Document:

Exhibit 4.2

                       SAVANNAH ELECTRIC AND POWER COMPANY

                                       TO

                              THE BANK OF NEW YORK,
                                    TRUSTEE.

                          FOURTH SUPPLEMENTAL INDENTURE

                          DATED AS OF NOVEMBER 7, 2002

                                   $55,000,000

                  SERIES D 5.50% SENIOR INSURED QUARTERLY NOTES

                              DUE NOVEMBER 15, 2017

<PAGE>

TABLE OF CONTENTS1

                                                                   PAGE

ARTICLE 1............................................................1

SECTION 101.  Establishment..........................................1

SECTION 102.  Definitions............................................2

SECTION 103.  Payment of Principal and Interest......................3

SECTION 104.  Denominations..........................................3

SECTION 105.  Global Securities......................................3

SECTION 106.  Transfer...............................................4

SECTION 107.  Redemption.............................................4

ARTICLE 2 ...........................................................5

SECTION 201.  Supplemental Indentures................................5

SECTION 202.  Events of Default and Remedies.........................5

SECTION 203.  Insurance Policy Payment Procedures....................5

SECTION 204.  Application of Term "Outstanding" to Series D Notes  ..7

SECTION 205.  Insurer as Third Party Beneficiary.....................7

SECTION 206.  Concerning the Special Insurance Provisions............7

ARTICLE 3..  .........................................................7

SECTION 301.  Recitals by Company.....................................7

SECTION 302.  Ratification and Incorporation of Original Indenture....7

SECTION 303.  Executed in Counterparts................................7

_______________________
    1  This Table of Contents does not constitute part of the
       Indenture or have any bearing upon the
       interpretation of any of its terms and provisions.

<PAGE>

                  THIS FOURTH SUPPLEMENTAL INDENTURE is made as of the 7th day
of November, 2002, by and between SAVANNAH ELECTRIC AND POWER COMPANY, a Georgia
corporation, 600 Bay Street, East, Savannah, Georgia 31401 (the "Company"), and
THE BANK OF NEW YORK, a New York banking corporation, 101 Barclay Street, 21
West, New York, New York 10286 (the "Trustee").

                              W I T N E S S E T H:

                  WHEREAS, the Company has heretofore entered into a Senior Note
Indenture, dated as of March 1, 1998 (the "Original Indenture"), with The Bank
of New York, as trustee, as heretofore supplemented;

                  WHEREAS, the Original Indenture is incorporated herein by this
reference and the Original Indenture, as heretofore supplemented and as further
supplemented by this Fourth Supplemental Indenture, is herein called the
"Indenture";

                  WHEREAS, under the Original Indenture, a new series of Senior
Notes may at any time be established pursuant to a supplemental indenture
executed by the Company and the Trustee;

                  WHEREAS, the Company proposes to create under the Indenture
a new series of Senior Notes;

                  WHEREAS, additional Senior Notes of other series hereafter
established, except as may be limited in the Original Indenture as at the time
supplemented and modified, may be issued from time to time pursuant to the
Indenture as at the time supplemented and modified; and

                  WHEREAS, all conditions necessary to authorize the execution
and delivery of this Fourth Supplemental Indenture and to make it a valid and
binding obligation of the Company have been done or performed.

                  NOW, THEREFORE, in consideration of the agreements and
obligations set forth herein and for other good and valuable consideration, the
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:

                                    ARTICLE 1

                              Series D Senior Notes

         SECTION 101. Establishment. In accordance with Section 301 of the
Indenture, there is hereby established a new series of Senior Notes to be issued
under the Indenture, to be designated as the Company's Series D 5.50% Senior
Insured Quarterly Notes due November 15, 2017 (the "Series D Notes").

         There are to be authenticated and delivered $55,000,000 principal
amount of Series D Notes, and such principal amount of the Series D Notes may be
increased from time to time without limit pursuant to Section 301 of the
Original Indenture. All Series D Notes need not be issued at the same time and
such series may be reopened at any time, without the consent of any Holder, for
issuances of additional Series D Notes. Any such additional Series D Notes will
have the same interest rate, maturity and other terms as those initially issued.
No Series D Notes shall be authenticated and delivered in excess of the
principal amount as so increased except as provided by Sections 203, 303, 304,
907 or 1107 of the Original Indenture. The Series D Notes shall be issued in
definitive fully registered form.

         As provided in Section 105 hereof, the Series D Notes shall be issued
in the form of one or more Global Securities in substantially the form set out
in Exhibit A hereto. The Depositary with respect to the Series D Notes shall be
The Depository Trust Company.

         The form of the Trustee's Certificate of Authentication for the Series
D Notes shall be in substantially the form set forth in Exhibit B hereto.

         Each Series D Note shall be dated the date of authentication thereof
and shall bear interest from the date of original issuance thereof or from the
most recent Interest Payment Date to which interest has been paid or duly
provided for.

         SECTION 102. Definitions. The following defined terms used herein
shall, unless the context otherwise requires, have the meanings specified below.
Capitalized terms used herein for which no definition is provided herein shall
have the meanings set forth in the Original Indenture.

         "Insurance Trustee" means The Bank of New York, a New York banking
corporation, having its principal corporate trust office at 101 Barclay Street,
21 West, New York, New York 10286, or any successor thereto, as the Insurance
Trustee under the Policy.

         "Insurer" means Ambac Assurance Corporation, a Wisconsin-domiciled
stock insurance corporation.

         "Interest Payment Dates" means February 15, May 15, August 15 and
November 15 of each year, commencing February 15, 2003.

         "Original Issue Date" means November 7, 2002.

         "Policy" means the financial guaranty insurance policy issued by the
Insurer with respect to payments due for principal of and interest on the Series
D Notes as provided in such policy.

         "Regular Record Date" means, with respect to each Interest Payment
Date, the close of business on the 15th calendar day preceding such Interest
Payment Date.

         "Stated Maturity" means November 15, 2017.

         SECTION 103. Payment of Principal and Interest. The principal of the
Series D Notes shall be due at the Stated Maturity (unless earlier redeemed).
The unpaid principal amount of the Series D Notes shall bear interest at the
rate of 5.50% per annum until paid or duly provided for. Interest shall be paid
quarterly in arrears on each Interest Payment Date to the Person in whose name
the Series D Notes are registered on the Regular Record Date for such Interest
Payment Date, provided that interest payable at the Stated Maturity of principal
or on a Redemption Date as provided herein will be paid to the Person to whom
principal is payable. Any such interest that is not so punctually paid or duly
provided for will forthwith cease to be payable to the Holders on such Regular
Record Date and may either be paid to the Person or Persons in whose name the
Series D Notes are registered at the close of business on a Special Record Date
for the payment of such defaulted interest to be fixed by the Trustee, notice
whereof shall be given to Holders of the Series D Notes not less than ten (10)
days prior to such Special Record Date, or be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange,
if any, on which the Series D Notes shall be listed, and upon such notice as may
be required by any such exchange, all as more fully provided in the Original
Indenture.

