials Inventory. In determining the amount to be so included, Inventory
consisting of raw materials and work in process shall be valued at the lower of
cost or market on a basis consistent with Borrowers' historical accounting
practices. An item shall not be included in Eligible Raw Materials Inventory if:

                  (a) a Borrower does not have good, valid, and marketable title
thereto,

                  (b) it is not located at one of the locations in the United
States or in the Provinces of Quebec, Ontario, Nova Scotia, or New Brunswick,
Canada set forth on Schedule E-1 or in transit from one such location to another
such location,

                  (c) it is located on real property leased by a Borrower or in
a contract warehouse, in each case, unless it is subject to a Collateral Access
Agreement executed by the lessor, warehouseman, or other third party, as the
case may be, and unless it is segregated or otherwise separately identifiable
from goods of others, if any, stored on the premises,

                  (d) it is not subject to a valid and perfected first priority
security Agent's Lien, or

                  (e) it consists of goods that constitute packaging and
shipping materials or supplies used or consumed in a Borrower's business.

            "Eligible Transferee" means (a) a commercial bank organized under
the laws of the United States, or any state thereof, and having total assets in
excess of $250,000,000, (b) a commercial bank organized under the laws of any
other country which is a member of the Organization for Economic Cooperation and
Development or a political subdivision of

                                      -14-
<PAGE>
any such country and which has total assets in excess of $250,000,000, provided
that such bank is acting through a branch or agency located in the United
States, (c) a finance company, insurance company, or other financial institution
or fund that is engaged in making, purchasing, or otherwise investing in
commercial loans in the ordinary course of its business and having (together
with its Affiliates) total assets in excess of $250,000,000, (d) any Affiliate
(other than individuals) of a Lender that was party hereto as of the Closing
Date, (e) so long as no Event of Default has occurred and is continuing, any
other Person approved by Agent and Borrowers, and (f) during the continuation of
an Event of Default, any other Person approved by Agent.

            "Environmental Actions" means any complaint, summons, citation,
notice, directive, order, claim, litigation, investigation, judicial or
administrative proceeding, judgment, letter, or other communication from any
Governmental Authority, or any third party involving violations of Environmental
Laws or releases of Hazardous Materials from (a) any assets, properties, or
businesses of any Borrower or any predecessor in interest, (b) from adjoining
properties or businesses, or (c) from or onto any facilities which received
Hazardous Materials generated by any Borrower or any predecessor in interest.

            "Environmental Law" means any applicable federal, state, provincial,
foreign or local statute, law, rule, regulation, ordinance, code, binding and
enforceable guideline, binding and enforceable written policy or rule of common
law now or hereafter in effect and in each case as amended, or any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent decree or judgment, to the extent binding on Borrowers, relating
to the environment, employee health and safety, or Hazardous Materials,
including CERCLA; RCRA; the Federal Water Pollution Control Act, 33 USC Section
1251 et seq; the Toxic Substances Control Act, 15 USC, Section 2601 et seq; the
Clean Air Act, 42 USC Section 7401 et seq.; the Safe Drinking Water Act, 42 USC.
Section 3803 et seq.; the Oil Pollution Act of 1990, 33 USC. Section 2701 et
seq.; the Emergency Planning and the Community Right-to-Know Act of 1986, 42
USC. Section 11001 et seq.; the Hazardous Material Transportation Act, 49 USC
Section 1801 et seq.; and the Occupational Safety and Health Act, 29 USC.
Section 651 et seq. (to the extent it regulates occupational exposure to
Hazardous Materials); any state and local or foreign counterparts or
equivalents, in each case as amended from time to time.

            "Environmental Liabilities and Costs" means all liabilities,
monetary obligations, Remedial Actions, losses, damages, punitive damages,
consequential damages, treble damages, costs and expenses (including all
reasonable fees, disbursements and expenses of counsel, experts, or consultants,
and costs of investigation and feasibility studies), fines, penalties,
sanctions, and interest incurred as a result of any claim or demand by any
Governmental Authority or any third party, and which relate to any Environmental
Action.

            "Environmental Lien" means any Lien in favor of any Governmental
Authority for Environmental Liabilities and Costs.

                                      -15-
<PAGE>
            "Equipment" means all of Borrowers' now owned or hereafter acquired
right, title, and interest with respect to equipment, machinery, machine tools,
motors, furniture, furnishings, fixtures, vehicles (including motor vehicles),
tools, parts, goods (other than consumer goods, farm products, or Inventory),
wherever located, including all attachments, accessories, accessions,
replacements, substitutions, additions, and improvements to any of the
foregoing.

            "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and any successor statute thereto.

            "ERISA Affiliate" means (a) any Person subject to ERISA whose
employees are treated as employed by the same employer as the employees of a
Borrower under IRC Section 414(b), (b) any trade or business subject to ERISA
whose employees are treated as employed by the same employer as the employees of
a Borrower under IRC Section 414(c), (c) solely for purposes of Section 302 of
ERISA and Section 412 of the IRC, any organization subject to ERISA that is a
member of an affiliated service group of which a Borrower is a member under IRC
Section 414(m), or (d) solely for purposes of Section 302 of ERISA and Section
412 of the IRC, any Person subject to ERISA that is a party to an arrangement
with a Borrower and whose employees are aggregated with the employees of a
Borrower under IRC Section 414(o).

            "Event of Default" has the meaning set forth in Section 8.

            "Excess Availability" means the amount, as of the date any
determination thereof is to be made, equal to Availability minus the aggregate
amount, if any, of all trade payables of Borrowers aged in excess of their
historical levels with respect thereto and all book overdrafts in excess of
their historical practices with respect thereto, in each case as determined by
Agent in its Permitted Discretion.

            "Exchange Act" means the Securities Exchange Act of 1934, as in
effect from time to time.

            "Existing Lender" means Congress Financial Corporation (Southwest)
and Congress Financial Corporation (Canada).

            "Fee Letter" means that certain fee letter, dated as of even date
herewith, between Borrowers and Agent, in form and substance satisfactory to
Agent.

            "FEIN" means Federal Employer Identification Number.

            "Foothill" means Foothill Capital Corporation, a California
corporation.

            "Foreign Lender" has the meaning set forth in Section 2.4(c)(v).

            "Funding Date" means the date on which a Borrowing occurs.

            "Funding Losses" has the meaning set forth in Section 2.13(b)(ii).

                                      -16-
<PAGE>
            "GAAP" means generally accepted accounting principles as in effect
from time to time in the United States, consistently applied.

            "General Intangibles" means all of Borrowers' now owned or hereafter
acquired right, title, and interest with respect to general intangibles
(including payment intangibles, contract rights, rights to payment, rights
arising under common law, statutes, or regulations, choses or things in action,
goodwill, patents, trade names, trademarks, servicemarks, copyrights,
blueprints, drawings, purchase orders, customer lists, monies due or recoverable
from pension funds, route lists, rights to payment and other rights under any
royalty or licensing agreements, infringement claims, computer programs,
information contained on computer disks or tapes, software, literature, reports,
catalogs, money, deposit accounts, insurance premium rebates, tax refunds, and
tax refund claims), and any and all supporting obligations in respect thereof,
directly relating to Accounts and Inventory.

            "Governing Documents" means, with respect to any Person, the
certificate or articles of incorporation, by-laws, certificate of formation,
operating agreement, or other organizational documents of such Person.

            "Governmental Authority" means any (domestic or foreign) federal,
state, province, county, local, or other governmental or administrative body,
instrumentality, department, or agency or any court, tribunal, administrative
hearing body, arbitration panel, commission, or other similar dispute-resolving
panel or body.

            "Guarantors" means Pioneer Companies, Inc., Pioneer (East), Inc.,
Pioneer Licensing, Inc., Imperial West Chemical Co., Kemwater North America
Company, Pioneer Water Technologies, Inc., and KWT, Inc.

            "Guaranty" means that certain general continuing guaranty executed
and delivered by Guarantors in favor of Agent, for the benefit of the Lender
Group, in form and substance satisfactory to Agent.

            "Hazardous Materials" means (a) substances that are defined or
listed in, or otherwise classified pursuant to, any Environmental Laws as
"hazardous substances," "hazardous materials," "hazardous wastes," "toxic
substances," or any other formulation intended to define, list, or classify
substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity, or "EP
toxicity", (b) oil, petroleum, or petroleum derived substances, natural gas,
natural gas liquids, synthetic gas, drilling fluids, produced waters, and other
wastes associated with the exploration, development, or production of crude oil,
natural gas, or geothermal resources regulated under Environmental Laws, (c) any
flammable substances or explosives or any radioactive materials, and (d)
asbestos in any form or electrical equipment that contains any oil or dielectric
fluid containing levels of polychlorinated biphenyls in excess of 50 parts per
million which is regulated by Environmental Law.

            "Hedge Agreement" means any and all transactions, agreements, or
documents now existing or hereafter entered into between Borrowers and Wells
Fargo or its Affiliates,

                                      -17-
<PAGE>
which provide for an interest rate, credit, commodity or equity swap, cap,
floor, collar, forward foreign exchange transaction, currency swap, cross
currency rate swap, currency option, or any combination of, or option with
respect to, these or similar transactions, for the purpose of hedging such
Borrower's exposure to fluctuations in interest or exchange rates, loan, credit
exchange, security or currency valuations or commodity prices.

            "Highest Lawful Rate" means with respect to each Lender, the maximum
nonusurious interest rate, if any, that at any time or from time to time may be
contracted for, taken, reserved, charged, or received on the Obligations owed to
such Lender under the law of any jurisdiction whose laws may be mandatorily
applicable to such Lender notwithstanding other provisions of this Agreement, or
the law of the United States of America, Canada, or any other jurisdiction
applicable to such Lender and the transactions contemplated by this Agreement,
which would permit such Lender to contract for, charge, take, reserve, or
receive a greater amount of interest than under such jurisdiction's laws.

            "Indebtedness" means (a) all obligations for borrowed money, (b) all
obligations evidenced by bonds, debentures, notes, or other similar instruments
and all reimbursement or other obligations in respect of letters of credit,
bankers acceptances, interest rate swaps, forward contracts, or other financial
and/or hedging products, (c) the capitalized amount of all obligations under
Capital Leases as determined in accordance with GAAP, (d) all obligations or
liabilities of others secured by a Lien on any asset of Borrowers or their
Subsidiaries, irrespective of whether such obligation or liability is assumed,
(e) all obligations for the deferred purchase price of assets (other than trade
debt incurred in the ordinary course of business and repayable in accordance
with customary trade practices), and (f) any obligation guaranteeing or intended
to guarantee (whether directly or indirectly guaranteed, endorsed, co-made,
discounted, or sold with recourse) any obligation of any other Person.

            "Indemnified Liabilities" has the meaning set forth in Section 11.3.

            "Indemnified Person" has the meaning set forth in Section 11.3.

            "Indenture Documents" means the Tranche A Indenture, the Tranche A
Indenture Documents, the Tranche B Indenture, the Tranche B Indenture Documents,
the Term Loan Agreement, and the Term Loan Agreement Documents.

            "Insolvency Proceeding" means any proceeding commenced by or against
any Person under any provision of the Bankruptcy Law.

            "Intercompany Loans" has the meaning set forth in Section 7.13.

            "Intercompany Notes" has the meaning set forth in Section 7.13.

            "Intercreditor Agreement" means that certain Intercreditor Agreement
among Foothill, as Agent for the Lenders, and Wells Fargo Bank Minnesota,
National Association,

                                      -18-
<PAGE>
as Collateral Agent for the holders of the indebtedness under the Indenture
Documents, the form and substance of which is satisfactory to Agent.

            "Interest Period" means, with respect to each LIBOR Rate Loan, a
period commencing on the date of the making of such LIBOR Rate Loan and ending
1, 2, or 3 months thereafter; provided, however, that (a) if any Interest Period
would end on a day that is not a Business Day, such Interest Period shall be
extended (subject to clauses (c)-(e) below) to the next succeeding Business Day,
(b) interest shall accrue at the applicable rate based upon the LIBOR Rate from
and including the first day of each Interest Period to, but excluding, the day
on which any Interest Period expires, (c) any Interest Period that would end on
a day that is not a Business Day shall be extended to the next succeeding
Business Day unless such Business Day falls in another calendar month, in which
case such Interest Period shall end on the next preceding Business Day, (d) with
respect to an Interest Period that begins on the last Business Day of a calendar
month (or on a day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period), the Interest Period shall
end on the last Business Day of the calendar month that is 1, 2, or 3 months
after the date on which the Interest Period began, as applicable, and (e)
Borrowers may not elect an Interest Period which will end after the Maturity
Date.

            "Inventory" means each Borrower's now owned or hereafter acquired
right, title, and interest with respect to inventory, including all goods held
for sale or lease or to be furnished under contracts of service, and all
additions, substitutions and replacements thereof, wherever located, together
with all goods and materials used or usable in manufacturing, processing,
packaging or shipping the same, in each case in all stages of production, from
raw materials through work-in-process to finished goods, including chlorine,
caustic soda, bleach, hydrochloric acid, other chlorides and aluminum sulfate.

            "Investment" means, with respect to any Person, any investment by
such Person in any other Person (including Affiliates) in the form of loans,
guarantees, advances, or capital contributions (excluding (a) commission,
travel, and similar advances to officers and employees of such Person made in
the ordinary course of business, and (b) bona fide Accounts arising in the
ordinary course of business consistent with past practices), purchases or other
acquisitions for consideration of Indebtedness or Stock, and any other items
that are or would be classified as investments on a balance sheet prepared in
accordance with GAAP.

            "Investment Property" means all of Borrowers' now owned or hereafter
acquired right, title, and interest with respect to "investment property" as
that term is defined in the Code, and any and all supporting obligations in
respect thereof.

            "IRC" means the Internal Revenue Code of 1986, as in effect from
time to time.

            "Issuing Lender" means Foothill or any other Lender that, at the
request of Borrowers and with the consent of Agent agrees, in such Lender's sole
discretion, to become an Issuing Lender for the purpose of issuing L/Cs or L/C
Undertakings pursuant to Section 2.12.

                                      -19-
<PAGE>
            "Judgment Currency" has the meaning set forth in Section 2.17.

            "L/C" has the meaning set forth in Section 2.12(a).

            "L/C Disbursement" means a payment made by the Issuing Lender
pursuant to a Letter of Credit.

            "L/C Undertaking" has the meaning set forth in Section 2.12(a).

            "Lender" and "Lenders" have the respective meanings set forth in the
preamble to this Agreement, and shall include any other Person made a party to
this Agreement in accordance with the provisions of Section 14.1.

            "Lender Group" means, individually and collectively, each of the
Lenders (including the Issuing Lender) and Agent.

            "Lender Group Expenses" means all (a) costs or expenses (including
taxes, and insurance premiums) required to be paid by a Borrower under any of
the Loan Documents that are paid or incurred by the Lender Group, (b) fees or
charges paid or incurred by Agent in connection with the Lender Group's
transactions with Borrowers, including, fees or charges for photocopying,
notarization, couriers and messengers, telecommunication, public record searches
(including tax lien, litigation, and UCC searches and including searches with
the patent and trademark office, or the copyright office, filing, recording,
publication, appraisal (including periodic Collateral appraisals or business
valuations to the extent of the fees and charges (and up to the amount of any
limitation) contained in this Agreement and environmental audits, (c) costs and
expenses incurred by Agent in the disbursement of funds to or for the account of
Borrowers (by wire transfer or otherwise), (d) charges paid or incurred by Agent
resulting from the dishonor of checks, (e) reasonable costs and expenses paid or
incurred by the Lender Group to correct any default or enforce any provision of
the Loan Documents, or in gaining possession of, maintaining, handling,
preserving, storing, shipping, selling, preparing for sale, or advertising to
sell the Collateral, or any portion thereof, irrespective of whether a sale is
consummated, (f) audit fees and expenses of Agent related to audit examinations
of the Books to the extent of the fees and charges (and up to the amount of any
limitation) contained in this Agreement, (g) reasonable costs and expenses of
third party claims or any other suit paid or incurred by the Lender Group in
enforcing or defending the Loan Documents or in connection with the transactions
contemplated by the Loan Documents or the Lender Group's relationship with any
Borrower or any guarantor of the Obligations, (h) Agent's and each Lender's
reasonable fees and expenses (including attorneys fees) incurred in advising,
structuring, drafting, reviewing, administering, or amending the Loan Documents,
and (i) Agent's and each Lender's reasonable fees and expenses (including
attorneys fees) incurred in terminating, enforcing (including attorneys fees and
expenses incurred in connection with a "workout," a "restructuring," or an
Insolvency Proceeding concerning any Borrower or in exercising rights or
remedies under the Loan Documents), or defending the Loan Documents,
irrespective of whether suit is brought, or in taking any Remedial Action
concerning the Collateral.

                                      -20-
<PAGE>
            "Lender-Related Person" means, with respect to any Lender, such
Lender, together with such Lender's Affiliates, and the officers, directors,
employees, and agents of such Lender.

            "Letter of Credit" means an L/C or an L/C Undertaking, as the
context requires.

            "Letter of Credit Usage" means, as of any date of determination, the
aggregate undrawn amount of all outstanding Letters of Credit plus 100% of the
amount of outstanding time drafts accepted by an Underlying Issuer as a result
of drawings under Underlying Letters of Credit.

            "LIBOR Deadline" has the meaning set forth in Section 2.13(b)(i).

            "LIBOR Notice" means a written notice in the form of Exhibit L-1.

            "LIBOR Option" has the meaning set forth in Section 2.13(a).

            "LIBOR Rate" means, for each Interest Period for each LIBOR Rate
Loan, the rate per annum determined by Agent (rounded upwards, if necessary, to
the next 1/16%) by dividing (a) the Base LIBOR Rate for such Interest Period, by
(b) 100% minus the Reserve Percentage. The LIBOR Rate shall be adjusted on and
as of the effective day of any change in the Reserve Percentage.

            "LIBOR Rate Loan" means each portion of an Advance that bears
interest at a rate determined by reference to the LIBOR Rate.

            "Lien" means any interest in an asset securing an obligation owed
to, or a claim by, any Person other than the owner of the asset, whether such
interest shall be based on the common law, statute, or contract, whether such
interest shall be recorded or perfected, and whether such interest shall be
contingent upon the occurrence of some future event or events or the existence
of some future circumstance or circumstances, including the lien or security
interest arising from a mortgage, deed of trust, encumbrance, pledge,
hypothecation, assignment, deposit arrangement, security agreement, conditional
sale or trust receipt, or from a lease, consignment, or bailment for security
purposes and also including reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases, and other title
exceptions and encumbrances affecting Real Property.

            "Loan Account" has the meaning set forth in Section 2.10.

            "Loan Documents" means this Agreement, the Canadian Security
Documents, the Bank Product Agreements, the Cash Management Agreements, the
Control Agreements, the Disbursement Letter, the Fee Letter, the Guaranty, the
Letters of Credit and the applications and agreements executed in connection
therewith, the Officers' Certificate, the Intercreditor Agreement, the Notice
and Acknowledgment of the Oral Agreements, the Hedge Agreements, the Collateral
Access Agreements, any note or notes executed by a

                                      -21-
<PAGE>
Borrower in connection with this Agreement and payable to a member of the Lender
Group, and any other agreement entered into, now or in the future, by any
Borrower and the Lender Group in connection with this Agreement.

            "Material Adverse Change" means (a) a material adverse change in the
business, prospects, operations, results of operations, assets, liabilities or
condition (financial or otherwise) of Borrowers taken as a whole, (b) a material
impairment of a Borrower's ability to perform its obligations under the Loan
Documents to which it is a party or of the Lender Group's ability to enforce the
Obligations or realize upon the Collateral, or (c) a material impairment of the
enforceability or priority of the Agent's Liens with respect to the Collateral
as a result of an action or failure to act on the part of a Borrower.

            "Maturity Date" has the meaning set forth in Section 3.5.

            "Maximum Revolver Amount" means $50,000,000.00.

            "Negotiable Collateral" means all of Borrowers' now owned and
hereafter acquired right, title, and interest with respect to letters of credit,
letter of credit rights, instruments, promissory notes, drafts, documents, and
chattel paper (including electronic chattel paper and tangible chattel paper),
and any and all supporting obligations in respect thereof.

            "Net Liquidation Percentage" means the percentage of the book value
of Borrowers' Inventory that is estimated to be recoverable in an orderly
liquidation of such Inventory, such percentage to be as determined from time to
time by a qualified appraisal company selected by Agent.

            "Obligations" means (a) all loans, Advances, debts, principal,
interest (including any interest that, but for the provisions of the Bankruptcy
Law, would have accrued), contingent reimbursement obligations with respect to
outstanding Letters of Credit, premiums, liabilities (including all amounts
charged to Borrowers' Loan Account pursuant hereto), obligations, fees
(including the fees provided for in the Fee Letter), charges, costs, Lender
Group Expenses (including any fees or expenses that, but for the provisions of
the Bankruptcy Code, would have accrued), lease payments, guaranties, covenants,
and duties of any kind and description owing by Borrowers to the Lender Group
pursuant to or evidenced by the Loan Documents and irrespective of whether for
the payment of money, whether direct or indirect, absolute or contingent, due or
to become due, now existing or hereafter arising, and including all interest not
paid when due and all Lender Group Expenses that Borrowers are required to pay
or reimburse by the Loan Documents, by law, or otherwise, and (b) all Bank
Product Obligations. Any reference in this Agreement or in the Loan Documents to
the Obligations shall include all amendments, changes, extensions,
modifications, renewals replacements, substitutions, and supplements, thereto
and thereof, as applicable, both prior and subsequent to any Insolvency
Proceeding.

                                      -22-
<PAGE>
            "Offsite Eligible Inventory" means, as to each Borrower, Inventory
of such Borrower which would not be excluded from the definition of Eligible
Inventory but for the fact that it is not located at a location specified in
Schedule E-1.

            "Officers' Certificate" means the representations and warranties of
officers form submitted by Agent to Borrowers, together with Borrowers'
completed responses to the inquiries set forth therein, the form and substance
of such responses to be satisfactory to Agent.

            "Originating Lender" has the meaning set forth in Section 14.1(e).

            "Overadvance" has the meaning set forth in Section 2.5.

            "Parent" means Pioneer Companies, Inc., a Delaware corporation.

            "Participant" has the meaning set forth in Section 14.1(e).

            "Pay-Off Letter" means a letter, in form and substance reasonably
satisfactory to Agent, from Existing Lender to Agent respecting the amount
necessary to repay in full all of the obligations of Borrowers owing to Existing
Lender and obtain a release of all of the Liens existing in favor of Existing
Lender in and to the assets of Borrowers.

            "PCI Chemicals" means PCI Chemicals Canada Company, an unlimited
liability company organized and existing under the laws of the Province of Nova
Scotia, Canada.

            "Permitted Discretion" means a determination made in good faith and
in the exercise of reasonable (from the perspective of a secured asset-based
lender) business judgment.

            "Permitted Dispositions" means (a) sales or other dispositions by
Borrowers of Equipment that is substantially worn, damaged, or obsolete in the
ordinary course of business, (b) sales by a Borrower of Inventory to the other
Borrower provided the sale is for fair and equivalent value and after the sale
the Inventory sold remains Collateral, (c) sales by Borrowers of Inventory to
buyers in the ordinary course of business, (d) the use or transfer of money or
Cash Equivalents by Borrowers in a manner that is not prohibited by the terms of
this Agreement or the other Loan Documents, (e) the licensing by Borrowers, on a
non-exclusive basis, of patents, trademarks, copyrights, and other intellectual
property rights in the ordinary course of business, (f) sales of Equipment by a
Borrower provided the value of any single piece of Equipment sold does not
exceed $50,000.00 and the value all Equipment sold in any calendar year does not
exceed $250,000.00 in the aggregate, (g) sales of other assets of Borrowers
provided that (i) Borrowers provide Agent with at least ten (10) days prior
written notice of the proposed sale, (ii) the net cash proceeds from the sale
are immediately deposited into the Cash Management Account, (iii) the value of
the assets sold does not exceed $100,000.00 in the aggregate during any calendar
year, and (iv) the assets

                                      -23-
<PAGE>
sold are not necessary to the continued operations of the Borrowers or any of
the Guarantors, and (h) the sale of the Pioneer Technology Center situated at
Mississauga, Canada.

            "Permitted Indebtedness" means (a) Indebtedness of Borrowers
disclosed on Schedule 5.20 attached hereto, (b) Indebtedness arising by the
Intercompany Loans to the extent permitted by Section 7.13, (c) Indebtedness
arising from the sale of assets from one Borrower to another Borrower pursuant
to a Permitted Disposition, (d) Indebtedness, not secured by or subject to a
Lien, in respect of performance, completion, guarantee, surety and similar
bonds, banker's acceptances, bills of exchange, or letters of credit provided by
Borrowers in the ordinary course of business provided such Indebtedness does not
exceed $100,000.00 in the aggregate at any one time outstanding, and (e)
indemnities and guaranties permitted pursuant to Section 7.6.

            "Permitted Investments" means (a) investments in Cash Equivalents,
(b) investments in negotiable instruments for collection, (c) advances made in
connection with purchases of goods or services in the ordinary course of
business, (d) Investments received in connection with the bankruptcy or
reorganization of suppliers and customers and in settlement of delinquent
obligations of and other disputes with, customers and suppliers arising in the
ordinary course of business, (e) Investments made as a result of receipt of
non-cash consideration of an asset sale that was made pursuant to a Permitted
Disposition, and (f) Hedge Agreements.

            "Permitted Liens" means (a) Liens held by Agent for the benefit of
Agent and the Lenders, (b) Liens for unpaid taxes that either (i) are not yet
delinquent, or (ii) do not constitute an Event of Default hereunder and are the
subject of Permitted Protests, (c) Liens set forth on Schedule P-1, (d) the
interests of lessors under operating leases (and any precautionary UCC Financing
Statements related thereto provided such UCC Financing Statements are limited to
the personal property which is the subject of the operating lease), (e) purchase
money Liens or the interests of lessors under Capital Leases to the extent that
such Liens or interests secure Permitted Purchase Money Indebtedness and so long
as such Lien attaches only to the asset purchased or acquired and the proceeds
thereof, (f) Liens arising by operation of law in favor of warehousemen,
landlords, carriers, mechanics, materialmen, laborers, or suppliers, incurred in
the ordinary course of business and not in connection with the borrowing of
money, and which Liens either (i) are for sums not yet delinquent, or (ii) are
the subject of Permitted Protests, (g) Liens arising from deposits made in
connection with obtaining worker's compensation or other unemployment insurance,
(h) Liens or deposits to secure performance of bids, tenders, or leases incurred
in the ordinary course of business and not in connection with the borrowing of
money, (i) Liens granted as security for surety or appeal bonds in connection
with obtaining such bonds in the ordinary course of business, (j) Liens
resulting from any judgment or award that is not an Event of Default hereunder,
and (k) with respect to any Real Property, easements, rights of way, and zoning
restrictions that do not materially interfere with or impair the use or
operation thereof.

            "Permitted Protest" means the right of the applicable Borrower to
protest any Lien (other than any such Lien that secures the Obligations), taxes
(other than payroll taxes

                                      -24-
<PAGE>
or taxes that are the subject of a United States federal tax lien), or rental
payment, provided that (a) a reserve with respect to such obligation is
established on the Books in such amount as is required under GAAP, (b) any such
protest is instituted promptly and prosecuted diligently by the applicable
Borrower, in good faith, and (c) Agent is satisfied that, while any such protest
is pending, there will be no impairment of the enforceability, validity, or
priority of any of the Agent's Liens.

            "Permitted Purchase Money Indebtedness" means, as of any date of
determination, Purchase Money Indebtedness incurred after the Closing Date in an
aggregate amount outstanding at any one time not in excess of $10,000,000.00.

            "Person" means natural persons, corporations, limited liability
companies, limited partnerships, general partnerships, limited liability
partnerships, joint ventures, trusts, land trusts, business trusts, or other
organizations, irrespective of whether they are legal entities, and governments
and agencies and political subdivisions thereof.

            "Pioneer Americas" means Pioneer Americas LLC, a Delaware limited
liability company.

            "Plan of Reorganization" means the Debtors' Amended Joint Plan of
Reorganization Under Chapter 11 of the Bankruptcy Code dated September 21, 2001,
filed with the United States Bankruptcy Court, Southern District of Texas,
Houston Division, Case No. 01-38259-H3-11, on behalf of Pioneer Companies, Inc,
Pioneer Corporation of America, Imperial West Chemical Co., Kemwater North
America Co., PCI Chemicals Canada Inc./PCI Chimie Canada Inc., Pioneer Americas,
Inc., Pioneer (East), Inc., Pioneer Water Technologies, Inc., Pioneer Licensing,
Inc., and KWT, Inc.

            "PPSA" means the Personal Property Security Act as from time to time
in effect in each Province of Canada in which Collateral is located.

            "Projections" means Borrowers' forecasted (a) balance sheets, (b)
profit and loss statements, and (c) cash flow statements, all prepared on a
consistent basis with Borrowers' historical financial statements, together with
appropriate supporting details and a statement of underlying assumptions.

            "Pro Rata Share" means:

                  (a) with respect to a Lender's obligation to make Advances and
receive payments of principal, interest, fees, costs, and expenses with respect
thereto, the percentage obtained by dividing (i) such Lender's Revolver
Commitment, by (ii) the aggregate Revolver Commitments of all Lenders,

                  (b) with respect to a Lender's obligation to participate in
Letters of Credit, to reimburse the Issuing Lender, and to receive payments of
fees with respect thereto, the percentage obtained by dividing (i) such Lender's
Revolver Commitment, by (ii) the aggregate Revolver Commitments of all Lenders,

                                      -25-
<PAGE>
                  (c) with respect to all other matters (including the
indemnification obligations arising under Section 16.7), the percentage obtained
by dividing (i) such Lender's Total Commitment, by (ii) the aggregate amount of
Total Commitments of all Lenders; provided, however, that, in each case, in the
event all Commitments have been terminated, Pro Rata Share shall be determined
according to the Commitments in effect immediately prior to such termination.

            "Purchase Money Indebtedness" means Indebtedness (other than the
Obligations, but including Capitalized Lease Obligations), incurred at the time
of, or within 20 days after, the acquisition of any fixed assets for the purpose
of financing all or any part of the acquisition cost thereof.

            "Real Property" means any estates or interests in real property now
owned or hereafter acquired by any Borrower and the improvements thereto.

            "Record" means information that is inscribed on a tangible medium or
which is stored in an electronic or other medium and is retrievable in
perceivable form.

            "Remedial Action" means all actions taken to (a) clean up, remove,
remediate, contain, treat, monitor, assess, evaluate, or in any way address
Hazardous Materials in the indoor or outdoor environment, (b) prevent or
minimize a release or threatened release of Hazardous Materials so they do not
migrate or endanger or threaten to endanger public health or welfare or the
indoor or outdoor environment, (c) perform any pre-remedial studies,
investigations, or post-remedial operation and maintenance activities, or (d)
conduct any other actions authorized by 42 USC Section 9601.

