Exhibit 10.2

INDENTURE OF TRUST

BETWEEN

RED RIVER AUTHORITY OF TEXAS

AND

THE BANK OF NEW YORK TRUST COMPANY, N.A., AS TRUSTEE

DATED AS OF JULY 1, 2006

RED RIVER AUTHORITY OF TEXAS

SOLID WASTE DISPOSAL REVENUE BONDS

(PANDA HEREFORD ETHANOL, L.P. PROJECT)

SERIES 2006

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

TABLE OF CONTENTS

 

            PAGE

Article I. DEFINITIONS

   3

Section 1.1

    

Definitions

   3

Article II. THE BONDS

   14

Section 2.1

    

Amount, Terms, and Issuance of Bonds

   14

Section 2.2

    

Designation, Denominations, Maturity and Form

   14

Section 2.3

    

Registered Bonds Required; Bond Registrar and Bond Register

   14

Section 2.4

    

Transfer and Exchange

   15

Section 2.5

    

Execution

   16

Section 2.6

    

Authentication; Authenticating Agent

   16

Section 2.7

    

Payment of Principal and Interest; Interest Rights Preserved

   17

Section 2.8

    

Persons Deemed Owners

   18

Section 2.9

    

Mutilated, Destroyed, Lost or Stolen Bonds

   19

Section 2.10

    

Temporary Bonds

   20

Section 2.11

    

Cancellation of Surrendered Bonds

   20

Section 2.12

    

Limited Obligation

   20

Section 2.13

    

Book - Entry System

   20

Section 2.14

    

Payments to Securities Depository; Payments to Beneficial Owners

   22

Article III. INTEREST RATES ON THE BONDS

   22

Section 3.1

    

Interest Rate

   22

Section 3.2

    

Determination of Interest Rates

   22

Section 3.3

    

Conversions Between Rate Periods

   27

Article IV. TENDER AND PURCHASE OF BONDS

   30

Section 4.1

    

Optional Tenders for Purchase

   30

Section 4.2

    

Mandatory Tenders for Purchase

   31

Section 4.3

    

Remarketing and Purchase

   32

Section 4.4

    

Bond Purchase Fund

   36

Article V. CUSTODY AND APPLICATION OF PROCEEDS OF BONDS

   37

Section 5.1

    

Creation of Construction Fund

   37

Section 5.2

    

Payments into Construction Fund

   37

Section 5.3

    

Disbursements from Construction Fund

   37

Section 5.4

    

Balance in Construction Fund

   37

Section 5.5

    

Acceleration of Bonds

   37

Article VI. REVENUES AND APPLICATION THEREOF

   37

Section 6.1

    

Revenues to be Paid Over to the Trustee

   37

Section 6.2

    

Bond Fund

   38

Section 6.3

    

Revenues to Be Held for All Bondholders; Certain Exceptions

   39

Section 6.4

    

Amounts Remaining in Bond Fund

   39

 

-i-

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

Article VII. LETTER OF CREDIT

   40

Section 7.1

    

Extension in Anticipation of Expiration

   40

Section 7.2

    

Alternate Credit Facility

   40

Section 7.3

    

Notice to Holders

   41

Section 7.4

    

Reduction

   41

Section 7.5

    

Other Credit Enhancement; No Credit Enhancement

   41

Article VIII. INVESTMENT OR DEPOSIT OF MONEYS

   42

Section 8.1

    

Deposits

   42

Section 8.2

    

Investment or Deposit of Bond Fund

   42

Section 8.3

    

Investment of Moneys in the Construction Fund

   42

Section 8.4

    

Covenants Regarding Rebate

   43

Section 8.5

    

Tax-Exempt Status of the Bonds

   44

Article IX. REDEMPTION OF BONDS

   44

Section 9.1

    

Bonds Subject to Redemption

   44

Section 9.2

    

Company Direction of Optional Redemption

   46

Section 9.3

    

Selection of Bonds to be Called for Redemption; Identification of Redeemed Bonds

   47

Section 9.4

    

Notice of Redemption

   47

Article X. COVENANTS OF THE ISSUER

   49

Section 10.1

    

Payment of Principal of, Premium, if any, and Interest on Bonds; Appointment of
Paying Agent

   49

Section 10.2

    

Compliance with Laws

   49

Section 10.3

    

Enforcement of Agreement; Prohibition Against Amendments of Agreement; Notice of
Default

   50

Section 10.4

    

Further Assurances

   50

Section 10.5

    

Administration Expenses

   50

Section 10.6

    

Moneys to be Held in Trust

   50

Section 10.7

    

Rights of Company Under Agreement

   50

Article XI. EVENTS OF DEFAULT AND REMEDIES

   51

Section 11.1

    

Events of Default Defined

   51

Section 11.2

    

Acceleration and Annulment Thereof

   51

Section 11.3

    

Other Remedies

   53

Section 11.4

    

Legal Proceedings by Trustee

   53

Section 11.5

    

Discontinuance of Proceedings by Trustee

   53

Section 11.6

    

Bondholders May Direct Proceedings

   53

Section 11.7

    

Limitations on Actions by Bondholders

   54

Section 11.8

    

Trustee May Enforce Rights Without Possession of Bonds

   54

Section 11.9

    

Remedies Not Exclusive

   54

Section 11.10

    

Delays and Omissions Not to Impair Rights

   54

Section 11.11

    

Application of Moneys in Event of Default

   54

Section 11.12

    

Trustee and Bondholders Entitled to All Remedies Under the Act

   55

Article XII. THE TRUSTEE

   55

Section 12.1

    

Acceptance of Trust

   55

Section 12.2

    

No Responsibility for Recitals, etc.

   55

 

-ii-

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

Section 12.3

    

Trustee May Act Through Agents; Answerable Only for Willful Misconduct or
Negligence

   56

Section 12.4

    

Compensation

   56

Section 12.5

    

Notice of Default; Right to Investigate

   56

Section 12.6

    

Obligation to Act

   56

Section 12.7

    

Reliance

   57

Section 12.8

    

Trustee May Deal in Bonds

   57

Section 12.9

    

Construction of Ambiguous Provisions

   57

Section 12.10

    

Resignation of Trustee

   57

Section 12.11

    

Removal of Trustee

   57

Section 12.12

    

Appointment of Successor Trustee

   58

Section 12.13

    

Qualification of Successor

   58

Section 12.14

    

Instruments of Succession

   58

Section 12.15

    

Merger of Trustee

   58

Section 12.16

    

Trustee Not Required to Expend or Risk Own Funds

   58

Section 12.17

    

Right of Trustee to Pay Taxes and Other Charges

   58

Section 12.18

    

Trust Estate May be Vested in Separate or Co-Trustee

   59

Section 12.19

    

Reliance Upon Counsel

   59

Section 12.20

    

No Implied Duties

   60

Section 12.21

    

Certain Other Rights of the Trustee

   60

Section 12.22

    

Reporting Requirements

   60

Article XIII. THE REMARKETING AGENT AND THE PAYING AGENT

   60

Section 13.1

    

The Remarketing Agent

   60

Section 13.2

    

The Paying Agent

   61

Section 13.3

    

Notices

   62

Article XIV. ACTS OF BONDHOLDERS; EVIDENCE OF OWNERSHIP

   62

Section 14.1

    

Acts of Bondholders; Evidence of Ownership

   62

Article XV. AMENDMENTS AND SUPPLEMENTS

   63

Section 15.1

    

Amendments and Supplements Without Bondholders’ Consent

   63

Section 15.2

    

Amendments and Supplements With Bondholders’ Consent

   64

Section 15.3

    

Amendment of Agreement

   64

Section 15.4

    

Trustee Authorized to Join in Amendments and Supplements; Reliance on Counsel

   65

Section 15.5

    

Consent of Company

   65

Section 15.6

    

Consent of Bank

   65

Article XVI. DEFEASANCE

   65

Section 16.1

    

Defeasance

   65

Article XVII. MISCELLANEOUS

   67

Section 17.1

    

No Personal Recourse

   67

Section 17.2

    

Deposit of Funds for Payment of Bonds

   67

Section 17.3

    

Effect of Purchase of Bonds

   67

Section 17.4

    

No Rights Conferred on Others

   68

Section 17.5

    

Severability

   68

 

-iii-

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

Section 17.6

    

Notices

   68

Section 17.7

    

Successors and Assigns

   69

Section 17.8

    

Headings for Convenience Only

   69

Section 17.9

    

Counterparts

   69

Section 17.10

    

Applicable Law

   69

Section 17.11

    

Notice of Change

   69

Section 17.12

    

Payments Due on non-Business Days

   70

Section 17.13

    

References to Bank

   70

 

EXHIBIT A   Form of Bond EXHIBIT B   DTC Letter

 

-iv-

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

INDENTURE OF TRUST

This Indenture of Trust, made and entered into as of July 1, 2006, by and
between Red River Authority of Texas, a governmental agency and body politic and
corporate of the State of Texas (herein called the “Issuer”) existing and
operating as a conservation and reclamation district and political subdivision
of the State of Texas pursuant to Article 16, Section 59 of the Texas
Constitution and the laws of the State of Texas, particularly, Chapter 279, Acts
of the 56th Legislature of the State of Texas, Regular Session, 1959, as amended
(originally compiled as Article 8280-228 Vernon’s Texas Civil Statutes (the
“Authority Act”)), and The Bank of New York Trust Company, N.A., and being
qualified to accept and administer the trusts hereby created acting as trustee
(herein called the “Trustee”).