         Payments of interest on the Series D Notes will include interest
accrued to but excluding the respective Interest Payment Dates. Interest
payments for the Series D Notes shall be computed and paid on the basis of a
360-day year of twelve 30-day months. In the event that any date on which
interest is payable on the Series D Notes is not a Business Day, then a payment
of the interest payable on such date will be made on the next succeeding day
that is a Business Day (and without any interest or other payment in respect of
any such delay), with the same force and effect as if made on the date the
payment was originally payable.

         Payment of the principal and interest due at the Stated Maturity or
earlier redemption of the Series D Notes shall be made upon surrender of the
Series D Notes at the Corporate Trust Office of the Trustee. The principal of
and interest on the Series D Notes shall be paid 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. Payments of interest (including interest on any
Interest Payment Date) will be made, subject to such surrender where applicable,
at the option of the Company, (i) by check mailed to the address of the Person
entitled thereto as such address shall appear in the Security Register or (ii)
by wire transfer or other electronic transfer at such place and to such account
at a banking institution in the United States as may be designated in writing to
the Trustee at least sixteen (16) days prior to the date for payment by the
Person entitled thereto.

         SECTION 104. Denominations. The Series D Notes may be issued in the
denominations of $1,000, or any integral multiple thereof.

         SECTION 105. Global Securities. The Series D Notes will be issued in
the form of one or more Global Securities registered in the name of the
Depositary (which shall be The Depository Trust Company) or its nominee. Except
under the limited circumstances described below, Series D Notes represented by
the Global Securities will not be exchangeable for, and will not otherwise be
issuable as, Series D Notes in definitive form. The Global Securities described
above may not be transferred except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or to a successor Depositary or its nominee.

         Owners of beneficial interests in such a Global Security will not be
considered the Holders thereof for any purpose under the Indenture, and no
Global Security representing a Series D Note shall be exchangeable, except for
another Global Security of like denomination and tenor to be registered in the
name of the Depositary or its nominee or to a successor Depositary or its
nominee. The rights of Holders of such Global Security shall be exercised only
through the Depositary.

         A Global Security shall be exchangeable for Series D Notes registered
in the names of persons other than the Depositary or its nominee only if (i) the
Depositary notifies the Company that it is unwilling or unable to continue as a
Depositary for such Global Security or if at any time the Depositary ceases to
be a clearing agency registered under the Securities Exchange Act of 1934, as
amended, at a time when the Depositary is required to be so registered to act as
such Depositary and in each case no successor Depositary shall have been
appointed by the Company within 90 days after the Company receives such notice
or becomes aware of such cessation, (ii) the Company in its sole discretion
determines that such Global Security shall be so exchangeable or (iii) there
shall have occurred an Event of Default with respect to the Series D Notes. Any
Global Security that is exchangeable pursuant to the preceding sentence shall be
exchangeable for Series D Notes registered in such names as the Depositary shall
direct.

         SECTION 106. Transfer. No service charge will be made for any transfer
or exchange of Series D Notes, but payment will be required of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
therewith.

         The Company shall not be required (a) to issue, transfer or exchange
any Series D Notes except to the Insurer during a period beginning at the
opening of business fifteen (15) days before the day of the mailing of a notice
pursuant to Section 1104 of the Original Indenture identifying the serial
numbers of the Series D Notes to be called for redemption, and ending at the
close of business on the day of the mailing, or (b) to transfer or exchange any
Series D Notes theretofore selected for redemption in whole or in part, except
the unredeemed portion of any Series D Note redeemed in part.

         SECTION 107. Redemption. The Series D Notes shall be subject to
redemption at the option of the Company, in whole or in part, without premium or
penalty, at any time or from time to time on or after November 15, 2005, at a
Redemption Price equal to 100% of the principal amount to be redeemed plus
accrued but unpaid interest to the Redemption Date.

         In the event of redemption of the Series D Notes in part only, a new
Series D Note or Notes for the unredeemed portion will be issued in the name or
names of the Holders thereof upon the surrender thereof.

         The Series D Notes will not have a sinking fund.

         Notice of redemption shall be given as provided in Section 1104 of the
Original Indenture.

         Any redemption of less than all of the Series D Notes shall, with
respect to the principal thereof, be divisible by $1,000.

                                    ARTICLE 2

                          Special Insurance Provisions

         SECTION 201. Supplemental Indentures. The consent of the Insurer shall
be required with respect to any supplemental indenture to the Original Indenture
requiring the consent of the Holders of the Series D Notes pursuant to Section
902 of the Original Indenture.

         SECTION 202. Events of Default and Remedies. Subject to Section 107 of
the Original Indenture and to the Trust Indenture Act, including, without
limitation, Sections 316(a)(1) and 317(a) thereof, if an Event of Default with
respect to the Series D Notes occurs and is continuing, the Insurer shall be
entitled to control and direct the enforcement of all rights and remedies
granted to the Holders of the Series D Notes or the Trustee for the benefit of
the Holders of the Series D Notes under the Indenture, including, without
limitation (i) the right to accelerate the principal of the Series D Notes as
provided in Section 502 of the Original Indenture and (ii) the right to annul
any declaration of acceleration, and the Insurer shall also be entitled to
approve any waiver of an Event of Default with respect to the Series D Notes;
provided, however, that the obligations of the Trustee to comply with any such
direction to be subject to compliance with the conditions set forth in Sections
512 and 603(e) of the Original Indenture (as if references in those Sections to
Holders were references to the Insurer) and the protections provided to the
Trustee by Section 601(c)(3) of the Original Indenture shall be applicable with
respect to any direction from the Insurer given pursuant hereto (as if
references in said Section to Holders were references to the Insurer).

         In addition to the Events of Default listed in the Original Indenture,
the occurrence and continuance of an "Event of Default" under the Insurance
Agreement dated as of November 7, 2002 between the Company and the Insurer, as
the same may be amended, shall also constitute an Event of Default with respect
to the Series D Notes.

         SECTION 203. Insurance Policy Payment Procedures. (a) On all Interest
Payment Dates the Trustee will determine whether there are sufficient funds to
pay the principal of or interest on the Series D Notes on such Interest Payment
Date. If the Trustee determines that there are insufficient funds available, the
Trustee shall so notify the Insurer. Such notice shall specify the amount of the
deficiency and whether the Series D Notes are deficient as to principal or
interest, or both. The Insurer will make payments of principal or interest due
on the Series D Notes in accordance with the Policy on or before the first (1st)
Business Day next following the date on which the Insurer shall have received
notice of Nonpayment (as defined in the Policy) from the Trustee.

         (b) In the event of Nonpayment and notification thereof to the Insurer,
the Security Registrar shall make available to the Insurer and, at the Insurer's
direction, to the Insurance Trustee, the books kept by the Security Registrar
for the registration and for the registration of transfer of Series D Notes as
provided in the Indenture.