            "Report" has the meaning set forth in Section 16.17.

            "Required Availability" means Excess Availability and unrestricted
cash and Cash Equivalents in an amount of not less than $5,000,000.00.

            "Required Lenders" means, at any time, (a) Agent, and (b) Lenders
whose Pro Rata Shares aggregate 51% of the Total Commitments, or if the
Commitments have been terminated irrevocably, 51% of the Obligations (other than
Bank Product Obligations) then outstanding.

            "Reserve Percentage" means, on any day, for any Lender, the maximum
percentage prescribed by the Board of Governors of the Federal Reserve System
(or any successor Governmental Authority) for determining the reserve
requirements (including any basic, supplemental, marginal, or emergency
reserves) that are in effect on such date with respect to eurocurrency funding
(currently referred to as "eurocurrency liabilities" in Regulation D of the
Board of Governors of the Federal Reserve System) of that Lender, but so long as
such Lender is not required or directed under applicable regulations to maintain
such reserves, the Reserve Percentage shall be zero.

                                      -26-
<PAGE>
            "Returns" means, collectively, (a) all reports, declarations,
estimates, returns, information statements, and similar documents relating to,
or required to be filed in respect of, any Taxes; and (b) any statements,
returns, reports, or similar documents required to be filed pursuant to Part III
of Subchapter A of Chapter 61 of the IRC or pursuant to any similar income,
excise, or other tax provision of federal, territorial, state, local, or foreign
law; and the term "Return" means any one of the foregoing Returns.

            "Revolver Commitment" means, with respect to each Lender, its
Revolver Commitment, and, with respect to all Lenders, their Revolver
Commitments, in each case as such Dollar amounts are set forth beside such
Lender's name under the applicable heading on Schedule C-1 or on the signature
page of the Assignment and Acceptance pursuant to which such Lender became a
Lender hereunder in accordance with the provisions of Section 14.1.

            "Revolver Usage" means, as of any date of determination, the sum of
(a) the then extant amount of outstanding Advances, plus (b) the then extant
amount of the Letter of Credit Usage.

            "Risk Participation Liability" means, as to each Letter of Credit,
all reimbursement obligations of Borrowers to the Issuing Lender with respect to
an L/C Undertaking, consisting of (a) the amount available to be drawn or which
may become available to be drawn, (b) all amounts that have been paid by the
Issuing Lender to the Underlying Issuer to the extent not reimbursed by
Borrowers, whether by the making of an Advance or otherwise, and (c) all accrued
and unpaid interest, fees, and expenses payable with respect thereto.

            "SEC" means the United States Securities and Exchange Commission and
any successor thereto.

            "Securities Account" means a "securities account" as that term is
defined in the Code.

            "Settlement" has the meaning set forth in Section 2.3(f)(i).

            "Settlement Date" has the meaning set forth in Section 2.3(f)(i).

            "Solvent" means, with respect to any Person on a particular date,
that such Person is not insolvent (as such term is defined in the Uniform
Fraudulent Transfer Act).

            "Spot Exchange Rate" shall mean, on any Business Day, the spot rate
at which Dollars are offered on such day by Bank of Montreal in Montreal,
Quebec, Canada for C$ at approximately 11:00 a.m. (Montreal, Quebec, Canada
time).

            "Stock" means all shares, options, warrants, interests,
participations, or other equivalents (regardless of how designated) of or in a
Person, whether voting or nonvoting, including common stock, preferred stock,
membership interests, or any other "equity

                                      -27-
<PAGE>
security" (as such term is defined in Rule 3a11-1 of the General Rules and
Regulations promulgated by the SEC under the Exchange Act).

            "Subsidiary" of a Person means a corporation, partnership, limited
liability company, or other entity in which that Person directly or indirectly
owns or controls the shares of Stock having ordinary voting power to elect a
majority of the board of directors (or appoint other comparable managers) of
such corporation, partnership, limited liability company, or other entity.

            "Swing Lender" means Foothill or any other Lender that, at the
request of Borrowers and with the consent of Agent agrees, in such Lender's sole
discretion, to become the Swing Lender hereunder.

            "Swing Loan" has the meaning set forth in Section 2.3(d)(i).

            "Taxes" means (a) all present and future income, net income, gross
income, large corporations, capital, gross receipts, sales, goods and services,
use, ad valorem, franchise, business, profits, license, lease, service, service
use, withholding, employment, payroll, excise, severance, transfer, documentary,
mortgage, registration, stamp, occupation, environmental, premium, property,
windfall, profits, customs, and other taxes, duties, fees, assessments or
charges of any kind whatever, together with any interest, penalties and other
additions with respect thereto, imposed by any U.S., Canadian, or other foreign
federal, territorial, provincial, state, local or other foreign government; and
(b) any penalties, interest, or other additions to tax for the failure to
collect, withhold, or pay over any of the foregoing, or to accurately file any
Return; and the term "Tax" shall mean any one of the foregoing Taxes. When used
with reference to specified persons (for example and without limitation, "Taxes
of the Borrowers"), the terms "Taxes" and "Tax" shall include only amounts of,
or in respect of, Taxes for which such person is, or could become, liable in
whole or part (including, without limitation, any obligation in connection with
a duty to collect, withhold, or pay over any Tax, any obligation to contribute
to the payment of any Taxes determined on a consolidated, combined, or unitary
basis, any liability as a transferee, or any liability as a result of any
express or implied obligation to indemnify or pay the Tax obligations of another
person).

            "Term Loan Agreement" means that certain Term Loan Agreement, dated
as of December 31, 2001 among Pioneer Americas, as borrower, each Guarantor
(therein defined) from time to time party thereto, the various lenders as are or
may from time to time become parties thereto, and Wells Fargo Bank Minnesota,
National Association, as administrative agent.

            "Term Loan Agreement Documents" means the Term Loan Agreement, all
promissory notes and guaranties issued in connection therewith, and all other
documents now or hereafter executed in connection with or as security for the
obligations owing under the Term Loan Agreement.

                                      -28-
<PAGE>
            "Total Commitment" means, with respect to each Lender, its Total
Commitment, and, with respect to all Lenders, their Total Commitments, in each
case as such Dollar amounts are set forth beside such Lender's name under the
applicable heading on Schedule C-1 attached hereto or on the signature page of
the Assignment and Acceptance pursuant to which such Lender became a Lender
hereunder in accordance with the provisions of Section 14.1.

            "Tranche A Indenture" means that certain Indenture dated December
31, 2001, among Pioneer Americas LLC, as Issuer, Pioneer Companies, Inc., PCI
Chemicals Canada Company, Imperial West Chemical Co., Kemwater North America
Co., Pioneer (East), Inc., Pioneer Water Technologies, Inc., Pioneer Licensing,
Inc., and KWT, Inc., as Guarantors, and Wells Fargo Bank Minnesota, National
Association, as Trustee, relating to the issuance of up to $45,421,874.00 Senior
Secured Floating Rate Guaranteed Notes due 2006.

            "Tranche A Documents" has the meaning set forth in the Tranche A
Indenture.

            "Tranche B Indenture" means that certain Indenture dated December
31, 2001, among PCI Chemicals Canada Company, as Issuer, Pioneer Companies,
Inc., Pioneer Americas LLC, Imperial West Chemical Co., Kemwater North America
Co., Pioneer (East), Inc., Pioneer Water Technologies, Inc., Pioneer Licensing,
Inc., and KWT, Inc., as Guarantors, and Wells Fargo Bank Minnesota, National
Association, as Trustee, relating to the issuance of up to $150,000,000.00 10%
Senior Secured Guaranteed Notes due 2008.

            "Tranche B Documents" has the meaning set forth in the Tranche B
Indenture.

            "Underlying Issuer" means a third Person which is the beneficiary of
an L/C Undertaking and which has issued a letter of credit at the request of the
Issuing Lender for the benefit of Borrowers.

            "Underlying Letter of Credit" means a letter of credit that has been
issued by an Underlying Issuer.

            "U.S. Designated Account" means that certain DDA of Pioneer Americas
identified as the U.S. Designated Account on Schedule D-1.

            "U.S. Eligible Accounts" means Eligible Accounts owing to Pioneer
Americas.

            "U.S. Eligible Collateral" means U.S. Eligible Accounts and U.S.
Eligible Inventory.

            "U.S. Eligible Finished Goods Inventory" means Eligible Finished
Goods Inventory owned by Pioneer Americas and located in the continental United
States at any of the locations specified in Schedule E-1.

                                      -29-
<PAGE>
            "U.S. Eligible Inventory" means U.S. Eligible Finished Goods
Inventory and U.S. Eligible Raw Materials Inventory.

            "U.S. Eligible Raw Materials Inventory" means Eligible Raw Materials
Inventory owned by Pioneer Americas and located in the continental United States
at one of the locations specified in Schedule E-1.

            "Voidable Transfer" has the meaning set forth in Section 17.7.

            "Wells Fargo" means Wells Fargo Bank, National Association, a
national banking association.

      1.2 ACCOUNTING TERMS. All accounting terms not specifically defined herein
shall be construed in accordance with GAAP. When used herein, the term
"financial statements" shall include the notes and schedules thereto. Whenever
the term "Borrowers" or the term "Parent" is used in respect of a financial
covenant or a related definition, it shall be understood to mean Parent and its
Subsidiaries on a consolidated basis unless the context clearly requires
otherwise.

      1.3 CODE. Any terms used in this Agreement that are defined in the Code
shall be construed and defined as set forth in the Code unless otherwise defined
herein.

      1.4 CONSTRUCTION. Unless the context of this Agreement or any other Loan
Document clearly requires otherwise, references to the plural include the
singular, references to the singular include the plural, the term "including" is
not limiting, and the term "or" has, except where otherwise indicated, the
inclusive meaning represented by the phrase "and/or." The words "hereof,"
"herein," "hereby," "hereunder," and similar terms in this Agreement or any
other Loan Document refer to this Agreement or such other Loan Document, as the
case may be, as a whole and not to any particular provision of this Agreement or
such other Loan Document, as the case may be. Section, subsection, clause,
schedule, and exhibit references herein are to this Agreement unless otherwise
specified. Any reference in this Agreement or in the other Loan Documents to any
agreement, instrument, or document shall include all alterations, amendments,
changes, extensions, modifications, renewals, replacements, substitutions,
joinders, and supplements, thereto and thereof, as applicable (subject to any
restrictions on such alterations, amendments, changes, extensions,
modifications, renewals, replacements, substitutions, joinders, and supplements
set forth herein). Any reference herein to any Person shall be construed to
include such Person's successors and assigns. Any requirement of a writing
contained herein or in the other Loan Documents shall be satisfied by the
transmission of a Record and any Record transmitted shall constitute a
representation and warranty as to the accuracy and completeness of the
information contained therein.

      1.5 SCHEDULES AND EXHIBITS. All of the schedules and exhibits attached to
this Agreement shall be deemed incorporated herein by reference.

                                      -30-
<PAGE>
2. LOAN AND TERMS OF PAYMENT.

      2.1 REVOLVER ADVANCES.

                  (a) Subject to the terms and conditions of this Agreement, and
during the term of this Agreement, each Lender agrees (severally, not jointly or
jointly and severally) to make advances ("Advances") to Borrowers in Dollars in
an amount at any one time outstanding not to exceed such Lender's Pro Rata Share
of an amount equal to the lesser of (i) the Maximum Revolver Amount less the
Letter of Credit Usage, or (ii) the Borrowing Base less the Letter of Credit
Usage; provided, however, the aggregate amount of the Letter of Credit Usage
shall not exceed $10,000,000.00. For purposes of this Agreement, "Borrowing
Base," as of any date of determination, shall mean the result of:

                                    (x)    the lesser of

                                                  (i) 85% of the amount of
                                            Eligible Accounts, less the amount,
                                            if any, of the Dilution Reserve, and
                                            (ii) an amount equal to Borrowers'
                                            Collections with respect to Accounts
                                            for the immediately preceding sixty
                                            (60) day period (subject to
                                            reasonable adjustments as may be
                                            mutually acceptable to the Borrowers
                                            and the Agent to reflect changes in
                                            the market selling price for
                                            chlorine and caustic soda), plus

                                    (y)     the lowest of

                                                  (i) $15,000,000.00,

                                                  (ii) the sum of (aa) 55% of
                                            the lower of cost or market value of
                                            Eligible Finished Goods Inventory,
                                            plus (bb) 25% of the lower of cost
                                            or market value of Eligible Raw
                                            Materials Inventory, but in no event
                                            to exceed (1) $5,000,000.00 in the
                                            aggregate with respect to Canadian
                                            Eligible  Inventory  and (2)
                                            $10,000,000.00  in  the  aggregate
                                            with respect to U.S. Eligible
                                            Inventory,

                                                  (iii) 80% times the then
                                            extant Net Liquidation Percentage
                                            times the book
                                            value of Borrowers' Inventory,

                                                  (iv) minus

                                    (z)     the sum of (i) the Bank Products
                                    Reserve, and (ii) the aggregate amount of
                                    reserves, if any, established by Agent under
                                    Section 2.1(c).

                                      -31-
<PAGE>
                  (b) Anything in this Section 2.1 to the contrary
notwithstanding, it is agreed that Lenders shall have no obligation hereunder:
(i) to make Advances or issue Letters of Credit in an aggregate amount at any
one time outstanding in excess of $30,000,000.00 until the conditions set forth
in Section 3.4 have been satisfied, (ii) to make Advances or issue Letters of
Credit to pay any of the indebtedness or obligations owing with respect to any
of the Disputed CRC Portfolio, unless immediately after giving effect to the
making of such Advance or the issuance of such Letter of Credit there is Excess
Availability of at least $10,000,000.00, (iii) to make Advances or issue Letters
of Credit in amounts in excess of $1,000,000.00 in the aggregate against
Off-Site Eligible Inventory, and (iv) to make Advances for the use of, or issue
Letters of Credit for the account of, PCI Chemicals in an aggregate amount in
excess of an amount equal to the lesser of (aa) $18,000,000.00 or (bb) an amount
equal to:

                                     (1)    the lesser of

                                            (aaa) 85% of the amount of Canadian
                                            Eligible Accounts, less the amount,
                                            if any, of the Dilution Reserve, and
                                            (bbb) an amount equal to PCI
                                            Chemical's Collections with respect
                                            to Accounts owing to PCI Chemicals
                                            for the immediately preceding sixty
                                            (60) day period (subject to
                                            reasonable adjustments as may be
                                            mutually acceptable to the Borrowers
                                            and the Agent to reflect changes in
                                            the market selling price for
                                            chlorine and caustic soda), plus

                                     (2)    the lower of:

                                            (aaa) the sum of 55% of the lower of
                                            cost or market value of Canadian
                                            Eligible Finished Goods Inventory,
                                            plus 25% of the lower of cost or
                                            market value of Canadian Eligible
                                            Raw Materials Inventory, but in no
                                            event to exceed $5,000,000.00,

                                            (bbb) 80% times the then extant Net
                                            Liquidation Percentage (calculated
                                            with respect to PCI Chemical's
                                            Inventory) times the book value of
                                            PCI Chemical's Inventory,

                                            (ccc)    minus

                                    (3) the sum of (aaa) the Bank Products
            Reserve, and (bbb) the aggregate amount of reserves, if any,
            established by Agent under Section 2.1(c), or

                  (c) Anything to the contrary in this Section 2.1
notwithstanding, Agent shall have the right to establish reserves in such
amounts, and with respect to such matters, as

                                      -32-
<PAGE>
Agent in its Permitted Discretion shall deem necessary or appropriate, against
the Borrowing Base, including reserves with respect to (i) sums that Borrowers
are required to pay (such as taxes, assessments, insurance premiums, or, in the
case of leased assets, rents or other amounts payable under such leases) and has
failed to pay under any Section of this Agreement or any other Loan Document,
and (ii) amounts owing by Borrowers to any Person to the extent secured by a
Lien on, or trust over, any of the Collateral (other than any existing Permitted
Lien set forth on Schedule P-1 which is specifically identified thereon as
entitled to have priority over the Agent's Liens), which Lien or trust, in the
Permitted Discretion of Agent likely would have a priority superior to the
Agent's Liens (such as Liens or trusts in favor of landlords, warehousemen,
carriers, mechanics, materialmen, laborers, or suppliers, or Liens or trusts for
ad valorem, excise, sales, or other taxes where given priority under applicable
law) in and to such item of the Collateral. In addition to the foregoing, Agent
shall have the right to have the Inventory reappraised by a qualified appraisal
company selected by Agent from time to time after the Closing Date for the
purpose of redetermining the Net Liquidation Percentage of the Eligible
Inventory portion of the Collateral and, as a result, redetermining the
Borrowing Base.

                  (d) The Lenders shall have no obligation to make additional
Advances hereunder to the extent such additional Advances would cause the
Revolver Usage to exceed the Maximum Revolver Amount.

                  (e) Amounts borrowed pursuant to this Section may be repaid
and, subject to the terms and conditions of this Agreement, reborrowed at any
time during the term of this Agreement.

      2.2 INTENTIONALLY DELETED.

      2.3 BORROWING PROCEDURES AND SETTLEMENTS.

                  (a) PROCEDURE FOR BORROWING. Each Borrowing shall be made by
an irrevocable written request by an Authorized Person of each Borrower
delivered to Agent, which notice must be received by Agent, subject to the
provisions of Section 2.13 with respect to LIBOR Rate Loans, no later than 10:00
a.m. (California time) on the Business Day prior to the date that is the
requested Funding Date in the case of a request for an Advance specifying (i)
the amount of such Borrowing, (ii) whether the proceeds of the Advance are to be
used by Pioneer Americas or PCI Chemicals, (iii) whether it is to be a Base Rate
Loan or a LIBOR Rate Loan, (iv) in the case of LIBOR Loans, the Interest Period
to be applicable thereto, and (v) the requested Funding Date, which shall be a
Business Day; provided, however, that in the request for Swing Loans in an
amount of $5,000,000.00, or less such notice will be timely received if it is
received by Agent no later than 10:00 a.m. (California time) on the Business Day
that is the requested Funding Date specifying (aa) the amount of such Borrowing,
and (ii) the requested Funding Date, which shall be a Business Day. At Agent's
election, in lieu of delivering the above-described written request, any
Authorized Person may give Agent telephonic notice of such request by the
required time, with such telephonic notice to be confirmed in writing within 24
hours of the giving of such notice.

                                      -33-
<PAGE>
                  (b) Promptly after receipt of a request for a Borrowing
pursuant to Section 2.3(a), Agent shall elect, in its discretion, (i) to have
the terms of Section 2.3(c) apply to such requested Borrowing, or (ii) if the
Borrowing is for an Advance, to request Swing Lender to make a Swing Loan
pursuant to the terms of Section 2.3(d) in the amount of the requested
Borrowing; provided, however, that if Swing Lender declines in its sole
discretion to make a Swing Loan pursuant to Section 2.3(d), Agent shall elect to
have the terms of Section 2.3(c) apply to such requested Borrowing.

                  (c) MAKING OF ADVANCES.

                        (i) In the event that Agent shall elect to have the
            terms of this Section 2.3(c) apply to a requested Borrowing as
            described in Section 2.3(b), then promptly after receipt of a
            request for a Borrowing pursuant to Section 2.3(a), Agent shall
            notify the Lenders, not later than 1:00 p.m. (California time) on
            the Business Day immediately preceding the Funding Date applicable
            thereto, by telecopy, telephone, or other similar form of
            transmission, of the requested Borrowing. Each Lender shall make the
            amount of such Lender's Pro Rata Share of the requested Borrowing
            available to Agent in immediately available funds, to Agent's
            Account, not later than 10:00 a.m. (California time) on the Funding
            Date applicable thereto. After Agent's receipt of the proceeds of
            such Advances upon satisfaction of the applicable conditions
            precedent set forth in Section 3 hereof, Agent shall make the
            proceeds thereof available to Borrowers on the applicable Funding
            Date by transferring immediately available funds equal to such
            proceeds received by Agent to (aa) the U.S. Designated Account if
            the request for Advance has designated Pioneer Americas as the user
            of the proceeds and (bb) to the Canadian Designated Account if the
            request for Advance has designated PCI Chemicals as the user of the
            proceeds of the Advance; provided, however, that, subject to the
            provisions of Section 2.3(i), Agent shall not request any Lender to
            make, and no Lender shall have the obligation to make, any Advance
            if Agent shall have actual knowledge that (1) one or more of the
            applicable conditions precedent set forth in Section 3 will not be
            satisfied on the requested Funding Date for the applicable Borrowing
            unless such condition has been waived, or (2) the requested
            Borrowing would exceed the Availability on such Funding Date.

                        (ii) Unless Agent receives notice from a Lender on or
            prior to the Closing Date or, with respect to any Borrowing after
            the Closing Date, at least one (1) Business Day prior to the date of
            such Borrowing, that such Lender will not make available as and when
            required hereunder to Agent for the account of Borrowers the amount
            of that Lender's Pro Rata Share of the Borrowing, Agent may assume
            that each Lender has made or will make such amount available to
            Agent in immediately available funds on the Funding Date and Agent
            may (but shall not be so required), in reliance upon such
            assumption, make available to Borrowers on such date a corresponding

                                      -34-
<PAGE>
            amount. If and to the extent any Lender shall not have made its full
            amount available to Agent in immediately available funds and Agent
            in such circumstances has made available to Borrowers such amount,
            that Lender shall on the Business Day following such Funding Date
            make such amount available to Agent, together with interest at the
            Defaulting Lender Rate for each day during such period. A notice
            submitted by Agent to any Lender with respect to amounts owing under
            this subsection shall be conclusive, absent manifest error. If such
            amount is so made available, such payment to Agent shall constitute
            such Lender's Advance on the date of Borrowing for all purposes of
            this Agreement. If such amount is not made available to Agent on the
            Business Day following the Funding Date, Agent will notify Borrowers
            of such failure to fund and, upon demand by Agent, Borrowers shall
            pay such amount to Agent for Agent's account, together with interest
            thereon for each day elapsed since the date of such Borrowing, at a
            rate per annum equal to the interest rate applicable at the time to
            the Advances composing such Borrowing. The failure of any Lender to
            make any Advance on any Funding Date shall not relieve any other
            Lender of any obligation hereunder to make an Advance on such
            Funding Date, but no Lender shall be responsible for the failure of
            any other Lender to make the Advance to be made by such other Lender
            on any Funding Date.

                        (iii) Agent shall not be obligated to transfer to a
            Defaulting Lender any payments made by Borrowers to Agent for the
            Defaulting Lender's benefit, and, in the absence of such transfer to
            the Defaulting Lender, Agent shall transfer any such payments to
            each other non-Defaulting Lender member of the Lender Group ratably
            in accordance with their Commitments (but only to the extent that
            such Defaulting Lender's Advance was funded by the other members of
            the Lender Group) or, if so directed by Borrowers and if no Default
            or Event of Default had occurred and is continuing (and to the
            extent such Defaulting Lender's Advance was not funded by the Lender
            Group), retain same to be re-advanced to Borrowers as if such
            Defaulting Lender had made Advances to Borrowers. Subject to the
            foregoing, Agent may hold and, in its Permitted Discretion, re-lend
            to Borrowers for the account of such Defaulting Lender the amount of
            all such payments received and retained by it for the account of
            such Defaulting Lender. Solely for the purposes of voting or
            consenting to matters with respect to the Loan Documents, such
            Defaulting Lender shall be deemed not to be a "Lender" and such
            Lender's Commitment shall be deemed to be zero. This Section shall
            remain effective with respect to such Lender until (x) the
            Obligations under this Agreement shall have been declared or shall
            have become immediately due and payable, (y) the non-Defaulting
            Lenders, Agent, and Borrowers shall have waived such Defaulting
            Lender's default in writing, or (z) the Defaulting Lender makes its
            Pro Rata Share of the applicable Advance and pays to Agent all
            amounts owing by Defaulting Lender in respect thereof. The operation
            of this Section shall not be construed to increase or otherwise
            affect the

                                      -35-
<PAGE>
            Commitment of any Lender, to relieve or excuse the performance by
            such Defaulting Lender or any other Lender of its duties and
            obligations hereunder, or to relieve or excuse the performance by
            Borrowers of their duties and obligations hereunder to Agent or to
            the Lenders other than such Defaulting Lender. Any such failure to
            fund by any Defaulting Lender shall constitute a material breach by
            such Defaulting Lender of this Agreement and shall entitle Borrowers
            at their option, upon written notice to Agent, to arrange for a
            substitute Lender to assume the Commitment of such Defaulting
            Lender, such substitute Lender to be acceptable to Agent. In
            connection with the arrangement of such a substitute Lender, the
            Defaulting Lender shall have no right to refuse to be replaced
            hereunder, and agrees to execute and deliver a completed form of
            Assignment and Acceptance Agreement in favor of the substitute
            Lender (and agrees that it shall be deemed to have executed and
            delivered such document if it fails to do so) subject only to being
            repaid its share of the outstanding Obligations (other than Bank
            Product Obligations) (including an assumption of its Pro Rata Share
            of the Risk Participation Liability) without any premium or penalty
            of any kind whatsoever; provided further, however, that any such
            assumption of the Commitment of such Defaulting Lender shall not be
            deemed to constitute a waiver of any of the Lender Groups' or
            Borrowers' rights or remedies against any such Defaulting Lender
            arising out of or in relation to such failure to fund.

                  (d) MAKING OF SWING LOANS.

                        (i) In the event Agent shall elect, with the consent of
            Swing Lender, as a Lender, to have the terms of this Section 2.3(d)
            apply to a requested Borrowing as described in Section 2.3(b), Swing
            Lender as a Lender shall make such Advance in the amount of such
            Borrowing (any such Advance made solely by Swing Lender as a Lender
            pursuant to this Section 2.3(d) being referred to as a "Swing Loan"
            and such Advances being referred to collectively as "Swing Loans")
            available to Borrowers on the Funding Date applicable thereto by
            transferring immediately available funds to Borrowers' Designated
            Account. Each Swing Loan is an Advance hereunder and shall be
            subject to all the terms and conditions applicable to other
            Advances, except that no such Swing Loan shall be eligible for the
            LIBOR Option and all payments on any Swing Loan shall be payable to
            Swing Lender as a Lender solely for its own account (and for the
            account of the holder of any participation interest with respect to
            such Swing Loan). Subject to the provisions of Section 2.3(i), Agent
            shall not request Swing Lender as a Lender to make, and Swing Lender
            as a Lender shall not make, any Swing Loan if Agent has actual
            knowledge that (i) one or more of the applicable conditions
            precedent set forth in Section 3 will not be satisfied on the
            requested Funding Date for the applicable Borrowing unless such
            condition has been waived, or (ii) the requested Borrowing would
            exceed the Availability on such Funding Date. Swing Lender as a
            Lender shall not otherwise be required to determine

                                      -36-
<PAGE>
            whether the applicable conditions precedent set forth in Section 3
            have been satisfied on the Funding Date applicable thereto prior to
            making, in its sole discretion, any Swing Loan.

                        (ii) The Swing Loans shall be secured by the Agent's
            Liens, shall constitute Advances and Obligations hereunder, and
            shall bear interest at the rate applicable from time to time to
            Advances that are Base Rate Loans.

                  (e) AGENT ADVANCES.

                        (i) Agent hereby is authorized by Borrowers and the
            Lenders, from time to time in Agent's sole discretion, (1) after the
            occurrence and during the continuance of a Default or an Event of
            Default, or (2) at any time that any of the other applicable
            conditions precedent set forth in Section 3 have not been satisfied,
            to make Advances to Borrowers on behalf of the Lenders that Agent,
            in its Permitted Discretion deems necessary or desirable (A) to
            preserve or protect the Collateral, or any portion thereof, (B) to
            enhance the likelihood of repayment of the Obligations (other than
            the Bank Product Obligations), or (C) to pay any other amount
            chargeable to Borrowers pursuant to the terms of this Agreement,
            including Lender Group Expenses and the costs, fees, and expenses
            described in Section 10 (any of the Advances described in this
            Section 2.3(e) shall be referred to as "Agent Advances"). Each Agent
            Advance is an Advance hereunder and shall be subject to all the
            terms and conditions applicable to other Advances, except that no
            such Agent Advance shall be eligible for the LIBOR Option and all
            payments thereon shall be payable to Agent solely for its own
            account (and for the account of the holder of any participation
            interest with respect to such Agent Advance).

                        (ii) The Agent Advances shall be repayable on demand and
            secured by the Agent's Liens granted to Agent under the Loan
            Documents, shall constitute Advances and Obligations hereunder, and
            shall bear interest at the rate applicable from time to time to
            Advances that are Base Rate Loans.

                  (f) SETTLEMENT. It is agreed that each Lender's funded portion
of the Advances is intended by the Lenders to equal, at all times, such Lender's
Pro Rata Share of the outstanding Advances. Such agreement notwithstanding,
Agent, Swing Lender, and the other Lenders agree (which agreement shall not be
for the benefit of or enforceable by Borrowers) that in order to facilitate the
administration of this Agreement and the other Loan Documents, settlement among
them as to the Advances, the Swing Loans, and the Agent Advances shall take
place on a periodic basis in accordance with the following provisions:

                        (i) Agent shall request settlement ("Settlement") with
            the Lenders on a weekly basis, or on a more frequent basis if so
            determined by Agent, (1) on behalf of Swing Lender, with respect to
            each outstanding Swing Loan, (2) for itself, with respect to each
            Agent Advance, and (3) with respect to Collections received, as to
            each by notifying the Lenders by telecopy,

                                      -37-
<PAGE>
            telephone, or other similar form of transmission, of such requested
            Settlement, no later than 2:00 p.m. (California time) on the
            Business Day immediately prior to the date of such requested
            Settlement (the date of such requested Settlement being the
            "Settlement Date"). Such notice of a Settlement Date shall include a
            summary statement of the amount of outstanding Advances and Agent
            Advances for the period since the prior Settlement Date. Subject to
            the terms and conditions contained herein (including Section
            2.3(c)(iii)): (y) if a Lender's balance of the Advances, Swing
            Loans, and Agent Advances exceeds such Lender's Pro Rata Share of
            the Advances, Swing Loans, and Agent Advances as of a Settlement
            Date, then Agent shall, by no later than 12:00 p.m. (California
            time) on the Settlement Date, transfer in immediately available
            funds to the account of such Lender as such Lender may designate, an
            amount such that each such Lender shall, upon receipt of such
            amount, have as of the Settlement Date, its Pro Rata Share of the
            Advances, Swing Loans, and Agent Advances, and (z) if a Lender's
            balance of the Advances, Swing Loans, and Agent Advances is less
            than such Lender's Pro Rata Share of the Advances and Agent Advances
            as of a Settlement Date, such Lender shall no later than 12:00 p.m.
            (California time) on the Settlement Date transfer in immediately
            available funds to the Agent's Account, an amount such that each
            such Lender shall, upon transfer of such amount, have as of the
            Settlement Date, its Pro Rata Share of the Advances, Swing Loans,
            and Agent Advances. Such amounts made available to Agent under
            clause (z) of the immediately preceding sentence shall be applied
            against the amounts of the applicable Swing Loan or Agent Advance
            and, together with the portion of such Swing Loan or Agent Advance
            representing Swing Lender's Pro Rata Share thereof, shall constitute
            Advances of such Lenders. If any such amount is not made available
            to Agent by any Lender on the Settlement Date applicable thereto to
            the extent required by the terms hereof, Agent shall be entitled to
            recover for its account such amount on demand from such Lender
            together with interest thereon at the Defaulting Lender Rate.