WITNESSETH:

WHEREAS, an Installment Sale Agreement, dated as of July 1, 2006 (hereinafter
the “Agreement”), relating to the below defined Bonds has been duly executed
between the Issuer and Panda Hereford Ethanol, L.P. (the “Company”), a limited
partnership organized and existing under and by virtue of the laws of the State
of Delaware and authorized to transact business in the State of Texas;

WHEREAS, the recitals and provisions of the Agreement are incorporated herein as
if set forth in their entirety, and the capitalized terms of this Indenture, to
the extent not defined herein, shall have the same meanings, and shall be
defined, as set forth in the Agreement and the Bond Resolution (hereinafter
defined);

WHEREAS, the Board of Directors of the Issuer duly adopted a Resolution
Authorizing Red River Authority of Texas Solid Waste Disposal Revenue Bonds
(Panda Hereford Ethanol, L.P. Project) Series 2006; the execution of an
Indenture of Trust, the Agreement, and an Underwriting Agreement; approval of an
Official Statement; and other matters in connection therewith (together with any
amendment or supplement to such resolution as authorized therein, hereinafter
called the “Bond Resolution”);

WHEREAS, the Bond Resolution authorized the issuance of Red River Authority of
Texas Solid Waste Disposal Revenue Bonds (Panda Hereford Ethanol, L.P. Project)
Series 2006 (hereinafter called the “Bonds”) for paying the costs of acquiring,
constructing, and improving certain sewage and solid waste disposal facilities
(the “Project”) serving the ethanol production facilities (the “Plant”) of the
Company, to be located along County Road 8 approximately five miles northeast of
the City of Hereford, in Deaf Smith County, Texas;

WHEREAS, the Bonds, and the interest thereon, are and shall be payable from and
secured by a first and superior lien on and pledge of the payments designated as
“Installment Sale Payments” to be made by the Company pursuant to the Agreement
in amounts sufficient to pay and redeem, and provide for the payment of the
principal of, premium, if any, and interest on the Bonds, when due, and the fees
and expenses of the Trustee and any paying agent for the Bonds, all as required
by the Bond Resolution;

 

-1-

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

WHEREAS, pursuant to Section 5.11 of the Agreement, the Company has elected to
cause and is causing to be delivered to the Trustee an irrevocable direct pay
letter of credit (the “Letter of Credit”) issued by Société Générale, a bank
organized and existing under the laws of France and acting through its New York
Branch (the “Bank”);

WHEREAS, the Trustee has agreed to accept the trusts herein created upon the
terms herein set forth; and

WHEREAS, all other things necessary to make the Bonds, when issued, executed and
delivered by the Issuer and authenticated pursuant to this Indenture, the valid,
legal and binding obligations of the Issuer, and to constitute this Indenture a
valid pledge of the Revenues (as hereinafter defined) and other amounts pledged
hereunder as security for the payment of the principal of, premium, if any, and
interest on, the Bonds authenticated and delivered under this Indenture, have
been performed, and the creation, execution and delivery of this Indenture and
the creation, execution and issuance of the Bonds, subject to the terms hereof,
have in all respects been duly authorized;

NOW, THEREFORE, THIS INDENTURE WITNESSETH that to provide for the payment of
principal and redemption price (as the case may be) in respect of all Bonds
issued and outstanding under this Indenture, together with interest thereon, and
in order to secure the rights of the Bondholders and the performance of the
covenants contained in the Bonds and herein, the Issuer does hereby pledge,
pawn, transfer and assign unto the Trustee, its successors in the trust and its
assigns forever (i) all of the right, title and interest of the Issuer in and to
the Revenues, (ii) the Agreement and all right, title and interest of the Issuer
under and pursuant to the Agreement, insofar as they relate to all Bonds issued
and outstanding under this Indenture (except for the Unassigned Rights (as
defined herein)), including, without limitation, all payments to be received
under and pursuant to and subject to the provisions of the Agreement, and
(iii) all amounts on deposit in the Bond Fund, the Construction Fund or other
funds created under this Indenture other than the Bond Purchase Fund and the
Rebate Fund which are not pledged hereunder and do not constitute security for
the Bonds (collectively, the “Trust Estate”); provided, however, that nothing in
the Bonds or in this Indenture shall be construed as pledging the general credit
of the Issuer or the State of Texas, nor shall this Indenture or the Bonds give
rise to a pecuniary liability of the Issuer.

TO HAVE AND TO HOLD all of the same hereby conveyed and assigned, or agreed or
intended so to be, to the Trustee and its successors in said trust and to it and
its assigns forever.

IN TRUST NEVERTHELESS, upon the terms and trusts herein set forth for the equal
and proportionate benefit, security and protection of all holders and owners of
the Bonds issued under and secured by this Indenture without privilege,
preference, priority or distinction as to the lien or otherwise of any of the
Bonds over any of the other Bonds.

PROVIDED, HOWEVER, that if the Issuer, its successors or assigns, shall well and
truly pay, or cause to be paid, the principal of, premium, if any, and interest
on, and Purchase Price of, the Bonds due or to become due thereon, at the times
and in the manner mentioned in the Bonds, according to the true intent and
meaning thereof, and shall cause the payments to be made into the Bond Fund as
required under Article VI hereof, or shall provide, as permitted hereby, for the

 

-2-

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

payment thereof by depositing with the Trustee the entire amount due or to
become due thereon, and shall well and truly keep, perform and observe all the
covenants and conditions pursuant to the terms of this Indenture to be kept,
performed and observed by it, and shall pay or cause to be paid to the Trustee
all sums of money due or to become due in accordance with the terms and
provisions hereof, then upon such final payments this Indenture and the rights
hereby granted shall cease, terminate and be void; otherwise this Indenture to
be and remain in full force and effect.

THIS INDENTURE FURTHER WITNESSETH, and it is expressly declared, that all Bonds
issued and secured hereunder are to be issued, authenticated and delivered, and
all said Revenues and receipts hereby pledged and assigned are to be dealt with
and disposed of under, upon and subject to the terms, conditions, stipulations,
covenants, agreements, trusts, uses and purposes hereinafter expressed, and the
Issuer has agreed and covenanted, and does hereby agree and covenant, with the
Trustee and with the respective holders and owners, from time to time, of the
Bonds, as follows (provided that, in the performance of the agreements of the
Issuer herein contained, any obligation it may thereby incur for the payment of
money shall not be a general debt on its part or a charge against its general
credit but shall be payable solely from the Trust Estate, including the
Revenues):

ARTICLE I.

DEFINITIONS

Section 1.1 Definitions. Unless otherwise defined herein, all words and phrases
defined in the preamble hereto or in Article I of the Agreement shall have the
same meaning in this Indenture. In this Indenture and any indenture supplemental
hereto (except as otherwise expressly provided for or unless the context
otherwise requires) the singular includes the plural, the masculine includes the
feminine, and each of the following terms shall have the following meanings:

“Acts” shall mean, collectively, the Authority Act, Chapter 30, Texas Water
Code, as amended, and Chapter 1371, Texas Government Code, as amended.

“Administration Expenses” shall mean amounts payable pursuant to Sections
5.04(a), (b) and (e), 5.06, and 5.07 of the Agreement.

“Affiliate” of any Person shall mean (i) any other Person who, directly or
indirectly, controls or is controlled by or is under common control with such
other Person. For purposes of this definition, “control” (and with correlative
meaning “controlled” and “under common control”) of a Person shall mean the
power, direct or indirect, (1) to vote 50% or more of the securities having
ordinary voting power for the election of directors of such Person or (2) to
direct or cause the direction of the management and policies of such Person,
whether by contract or otherwise.

“Agreement” shall mean the Installment Sale Agreement, dated as of July 1, 2006,
between the Issuer and the Company, including all amendments thereof and
supplements thereto.

“Alternate Credit Facility” shall mean any irrevocable letter of credit, surety
bond, insurance policy, or similar instrument authorizing drawings thereunder by
the Trustee, and satisfying the requirements of Article VII hereof.

 

-3-

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

“Alternate Rate” shall mean the rate calculated according to The Bond Market
Association Municipal Index as of the most recent date for which such index was
published or such other high-grade index composed of one-day, tax-exempt
variable rate demand notes produced by Municipal Market Data, Inc. or its
successor, or as otherwise designated by The Bond Market Association; provided,
however, that, if such index is no longer produced by Municipal Market Data,
Inc. or its successor, then “Alternate Rate” shall mean such other reasonably
comparable index selected by the Company.

“Approval Certificate” shall mean the certificate of the President or General
Manager of the Issuer approving certain terms of the Bonds.

“Authenticating Agent” shall mean the Trustee and any agent so designated in and
appointed pursuant to Section 2.6 hereof.

“Authority Act” shall mean Chapter 279, Acts of the 56th Legislature of the
State of Texas, Regular Session, 1959, as amended (originally compiled as
Article 8280-228 Vernon’s Texas Civil Statutes).

“Authorized Company Representative” shall mean the Chief Executive Officer,
Chief Financial Officer, Chief Operating Officer, President, any Senior Vice
President, any Vice President, or any duly authorized attorney-in-fact of the
General Partner or such other person or persons at any time designated to act on
behalf of the Company, such designation in each case, to be evidenced by a
certificate furnished to the Issuer and the Trustee containing the specimen
signature of such person or persons and signed by the President, any Vice
President, Secretary, Treasurer, any Assistant Treasurer or any duly authorized
attorney-in-fact of the General Partner. Such certificate may designate an
alternate or alternates.

“Authorized Issuer Representative” shall mean each person designated as such in
the Bond Resolution (as defined in the recitals hereto), or from time to time
designated by written certificate furnished to the Company and the Trustee
containing the specimen signature of each such person and signed on behalf of
the Issuer by its President, General Manager or Secretary. Such certificate may
designate an alternate or alternates.

“Authorized Denominations” shall mean the denominations for the Bonds set forth
in Section 2.2 hereof.

“Bank” shall mean, initially, Société Générale, a bank organized and existing
under the laws of France and acting through its New York Branch, as issuer of
the Letter of Credit, and its successors and assigns in that capacity and, in
the event an Alternate Credit Facility is outstanding, the issuer of the
Alternate Credit Facility.

“Bank Bonds” shall have the meaning assigned to such term in Section 4.3(b)(v)
hereof.

“Beneficial Owner” or “beneficial owner” shall mean any Person who acquires a
beneficial ownership interest in a Bond held by DTC or any successor Securities
Depository hereunder. In determining the Beneficial Owner of the Bond, the
Trustee, the Remarketing Agent and the Paying

 

-4-

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

Agent may rely conclusively upon written representations (or, in the case of
tender of Bonds in the Daily Rate, oral representations of the beneficial owner
thereof) made and written information given to the Trustee, the Remarketing
Agent or the Paying Agent by DTC or any successor Securities Depository
hereunder or their respective participants with respect to any Bond held by DTC
or any successor Securities Depository hereunder in which a beneficial interest
is claimed.

“Bond” shall mean any bond or bonds authenticated and delivered under this
Indenture.

“Bond Counsel” shall mean McCall, Parkhurst & Horton L.L.P. or such other firm
of attorneys of nationally recognized standing in the field of law relating to
municipal bond law and the excludability of interest on state or local bonds
from gross income of the owners of the Bonds for purposes of federal income
taxation, selected by the Issuer and acceptable to the Company.

“Bond Fund” shall mean the trust fund so designated which is established
pursuant to Section 6.2 hereof.

“Bond Owner,” “Bondowner,” “Owner,” “owner,” “Bondholder,” “bondholder,”
“holder,” “Registered Owner,” “registered owner,” or “owner of Bonds” shall mean
the registered owner of any Bond other than the registered owner of any Bond
which has been purchased pursuant to Section 4.3 and not surrendered for payment
of the Purchase Price thereof.

“Bond Purchase Fund” shall mean the special fund of that name created pursuant
to Section 4.4 hereof.

“Bond Register” and “Bond Registrar” shall have the respective meanings
specified in Section 2.3 hereof.

“Book-Entry System” or “book-entry system” shall mean the book-entry system
maintained by the Securities Depository described in Section 2.13 of this
Indenture.

“Business Day” or “business day” shall mean any day other than (i) a Saturday or
Sunday or legal holiday or a day on which banking institutions in the City of
New York, New York or in the cities in which the Principal Offices of the
Trustee or the Paying Agent or the office of the Bank at which drawing documents
are required to be presented under the Letter of Credit are located are
authorized or required by law or executive order to close or (ii) a day on which
the New York Stock Exchange is closed.