         (c) The Trustee shall, at the time it provides notice to the Insurer
pursuant to (a) above, notify Holders of Series D Notes entitled to receive the
payment of principal or interest thereon from the Insurer (i) as to the fact of
such entitlement, (ii) that the Insurer will remit to them all or a part of the
interest payments next coming due upon proof of Holder entitlement to interest
payments and delivery to the Insurance Trustee, in form satisfactory to the
Insurance Trustee, of an appropriate assignment of the Holder's right to
payment, (iii) that should they be entitled to receive full payment of principal
from the Insurer, they must surrender their Series D Notes (along with an
appropriate instrument of assignment in form satisfactory to the Insurance
Trustee to permit ownership of such Series D Notes to be registered in the name
of the Insurer) for payment to the Insurance Trustee, and not the Trustee or any
Paying Agent and (iv) that should they be entitled to receive partial payment of
principal from the Insurer, they must surrender their Series D Notes for payment
thereon first to the Trustee, who shall note on such Series D Notes the portion
of the principal paid by the Trustee, and then, along with an appropriate
instrument of assignment in form satisfactory to the Insurance Trustee, to the
Insurance Trustee, which will then pay the unpaid portion of principal.

         (d) In the event that the Trustee has notice that any payment of
principal of or interest on a Series D Note which has become Due for Payment (as
defined in the Policy) and which is made to a Holder by or on behalf of the
Company has been deemed a preferential transfer and theretofore recovered from
its Holder pursuant to the United States Bankruptcy Code by a trustee in
bankruptcy in accordance with a final, nonappealable order of a court having
competent jurisdiction, the Trustee shall, at the time the Insurer is notified
pursuant to (a) above, notify all Holders of the Series D Notes that in the
event that any Holder's payment is so recovered, such Holder will be entitled to
payment from the Insurer to the extent of such recovery if sufficient funds are
not otherwise available, and the Trustee shall furnish to the Insurer its
records evidencing the payments of principal of and interest on the Series D
Notes which have been made by the Trustee and subsequently recovered from
Holders and the dates on which such payments were made.

         (e) In addition to those rights granted the Insurer under the
Indenture, the Insurer shall, to the extent it makes payment of principal of or
interest on Series D Notes, become subrogated to the rights of the recipients of
such payments in accordance with the terms of the Policy, and to evidence such
subrogation (i) in the case of subrogation as to claims for past due interest,
the Trustee shall note the Insurer's rights as subrogee on the registration
books of the Company maintained by the Trustee upon receipt from the Insurer of
proof of the payment of interest thereon to the Holders of the Series D Notes
and (ii) in the case of subrogation as to claims for past due principal, the
Trustee shall note the Insurer's rights as subrogee on the registration books of
the Company maintained by the Trustee upon surrender of the Series D Notes by
the Holders thereof together with proof of the payment of principal thereof.

         SECTION 204. Application of Term "Outstanding" to Series D Notes. In
the event that the principal and/or interest due on the Series D Notes shall be
paid by the Insurer pursuant to the Policy, the Series D Notes shall remain
Outstanding for all purposes of the Indenture, not be considered defeased or
otherwise satisfied and not be considered paid by the Company, and the
assignment and pledge of the Indenture and all covenants, agreements and other
obligations of the Company to the Holders of the Series D Notes shall continue
to exist and shall run to the benefit of the Insurer, and the Insurer shall be
subrogated to the rights of such Holders to the extent of each such payment.

         SECTION 205. Insurer as Third Party Beneficiary. To the extent that the
Indenture confers upon or gives or grants to the Insurer any right, remedy or
claim under or by reason of the Indenture, the Insurer is hereby explicitly
recognized as being a third-party beneficiary hereunder and may enforce any such
right, remedy or claim conferred, given or granted hereunder.

         SECTION 206. Concerning the Special Insurance Provisions. The
provisions of this Article 2 shall apply notwithstanding anything in the
Indenture to the contrary, but only so long as the Policy shall be in full force
and effect and the Insurer is not in default thereunder.

                                    ARTICLE 3

                            Miscellaneous Provisions

         SECTION 301. Recitals by Company. The recitals in this Fourth
Supplemental Indenture are made by the Company only and not by the Trustee, and
all of the provisions contained in the Original Indenture in respect of the
rights, privileges, immunities, powers and duties of the Trustee shall be
applicable in respect of Series D Notes and of this Fourth Supplemental
Indenture as fully and with like effect as if set forth herein in full.

         SECTION 302. Ratification and Incorporation of Original Indenture. As
heretofore supplemented and as supplemented hereby, the Original Indenture is in
all respects ratified and confirmed, and the Original Indenture as heretofore
supplemented and as supplemented by this Fourth Supplemental Indenture shall be
read, taken and construed as one and the same instrument.

         SECTION 303. Executed in Counterparts. This Fourth Supplemental
Indenture may be simultaneously executed in several counterparts, each of which
shall be deemed to be an original, and such counterparts shall together
constitute but one and the same instrument.

<PAGE>

                  IN WITNESS WHEREOF, each party hereto has caused this
instrument to be signed in its name and behalf by its duly authorized officers,
all as of the day and year first above written.

ATTEST:           .........         SAVANNAH ELECTRIC AND POWER COMPANY

By:               .........                 By:
   ---------------------------------           ------------------------------
         Wayne Boston......                  Kirby R. Willis
         Assistant Secretary                 Vice President, Treasurer and
                  .........                  Chief Financial Officer

ATTEST:           .........         THE BANK OF NEW YORK, as Trustee

By:               .........                 By:
   ---------------------------------           ------------------------------
         Mark P. Brown.....                 Elizabeth T. Wagner
         Authorized Signatory                   Authorized Signatory

<PAGE>

                                    EXHIBIT A

                              FORM OF SERIES D NOTE

<PAGE>

NO. __ CUSIP NO. 804787DG1

                       SAVANNAH ELECTRIC AND POWER COMPANY
                  SERIES D 5.50% SENIOR INSURED QUARTERLY NOTE
                              DUE NOVEMBER 15, 2017

 Principal Amount:           $__________

 Regular Record Date:        15th calendar day prior to the applicable Interest
                              Payment Date