                        (ii) In determining whether a Lender's balance of the
            Advances, Swing Loans, and Agent Advances is less than, equal to, or
            greater than such Lender's Pro Rata Share of the Advances, Swing
            Loans, and Agent Advances as of a Settlement Date, Agent shall, as
            part of the relevant Settlement, apply to such balance the portion
            of payments actually received in good funds by Agent with respect to
            principal, interest, fees payable by Borrowers and allocable to the
            Lenders hereunder, and proceeds of Collateral. To the extent that a
            net amount is owed to any such Lender after such application, such
            net amount shall be distributed by Agent to that Lender as part of
            such next Settlement.

                        (iii) Between Settlement Dates, Agent, to the extent no
            Agent Advances or Swing Loans are outstanding, may pay over to Swing
            Lender any payments received by Agent, that in accordance with the
            terms of this

                                      -38-
<PAGE>
            Agreement would be applied to the reduction of the Advances, for
            application to Swing Lender's Pro Rata Share of the Advances. If, as
            of any Settlement Date, Collections received since the then
            immediately preceding Settlement Date have been applied to Swing
            Lender's Pro Rata Share of the Advances other than to Swing Loans,
            as provided for in the previous sentence, Swing Lender shall pay to
            Agent for the accounts of the Lenders, and Agent shall pay to the
            Lenders, to be applied to the outstanding Advances of such Lenders,
            an amount such that each Lender shall, upon receipt of such amount,
            have, as of such Settlement Date, its Pro Rata Share of the
            Advances. During the period between Settlement Dates, Swing Lender
            with respect to Swing Loans, Agent with respect to Agent Advances,
            and each Lender (subject to the effect of letter agreements between
            Agent and individual Lenders) with respect to the Advances other
            than Swing Loans and Agent Advances, shall be entitled to interest
            at the applicable rate or rates payable under this Agreement on the
            daily amount of funds employed by Swing Lender, Agent, or the
            Lenders, as applicable.

                  (g) NOTATION. Agent shall record on its books the principal
amount of the Advances owing to each Lender, including the Swing Loans owing to
Swing Lender, and Agent Advances owing to Agent, and the interests therein of
each Lender, from time to time. In addition, each Lender is authorized, at such
Lender's option, to note the date and amount of each payment or prepayment of
principal of such Lender's Advances in its books and records, including computer
records, such books and records constituting conclusive evidence, absent
manifest error, of the accuracy of the information contained therein.

                  (h) LENDERS' FAILURE TO PERFORM. All Advances (other than
Swing Loans and Agent Advances) shall be made by the Lenders contemporaneously
and in accordance with their Pro Rata Shares. It is understood that (i) no
Lender shall be responsible for any failure by any other Lender to perform its
obligation to make any Advance (or other extension of credit) hereunder, nor
shall any Commitment of any Lender be increased or decreased as a result of any
failure by any other Lender to perform its obligations hereunder, and (ii) no
failure by any Lender to perform its obligations hereunder shall excuse any
other Lender from its obligations hereunder.

                  (i) OPTIONAL OVERADVANCES. Any contrary provision of this
Agreement notwithstanding, the Lenders hereby authorize Agent or Swing Lender,
as applicable, and Agent or Swing Lender, as applicable, may, but is not
obligated to, knowingly and intentionally, continue to make Advances (including
Swing Loans) to Borrowers notwithstanding that an Overadvance exists or thereby
would be created, so long as (i) after giving effect to such Advances (including
a Swing Loan), the Revolver Usage does not exceed the Borrowing Base by more
than $4,000,000.00, (ii) after giving effect to such Advances the outstanding
Revolver Usage (except for and excluding amounts charged to the Loan Account for
interest, fees, or Lender Group Expenses) does not exceed the Maximum Revolver
Amount, and (iii) at the time of the making of any such Advance (including a
Swing Loan), Agent does not believe, in good faith, that the Overadvance

                                      -39-
<PAGE>
created by such Advance will be outstanding for more than 90 days. The foregoing
provisions are for the exclusive benefit of Agent, Swing Lender, and the Lenders
and are not intended to benefit Borrowers in any way. The Advances and Swing
Loans, as applicable, that are made pursuant to this Section 2.3(i) shall be
subject to the same terms and conditions as any other Advance or Swing Loan, as
applicable, except that they shall not be eligible for the LIBOR Option and the
rate of interest applicable thereto shall be the rate applicable to Advances
that are Base Rate Loans under Section 2.6(c) hereof without regard to the
presence or absence of a Default or Event of Default.

                        (i) In the event Agent obtains actual knowledge that the
                  Revolver Usage exceeds the amounts permitted by the preceding
                  paragraph, regardless of the amount of, or reason for, such
                  excess, Agent shall notify Lenders as soon as practicable (and
                  prior to making any (or any additional) intentional
                  Overadvances (except for and excluding amounts charged to the
                  Loan Account for interest, fees, or Lender Group Expenses)
                  unless Agent determines that prior notice would result in
                  imminent harm to the Collateral or its value), and the Lenders
                  with Revolver Commitments thereupon shall, together with
                  Agent, jointly determine the terms of arrangements that shall
                  be implemented with Borrowers and intended to reduce, within a
                  reasonable time, the outstanding principal amount of the
                  Advances to Borrowers to an amount permitted by the preceding
                  paragraph. In the event Agent or any Lender disagrees over the
                  terms of reduction or repayment of any Overadvance, the terms
                  of reduction or repayment thereof shall be implemented
                  according to the determination of the Required Lenders.

                        (ii) Each Lender shall be obligated to settle with Agent
                  as provided in Section 2.3(f) for the amount of such Lender's
                  Pro Rata Share of any unintentional Overadvances by Agent
                  reported to such Lender, any intentional Overadvances made as
                  permitted under this Section 2.3(i), and any Overadvances
                  resulting from the charging to the Loan Account of interest,
                  fees, or Lender Group Expenses.

      2.4 PAYMENTS.

                        (a) PAYMENTS BY BORROWERS.

                              (i) Except as otherwise expressly provided herein,
                        all payments by Borrowers shall be made to Agent's
                        Account for the account of the Lender Group and shall be
                        made in Dollars in immediately available funds, no later
                        than 11:00 a.m. (California time) on the date specified
                        herein without defense, set-off, or counterclaim. Any
                        payment received by Agent later than 11:00 a.m.
                        (California time), shall be deemed to have been received
                        on the following Business Day and any applicable
                        interest or fee shall continue to accrue until such
                        following Business Day.

                                      -40-
<PAGE>
                              (ii) Unless Agent receives notice from Borrowers
                        prior to the date on which any payment is due to the
                        Lenders that Borrowers will not make such payment in
                        full as and when required, Agent may assume that
                        Borrowers have made (or will make) such payment in full
                        to Agent on such date in immediately available funds and
                        Agent may (but shall not be so required), in reliance
                        upon such assumption, distribute to each Lender on such
                        due date an amount equal to the amount then due such
                        Lender. If and to the extent Borrowers do not make such
                        payment in full to Agent on the date when due, each
                        Lender severally shall repay to Agent on demand such
                        amount distributed to such Lender, together with
                        interest thereon at the Defaulting Lender Rate for each
                        day from the date such amount is distributed to such
                        Lender until the date repaid.

                        (b) APPORTIONMENT AND APPLICATION.

                              (i) Except as otherwise provided with respect to
                        Defaulting Lenders and except as otherwise provided in
                        the Loan Documents (including letter agreements between
                        Agent and individual Lenders), aggregate principal and
                        interest payments shall be apportioned ratably among the
                        Lenders (according to the unpaid principal balance of
                        the Obligations to which such payments relate held by
                        each Lender) and payments of fees and expenses (other
                        than fees or expenses that are for Agent's separate
                        account, after giving effect to any letter agreements
                        between Agent and individual Lenders) shall be
                        apportioned ratably among the Lenders having a Pro Rata
                        Share of the type of Commitment or Obligation to which a
                        particular fee relates. All payments shall be remitted
                        to Agent and all such payments (other than payments
                        received while no Default or Event of Default has
                        occurred and is continuing and which relate to the
                        payment of principal or interest of specific Obligations
                        or which relate to the payment of specific fees), and
                        all proceeds of Accounts or other Collateral received by
                        Agent, shall be applied as follows:

                                    A. first, to pay any Lender Group Expenses
                              then due to Agent under the Loan Documents, until
                              paid in full,

                                    B. second, to pay any Lender Group Expenses
                              then due to the Lenders under the Loan Documents,
                              on a ratable basis, until paid in full,

                                    C. third, to pay any fees then due to Agent
                              (for its separate accounts, after giving effect to
                              any letter agreements between Agent and the
                              individual Lenders) under the Loan Documents until
                              paid in full,

                                      -41-
<PAGE>
                                    D. fourth, to pay any fees then due to any
                               or all of the Lenders (after giving effect to any
                               letter agreements between Agent and individual
                               Lenders) under the Loan Documents, on a ratable
                               basis, until paid in full,

                                    E. fifth, to pay interest due in respect of
                               all Agent Advances, until paid in full,

                                    F. sixth, ratably to pay interest due in
                               respect of the Advances (other than Agent
                               Advances), and the Swing Loans until paid in
                               full,

                                    G. seventh, to pay the principal of all
                               Agent Advances until paid in full,

                                    H. eighth, to pay the principal of all Swing
                               Loans until paid in full,

                                    I. ninth, so long as no Event of Default has
                               occurred and is continuing, and at Agent's
                               election (which election Agent agrees will not be
                               made if an Overadvance would be created thereby),
                               to pay amounts then due and owing by Borrowers in
                               respect of Bank Products, until paid in full,

                                    J. tenth, so long as no Event of Default has
                               occurred and is continuing, to pay the principal
                               of all Advances until paid in full,

                                    K. eleventh, if an Event of Default has
                               occurred and is continuing, ratably (i) to pay
                               the principal of all Advances until paid in full,
                               and (ii) to Agent, to be held by Agent, for the
                               benefit of Wells Fargo or its Affiliates, as
                               applicable, as cash collateral in an amount up to
                               the amount of the Bank Products Reserve
                               established prior to the occurrence of, and not
                               in contemplation of, the subject Event of Default
                               until Borrowers' obligations in respect of the
                               then extant Bank Products have been paid in full
                               or the cash collateral amount has been exhausted,

                                    L. twelfth, if an Event of Default has
                               occurred and is continuing, to Agent, to be held
                               by Agent, for the ratable benefit of Issuing
                               Lender and Lenders, as cash collateral in an
                               amount up to 105% of the then extant Letter of
                               Credit Usage until paid in full,

                                      -42-
<PAGE>
                                    M. thirteenth, to pay any other Obligations
                               (including Bank Product Obligations) until paid
                               in full, and

                                    N. fourteenth, to Borrowers (to be wired to
                               the Designated Account) or such other Person
                               entitled thereto under applicable law.

                              (ii) Agent promptly shall distribute to each
                        Lender, pursuant to the applicable wire instructions
                        received from each Lender in writing, such funds as it
                        may be entitled to receive, subject to a Settlement
                        delay as provided in Section 2.3(h).

                              (iii) In each instance, so long as no Event of
                        Default has occurred and is continuing, Section 2.4(b)
                        shall not be deemed to apply to any payment by Borrowers
                        specified by Borrowers to be for the payment of specific
                        Obligations then due and payable (or prepayable) under
                        any provision of this Agreement.

                              (iv) For purposes of the foregoing, "paid in full"
                        means payment of all amounts owing under the Loan
                        Documents according to the terms thereof, including loan
                        fees, service fees, professional fees, interest (and
                        specifically including interest accrued after the
                        commencement of any Insolvency Proceeding), default
                        interest, interest on interest, and expense
                        reimbursements, whether or not the same would be or is
                        allowed or disallowed in whole or in part in any
                        Insolvency Proceeding.

                              (v) In the event of a direct conflict between the
                        priority provisions of this Section 2.4 and other
                        provisions contained in any other Loan Document, it is
                        the intention of the parties hereto that such priority
                        provisions in such documents shall be read together and
                        construed, to the fullest extent possible, to be in
                        concert with each other. In the event of any actual,
                        irreconcilable conflict that cannot be resolved as
                        aforesaid, the terms and provisions of this Section 2.4
                        shall control and govern.

                        (c) WITHHOLDING TAXES

                              (i) Each payment by the Borrowers under each Loan
                        Document shall be made without set-off or counterclaim
                        and free and clear of, and without deduction or
                        withholding for or on account of, any Tax, except to the
                        extent such deduction or withholding is required by any
                        Applicable Law, as modified by the administrative
                        practice of any relevant Governmental Authority, then in
                        effect. To the extent and each time that any Borrower is
                        so required to deduct or withhold Tax from any such
                        payment to any Lender, then such Borrower shall:

                                      -43-
<PAGE>
                              A. promptly notify the Agent of such requirement,

                              B. promptly pay to the relevant Governmental
                        Authority when due the full amount required to be
                        deducted or withheld (including the full amount of Tax
                        required to be deducted or withheld from any additional
                        amount paid by such Borrower to such Lender under this
                        Section 2.4(c)),

                              C. promptly forward to the Agent and such Lender
                        an official receipt (or a certified copy), or other
                        documentation reasonably acceptable to the Agent and
                        such Lender, evidencing such payment to such
                        Governmental Authority, and

                              D. pay to such Lender, in addition to the payment
                        to which such Lender is otherwise entitled under such
                        Loan Document such additional amount as is necessary to
                        ensure that the net amount actually received by such
                        Lender (free and clear of any such Tax, whether assessed
                        against a Borrower or such Lender) will equal the full
                        amount such Lender would have received had no such
                        deduction or withholding been required.

                  (ii) If any Borrower fails to pay to the relevant Governmental
            Authority when due any Tax that it was required to deduct or
            withhold under this Section 2.4(c) in respect of any payment to or
            for the benefit of any Lender under any Loan Document or fails to
            promptly furnish the Agent and such Lender with the documentation
            referred to in Section 2.4(c)(i)(C), the Borrowers shall forthwith
            on demand fully indemnify such Lender on an after-Tax basis from and
            against any Taxes (including interest and penalties), losses and
            expenses which such Lender may suffer or incur as a result of such
            failure.

                  (iii) Borrowers shall also indemnify each Lender, on an
            after-Tax basis, for any additional Taxes on net income that such
            Lender may be obliged to pay as a result of the receipt of
            additional amounts under this Section 2.4(c).

                  (iv) Borrowers' obligations under this Section 2.4(c) shall
            survive the termination of the Loan Documents and the payment of all
            other amounts payable under the Loan Documents.

                  (v) If any Lender is a "foreign corporation, partnership or
            trust" within the meaning of the IRC (a "Foreign Lender") and such
            Foreign Lender claims exemption from, or a reduction of, United
            States federal withholding Tax under Sections 1441 or 1442 of the
            IRC, such Foreign Lender agrees with and in favor of Agent and
            Borrowers, to deliver to Agent and Borrowers:

                        A. if such Foreign Lender claims an exemption from
                  withholding tax pursuant to its portfolio interest exception,
                  (I) a

                                      -44-
<PAGE>
                  statement of the Lender, signed under penalty of perjury, that
                  it is not a (x) "bank" as described in Section 881(c)(3)(A) of
                  the IRC, (y) 10% shareholder (within the meaning of Section
                  881(c)(3)(B) of the IRC), or (z) controlled foreign
                  corporation described in Section 881(c)(3)(C) of the IRC, and
                  (II) a properly completed IRS Form W-8BEN, before the first
                  payment of any interest under the Loan Documents and at any
                  other time reasonably requested by Agent or Borrowers;

                        B. if such Foreign Lender claims an exemption from, or a
                  reduction of, withholding tax under a United States tax
                  treaty, properly completed IRS Form W-8BEN before the first
                  payment of any interest under the Loan Documents and at any
                  other time reasonably requested by Agent or Borrowers;

                        C. if such Foreign Lender claims that interest paid
                  under the Loan Documents is exempt from United States
                  withholding tax because it is effectively connected with a
                  United States trade or business of such Foreign Lender, two
                  properly completed and executed copies of IRS Form W-8ECI
                  before the first payment of any interest is due under the Loan
                  Document and at any other time reasonably requested by Agent
                  or Borrowers;

                        D. such other form or forms as may be required under the
                  IRC or other laws of the United States as a condition to
                  exemption from, or reduction of, United States withholding
                  tax.

            Such Lender agrees promptly to notify Agent and Borrowers of any
            change in circumstances which would modify or render invalid any
            claimed exemption or reduction.

                  (vi) If any Foreign Lender claims exemption from, or
            reduction of, withholding tax under a United States tax treaty by
            providing IRS Form W-8BEN and such Foreign Lender sells, assigns,
            grants a participation in, or otherwise transfers all or part of the
            Obligations of Borrowers to such Foreign Lender, such Foreign Lender
            agrees to notify Agent of the percentage amount in which it is no
            longer the beneficial owner of Obligations of Borrowers to such
            Foreign Lender. To the extent of such percentage amount, Agent will
            treat such Foreign Lender's IRS Form W-8BEN as no longer valid.

                  (vii) If any Foreign Lender is entitled to a reduction in the
            applicable withholding tax, Agent may withhold from any interest
            payment to such Foreign Lender an amount equivalent to the
            applicable withholding tax after taking into account such reduction.
            If the forms or other documentation required by Section 2.4(c)(v)
            are not delivered to Agent, then Agent may withhold from any
            interest payment to such Foreign Lender not providing such

                                      -45-
<PAGE>
            forms or other documentation an amount equivalent to the applicable
            withholding tax.

                  (vii) If the IRS or any other Governmental Authority of the
            United States or other jurisdiction asserts a claim that Agent did
            not properly withhold tax from amounts paid to or for the account of
            any Foreign Lender (because the appropriate form was not delivered,
            was not properly executed, or because such Foreign Lender failed to
            notify Agent of a change in circumstances which rendered the
            exemption from, or reduction of, withholding tax ineffective, or for
            any other reason) such Foreign Lender shall indemnify and hold Agent
            harmless for all amounts paid, directly or indirectly, by Agent as
            tax or otherwise, including penalties and interest, and including
            any taxes imposed by any jurisdiction on the amounts payable to
            Agent under this Section, together with all costs and expenses
            (including attorneys fees and expenses). The obligation of the
            Foreign Lenders under this subsection shall survive the payment of
            all Obligations and the resignation or replacement of Agent.

      2.5 OVERADVANCES. If, at any time or for any reason, the amount of
Obligations (other than Bank Product Obligations) owed by Borrowers to the
Lender Group pursuant to Sections 2.1 and 2.12 is greater than either the Dollar
or percentage limitations set forth in Sections 2.1 or 2.12, (an "Overadvance"),
Borrowers immediately shall pay to Agent, in cash, the amount of such excess,
which amount shall be used by Agent to reduce the Obligations in accordance with
the priorities set forth in Section 2.4(b). In addition, Borrowers hereby
promise to pay the Obligations (including principal, interest, fees, costs, and
expenses) in Dollars in full to the Lender Group as and when due and payable
under the terms of this Agreement and the other Loan Documents.

      2.6 INTEREST RATES AND LETTER OF CREDIT FEE: RATES, PAYMENTS, AND
CALCULATIONS.

                  (a) INTEREST RATES. Except as provided in clause (c) below,
all Obligations (except for undrawn Letters of Credit and except for Bank
Product Obligations) that have been charged to the Loan Account pursuant to the
terms hereof shall bear interest on the Daily Balance thereof as follows (i) if
the relevant Obligation is an Advance that is a LIBOR Rate Loan, at a per annum
rate equal to the sum of LIBOR Rate plus the Applicable Margin, but in no event
to exceed the Highest Lawful Rate, (ii) if the relevant Obligation is an Advance
that is a Base Rate Loan, at a per annum rate equal to the sum of the Base Rate
plus the Applicable Margin, but in no event to exceed the Highest Lawful Rate,
and (iii) otherwise, at a per annum rate equal to the sum of the Base Rate plus
the Applicable Margin, but in no event to exceed the Highest Lawful Rate.

            The foregoing notwithstanding, at no time shall any portion of the
Obligations (other than Bank Product Obligations) bear interest on the Daily
Balance thereof at a per annum rate less than five percent (5%) per annum. To
the extent that interest accrued hereunder at the rate set forth herein would be
less than the foregoing minimum daily rate,

                                      -46-
<PAGE>
the interest rate chargeable hereunder for such day automatically shall be
deemed increased to the minimum rate.

                  (b) LETTER OF CREDIT FEE. Borrowers shall pay Agent (for the
ratable benefit of the Lenders, subject to any letter agreement between Agent
and individual Lenders), a Letter of Credit fee (in addition to the charges,
commissions, fees, and costs set forth in Section 2.12(e)) which shall accrue at
a rate equal to 1.75% per annum times the Daily Balance of the undrawn amount of
all outstanding Letters of Credit.

                  (c) DEFAULT RATE. Upon the occurrence and during the
continuation of an Event of Default (and at the election of Agent or the
Required Lenders),

                        (i) all Obligations (except for undrawn Letters of
                  Credit and except for Bank Product Obligations) that have been
                  charged to the Loan Account pursuant to the terms hereof shall
                  bear interest on the Daily Balance thereof at a per annum rate
                  equal to 3 percentage points above the per annum rate
                  otherwise applicable hereunder, and

                        (ii) the Letter of Credit fee provided for above shall
                  be increased to 3 percentage points above the per annum rate
                  otherwise applicable hereunder.

                  (d) PAYMENT. Interest, Letter of Credit fees, and all other
fees payable hereunder shall be due and payable, in arrears, on the first day of
each month at any time that Obligations or Commitments are outstanding.
Borrowers hereby authorize Agent, from time to time, without prior notice to
Borrowers, to charge such interest and fees, all Lender Group Expenses (as and
when incurred), the charges, commissions, fees, and costs provided for in
Section 2.12(e) (as and when accrued or incurred), the fees and costs provided
for in Section 2.11 (as and when accrued or incurred), and all other payments as
and when due and payable under any Loan Document (including any amounts due and
payable to Wells Fargo or its Affiliates in respect of Bank Products up to the
amount of the then extant Bank Products Reserve) to Borrowers' Loan Account,
which amounts thereafter shall constitute Advances hereunder and shall accrue
interest at the rate then applicable to Advances hereunder. Any interest not
paid when due shall be compounded by being charged to Borrowers' Loan Account
and shall thereafter constitute Advances hereunder and shall accrue interest at
the rate then applicable to Advances that are Base Rate Loans hereunder.

                  (e) COMPUTATIONS. All computations of interest shall be made
on the basis of a year of 360 days (unless such calculation would result in a
usurious rate, in which case interest shall be calculated on the basis of a year
of 365 or 366 days, as the case may be) in the case of LIBOR Loans, and 365 or
366 days (as the case may be) in the case of Base Rate Loans that are based upon
the Base Rate, and all computations of fees shall be made on the basis of a year
of 360 days (unless such calculation would result in a usurious rate, in which
case interest shall be calculated on the basis of a year of 365 or 366 days, as
the case may be), in each case for the actual number of days (including the
first day but excluding the last day) occurring in the period for which such
interest or fees are payable. Each

                                      -47-
<PAGE>
determination by the Agent of an interest rate or fee hereunder shall, except
for manifest error, be final, conclusive and binding for all purposes, provided
that such determination shall be made in good faith in a manner generally
consistent with the Agent's standard practice. If the Agent and the Borrowers
determine that manifest error exists, said parties shall correct such error by
way of an adjustment to the next payment due hereunder. For the purpose of the
Interest Act (Canada) and disclosure thereunder, whenever any interest or any
fee to be paid hereunder or in connection herewith is to be calculated on the
basis of any period of time that is less than a calendar year, the yearly rate
of interest to which the rate used in such calculation is equivalent is the rate
so used multiplied by the actual number of days in the calendar year in which
the same is to be ascertained and divided by 360.

                  (f) INTENT TO LIMIT CHARGES TO HIGHEST LAWFUL RATE. In no
event shall the interest rate or rates payable under this Agreement, plus any
other amounts paid in connection herewith, exceed the Highest Lawful Rate.
Borrowers and the Lender Group, in executing and delivering this Agreement,
intend legally to agree upon the rate or rates of interest and manner of payment
stated within it; provided, however, that, anything contained herein to the
contrary notwithstanding, if said rate or rates of interest or manner of payment
exceeds the Highest Lawful Rate, then, ipso facto, as of the date of this
Agreement, Borrowers are and shall be liable only for the payment of such
Highest Lawful Rate, and payment received from any Borrower in excess of the
Highest Lawful Rate, whenever received, shall be applied to reduce the principal
balance of the Obligations to the extent of such excess, and if the principal
owing has been paid in full, any remaining excess shall forthwith be paid to
Borrowers and the provisions of this Agreement and the other Loan Documents
immediately be deemed reformed and the amounts thereafter collectible hereunder
and thereunder reduced, without the necessity of the execution of any new
document, so as to comply with the applicable law, but so as to permit the
recovery of the fullest amount otherwise called for hereunder and thereunder.
For purposes of determining the Highest Lawful Rate allowed under Texas law, the
applicable rate ceiling shall be the weekly rate ceiling described and computed
in accordance with Chapter 303 of the Texas Finance Code, as amended from time
to time. Furthermore, the parties hereto specifically declare that the
provisions of Chapter 346 of the Texas Credit Code, as amended from time to
time, are not applicable to this Agreement of any of the other Loan Documents or
to the transactions contemplated hereby.

                  (g) INTEREST ACT (CANADA). For the purposes of the Interest
Act (Canada) and disclosure thereunder, whenever interest to be paid hereunder
or in connection herewith is to be calculated on the basis of a year of 360 days
or any other period of time that is less than a calendar year, the yearly rate
of interest to which the rate determined pursuant to such calculation is
equivalent is the rate so determined multiplied by the actual number of days in
the calendar year in which the same is to be ascertained and divided by either
360 or such other period of time, as the case may be. The rates of interest
under this Agreement are nominal rates, and not effective rates or yields. The
principal of deemed reinvestment of interest does not apply to any interest
calculation under this Agreement.

                                      -48-
<PAGE>
                  (h) INTEREST LIMITATION. If any provision of this Agreement
would oblige the Borrowers to make any payment of interest or other amount
payable to Lenders in an amount or calculated at a rate which would be
prohibited by law or would result in a receipt by Lender of "interest" at a
"criminal rate" (as such terms are construed under the Criminal Code (Canada)),
then notwithstanding such provision, such amount or rate shall be deemed to have
been adjusted with retroactive effect to the maximum amount or rate of interest,
as the case may be, as would not be so prohibited by law or so result in a
receipt by Lenders of "interest" at a "criminal rate", such adjustment to be
effected, to the extent necessary, as follows:

                        (i) first, by reducing the amount or rate of interest
            required to be paid to Lenders; and

                        (ii) thereafter, by reducing any fees, commissions,
            premiums and other amounts required to be paid to Lender which would
            constitute interest for purposes of Section 347 of the Criminal Code
            (Canada).

To the extent lawful, the interest and charges that would have been payable in
respect of any amounts owed to Lenders but were not payable as a result of the
operation of this section shall be cumulated and the interest and charges
payable to Lenders in respect of other amounts owed to Lender at that time or at
any time thereafter shall be increased (but not above the maximum lawful rate
therefor) until such cumulated amount, together with interest thereon at the
applicable rate to the date of repayment, shall have been received by Lenders.

      2.7 CASH MANAGEMENT.

                  (a) Borrowers shall (i) establish and maintain cash management
services of a type and on terms satisfactory to Agent at one or more of the
banks set forth on Schedule 2.7(a) (each a "Cash Management Bank"), and shall
request in writing and otherwise take such reasonable steps to ensure that all
of its Account Debtors forward payment of the amounts owed by them directly to
such Cash Management Bank, and (ii) deposit or cause to be deposited promptly,
and in any event no later than the first Business Day after the date of receipt
thereof, all Collections (including those sent directly by Account Debtors to a
Cash Management Bank) into a bank account in Agent's name (a "Cash Management
Account") at one of the Cash Management Banks.

                  (b) Each Cash Management Bank shall establish and maintain
Cash Management Agreements with Agent and Borrowers, in form and substance
acceptable to Agent. Each such Cash Management Agreement shall provide, among
other things, that (i) all items of payment deposited in such Cash Management
Account and proceeds thereof are held by such Cash Management Bank agent or
bailee-in-possession for Agent, (ii) the Cash Management Bank has no rights of
setoff or recoupment or any other claim against the applicable Cash Management
Account, other than for payment of its service fees and other charges directly
related to the administration of such Cash Management Account and for returned
checks or other items of payment, (iii) with respect to the Cash Management Bank
acting in the United States, it immediately will forward by daily sweep all
amounts in the

                                      -49-
<PAGE>
applicable Cash Management Account to the Agent's Account, and (iv) with respect
to the Cash Management Bank acting in Canada, it will, until the occurrence of a
Default, forward by daily sweep all amounts in the applicable Cash Management
Account to PCI Chemical's operating account, and after the occurrence of a
Default, immediately deposit all such amounts in the applicable Cash Management
Account to the Agent's account.

                  (c) So long as no Default or Event of Default has occurred and
is continuing, Borrowers may amend Schedule 2.7(a) or (b) to add or replace a
Cash Management Account Bank or Cash Management Account; provided, however, that
(i) such prospective Cash Management Bank shall be satisfactory to Agent and
Agent shall have consented in writing in advance to the opening of such Cash
Management Account with the prospective Cash Management Bank, and (ii) prior to
the time of the opening of such Cash Management Account, Borrowers and such
prospective Cash Management Bank shall have executed and delivered to Agent a
Cash Management Agreement. Borrowers shall close any of their Cash Management
Accounts (and establish replacement cash management accounts in accordance with
the foregoing sentence) promptly and in any event within 30 days of notice from
Agent that the creditworthiness of any Cash Management Bank is no longer
acceptable in Agent's reasonable judgment, or as promptly as practicable and in
any event within 60 days of notice from Agent that the operating performance,
funds transfer, or availability procedures or performance of the Cash Management
Bank with respect to Cash Management Accounts or Agent's liability under any
Cash Management Agreement with such Cash Management Bank is no longer acceptable
in Agent's reasonable judgment.

                  (d) The Cash Management Accounts shall be cash collateral
accounts, with all cash, checks and similar items of payment in such accounts
securing payment of the Obligations, and in which Borrowers are hereby deemed to
have granted a Lien to Agent.