“Calendar Quarter” shall mean the three-month period commencing with the first
day of each January, April, July and October.

“Code” shall mean the Internal Revenue Code of 1986, as amended, and the rulings
and regulations (including temporary and proposed regulations) promulgated
thereunder or, to the extent applicable, under the Internal Revenue Code of
1954, as amended.

“Commercial Paper Rate” shall mean the interest rate for each Bond as determined
with respect to such Bond as provided in Section 3.2 hereof.

 

-5-

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

“Commercial Paper Rate Period” shall mean with respect to any Bond, each period
determined for such Bond as provided in Section 3.2 hereof.

“Company” shall mean Panda Hereford Ethanol, L.P., a Delaware limited
partnership, and its successors and assigns as permitted under the Agreement.

“Company Bonds” shall mean any Bonds ownership of which is registered in the
name of the Company or any Affiliate of the Company (or held by the Trustee on
behalf of any of them) other than Bank Bonds.

“Company Debt Service Account” shall mean the special account of that name
within the Bond Fund established pursuant to Section 6.2 hereof.

“Company Purchase Account” shall mean the special account of that name within
the Bond Purchase Fund established pursuant to Section 4.4 hereof.

“Construction Fund” shall mean the fund by that name created and established in
Section 5.1 hereof.

“Conversion Date” shall mean the day on which a particular type of interest rate
becomes effective for the Bonds which is not immediately preceded by a day on
which the Bonds have accrued interest at the same type of rate (and, when used
with respect to any Term Rate Period, a date which is not preceded by a Term
Rate Period of the same duration). Each Conversion Date shall be an Interest
Payment Date for the Rate Period from which the Bonds are converted.

“Costs of Issuance” shall mean all costs and expenses incurred by the Issuer or
the Company in connection with the issuance and sale of the Bonds, including
without limitation (i) fees and reasonable expenses of accountants, attorneys,
engineers, the Trustee, and financial advisors, (ii) materials, supplies, and
printing and engraving costs, (iii) recording and filing fees, (iv) Rating
Service fees, (v) compensation to the Underwriter, whether paid as a fee or as a
discount from purchase price, and (vi) the Issuer’s administrative expenses as
provided in Section 5.04(a) of the Agreement.

“Counsel” shall mean an attorney at law or law firm (who may be counsel for the
Issuer or the Company).

“Daily Rate” shall mean the interest rate to be determined for the Bonds on each
Business Day pursuant to Section 3.2 hereof.

“Daily Rate Conversion Date” shall mean the day on which the Bonds accrue
interest at a Daily Rate pursuant to Section 3.3 which is immediately preceded
by a day on which the Bonds did not accrue interest at a Daily Rate.

“Daily Rate Period” shall mean each period during which the Bonds accrue
interest at a particular Daily Rate.

 

-6-

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

“Default” shall mean any event which with the giving of notice or the lapse of
time or both would constitute an Event of Default.

“Delivery” or “deliver” shall mean, when used with respect to Bonds held in the
book-entry only system pursuant to Section 2.13 hereof, the making of or the
irrevocable authorization to make appropriate entries on the books of DTC or any
DTC Participant or any securities broker or dealer, bank or trust company that
clears through or maintains a custodial relationship with a DTC Participant.

“DTC” shall mean The Depository Trust Company, New York, New York and its
successors.

“DTC Letter” shall mean the Blanket Letter of Representation between the Issuer
and DTC.

“DTC Participant” shall mean (i) any Person for which, from time to time, DTC,
or, in the event that a successor Securities Depository to DTC is acting as such
under Section 2.13 hereof, such successor Securities Depository effectuates
book-entry transfers and pledges of securities pursuant to the book-entry system
referred to in Section 2.13 hereof or (ii) any securities broker or dealer,
bank, trust company or other Person that clears through or maintains a custodial
relationship with the Person referred to in (i).

“Electronic” shall mean notice transmitted by means of a facsimile machine or
other electronic communication, including e-mail, if operative as between any
two parties, or if not operative, in writing or by telephone (promptly confirmed
in writing).

“Event of Default” shall mean any of the events specified in Section 11.1 hereof
to be an Event of Default.

“Expiration Date” shall mean the stated expiration date of the Letter of Credit,
as such date may be extended from time to time by the Bank.

“Favorable Opinion” shall mean an opinion of Bond Counsel or Special Tax Counsel
addressed to the Issuer, the Company and the Trustee and stating, unless
otherwise specified herein, that the action proposed to be taken is authorized
or permitted by the Act and this Indenture and will not adversely affect the
excludability from gross income for federal income tax purposes of interest on
the Bonds (other than as held by a “substantial user” of the Project or a
“related person” within the meaning of the Code).

“General Partner” shall mean PHE I LLC d/b/a Panda Hereford Ethanol I, LLC, a
Delaware limited liability company, and any successor general partner of the
Company.

“Governmental Obligations” shall mean (i) direct obligations of the United
States of America, (ii) obligations the timely payment of the principal of and
interest on which is fully and unconditionally guaranteed by the United States
of America, and (iii) certificates, depositary receipts or other instruments
which evidence a direct ownership interest in obligations described in clause
(i) and (ii) above or in any specific interest or principal payments due in
respect thereof; provided, however, that the custodian of such obligations or
specific interest or principal payments shall be a

 

-7-

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

bank or trust company organized under the laws of the United States of America
or of any state or territory thereof or of the District of Columbia, with a
combined capital stock, surplus and undivided profits of at least $50,000,000;
and provided, further, that except as may be otherwise required by law, such
custodian shall be obligated to pay to the holders of such certificates,
depositary receipts or other instruments the full amount received by such
custodian in respect of such obligations or specific payments and shall not be
permitted to make any deduction therefrom.

“Indenture” shall mean this Indenture of Trust as originally executed, and as
amended, modified or supplemented thereafter in accordance with its terms.

“Interest Payment Date” shall mean (i) when used with respect to any particular
Bond accruing interest at a Commercial Paper Rate, the day after the last day of
each Commercial Paper Rate Period applicable thereto; (ii) when used with
respect to Bonds accruing interest at Daily or Weekly Rates, the first Business
Day of each Calendar Quarter following a Calendar Quarter in which interest on
the Bonds has accrued; (iii) when used with respect to Bonds accruing interest
at a Term Rate, the first day of the sixth calendar month following the month in
which the Term Rate Conversion Date occurs and the first day of each sixth month
thereafter to which interest at such rate has accrued, except that the last
Interest Payment Date for any Term Rate Period which is followed by a Commercial
Paper, Daily or Weekly Rate Period shall be the first Business Day of the sixth
month following the preceding Interest Payment Date; and (iv) the Maturity Date.

“Interest Period” or “Interest Rate Period” shall mean the period from and
including any Interest Payment Date to and including the day immediately
preceding the next following Interest Payment Date.

“Interest Rate” shall mean a Commercial Paper, Daily, Weekly or Term Rate.

“Issue Date” shall mean the date on which the Bonds are first authenticated and
delivered to the Underwriter against payment therefor.

“Issuer” shall mean the Red River Authority of Texas, a governmental agency and
body political and corporate of the State of Texas.

“Letter of Credit” shall mean the irrevocable direct pay letter of credit issued
by the Bank to the Trustee on the Issue Date and any Alternate Credit Facility
delivered pursuant to Article VII hereof.

“Letter of Credit Debt Service Account” shall mean the special account of that
name within the Bond Fund established pursuant to Section 6.2 hereof.

“Letter of Credit Purchase Account” shall mean the special account of that name
within the Bond Purchase Fund established pursuant to Section 4.4 hereof.

“Maturity Date” shall mean the date or dates specified as such in the Approval
Certificate.

“Maximum Rate” shall mean the lesser of (i) the maximum interest rate which, at
any point in time, if borne by the Bonds through the Maturity Date, would result
in a “net effective interest

 

-8-

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

rate” (as defined and calculated in accordance with the provisions of Chapter
1204, Texas Government Code) which does not exceed fifteen percent (15%) per
annum or (ii) the maximum rate permitted or covered by any Letter of Credit then
in effect.

“Moody’s” shall mean Moody’s Investors Service, Inc. or any successor thereto
maintaining a rating on the Bonds.

“Outstanding” or “outstanding”, in connection with Bonds shall mean, as of the
time in question, all Bonds authenticated and delivered under the Indenture,
except:

(i) Bonds canceled or required to be canceled under Section 2.11 hereof;

(ii) Bonds deemed to have been paid in accordance with Article XVI hereof;

(iii) Bonds in lieu of which others have been authenticated and delivered
pursuant to Article II hereof;

(iv) Bonds registered in the name of the Issuer;

(v) On or after any Purchase Date for Bonds pursuant to Article IV hereof, all
Bonds (or portions of Bonds) which are tendered or deemed to have been tendered
for purchase on such date, provided that funds sufficient for such purchase are
on deposit with the Paying Agent; and

(vi) For purposes of any consent, request, demand, authorization, direction,
notice, waiver or other action to be taken by the holders of a specified
percentage of outstanding Bonds hereunder, all Bonds held by or for the account
of the Issuer or the Company, except that for purposes of any such consent,
request, demand, authorization, direction, notice, waiver or action the Trustee
shall be obligated to consider as not being outstanding only Bonds known by the
Trustee by actual notice thereof to be so held.

In determining whether the owners of a requisite aggregate principal amount of
Bonds outstanding have concurred in any request, demand, authorization,
direction, notice, consent or waiver under the provisions hereof, Bonds which
are held by or on behalf of the Company or any Affiliates thereof (unless all of
the outstanding Bonds are then owned by said parties) and Bonds which are held
by or on behalf of the Bank (unless all of the outstanding Bonds are then held
by or on behalf of the Bank) shall be disregarded for the purpose of any such
determination. Notwithstanding the foregoing, Bonds so owned which have been
pledged in good faith shall not be disregarded as aforesaid if the pledgee has
established to the satisfaction of the Bond Registrar the pledgee’s right so to
act with respect to such Bonds and that the pledgee is not the Company or an
Affiliate thereof.

“Paying Agent”, “paying agent”, “Co-Paying Agent” or “co-paying agent” shall
mean the Trustee or any successor paying agent or co-paying agent serving as
such under this Indenture. If at any time there is no qualified paying agent
serving as such, the Trustee shall act as paying agent under the Indenture.
“Principal Office of the Paying Agent” or “Principal Office of the Co-Paying
Agent” shall mean the office thereof designated in writing to the Trustee, and
which initially shall be as specified in Section 17.6 hereof.

 

-9-

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

“Person” shall mean an individual or an entity, including, without limitation, a
corporation, a partnership, a limited liability company, an association, a joint
stock company, a trust, an unincorporated organization, a governmental body or a
political subdivision, a municipal corporation, a public corporation or any
other group or organization of individuals.