 Original Issue Date:        November 7, 2002

 Stated Maturity:            November 15, 2017

 Interest Payment Dates:     February 15, May 15, August 15 and November 15

 Interest Rate:              5.50% per annum

 Authorized Denomination:    $1,000, or any integral multiple thereof

         Savannah Electric and Power Company, a Georgia corporation (the
"Company", which term includes any successor corporation under the Indenture
referred to on the reverse hereof), for value received, hereby promises to pay
to _____________________________________________, or registered assigns, the
principal sum of _________ DOLLARS ($__________) on the Stated Maturity shown
above (or upon earlier redemption), and to pay interest thereon from the
Original Issue Date shown above, or from the most recent Interest Payment Date
to which interest has been paid or duly provided for, quarterly in arrears on
each Interest Payment Date as specified above, commencing February 15, 2003, and
on the Stated Maturity (or upon earlier redemption) at the rate per annum shown
above until the principal hereof is paid or made available for payment and on
any overdue principal and on any overdue installment of interest. The interest
so payable, and punctually paid or duly provided for, on any Interest Payment
Date (other than an Interest Payment Date that is the Stated Maturity or on a
Redemption Date) will, as provided in such Indenture, be paid to the Person in
whose name this Note (the "Note") is registered at the close of business on the
Regular Record Date as specified above next preceding such Interest Payment
Date, provided that any interest payable at Stated Maturity or on any Redemption
Date will be paid to the Person to whom principal is payable. Except as
otherwise provided in the Indenture, any such interest not so punctually paid or
duly provided for will forthwith cease to be payable to the Holder on such
Regular Record Date and may either be paid to the Person in whose name this Note
is registered at the close of business on a Special Record Date for the payment
of such defaulted interest to be fixed by the Trustee, notice whereof shall be
given to Holders of Notes of this series not less than 10 days prior to such
Special Record Date, or be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange, if any, on which
the Notes of this series shall be listed, and upon such notice as may be
required by any such exchange, all as more fully provided in the Indenture.

         Payments of interest on this Note will include interest accrued to but
excluding the respective Interest Payment Dates. Interest payments for this Note
shall be computed and paid on the basis of a 360-day year of twelve 30-day
months. In the event that any date on which interest is payable on this Note is
not a Business Day, then payment of the interest payable on such date will be
made on the next succeeding day that is a Business Day (and without any interest
or other payment in respect of any such delay), with the same force and effect
as if made on the date the payment was originally payable. A "Business Day"
shall mean any day other than a Saturday or a Sunday or a day on which banking
institutions in New York City are authorized or required by law or executive
order to remain closed or a day on which the Corporate Trust Office of the
Trustee is closed for business.

         Payment of the principal of and interest due at the Stated Maturity or
earlier redemption of the Series D Notes shall be made upon surrender of the
Series D Notes at the Corporate Trust Office of the Trustee. The principal of
and interest on the Series D Notes shall be paid 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. Payment of interest (including interest on an
Interest Payment Date) will be made, subject to such surrender where applicable,
at the option of the Company, (i) by check mailed to the address of the Person
entitled thereto as such address shall appear in the Security Register or (ii)
by wire transfer at such place and to such account at a banking institution in
the United States as may be designated in writing to the Trustee at least 16
days prior to the date for payment by the Person entitled thereto.

         Financial Guaranty Insurance Policy No. 20200BE (the "Policy") with
respect to payments due for principal of and interest on this Note has been
issued by Ambac Assurance Corporation ("Ambac Assurance"). The Policy has been
delivered to The Bank of New York in New York, New York, as the Insurance
Trustee under said Policy and will be held by such Insurance Trustee or any
successor insurance trustee. The Policy is on file and available for inspection
at the principal office of the Insurance Trustee and a copy thereof may be
secured from Ambac Assurance or the Insurance Trustee. All payments required to
be made under the Policy shall be made in accordance with the provisions
thereof. The owner of this Note acknowledges and consents to the subrogation
rights of Ambac Assurance as more fully set forth in the Policy.

         REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS NOTE SET
FORTH ON THE REVERSE HEREOF, WHICH FURTHER PROVISIONS SHALL FOR ALL PURPOSES
HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE.

         Unless the certificate of authentication hereon has been executed by
the Trustee by manual signature, this Note shall not be entitled to any benefit
under the Indenture or be valid or obligatory for any purpose.
         IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.

Dated:

                           SAVANNAH ELECTRIC AND POWER COMPANY

                           By:
                              --------------------------------
                           Name:
                           Title:

Attest:

Title:

           {Seal of SAVANNAH ELECTRIC AND POWER COMPANY appears here}

<PAGE>

                          CERTIFICATE OF AUTHENTICATION

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

                     THE BANK OF NEW YORK,
                     as Trustee

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

<PAGE>

                             (Reverse Side of Note)

         This Note is one of a duly authorized issue of Senior Notes of the
Company (the "Notes"), issued and issuable in one or more series under a Senior
Note Indenture, dated as of March 1, 1998, as supplemented (the "Indenture"),
between the Company and The Bank of New York, as Trustee (the "Trustee," which
term includes any successor trustee under the Indenture), to which Indenture and
all indentures incidental thereto reference is hereby made for a statement of
the respective rights, limitation of rights, duties and immunities thereunder of
the Company, the Trustee and the Holders of the Notes issued thereunder and of
the terms upon which said Notes are, and are to be, authenticated and delivered.
This Note is one of the series designated on the face hereof as Series D 5.50%
Senior Insured Quarterly Notes due November 15, 2017 (the "Series D Notes")
which is unlimited in aggregate principal amount. Capitalized terms used herein
for which no definition is provided herein shall have the meanings set forth in
the Indenture.

         The Company shall have the right, subject to the terms and conditions
of the Indenture, to redeem this Note at any time on or after November 15, 2005
at the option of the Company, without premium or penalty, in whole or in part at
a Redemption Price equal to 100% of the principal amount to be redeemed plus
accrued but unpaid interest to the Redemption Date.

         In the event of redemption of this Note in part only, a new Note or
Notes of this series for the unredeemed portion hereof will be issued in the
name of the Holder hereof upon the surrender hereof. The Series D Notes will not
have a sinking fund.

         If an Event of Default with respect to the Notes of this series shall
occur and be continuing, the principal of the Notes of this series may be
declared due and payable in the manner, with the effect and subject to the
conditions provided in the Indenture.

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

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

         As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Note is registrable in the Security Register,
upon surrender of this Note for registration of transfer at the office or agency
of the Company for such purpose, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Security
Registrar and duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Notes of this series, of
authorized denominations and of like tenor and for the same aggregate principal
amount, will be issued to the designated transferee or transferees. No service
charge shall be made for any such registration of transfer or exchange, but the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith.

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

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

         This Note shall be governed by, and construed in accordance with, the
internal laws of the State of New York.

<PAGE>

                                  ABBREVIATIONS

The following abbreviations, when used in the inscription on the face of this
instrument, shall be construed as though they were written out in full according
to applicable laws or regulations:

<PAGE>

TEN COM- as tenants in.....       UNIF GIFT MIN ACT- _______ Custodian ________
         common...                                 (Cust)             (Minor)
TEN ENT- as tenants by the
         entireties                                   under Uniform Gifts to
 JT TEN- as joint tenants..                                 Minors Act
         with right of
         survivorship and                       ________________________
         not as tenants                                       (State)
         in common

                    Additional abbreviations may also be used
                          though not on the above list.