      2.8 CREDITING PAYMENTS; FLOAT CHARGE. The receipt of any payment item by
Agent (whether from transfers to Agent by the Cash Management Banks pursuant to
the Cash Management Agreements or otherwise) shall not be considered a payment
on account unless such payment item is a wire transfer of immediately available
federal funds made to the Agent's Account or unless and until such payment item
is honored when presented for payment. Should any payment item not be honored
when presented for payment, then Borrowers shall be deemed not to have made such
payment and interest shall be calculated accordingly. Anything to the contrary
contained herein notwithstanding, any payment item shall be deemed received by
Agent only if it is received into the Agent's Account on a Business Day on or
before 11:00 a.m. (California time). If any payment item is received into the
Agent's Account on a non-Business Day or after 11:00 a.m. (California time) on a
Business Day, it shall be deemed to have been received by Agent as of the
opening of business on the immediately following Business Day. From and after
the Closing Date, Agent shall be entitled to charge Borrowers for one (1)
Business Day of `clearance' or `float' at the rate applicable to Base Rate Loans
under Section 2.6 on all Collections that are received by Borrowers (regardless
of whether forwarded by the Cash Management Banks to Agent). This
across-the-board one (1) Business Day clearance or float charge on all
Collections is acknowledged by the parties to constitute an integral aspect of
the pricing of

                                      -50-
<PAGE>
the financing of Borrowers and shall apply irrespective of whether or not there
are any outstanding monetary Obligations; the effect of such clearance or float
charge being the equivalent of charging one (1) Business Days of interest on
such Collections. The parties acknowledge and agree that the economic benefit of
the foregoing provisions of this Section 2.8 shall be for the exclusive benefit
of Agent.

      2.9 DESIGNATED ACCOUNTS. Agent is authorized to make the Advances and
Issuing Lender is authorized to issue the Letters of Credit, under this
Agreement based upon telephonic or other instructions received from anyone
purporting to be an Authorized Person, or without instructions if pursuant to
Section 2.6(d). Borrowers agree to establish and maintain the Designated
Accounts with the Designated Account Banks for the purpose of receiving the
proceeds of the Advances requested by Borrowers and made by Agent or the Lenders
hereunder. Unless otherwise agreed by Agent and Borrowers, any Advance or Agent
Advance, or Swing Loan requested by Borrowers and made by Agent or the Lenders
hereunder shall be made to the (a) Canadian Designated Account, if the proceeds
of the Advance are to be used by PCI Chemicals or for its benefit, or (b) the
U.S. Designated Account if the proceeds of the Advance are to be used by Pioneer
Americas or for its benefit.

      2.10 MAINTENANCE OF LOAN ACCOUNT; STATEMENTS OF OBLIGATIONS. Agent shall
maintain an account on its books in the name of Borrowers (the "Loan Account")
on which Borrowers will be charged with all Advances (including Agent Advances
and Swing Loans) made by Agent, Swing Lender, or the Lenders to Borrowers or for
Borrowers' account, the Letters of Credit issued by Issuing Lender for
Borrowers' account, and with all other payment Obligations hereunder or under
the other Loan Documents (except for Bank Product Obligations), including,
accrued interest, fees and expenses, and Lender Group Expenses. In accordance
with Section 2.8, the Loan Account will be credited with all payments received
by Agent from Borrowers or for Borrowers' account, including all amounts
received in the Agent's Account from any Cash Management Bank. Agent shall
render statements regarding the Loan Account to Borrowers, including principal,
interest, fees, and including an itemization of all charges and expenses
constituting Lender Group Expenses owing, and such statements shall be
conclusively presumed to be correct and accurate and constitute an account
stated between Borrowers and the Lender Group unless, within 30 days after
receipt thereof by Borrowers, Borrowers shall deliver to Agent written objection
thereto describing the error or errors contained in any such statements.

      2.11 FEES. Borrowers shall pay to Agent the following fees and charges,
which fees and charges shall be non-refundable when paid (irrespective of
whether this Agreement is terminated thereafter) and shall be apportioned among
the Lenders in accordance with the terms of letter agreements between Agent and
individual Lenders:

                  (a) UNUSED LINE FEE. On the first day of each month during the
term of this Agreement, an unused line fee in the amount equal to 0.375% per
annum times the result of (a) the Maximum Revolver Amount, less (b) the sum of
(i) the average Daily Balance of Advances that were outstanding during the
immediately preceding month, plus

                                      -51-
<PAGE>
(ii) the average Daily Balance of the Letter of Credit Usage during the
immediately preceding month,

                  (b) FEE LETTER FEES. As and when due and payable under the
terms of the Fee Letter, Borrowers shall pay to Agent the fees set forth in the
Fee Letter, and

                  (c) AUDIT, APPRAISAL, AND VALUATION CHARGES. For the separate
account of Agent, audit, appraisal, and valuation fees and charges as follows,
(i) a fee of $850 per day, per auditor, plus out-of-pocket expenses for each
financial audit of a Borrower performed by personnel employed by Agent, (ii) if
implemented, a one time charge of $3,000 plus out-of-pocket expenses for
expenses for the establishment of electronic collateral reporting systems, (iii)
a fee of $1,500 per day per appraiser, plus out-of-pocket expenses, for each
appraisal of the Collateral performed by personnel employed by Agent, and (iv)
the actual charges paid or incurred by Agent if it elects to employ the services
of one or more third Persons to perform financial audits of Borrowers, to
appraise the Collateral, or any portion thereof, or to assess a Borrower's
business valuation.

      2.12 LETTERS OF CREDIT

                  (a) Subject to the terms and conditions of this Agreement, the
Issuing Lender agrees to issue letters of credit for the account of Borrowers
(each, an "L/C") or to purchase participations or execute indemnities or
reimbursement obligations (each such undertaking, an "L/C Undertaking") with
respect to letters of credit issued by an Underlying Issuer (as of the Closing
Date, the prospective Underlying Issuer is to be Wells Fargo) for the account of
Borrowers. To request the issuance of an L/C or an L/C Undertaking (or the
amendment, renewal, or extension of an outstanding L/C or L/C Undertaking),
Borrowers shall hand deliver or telecopy (or transmit by electronic
communication, if arrangements for doing so have been approved by the Issuing
Lender) to the Issuing Lender and Agent (reasonably in advance of the requested
date of issuance, amendment, renewal, or extension) a notice requesting the
issuance of an L/C or L/C Undertaking, or identifying the L/C or L/C Undertaking
to be amended, renewed, or extended, the date of issuance, amendment, renewal,
or extension, whether the L/C or L/C Undertaking is being utilized by Pioneer
Americas or PCI Chemicals, the date on which such L/C or L/C Undertaking is to
expire, the amount of such L/C or L/C Undertaking, the name and address of the
beneficiary thereof (or of the Underlying Letter of Credit, as applicable), and
such other information as shall be necessary to prepare, amend, renew, or extend
such L/C or L/C Undertaking. If requested by the Issuing Lender, Borrowers also
shall be an applicant under the application with respect to any Underlying
Letter of Credit that is to be the subject of an L/C Undertaking. The Issuing
Lender shall have no obligation to issue a Letter of Credit if any of the
following would result after giving effect to the requested Letter of Credit:

                  (i) the Letter of Credit Usage would exceed the Borrowing Base
            less the amount of outstanding Advances, or

                  (ii) the Letter of Credit Usage would exceed $10,000,000.00,
            or

                                      -52-
<PAGE>
                  (iii) the Letter of Credit Usage would exceed the Maximum
            Revolver Amount less the then extant amount of outstanding Advances.

            Borrowers and the Lender Group acknowledge and agree that certain
Underlying Letters of Credit may be issued to support letters of credit that
already are outstanding as of the Closing Date. Each Letter of Credit (and
corresponding Underlying Letter of Credit) shall have an expiry date no later
than 30 days prior to the Maturity Date and all such Letters of Credit (and
corresponding Underlying Letter of Credit) shall be in form and substance
acceptable to the Issuing Lender (in the exercise of its Permitted Discretion),
including the requirement that the amounts payable thereunder must be payable in
Dollars. If Issuing Lender is obligated to advance funds under a Letter of
Credit, Borrowers immediately shall reimburse such L/C Disbursement to Issuing
Lender by paying to Agent an amount equal to such L/C Disbursement not later
than 11:00 a.m., California time, on the date that such L/C Disbursement is
made, if Borrowers shall have received written or telephonic notice of such L/C
Disbursement prior to 10:00 a.m., California time, on such date, or, if such
notice has not been received by Borrowers prior to such time on such date, then
not later than 11:00 a.m., California time, on (i) the Business Day that
Borrowers receive such notice, if such notice is received prior to 10:00 a.m.,
California time, on the date of receipt, and, in the absence of such
reimbursement, the L/C Disbursement immediately and automatically shall be
deemed to be an Advance hereunder and, thereafter, shall bear interest at the
rate then applicable to Advances that are Base Rate Loans under Section 2.6. To
the extent a L/C Disbursement is deemed to be an Advance hereunder, Borrowers'
obligation to reimburse such L/C Disbursement shall be discharged and replaced
by the resulting Advance. Promptly following receipt by Agent of any payment
from Borrowers pursuant to this paragraph, Agent shall distribute such payment
to the Issuing Lender or, to the extent that Lenders have made payments pursuant
to Section 2.12(c) to reimburse the Issuing Lender, then to such Lenders and the
Issuing Lender as their interest may appear.

                  (b) Promptly following receipt of a notice of L/C Disbursement
pursuant to Section 2.12(a), each Lender agrees to fund its Pro Rata Share of
any Advance deemed made pursuant to the foregoing subsection on the same terms
and conditions as if Borrowers had requested such Advance and Agent shall
promptly pay to Issuing Lender the amounts so received by it from the Lenders.
By the issuance of a Letter of Credit (or an amendment to a Letter of Credit
increasing the amount thereof) and without any further action on the part of the
Issuing Lender or the Lenders, the Issuing Lender shall be deemed to have
granted to each Lender, and each Lender shall be deemed to have purchased, a
participation in each Letter of Credit, in an amount equal to its Pro Rata Share
of the Risk Participation Liability of such Letter of Credit, and each such
Lender agrees to pay to Agent, for the account of the Issuing Lender, such
Lender's Pro Rata Share of any payments made by the Issuing Lender under such
Letter of Credit. In consideration and in furtherance of the foregoing, each
Lender hereby absolutely and unconditionally agrees to pay to Agent, for the
account of the Issuing Lender, such Lender's Pro Rata Share of each L/C
Disbursement made by the Issuing Lender and not reimbursed by Borrowers on the
date due as provided in clause (a) of this Section, or of any reimbursement
payment required to be refunded to

                                      -53-
<PAGE>
Borrowers for any reason. Each Lender acknowledges and agrees that its
obligation to deliver to Agent, for the account of the Issuing Lender, an amount
equal to its respective Pro Rata Share pursuant to this Section 2.12(b) shall be
absolute and unconditional and such remittance shall be made notwithstanding the
occurrence or continuation of an Event of Default or Default or the failure to
satisfy any condition set forth in Section 3 hereof. If any such Lender fails to
make available to Agent the amount of such Lender's Pro Rata Share of any
payments made by the Issuing Lender in respect of such Letter of Credit as
provided in this Section, Agent (for the account of the Issuing Lender) shall be
entitled to recover such amount on demand from such Lender together with
interest thereon at the Defaulting Lender Rate until paid in full.

                  (c) Each Borrower hereby agrees to indemnify, save, defend,
and hold the Lender Group harmless from any loss, cost, expense, or liability,
and reasonable attorneys fees incurred by the Lender Group arising out of or in
connection with any Letter of Credit; provided, however, that no Borrower shall
be obligated hereunder to indemnify for any loss, cost, expense, or liability
that is caused by the gross negligence or willful misconduct of the Issuing
Lender or any other member of the Lender Group. Each Borrower agrees to be bound
by the Underlying Issuer's regulations and interpretations of any Underlying
Letter of Credit or by Issuing Lender's interpretations of any L/C issued by
Issuing Lender to or for such Borrower's account, even though this
interpretation may be different from such Borrower's own, and each Borrower
understands and agrees that the Lender Group shall not be liable for any error,
negligence, or mistake, whether of omission or commission, in following
Borrowers' instructions or those contained in the Letter of Credit or any
modifications, amendments, or supplements thereto. Each Borrower understands
that the L/C Undertakings may require Issuing Lender to indemnify the Underlying
Issuer for certain costs or liabilities arising out of claims by Borrowers
against such Underlying Issuer. Each Borrower hereby agrees to indemnify, save,
defend, and hold the Lender Group harmless with respect to any loss, cost,
expense (including reasonable attorneys fees), or liability incurred by the
Lender Group under any L/C Undertaking as a result of the Lender Group's
indemnification of any Underlying Issuer; provided, however, that no Borrower
shall be obligated hereunder to indemnify for any loss, cost, expense, or
liability that is caused by the gross negligence or willful misconduct of the
Issuing Lender or any other member of the Lender Group.

                  (d) Each Borrower hereby authorizes and directs any Underlying
Issuer to deliver to the Issuing Lender all instruments, documents, and other
writings and property received by such Underlying Issuer pursuant to such
Underlying Letter of Credit and to accept and rely upon the Issuing Lender's
instructions with respect to all matters arising in connection with such
Underlying Letter of Credit and the related application.

                  (e) Any and all charges, commissions, fees, and costs incurred
by the Issuing Lender relating to Underlying Letters of Credit shall be Lender
Group Expenses for purposes of this Agreement and immediately shall be
reimbursable by Borrowers to Agent for the account of the Issuing Lender; it
being acknowledged and agreed by each Borrower that, as of the Closing Date, the
issuance charge imposed by the prospective Underlying

                                      -54-
<PAGE>
Issuer is .825% per annum times the face amount of each Underlying Letter of
Credit, that such issuance charge may be changed from time to time, and that the
Underlying Issuer also imposes a schedule of charges for amendments, extensions,
drawings, and renewals.

                  (f) If by reason of (i) any change in any applicable law,
treaty, rule, or regulation or any change in the interpretation or application
thereof by any Governmental Authority, or (ii) compliance by the Underlying
Issuer or the Lender Group with any direction, request, or requirement
(irrespective of whether having the force of law) of any Governmental Authority
or monetary authority including, Regulation D of the Federal Reserve Board as
from time to time in effect (and any successor thereto):

                  (i) any reserve, deposit, or similar requirement is or shall
            be imposed or modified in respect of any Letter of Credit issued
            hereunder, or

                  (ii) there shall be imposed on the Underlying Issuer or the
            Lender Group any other condition regarding any Underlying Letter of
            Credit or any Letter of Credit issued pursuant hereto;

and the result of the foregoing is to increase, directly or indirectly, the cost
to the Lender Group of issuing, making, guaranteeing, or maintaining any Letter
of Credit or to reduce the amount receivable in respect thereof by the Lender
Group, then, and in any such case, Agent may, at any time within a reasonable
period after the additional cost is incurred or the amount received is reduced,
notify Borrowers, and Borrowers shall pay on demand such amounts as Agent may
specify to be necessary to compensate the Lender Group for such additional cost
or reduced receipt, together with interest on such amount from the date of such
demand until payment in full thereof at the rate then applicable to Base Rate
Loans hereunder. The determination by Agent of any amount due pursuant to this
Section, as set forth in a certificate setting forth the calculation thereof in
reasonable detail, shall, in the absence of manifest or demonstrable error, be
final and conclusive and binding on all of the parties hereto.

      2.13 LIBOR OPTION.

                  (a) INTEREST AND INTEREST PAYMENT DATES. In lieu of having
interest charged at the rate based upon the Base Rate, Borrowers shall have the
option (the "LIBOR Option") to have interest on all or a portion of the Advances
be charged at a rate of interest based upon the LIBOR Rate. Interest on LIBOR
Rate Loans shall be payable on the earliest of (i) the last day of the Interest
Period applicable thereto, (ii) the occurrence of an Event of Default in
consequence of which the Required Lenders or Agent on behalf thereof elect to
accelerate the maturity of all or any portion of the Obligations, or (iii)
termination of this Agreement pursuant to the terms hereof. On the last day of
each applicable Interest Period, unless Borrowers properly have exercised the
LIBOR Option with respect thereto, the interest rate applicable to such LIBOR
Rate Loan automatically shall convert to the rate of interest then applicable to
Base Rate Loans of the same type hereunder. At any time that an Event of Default
has occurred and is continuing, Borrowers no longer shall have the option to
request that Advances bear interest at the LIBOR Rate and Agent shall have the
right to

                                      -55-
<PAGE>
convert the interest rate on all outstanding LIBOR Rate Loans to the rate then
applicable to Base Rate Loans hereunder.

                  (b) LIBOR Election.

                        (i) Borrowers may, at any time and from time to time, so
            long as no Event of Default has occurred and is continuing, elect to
            exercise the LIBOR Option by notifying Agent prior to 11:00 a.m.
            (California time) at least 3 Business Days prior to the commencement
            of the proposed Interest Period (the "LIBOR Deadline"). Notice of
            Borrowers' election of the LIBOR Option for a permitted portion of
            the Advances and an Interest Period pursuant to this Section shall
            be made by delivery to Agent of a LIBOR Notice received by Agent
            before the LIBOR Deadline, or by telephonic notice received by Agent
            before the LIBOR Deadline (to be confirmed by delivery to Agent of a
            LIBOR Notice received by Agent prior to 5:00 p.m. (California time)
            on the same day). Promptly upon its receipt of each such LIBOR
            Notice, Agent shall provide a copy thereof to each of the Lenders.

                        (ii) Each LIBOR Notice shall be irrevocable and binding
            on Borrowers. In connection with each LIBOR Rate Loan, each Borrower
            shall indemnify, defend, and hold Agent and the Lenders harmless
            against any loss, cost, or expense incurred by Agent or any Lender
            as a result of (a) the payment of any principal of any LIBOR Rate
            Loan other than on the last day of an Interest Period applicable
            thereto (including as a result of an Event of Default), (b) the
            conversion of any LIBOR Rate Loan other than on the last day of the
            Interest Period applicable thereto, or (c) the failure to borrow,
            convert, continue or prepay any LIBOR Rate Loan on the date
            specified in any LIBOR Notice delivered pursuant hereto (such
            losses, costs, and expenses, collectively, "Funding Losses").
            Funding Losses shall, with respect to Agent or any Lender, be deemed
            to equal the amount determined by Agent or such Lender to be the
            excess, if any, of (i) the amount of interest that would have
            accrued on the principal amount of such LIBOR Rate Loan had such
            event not occurred, at the LIBOR Rate that would have been
            applicable thereto, plus the Applicable Margin, for the period from
            the date of such event to the last day of the then current Interest
            Period therefor (or, in the case of a failure to borrow, convert or
            continue, for the period that would have been the Interest Period
            therefor), minus (ii) the amount of interest that would accrue on
            such principal amount for such period at the interest rate which
            Agent or such Lender would be offered were it to be offered, at the
            commencement of such period, Dollar deposits of a comparable amount
            and period in the London interbank market. A certificate of Agent or
            a Lender delivered to Borrowers setting forth any amount or amounts
            that Agent or such Lender is entitled to receive pursuant to this
            Section shall be conclusive absent manifest error.

                                      -56-
<PAGE>
                        (iii) Borrowers shall have not more than 5 LIBOR Rate
            Loans in effect at any given time. Borrowers only may exercise the
            LIBOR Option for LIBOR Rate Loans of at least $1,000,000 and
            integral multiples of $500,000 in excess thereof.

                  (c) PREPAYMENTS. Borrowers may prepay LIBOR Rate Loans at any
time; provided, however, that in the event that LIBOR Rate Loans are prepaid on
any date that is not the last day of the Interest Period applicable thereto,
including as a result of any automatic prepayment through the required
application by Agent of proceeds of Collections in accordance with Section
2.4(b) or for any other reason, including early termination of the term of this
Agreement or acceleration of all or any portion of the Obligations pursuant to
the terms hereof, each Borrower shall indemnify, defend, and hold Agent and the
Lenders and their Participants harmless against any and all Funding Losses in
accordance with clause (b) above.

                  (d) SPECIAL PROVISIONS APPLICABLE TO LIBOR RATE.

                        (i) The LIBOR Rate may be adjusted by Agent with respect
            to any Lender on a prospective basis to take into account any
            additional or increased costs to such Lender of maintaining or
            obtaining any eurodollar deposits or increased costs due to changes
            in applicable law occurring subsequent to the commencement of the
            then applicable Interest Period, including changes in tax laws
            (except changes of general applicability in corporate income tax
            laws) and changes in the reserve requirements imposed by the Board
            of Governors of the Federal Reserve System (or any successor),
            excluding the Reserve Percentage, which additional or increased
            costs would increase the cost of funding loans bearing interest at
            the LIBOR Rate. In any such event, the affected Lender shall give
            Borrowers and Agent notice of such a determination and adjustment
            and Agent promptly shall transmit the notice to each other Lender
            and, upon its receipt of the notice from the affected Lender,
            Borrowers may, by notice to such affected Lender (y) require such
            Lender to furnish to Borrowers a statement setting forth the basis
            for adjusting such LIBOR Rate and the method for determining the
            amount of such adjustment, or (z) repay the LIBOR Rate Loans with
            respect to which such adjustment is made (together with any amounts
            due under clause (b)(ii) above).

                        (ii) In the event that any change in market conditions
            or any law, regulation, treaty, or directive, or any change therein
            or in the interpretation or application thereof, shall at any time
            after the date hereof, in the reasonable opinion of any Lender, make
            it unlawful or impractical for such Lender to fund or maintain LIBOR
            Rate Loans or to continue such funding or maintaining, or to
            determine or charge interest rates at the LIBOR Rate, such Lender
            shall give notice of such changed circumstances to Agent and
            Borrowers and Agent promptly shall transmit the notice to each other
            Lender

                                      -57-
<PAGE>
            and (y) in the case of any LIBOR Rate Loans of such Lender that are
            outstanding, the date specified in such Lender's notice shall be
            deemed to be the last day of the Interest Period of such LIBOR Rate
            Loans, and interest upon the LIBOR Rate Loans of such Lender
            thereafter shall accrue interest at the rate then applicable to Base
            Rate Loans, and (z) Borrowers shall not be entitled to elect the
            LIBOR Option until such Lender determines that it would no longer be
            unlawful or impractical to do so.

                  (e) NO REQUIREMENT OF MATCHED FUNDING. Anything to the
contrary contained herein notwithstanding, neither Agent, nor any Lender, nor
any of their Participants, is required actually to acquire eurodollar deposits
to fund or otherwise match fund any Obligation as to which interest accrues at
the LIBOR Rate. The provisions of this Section shall apply as if each Lender or
its Participants had match funded any Obligation as to which interest is
accruing at the LIBOR Rate by acquiring eurodollar deposits for each Interest
Period in the amount of the LIBOR Rate Loans.

      2.14 CAPITAL REQUIREMENTS. If, after the date hereof, any Lender
determines that (i) the adoption of or change in any law, rule, regulation or
guideline regarding capital requirements for banks or bank holding companies, or
any change in the interpretation or application thereof by any Governmental
Authority charged with the administration thereof, or (ii) compliance by such
Lender or its parent bank holding company with any guideline, request or
directive of any such entity regarding capital adequacy (whether or not having
the force of law), the effect of reducing the return on such Lender's or such
holding company's capital as a consequence of such Lender's Commitments
hereunder to a level below that which such Lender or such holding company could
have achieved but for such adoption, change, or compliance (taking into
consideration such Lender's or such holding company's then existing policies
with respect to capital adequacy and assuming the full utilization of such
entity's capital) by any amount deemed by such Lender to be material, then such
Lender may notify Borrowers and Agent thereof. Following receipt of such notice,
Borrowers agree to pay such Lender on demand the amount of such reduction of
return of capital as and when such reduction is determined, payable within 90
days after presentation by such Lender of a statement in the amount and setting
forth in reasonable detail such Lender's calculation thereof and the assumptions
upon which such calculation was based (which statement shall be deemed true and
correct absent manifest error). In determining such amount, such Lender may use
any reasonable averaging and attribution methods.

                                      -58-
<PAGE>
      2.15 JOINT AND SEVERAL LIABILITY OF BORROWERS.

            (a) Each of Borrowers is accepting joint and several liability
hereunder and under the other Loan Documents in consideration of the financial
accommodations to be provided by the Agent and the Lenders under this Agreement,
for the mutual benefit, directly and indirectly, of each of Borrowers and in
consideration of the undertakings of the other Borrowers to accept joint and
several liability for the Obligations.

            (b) Each of Borrowers, jointly and severally, hereby irrevocably and
unconditionally accepts, not merely as a surety but also as a co-debtor, joint
and several liability with the other Borrowers, with respect to the payment and
performance of all of the Obligations (including, without limitation, any
Obligations arising under this Section 2.15), it being the intention of the
parties hereto that all the Obligations shall be the joint and several
obligations of each Person composing Borrowers without preferences or
distinction among them.

            (c) If and to the extent that any of Borrowers shall fail to make
any payment with respect to any of the Obligations as and when due or to perform
any of the Obligations in accordance with the terms thereof, then in each such
event the other Persons composing Borrowers will make such payment with respect
to, or perform, such Obligation.

            (d) The Obligations of each Person composing Borrowers under the
provisions of this Section 2.15 constitute the absolute and unconditional, full
recourse Obligations of each Person composing Borrowers enforceable against each
such Borrower to the full extent of its properties and assets, irrespective of
the validity, regularity or enforceability of this Agreement or any other
circumstances whatsoever.

            (e) Except as otherwise expressly provided in this Agreement, each
Person composing Borrowers hereby waives notice of acceptance of its joint and
several liability, notice of any Advances or Letters of Credit issued under or
pursuant to this Agreement, notice of the occurrence of any Default, Event of
Default, or of any demand for any payment under this Agreement, notice of any
action at any time taken or omitted by Agent or Lenders under or in respect of
any of the Obligations, any requirement of diligence or to mitigate damages and,
generally, to the extent permitted by applicable law, all demands, notices and
other formalities of every kind in connection with this Agreement (except as
otherwise provided in this Agreement). Each Person composing Borrowers hereby
assents to, and waives notice of, any extension or postponement of the time for
the payment of any of the Obligations, the acceptance of any payment of any of
the Obligations, the acceptance of any partial payment thereon, any waiver,
consent or other action or acquiescence by Agent or Lenders at any time or times
in respect of any default by any Person composing Borrowers in the performance
or satisfaction of any term, covenant, condition or provision of this Agreement,
any and all other indulgences whatsoever by Agent or Lenders in respect of any
of the Obligations, and the taking, addition, substitution or release, in whole
or in part, at any time or times, of any security for any of the Obligations or
the addition, substitution or release, in whole or in part, of any Person
composing Borrowers. Without limiting the

                                      -59-
<PAGE>
generality of the foregoing, each of Borrowers assents to any other action or
delay in acting or failure to act on the part of any Agent or Lender with
respect to the failure by any Person composing Borrowers to comply with any of
its respective Obligations, including, without limitation, any failure strictly
or diligently to assert any right or to pursue any remedy or to comply fully
with applicable laws or regulations thereunder, which might, but for the
provisions of this Section 2.15 afford grounds for terminating, discharging or
relieving any Person composing Borrowers, in whole or in part, from any of its
Obligations under this Section 2.15, it being the intention of each Person
composing Borrowers that, so long as any of the Obligations hereunder remain
unsatisfied, the Obligations of such Person composing Borrowers under this
Section 2.15 shall not be discharged except by performance and then only to the
extent of such performance. The Obligations of each Person composing Borrowers
under this Section 2.15 shall not be diminished or rendered unenforceable by any
winding up, reorganization, arrangement, liquidation, reconstruction or similar
proceeding with respect to any Person composing Borrowers or any Agent or
Lender. The joint and several liability of the Persons composing Borrowers
hereunder shall continue in full force and effect notwithstanding any
absorption, merger, amalgamation or any other change whatsoever in the name,
constitution or place of formation of any of the Persons composing Borrowers or
any Agent or Lender.

            (f) Each Person composing Borrowers represents and warrants to Agent
and Lenders that such Borrower is currently informed of the financial condition
of Borrowers and of all other circumstances which a diligent inquiry would
reveal and which bear upon the risk of nonpayment of the Obligations. Each
Person composing Borrowers further represents and warrants to Agent and Lenders
that such Borrower has read and understands the terms and conditions of the Loan
Documents. Each Person composing Borrowers hereby covenants that such Borrower
will continue to keep informed of Borrowers' financial condition, the financial
condition of the Guarantors, if any, and of all other circumstances which bear
upon the risk of nonpayment or nonperformance of the Obligations.

            (g) Each of the Persons composing Borrowers waives all rights and
defenses arising out of an election of remedies by the Agent or any Lender, even
though that election of remedies, such as a nonjudicial foreclosure with respect
to security for a guaranteed obligation, has destroyed the Agent's or such
Lender's rights of subrogation and reimbursement against such Borrower by the
operation of Section 580(d) of the California Code of Civil Procedure or
otherwise.

            (h) Intentionally Deleted.

            (i) The provisions of this Section 2.15 are made for the benefit of
the Agent, the Lenders and their respective successors and assigns, and may be
enforced by it or them from time to time against any or all of the Persons
composing Borrowers as often as occasion therefor may arise and without
requirement on the part of any such Agent, Lender, successor or assign first to
marshal any of its or their claims or to exercise any of its or their rights
against any of the other Persons composing Borrowers or to exhaust any remedies
available to it or them against any of the other Persons composing Borrowers or
to resort to

                                      -60-
<PAGE>
any other source or means of obtaining payment of any of the Obligations
hereunder or to elect any other remedy. The provisions of this Section 2.15
shall remain in effect until all of the Obligations shall have been paid in full
or otherwise fully satisfied. If at any time, any payment, or any part thereof,
made in respect of any of the Obligations, is rescinded or must otherwise be
restored or returned by any Agent or Lender upon the insolvency, bankruptcy or
reorganization of any of the Persons composing Borrowers, or otherwise, the
provisions of this Section 2.15 will forthwith be reinstated in effect, as
though such payment had not been made.

            (j) Each of the Persons composing Borrowers hereby agrees that it
will not enforce any of its rights of contribution or subrogation against the
other Persons composing Borrowers with respect to any liability incurred by it
hereunder or under any of the other Loan Documents, any payments made by it to
the Agent or the Lenders with respect to any of the Obligations or any
collateral security therefor until such time as all of the Obligations have been
paid in full in cash. Any claim which any Borrower may have against any other
Borrower with respect to any payments to any Agent or Lender hereunder or under
any other Loan Documents are hereby expressly made subordinate and junior in
right of payment, without limitation as to any increases in the Obligations
arising hereunder or thereunder, to the prior payment in full in cash of the
Obligations and, in the event of any insolvency, bankruptcy, receivership,
liquidation, reorganization or other similar proceeding under the laws of any
jurisdiction relating to any Borrower, its debts or its assets, whether
voluntary or involuntary, all such Obligations shall be paid in full in cash
before any payment or distribution of any character, whether in cash, securities
or other property, shall be made to any other Borrower therefor.