“Preference Opinion” shall mean an opinion of nationally recognized Counsel
experienced in bankruptcy matters to the effect that the payment of principal,
interest and premium (if any) on the Bonds made solely with drawings under the
Letter of Credit and the payment of the Purchase Price of any Bonds made solely
from the proceeds of the remarketing of the Bonds and/or drawings under the
Letter of Credit will not be considered an avoidable “preferential transfer” by
the Company or the Issuer under the United States Bankruptcy Code in the event
of the commencement of a bankruptcy case under the United States Bankruptcy Code
by the Issuer or by or against the Company or any Affiliate of the Company, as
debtor.

“Principal Office of the Trustee,” “Principal Office of the Paying Agent” or
“Principal Office of the Remarketing Agent” is defined in the definitions of
Trustee, Paying Agent, and Remarketing Agent herein.

“Project” shall mean the facilities located at the Plant, as described more
fully in Exhibit A to the Agreement, to the extent financed with proceeds of the
Bonds.

“Project Certificate” shall mean the certificate regarding the use of the
proceeds of the Bonds and other facts that are within the Company’s knowledge,
furnished by the Company to the Issuer, Bond Counsel and Special Tax Counsel in
connection with the issuance of the Bonds.

“Project Costs” shall mean costs paid by the Issuer or the Company, whether
before or after issuance of the Bonds but in no event prior to May 21, 2005, and
reimbursed not later than three years after the payment thereof, with respect to
the acquisition, construction and improvement of the Project, including but not
limited to, the following items:

(i) Obligations incurred or assumed for labor, materials and equipment
(including obligations payable to the Company for expenditures made or costs
incurred by the Company);

(ii) Costs of any bonds and insurance deemed necessary or appropriate by the
Company;

(iii) Costs of engineering and other services, including the costs incurred or
assumed for preliminary design and development, surveys, estimates and plans and
specifications, and for supervising construction and performing all other duties
required by or consequent upon proper construction;

(iv) Costs which the Company shall be required to pay under the terms of any
contract or contracts in connection with the construction, acquisition and
improvement of the Project;

(v) Amounts which are required to be paid for taxes, assessments and other
similar charges payable during the period of construction;

 

-10-

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

(vi) Expenses incurred in seeking to enforce any remedy against any contractor,
subcontractors or other provider of labor, materials, equipment or services, in
respect of any default, breach or dispute relating to the Project;

(vii) Sums required to reimburse the Company for advances made for any of the
above items, and for other costs incurred for work done or caused to be done by
the Company which are properly chargeable to the Project;

(viii) Interest on the Bonds actually paid during or attributable to the period
of construction of the Project;

(ix) To the extent authorized by the Acts, costs of all other items related to
the acquisition, construction and improvement of the Project; and

(x) All Costs of Issuance.

“Purchase Date” shall mean, with respect to each Bond, each day that such Bond
is subject to purchase pursuant to Section 4.1 or 4.2 hereof.

“Purchase Price” or “purchase price” for any Bond tendered or deemed tendered
for purchase shall equal 100% of the principal amount of such Bond plus accrued
but unpaid interest, if any, plus in the case of a Bond converted from a Term
Rate Period on a date when such Bond is also subject to optional redemption at a
premium or a Bond bearing interest at a Term Rate subject to mandatory tender
pursuant to Section 4.2(b) hereof, on a date when such Bond is also subject to
optional redemption at a premium, an amount equal to the premium that would be
payable on such Bond if redeemed on such date.

“Rate Period” shall mean the period during which a particular rate of interest
determined for the Bonds is to remain in effect pursuant to Article III hereof.

“Rating Service” shall mean S&P and/or Moody’s, according to which of such
rating agencies then rates the Bonds; and provided that if neither of such
rating agencies then rates the Bonds, the term “Rating Agencies” shall refer to
any national rating service (if any) which provides such rating.

“Rebate Fund” shall mean the fund by that name created and established in
Section 8.4 of this Indenture.

“Record Date” shall mean, as the case may be, the applicable Regular or Special
Record Date.

“Regular Record Date” shall mean the close of business on either (i) the day
(whether or not a Business Day) immediately preceding an Interest Payment Date
in the case of Bonds accruing interest at Commercial Paper, Daily or Weekly
Rates or (ii) the fifteenth day (whether or not a Business Day) of the calendar
month immediately preceding the Interest Payment Date in the case of Bonds
accruing interest at Term Rates.

 

-11-

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

“Reimbursement Agreement” shall mean the Letter of Credit and Reimbursement
Agreement, dated as of July 1, 2006, by and between the Company and the Bank
relating to the Letter of Credit and any agreement pursuant to which any
Alternate Credit Facility is delivered, as such agreement may be amended,
supplemented or replaced from time to time.

“Remarketing Account” shall mean the special account of that name within the
Bond Purchase Fund established pursuant to Section 4.4 hereof.

“Remarketing Agent” shall mean Thornton Farish, Inc., and any successor
remarketing agent appointed as provided in Section 13.1 hereof. “Principal
Office of the Remarketing Agent” shall mean the office designated in writing to
the Trustee, and the Company, and which initially shall be specified in
Section 17.6 hereof.

“Remarketing Agreement” shall mean the Remarketing Agreement, dated as of
July 1, 2006 between the Company and the Remarketing Agent, as the same may be
amended from time to time, and any remarketing agreement between the Company and
a successor Remarketing Agent.

“Revenues” shall mean (i) all amounts payable to the Trustee with respect to the
principal, redemption price of or interest on the Bonds (A) on deposit in the
Bond Fund from the proceeds of the Bonds or obligations of the Issuer issued to
refund the Bonds or from any other source and (B) by the Company as, or on
behalf of the Company as a credit against the Company’s obligation to pay,
Installment Sale Payments under the Agreement, (ii) all receipts of the Trustee
credited under the provisions of this Indenture against amounts described in
clause (i); and (iii) investment income with respect to any moneys held by the
Trustee in the Bond Fund.

“S&P” shall mean Standard & Poor’s Credit Market Services, a division of The
McGraw-Hill Companies, Inc. or any successor thereto maintaining a rating on the
Bonds.

“Securities Depository” shall mean DTC and any other “clearing agency”
registered under Section 17A of the Securities Exchange Act of 1934, as amended.

“Special Record Date” shall mean such date as may be fixed for the payment of
defaulted interest in accordance with Section 2.7 hereof.

“Special Tax Counsel” shall mean Chapman and Cutler LLP or such other firm of
attorneys of nationally recognized standing in the field of law relating to
municipal bond law and the excludability of interest on state or local bonds
from gross income of the owners of the Bonds for purposes of federal income
taxation, selected by the Issuer and acceptable to the Company.

“State” shall mean the State of Texas.

“Subsidiary” shall mean any corporation, partnership, association or other
business entity of which 50% or more of the voting stock or other equity
interests, as appropriate, is at the time directly or indirectly owned by the
Company, by the Company and one or more other Subsidiaries, or by one or more
other Subsidiaries.

 

-12-

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

“Tax Agreement” shall mean the “Tax Exemption Certificate and Agreement” dated
the date of issue of the Bonds among the Issuer, the Company and the Trustee.

“Tender Office” shall mean the office of the Paying Agent designated in writing
to the Issuer, the Company and the Remarketing Agent as its office for the
receipt of tender notices under Article IV hereof, and which initially shall be
specified in Section 17.6 hereof.

“Term Rate” shall mean the interest rate to be determined for the Bonds for a
term of one or more years pursuant to Section 3.2 hereof.

“Term Rate Conversion Date” shall mean each day on which the Bonds accrue
interest at a Term Rate pursuant to Section 3.2 hereof which is immediately
preceded by a day on which the Bonds did not accrue interest at a Term Rate or
accrued interest at a Term Rate for a Term Rate Period of a different duration.

“Term Rate Period” shall mean each period during which the Bonds accrue interest
at a particular Term Rate.

“Trustee” shall mean The Bank of New York Trust Company, N.A., in Dallas, Texas,
and any successor trustee or co-trustee serving as such hereunder. “Principal
Office of the Trustee” shall mean the business address designated in writing to
the Issuer, the Company, and the Remarketing Agent as its principal office for
its duties hereunder, and which initially shall be as specified in Section 17.6
hereof.

“Unassigned Rights” shall mean the rights of the Issuer under Sections 5.04,
6.03 and 7.03(a) of the Agreement and the right to receive notices thereunder.

“Underwriter” shall mean the initial underwriter of the Bonds, Thornton Farish,
Inc.

“Weekly Rate” shall mean the interest rate to be determined for the Bonds on a
weekly basis pursuant to Section 3.2 hereof.

“Weekly Rate Conversion Date” shall mean each day on which the Bonds accrue
interest at a Weekly Rate pursuant to Section 3.2 hereof which is immediately
preceded by a day on which the Bonds did not accrue interest at a Weekly Rate.

“Weekly Rate Period” shall mean the period during which the Bonds accrue
interest at a particular Weekly Rate.

The words “hereof”, “herein”, “hereto”, “hereby” and “hereunder” (except in the
form of Bond) refer to the entire Indenture. Unless otherwise noted, all Section
and Article references are to sections and articles in this Indenture.

 

-13-

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

ARTICLE II.

THE BONDS

Section 2.1 Amount, Terms, and Issuance of Bonds. The Bonds shall, except as
provided in Section 2.9 hereof, be in the aggregate principal amount set forth
in the Approval Certificate, not exceeding $100,000,000, and shall contain
substantially the terms recited in the form of bond attached hereto as Exhibit A
with such changes and variations as may be necessary to conform to the
provisions thereof. The Bonds shall be issued for the purpose of paying the
costs of acquiring, constructing, or improving the Project, as provided herein
and in the Agreement. The Bonds may have such additional legends thereon as
shall be customary in the industry or deemed necessary by the Trustee in order
to provide for an orderly transition of Bonds bearing interest at a Commercial
Paper Rate to Bonds bearing interest at a Daily Rate or Weekly Rate as permitted
by Section 3.2(b). No bonds other than the Bonds may be issued under this
Indenture. No Bonds may be issued under this Indenture except in accordance with
this Article.

Pursuant to recommendations promulgated by the Committee on Uniform Security
Identification Procedures, “CUSIP” numbers may be printed on the Bonds. The
Bonds may bear such endorsement or legend satisfactory to the Trustee as may be
required to conform to usage or law with respect thereto.

The Issuer may issue the Bonds upon the execution of this Indenture, and the
Trustee shall, at the Issuer’s written direction, authenticate the Bonds, insert
the Issue Date thereon, and deliver them as specified in the direction.

Section 2.2 Designation, Denominations, Maturity and Form. The Bonds shall be
designated “Red River Authority of Texas Solid Waste Disposal Revenue Bonds
(Panda Hereford Ethanol, L.P. Project) Series 2006”.