         FOR VALUE RECEIVED, the undersigned hereby sell(s) and transfer(s)
 unto
(please insert Social Security or other identifying number of assignee)

PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE OF
ASSIGNEE

the within Note and all rights thereunder, hereby irrevocably constituting and
appointing agent to transfer said Note on the books of the Company, with full
power of  ubstitution in the premises.

Dated:
       --------------------         ------------------------------------

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

<PAGE>

                                    EXHIBIT B

                          CERTIFICATE OF AUTHENTICATION

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

         THE BANK OF NEW YORK,
         as Trustee

         By:
            -------------------------------------
                  Authorized SignatoryExhibit 10.1

                              SUBSIDIARY GUARANTEE

               This Supplemental Indenture, dated as of July 1, 2002 (this
"Supplemental Indenture" or "Guarantee"), among Specialty Books, Inc. (the
"Guarantor"), Nebraska Book Company, Inc. (together with its successors and
assigns, the "Company"), and The Bank of New York, as Trustee under the
Indenture referred to below.

                              W I T N E S S E T H:
                               - - - - - - - - - -

               WHEREAS, the Company and the Trustee have heretofore executed and
delivered an Indenture, dated as of February 13, 1998 (as amended, supplemented,
waived or otherwise modified, the "Indenture"), providing for the issuance of an
aggregate principal amount of $110.0 million of 8 3/4% Senior Subordinated Notes
due 2008 of the Company (the "Securities");

               WHEREAS, Section 3.12 of the Indenture provides that the Company
is required to cause each Restricted Subsidiary created or acquired by the
Company to execute and deliver to the Trustee a Subsidiary Guarantee pursuant to
which such Subsidiary Guarantor will unconditionally Guarantee, on a joint and
several basis, the full and prompt payment of the principal of, premium, if any
and interest on the Securities on a senior subordinated basis; and

               WHEREAS, pursuant to Section 9.1 of the Indenture, the Trustee
and the Company are authorized to execute and deliver this Supplemental
Indenture to amend the Indenture, without the consent of any Securityholder;

               NOW, THEREFORE, in consideration of the foregoing and for other
good and valuable consideration, the receipt of which is hereby acknowledged,
the Guarantor, the Company and the Trustee mutually covenant and agree for the
equal and ratable benefit of the holders of the Securities as follows:

                                    ARTICLE I

                                   DEFINITIONS

               Section 1.1 Defined Terms. As used in this Subsidiary Guarantee,
terms defined in the Indenture or in the preamble or recital hereto are used
herein as therein defined, except that the term "Holders" in this Guarantee
shall refer to the term "Holders" as defined in the Indenture and the Trustee
acting on behalf or for the benefit of such holders. The words "herein,"
"hereof" and "hereby" and other words of similar import used in this
Supplemental Indenture refer to this Supplemental Indenture as a whole and not
to any particular section hereof.

<PAGE>

                                   ARTICLE II

                                    GUARANTEE

               Section 2.1 Guarantee. The Guarantor hereby fully,
unconditionally and irrevocably guarantees, as primary obligor and not merely as
surety, jointly and severally with each other Subsidiary Guarantor, to each
Holder of the Securities the full and punctual payment when due, whether at
maturity, by acceleration, by redemption or otherwise, of the principal of,
premium, if any, and interest on the Securities (all the foregoing being
hereinafter collectively called the "Obligations"). The Guarantor further agrees
(to the extent permitted by law) that the Obligations may be extended or
renewed, in whole or in part, without notice or further assent from it, and that
it will remain bound under this Article II notwithstanding any extension or
renewal of any obligation.

               The Guarantor waives presentation to, demand of payment from and
protest to the Company of any of the Obligations and also waives notice of
protest for nonpayment. The Guarantor waives notice of any default under the
Securities or the Obligations. The obligations of the Guarantor hereunder shall
not be affected by (a) the failure of any Holder to assert any claim or demand
or to enforce any right or remedy against the Company or any other person under
the Indenture, the Securities or any other agreement or otherwise; (b) any
extension or renewal of any thereof; (c) any rescission, waiver, amendment or
modification of any of the terms or provisions of the Indenture, the Securities
or any other agreement; (d) the release of any security held by any Holder or
the Trustee for the obligations or any of them; (e) the failure of any Holder to
exercise any right or remedy against any other Subsidiary Guarantor; or (f) any
change in the ownership of the Company.

               The Guarantor further agrees that its Guarantee herein
constitutes a guarantee of payment when due (and not a guarantee of collection)
and waives any right to require that any resort be had by any Holder to any
security held for payment of the Obligations.

               The Guarantee of the Guarantor is, to the extent and in the
manner set forth in Article III, subordinated and subject in right of payment to
the prior payment in full of all Guarantor Senior Indebtedness of the Guarantor
and this Guarantee is made subject to such provisions of this Guarantee.

               The obligations of the Guarantor hereunder shall not be subject
to any reduction, limitation, impairment or termination for any reason (other
than payment of the obligations in full), including any claim of waiver,
release, surrender, alteration or compromise, and shall not be subject to any
defense of setoff, counterclaim, recoupment or termination whatsoever or by
reason of the invalidity, illegality or unenforceability of the Obligations or
otherwise. Without limiting the generality of the foregoing, the obligations of
the Guarantor herein shall not be discharged or impaired or otherwise affected
by the failure of any Holder to assert any claim or demand or to enforce any
remedy under the Indenture, the Securities or any other agreement, by any waiver

                                       2
<PAGE>

or modification of any thereof, by any default, failure or delay, willful or
otherwise, in the performance of the obligations, or by any other act or thing
or omission or delay to do any other act or thing which may or might in any
manner or to any extent vary the risk of the Guarantor or would otherwise
operate as a discharge of the Guarantor as a matter of law or equity.

               The Guarantor further agrees that its Guarantee herein shall
continue to be effective or be reinstated, as the case may be, if at any time
payment, or any part thereof, of principal of or interest on any of the
Obligations is rescinded or must otherwise be restored by any Holder upon the
bankruptcy or reorganization of the Company or otherwise.

               In furtherance of the foregoing and not in limitation of any
other right which any Holder has at law or in equity against the Guarantor by
virtue hereof, upon the failure of the Company to pay any of the Obligations
when and as the same shall become due, whether at maturity, by acceleration, by
redemption or otherwise, the Guarantor hereby promises to and will, upon receipt
of written demand by the Trustee, forthwith pay, or cause to be paid, in cash,
to the Holders an amount equal to the sum of (i) the unpaid amount of such
obligations then due and owing and (ii) accrued and unpaid interest on such
Obligations then due and owing (but only to the extent not prohibited by law).