            (k) Each of the Persons composing Borrowers hereby agrees that,
after the occurrence and during the continuance of any Default or Event of
Default, the payment of any amounts due with respect to the indebtedness owing
by any Borrower to any other Borrower is hereby subordinated to the prior
payment in full in cash of the Obligations. Each Borrower hereby agrees that
after the occurrence and during the continuance of any Default or Event of
Default, such Borrower will not demand, sue for or otherwise attempt to collect
any indebtedness of any other Borrower owing to such Borrower until the
Obligations shall have been paid in full in cash. If, notwithstanding the
foregoing sentence, such Borrower shall collect, enforce or receive any amounts
in respect of such indebtedness, such amounts shall be collected, enforced and
received by such Borrower as trustee for the Agent, and the Agent shall deliver
any such amounts to the Administrative Agent for application to the Obligations
in accordance with Section 2.4(b).

      2.16 NOTELESS AGREEMENT. No promissory notes shall evidence the payment
obligations of any Advances of Borrowers to any Lender. Each Lender shall
maintain in accordance with its usual practice an account or accounts on its
books evidencing the obligations of Borrowers resulting from each Advance made
by such Lender from time to time, including the amounts of principal and
interest payable and paid to such Lender hereunder. The entries maintained in
said accounts shall be prima facie evidence of the existence and amounts of the
Advances made by each Lender and the payment obligations of

                                      -61-
<PAGE>
Borrowers; provided, however, that the failure of a Lender to maintain such
accounts or any error therein shall not in any manner affect the obligation of
Borrowers to repay the Advances.

      2.17 CURRENCY INDEMNITY. If, for the purposes of obtaining judgment in any
court in any jurisdiction with respect to this Agreement or any other Loan
Document, it becomes necessary to convert into the currency of such jurisdiction
(the "Judgment Currency") any amount due under this Agreement or under any other
Loan Document in any currency other than the Judgment Currency (the "Currency
Due"), then conversion shall be made at the rate of exchange prevailing on the
Business Day before the day on which judgment is given. For this purpose "rate
of exchange" means the rate at which Bank of Montreal is able, on the relevant
date, to purchase the Currency Due with the Judgment Currency in accordance with
its normal practice at its main branch in Montreal, Quebec, Canada. In the event
that there is a change in the rate of exchange prevailing between the Business
Day before the day on which the judgment is given and the date of receipt by the
Agent of the amount due, the Borrowers will, on the date of receipt by the
Agent, pay such additional amounts, if any, or be entitled to receive
reimbursement of such amount, if any as may be necessary to ensure that the
amount received by the Agent on such date is the amount in the Judgment Currency
which when converted at the rate of exchange prevailing on the date of receipt
by the Agent is the amount then due under this Agreement or such other Loan
Document in the Currency Due. If the amount of the Currency Due which the Agent
is so able to purchase is less than the amount of the Currency Due originally
due to it, the Borrowers shall indemnify and save the Agent and the Lenders
harmless from and against loss or damage arising as a result of such deficiency.
This indemnity shall constitute an obligation separate and independent from the
other obligations contained in this Agreement and the other Loan Document, shall
give rise to a separate and independent cause of action, shall apply
irrespective of any indulgence granted by the Agent from time to time and shall
continue in full force and effect notwithstanding any judgment or order for a
liquidated sum in respect of an amount due under this Agreement or any other
Loan or under any judgment or order.

3. CONDITIONS; TERM OF AGREEMENT.

      3.1 CONDITIONS PRECEDENT TO THE INITIAL EXTENSION OF CREDIT. The
obligation of the Lender Group (or any member thereof) to make the initial
Advance (or otherwise to extend any credit provided for hereunder), is subject
to the fulfillment, to the satisfaction of Agent, of each of the conditions
precedent set forth below:

                  (a) the Closing Date shall occur on or before December 31,
2001;

                  (b) Agent shall have received all UCC-1 financing statements,
fixture filings, or PPSA financing statements or other equivalent forms of
registration required by Agent which are necessary to perfect Agent's Liens in
the Collateral, and Agent shall have received searches reflecting the filing of
all such financing statements and other equivalent forms;

                                      -62-
<PAGE>
                  (c) Agent shall have received each of the following documents,
in form and substance satisfactory to Agent, duly executed, and each such
document shall be in full force and effect:

                  (i) the Canadian Security Documents;

                  (ii) the Cash Management Agreements,

                  (iii) the Control Agreements,

                  (iv) the Disbursement Letter,

                  (v) the Fee Letter,

                  (vi) the Guaranty,

                  (vii) the Officers' Certificate,

                  (viii) the Pay-Off Letter, together with UCC termination
            statements and other documentation evidencing the termination by
            Existing Lender of its Liens in and to the properties and assets of
            Borrower, including, without limitation a termination agreement
            substantially in the form attached as Exhibit E-1 hereto,

                  (ix) the Intercompany Notes,

                  (x) the Intercreditor Agreement,

                  (xi) the Notice and Acknowledgment of No Oral Agreements, and

                  (xii) any and all other documents executed prior to or upon
            the Closing Date by Borrowers, Guarantors and Lenders in connection
            with this Agreement.

                  (d) Agent shall have received a certificate from the Secretary
of each Borrower attesting to the resolutions of such Borrower's Board of
Directors authorizing its execution, delivery, and performance of this Agreement
and the other Loan Documents to which such Borrower is a party and authorizing
specific officers of such Borrower to execute the same;

                  (e) Agent shall have received copies of each Borrower's
Governing Documents, as amended, modified, or supplemented to the Closing Date,
certified by the Secretary of such Borrower;

                  (f) Agent shall have received a certificate of status with
respect to each Borrower, dated within 10 days of the Closing Date, such
certificate to be issued by the

                                      -63-
<PAGE>
appropriate officer of the jurisdiction of organization of such Borrower, which
certificate shall indicate that such Borrower is in good standing in such
jurisdiction;

                  (g) Intentionally Deleted;

                  (h) Agent shall have received a certificate from the Secretary
of each Guarantor attesting to the resolutions of such Guarantor's Board of
Directors authorizing its execution, delivery, and performance of the Loan
Documents to which such Guarantor is a party and authorizing specific officers
of such Guarantor to execute the same;

                  (i) Agent shall have received copies of each Guarantor's
Governing Documents, as amended, modified, or supplemented to the Closing Date,
certified by the Secretary of such Guarantor;

                  (j) Agent shall have received a certificate of status with
respect to each Guarantor, dated within 10 days of the Closing Date, such
certificate to be issued by the appropriate officer of the jurisdiction of
organization of such Guarantor, which certificate shall indicate that such
Guarantor is in good standing in such jurisdiction;

                  (k) Agent shall have received certificates of status with
respect to each Guarantor, each dated within 30 days of the Closing Date, such
certificates to be issued by the appropriate officer of the jurisdictions (other
than the jurisdiction of organization of such Guarantor) in which its failure to
be duly qualified or licensed would constitute a Material Adverse Change, which
certificates shall indicate that such Guarantor is in good standing in such
jurisdictions;

                  (l) Agent shall have received a certificate of insurance,
together with the endorsements thereto, as are required by Section 6.8, the form
and substance of which shall be reasonably satisfactory to Agent;

                  (m) Intentionally deleted;

                  (n) Agent shall have received opinions of Borrowers' and
Guarantors' counsel in form and substance reasonably satisfactory to Agent;

                  (o) Agent shall have received satisfactory evidence (including
a certificate of the chief financial officer of each Borrower) that all Returns
required to be filed by Borrowers have been timely filed and all Taxes upon
Borrowers or their properties, assets, income, and franchises (including Real
Property Taxes and payroll Taxes) have been paid prior to delinquency, except
such Taxes that are the subject of a Permitted Protest;

                  (p) Borrowers shall have the Required Availability after
giving effect to the initial extensions of credit hereunder;

                  (q) Agent shall have completed its business, legal, and
collateral due diligence, including (i) a collateral audit and review of
Borrowers' books and records and

                                      -64-
<PAGE>
verification of Borrowers' representations and warranties to the Lender Group,
the results of which shall be reasonably satisfactory to Agent, and (ii) an
inspection of each of the locations where Inventory is located, the results of
which shall be reasonably satisfactory to Agent;

                  (r) Agent shall have received completed reference checks with
respect to Borrowers' senior management, the results of which shall be
reasonably satisfactory to Agent in its sole discretion;

                  (s) Agent shall have received an appraisal of the Liquidation
Percentage applicable to Borrowers' Inventory, the results of which shall be
satisfactory to Agent;

                  (t) Agent shall have received Borrowers' Closing Date Business
Plan that is satisfactory to Agent and that provides verification that the
Borrowers have reduced the amount of accounts payable set forth in financial
statements prepared prior to the Chapter 11 Bankruptcy Proceeding by at least
$12,000,000;

                  (u) Borrowers shall pay all Lender Group Expenses incurred in
connection with the transactions evidenced by this Agreement;

                  (v) Agent shall have received and approved executed copies of
each of the Indenture Documents, together with a certificate of the Secretary of
the applicable Borrower certifying each such document as being a true, correct,
and complete copy thereof and the same shall be in full force and effect;

                  (w) Borrowers shall have received all licenses, approvals or
evidence of other actions required by any Governmental Authority in connection
with the execution and delivery by Borrowers and Guarantors of this Agreement or
any other Loan Document or with the consummation of the transactions
contemplated hereby and thereby;

                  (x) all other documents and legal matters in connection with
the transactions contemplated by this Agreement shall have been delivered,
executed, or recorded and shall be in form and substance reasonably satisfactory
to Agent;

                  (y) the Bankruptcy Courts shall have entered a final
non-appealable order, in form and substance acceptable to the Agent and Lenders,
confirming the Plan of Reorganization and authorizing and granting final
approval of the financing transaction contemplated by and between the Borrowers
and the Lenders and evidenced by this Agreement which order shall not be subject
to any pending appeal, stay, injunction, request for a stay or injunction or
request for reargument or reconsideration of any type;

                  (z) Agent shall have completed a Senior Sponsor Visit in
accordance with its customary procedures;

                                      -65-
<PAGE>
                  (aa) Agent shall have received satisfactory evidence
(including a certificate of the chief financial officer of Parent) that all
amounts required to be included in the gross income of Parent pursuant to
Section 951 of the IRC, including amounts in connection with prior credit
arrangements where Borrowers (or the predecessors of Borrowers) were pledgors or
guarantors of all or any portion of an obligation of Parent (or the predecessors
of Parent), have in fact been properly reported on all Returns required to be
filed by Parent and all Taxes related thereto have been paid by Parent prior to
delinquency; and

                  (bb) The Indenture Documents shall have been duly and validly
executed by the parties thereto and the transaction contemplated thereby shall
have closed.

      3.2 CONDITIONS SUBSEQUENT TO THE INITIAL EXTENSION OF CREDIT. The
obligation of the Lender Group (or any member thereof) to continue to make
Advances (or otherwise extend credit hereunder) is subject to the fulfillment,
on or before the date applicable thereto, of each of the conditions subsequent
set forth below (the failure by Borrowers to so perform or cause to be performed
constituting an Event of Default).

                  (a) within thirty (30) days of the Closing Date, delivery to
Agent of certified copies of the policies of insurance, together with the
endorsements thereto, as are required by Section 6.8, the form and substance of
which shall be satisfactory to Agent and its counsel;

                  (b) within thirty (30) days of the Closing Date, delivery to
Agent of certificates of status with respect to each Borrower issued by the
appropriate officer of the jurisdictions (other than the jurisdiction of
organization of such Borrower) in which its failure to be so duly qualified or
licensed would constitute a Material Adverse Change, which certificates shall
indicate that such Borrower is in good standing in such jurisdiction;

                  (c) within thirty (30) days of the Closing Date, delivery to
Agent of Collateral Access Agreements with respect to the locations specified in
Schedule 5.5 to the extent not specified in Schedule E-1;

                  (d) within ten (10) days of the Closing Date, delivery to
Agent of a blocked account agreement, in form, scope, and content acceptable to
Agent, executed by Bank of Montreal and Agent; and

                  (e) within ten (10) days of the Closing Date, delivery to
Agent of an itemization by Governmental Authority of all unpaid taxes owing by
each Borrower and each Guarantor, in form and scope acceptable to Agent.

                                      -66-
<PAGE>
      3.3 CONDITIONS PRECEDENT TO ALL EXTENSIONS OF CREDIT. The obligation of
the Lender Group (or any member thereof) to make all Advances (or to extend any
other credit hereunder) shall be subject to the following conditions precedent:

                  (a) the representations and warranties contained in this
Agreement and the other Loan Documents shall be true and correct in all material
respects on and as of the date of such extension of credit, as though made on
and as of such date (except to the extent that such representations and
warranties relate solely to an earlier date);

                  (b) no Default or Event of Default shall have occurred and be
continuing on the date of such extension of credit, nor shall either result from
the making thereof;

                  (c) no injunction, writ, restraining order, or other order of
any nature prohibiting, directly or indirectly, the extending of such credit
shall have been issued andremain in force by any Governmental Authority against
any Borrower, Agent, any Lender, or any of their Affiliates; and

                  (d) no Material Adverse Change shall have occurred.

      3.4 EXTENSION OF CREDIT IN EXCESS OF $30,000,000.00. The obligation of the
Lender Group (or any member thereof) to make Advances or issue Letters of Credit
(or otherwise to extend credit provided for hereunder) in excess of
$30,000,000.00 in the aggregate is subject to Foothill's successful assignment
and delegation to one or more Assignees acceptable to Foothill (and Agent's
written consent thereof) of a ratable portion of all the Obligations, the
Commitment, and the other rights and obligations of Foothill as Lender hereunder
and under the other Loan Documents in a minimum amount of $20,000,000.00, all in
accordance with and subject to compliance with the terms and conditions set
forth in Article 14.

      3.5 TERM. This Agreement shall become effective upon the execution and
delivery hereof by Borrowers, Agent, and the Lenders and shall continue in full
force and effect for a term ending on December 31, 2004 (the "Maturity Date").
The foregoing notwithstanding, the Lender Group, upon the election of the
Required Lenders, shall have the right to terminate its obligations under this
Agreement immediately and without notice upon the occurrence and during the
continuation of an Event of Default.

      3.6 EFFECT OF TERMINATION. On the date of termination of this Agreement,
all Obligations (including contingent reimbursement obligations of Borrowers
with respect to any outstanding Letters of Credit and including all Bank
Products Obligations) immediately shall become due and payable without notice or
demand (including (a) either (i) providing cash collateral to be held by Agent
for the benefit of the Lenders in an amount equal to 105% of the then extant
Letter of Credit Usage, or (ii) causing the original Letters of Credit to be
returned to the Issuing Lender, and (b) providing cash collateral to be held by
Agent for the benefit of Wells Fargo or its Affiliates with respect to the then
extant Bank Products Obligations). No termination of this Agreement, however,
shall relieve or discharge Borrowers of their duties, Obligations, or covenants
hereunder and the Agent's Liens in the

                                      -67-
<PAGE>
Collateral shall remain in effect until all Obligations have been fully and
finally discharged and the Lender Group's obligations to provide additional
credit hereunder have been terminated. When this Agreement has been terminated
and all of the Obligations have been fully and finally discharged and the Lender
Group's obligations to provide additional credit under the Loan Documents have
been terminated irrevocably, Agent will, at Borrowers' sole expense, execute and
deliver any UCC termination statements, lien releases, discharges of security
interests, and other similar discharge or release documents (and, if applicable,
in recordable form) as are reasonably necessary to release, as of record, the
Agent's Liens and all notices of security interests and liens previously filed
by Agent with respect to the Obligations.

      3.7 EARLY TERMINATION BY BORROWERS. Borrowers have the option, at any time
upon 90 days prior written notice by Borrowers to Agent, to terminate this
Agreement by paying to Agent, for the benefit of the Lender Group, in cash, the
Obligations (including (a) either (i) providing cash collateral to be held by
Agent for the benefit of the Lenders in an amount equal to 105% of the then
extant Letter of Credit Usage, or (ii) causing the original Letters of Credit to
be returned to the Issuing Lender, and (b) providing cash collateral to be held
by Agent for the benefit of Wells Fargo or its Affiliates with respect to the
then extant Bank Products Obligations), in full, together with the Applicable
Prepayment Premium (to be allocated based upon letter agreements between Agent
and individual Lenders). If Borrowers have sent a notice of termination pursuant
to the provisions of this Section, then the Commitments shall terminate and
Borrowers shall be obligated to repay the Obligations (including (a) either (i)
providing cash collateral to be held by Agent for the benefit of the Lenders in
an amount equal to 105% of the then extant Letter of Credit Usage, or (ii)
causing the original Letters of Credit to be returned to the Issuing Lender, and
(b) providing cash collateral to be held by Agent for the benefit of Wells Fargo
or its Affiliates with respect to the then extant Bank Products Obligations), in
full, together with the Applicable Prepayment Premium, on the date set forth as
the date of termination of this Agreement in such notice. In the event of the
termination of this Agreement and repayment of the Obligations at any time prior
to the Maturity Date, for any other reason, including (a) termination upon the
election of the Required Lenders to terminate after the occurrence of an Event
of Default, (b) foreclosure and sale of Collateral, (c) sale of the Collateral
in any Insolvency Proceeding, or (iv) restructure, reorganization or compromise
of the Obligations by the confirmation of a plan of reorganization, or any other
plan of compromise, restructure, or arrangement in any Insolvency Proceeding,
then, in view of the impracticability and extreme difficulty of ascertaining the
actual amount of damages to the Lender Group or profits lost by the Lender Group
as a result of such early termination, and by mutual agreement of the parties as
to a reasonable estimation and calculation of the lost profits or damages of the
Lender Group, Borrowers shall pay the Applicable Prepayment Premium to Agent (to
be allocated based upon letter agreements between Agent and individual Lenders),
measured as of the date of such termination.

                                      -68-
<PAGE>
4. CREATION OF SECURITY INTEREST.

      4.1 GRANT OF SECURITY INTEREST. Each Borrower hereby grants to Agent, for
the benefit of the Lender Group, a continuing security interest in all of its
right, title, and interest in all currently existing and hereafter acquired or
arising Collateral in order to secure prompt repayment of any and all of the
Obligations in accordance with the terms and conditions of the Loan Documents
and in order to secure prompt performance by Borrowers of each of their
covenants and duties under the Loan Documents. Borrowers authorize Agent and
Lenders to file one or more financing statements and amendments thereto that
contain the information required by Article 9 of the Code or by the applicable
provisions of the PPSA or other equivalent law of each applicable jurisdiction
without the signature of Borrowers where permitted by law. The Agent's Liens in
and to the Collateral shall attach to all Collateral without further act on the
part of Agent or Borrowers. Anything contained in this Agreement or any other
Loan Document to the contrary notwithstanding, except for Permitted
Dispositions, Borrowers have no authority, express or implied, to dispose of any
item or portion of the Collateral.

      4.2 NEGOTIABLE COLLATERAL. In the event that any Collateral, including
proceeds, is evidenced by or consists of Negotiable Collateral, and if and to
the extent that perfection or priority of Agent's security interest is dependent
on or enhanced by possession, the applicable Borrower, immediately upon the
request of Agent, shall endorse and deliver physical possession of such
Negotiable Collateral to Agent.

      4.3 COLLECTION OF ACCOUNTS, GENERAL INTANGIBLES, AND NEGOTIABLE
COLLATERAL. At any time after the occurrence and during the continuation of an
Event of Default, Agent or Agent's designee may (a) notify Account Debtors of
Borrowers that the Accounts, chattel paper, or General Intangibles have been
assigned to Agent or that Agent has a security interest therein, or (b) collect
the Accounts, chattel paper, or General Intangibles directly and charge the
collection costs and expenses to the Loan Account. Each Borrower agrees that it
will hold in trust for the Lender Group, as the Lender Group's trustee, any
Collections that it receives and immediately will deliver said Collections to
Agent or a Cash Management Bank in their original form as received by the
applicable Borrower.

      4.4 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED. At any time upon the
request of Agent, Borrowers shall execute and deliver to Agent, any and all
financing statements, original financing statements in lieu of continuation
statements, fixture filings, security agreements, pledges, assignments,
endorsements of certificates of title, and all other documents (the "Additional
Documents") that Agent may request in its Permitted Discretion, in form and
substance satisfactory to Agent, to perfect and continue perfected or better
perfect the Agent's Liens in the Collateral (whether now owned or hereafter
arising or acquired), and in order to fully consummate all of the transactions
contemplated hereby and under the other Loan Documents. To the maximum extent
permitted by applicable law, each Borrower authorizes Agent to execute any such
Additional Documents in the applicable Borrower's name and authorize Agent to
file such executed Additional Documents in any appropriate filing office.

                                      -69-
<PAGE>
      4.5 POWER OF ATTORNEY. Each Borrower hereby irrevocably makes,
constitutes, and appoints Agent (and any of Agent's officers, employees, or
agents designated by Agent) as such Borrower's true and lawful attorney, with
power to (a) if such Borrower refuses to, or fails timely to execute and deliver
any of the documents described in Section 4.4, sign the name of such Borrower on
any of the documents described in Section 4.4, (b) at any time that an Event of
Default has occurred and is continuing, sign such Borrower's name on any invoice
or bill of lading relating to the Collateral, drafts against Account Debtors, or
notices to Account Debtors, (c) send requests for verification of Accounts, (d)
endorse such Borrower's name on any Collection item that may come into the
Lender Group's possession, (e) at any time that an Event of Default has occurred
and is continuing, make, settle, and adjust all claims under such Borrower's
policies of insurance and make all determinations and decisions with respect to
such policies of insurance to the extent such claims relate to the Collateral,
and (f) at any time that an Event of Default has occurred and is continuing,
settle and adjust disputes and claims respecting the Accounts, chattel paper, or
General Intangibles directly with Account Debtors, for amounts and upon terms
that Agent determines to be reasonable, and Agent may cause to be executed and
delivered any documents and releases that Agent determines to be necessary. The
appointment of Agent as each Borrower's attorney, and each and every one of its
rights and powers, being coupled with an interest, is irrevocable until all of
the Obligations have been fully and finally repaid and performed and the Lender
Group's obligations to extend credit hereunder are terminated.

      4.6 RIGHT TO INSPECT. Agent and each Lender (through any of their
respective officers, employees, or agents) shall have the right, from time to
time hereafter to inspect the Books and to check, test, and appraise the
Collateral in order to verify Borrowers' financial condition or the amount,
quality, value, condition of, or any other matter relating to, the Collateral.

      4.7 CONTROL AGREEMENTS. Each Borrower agrees that it will not transfer
assets out of any Securities Accounts other than as permitted under Section 7.19
and, if to another securities intermediary, unless each of the applicable
Borrower, Agent, and the substitute securities intermediary have entered into a
Control Agreement. No arrangement contemplated hereby or by any Control
Agreement in respect of any Securities Accounts or other Investment Property
shall be modified by Borrowers without the prior written consent of Agent. Upon
the occurrence and during the continuance of a Default or Event of Default,
Agent may, at the direction of the Required Lenders, notify any securities
intermediary to liquidate the applicable Securities Account or any related
Investment Property maintained or held thereby and remit the proceeds thereof to
the Agent's Account for application to the Obligations pursuant to Section 2.4.

5. REPRESENTATIONS AND WARRANTIES.

            In order to induce the Lender Group to enter into this Agreement,
each Borrower makes the following representations and warranties to the Lender
Group which shall be true, correct, and complete, in all material respects, as
of the date hereof, and shall be true, correct, and complete, in all material
respects, as of the Closing Date, and at and as of

                                      -70-
<PAGE>
the date of the making of each Advance (or other extension of credit) made
thereafter, as though made on and as of the date of such Advance (or other
extension of credit) (except to the extent that such representations and
warranties relate solely to an earlier date) and such representations and
warranties shall survive the execution and delivery of this Agreement:

      5.1 NO ENCUMBRANCES. Each Borrower has good and marketable title to its
Collateral, free and clear of Liens except for Permitted Liens.

      5.2 ELIGIBLE ACCOUNTS. The Eligible Accounts are bona fide existing
payment obligations of Account Debtors created by the sale and delivery of
Inventory or the rendition of services to such Account Debtors in the ordinary
course of Borrowers' business, owed to Borrowers without defenses, disputes,
offsets, counterclaims, or rights of return or cancellation. As to each Account
that is identified by Borrowers as an Eligible Account in a borrowing base
report submitted to Agent, such Account is not excluded as ineligible by virtue
of one or more of the excluding criteria set forth in the definition of eligible
Accounts.

      5.3 ELIGIBLE INVENTORY. All Eligible Inventory is of good and merchantable
quality, free from defects. As to each item of Inventory that is identified by
Borrowers as Eligible Inventory in a borrowing base report submitted to Agent,
such Inventory is not excluded as ineligible by virtue of one or more of the
excluding criteria set forth in the definitions of Eligible Finished Goods
Inventory or Eligible Raw Materials Inventory.

      5.4 EQUIPMENT. All of the Equipment is used or held for use in Borrowers'
business and is fit for such purposes.

      5.5 LOCATION OF INVENTORY. The Inventory is not stored with a bailee,
warehouseman, or similar party and is located only at the locations identified
on Schedule 5.5 (other than Inventory in transit between locations specified in
Schedule 5.5).

      5.6 INVENTORY RECORDS. Each Borrower keeps correct and accurate records
itemizing and describing the type, quality, and quantity of its Inventory and
the book value thereof.

      5.7 LOCATION OF CHIEF EXECUTIVE OFFICE; FEIN. The chief executive office
of each Borrower is located at the address indicated in Schedule 5.7 and each
Borrower's FEIN is identified in Schedule 5.7.

      5.8 DUE ORGANIZATION AND QUALIFICATION; SUBSIDIARIES

                  (a) Each Borrower is duly organized and existing and in good
standing under the laws of the jurisdiction of its organization and qualified to
do business in any state where the failure to be so qualified reasonably could
be expected to have a Material Adverse Change.

                  (b) Set forth on Schedule 5.8(b), is a complete and accurate
description of the authorized capital Stock of each Borrower, by class, and, as
of the Closing Date, a description of the number of shares of each such class
that are issued and outstanding. Other

                                      -71-
<PAGE>
than as described on Schedule 5.8(b), there are no subscriptions, options,
warrants, or calls relating to any shares of each Borrower's capital Stock,
including any right of conversion or exchange under any outstanding security or
other instrument. No Borrower is subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of its
capital Stock or any security convertible into or exchangeable for any of its
capital Stock.

                  (c) Set forth on Schedule 5.8(c), is a complete and accurate
list of each Borrower's direct and indirect Subsidiaries, showing: (i) the
jurisdiction of their organization; (ii) the number of shares of each class of
common and preferred Stock authorized for each of such Subsidiaries; and (iii)
the number and the percentage of the outstanding shares of each such class owned
directly or indirectly by the applicable Borrower. All of the outstanding
capital Stock of each such Subsidiary has been validly issued and is fully paid
and non-assessable.

                  (d) Except as set forth on Schedule 5.8(c), there are no
subscriptions, options, warrants, or calls relating to any shares of any
Borrower's Subsidiaries' capital Stock, including any right of conversion or
exchange under any outstanding security or other instrument. No Borrower or any
of its respective Subsidiaries is subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of any
Borrower's Subsidiaries' capital Stock or any security convertible into or
exchangeable for any such capital Stock.

      5.9 DUE AUTHORIZATION; NO CONFLICT.

                  (a) As to each Borrower, the execution, delivery, and
performance by such Borrower of this Agreement and the Loan Documents to which
it is a party have been duly authorized by all necessary action on the part of
such Borrower.

                  (b) As to each Borrower, the execution, delivery, and
performance by such Borrower of this Agreement and the Loan Documents to which
it is a party do not and will not (i) violate any provision of federal, state,
or local law or regulation applicable to any Borrower, the Governing Documents
of any Borrower, or any order, judgment, or decree of any court or other
Governmental Authority binding on any Borrower, (ii) conflict with, result in a
breach of, or constitute (with due notice or lapse of time or both) a default
under any material contractual obligation of any Borrower, (iii) result in or
require the creation or imposition of any Lien of any nature whatsoever upon any
properties or assets of Borrower, other than Permitted Liens, or (iv) require
any approval of any Borrower's interestholders or any approval or consent of any
Person under any material contractual obligation of any Borrower (except for
approvals and consents which have been obtained prior to the date of this
Agreement and are in full force and effect).

                  (c) Other than the filing of financing statements, the
execution, delivery, and performance by each Borrower of this Agreement and the
Loan Documents to which such Borrower is a party do not and will not require any
registration with, consent, or approval of, or notice to, or other action with
or by, any Governmental Authority or other

                                      -72-
<PAGE>
Person (other than approval of the Bankruptcy Courts through confirmation of the
Plan of Reorganization).

                  (d) As to each Borrower, this Agreement and the other Loan
Documents to which such Borrower is a party, and all other documents
contemplated hereby and thereby, when executed and delivered by such Borrower
will be the legally valid and binding obligations of such Borrower, enforceable
against such Borrower in accordance with their respective terms, except as
enforcement may be limited by equitable principles or by bankruptcy, insolvency,
reorganization, moratorium, or similar laws relating to or limiting creditors'
rights generally.

                  (e) The Agent's Liens are validly created, perfected, and
first priority Liens, subject only to Permitted Liens.

                  (f) The execution, delivery, and performance by each Guarantor
of the Loan Documents to which it is a party have been duly authorized by all
necessary action on the part of such Guarantor.

                  (g) The execution, delivery, and performance by each Guarantor
of the Loan Documents to which it is a party do not and will not (i) violate any
provision of any (domestic or foreign) federal, state, province, county or local
law or regulation applicable to such Guarantor, the Governing Documents of such
Guarantor, or any order, judgment, or decree of any court or other Governmental
Authority binding on such Guarantor, (ii) conflict with, result in a breach of,
or constitute (with due notice or lapse of time or both) a default under any
material contractual obligation of such Guarantor, (iii) result in or require
the creation or imposition of any Lien of any nature whatsoever upon any
properties or assets of such Guarantor, other than Permitted Liens, or (iv)
require any approval of such Guarantor's interestholders or any approval or
consent of any Person under any material contractual obligation of such
Guarantor (except for approvals and consents which have been obtained prior to
the date of this Agreement and are in full force and effect).

                  (h) The execution, delivery, and performance by each Guarantor
of the Loan Documents to which such Guarantor is a party do not and will not
require any registration with, consent, or approval of, or notice to, or other
action with or by, any Governmental Authority or other Person (other than
approval of the Bankruptcy Courts through confirmation of the Plan of
Reorganization).

                  (i) The Loan Documents to which each Guarantor is a party, and
all other documents contemplated hereby and thereby, when executed and delivered
by such Guarantor will be legally valid and binding obligations of such
Guarantor, enforceable against such Guarantor in accordance with their
respective terms, except as enforcement may be limited by equitable principles
or by bankruptcy, insolvency, reorganization, moratorium, or similar laws
relating to or limiting creditors' rights generally.

      5.10 LITIGATION. Other than those matters disclosed on Schedule 5.10,
there are no actions, suits, or proceedings pending or, to the best knowledge of
Borrowers, threatened

                                      -73-
<PAGE>
against Borrowers or any of their Subsidiaries, or any Guarantor, except for (a)
matters that are fully covered by insurance (subject to customary deductibles),
and (b) matters arising after the Closing Date that, if decided adversely to
Borrowers or any of their Subsidiaries, or any Guarantor reasonably could not be
expected to result in a Material Adverse Change.