Unless otherwise directed by the Issuer, the Bonds shall be numbered from R-1
upward, unless otherwise determined by the Trustee. Temporary Bonds issued
pursuant to Section 2.10 hereof shall be numbered from TR-1 upward, unless
otherwise determined by the Trustee.

All Bonds shall be dated as of July 1, 2006, but shall initially bear interest
from the Issue Date.

The Bonds shall mature on the Maturity Date.

All Bonds accruing interest at Daily or Weekly Rates shall be issued in
denominations of $100,000 and integral multiples of $5,000 in excess thereof.
All Bonds accruing interest at Commercial Paper Rates shall be issued in
denominations of $100,000 and integral multiples of $1,000 in excess thereof.
All Bonds accruing interest at a Term Rate shall be in denominations of $5,000
and whole multiples thereof.

Section 2.3 Registered Bonds Required; Bond Registrar and Bond Register. All
Bonds shall be issued in fully registered form. The Bonds shall be registered
upon original issuance and upon subsequent transfer or exchange as provided in
this Indenture.

The Issuer shall designate, at the direction of the Company, one or more Persons
to act as “Bond Registrar” for the Bonds provided that the Bond Registrar
appointed for the Bonds shall be either the Trustee, the Paying Agent or a
Person which would meet the requirements for qualification

 

-14-

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

as a successor trustee imposed by Section 12.13. The Issuer hereby appoints the
Trustee as Bond Registrar. Any Person other than the Trustee undertaking to act
as Bond Registrar shall first execute a written agreement, in form satisfactory
to the Trustee and the Company, to perform the duties of a Bond Registrar under
this Indenture, which agreement shall be filed with the Trustee and the Company.
The Paying Agent and Bond Registrar, in performing their respective duties
hereunder, shall be entitled to the same protective provisions in the
performance of their respective duties as are specified in Article XII of this
Indenture with respect to the Trustee hereunder to the same extent and as fully
for all intents and purposes as though the Paying Agent and Bond Registrar had
been expressly named therein in place of such Trustee and as though the
applicable provisions of Article XII of this Indenture had been set forth herein
at length.

The Bond Registrar shall act as registrar and transfer agent for the Bonds. The
Issuer shall cause to be kept at an office of the Bond Registrar or its agent a
register (herein sometimes referred to as the “Bond Register”) in which, subject
to such reasonable regulations as it, the Trustee or the Bond Registrar may
prescribe, the Issuer shall provide for the registration of the Bonds and for
the registration of transfers of the Bonds. The Issuer shall cause the Bond
Registrar to designate, by a written notification to the Trustee, a specific
office location (which may be changed from time to time, upon similar
notification) at which the Bond Register is kept, and, if such location is not
in the State of Texas, a specific office location in the State of Texas at which
a current copy of the Bond Register is kept.

The Bond Registrar shall at any time as reasonably requested by the Trustee, the
Paying Agent, the Company, or the Remarketing Agent, certify and furnish to the
Trustee, the Paying Agent, the Remarketing Agent, the Company, and any Paying
Agent as the Trustee shall specify, the names, addresses, and holdings of
Bondholders and any other relevant information reflected in the Bond Register,
and the Trustee, the Remarketing Agent and any such Paying Agent shall for all
purposes be fully entitled to rely upon the information so furnished to them and
shall have no liability or responsibility in connection with the preparation
thereof.

Section 2.4 Transfer and Exchange. Upon surrender for registration of transfer
of any Bond at the designated office of the Bond Registrar or its agent, the
Issuer shall execute and the Trustee or its Authenticating Agent shall
authenticate and deliver in the name of the transferee or transferees, one or
more new fully registered Bonds of Authorized Denomination for the aggregate
principal amount which the Registered Owner is entitled to receive.

At the option of the owner, Bonds may be exchanged for other Bonds of any other
Authorized Denomination, of a like aggregate principal amount and accruing
interest at the same Interest Rate, upon surrender of the Bonds to be exchanged
at the designated office of the Bond Registrar or its agent. Whenever any Bonds
are so surrendered for exchange, the Issuer shall execute, and the Trustee or
the Authenticating Agent shall authenticate and deliver, the Bonds which the
Bondholder making the exchange is entitled to receive.

All Bonds presented for registration of transfer or exchange shall be
accompanied by a written instrument or instruments of transfer or authorization
for exchange, in form and with guaranty of signature satisfactory to the Bond
Registrar, duly executed by the owner or by his

 

-15-

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

attorney duly authorized in writing, and such documentation as the Bond
Registrar shall reasonably require.

No service charge shall be made to a Bondholder for any exchange or registration
of transfer of Bonds, but the Issuer or the Bond Registrar may require payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in relation thereto.

New Bonds delivered upon any registration of transfer or exchange shall be valid
obligations of the Issuer, evidencing the same debt as the Bonds surrendered,
shall be secured by this Indenture and shall be entitled to all of the security
and benefits hereof to the same extent as the Bonds surrendered.

Except as provided above or in Article IV hereof, the Trustee shall not be
required to effect any transfer or exchange during the 15 days immediately
preceding the date of mailing of any notice of redemption or at any time
following the mailing of any such notice in the case of Bonds selected for such
redemption.

Section 2.5 Execution. All the Bonds shall, from time to time, be executed on
behalf of the Issuer by the manual or facsimile signature of the President of
the Board of Directors of the Issuer, its seal (which may be in facsimile) shall
be thereunto affixed (or printed or engraved or otherwise reproduced thereon if
in facsimile), and attested by the manual or facsimile signature of the
Secretary of the Issuer.

If any of the officers whose manual or facsimile signatures shall be upon the
Bonds shall cease to be such officers of the Issuer before such Bonds shall have
been actually authenticated by the Trustee or delivered by the Issuer, such
Bonds nevertheless may be authenticated, issued and delivered with the same
force and effect as though the Person or Persons whose signature shall be upon
such Bonds had not ceased to be such officer or officers of the Issuer; and also
any such Bonds may be signed and sealed on behalf of the Issuer by those Persons
who, at the actual date of the execution of such Bond, shall be the proper
officers of the Issuer, although at the nominal date of such Bonds any such
Person shall not have been such officer of the Issuer.

Section 2.6 Authentication; Authenticating Agent. No Bond shall be valid for any
purpose until either (i) the Certificate of Authentication substantially in the
form set forth in Exhibit A attached hereto has been duly executed in accordance
herewith by the Trustee or (ii) in the case of Bonds initially delivered to the
Underwriter, a Comptroller’s Registration Certificate attached to or endorsed on
such Bond has been duly executed. Such executed Certificate of Authentication or
Comptroller’s Registration Certificate, as the case may be, shall be conclusive
proof that such Bond has been duly authenticated and delivered under this
Indenture and that the owner thereof is entitled to the benefit of the trust
hereby created.

If the Bond Registrar is other than the Trustee, the Trustee may appoint the
Bond Registrar as an Authenticating Agent with the power to act on the Trustee’s
behalf and subject to its direction in the authentication and delivery of Bonds
in connection with the registration of transfers and exchanges under Section 2.4
hereof, and the authentication and delivery of Bonds by an Authenticating Agent
pursuant to this Section shall, for all purposes of this Indenture, be deemed to
be the authentication and delivery “by the Trustee”.

 

-16-

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

Any corporation or association into which any Authenticating Agent may be merged
or converted or with which it may be consolidated, or any corporation or
association resulting from any merger, consolidation or conversion to which any
Authenticating Agent shall be a party, or any corporation or association
succeeding to all or substantially all of the corporate trust business of any
Authenticating Agent, shall be the successor of the Authenticating Agent
hereunder, if such successor corporation is otherwise eligible as a Bond
Registrar under Section 2.3, without the execution or filing of any further act
on the part of the parties hereto or the Authenticating Agent or such successor
corporation or association.

Any Authenticating Agent may at any time resign by giving written notice of
resignation to the Trustee, the Issuer and the Company. The Trustee may at any
time terminate the agency of any Authenticating Agent by giving written notice
of termination to such Authenticating Agent, the Issuer and the Company. Upon
receiving such a notice of resignation or upon such a termination, or in case at
any time any Authenticating Agent shall cease to be eligible under this Section,
the Trustee may, with the consent of the Company (which shall not be
unreasonably withheld) appoint a successor Authenticating Agent, shall give
written notice of such appointment to the Issuer, and shall mail notice of such
appointment to all owners of Bonds as the names and addresses of such owners
appear on the Bond Register.

Section 2.7 Payment of Principal and Interest; Interest Rights Preserved.

(a) Subject to the provisions relating to book-entry only set forth in
Section 2.13 hereof, the principal or redemption price of any Bond shall be
payable upon presentation and surrender of such Bond to the Principal Office of
the Paying Agent or the Principal Office of the Co-Paying Agent. The principal
or redemption price of the Bonds shall be payable in immediately available
funds. Such payments shall be made to the Registered Owner of the Bond so
delivered, as shown in the Bond Register maintained by the Bond Registrar.

(b) Subject to the further provisions of Article III hereof, each Bond shall
accrue interest and be payable as to interest as follows:

(i) Each Bond shall accrue interest (at the applicable rate determined pursuant
to Article III hereof) initially from the Issue Date, and thereafter (A) from
the date of authentication, if authenticated on an Interest Payment Date to
which interest has been paid or duly provided for, or (B) from the last
preceding Interest Payment Date to which interest has been paid in full or duly
provided for (or the Issue Date if no interest thereon has been paid or duly
provided for) in all other cases.

(ii) Subject to the provisions of paragraph (c) below, the interest due on any
Bond on any Interest Payment Date shall be paid to the Registered Owner of such
Bond as shown on the registration books kept by the Bond Registrar as of the
Regular Record Date. The amount of interest so payable on any Interest Payment
Date shall be computed (A) on the basis of a 365- or 366-day year for the number
of days actually elapsed during Daily Rate

 

-17-

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

Periods, (B) on the basis of a 365- or 366-day year for the number of days
actually elapsed based on the calendar year in which the Commercial Paper Rate
Period or the Weekly Rate Period commences, during Commercial Paper Rate Periods
or Weekly Rate Periods, and (C) on the basis of a 360-day year of twelve 30-day
months during Term Rate Periods.

(iii) All payments of interest on the Bonds shall be paid to the Registered
Owners entitled thereto in immediately available funds by wire transfer to a
bank within the continental United States or deposited to a designated account
if such account is maintained with the Paying Agent as directed by the
Registered Owner in writing or as otherwise directed in writing by the
Registered Owner prior to the time of payment with respect to Bonds accruing
interest at a Commercial Paper Rate or five Business Days prior to the Interest
Payment Date with respect to Bonds accruing interest at Daily, Weekly or Term
Rates.

(iv) Interest accrued during any Commercial Paper Rate Period or due at the
maturity or redemption of the Bonds shall be paid only upon presentation and
surrender of Bonds.

(v) Interest on any Bond 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 Bond is registered at the close of business on the Regular Record Date
for such interest.