               The Guarantor further agrees that, as between the Guarantor, on
the one hand, and the Holders, on the other hand, (x) the maturity of the
Obligations guaranteed hereby may be accelerated as provided in the Indenture
for the purposes of the Guarantee herein, notwithstanding any stay, injunction
or other prohibition preventing such acceleration in respect of the Obligations
guaranteed hereby and (y) in the event of any such declaration of acceleration
of such Obligations, such Obligations (whether or not due and payable) shall
forthwith become due and payable by the Guarantor for the purposes of this
Guarantee.

               The Guarantor also agrees to pay any and all reasonable costs and
expenses (including reasonable attorneys, fees) incurred by the Trustee or the
Holders in enforcing any rights under this Section.

               Section 2.2 Limitation on Liability; Termination, Release and
Discharge. The obligations of the Guarantor hereunder will be limited to the
maximum amount as will, after giving effect to all other contingent and fixed
liabilities of the Guarantor (including, without limitation, any guarantees
under the Credit Agreement) and after giving effect to any collections from or
payments made by or on behalf of any other Subsidiary Guarantor in respect of
the obligations of such other Subsidiary Guarantor under its Subsidiary
Guarantee or pursuant to its contribution obligations under the Indenture or as
set forth below, result in the obligations of the Guarantor under this Guarantee
not constituting a fraudulent conveyance or fraudulent transfer under federal or
state law.

               The Guarantor may consolidate with or merge into or sell its
assets to the Company or another Subsidiary Guarantor without limitation. The

                                       3
<PAGE>

Guarantor may consolidate with or merge into or sell all or substantially all
its assets to a corporation, partnership or trust other than the Company or
another Subsidiary Guarantor (whether or not affiliated with the Subsidiary
Guarantor). Upon the sale or disposition of the Guarantor (by merger,
consolidation, the sale of all or substantially all of its assets) to a Person
(whether or not an Affiliate of the Subsidiary Guarantor) which is not a
Subsidiary of the Company, which sale or disposition is otherwise in compliance
with the Indenture (including Section 3.7), the Guarantor shall be deemed
released from all its obligations under the Indenture and this Subsidiary
Guarantee and this Subsidiary Guarantee shall terminate; provided, however, that
any such termination shall occur only to the extent that all obligations of the
Guarantor under all of its guarantees of, and under all of its pledges of assets
or other security interests which secure, any other Indebtedness of the Company
shall also terminate upon such release, sale or transfer.

               Section 2.3 Right of Contribution. The Guarantor hereby agrees
that to the extent that any Subsidiary Guarantor shall have paid more than its
proportionate share of any payment made on the obligations under the Subsidiary
Guarantees, such Subsidiary Guarantor shall be entitled to seek and receive
contribution from and against the Company or any other Subsidiary Guarantor
(including the Guarantor) who has not paid its proportionate share of such
payment. Each Subsidiary Guarantor's right of contribution shall be subject to
the terms and conditions of Section 3.6. The provisions of this Section 2.3
shall in no respect limit the obligations and liabilities of the Guarantor to
the Trustee and the Holders and the Guarantor shall remain liable to the Trustee
and the Holders for the full amount guaranteed by the Guarantor hereunder.

               Section 2.4 No Subrogation. Notwithstanding any payment or
payments made by the Guarantor hereunder, the Guarantor shall not be entitled to
be subrogated to any of the rights of the Trustee or any Holder against the
Company or any other Subsidiary Guarantor or any collateral security or
guarantee or right of offset held by the Trustee or any Holder for the payment
of the Obligations, nor shall the Guarantor seek or be entitled to seek any
contribution or reimbursement from the Company or any other Subsidiary Guarantor
in respect of payments made by the Guarantor hereunder, until all amounts owing
to the Trustee and the Holders by the Company on account of the obligations are
paid in full. If any amount shall be paid to the Guarantor on account of such
subrogation rights at any time when all of the obligations shall not have been
paid in full, such amount shall be held by the Guarantor in trust for the
Trustee and the Holders, segregated from other funds of the Guarantor, and
shall, forthwith upon receipt by the Guarantor, be turned over to the Trustee in
the exact form received by the Guarantor (duly indorsed by the Guarantor to the
Trustee, if required), to be applied against the obligations.

                                   ARTICLE III

                                  SUBORDINATION

               Section 3.1 Agreement To Subordinate. The Guarantor agrees, and
each Securityholder by accepting a Security agrees, that the Indebtedness
evidenced by this Guarantee and other obligations relating to the Securities are

                                       4
<PAGE>

subordinated in right of payment, to the extent and in the manner provided in
this Article III, to the prior payment when due in cash or Cash Equivalents of
all Guarantor Senior Indebtedness and that the subordination is for the benefit
of and enforceable by the holders of Guarantor Senior Indebtedness. This
Guarantee shall in all respects rank pari passu with all other Guarantor Senior
Subordinated Indebtedness of the Guarantor and only Indebtedness of the
Guarantor which is Guarantor Senior Indebtedness will rank senior to this
Guarantee in accordance with the provisions set forth herein. All provisions of
this Article III shall be subject to Section 3.12.

               Section 3.2 Liquidation, Dissolution, Bankruptcy. Upon any
payment or distribution of the assets or securities of the Guarantor upon a
total or partial liquidation or a total or partial dissolution of the Guarantor
or in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to the Guarantor or its respective properties:

               (a) holders of Guarantor Senior Indebtedness shall be entitled to
receive payment in full in cash or Cash Equivalents of the Guarantor Senior
Indebtedness (including interest accruing after, or which would accrue but for,
the commencement of any proceeding at the rate specified in the applicable
Guarantor Senior Indebtedness, whether or not a claim for such interest would be
allowed) before Securityholders shall be entitled to receive any payment of
principal of, premium, if any, or interest on or other amounts with respect to
the Securities; and

               (b) until the Guarantor Senior Indebtedness is paid in full in
cash or Cash Equivalents, any payment or distribution to which Securityholders
would be entitled but for this Article III shall be made to holders of Guarantor
Senior Indebtedness as their respective interests may appear.

               Section 3.3 Default on Senior Indebtedness. The Guarantor shall
not pay the principal of, premium (if any) or interest on or other amounts with
respect to the Securities or make any deposit pursuant to Section 8.1 or
repurchase, redeem or otherwise retire any Securities ("pay the Securities") if
(i) any Guarantor Senior Indebtedness or Senior Indebtedness of the Company is
not paid when due in cash or Cash Equivalents or (ii) any other default on
Guarantor Senior Indebtedness or Senior Indebtedness of the Company occurs and
the maturity of such Guarantor Senior Indebtedness or Senior Indebtedness of the
Company is accelerated in accordance with its terms unless, in either case, (x)
the default has been cured or waived and any such acceleration has been
rescinded in writing or (y) such Guarantor Senior Indebtedness or Senior
Indebtedness of the Company has been paid in full in cash or Cash Equivalents;
provided, however, that the Guarantor may pay the Securities without regard to
the foregoing if the Company and the Trustee receive written notice approving
such payment from the Representative of the Guarantor Senior Indebtedness or the
Senior Indebtedness of the Company with respect to which either of the events
set forth in clause (i) or (ii) of this sentence has occurred or is continuing.
During the continuance of any default (other than a default described in clause
(i) or (ii) of the preceding sentence) with respect to any Designated Senior