      5.11 NO MATERIAL ADVERSE CHANGE. All financial statements (other than the
financial statements as of June 30, 2001, prior to restatement) relating to
Borrowers and Guarantors that have been delivered by Borrowers and Guarantors to
the Lender Group have been prepared in accordance with GAAP (except, in the case
of unaudited financial statements, for the lack of footnotes and being subject
to year-end audit adjustments) and present fairly in all material respects,
Borrowers' and Guarantors', as applicable, financial condition as of the date
thereof and results of operations for the period then ended. There has not been
a Material Adverse Change with respect to Borrowers or Guarantors, as
applicable, since the date of the latest financial statements submitted to the
Lender Group on or before the Closing Date.

      5.12 FRAUDULENT TRANSFER.

                  (a) each Borrower and each Guarantor is Solvent.

                  (b) No transfer of property is being made by any Borrower or
any Guarantor and no obligation is being incurred by any Borrower or any
Guarantor in connection with the transactions contemplated by this Agreement or
the other Loan Documents with the intent to hinder, delay, or defraud either
present or future creditors of Borrowers or Guarantors.

      5.13 EMPLOYEE BENEFITS. Except as set forth on Schedule 5.13, none of
Borrowers, any of their Subsidiaries, or any of their ERISA Affiliates maintains
or contributes to any Benefit Plan.

      5.14 ENVIRONMENTAL CONDITION. Except as set forth on Schedule 5.14, (a) to
Borrowers' knowledge, none of Borrowers' properties or assets has ever been used
by Borrowers or by previous owners or operators in the disposal of, or to
produce, store, handle, treat, release, or transport, any Hazardous Materials,
where such production, storage, handling, treatment, release or transport was in
violation, in any material respect, of applicable Environmental Law, (b) to
Borrowers' knowledge, none of Borrowers' properties or assets has ever been
designated or identified in any manner pursuant to any Environmental Law as a
Hazardous Materials disposal site for which Remedial Action is required, (c)
none of Borrowers have received notice that a Lien arising under any
Environmental Law has attached to any revenues or to any Real Property owned or
operated by Borrowers, and (d) none of Borrowers have received a summons,
citation, notice, or directive from the Environmental Protection Agency or any
other federal or state governmental agency concerning any action or omission by
any Borrower resulting in the releasing or disposing of Hazardous Materials into
the environment.

                                      -74-
<PAGE>
      5.15 BROKERAGE FEES. Borrowers have not utilized the services of any
broker or finder in connection with Borrowers' obtaining financing from the
Lender Group under this Agreement and no brokerage commission or finders fee is
payable by Borrowers in connection herewith.

      5.16 INTELLECTUAL PROPERTY. Each Borrower owns, or holds licenses in, all
trademarks, trade names, copyrights, patents, patent rights, and licenses that
are necessary to the conduct of its business as currently conducted.. Attached
hereto as Schedule 5.16 is a true, correct, and complete listing of all material
patents, patent applications, trademarks, trademark applications, copyrights,
and copyright registrations as to which each Borrower is the owner or is an
exclusive licensee.

      5.17 LEASES. Borrowers enjoy peaceful and undisturbed possession under all
leases material to the business of Borrowers and to which Borrowers are a party
or under which Borrowers are operating. All of such leases are valid and
subsisting and no material default by Borrowers exists under any of them.

      5.18 DDAS. Set forth on Schedule 5.18 are all of the DDAs of each
Borrower, including, with respect to each depository (i) the name and address of
that depository, and (ii) the account numbers of the accounts maintained with
such depository.

      5.19 COMPLETE DISCLOSURE. All factual information (taken as a whole)
furnished by or on behalf of Borrowers in writing to Agent or any Lender
(including all information contained in the Schedules hereto or in the other
Loan Documents) for purposes of or in connection with this Agreement, the other
Loan Documents or any transaction contemplated herein or therein is, and all
other such factual information (taken as a whole) hereafter furnished by or on
behalf of Borrowers in writing to the Agent or any Lender will be, true and
accurate in all material respects on the date as of which such information is
dated or certified and not incomplete by omitting to state any fact necessary to
make such information (taken as a whole) not misleading in any material respect
at such time in light of the circumstances under which such information was
provided. On the Closing Date, the Closing Date Projections represent, and as of
the date on which any other Projections are delivered to Agent, such additional
Projections represent Borrowers' good faith best estimate of its future
performance for the periods covered thereby.

      5.20 INDEBTEDNESS. Set forth on Schedule 5.20 is a true and complete list
of all Indebtedness of each Borrower outstanding on the Closing Date pursuant to
a confirmation order approving the Plan of Organization, and such Schedule
accurately reflects the aggregate principal amount of such Indebtedness and the
principal terms thereof.

      5.21 TAXES. Each Borrower has filed or caused to be filed all Returns
which are required to be filed and has paid all Taxes shown to be due and
payable on such Returns or any assessments made against it or any of its
property and all other Taxes, fees or other charges imposed on it or any of its
property by any Governmental Authority. Parent has included in its gross income
for federal income tax purposes and properly reported on all Returns required to
be filed by Parent all amounts that it was required to include pursuant to

                                      -75-
<PAGE>
Section 951 of the IRC, including amounts in connection with prior credit
arrangements where Borrowers (or the predecessors of Borrowers) were pledgors or
guarantors of all or any portion of an obligation of Parent (or the predecessors
of Parent) and Parent has paid all Taxes related thereto prior to deficiency. No
Tax lien has been filed and to the knowledge of each Borrower, no claim is being
asserted, with respect to any Taxes of Parent or any Borrower.

      5.22 INDENTURE DOCUMENTS. The Indenture Documents, true and complete
copies of which have been furnished to Lenders, have been duly authorized,
executed, and delivered by the Borrowers and the Guarantors and, to the best of
Borrowers' knowledge, all other parties thereto, have not been amended or
otherwise modified, are in full force and effect, and are binding upon and
enforceable against all parties thereto in accordance with their respective
terms. There exists no event of default under any Indenture Document by the
Borrowers or any of the Guarantors or, to the best of Borrowers' knowledge, any
other party thereto.

6. AFFIRMATIVE COVENANTS.

            Each Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until full and final payment of the
Obligations, Borrowers shall, and shall cause each Guarantor to, do all of the
following:

      6.1 ACCOUNTING SYSTEM. Maintain a system of accounting that enables
Borrowers to produce financial statements in accordance with GAAP and maintain
records pertaining to the Collateral that contain information as from time to
time reasonably may be requested by Agent. Borrowers also shall keep an
inventory reporting system that shows all additions, sales, claims, returns, and
allowances with respect to the Inventory.

      6.2 COLLATERAL REPORTING. Provide Agent (and if so requested by Agent,
with copies for each Lender) with the following documents at the following times
in form satisfactory to Agent:

<TABLE>
<S>                        <C>
--------------------------------------------------------------------------------
Daily                      (a) a sales journal, collection journal, and credit
                           register since the last such schedule and a
                           calculation of the Borrowing Base as of such date,
                           and

                           (b) notice of all returns, disputes, or claims.
--------------------------------------------------------------------------------
Weekly                     (c) Inventory reports specifying each Borrower's cost
                           and the wholesale market value of its Inventory, by
                           category, with additional detail showing additions to
                           and deletions from the Inventory.
--------------------------------------------------------------------------------
Monthly (not               (d) a detailed calculation of the Borrowing Base
later than the             (including detail regarding those Accounts that are
10th day of each           not Eligible Accounts),
month)
                           (e) a detailed aging, by total, of the Accounts,
                           together with a
</TABLE>

                                      -76-
<PAGE>
<TABLE>
<S>                        <C>
                           reconciliation to the detailed calculation of the
                           Borrowing Base previously provided to Agent,

                           (f) a summary aging, by vendor, of Borrowers'
                           accounts payable  and any book overdraft,
--------------------------------------------------------------------------------
Monthly (not              (g) a calculation of Dilution for the prior month; and
later than the
15th day of each
month)                    (h) a list of the selling prices of chlorine and
                          caustic soda.
--------------------------------------------------------------------------------
Quarterly                 (i) a detailed list of each Borrower's customers,

                          (j) a report regarding each Borrower's accrued, but
                          unpaid, ad valorem taxes,
--------------------------------------------------------------------------------
Upon request by           (k) copies of invoices in connection with the
Agent                     Accounts, credit memos, remittance advices, deposit
                          slips, shipping and delivery documents in connection
                          with the Accounts and, for Inventory acquired by
                          Borrowers, purchase orders and invoices, and

                          (l) such other reports as to the Collateral, or the
                          financial  condition of Borrowers as Agent may
                          request.
--------------------------------------------------------------------------------
</TABLE>

            In addition, each Borrower agrees to cooperate fully with Agent to
facilitate and implement a system of electronic collateral reporting in order to
provide electronic reporting of each of the items set forth above.

      6.3 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Deliver to Agent, with
copies to each Lender:

                  (a) as soon as available, but in any event within 30 days (45
days in the case of a month that is the end of one of the first 3 fiscal
quarters in a fiscal year) after the end of each month during Parent's fiscal
years,

                  (i) a company prepared consolidated balance sheet, income
            statement, and statement of cash flow covering Parent's and its
            Subsidiaries operations during such period,

                  (ii) a certificate signed by the chief financial officer of
            Parent and each Borrower to the effect that:

                        A. the financial statements delivered hereunder have
                  been prepared in accordance with GAAP (except for the lack of
                  footnotes and being subject to year-end audit adjustments) and
                  fairly present in

                                      -77-
<PAGE>
                  all material respects the financial condition of Parent and
                  its Subsidiaries,

                        B. the representations and warranties of Borrowers
                  contained in this Agreement and the other Loan Documents are
                  true and correct in all material respects on and as of the
                  date of such certificate, as though made on and as of such
                  date (except to the extent that such representations and
                  warranties relate solely to an earlier date), and

                        C. there does not exist any condition or event that
                  constitutes a Default or Event of Default (or, to the extent
                  of any non-compliance, describing such non-compliance as to
                  which he or she may have knowledge and what action Borrowers
                  have taken, are taking, or propose to take with respect
                  thereto), and

                  (iii) for each month that is the date on which a financial
            covenant in Section 7.20 is to be tested, a Compliance Certificate
            demonstrating, in reasonable detail, compliance at the end of such
            period with the applicable financial covenants contained in Section
            7.20, and

                  (b) as soon as available, but in any event within 90 days
after the end of each of Parent's fiscal years,

                  (i) financial statements of each Borrower for each such fiscal
            year, audited by Deloitte & Touche or other independent certified
            public accountants reasonably acceptable to Agent and certified,
            without any qualifications, by such accountants to have been
            prepared in accordance with GAAP (such audited financial statements
            to include a balance sheet, income statement, and statement of cash
            flow and, if prepared, such accountants' letter to management), and

                  (ii) a certificate of such accountants addressed to Agent and
            the Lenders stating that such accountants do not have knowledge of
            the existence of any Default or Event of Default under Section 7.20,

                  (c) as soon as available, but in any event within 30 days
prior to the start of each of Borrower's fiscal years,

                  (i) copies of each Borrower's Projections, in form and
            substance (including as to scope and underlying assumptions)
            satisfactory to Agent, in its sole discretion, for the forthcoming 3
            years, year by year, and for the forthcoming fiscal year, month by
            month, certified by the chief financial officer of each Borrower as
            being such officer's good faith best estimate of the financial
            performance of such Borrower during the period covered thereby,

                  (d) if and when filed by any Borrower or the Parent,

                                      -78-
<PAGE>
                  (i) 10-Q quarterly reports, Form 10-K annual reports, and Form
            8-K current reports,

                  (ii) any other filings made by any Borrower with the SEC,

                  (iii) copies of Borrowers' federal (U.S. and Canada) income
            tax returns, and any amendments thereto, filed with the Internal
            Revenue Service and the applicable Canadian agency, and

                  (iv) any other information that is provided by Parent to its
            shareholders generally,

                  (e) if and when filed by any Borrower and as requested by
Agent, satisfactory evidence of payment of applicable excise taxes in each
jurisdictions in which (i) any Borrower conducts business or is required to pay
any such excise tax, (ii) where any Borrower's failure to pay any such
applicable excise tax would result in a Lien on the properties or assets of any
Borrower, or (iii) where any Borrower's failure to pay any such applicable
excise tax reasonably could be expected to result in a Material Adverse Change,

                  (f) as soon as a Borrower has knowledge of any event or
condition that constitutes a Default or an Event of Default, notice thereof and
a statement of the curative action that Borrowers propose to take with respect
thereto,

                  (g) as and when delivered pursuant to the Tranche A Indenture,
a copy of the certificate (including the calculations and methods used in
determining the Minimum Quarterly Prepayment and/or the Liquidity Quarterly
Prepayment [as defined in the Tranche A Indenture]) of the chief financial
officer of Pioneer Americas set forth in Section 1101 (c) (iii) of the Tranche A
Indenture, and

                  (h) upon the request of Agent, any other report reasonably
requested relating to the financial condition of Borrowers.

            In addition to the financial statements referred to above, Borrowers
agree to deliver financial statements prepared on both a consolidated and
consolidating basis and that no Borrower, or any Subsidiary of a Borrower, will
have a fiscal year different from that of Parent. Borrowers agree that their
independent certified public accountants are authorized to communicate with
Agent and to release to Agent whatever financial information concerning
Borrowers that Agent reasonably may request, and Borrowers will be given an
opportunity to be present with respect to any such discussions. Each Borrower
waives the right to assert a confidential relationship, if any, it may have with
any accounting firm or service bureau in connection with any information
requested by Agent pursuant to or in accordance with this Agreement, and agree
that Agent may contact directly any such accounting firm or service bureau in
order to obtain such information.

                                      -79-
<PAGE>
      6.4 GUARANTOR REPORTS. Cause each Guarantor to deliver its annual
financial statements at the time when Borrowers provide their audited financial
statements to Agent and copies of all federal income tax returns as soon as the
same are available and in any event no later than 30 days after the same are
required to be filed by law.

      6.5 RETURN. Cause returns and allowances as between Borrowers and their
Account Debtors, to be on the same basis and in accordance with the usual
customary practices of the applicable Borrower, as they exist at the time of the
execution and delivery of this Agreement. If, at a time when no Event of Default
has occurred and is continuing, any Account Debtor returns any Inventory to any
Borrower, the applicable Borrower promptly shall determine the reason for such
return and, if the applicable Borrower accepts such return, issue a credit
memorandum (with a copy to be sent to Agent) in the appropriate amount to such
Account Debtor. If, at a time when an Event of Default has occurred and is
continuing, any Account Debtor returns any Inventory to any Borrower, the
applicable Borrower promptly shall determine the reason for such return and, if
Agent consents (which consent shall not be unreasonably withheld), issue a
credit memorandum (with a copy to be sent to Agent) in the appropriate amount to
such Account Debtor.

      6.6 MAINTENANCE OF PROPERTIES. Maintain and preserve all of its properties
which are necessary or useful in the proper conduct to its business in good
working order and condition, ordinary wear and tear excepted, and comply at all
times with the provisions of all leases to which it is a party as lessee, so as
to prevent any loss or forfeiture thereof or thereunder.

      6.7 TAXES. Cause all assessments and Taxes, whether real, personal, or
otherwise, due or payable by, or imposed, levied, or assessed against Borrowers
or any of their assets to be paid in full, before delinquency or before the
expiration of any extension period, except to the extent that the validity of
such assessment or Tax shall be the subject of a Permitted Protest. Borrowers
will make timely payment or deposit of all Tax payments and withholding Taxes
required of them by Applicable Laws, including those laws concerning F.I.C.A.,
F.U.T.A., state disability, and local, state, and federal income Taxes, and
will, upon request, furnish Agent with proof satisfactory to Agent indicating
that the applicable Borrower has made such payments or deposits. Borrowers
shall, upon request of Agent, deliver satisfactory evidence of payment of
applicable excise Taxes in each jurisdictions in which any Borrower is required
to pay any such excise Tax. Borrowers shall withhold and collect all taxes
required to be withheld and collected by them and remit such Taxes to the
appropriate Governmental Authority before they are past due and otherwise in the
manner required by Applicable Law.

      6.8 INSURANCE.

            (a) At Borrowers' expense, maintain insurance respecting its
property and assets wherever located, covering loss or damage by fire, theft,
explosion, and all other hazards and risks as ordinarily are insured against by
other Persons engaged in the same or similar businesses. Borrowers also shall
maintain business interruption, public liability, and

                                      -80-
<PAGE>
product liability insurance, as well as insurance against larceny, embezzlement,
and criminal misappropriation. All such policies of insurance shall be in such
amounts and with such insurance companies as are reasonably satisfactory to
Agent. Borrowers shall deliver copies of all such policies to Agent with a
satisfactory lender's loss payable endorsement naming Agent as sole loss payee
or additional insured, as appropriate, as the Agent's interest may appear. Each
policy of insurance or endorsement shall contain a clause requiring the insurer
to give not less than 15 days prior written notice to Agent in the event of
cancellation of the policy for any reason whatsoever.

                  (b) Borrowers shall give Agent prompt notice of any loss
covered by such insurance. Agent shall have the exclusive right to adjust any
losses payable under any such insurance policies in excess of $100,000 to the
extent such loss relates to any of the Collateral, without any liability to
Borrowers whatsoever in respect of such adjustments. Any monies received as
payment for any loss under any insurance policy mentioned above (other than
liability insurance policies) or as payment of any award or compensation for
condemnation or taking by eminent domain, shall be paid over to Agent to be
applied at the option of the Required Lenders either to the prepayment of the
Obligations or shall be disbursed to Borrowers under staged payment terms
reasonably satisfactory to the Required Lenders for application to the cost of
repairs, replacements, or restorations. Any such repairs, replacements, or
restorations shall be effected with reasonable promptness and shall be of a
value at least equal to the value of the items or property destroyed prior to
such damage or destruction.

                  (c) Borrowers shall not take out separate insurance concurrent
in form or contributing in the event of loss with that required to be maintained
under this Section 6.8, unless Agent is included thereon as named insured with
the loss payable to Agent under a lender's loss payable endorsement or its
equivalent as the Agent's interest may appear. Borrowers immediately shall
notify Agent whenever such separate insurance is taken out, specifying the
insurer thereunder and full particulars as to the policies evidencing the same,
and copies of such policies promptly shall be provided to Agent.

      6.9 LOCATION OF INVENTORY. Keep the Inventory (other than Inventory in
transit between locations specified on Schedule 5.5) only at the locations
identified on Schedule 5.5; provided, however, that Borrowers may amend Schedule
5.5 so long as such amendment occurs by written notice to Agent not less than 30
days prior to the date on which the Inventory is moved to such new location, so
long as such new location is within the continental United States or Canada, and
so long as, at the time of such written notification, the applicable Borrower
provides any UCC-1 financing statements, fixture filings, PPSA financing
statements, or any other equivalent form of registration necessary to perfect
and continue perfected the Agent's Liens on such assets and also provides to
Agent a Collateral Access Agreement.

      6.10 COMPLIANCE WITH LAWS. Comply with the requirements of all applicable
laws, rules, regulations, and orders of any Governmental Authority, including
the Fair Labor Standards Act and the Americans With Disabilities Act, other than
laws, rules, regulations,

                                      -81-
<PAGE>
and orders the non-compliance with which, individually or in the aggregate,
would not result in and reasonably could not be expected to result in a Material
Adverse Change.

      6.11 LEASES. Pay when due all rents and other amounts payable under any
leases to which any Borrower is a party or by which any Borrower's properties
and assets are bound, unless such payments are the subject of a Permitted
Protest.

      6.12 BROKERAGE COMMISSIONS. Pay any and all brokerage commission or
finders fees incurred in connection with or as a result of Borrowers' obtaining
financing from the Lender Group under this Agreement. Borrowers agree and
acknowledge that payment of all such brokerage commissions or finders fees shall
be the sole responsibility of Borrowers, and each Borrower agrees to indemnify,
defend, and hold Agent and the Lender Group harmless from and against any claim
of any broker or finder arising out of Borrowers' obtaining financing from the
Lender Group under this Agreement.

      6.13 EXISTENCE. At all times preserve and keep in full force and effect
each Borrower's valid existence and good standing and any rights and franchises
material to Borrowers' businesses.

      6.14 ENVIRONMENTAL.

                  (a) Keep any property either owned or operated by any Borrower
free of any Environmental Liens or post bonds or other financial assurances
sufficient to satisfy the obligations or liability evidenced by such
Environmental Liens, (b) comply, in all material respects, with Environmental
Laws and provide to Agent documentation of such compliance which Agent
reasonably requests, (c) promptly notify Agent of any release of a Hazardous
Material of any reportable quantity from or onto property owned or operated by
any Borrower and take any Remedial Actions required to abate said release or
otherwise to come into compliance with applicable Environmental Law, and (d)
promptly provide Agent with written notice within 10 days of the receipt of any
of the following: (i) notice that an Environmental Lien has been filed against
any of the real or personal property of any Borrower, (ii) commencement of any
Environmental Action or notice that an Environmental Action will be filed
against any Borrower, and (iii) notice of a violation, citation, or other
administrative order which reasonably could be expected to result in a Material
Adverse Change.

      6.15 DISCLOSURE UPDATES. Promptly and in no event later than 5 Business
Days after obtaining knowledge thereof, (a) notify Agent if any written
information, exhibit, or report furnished to the Lender Group contained any
untrue statement of a material fact or omitted to state any material fact
necessary to make the statements contained therein not misleading in light of
the circumstances in which made, and (b) correct any defect or error that may be
discovered therein or in any Loan Document or in the execution, acknowledgement,
filing, or recordation thereof.

      6.16 INTENTIONALLY DELETED.

                                      -82-
<PAGE>
      6.17 OBLIGATION TO PAY. Each Borrower hereby unconditionally promises to
pay Agent, for the benefit of Lenders, in accordance with the terms and
conditions of this Loan Agreement including, without limitation, Section 2.3
hereof, the Obligations, and to pay the Obligations in full on the Maturity
Date.

      6.18 INDENTURE DOCUMENTS. Borrowers shall perform and observe all the
terms and provisions of the Indenture Documents to be performed or observed by
them.

      6.19 PARENT TAXES. Cause Parent, by obtaining an affirmative covenant of
Parent, to (i) file or cause to be filed all Returns which are required to be
filed and to pay all Taxes shown to be due and payable on such Returns or any
assessments made against it or any of its property and all other Taxes, fees or
other charges imposed on it or any of its property by any Governmental
Authority; (ii) include in Parent's gross income for United States federal
income tax purposes and properly report on all Returns required to be filed by
Parent all amounts that it is required to include pursuant to Section 951 of the
IRC, including amounts in connection with prior credit arrangements where
Borrowers (or the predecessors of Borrowers) were pledgors or guarantors of all
or any portion of an obligation of Parent (or the predecessors of Parent) and
pay all Taxes related thereto prior to deficiency; and (iii) include in the
gross income of Parent the "all earnings and profits amount," if any, required
to be included in the gross income of Parent pursuant to Section 367(b) of the
IRC and Section 1.367(b)-3 of the federal income tax regulations promulgated
under the IRC in connection with the reorganization of Parent and its
subsidiaries, including Borrowers and their predecessors, pursuant to the
Chapter 11 Bankruptcy Proceeding and pay all Taxes related thereto prior to
deficiency.

7. NEGATIVE COVENANTS.

            Each Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until full and final payment of the
Obligations, Borrowers will not, and will not permit any of the Guarantors, to
do any of the following:

      7.1 INDEBTEDNESS. Create, incur, assume, permit, guarantee, or otherwise
become or remain, directly or indirectly, liable with respect to any
Indebtedness, except:

                  (a) Indebtedness evidenced by this Agreement and the other
Loan Documents, together with Indebtedness owed to Underlying Issuers with
respect to Underlying Letters of Credit;

                  (b) Indebtedness comprising Permitted Indebtedness;

                  (c) Permitted Purchase Money Indebtedness; and

                  (d) refinancings, renewals, or extensions of Indebtedness
permitted under clauses (b) and (c) of this Section 7.1 (and continuance or
renewal of any Permitted Liens associated therewith) so long as: (i) the terms
and conditions of such refinancings, renewals, or extensions do not, in Agent's
judgment, materially impair the prospects of

                                      -83-
<PAGE>
repayment of the Obligations by Borrowers or materially impair Borrowers'
creditworthiness, (ii) such refinancings, renewals, or extensions do not result
in an increase in the principal amount of, or interest rate with respect to, the
Indebtedness so refinanced, renewed, or extended, (iii) such refinancings,
renewals, or extensions do not result in a shortening of the average weighted
maturity of the Indebtedness so refinanced, renewed, or extended, nor are they
on terms or conditions, that, taken as a whole, are materially more burdensome
or restrictive to the applicable Borrower, and (iv) if the Indebtedness that is
refinanced, renewed, or extended was subordinated in right of payment to the
Obligations, then the terms and conditions of the refinancing, renewal, or
extension Indebtedness must be include subordination terms and conditions that
are at least as favorable to the Lender Group as those that were applicable to
the refinanced, renewed, or extended Indebtedness.

      7.2 LIENS. Create, incur, assume, or permit to exist, directly or
indirectly, any Lien on or with respect to any of its assets, of any kind,
whether now owned or hereafter acquired, or any income or profits therefrom,
except for Permitted Liens (including Liens that are replacements of Permitted
Liens to the extent that the original Indebtedness is refinanced, renewed, or
extended under Section 7.1(d) and so long as the replacement Liens only encumber
those assets that secured the refinanced, renewed, or extended Indebtedness).

      7.3 RESTRICTIONS ON FUNDAMENTAL CHANGES.

                  (a) Enter into any merger, consolidation, reorganization,
amalgamation, or recapitalization, or reclassify its Stock.

                  (b) Liquidate, wind up, or dissolve itself (or suffer any
liquidation or dissolution).

                  (c) Except for Permitted Dispositions, convey, sell, lease,
license, assign, transfer, or otherwise dispose of, in one transaction or a
series of transactions, all or any substantial part of its assets.

      7.4 DISPOSAL OF ASSETS. Other than Permitted Dispositions, convey, sell,
lease, license, assign, transfer, or otherwise dispose of any of the assets of
any Borrower.

      7.5 CHANGE NAME. Change any Borrower's name, FEIN, organizational
structure, jurisdiction of incorporation, organization, or formation, as
applicable, or identity, or add any new fictitious name; provided, however, that
a Borrower may change its name upon at least 30 days prior written notice by
Borrowers to Agent of such change and so long as, at the time of such written
notification, such Borrower provides any UCC-1 financing statements, fixture
filings, PPSA financing statements, or any other equivalent form of registration
necessary to perfect and continue perfected Agent's Liens.

      7.6 GUARANTEE. Guarantee or otherwise become in any way liable with
respect to the obligations of any third Person except:

                                      -84-
<PAGE>
                  (a) endorsements of instruments or items of payment for
deposit to the account of Borrowers or which are transmitted or turned over to
Agent;

                  (b) indemnifications existing on the date of this Agreement
issued in favor of title insurers; and

                  (c) guaranties and indemnifications (other than guaranties of
indebtedness) under the Borrowers' employee relocation assistance program
provided the aggregate amount of such indemnifications and guaranties together
with the loans and advances permitted by Section 7.14(a) do not exceed
$500,000.00 at any time.

      7.7 NATURE OF BUSINESS. Make any change in the principal nature of
Borrowers' business.

      7.8 PREPAYMENTS AND AMENDMENTS.

                  (a) Except in connection with a refinancing permitted by
Section 7.1(d) and prepayments required to be made to the holders of the
indebtedness under the Indenture Documents pursuant to the terms of the
Indenture Documents, prepay, redeem, defease, purchase, or otherwise acquire any
Indebtedness of any Borrower, other than the Obligations in accordance with this
Agreement; and

                  (b) Except in connection with a refinancing permitted by
Section 7.1(d), directly or indirectly, amend, modify, alter, increase, or
change any of the terms or conditions of any agreement, instrument, document,
indenture, or other writing evidencing or concerning Indebtedness permitted
under Sections 7.1(b) or (c).

      7.9 CHANGE OF CONTROL. Cause, permit, or suffer, directly or indirectly,
any Change of Control.

      7.10 CONSIGNMENTS. Consign any Inventory or sell any Inventory having a
value in excess of $100,000.00 in the aggregate on bill and hold, sale or
return, sale on approval, or other conditional terms of sale.

      7.11 DISTRIBUTIONS. Make any distribution or declare or pay any dividends
(in cash or other property, other than common Stock) on, or purchase, acquire,
redeem, or retire any of any Borrower's Stock, of any class, whether now or
hereafter outstanding except for dividends and distributions payable (a) by
Pioneer Americas to PCI Chemicals, and (b) by PCI Chemicals to the Parent
provided that the aggregate amount of such dividends and distributions together
with the Investments permitted to be made to the Parent by Pioneer Americas
pursuant to Section 7.13(b) do not exceed $500,000.00 in any calendar year
during the term of this Agreement.

      7.12 ACCOUNTING METHODS. Modify or change its method of accounting (other
than as may be required to conform to GAAP) or enter into, modify, or terminate
any agreement currently existing, or at any time hereafter entered into with any
third party accounting firm

                                      -85-
<PAGE>
or service bureau for the preparation or storage of Borrowers' accounting
records without said accounting firm or service bureau agreeing to provide Agent
information regarding the Collateral or Borrowers' financial condition.

      7.13 INVESTMENTS. Directly or indirectly, make or acquire any Investment,
or incur any liabilities (including contingent obligations) for or in connection
with any Investment except:

                  (a) Permitted Investments; and

                  (b) loans and advances ("Intercompany Loans") from (i) Pioneer
Americas to Parent provided that the aggregate amount of such loans together
with the amount of distributions and dividends permitted to be made to the
Parent by PCI Chemicals pursuant to Section 7.11(b) does not exceed $500,000.00
in any calendar year during the term of this Agreement, (ii) Pioneer Americas to
Imperial West Chemical Co., provided the aggregate amount of such loans and
advances does not exceed $800,000.00 during any calendar year during the term of
this Agreement, and (iii) Pioneer Americas to the other Guarantors provided the
aggregate amount of such loans and advances does not exceed $100,000.00 in any
calendar year during the term of this Agreement; and further provided that the
Intercompany Loans are evidenced by a promissory note ("Intercompany Note") in
the form of promissory note attached hereto as Exhibit D-1, and the Intercompany
Notes are endorsed and delivered to Agent, for the benefit of the Lenders, to be
held as Collateral.

      7.14 TRANSACTIONS WITH AFFILIATES. Directly or indirectly enter into or
permit to exist any transaction with any Affiliate of any Borrower except for
transactions that are in the ordinary course of Borrowers' business, upon fair
and reasonable terms, that are fully disclosed to Agent, and that are no less
favorable to Borrowers than would be obtained in an arm's length transaction
with a non-Affiliate; provided, however, that the foregoing provisions do not
prohibit loans and advances under Borrowers' employee relocation assistance
program provided the aggregate amount of such loans and advances together with
the guaranties and indemnifications permitted by Section 7.6(c) do not exceed
$500,000.00 at any time.