(c) Any interest on any Bond which is payable, but is not punctually paid or
provided for, on any Interest Payment Date and within any applicable grace
period (herein called “Defaulted Interest”) shall forthwith cease to be payable
to the owner of such Bond on the relevant Regular Record Date by virtue of
having been such owner, and such Defaulted Interest shall be paid to the Person
in whose name the Bond is registered at the close of business on a Special
Record Date to be fixed by the Trustee, such date to be no more than 15 nor
fewer than 10 days prior to the date of proposed payment. 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
Bondholder at his address as it appears in the Bond Register, not fewer than 10
days prior to such Special Record Date.

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

Section 2.8 Persons Deemed Owners. The Issuer, the Trustee, any Paying Agent,
the Bond Registrar and any Authenticating Agent may deem and treat the Person in
whose name any Bond is registered in the Bond Register as the absolute owner
thereof (whether or not such Bond shall be overdue and notwithstanding any
notation of ownership or other writing thereon made by anyone other than the
Issuer, the Trustee, any Paying Agent, the Bond Registrar or the Authenticating
Agent) for the purpose of receiving payment of or on account of the principal of
and (subject to Section 2.7 hereof) interest on, such Bond, and for all other
purposes, and neither the Issuer, the Trustee, any Paying Agent, the Bond
Registrar, the Remarketing Agent nor the Authenticating Agent shall be affected
by any notice to the contrary. All such payments so made to any such Registered
Owner, or upon his written order, shall be valid and, to the extent of the sum
or sums so paid, effectual to satisfy and discharge the liability for moneys
payable upon any such Bond.

 

-18-

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

Section 2.9 Mutilated, Destroyed, Lost or Stolen Bonds.

(a) If any Bond shall become mutilated, lost, stolen or destroyed, the affected
Bondholder shall be entitled to the issuance of a substitute Bond only as
follows:

(i) in the case of a lost, stolen or destroyed Bond, the Bondholder shall
(A) provide written notice of the loss, theft or destruction to the Trustee
within a reasonable time after the Bondholder becomes aware of the loss, theft
or destruction, (B) request, in writing, the issuance of a substitute Bond and
(C) provide evidence, satisfactory to the Trustee, of the ownership and the
loss, theft or destruction of the affected Bond;

(ii) in the case of a mutilated Bond, the Bondholder shall surrender the Bond to
the Trustee for cancellation;

(iii) in all cases, the Bondholder shall provide indemnity against any and all
claims arising out of or otherwise related to the issuance of substitute Bonds
pursuant to this Section 2.9 satisfactory to the Issuer, the Trustee and the
Company; and

(iv) in all cases, upon payment by the affected Bondholder of the fees and
expenses of the Trustee and the Issuer in connection with the issuance of any
such substitute Bond.

Upon compliance with the foregoing, a substitute Bond of like tenor and
denomination, executed by the Issuer, shall be authenticated by the Trustee or
Authenticating Agent and delivered to the Bondholder.

Notwithstanding the foregoing, the Trustee or Authenticating Agent shall not be
required to authenticate and deliver any substitute Bond for a Bond which has
been called for redemption or which has matured or is about to mature or which
shall have been purchased pursuant to Section 4.3 hereof and, in any such case,
the principal, redemption price or Purchase Price and interest then due or
becoming due shall be paid by the Trustee or a Paying Agent in accordance with
the terms of the mutilated, lost, stolen or destroyed Bond without substitution
therefor.

(b) Every substituted Bond issued pursuant to this Section shall constitute an
additional contractual obligation of the Issuer and shall be entitled to all the
benefits of this Indenture equally and proportionately with any and all other
Bonds duly issued hereunder.

(c) All Bonds shall be held and owned upon the express condition that the
foregoing provisions are exclusive with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Bonds, and shall preclude any and all other
rights or remedies, notwithstanding any law or statute existing or hereafter
enacted to the contrary with respect to the replacement or payment of negotiable
instruments or investment or other securities without their surrender.

 

-19-

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

Section 2.10 Temporary Bonds. Pending preparation of definitive Bonds, or by
agreement with the purchasers of all Bonds, the Issuer may issue, and, upon its
written request, the Trustee or Authenticating Agent shall authenticate, in lieu
of definitive Bonds one or more temporary printed or typewritten Bonds of
substantially the tenor set forth in the form of bond attached hereto as Exhibit
A in any Authorized Denomination. Upon the written request of the Issuer, the
Trustee shall authenticate definitive Bonds in exchange for and upon surrender
of an equal principal amount of temporary Bonds. Until so exchanged, temporary
Bonds shall have the same rights, remedies and security hereunder as definitive
Bonds.

Section 2.11 Cancellation of Surrendered Bonds. Bonds surrendered for payment
upon maturity or prior redemption, transfer or exchange and Bonds surrendered to
the Trustee by the Issuer or by the Company for cancellation shall be canceled
by the Trustee and treated in accordance with its document retention policies.

Section 2.12 Limited Obligation. The Bonds are not and never shall become
general obligations of the Issuer, but are limited obligations payable by the
Issuer solely and only from the payments received under or with respect to the
documents executed by the Company, including, without limitation, any Letter of
Credit (except to the extent paid out of moneys attributable to the proceeds
derived from the sale of the Bonds or income from the temporary investment of
such funds or other funds held hereunder), which amounts, together with any
other security provided herein, are hereby specifically assigned and pledged to
such purposes, in the manner and to the extent provided herein. Neither the
faith and credit nor the taxing power of the State, the Issuer, or any other
political corporation, subdivision, or agency is pledged to the payment of the
principal of, premium, if any, or interest on, or Purchase Price of, the Bonds.
No recourse shall be had for any claim based on the Agreement, the Indenture, or
the Bonds against any member, officer or employee, past, present or future, of
the Issuer, or of any successor body thereto, either directly or through the
Issuer, or any such successor body, under any constitutional provision, statute
or rule of law or by the enforcement of any assessment or penalty or otherwise.
The Bonds are special revenue obligations of the Issuer payable solely from the
sources described herein and therein and the holder thereof shall never have the
right to demand payment from moneys derived by taxation or any revenues of the
Issuer except the funds pledged to the payment thereof.

Section 2.13 Book - Entry System.

(a) DTC will act as the initial Securities Depository for the Bonds. The Bonds
shall be initially issued in the form of a single fully registered Bond
registered in the name of Cede & Co. (DTC’s nominee). So long as Cede & Co. is
the Registered Owner of the Bonds, as nominee of DTC, references herein to
Registered Owners, Bondholders or holders of the Bonds shall mean Cede & Co. and
shall not mean the beneficial owners of the Bonds.

(b) While DTC is the Securities Depository, the ownership interest of each of
the beneficial owners of the Bonds will be recorded through the records of a DTC
Participant. Transfers of beneficial ownership interests in the Bonds which are
registered in the name of Cede & Co. will be accompanied by book entries made by
DTC and, in turn, by the DTC Participants who act on behalf of the beneficial
owners of the Bonds.

 

-20-

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

(c) With respect to Bonds registered in the name of the Securities Depository,
the Issuer, the Bond Registrar, the Paying Agent, any Co-Paying Agent and the
Trustee shall have no responsibility or obligation to any Person on behalf of
whom such Securities Depository holds an interest in the Bonds, except as
provided in this Indenture. Without limiting the immediately preceding sentence,
the Issuer, the Bond Registrar, the Paying Agent, any Co-Paying Agent and the
Trustee shall have no responsibility or obligation with respect to (i) the
accuracy of the records of the Securities Depository with respect to any
ownership interest in the Bonds, (ii) the delivery to any Person, other than a
Bondholder, as shown on the Bond Register, of any notice with respect to the
Bonds, including any notice of redemption, or (iii) the payment to any Person,
other than a Registered Owner, as shown in the Bond Register of any amount with
respect to principal of, premium, if any, Purchase Price or interest on, the
Bonds.

(d) Notwithstanding any other provisions of this Indenture to the contrary, the
Issuer, the Bond Registrar, the Paying Agent, any Co-Paying Agent and the
Trustee shall be entitled to treat and consider the Person in whose name each
Bond is registered in the Bond Register as the absolute owner of such Bond for
the purpose of payment of principal, premium, if any, Purchase Price, and
interest with respect to such Bond, for the purpose of giving notices of
redemption and other matters with respect to such Bond, for the purpose of
registering transfers with respect to such Bond, and for all other purposes
whatsoever. The Paying Agent shall pay all principal of, premium, if any,
Purchase Price, and interest on the Bonds only to or upon the order of the
respective owners, as shown in the Bond Register as provided in this Indenture,
or their respective attorneys duly authorized in writing, and all such payments
shall be valid and effective to fully satisfy and discharge the Issuer’s
obligations with respect to payment of principal of, premium, if any, Purchase
Price, and interest on, the Bonds to the extent of the sum or sums so paid.

(e) No Person other than a Registered Owner, as shown in the registration books,
shall receive a Bond certificate evidencing the obligation of the Issuer to make
payments of principal, premium, if any, Purchase Price, and interest, pursuant
to this Indenture.

(f) Except in the case of payment upon maturity or redemption if the book-entry
system is not in effect, any provision of this Indenture permitting or requiring
the delivery of Bonds shall, while the book-entry system is in effect, be
satisfied by the notation on the books of the Securities Depository, of the
transfer of the beneficial owner’s interest in such Bond.

(g) So long as the book-entry system is in effect, the Trustee, the Remarketing
Agent, the Paying Agent and the Bond Registrar shall comply with the terms of
the DTC Letter.

(h) The Securities Depository may determine to discontinue providing its service
with respect to the Bonds at any time by giving reasonable written notice and
all relevant information on the beneficial owners of the Bonds to the Issuer or
the Trustee. If there is no successor Securities Depository appointed by the
Issuer, the Trustee, based solely upon information provided to it in writing by
the Securities Depository, shall authenticate and deliver Bonds to the
beneficial owners thereof. In the event that the Company determines that the
Securities Depository is incapable of discharging its responsibilities described
herein or in any agreement among the Issuer, the Trustee and the Securities
Depository, the Issuer, at the direction of the Company, shall (i) appoint a
successor securities depository, qualified to act as such under Section 17(a) of
the securities and

 

-21-

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

Exchange Act of 1934, as amended, notify the Securities Depository of the
appointment of such successor securities depository and transfer one or more
separate Bonds to such successor securities depository or (ii) notify the
Securities Depository and the beneficial owners, identified by the Securities
Depository, of the availability through the Securities Depository of Bonds and
transfer one or more separate Bonds to the beneficial owners, identified in
writing by the Securities Depository as having Bonds credited to their accounts.
In such event, the Bonds shall no longer be restricted to being registered in
the Bond Register in the name of the Securities Depository, but may be
registered in the name of the successor securities depository, or its nominee,
or in whatever name or names Bondholders transferring or exchanging Bonds shall
designate, in accordance with the provisions of this Indenture.