                                       5
<PAGE>

Indebtedness pursuant to which the maturity thereof may be accelerated
immediately without further notice (except such notice as may be required to
effect such acceleration) or the expiration of any applicable grace periods, the
Guarantor may not pay the Securities for a period (a "Payment Blockage Period")
commencing upon the receipt by the Trustee (with a copy to the Company) of
written notice (a "Blockage Notice") of such default from the Representative of
the holders of such Designated Senior Indebtedness specifying an election to
effect a Payment Blockage Period and ending 179 days thereafter (or earlier if
such Payment Blockage Period is terminated (i) by written notice to the Trustee
and the Company from the Person or Persons who gave such Blockage Notice, (ii)
because the default giving rise to such Blockage Notice is no longer continuing
or (iii) because such Designated Senior Indebtedness has been repaid in full in
cash or Cash Equivalents). Notwithstanding the provisions of the immediately
preceding sentence, unless the holders of such Designated Senior Indebtedness or
the Representative of such holders shall have accelerated the maturity of such
Designated Senior Indebtedness, the Guarantor may resume payments on the
Securities after the end of such Payment Blockage Period. Not more than one
Blockage Notice may be given in any consecutive 360-day period, irrespective of
the number of defaults with respect to Designated Senior Indebtedness during
such period.

               Section 3.4 Acceleration of Payment of Securities. If payment of
the Securities is accelerated because of an Event of Default and if any
Designated Senior Indebtedness is outstanding, the Guarantor shall not pay the
Securities until five Business Days after the holders or Representative of the
Designated Senior Indebtedness receives notice of such acceleration as provided
in the Indenture and, thereafter, may pay the Securities only if this Article
III otherwise permits payments at that time.

               Section 3.5 When Distribution Must Be Paid Over. If a payment or
distribution is made to the Trustee or Securityholders that because of this
Article III should not have been made to them, the Trustee or the
Securityholders who receive the payment or distribution shall hold it in trust
for holders of Guarantor Senior Indebtedness and promptly pay it over to them as
their respective interests may appear.

               Section 3.6 Subrogation. After all Guarantor Senior Indebtedness
is paid in full in cash or Cash Equivalents and until the Securities are paid in
full, Securityholders shall be subrogated to the rights of holders of Guarantor
Senior Indebtedness to receive distributions applicable to Guarantor Senior
Indebtedness. A payment or distribution made under this Article III to holders
of Guarantor Senior Indebtedness which otherwise would have been made to
Securityholders is not, as between the Guarantor and Securityholders, a payment
by the Guarantor of Guarantor Senior Indebtedness.

               Section 3.7 Relative Rights. This Article III defines the
relative rights of Holders and holders of Guarantor Senior Indebtedness. Nothing
in this Guarantee shall:

               (a) impair, as between the Guarantor and Holders, the obligation
of the Guarantor which is absolute and unconditional, to pay the Obligations in
accordance with the terms of this Guarantee; or

                                       6
<PAGE>

               (b) prevent the Trustee or any Securityholder from exercising its
available remedies upon a Default or Event of Default, subject to the rights of
holders of Guarantor Senior Indebtedness to receive payments and distributions
otherwise payable to Securityholders.

               Section 3.8 Subordination May Not Be Impaired by Guarantor. No
right of any holder of Guarantor Senior Indebtedness to enforce the
subordination of the Indebtedness evidenced by this Guarantee shall be impaired
by any act or failure to act by the Guarantor or by the failure of any of them
to comply with this Guarantee or the Indenture.

               Section 3.9 Rights of Trustee and Paying Agent. Notwithstanding
Section 3.3, the Trustee or Paying Agent may continue to make payments on the
Securities and shall not be charged with knowledge of the existence of facts
that would prohibit the making of any such payments unless, not less than one
Business Day prior to the date of such payment, a Trust Officer of the Trustee
receives notice satisfactory to it that payments may not be made under this
Article III. The Guarantor, the Company, the Registrar or co-registrar, the
Paying Agent, a Representative or a holder of Senior Indebtedness of the Company
or Guarantor Senior Indebtedness may give the notice; provided, however, that,
if an issue of Senior Indebtedness of the Company or Guarantor Senior
Indebtedness has a Representative, only the Representative may give the notice.

               The Trustee in its individual or any other capacity may hold
Guarantor Senior Indebtedness with the same rights it would have if it were not
Trustee. The Registrar and co-registrar and the Paying Agent may do the same
with like rights. The Trustee shall be entitled to all the rights set forth in
this Article III with respect to any Guarantor Senior Indebtedness which may at
any time be held by it, to the same extent as any other holder of Guarantor
Senior Indebtedness; and nothing in Article VII of the Indenture shall deprive
the Trustee of any of its rights as such holder. Nothing in this Article III
shall apply to claims of, or payments to, the Trustee under or pursuant to
Section 7.7 of the Indenture. Each Paying Agent shall have the same rights and
obligations under this Article III as does the Trustee.

               Section 3.10 Distribution or Notice to Representative. Whenever a
payment or distribution is to be made or a notice given to holders of Guarantor
Senior Indebtedness, the payment or distribution may be made and the notice
given to their Representative (if any).

               Section 3.11 Article III Not To Prevent Events of Default or
Limit Right To Accelerate. The failure to make a payment in respect of the
Securities by reason of any provision in this Article III shall not be construed
as preventing the occurrence of a Default or Event of Default. Nothing in this
Article III shall have any effect on the right of the Securityholders or the
Trustee to accelerate the maturity of the Securities.

               Section 3.12 Trust Moneys Not Subordinated. Notwithstanding
anything contained herein to the contrary, payments from money or the proceeds
of U.S. Government Obligations held in trust under Article VIII of the Indenture
by the Trustee for the payment of principal of and interest on the Securities

                                       7
<PAGE>

shall not be subordinated to the prior payment of any Guarantor Senior
Indebtedness or subject to the restrictions set forth in this Article III, and
none of the Securityholders shall be obligated to pay over any such amount to
the Guarantor, any holder of Guarantor Senior Indebtedness or Senior
Indebtedness of the Company, or any other creditor of the Guarantor or the
Company.