      7.15 SUSPENSION. Suspend or go out of a substantial portion of its
business.

      7.16 INTENTIONALLY DELETED.

      7.17 USE OF PROCEEDS. Use more than $200,000.00 of the proceeds of the
Advances or the Letters of Credit in any calendar year for the acquisition of
new or used Equipment (whether by purchase or lease) unless (a) Borrowers have
provided Agent with prior written notice of such proposed purchase specifying
the type of Equipment being purchased, the purchase price, and the location
where the Equipment will be located and (b) immediately after giving effect to
the making of such Advance or the issuance of such Letter of Credit (i)
Borrowers are in compliance with the provisions of Section 7.20(b) and (ii)
there is Excess Availability of at least $10,000,000.00. Other than the purchase
of Equipment in accordance with and subject to the terms of this Section 7.17,
Borrowers will not use the

                                      -86-
<PAGE>
proceeds of the Advances or the Letters of Credit for any other purpose other
than (a) on the Closing Date, (i) to repay in full the outstanding principal,
accrued interest, and accrued fees and expenses owing to Existing Lender, and
(ii) to pay transactional fees, costs, and expenses incurred in connection with
this Agreement, the other Loan Documents, and the transactions contemplated
hereby and thereby, and (b) thereafter, consistent with the terms and conditions
hereof, for its lawful and permitted purposes.

      7.18 CHANGE IN LOCATION OF CHIEF EXECUTIVE OFFICE; INVENTORY WITH BAILEES.
Relocate its chief executive office to a new location from the location
specified in Schedule 5.7; provided, however, that Borrowers may amend Schedule
5.7 so long as such amendment occurs by written notice to Agent not less than 30
days prior to the date the chief executive office is to be relocated, so long as
such location is within the continental United States or Canada, and so long as,
at the time of such written notification, the applicable Borrower provides any
UCC-1 financing statements or fixture filings or PPSA financing statements or
any other equivalent form of registration necessary to perfect and continue
perfected the Agent's Liens and also provides to Agent a Collateral Access
Agreement with respect to such new location. The Inventory shall not at any time
now or hereafter be stored with a bailee, warehouseman, or similar party without
Agent's prior written consent.

      7.19 SECURITIES ACCOUNTS. Establish or maintain any Securities Account
unless Agent shall have received a Control Agreement in respect of such
Securities Account. Borrowers agree to not transfer assets out of any Securities
Account; provided, however, that, so long as no Event of Default has occurred
and is continuing or would result therefrom, Borrowers may use such assets (and
the proceeds thereof) to the extent not prohibited by this Agreement.

      7.20 FINANCIAL COVENANTS.

                  (a) Fail to maintain EBITDA, measured on the basis of its then
most recently ended four (4) fiscal quarters, of less than the required amount
set forth in the following table for the applicable period set forth opposite
thereto;

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
          Applicable Amount                    Applicable Period
--------------------------------------------------------------------------------
          <S>                        <C>
            $ 5,142,000.00                   For the 3 month period
                                             ending March 31, 2002
--------------------------------------------------------------------------------
                                             For the 6 month period
            $10,810,000.00                    ending June 30, 2002
--------------------------------------------------------------------------------
                                             For the 9 month period
            $19,573,000.00                 ending September 30, 2002
--------------------------------------------------------------------------------
                                            For the 12 month period
            $32,446,000.00                  ending December 31, 2002
--------------------------------------------------------------------------------
            $32,600,000.00                  For the 12 month period
                                     ending each fiscal quarter thereafter
--------------------------------------------------------------------------------
</TABLE>

                                      -87-
<PAGE>
                  (b) Make capital expenditures in any fiscal year in excess of
the amount set forth in the following table for the applicable period:

<TABLE>
<CAPTION>
---------------------------------------------------------------------------
Fiscal Year 2002          Fiscal Year 2003          Fiscal Year 2004
                                                  and each Fiscal Year
                                                       thereafter
---------------------------------------------------------------------------
<S>                       <C>                     <C>
 $20,000,000.00            $25,000,000.00            $25,000,000.00

---------------------------------------------------------------------------
</TABLE>

      7.21 AMENDMENTS. Borrowers will not amend, supplement, amend and restate,
or otherwise modify any of the Indenture Documents, without the prior written
consent of Agent.

8. EVENTS OF DEFAULT.

            Any one or more of the following events shall constitute an event of
default (each, an "Event of Default") under this Agreement:

      8.1 If Borrowers fail to pay when due and payable or when declared due and
payable, all or any portion of the Obligations (whether of principal, interest
(including any interest which, but for the provisions of the Bankruptcy Law,
would have accrued on such amounts), fees and charges due the Lender Group,
reimbursement of Lender Group Expenses, or other amounts constituting
Obligations);

      8.2 If any Borrower fails to perform, keep, or observe: (a) any term,
provision, condition, covenant, or agreement contained in Sections 6.2 or 6.3 of
this Agreement and such failure continues for a period of five (5) days after
the date of such failure; (b) any provision, condition, covenant or agreement
contained in Sections 6.1, 6.7, or 6.11 of this Agreement and such failure
continues for a period of fifteen (15) days after the date of such failure; or
(c) any other term, provision or condition of the Loan Documents;

      8.3 If any material portion of the assets of any Borrower, or any of its
Subsidiaries, or any Guarantor is attached, seized, subjected to a writ or
distress warrant, levied upon, or comes into the possession of any third Person;

      8.4 If an Insolvency Proceeding is commenced by the Parent, any Borrower,
any of its Subsidiaries, or any Guarantor;

      8.5 If an Insolvency Proceeding is commenced against any Borrower, any of
its Subsidiaries, the Parent, or any Guarantor, and any of the following events
occur: (a) the

                                      -88-
<PAGE>
Parent, the applicable Borrower, the applicable Subsidiary or Guarantor consents
to the institution of the Insolvency Proceeding against it, (b) the petition
commencing the Insolvency Proceeding is not timely controverted, (c) the
petition commencing the Insolvency Proceeding is not dismissed within 45
calendar days of the date of the filing thereof; provided, however, that, during
the pendency of such period, Agent (including any successor agent) and each
other member of the Lender Group shall be relieved of their obligation to extend
credit hereunder, (d) an interim trustee is appointed to take possession of all
or any substantial portion of the properties or assets of, or to operate all or
any substantial portion of the business of, any Borrower, any of its
Subsidiaries, the Parent, or Guarantor, or (e) an order for relief shall have
been entered therein;

      8.6 If any Borrower, any of its Subsidiaries, or any Guarantor is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs;

      8.7 If a notice of Lien, levy, or assessment is filed of record with
respect to any asset of any Borrower, any of its Subsidiaries, or any Guarantor
by the United States, or any department, agency, or instrumentality thereof, or
by any state, county, municipal, or governmental agency, or if any taxes or
debts owing at any time hereafter to any one or more of such entities becomes a
Lien, whether choate or otherwise, upon any assets of any Borrower, any of its
Subsidiaries, or any Guarantor and the same is not paid on the payment date
thereof;

      8.8 If a judgment or other claim becomes a Lien or encumbrance upon any
material portion of the properties or assets of any Borrower, any of its
Subsidiaries, or any Guarantor;

      8.9 If there is a default in any material agreement to which any
Borrowers, any of its Subsidiaries, or any Guarantor is a party and such default
(a) occurs at the final maturity of the obligations thereunder, or (b) results
in a right by the other party thereto, irrespective of whether exercised, to
accelerate the maturity of the applicable Borrower, Subsidiary's, or Guarantor's
obligations thereunder, to terminate such agreement, or to refuse to renew such
agreement pursuant to an automatic renewal right therein;

      8.10 If any Borrower, any of its Subsidiaries or any Guarantor makes any
payment on account of Indebtedness that has been contractually subordinated in
right of payment to the payment of the Obligations, except to the extent such
payment is permitted by the terms of the subordination provisions applicable to
such Indebtedness;

      8.11 If any misstatement or misrepresentation exists now or hereafter in
any warranty, representation, statement, or Record made to the Lender Group by
any Borrower, any of its Subsidiaries, or any officer, employee, agent, or
director of any Borrower or any of its Subsidiaries;

      8.12 If the obligation of any Guarantor under its Guaranty is limited or
terminated by operation of law or by such Guarantor thereunder;

                                      -89-
<PAGE>
      8.13 If this Agreement or any other Loan Document that purports to create
a Lien, shall, for any reason, fail or cease to create a valid and perfected
and, except to the extent permitted by the terms hereof or thereof, first
priority Lien on or security interest in the Collateral covered hereby or
thereby;

      8.14 Any provision of any Loan Document shall at any time for any reason
be declared to be null and void, or the validity or enforceability thereof shall
be contested by any Borrower, or a proceeding shall be commenced by any
Borrower, or by any Governmental Authority having jurisdiction over any
Borrower, seeking to establish the invalidity or unenforceability thereof, or
any Borrower shall deny that any Borrower has any liability or obligation
purported to be created under any Loan Document;

      8.15 Any event, circumstance, or condition occurs which constitutes an
Event of Default under any of the Indenture Documents or any of the Term Loan
Documents;

      8.16 Either Borrower or any Guarantor defaults in the payment of any
monetary obligation under the CRC Contracts or with respect to any of the CRC
Portfolio, when due, or defaults in the performance or observance of any
material non-monetary obligation with respect to any of the Approved CRC
Portfolio.

9. THE LENDER GROUP'S RIGHTS AND REMEDIES.

      9.1 RIGHTS AND REMEDIES. Upon the occurrence, and during the continuation,
of an Event of Default, the Required Lenders (at their election but without
notice of their election and without demand) may authorize and instruct Agent to
do any one or more of the following on behalf of the Lender Group (and Agent,
acting upon the instructions of the Required Lenders, shall do the same on
behalf of the Lender Group), all of which are authorized by Borrowers:

                  (a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due and
payable;

                  (b) Cease advancing money or extending credit to or for the
benefit of Borrowers under this Agreement, under any of the Loan Documents, or
under any other agreement between Borrowers and the Lender Group;

                  (c) Terminate this Agreement and any of the other Loan
Documents as to any future liability or obligation of the Lender Group, but
without affecting any of the Agent's Liens in the Collateral and without
affecting the Obligations;

                  (d) Settle or adjust disputes and claims directly with Account
Debtors for amounts and upon terms which Agent considers advisable, and in such
cases, Agent will credit the Loan Account with only the net amounts received by
Agent in payment of such disputed Accounts after deducting all Lender Group
Expenses incurred or expended in connection therewith;

                                      -90-
<PAGE>
                  (e) Cause Borrowers to hold all returned Inventory in trust
for the Lender Group, segregate all returned Inventory from all other assets of
Borrowers or in Borrowers' possession and conspicuously label said returned
Inventory as the property of the Lender Group;

                  (f) Without notice to or demand upon any Borrower or
Guarantor, make such payments and do such acts as Agent considers necessary or
reasonable to protect its security interests in the Collateral. Each Borrower
agrees to assemble the Collateral if Agent so requires, and to make the
Collateral available to Agent at a place that Agent may designate which is
reasonably convenient to both parties. Each Borrower authorizes Agent to enter
the premises where the Collateral is located, to take and maintain possession of
the Collateral, or any part of it, and to pay, purchase, contest, or compromise
any Lien that in Agent's determination appears to conflict with the Agent's
Liens and to pay all expenses incurred in connection therewith and to charge
Borrowers' Loan Account therefor. With respect to any of Borrowers' owned or
leased premises, each Borrower hereby grants Agent a license to enter into
possession of such premises and to occupy the same, without charge, in order to
exercise any of the Lender Group's rights or remedies provided herein, at law,
in equity, or otherwise;

                  (g) Without notice to any Borrower (such notice being
expressly waived), and without constituting a retention of any collateral in
satisfaction of an obligation (within the meaning of the Code or the PPSA, if
applicable), set off and apply to the Obligations any and all (i) balances and
deposits of any Borrower held by the Lender Group (including any amounts
received in the Cash Management Accounts), or (ii) Indebtedness at any time
owing to or for the credit or the account of any Borrower held by the Lender
Group;

                  (h) Hold, as cash collateral, any and all balances and
deposits of any Borrower held by the Lender Group, and any amounts received in
the Cash Management Accounts, to secure the full and final repayment of all of
the Obligations;

                  (i) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Collateral. Each Borrower hereby grants to Agent a license or other
right to use, without charge, such Borrower's labels, patents, copyrights, trade
secrets, trade names, trademarks, service marks, and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and such
Borrower's rights under all licenses and all franchise agreements shall inure to
the Lender Group's benefit;

                  (j) Sell the Collateral at either a public or private sale, or
both, by way of one or more contracts or transactions, for cash or on terms, in
such manner and at such places (including Borrowers' premises) as Agent
determines is commercially reasonable. It is not necessary that the Collateral
be present at any such sale;

                  (k) Agent shall give notice of the disposition of the
Collateral as follows:

                                      -91-
<PAGE>
                  (i) Agent shall give Borrowers a notice in writing of the time
            and place of public sale, or, if the sale is a private sale or some
            other disposition other than a public sale is to be made of the
            Collateral, the time on or after which the private sale or other
            disposition is to be made; and

                  (ii) The notice shall be personally delivered or mailed,
            postage prepaid, to Borrowers as provided in Section 12, at least 10
            days before the earliest time of disposition set forth in the
            notice; no notice needs to be given prior to the disposition of any
            portion of the Collateral that is perishable or threatens to decline
            speedily in value or that is of a type customarily sold on a
            recognized market;

                  (l) Agent, on behalf of the Lender Group may credit bid and
purchase at any public sale;

                  (m) Agent may seek the appointment of a receiver or keeper to
take possession of all or any portion of the Collateral or to operate same and,
to the maximum extent permitted by law, may seek the appointment of such a
receiver without the requirement of prior notice or a hearing;

                  (n) The Lender Group shall have all other rights and remedies
available to it at law or in equity pursuant to any other Loan Documents and all
rights and remedies of a secured party under the Code (whether or not the Code
applies to the affected Collateral) and under applicable PPSA; and

                  (o) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrowers. Any excess
will be returned, without interest and subject to the rights of third Persons,
by Agent to Borrowers (for the benefit of the applicable Borrower).

      9.2 REMEDIES CUMULATIVE. The rights and remedies of the Lender Group under
this Agreement, the other Loan Documents, and all other agreements shall be
cumulative. The Lender Group shall have all other rights and remedies not
inconsistent herewith as provided under the Code, by law, or in equity. No
exercise by the Lender Group of one right or remedy shall be deemed an election,
and no waiver by the Lender Group of any Event of Default shall be deemed a
continuing waiver. No delay by the Lender Group shall constitute a waiver,
election, or acquiescence by it.

10. TAXES AND EXPENSES.

            If any Borrower fails to pay any monies (whether taxes, assessments,
insurance premiums, or, in the case of leased properties or assets, rents or
other amounts payable under such leases) due to third Persons, or fails to make
any deposits or furnish any required proof of payment or deposit, all as
required under the terms of this Agreement, then, Agent, in its sole discretion
and without prior notice to any Borrower, may do any or all of the following:
(a) make payment of the same or any part thereof, (b) set up such reserves in

                                      -92-
<PAGE>
Borrowers' Loan Account as Agent deems necessary to protect the Lender Group
from the exposure created by such failure, or (c) in the case of the failure to
comply with Section 6.8 hereof, obtain and maintain insurance policies of the
type described in Section 6.8 and take any action with respect to such policies
as Agent deems prudent. Any such amounts paid by Agent shall constitute Lender
Group Expenses and any such payments shall not constitute an agreement by the
Lender Group to make similar payments in the future or a waiver by the Lender
Group of any Event of Default under this Agreement. Agent need not inquire as
to, or contest the validity of, any such expense, tax, or Lien and the receipt
of the usual official notice for the payment thereof shall be conclusive
evidence that the same was validly due and owing.

11. WAIVERS; INDEMNIFICATION.

      11.1 DEMAND; PROTEST; ETC. Each Borrower waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment,
nonpayment at maturity, release, compromise, settlement, extension, or renewal
of documents, instruments, chattel paper, and guarantees at any time held by the
Lender Group on which any such Borrower may in any way be liable.

      11.2 THE LENDER GROUP'S LIABILITY FOR COLLATERAL. Each Borrower hereby
agrees that: (a) so long as the Lender Group complies with its obligations, if
any, under the Code, Agent shall not in any way or manner be liable or
responsible for: (i) the safekeeping of the Collateral, (ii) any loss or damage
thereto occurring or arising in any manner or fashion from any cause, (iii) any
diminution in the value thereof, or (iv) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other Person, and (b) all risk of
loss, damage, or destruction of the Collateral shall be borne by Borrowers.

      11.3 INDEMNIFICATION. Each Borrower shall pay, indemnify, defend, and hold
the Agent-Related Persons, the Lender-Related Persons with respect to each
Lender, each Participant, and each of their respective officers, directors,
employees, agents, and attorneys-in-fact (each, an "Indemnified Person")
harmless (to the fullest extent permitted by law) from and against any and all
claims, demands, suits, actions, investigations, proceedings, and damages, and
all reasonable attorneys fees and disbursements and other costs and expenses
actually incurred in connection therewith (as and when they are incurred and
irrespective of whether suit is brought), at any time asserted against, imposed
upon, or incurred by any of them (a) in connection with or as a result of or
related to the execution, delivery, enforcement, performance, or administration
of this Agreement, any of the other Loan Documents, or the transactions
contemplated hereby or thereby, and (b) with respect to any investigation,
litigation, or proceeding related to this Agreement, any other Loan Document, or
the use of the proceeds of the credit provided hereunder (irrespective of
whether any Indemnified Person is a party thereto), or any act, omission, event,
or circumstance in any manner related thereto (all the foregoing, collectively,
the "Indemnified Liabilities"). The foregoing to the contrary notwithstanding,
Borrowers shall have no obligation to any Indemnified Person under this Section
11.3 with respect to any Indemnified Liability that a court of competent
jurisdiction finally determines to have resulted from the gross negligence

                                      -93-
<PAGE>
or willful misconduct of such Indemnified Person. This provision shall survive
the termination of this Agreement and the repayment of the Obligations. If any
Indemnified Person makes any payment to any other Indemnified Person with
respect to an Indemnified Liability as to which Borrowers were required to
indemnify the Indemnified Person receiving such payment, the Indemnified Person
making such payment is entitled to be indemnified and reimbursed by Borrowers
with respect thereto. WITHOUT LIMITATION, THE FOREGOING INDEMNITY SHALL APPLY TO
EACH INDEMNIFIED PERSON WITH RESPECT TO INDEMNIFIED LIABILITIES WHICH IN WHOLE
OR IN PART CAUSED BY OR ARISE OUT OF ANY NEGLIGENT ACT OR OMISSION OF SUCH
INDEMNIFIED PERSON OR OF ANY OTHER PERSON.

12. NOTICES.

            Unless otherwise provided in this Agreement, all notices or demands
by Borrowers or Agent to the other relating to this Agreement or any other Loan
Document shall be in writing and (except for financial statements and other
informational documents which may be sent by first-class mail, postage prepaid)
shall be personally delivered or sent by registered or certified mail (postage
prepaid, return receipt requested), overnight courier, electronic mail (at such
email addresses as Borrowers or Agent, as applicable, may designate to each
other in accordance herewith), or telefacsimile to Borrowers in care of
Borrowers or to Agent, as the case may be, at its address set forth below:

            If to Borrowers:
                                  Pioneer Americas LLC
                                  PCI Chemicals Canada Company
                                  700 Louisiana, Suite 4300
                                  Houston, Texas 77002
                                  Attn:   Philip Ablove, CFO
                                  Fax No.  713.225.6475

            with copies to:       Weil, Gotshel & Manges, LLP
                                  100 Crescent Court, Suite 1300
                                  Dallas, Texas 75201
                                  Attn:  Stephen Youngman, Esq.
                                  Fax No. 214.746.7777

            If to Agent:          Foothill Capital Corporation
                                  2450 Colorado Avenue
                                  Suite 3000 West
                                  Santa Monica, California  90404
                                  Attn: Business Finance Division Manager
                                  Fax No. 310.453.7443

                                      -94-
<PAGE>
            with copies to:       Munsch Hardt Kopf & Harr, PC
                                  4000 Fountain Place
                                  1445 Ross Avenue
                                  Dallas, Texas 75202-2790
                                  Attn:  Paul F. Seiler, Esq.
                                  Fax No. 214.978.4395

            Agent and Borrowers may change the address at which they are to
receive notices hereunder, by notice in writing in the foregoing manner given to
the other party. All notices or demands sent in accordance with this Section 12,
other than notices by Agent in connection with enforcement rights against the
Collateral under the provisions of the Code and/or the applicable PPSA, shall be
deemed received on the earlier of the date of actual receipt or 3 Business Days
after the deposit thereof in the mail. Each Borrower acknowledges and agrees
that notices sent by the Lender Group in connection with the exercise of
enforcement rights against Collateral under the provisions of the Code shall be
deemed sent when deposited in the mail or personally delivered, or, where
permitted by law, transmitted by telefacsimile or any other method set forth
above.

13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.

            (A) THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
(UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT
OF SUCH OTHER LOAN DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT
HEREOF AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO AND THERETO WITH
RESPECT TO ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR
THERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF TEXAS.

            (B) THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND
LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF DALLAS,
STATE OF TEXAS, PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY
COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT AGENT'S OPTION, IN THE COURTS OF
ANY JURISDICTION WHERE AGENT ELECTS TO BRING SUCH ACTION OR WHERE SUCH
COLLATERAL OR OTHER PROPERTY MAY BE FOUND. BORROWERS AND THE LENDER GROUP WAIVE,
TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT
THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY
PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 13(b).

                                      -95-
<PAGE>
            BORROWERS AND THE LENDER GROUP HEREBY WAIVE THEIR RESPECTIVE RIGHTS
TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY
OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. BORROWERS AND THE LENDER GROUP REPRESENT THAT EACH HAS
REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL
RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A
COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.

14. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.

      14.1 ASSIGNMENTS AND PARTICIPATIONS.

                  (a) Any Lender may, with the written consent of Agent
(provided that no written consent of Agent shall be required in connection with
any assignment and delegation by a Lender to an Eligible Transferee), assign and
delegate to one or more assignees (each an "Assignee") all, or any ratable part
of all, of the Obligations, the Commitments and the other rights and obligations
of such Lender hereunder and under the other Loan Documents, in a minimum amount
of $5,000,000; provided, however, that Borrowers and Agent may continue to deal
solely and directly with such Lender in connection with the interest so assigned
to an Assignee until (i) written notice of such assignment, together with
payment instructions, addresses, and related information with respect to the
Assignee, have been given to Borrowers and Agent by such Lender and the
Assignee, (ii) such Lender and its Assignee have delivered to Borrowers and
Agent an Assignment and Acceptance in form and substance satisfactory to Agent,
and (iii) the assignor Lender or Assignee has paid to Agent for Agent's separate
account a processing fee in the amount of $5,000. Anything contained herein to
the contrary notwithstanding, the consent of Agent shall not be required (and
payment of any fees shall not be required) if such assignment is in connection
with any merger, consolidation, sale, transfer, or other disposition of all or
any substantial portion of the business or loan portfolio of such Lender.

                  (b) From and after the date that Agent notifies the assignor
Lender (with a copy to Borrowers) that it has received an executed Assignment
and Acceptance and payment of the above-referenced processing fee, (i) the
Assignee thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, shall have the rights and obligations of a Lender under the Loan
Documents, and (ii) the assignor Lender shall, to the extent that rights and
obligations hereunder and under the other Loan Documents have been assigned by
it pursuant to such Assignment and Acceptance, relinquish its rights (except
with respect to Section 11.3 hereof) and be released from its obligations under
this Agreement (and in the case of an Assignment and Acceptance covering all or
the remaining portion of an assigning Lender's rights and obligations under this
Agreement and the other Loan Documents, such

                                      -96-
<PAGE>
Lender shall cease to be a party hereto and thereto), and such assignment shall
affect a novation between Borrowers and the Assignee.

                  (c) By executing and delivering an Assignment and Acceptance,
the assigning Lender thereunder and the Assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (1) other than as
provided in such Assignment and Acceptance, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other Loan Document furnished
pursuant hereto, (2) such assigning Lender makes no representation or warranty
and assumes no responsibility with respect to the financial condition of
Borrowers or the performance or observance by Borrowers of any of their
obligations under this Agreement or any other Loan Document furnished pursuant
hereto, (3) such Assignee confirms that it has received a copy of this
Agreement, together with such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance, (4) such Assignee will, independently and without
reliance upon Agent, such assigning Lender or any other Lender, and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement, (5) such Assignee appoints and authorizes Agent to take such
actions and to exercise such powers under this Agreement as are delegated to
Agent, by the terms hereof, together with such powers as are reasonably
incidental thereto, and (6) such Assignee agrees that it will perform all of the
obligations which by the terms of this Agreement are required to be performed by
it as a Lender.

                  (d) Immediately upon each Assignee's making its processing fee
payment under the Assignment and Acceptance and receipt and acknowledgment by
Agent of such fully executed Assignment and Acceptance, this Agreement shall be
deemed to be amended to the extent, but only to the extent, necessary to reflect
the addition of the Assignee and the resulting adjustment of the Commitments
arising therefrom. The Commitment allocated to each Assignee shall reduce such
Commitments of the assigning Lender pro tanto.

                  (e) Any Lender may at any time, with the written consent of
Agent, sell to one or more commercial banks, financial institutions, or other
Persons not Affiliates of such Lender (a "Participant") participating interests
in its Obligations, the Commitment, and the other rights and interests of that
Lender (the "Originating Lender") hereunder and under the other Loan Documents
(provided that no written consent of Agent shall be required in connection with
any sale of any such participating interests by a Lender to an Eligible
Transferee); provided, however, that (i) the Originating Lender shall remain a
"Lender" for all purposes of this Agreement and the other Loan Documents and the
Participant receiving the participating interest in the Obligations, the
Commitments, and the other rights and interests of the Originating Lender
hereunder shall not constitute a "Lender" hereunder or under the other Loan
Documents and the Originating Lender's obligations under this Agreement shall
remain unchanged, (ii) the Originating Lender shall remain solely

                                      -97-
<PAGE>
responsible for the performance of such obligations, (iii) Borrowers, Agent, and
the Lenders shall continue to deal solely and directly with the Originating
Lender in connection with the Originating Lender's rights and obligations under
this Agreement and the other Loan Documents, (iv) no Lender shall transfer or
grant any participating interest under which the Participant has the right to
approve any amendment to, or any consent or waiver with respect to, this
Agreement or any other Loan Document, except to the extent such amendment to, or
consent or waiver with respect to this Agreement or of any other Loan Document
would (A) extend the final maturity date of the Obligations hereunder in which
such Participant is participating, (B) reduce the interest rate applicable to
the Obligations hereunder in which such Participant is participating, (C)
release all or a material portion of the Collateral or guaranties (except to the
extent expressly provided herein or in any of the Loan Documents) supporting the
Obligations hereunder in which such Participant is participating, (D) postpone
the payment of, or reduce the amount of, the interest or fees payable to such
Participant through such Lender, or (E) change the amount or due dates of
scheduled principal repayments or prepayments or premiums; and (v) all amounts
payable by Borrowers hereunder shall be determined as if such Lender had not
sold such participation; except that, if amounts outstanding under this
Agreement are due and unpaid, or shall have been declared or shall have become
due and payable upon the occurrence of an Event of Default, each Participant
shall be deemed to have the right of set-off in respect of its participating
interest in amounts owing under this Agreement to the same extent as if the
amount of its participating interest were owing directly to it as a Lender under
this Agreement. The rights of any Participant only shall be derivative through
the Originating Lender with whom such Participant participates and no
Participant shall have any rights under this Agreement or the other Loan
Documents or any direct rights as to the other Lenders, Agent, Borrowers, the
Collections, the Collateral, or otherwise in respect of the Obligations. No
Participant shall have the right to participate directly in the making of
decisions by the Lenders among themselves.

                  (f) In connection with any such assignment or participation or
proposed assignment or participation, a Lender may disclose all documents and
information which it now or hereafter may have relating to Borrowers or
Borrowers' business.

                  (g) Any other provision in this Agreement notwithstanding, any
Lender may at any time create a security interest in, or pledge, all or any
portion of its rights under and interest in this Agreement in favor of any
Federal Reserve Bank in accordance with Regulation A of the Federal Reserve Bank
or U.S. Treasury Regulation 31 CFR ss.203.14, and such Federal Reserve Bank may
enforce such pledge or security interest in any manner permitted under
applicable law.

      14.2 SUCCESSORS. This Agreement shall bind and inure to the benefit of the
respective successors and assigns of each of the parties; provided, however,
that Borrowers may not assign this Agreement or any rights or duties hereunder
without the Lenders' prior written consent and any prohibited assignment shall
be absolutely void ab initio. No consent to assignment by the Lenders shall
release any Borrower from its Obligations. A Lender may assign this Agreement
and the other Loan Documents and its rights and duties hereunder

                                      -98-
<PAGE>
and thereunder pursuant to Section 14.1 hereof and, except as expressly required
pursuant to Section 14.1 hereof, no consent or approval by any Borrower is
required in connection with any such assignment.

15. AMENDMENTS; WAIVERS.

      15.1 AMENDMENTS AND WAIVERS. No amendment or waiver of any provision of
this Agreement or any other Loan Document, and no consent with respect to any
departure by Borrowers therefrom, shall be effective unless the same shall be in
writing and signed by the Required Lenders (or by Agent at the written request
of the Required Lenders) and Borrowers (on behalf of all Borrowers) and then any
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given; provided, however, that no such waiver,
amendment, or consent shall, unless in writing and signed by all of the Lenders
affected thereby and Borrowers and acknowledged by Agent, do any of the
following:

                  (a) increase or extend any Commitment of any Lender,

                  (b) postpone or delay any date fixed by this Agreement or any
other Loan Document for any payment of principal, interest, fees, or other
amounts due hereunder or under any other Loan Document,

                  (c) reduce the principal of, or the rate of interest on, any
loan or other extension of credit hereunder, or reduce any fees or other amounts
payable hereunder or under any other Loan Document,

                  (d) change the percentage of the Commitments that is required
to take any action hereunder,

                  (e) amend this Section or any provision of the Agreement
providing for consent or other action by all Lenders,

                  (f) release Collateral other than as permitted by Section
16.12,

                  (g) change the definition of "Required Lenders",

                  (h) contractually subordinate any of the Agent's Liens,

                  (i) release any Borrower or any Guarantor from any obligation
for the payment of money, or

                  (j) change the definition of Borrowing Base or the definitions
of Eligible Accounts, Eligible Inventory, Maximum Revolver Amount, or change
Section 2.1(b); or

                  (k) amend any of the provisions of Section 16.