Upon the written consent of 100% of the beneficial owners of the Bonds, the
Trustee, in accordance with any agreement among the Issuer, the Trustee, and the
Securities Depository, shall withdraw the Bonds from the Securities Depository,
and authenticate and deliver Bonds fully registered to the assignees of the
Securities Depository or its nominee. If the request for such withdrawal is not
the result of any Issuer action or inaction, such withdrawal, authentication and
delivery shall be at the cost and expense (including costs of printing,
preparing and delivering such Bonds) of the Persons requesting such withdrawal,
authentication and delivery.

Section 2.14 Payments to Securities Depository; Payments to Beneficial Owners.

(a) Notwithstanding any other provision of this Indenture to the contrary, so
long as any Bond is registered in the name of Cede & Co., as nominee of DTC, all
payments with respect to principal of, premium, if any, Purchase Price, and
interest on, such Bond and all notices with respect to such Bond shall be made
and given, respectively, pursuant to DTC’s rules and procedures, or in the case
of a successor Securities Depository, pursuant to any agreement among the
Issuer, the Trustee, the Bond Registrar, any Co-Paying Agent, and the Securities
Depository.

(b) With respect to Bonds registered in the name of a Securities Depository (or
its nominee) neither the Trustee, the Issuer nor the Company shall have any
obligation to any of its members or participants or to any Person on behalf of
whom an interest is held in the Bonds.

ARTICLE III.

INTEREST RATES ON THE BONDS

Section 3.1 Interest Rate. All Bonds shall accrue interest from the Issue Date
at Weekly Rates determined by the Remarketing Agent as provided herein until, if
ever, the Rate Period for the Bonds is converted to a different Rate Period
pursuant to Section 3.3. The interest rate on the Bonds will be the lesser of
(i) the Maximum Rate or (ii) the rate determined as provided in Section 3.2.

Section 3.2 Determination of Interest Rates.

(a) Determination by Remarketing Agent.

(i) The Interest Rate shall be determined by the Remarketing Agent as the rate
of interest which, in the judgment of the Remarketing Agent, would cause the
Bonds to have a market value as of the effective date thereof equal to the
principal amount thereof, taking into

 

-22-

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

account prevailing market conditions. With respect to Commercial Paper Rates,
the Remarketing Agent shall determine the Commercial Paper Rate and the
Commercial Paper Rate Period for each Bond at such rate and for such period as
it deems advisable in order to minimize the net interest cost on the Bonds,
taking into account prevailing market conditions.

(ii) In the event the Remarketing Agent fails for any reason to determine or
notify the Trustee of the Interest Rate for any Interest Rate Period:

(A) The Interest Rate then in effect for Bonds that accrue interest at Daily
Rates will remain in effect from day to day until the Trustee is notified of a
new Daily Rate determined by the Remarketing Agent. If no Daily Rate is
determined upon a conversion to a Daily Rate, the Interest Rate shall be the
Alternate Rate.

(B) The Interest Rate then in effect for Bonds that accrue interest at Weekly
Rates will remain in effect from week to week until the Trustee is notified of a
new Weekly Rate determined by the Remarketing Agent. If no Weekly Rate is
determined upon a conversion to a Weekly Rate, the Interest Rate shall be the
Alternate Rate.

(C) The Interest Rate for any Bond that accrues interest at a Commercial Paper
Rate and for which a Commercial Paper Rate and Commercial Paper Rate Period is
not determined shall be equal to 100% of the prime commercial paper rate (30
days) shown in the table captioned “short-term tax-exempt yields” in the edition
of The Bond Buyer published on the day on which such rate is determined or, if
such rate is not published on that day, the most recent publication of such
rate, and the Interest Rate Period for such Bond shall extend through the day
preceding the next Business Day, until the Trustee is notified of a new
Commercial Paper Rate and Commercial Paper Rate Period determined for such Bond
by the Remarketing Agent.

(D) The Interest Rate then in effect for Bonds that accrue interest at the Term
Rate will be automatically converted to Commercial Paper Rates with Commercial
Paper Rate Periods beginning on each Business Day and extending through the day
preceding the next Business Day until the Trustee is notified of a new
Commercial Paper Rate and Commercial Paper Rate Period determined for such Bond
by the Remarketing Agent.

(iii) All determinations of Interest Rates pursuant to this Section shall be
conclusive and binding upon the Issuer, the Company, the Trustee, the Paying
Agent, any Co-Paying Agent, the Bank, the Remarketing Agent, and the Owners of
the Bonds to which such rates are applicable.

(iv) The Interest Rate in effect for Bonds during any Interest Rate Period shall
be available to Owners on the date such Interest Rate is determined, between
1:00 p.m. and 5:00 p.m., New York City time, from the Remarketing Agent or the
Trustee at their Principal Offices and shall also be communicated by the
Remarketing Agent promptly to the Company by telephonic or Electronic notice.

 

-23-

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

(v) During any transitional period for a conversion from the Commercial Paper
Rate Period to a Daily Rate or Weekly Rate Period in which the Remarketing Agent
is setting different Commercial Paper Rate Periods in order to effect an orderly
transition of such conversion, Bonds bearing interest at the Commercial Paper
Rate shall be governed by the provisions of this Indenture applicable to
Commercial Paper Rate Periods and Commercial Paper Rates, and Bonds bearing
interest at the Daily Rate or Weekly Rate, as applicable, shall be governed by
the provisions of this Indenture applicable to such Daily Rates and Daily Rate
Periods or Weekly Rates and Weekly Rate Periods, as the case may be.

(b) Commercial Paper Rates. During any period that the Bonds bear interest at
Commercial Paper Rates, the Bonds shall bear interest at the Commercial Paper
Rate for each Commercial Paper Rate Period as determined in accordance with this
subsection (b) and interest shall be payable on the Interest Payment Date for
each Commercial Paper Rate Period. Interest on the Bonds shall be computed upon
the basis of a 365- or 366-day year for the number of days actually elapsed
based on the calendar year in which the Commercial Paper Rate Period commences.
Notwithstanding the foregoing, no Commercial Paper Rate Period may be
established which exceeds 270 days (provided that if a Letter of Credit is then
in effect, such period shall not be longer than a period equal to the maximum
number of days’ interest coverage provided by such Letter of Credit minus the
number of days, if any, allowed for any reinstatement of interest under the
Letter of Credit) or, if the Remarketing Agent has given or received notice of
any conversion to a Term Rate Period, the remaining number of days prior to the
Conversion Date or, if the Remarketing Agent has given or received notice of any
conversion to a Daily Rate or Weekly Rate, the length of each Commercial Paper
Rate Period for each Bond shall be determined by the Remarketing Agent to be
either (i) that length of period that, as soon as possible, shall enable the
Commercial Paper Rate Periods for all Bonds to end on the day before the
Conversion Date, or (ii) that length of period which, based on the Remarketing
Agent’s judgment, will best promote an orderly transition to the next Interest
Rate Period, and if a Letter of Credit is then in effect, no Commercial Paper
Rate Period may be established which extends beyond the remaining term of such
Letter of Credit minus the number of days, if any, allowed for any reinstatement
of interest under the Letter of Credit.

Commercial Paper Rates on and Commercial Paper Rate Periods for the Bonds shall
be determined as follows:

(i) The Commercial Paper Rate on a Bond for a specific Commercial Paper Rate
Period shall be the rate established by the Remarketing Agent no later than 1:00
p.m. (New York City time) on the first Business Day of that Commercial Paper
Rate Period as the minimum rate of interest necessary, in the judgment of the
Remarketing Agent, to enable the Remarketing Agent to sell such Bond on that day
at a price equal to the principal amount thereof, and such Commercial Paper Rate
shall be provided to the Trustee by the Remarketing Agent by telephonic or
Electronic notice by 1:00 p.m., New York City time, on that same day. Unless the
Bonds are in book-entry form, the Trustee will deliver certificates for such
Bonds to the Remarketing Agent not later than 2:45 p.m. New York City time on
such Business Day against receipt of payment therefor.

 

-24-

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

(ii) Each Commercial Paper Rate Period applicable to a Bond shall be determined
by the Remarketing Agent on or prior to the first Business Day of such
Commercial Paper Rate Period (but no later than 1:00 p.m. (New York City time)
on the first Business Day of the Commercial Paper Rate Period) as that Rate
Period which will, in the judgment of the Remarketing Agent, produce the
greatest likelihood of the lowest net interest cost during the term of the
Bonds; provided that each Commercial Paper Rate Period shall be from one to 270
days in length (provided that if a Letter of Credit is then in effect, such
period shall not be longer than a period equal to the maximum number of days’
interest coverage provided by such Letter of Credit minus the number of days, if
any, allowed for any reinstatement of interest under the Letter of Credit),
shall commence on a Business Day, shall end on a day preceding a Business Day or
the day preceding the Maturity Date, and in any event shall end no later than
the day preceding the Maturity Date. Each Bond may bear interest at a different
Commercial Paper Rate and for a Commercial Paper Rate Period different from any
other Bond. The Commercial Paper Rate Period shall be provided to the Trustee by
the Remarketing Agent by telephonic or Electronic notice by 1:00 p.m. New York
City time, on that same day.

The Remarketing Agent may, in the reasonable exercise of its judgment,
(1) determine Commercial Paper Rate Periods that result in Commercial Paper
Rates on the Bonds that are higher than would be borne by Bonds with shorter
Commercial Paper Rate Periods in order to increase the likelihood of achieving
the lowest net interest cost during the term of the Bonds by assuring the
availability of such Commercial Paper Rates for the longer Commercial Paper Rate
Periods, and (2) in view of the uncertainties involved in anticipating
Commercial Paper Rates, establish different Commercial Paper Rate Periods for
Bonds on the same date in order to achieve an average of Commercial Paper Rate
Periods that, in the reasonable exercise of its judgment, is most likely to
achieve the lowest net interest cost during the term of the Bonds.

The determination of the Commercial Paper Rate Periods by the Remarketing Agent
will be based upon the relative market yields of Bonds bearing interest at a
Commercial Paper Rate and other securities that bear interest at a variable rate
or at fixed rates that, in the reasonable exercise of the judgment of the
Remarketing Agent, are otherwise comparable to the Bonds, or any fact or
circumstance relating to the Bonds or affecting the market for the Bonds or
affecting such other comparable securities in a manner that, in the reasonable
exercise of the judgment of the Remarketing Agent, will affect the market for
the Bonds. The Remarketing Agent, in its discretion, may consider such
information and resources as it deems appropriate in making the determinations
described in this paragraph, including consultations with the Company, but the
Remarketing Agent’s determination of the Commercial Paper Rate Period for each
Bond will be based solely upon the reasonable exercise of the Remarketing
Agent’s judgment.