               Section 3.13 Trustee Entitled To Rely. Upon any payment or
distribution pursuant to this Article III, the Trustee and the Securityholders
shall be entitled to rely (i) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 3.2
are pending, (ii) upon a certificate of the liquidating trustee or agent or
other Person making such payment or distribution to the Trustee or to the
Securityholders or (iii) upon the Representatives for the holders of Guarantor
Senior Indebtedness or Senior Indebtedness of the Company for the purpose of
ascertaining the Persons entitled to participate in such payment or
distribution, the holders of Guarantor Senior Indebtedness or Senior
Indebtedness and other Indebtedness of the Company or the Guarantor, the amount
thereof or payable thereon, the amount or amounts paid or distributed thereon
and all other facts pertinent thereto or to this Article III. In the event that
the Trustee determines, in good faith, that evidence is required with respect to
the right of any Person as a holder of Guarantor Senior Indebtedness to
participate in any payment or distribution pursuant to this Article III, the
Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of Guarantor Senior Indebtedness
held by such Person, the extent to which such Person is entitled to participate
in such payment or distribution and other facts pertinent to the rights of such
Person under this Article III, and, if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment. The provisions of Section
7.1 and 7.2 of the Indenture shall be applicable to all actions or omissions of
actions by the Trustee pursuant to this Article III.

               Section 3.14 Trustee To Effectuate Subordination. Each
Securityholder by accepting a Security authorizes and directs the Trustee on its
behalf to take such action as may be necessary or appropriate to acknowledge or
effectuate the subordination between the Securityholders and the holders of
Guarantor Senior Indebtedness and Senior Indebtedness of the Company) as
provided in this Article III and appoints the Trustee as attorney-in-fact for
any and all such purposes.

               Section 3.15 Trustee Not Fiduciary for Holders of Senior
Indebtedness. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Guarantor Senior Indebtedness or Senior Indebtedness of the Company
and, subject to Section 3.9, shall not be liable to any such holders if it shall
mistakenly pay over or distribute to Securityholders or the Company or any other
Person, money or assets to which any holders of Guarantor Senior Indebtedness
shall be entitled by virtue of this Article III or otherwise.

               Section 3.16 Reliance on Subordination Provisions. Each
Securityholder by accepting a Security acknowledges and agrees that the
foregoing subordination provisions are, and are intended to be, an inducement
and a consideration to each holder of any Guarantor Senior Indebtedness, whether

                                       8
<PAGE>

such Guarantor Senior Indebtedness was created or acquired before or after the
issuance of the Securities, to acquire and continue to hold, or to continue to
hold, such Guarantor Senior Indebtedness and such holder of Guarantor Senior
Indebtedness shall be deemed conclusively to have relied on such subordination
provisions in acquiring and continuing to hold, or in continuing to hold, such
Guarantor Senior Indebtedness.

                                   ARTICLE IV

                                  MISCELLANEOUS

               Section 4.1 Notices. All notices and other communications
pertaining to this Guarantee or any Security shall be in writing and shall be
deemed to have been duly given upon the receipt thereof. Such notices shall be
delivered by hand, or mailed, certified or registered mail with postage prepaid
(a) if to the Guarantor, at its address set forth below, with a copy to the
Company as provided in the Indenture for notices to the Company, and (b) if to
the Holders or the Trustee, as provided in the Indenture. The Guarantor by
notice to the Trustee may designate additional or different addresses for
subsequent notices to or communications with the Guarantor.

               Section 4.2 Parties. Nothing expressed or mentioned in this
Guarantee is intended or shall be construed to give any Person, firm or
corporation, other than the Holders and the Trustee and the holders of any
Guarantor Senior Indebtedness, any legal or equitable right, remedy or claim
under or in respect of this Guarantee or any provision herein contained.

               Section 4.3 Governing Law. This Agreement shall be governed by
the laws of the State of New York.

               Section 4.4 Severability Clause. In case any provision in this
Guarantee shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby and such provision shall be ineffective only to the extent of
such invalidity, illegality or unenforceability.

               Section 4.5 Waivers and Remedies. Neither a failure nor a delay
on the part of the Holders or the Trustee in exercising any right, power or
privilege under this Guarantee shall operate as a waiver thereof, nor shall a
single or partial exercise thereof preclude any other or further exercise of any
right, power or privilege. The rights, remedies and benefits of the Holders and
the Trustee herein expressly specified are cumulative and not exclusive of any
other rights, remedies or benefits which either may have under this Guarantee or
at law, in equity, by statute or otherwise.

               Section 4.6 Successors and Assigns. Subject to Section 2.2
hereof, (a) this Guarantee shall be binding upon and inure to the benefit of the
Guarantor, the Trustee, any other parties hereto, the Holders and their
respective successors and assigns and (b) in the event of any transfer or

                                       9
<PAGE>

assignment of rights by any Holder, the rights and privileges conferred upon
that party in this Guarantee and in the Securities shall automatically extend to
and be vested in such transferee or assignee, all subject to the terms and
conditions of this Guarantee and the Indenture.

               Section 4.7 Modification, etc. Subject to the provisions of, and
except as otherwise provided in, Article IX of the Indenture (including without
limitation Sections 9.1 and 9.2 thereof), no modification, amendment or waiver
of any provision of this Guarantee, nor the consent to any departure by the
Guarantor therefrom, shall in any event be effective unless the same shall be in
writing and consented to by the Trustee (with the consent of the Holders of at
least a majority of the Securities if required by Section 9.2 of the Indenture)
and then such waiver or consent shall be effective only in the specific instance
and for the purpose for which it was given. No notice to or demand on the
Guarantor in any case shall entitle such Guarantor or any other guarantor to any
other or further notice or demand in the same, similar or other circumstances.

               Section 4.8 Entire Agreement. This Guarantee is intended by the
parties to be a final expression of their agreement in respect of the subject
matter contained herein and, together with the Indenture, supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.

               Section 4.9 Ratification of Indenture; Supplemental Indentures
Part of Indenture. Except as expressly amended hereby, the Indenture is in all
respects ratified and confirmed and all the terms, conditions and provisions
thereof shall remain in full force and effect. This Supplemental Indenture shall
form a part of the Indenture for all purposes, and every holder of Securities
heretofore or hereafter authenticated and delivered shall be bound hereby. The
Trustee makes no representation or warranty as to the validity or sufficiency of
this Supplemental Indenture.

               Section 4.10 Counterparts. The parties hereto may sign one or
more copies of this Supplemental Indenture in counterparts, all of which
together shall constitute one and the same agreement.

               Section 4.11 Headings. The headings of the Articles and the
sections in this Guarantee are for convenience of reference only and shall not
be deemed to alter or affect the meaning or interpretation of any provisions
hereof.

                                       10
<PAGE>

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

                                         SPECIALTY BOOKS, INC.

                                         By:/s/ Barry S. Major
                                            ------------------------------------
                                            Name:  Barry S. Major
                                            Title:  Vice President, Operations
                                            Address:  4700 South 19th Street

                                         NEBRASKA BOOK COMPANY, INC.

                                         By:/s/ Mark W. Oppegard
                                            ------------------------------------
                                            Name:  Mark W. Oppegard
                                            Title:  CEO, President, and Director

                                         THE BANK OF NEW YORK

                                         By:/s/ Sirojni Dindial
                                            ------------------------------------
                                            Name: Sirojni Dindial
                                            Title:  Assistant Vice President

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