                                      -99-
<PAGE>
and, provided further, however, that no amendment, waiver or consent shall,
unless in writing and signed by Agent or Issuing Lender, affect the rights or
duties of Agent or Issuing Lender, as applicable, under this Agreement or any
other Loan Document. The foregoing notwithstanding, any amendment, modification,
waiver, consent, termination, or release of, or with respect to, any provision
of this Agreement or any other Loan Document that relates only to the
relationship of the Lender Group among themselves, and that does not affect the
rights or obligations of Borrowers, shall not require consent by or the
agreement of Borrowers.

      15.2 REPLACEMENT OF HOLDOUT LENDER If any action to be taken by the Lender
Group or Agent hereunder requires the unanimous consent, authorization, or
agreement of all Lenders, and a Lender ("Holdout Lender") fails to give its
consent, authorization, or agreement, then Agent, upon at least 5 Business Days
prior irrevocable notice to the Holdout Lender, may permanently replace the
Holdout Lender with one or more substitute Lenders (each, a "Replacement
Lender"), and the Holdout Lender shall have not right to refuse to be replaced
hereunder. Such notice to replace the Holdout Lender shall specify an effective
date for such replacement, which date shall not be later than 15 Business Days
after the date such notice is given.

            Prior to the effective date of such replacement, the Holdout Lender
and each Replacement Lender shall execute and deliver an Assignment and
Acceptance Agreement, subject only to the Holdout Lender being repaid its share
of the outstanding Obligations (including an assumption of its Pro Rata Share of
the Risk Participation Liability) without any premium or penalty of any kind
whatsoever. If the Holdout Lender shall refuse or fail to execute and deliver
any such Assignment and Acceptance Agreement prior to the effective date of such
replacement, the Holdout Lender shall be deemed to have executed and delivered
such Assignment and Acceptance Agreement. The replacement of any Holdout Lender
shall be made in accordance with the terms of Section 14.1. Until such time as
the Replacement Lenders shall have acquired all of the Obligations, the
Commitments, and the other rights and obligations of the Holdout Lender
hereunder and under the other Loan Documents, the Holdout Lender shall remain
obligated to make the Holdout Lender's Pro Rata Share of Advances and to
purchase a participation in each Letter of Credit, in an amount equal to its Pro
Rata Share of the Risk Participation Liability of such Letter of Credit.

      15.3 NO WAIVERS; CUMULATIVE REMEDIES. No failure by Agent or any Lender to
exercise any right, remedy, or option under this Agreement or, any other Loan
Document, or delay by Agent or any Lender in exercising the same, will operate
as a waiver thereof. No waiver by Agent or any Lender will be effective unless
it is in writing, and then only to the extent specifically stated. No waiver by
Agent or any Lender on any occasion shall affect or diminish Agent's and each
Lender's rights thereafter to require strict performance by Borrowers of any
provision of this Agreement. Agent's and each Lender's rights under this
Agreement and the other Loan Documents will be cumulative and not exclusive of
any other right or remedy that Agent or any Lender may have.

                                     -100-
<PAGE>
16. AGENT; THE LENDER GROUP.

      16.1 APPOINTMENT AND AUTHORIZATION OF AGENT. Each Lender hereby designates
and appoints Foothill as its representative under this Agreement and the other
Loan Documents and each Lender hereby irrevocably authorizes Agent to take such
action on its behalf under the provisions of this Agreement and each other Loan
Document and to exercise such powers and perform such duties as are expressly
delegated to Agent by the terms of this Agreement or any other Loan Document,
together with such powers as are reasonably incidental thereto. Agent agrees to
act as such on the express conditions contained in this Section 16. The
provisions of this Section 16 are solely for the benefit of Agent, and the
Lenders, and Borrowers shall have no rights as a third party beneficiary of any
of the provisions contained herein. Any provision to the contrary contained
elsewhere in this Agreement or in any other Loan Document notwithstanding, Agent
shall not have any duties or responsibilities, except those expressly set forth
herein, nor shall Agent have or be deemed to have any fiduciary relationship
with any Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or any other Loan
Document or otherwise exist against Agent; it being expressly understood and
agreed that the use of the word "Agent" is for convenience only, that Foothill
is merely the representative of the Lenders, and only has the contractual duties
set forth herein. Except as expressly otherwise provided in this Agreement,
Agent shall have and may use its sole discretion with respect to exercising or
refraining from exercising any discretionary rights or taking or refraining from
taking any actions that Agent expressly is entitled to take or assert under or
pursuant to this Agreement and the other Loan Documents. Without limiting the
generality of the foregoing, or of any other provision of the Loan Documents
that provides rights or powers to Agent, Lenders agree that Agent shall have the
right to exercise the following powers as long as this Agreement remains in
effect: (a) maintain, in accordance with its customary business practices,
ledgers and records reflecting the status of the Obligations, the Collateral,
the Collections, and related matters, (b) execute or file any and all financing
or similar statements or notices, PPSA financing statements, amendments,
renewals, supplements, documents, instruments, proofs of claim, notices and
other written agreements with respect to the Loan Documents, (c) make Advances,
for itself or on behalf of Lenders as provided in the Loan Documents, (d)
exclusively receive, apply, and distribute the Collections as provided in the
Loan Documents, (e) open and maintain such bank accounts and cash management
accounts as Agent deems necessary and appropriate in accordance with the Loan
Documents for the foregoing purposes with respect to the Collateral and the
Collections, (f) perform, exercise, and enforce any and all other rights and
remedies of the Lender Group with respect to Borrowers, the Obligations, the
Collateral, the Collections, or otherwise related to any of same as provided in
the Loan Documents, and (g) incur and pay such Lender Group Expenses as Agent
may deem necessary or appropriate for the performance and fulfillment of its
functions and powers pursuant to the Loan Documents.

      16.2 DELEGATION OF DUTIES. Agent may execute any of its duties under this
Agreement or any other Loan Document by or through agents, employees or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. Agent shall not be responsible for the
negligence or misconduct of any agent

                                     -101-
<PAGE>
or attorney-in-fact that it selects as long as such selection was made without
gross negligence or willful misconduct.

      16.3 LIABILITY OF AGENT. None of the Agent-Related Persons shall (i) be
liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct),
or (ii) be responsible in any manner to any of the Lenders for any recital,
statement, representation or warranty made by any Borrower or any Subsidiary or
Affiliate of any Borrower, or any officer or director thereof, contained in this
Agreement or in any other Loan Document, or in any certificate, report,
statement or other document referred to or provided for in, or received by Agent
under or in connection with, this Agreement or any other Loan Document, or the
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Loan Document, or for any failure of any Borrower or any
other party to any Loan Document to perform its obligations hereunder or
thereunder. No Agent-Related Person shall be under any obligation to any Lender
to ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the Books or properties of Borrowers or the books or
records or properties of any of Borrowers' Subsidiaries or Affiliates.

      16.4 RELIANCE BY AGENT. Agent shall be entitled to rely, and shall be
fully protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone message,
statement or other document or conversation believed by it to be genuine and
correct and to have been signed, sent, or made by the proper Person or Persons,
and upon advice and statements of legal counsel (including counsel to Borrowers
or counsel to any Lender), independent accountants and other experts selected by
Agent. Agent shall be fully justified in failing or refusing to take any action
under this Agreement or any other Loan Document unless Agent shall first receive
such advice or concurrence of the Lenders as it deems appropriate and until such
instructions are received, Agent shall act, or refrain from acting, as it deems
advisable. If Agent so requests, it shall first be indemnified to its reasonable
satisfaction by Lenders against any and all liability and expense that may be
incurred by it by reason of taking or continuing to take any such action. Agent
shall in all cases be fully protected in acting, or in refraining from acting,
under this Agreement or any other Loan Document in accordance with a request or
consent of the Lenders and such request and any action taken or failure to act
pursuant thereto shall be binding upon all of the Lenders.

      16.5 NOTICE OF DEFAULT OR EVENT OF DEFAULT. Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or Event of Default,
except with respect to defaults in the payment of principal, interest, fees, and
expenses required to be paid to Agent for the account of the Lenders, except
with respect to Events of Default of which Agent has actual knowledge, unless
Agent shall have received written notice from a Lender or Borrowers referring to
this Agreement, describing such Default or Event of Default, and stating that
such notice is a "notice of default." Agent promptly will notify the Lenders of
its receipt of any such notice or of any Event of Default of which Agent has

                                     -102-
<PAGE>
actual knowledge. If any Lender obtains actual knowledge of any Event of
Default, such Lender promptly shall notify the other Lenders and Agent of such
Event of Default. Each Lender shall be solely responsible for giving any notices
to its Participants, if any. Subject to Section 16.4, Agent shall take such
action with respect to such Default or Event of Default as may be requested by
the Required Lenders in accordance with Section 9; provided, however, that
unless and until Agent has received any such request, Agent may (but shall not
be obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable.

      16.6 CREDIT DECISION. Each Lender acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that no
act by Agent hereinafter taken, including any review of the affairs of Borrowers
and their Subsidiaries or Affiliates, shall be deemed to constitute any
representation or warranty by any Agent-Related Person to any Lender. Each
Lender represents to Agent that it has, independently and without reliance upon
any Agent-Related Person and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, prospects, operations, property, financial and other condition and
creditworthiness of Borrowers and any other Person (other than the Lender Group)
party to a Loan Document, and all applicable bank regulatory laws relating to
the transactions contemplated hereby, and made its own decision to enter into
this Agreement and to extend credit to Borrowers. Each Lender also represents
that it will, independently and without reliance upon any Agent-Related Person
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Loan Documents,
and to make such investigations as it deems necessary to inform itself as to the
business, prospects, operations, property, financial and other condition and
creditworthiness of Borrowers and any other Person (other than the Lender Group)
party to a Loan Document. Except for notices, reports, and other documents
expressly herein required to be furnished to the Lenders by Agent, Agent shall
not have any duty or responsibility to provide any Lender with any credit or
other information concerning the business, prospects, operations, property,
financial and other condition or creditworthiness of Borrowers and any other
Person party to a Loan Document that may come into the possession of any of the
Agent-Related Persons.

      16.7 COSTS AND EXPENSES; INDEMNIFICATION. Agent may incur and pay Lender
Group Expenses to the extent Agent reasonably deems necessary or appropriate for
the performance and fulfillment of its functions, powers, and obligations
pursuant to the Loan Documents, including court costs, reasonable attorneys fees
and expenses, costs of collection by outside collection agencies and auctioneer
fees and costs of security guards or insurance premiums paid to maintain the
Collateral, whether or not Borrowers are obligated to reimburse Agent or Lenders
for such expenses pursuant to the Loan Agreement or otherwise. Agent is
authorized and directed to deduct and retain sufficient amounts from Collections
received by Agent to reimburse Agent for such out-of-pocket costs and expenses
prior to the distribution of any amounts to Lenders. In the event Agent is not
reimbursed for such costs and expenses from Collections received by Agent, each
Lender hereby agrees that it is and shall be obligated to pay to or reimburse
Agent for the amount of such Lender's Pro Rata

                                     -103-
<PAGE>
Share thereof. Whether or not the transactions contemplated hereby are
consummated, the Lenders shall indemnify upon demand the Agent-Related Persons
(to the extent not reimbursed by or on behalf of Borrowers and without limiting
the obligation of Borrowers to do so), according to their Pro Rata Shares, from
and against any and all Indemnified Liabilities; provided, however, that no
Lender shall be liable for the payment to any Agent-Related Person of any
portion of such Indemnified Liabilities resulting solely from such Person's
gross negligence or willful misconduct nor shall any Lender be liable for the
obligations of any Defaulting Lender in failing to make an Advance or other
extension of credit hereunder. Without limitation of the foregoing, each Lender
shall reimburse Agent upon demand for such Lender's ratable share of any costs
or out-of-pocket expenses (including attorneys fees and expenses) incurred by
Agent in connection with the preparation, execution, delivery, administration,
modification, amendment, or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Loan Document, or any document
contemplated by or referred to herein, to the extent that Agent is not
reimbursed for such expenses by or on behalf of Borrowers. The undertaking in
this Section shall survive the payment of all Obligations hereunder and the
resignation or replacement of Agent.

      16.8 AGENT IN INDIVIDUAL CAPACITY. Foothill and its Affiliates may make
loans to, issue letters of credit for the account of, accept deposits from,
acquire equity interests in, and generally engage in any kind of banking, trust,
financial advisory, underwriting, or other business with Borrowers and their
Subsidiaries and Affiliates and any other Person (other than the Lender Group)
party to any Loan Documents as though Foothill were not Agent hereunder, and, in
each case, without notice to or consent of the other members of the Lender
Group. The other members of the Lender Group acknowledge that, pursuant to such
activities, Foothill or its Affiliates may receive information regarding
Borrowers or their Affiliates and any other Person (other than the Lender Group)
party to any Loan Documents that is subject to confidentiality obligations in
favor of Borrowers or such other Person and that prohibit the disclosure of such
information to the Lenders, and the Lenders acknowledge that, in such
circumstances (and in the absence of a waiver of such confidentiality
obligations, which waiver Agent will use its reasonable best efforts to obtain),
Agent shall not be under any obligation to provide such information to them. The
terms "Lender" and "Lenders" include Foothill in its individual capacity.

      16.9 SUCCESSOR AGENT. Agent may resign as Agent upon 45 days notice to the
Lenders. If Agent resigns under this Agreement, the Required Lenders shall
appoint a successor Agent for the Lenders. If no successor Agent is appointed
prior to the effective date of the resignation of Agent, Agent may appoint,
after consulting with the Lenders, a successor Agent. If Agent has materially
breached or failed to perform any material provision of this Agreement or of
applicable law, the Required Lenders may agree in writing to remove and replace
Agent with a successor Agent from among the Lenders. In any such event, upon the
acceptance of its appointment as successor Agent hereunder, such successor Agent
shall succeed to all the rights, powers, and duties of the retiring Agent and
the term "Agent" shall mean such successor Agent and the retiring Agent's
appointment, powers, and

                                     -104-
<PAGE>
duties as Agent shall be terminated. After any retiring Agent's resignation
hereunder as Agent, the provisions of this Section 16 shall inure to its benefit
as to any actions taken or omitted to be taken by it while it was Agent under
this Agreement. If no successor Agent has accepted appointment as Agent by the
date which is 45 days following a retiring Agent's notice of resignation, the
retiring Agent's resignation shall nevertheless thereupon become effective and
the Lenders shall perform all of the duties of Agent hereunder until such time,
if any, as the Lenders appoint a successor Agent as provided for above.

      16.10 LENDER IN INDIVIDUAL CAPACITY. Any Lender and its respective
Affiliates may make loans to, issue letters of credit for the account of, accept
deposits from, acquire equity interests in and generally engage in any kind of
banking, trust, financial advisory, underwriting or other business with
Borrowers and their Subsidiaries and Affiliates and any other Person (other than
the Lender Group) party to any Loan Documents as though such Lender were not a
Lender hereunder without notice to or consent of the other members of the Lender
Group. The other members of the Lender Group acknowledge that, pursuant to such
activities, such Lender and its respective Affiliates may receive information
regarding Borrowers or their Affiliates and any other Person (other than the
Lender Group) party to any Loan Documents that is subject to confidentiality
obligations in favor of Borrowers or such other Person and that prohibit the
disclosure of such information to the Lenders, and the Lenders acknowledge that,
in such circumstances (and in the absence of a waiver of such confidentiality
obligations, which waiver such Lender will use its reasonable best efforts to
obtain), such Lender not shall be under any obligation to provide such
information to them. With respect to the Swing Loans and Agent Advances, Swing
Lender shall have the same rights and powers under this Agreement as any other
Lender and may exercise the same as though it were not the sub-agent of the
Agent.

      16.11 INTENTIONALLY DELETED.

      16.12 COLLATERAL MATTERS.

                  (a) The Lenders hereby irrevocably authorize Agent, at its
option and in its sole discretion, to release any Lien on any Collateral (i)
upon the termination of the Commitments and payment and satisfaction in full by
Borrowers of all Obligations, (ii) constituting property being sold or disposed
of if a release is required or desirable in connection therewith and if
Borrowers certify to Agent that the sale or disposition is permitted under
Section 7.4 of this Agreement or the other Loan Documents (and Agent may rely
conclusively on any such certificate, without further inquiry), (iii)
constituting property in which no Borrower owned any interest at the time the
security interest was granted or at any time thereafter, or (iv) constituting
property leased to a Borrower under a lease that has expired or is terminated in
a transaction permitted under this Agreement. Except as provided above, Agent
will not execute and deliver a release of any Lien on any Collateral without the
prior written authorization of (y) if the release is of all or substantially all
of the Collateral, all of the Lenders, or (z) otherwise, the Required Lenders.
Upon request by Agent or Borrowers at any time, the Lenders will confirm in
writing Agent's authority to release any such Liens on particular types or items
of Collateral pursuant to this Section 16.12; provided,

                                     -105-
<PAGE>
however, that (1) Agent shall not be required to execute any document necessary
to evidence such release on terms that, in Agent's opinion, would expose Agent
to liability or create any obligation or entail any consequence other than the
release of such Lien without recourse, representation, or warranty, and (2) such
release shall not in any manner discharge, affect, or impair the Obligations or
any Liens (other than those expressly being released) upon (or obligations of
Borrowers in respect of) all interests retained by Borrowers, including, the
proceeds of any sale, all of which shall continue to constitute part of the
Collateral.

                  (b) Agent shall have no obligation whatsoever to any of the
Lenders to assure that the Collateral exists or is owned by Borrowers or is
cared for, protected, or insured or has been encumbered, or that the Agent's
Liens have been properly or sufficiently or lawfully created, perfected,
protected, or enforced or are entitled to any particular priority, or to
exercise at all or in any particular manner or under any duty of care,
disclosure or fidelity, or to continue exercising, any of the rights,
authorities and powers granted or available to Agent pursuant to any of the Loan
Documents, it being understood and agreed that in respect of the Collateral, or
any act, omission, or event related thereto, subject to the terms and conditions
contained herein, Agent may act in any manner it may deem appropriate, in its
sole discretion given Agent's own interest in the Collateral in its capacity as
one of the Lenders and that Agent shall have no other duty or liability
whatsoever to any Lender as to any of the foregoing, except as otherwise
provided herein.

      16.13 RESTRICTIONS ON ACTIONS BY LENDERS; SHARING OF PAYMENTS.

                  (a) Each of the Lenders agrees that it shall not, without the
express consent of Agent, and that it shall, to the extent it is lawfully
entitled to do so, upon the request of Agent, set off against the Obligations,
any amounts owing by such Lender to Borrowers or any deposit accounts of
Borrowers now or hereafter maintained with such Lender. Each of the Lenders
further agrees that it shall not, unless specifically requested to do so by
Agent, take or cause to be taken any action, including, the commencement of any
legal or equitable proceedings, to foreclose any Lien on, or otherwise enforce
any security interest in, any of the Collateral the purpose of which is, or
could be, to give such Lender any preference or priority against the other
Lenders with respect to the Collateral.

                  (b) If, at any time or times any Lender shall receive (i) by
payment, foreclosure, setoff, or otherwise, any proceeds of Collateral or any
payments with respect to the Obligations arising under, or relating to, this
Agreement or the other Loan Documents, except for any such proceeds or payments
received by such Lender from Agent pursuant to the terms of this Agreement, or
(ii) payments from Agent in excess of such Lender's ratable portion of all such
distributions by Agent, such Lender promptly shall (1) turn the same over to
Agent, in kind, and with such endorsements as may be required to negotiate the
same to Agent, or in immediately available funds, as applicable, for the account
of all of the Lenders and for application to the Obligations in accordance with
the applicable provisions of this Agreement, or (2) purchase, without recourse
or warranty, an undivided interest and participation in the Obligations owed to
the other Lenders so that such excess payment received shall be applied ratably
as among the Lenders in accordance with their Pro Rata

                                     -106-
<PAGE>
Shares; provided, however, that if all or part of such excess payment received
by the purchasing party is thereafter recovered from it, those purchases of
participations shall be rescinded in whole or in part, as applicable, and the
applicable portion of the purchase price paid therefor shall be returned to such
purchasing party, but without interest except to the extent that such purchasing
party is required to pay interest in connection with the recovery of the excess
payment.

      16.14 AGENCY FOR PERFECTION. Agent hereby appoints each other Lender as
its agent (and each Lender hereby accepts such appointment) for the purpose of
perfecting the Agent's Liens in assets which, in accordance with Article 9 of
the UCC can be perfected only by possession. Should any Lender obtain possession
of any such Collateral, such Lender shall notify Agent thereof, and, promptly
upon Agent's request therefor shall deliver such Collateral to Agent or in
accordance with Agent's instructions.

      16.15 PAYMENTS BY AGENT TO THE LENDERS. All payments to be made by Agent
to the Lenders shall be made by bank wire transfer or internal transfer of
immediately available funds pursuant to such wire transfer instructions as each
party may designate for itself by written notice to Agent. Concurrently with
each such payment, Agent shall identify whether such payment (or any portion
thereof) represents principal, premium, or interest of the Obligations.

      16.16 CONCERNING THE COLLATERAL AND RELATED LOAN DOCUMENTS. Each member of
the Lender Group authorizes and directs Agent to enter into this Agreement and
the other Loan Documents relating to the Collateral, for the benefit of the
Lender Group. Each member of the Lender Group agrees that any action taken by
Agent in accordance with the terms of this Agreement or the other Loan Documents
relating to the Collateral and the exercise by Agent of its powers set forth
therein or herein, together with such other powers that are reasonably
incidental thereto, shall be binding upon all of the Lenders.

      16.17 FIELD AUDITS AND EXAMINATION REPORTS; CONFIDENTIALITY; DISCLAIMERS
BY LENDERS; OTHER REPORTS AND INFORMATION. By becoming a party to this
Agreement, each Lender:

                  (a) is deemed to have requested that Agent furnish such
Lender, promptly after it becomes available, a copy of each field audit or
examination report (each a "Report" and collectively, "Reports") prepared by
Agent, and Agent shall so furnish each Lender with such Reports,

                  (b) expressly agrees and acknowledges that Agent does not (i)
make any representation or warranty as to the accuracy of any Report, and (ii)
shall not be liable for any information contained in any Report,

                  (c) expressly agrees and acknowledges that the Reports are not
comprehensive audits or examinations, that Agent or other party performing any
audit or examination will inspect only specific information regarding Borrowers
and will rely significantly upon the Books, as well as on representations of
Borrowers' personnel,

                                     -107-
<PAGE>
                  (d) agrees to keep all Reports and other material, non-public
information regarding Borrowers and their Subsidiaries and their operations,
assets, and existing and contemplated business plans in a confidential manner;
it being understood and agreed by Borrowers that in any event such Lender may
make disclosures (a) to counsel for and other advisors, accountants, and
auditors to such Lender, (b) reasonably required by any bona fide potential or
actual Assignee or Participant in connection with any contemplated or actual
assignment or transfer by such Lender of an interest herein or any participation
interest in such Lender's rights hereunder, (c) of information that has become
public by disclosures made by Persons other than such Lender, its Affiliates,
assignees, transferees, or Participants, or (d) as required or requested by any
court, governmental or administrative agency, pursuant to any subpoena or other
legal process, or by any law, statute, regulation, or court order; provided,
however, that, unless prohibited by applicable law, statute, regulation, or
court order, such Lender shall notify Borrowers of any request by any court,
governmental or administrative agency, or pursuant to any subpoena or other
legal process for disclosure of any such non-public material information
concurrent with, or where practicable, prior to the disclosure thereof, and

                  (e) without limiting the generality of any other
indemnification provision contained in this Agreement, agrees: (i) to hold Agent
and any such other Lender preparing a Report harmless from any action the
indemnifying Lender may take or conclusion the indemnifying Lender may reach or
draw from any Report in connection with any loans or other credit accommodations
that the indemnifying Lender has made or may make to Borrowers, or the
indemnifying Lender's participation in, or the indemnifying Lender's purchase
of, a loan or loans of Borrowers; and (ii) to pay and protect, and indemnify,
defend and hold Agent, and any such other Lender preparing a Report harmless
from and against, the claims, actions, proceedings, damages, costs, expenses,
and other amounts (including, attorneys fees and costs) incurred by Agent and
any such other Lender preparing a Report as the direct or indirect result of any
third parties who might obtain all or part of any Report through the
indemnifying Lender.

In addition to the foregoing: (x) any Lender may from time to time request of
Agent in writing that Agent provide to such Lender a copy of any report or
document provided by Borrowers to Agent that has not been contemporaneously
provided by Borrowers to such Lender, and, upon receipt of such request, Agent
shall provide a copy of same to such Lender, (y) to the extent that Agent is
entitled, under any provision of the Loan Documents, to request additional
reports or information from Borrowers, any Lender may, from time to time,
reasonably request Agent to exercise such right as specified in such Lender's
notice to Agent, whereupon Agent promptly shall request of Borrowers the
additional reports or information reasonably specified by such Lender, and, upon
receipt thereof from Borrowers, Agent promptly shall provide a copy of same to
such Lender, and (z) any time that Agent renders to Borrowers a statement
regarding the Loan Account, Agent shall send a copy of such statement to each
Lender.

      16.18 SEVERAL OBLIGATIONS; NO LIABILITY. Notwithstanding that certain of
the Loan Documents now or hereafter may have been or will be executed only by or
in favor of Agent

                                     -108-
<PAGE>
in its capacity as such, and not by or in favor of the Lenders, any and all
obligations on the part of Agent (if any) to make any credit available hereunder
shall constitute the several (and not joint) obligations of the respective
Lenders on a ratable basis, according to their respective Commitments, to make
an amount of such credit not to exceed, in principal amount, at any one time
outstanding, the amount of their respective Commitments. Nothing contained
herein shall confer upon any Lender any interest in, or subject any Lender to
any liability for, or in respect of, the business, assets, profits, losses, or
liabilities of any other Lender. Each Lender shall be solely responsible for
notifying its Participants of any matters relating to the Loan Documents to the
extent any such notice may be required, and no Lender shall have any obligation,
duty, or liability to any Participant of any other Lender. Except as provided in
Section 16.7, no member of the Lender Group shall have any liability for the
acts or any other member of the Lender Group. No Lender shall be responsible to
any Borrower or any other Person for any failure by any other Lender to fulfill
its obligations to make credit available hereunder, nor to advance for it or on
its behalf in connection with its Commitment, nor to take any other action on
its behalf hereunder or in connection with the financing contemplated herein.

      16.19 LEGAL REPRESENTATION OF AGENT. In connection with the negotiation,
drafting, and execution of this Agreement and the other Loan Documents, or in
connection with future legal representation relating to loan administration,
amendments, modifications, waivers, or enforcement of remedies, Munsch Hardt
Kopf & Harr, P.C. ("MHKH") only has represented and only shall represent
Foothill in its capacity as Agent and as a Lender. Each other Lender hereby
acknowledges that MHKH does not represent it in connection with any such
matters.

17. GENERAL PROVISIONS.

      17.1 EFFECTIVENESS. This Agreement shall be binding and deemed effective
when executed by Borrowers, Agent, and each Lender whose signature is provided
for on the signature pages hereof.

      17.2 SECTION HEADINGS. Headings and numbers have been set forth herein for
convenience only. Unless the contrary is compelled by the context, everything
contained in each Section applies equally to this entire Agreement.

      17.3 INTERPRETATION. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against the Lender Group or
Borrowers, whether under any rule of construction or otherwise. On the contrary,
this Agreement has been reviewed by all parties and shall be construed and
interpreted according to the ordinary meaning of the words used so as to
accomplish fairly the purposes and intentions of all parties hereto.

      17.4 SEVERABILITY OF PROVISIONS. Each provision of this Agreement shall be
severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.

      17.5 AMENDMENTS IN WRITING. This Agreement only can be amended by a
writing in accordance with Section 15.1.

                                     -109-
<PAGE>
      17.6 COUNTERPARTS; TELEFACSIMILE EXECUTION. This Agreement may be executed
in any number of counterparts and by different parties on separate counterparts,
each of which, when executed and delivered, shall be deemed to be an original,
and all of which, when taken together, shall constitute but one and the same
Agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile shall be equally as effective as delivery of an original executed
counterpart of this Agreement. Any party delivering an executed counterpart of
this Agreement by telefacsimile also shall deliver an original executed
counterpart of this Agreement but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Agreement. The foregoing shall apply to each other Loan Document mutatis
mutandis.

      17.7 REVIVAL AND REINSTATEMENT OF OBLIGATIONS. If the incurrence or
payment of the Obligations by any Borrower or Guarantor or the transfer to the
Lender Group of any property should for any reason subsequently be declared to
be void or voidable under any state or federal law relating to creditors'
rights, including provisions of the Bankruptcy Code relating to fraudulent
conveyances, preferences, or other voidable or recoverable payments of money or
transfers of property (collectively, a "Voidable Transfer"), and if the Lender
Group is required to repay or restore, in whole or in part, any such Voidable
Transfer, or elects to do so upon the reasonable advice of its counsel, then, as
to any such Voidable Transfer, or the amount thereof that the Lender Group is
required or elects to repay or restore, and as to all reasonable costs,
expenses, and attorneys fees of the Lender Group related thereto, the liability
of Borrowers or Guarantor automatically shall be revived, reinstated, and
restored and shall exist as though such Voidable Transfer had never been made.

      17.8 INTEGRATION. This Agreement, together with the other Loan Documents,
reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof.

                           [Signature page to follow.]

                                     -110-
<PAGE>
         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first above written.

                            PCI CHEMICALS CANADA COMPANY
                            a Nova Scotia unlimited liability company

                            By:
                               -------------------------------------
                            Title:
                                  ----------------------------------

                            PIONEER AMERICAS LLC
                            a Delaware limited liability company

                            By:
                               -------------------------------------
                            Title:
                                  ----------------------------------

                            FOOTHILL CAPITAL CORPORATION,
                            a California corporation, as Agent and as a Lender

                            By:
                               -------------------------------------
                            Title:
                                  ----------------------------------

SIGNATURE PAGE TO LOAN AND SECURITY AGREEMENT
<PAGE>
                                  SCHEDULE A-1
                                 AGENT'S ACCOUNT

            An account at a bank designated by Agent from time to time as the
account into which Borrowers shall make all payments to Agent for the benefit of
the Lender Group and into which the Lender Group shall make all payments to
Agent under this Agreement and the other Loan Documents; unless and until Agent
notifies Borrowers and the Lender Group to the contrary, Agent's Account shall
be that certain deposit account bearing account number 323-266193 and maintained
by Agent with JP Morgan Chase Bank, 4 New York Plaza, 15th Floor, New York, New
York 10004, ABA #021000021.

                                      -6-
<PAGE>
                                  SCHEDULE D-1
                               DESIGNATED ACCOUNT

            Account number _________ of Borrowers maintained with Borrowers'
Designated Account Bank, or such other deposit account of Borrowers (located
within the United States) that has been designed as such, in writing, by
Borrowers to Agent.

            "Designated Account Bank" means ____________, whose office is
located at _________, and whose ABA number is _____________.

                                      -7-

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