(iii) Notwithstanding subsection (ii) above:

(A) if the Remarketing Agent fails for any reason to determine or notify the
Trustee of the length of a Commercial Paper Rate Period for any Bond or fails
for any reason to determine or notify the Trustee of a Commercial Paper Rate,
the Commercial Paper Rate and Commercial Paper Rate Period shall be established
as provided in Section 3.2(a)(ii) hereof;

 

-25-

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

(B) no Commercial Paper Rate Period shall be established for a period longer
than 270 days (provided that if a Letter of Credit is then in effect, such
period shall not be longer than a period equal to the maximum number of days’
interest coverage provided by such Letter of Credit minus the number of days, if
any, allowed for any reinstatement of interest under the Letter of Credit);

The determination of each Commercial Paper Rate and Commercial Paper Rate Period
in accordance with the terms of this Indenture shall be conclusive and binding
upon the owners of the Bonds, the Issuer, the Company, the Trustee, each Paying
Agent and the Remarketing Agent.

(c) Daily Rates. During any period that the Bonds bear interest at Daily Rates,
a Daily Rate shall be established for each Daily Rate Period as follows:

(i) Daily Rate Periods shall commence on a Daily Rate Conversion Date which
shall be a Business Day and thereafter, prior to the next Conversion Date, on
each Business Day thereafter until the Rate Period for the Bonds is converted to
another Rate Period pursuant to Section 3.3 and shall extend to, but not
include, the next succeeding Business Day.

(ii) The Daily Rate for each Daily Rate Period shall be effective from and
including the commencement date thereof and shall remain in effect to, but not
including, the next succeeding Business Day. Each such Daily Rate shall be
determined by the Remarketing Agent not later than 10:30 a.m., New York City
time, on the first Business Day of the Daily Rate Period to which it relates and
provided to the Trustee by the Remarketing Agent by Electronic notice by 12:00
noon, New York City time, on that same day; provided that no notice need be
given if the Daily Rate then in effect is to be the Daily Rate for the next
Daily Rate Period.

(d) Weekly Rates;. Initially and during any period that the Bonds bear interest
at a Weekly Rate, a Weekly Rate shall be determined for each Weekly Rate Period
as follows:

(i) Weekly Rate Periods shall commence on a Thursday and end on Wednesday of the
following week and each Weekly Rate Period shall be followed by another Weekly
Rate Period until the Rate Period of the Bonds is converted to another Rate
Period pursuant to Section 3.3; provided that (A) the initial Weekly Rate Period
shall commence on the Issue Date and end on Wednesday of the following week;
(B) in the case of a conversion to a Weekly Rate Period from a different Rate
Period, the Weekly Rate Period shall commence on the Weekly Rate Conversion Date
and shall end on Wednesday of the following week; (C) in the case of a
conversion from a Weekly Rate Period to a different Rate Period, the last Weekly
Rate Period prior to conversion shall end on the last day immediately preceding
the Conversion Date to the new Rate Period; and (D) the Company, by written
direction of an Authorized Company Representative to the Trustee, the Issuer,
and the Remarketing Agent specifying such new dates, and subject to
Section 3.3(d)(iii) hereof, may, from time to time, change the commencement date
and ending date of the Weekly Rate Period.

 

-26-

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

(ii) The Weekly Rate for each Weekly Rate Period shall be effective from and
including the commencement date of such period and shall remain in effect
through and including the last day thereof. Each such Weekly Rate shall be
determined by the Remarketing Agent no later than 10:00 a.m., New York City
time, on the commencement date of the Weekly Rate Period to which it relates and
provided to the Trustee by the Remarketing Agent by written, telephonic or
Electronic notice by 12:00 noon, New York City time, on such date.

(e) Term Rates. During any period that the Bonds bear interest at a Term Rate, a
Term Rate shall be determined for each Term Rate Period as follows:

(i) Term Rate Periods shall (A) commence on a Term Rate Conversion Date and
subsequently on the first day of a calendar month which is an integral multiple
of twelve (12) calendar months thereafter, (B) have a duration of not less than
365 days, and (C) end on the day preceding either the commencement date of the
following Term Rate Period or the Conversion Date on which a different Rate
Period shall become effective or the Maturity Date of the Bonds; provided that
if a Letter of Credit is then in effect, such Letter of Credit must (1) extend
for a period which shall not end on a date that is earlier than the first date
on which the Bonds can be called for optional redemption during the proposed
Term Rate Period plus 5 days, and (2) cover the premium, if any, which would be
included in the Purchase Price upon mandatory tender of the Bonds pursuant to
Section 4.2(c) if such Letter of Credit has not be extended beyond the
Expiration Date set forth therein. Each Term Rate Period shall be followed by
another Term Rate Period of the same duration until the Rate Period of the Bonds
is converted to another Rate Period or a Term Rate Period of a different
duration or until maturity pursuant to Section 3.3.

(ii) The Term Rate for each Term Rate Period shall be effective from and
including the commencement date of such period and remain in effect through and
including the last day thereof. Each such Term Rate shall be determined by the
Remarketing Agent not later than 12:00 noon, New York City time, on the Business
Day immediately preceding the commencement date of such period and provided to
the Trustee and the Bank by the Remarketing Agent by written, telephonic or
Electronic notice by the close of business on such Business Day.

Section 3.3 Conversions Between Rate Periods. The Company may elect to convert
all outstanding Bonds from one Rate Period to another as follows:

(a) Conversion Dates.

(i) If the conversion is from Commercial Paper Rate Periods, the Conversion
Date, if the Bonds are being converted to a Term Rate, must be the date on which
interest is payable on all of the Bonds accruing interest at Commercial Paper
Rates, and if the conversion is from a Commercial Paper Rate Period to a Daily
Rate or Weekly Rate, there

 

-27-

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

may be more than one Conversion Date in accordance with Section 3.2(b); however,
the Conversion Date with respect to each Bond must be the date on which interest
at the Commercial Paper Rate is payable on such Bond.

(ii) If the conversion is from a Daily or Weekly Rate Period, the Conversion
Date must be an Interest Payment Date on which interest is payable for the Daily
or Weekly Rate Period from which the conversion is made.

(iii) If the conversion is from a Term Rate Period, the Conversion Date may be
any date on which the Bonds are also subject to optional redemption pursuant to
Section 9.1 hereof.

(b) Notices by Company. The Company shall give written notice and telephone
notice of any proposed conversion to the Trustee, and written notice of any
proposed conversion to the Issuer, the Bank and the Remarketing Agent , not
fewer than seven Business Days prior to the date the notice to Bondholders must
be given pursuant to Section 3.3(c) of the proposed conversion from a Commercial
Paper, Daily, Weekly or Term Rate Period.

(c) Notices by Trustee. The Trustee shall give notice by first class mail, of
the proposed conversion to the Registered Owners of Bonds accruing interest at
Commercial Paper, Daily or Weekly Rates not less than 15 days before the
proposed Conversion Date and to Registered Owners of Bonds accruing interest at
a Term Rate not less than 30 days before the proposed Conversion Date. Such
notice shall state:

(i) the proposed Conversion Date and proposed Interest Rate (i.e. whether the
Bonds will bear interest at a Daily Rate, Weekly Rate, Commercial Paper Rate or
Term Rate) to be effective on such date;

(ii) that the Bonds will be subject to mandatory tender for purchase on the
Conversion Date (except in the case of conversions between Daily and Weekly Rate
Periods);

(iii) the conditions, if any, to the conversion pursuant to subsection
(d) below;

(iv) if the Bonds are in certificated form, information with respect to required
delivery of Bond certificates and payment of the Purchase Price; and

(v) the new Interest Payment Date and Regular Record Dates.

(d) Conditions to Conversion. No conversion of Interest Rate Periods will become
effective unless the following conditions to conversion have been met:

(i) if the conversion is from Commercial Paper Rate Periods, the Trustee has
received, prior to the date on which notice of conversion is required to be
given to Registered Owners, written confirmation from the Remarketing Agent that
it has not established and will not establish any Commercial Paper Rate Periods
extending beyond the day before the Conversion Date (or Conversion Dates if the
Remarketing Agent will be establishing Commercial Paper Rate Periods pursuant to
Section 3.2(b));

 

-28-

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

(ii) if the conversion is from Commercial Paper, Daily or Weekly Rate Periods to
a Term Rate Period, or from a Term Rate Period to a Commercial Paper, Daily or
Weekly Rate Period, or to a Term Rate Period of a different duration the Trustee
has been provided, no later than one day before the Conversion Date, with a
Favorable Opinion with respect to the conversion; and

(iii) conversions (except any conversion resulting from the failure to
determine, or the invalidity of, an Interest Rate or, in the case of Bonds
accruing interest at a Term Rate, an Interest Rate Period, and including a
conversion from one Term Rate Period to a Term Rate Period of a different
duration) and any change in the commencement and/or ending date of a Weekly Rate
Period pursuant to Section 3.2(d)(i)(D) hereof, are subject to veto by the
Issuer, which veto may not be unreasonably exercised and must be exercised by
the Authorized Issuer Representative within one hour after the receipt of notice
from the Company of such change in interest rate determination method or change
in Weekly Rate Period dates by the sending of a telephonic notice to the
Company, the Trustee and the Remarketing Agent and confirmed in writing
thereafter.

(iv) if a Letter of Credit will be held by the Trustee after the Conversion
Date, such Letter of Credit (A) will cover the principal of and interest
(computed on the basis of a 365-day year, in the case of conversion to a
Commercial Paper, Daily or Weekly Rate Period, and on the basis of a 360-day
year consisting of twelve 30-day months, in the case of conversion to a Term
Rate Period) which will accrue on the Outstanding Bonds for 106 days in the case
of conversion to a Daily or Weekly Rate Period, 275 days (or such fewer number
of days as may be determined by the Company) in the case of conversion to a
Commercial Paper Rate Period, and 185 days in the case of conversion to a Term
Rate Period, plus, in each case, an amount equal to interest for the number of
days, if any, allowed for reinstatement of interest under the Letter of Credit,
and (B) in the case of conversion to a Term Rate Period, (1) extends for a
period which shall not end on a date that is earlier than the first date on
which the Bonds can be called for optional redemption plus 5 days, and
(2) covers the premium, if any, which would be included in the Purchase Price
upon mandatory purchase of the Bonds pursuant to Section 4.2(c) hereof if such
Letter of Credit were not extended beyond the Expiration Date set forth therein.

(v) if a Letter of Credit is then in effect and the Purchase Price determined
under Section 4.2(b) hereof payable on the Conversion Date includes any premium,
the Trustee has received, prior to the date on which notice of conversion is
required to be given to Registered Owners, written confirmation from the Bank
that it can draw under the Letter of Credit on the proposed Conversion Date in
an aggregate amount sufficient to cover such premium due upon mandatory purchase
of the Bonds pursuant to Section 4.2(b) hereof.

 

-29-

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

ARTICLE IV.

TENDER AND PURCHASE OF BONDS

Section 4.1 Optional Tenders for Purchase.

(a) Purchase Dates. The Owners or beneficial owners of Bonds accruing interest
at Daily, Weekly or Term Rates may elect to have their Bonds (or portions
thereof in Authorized Denominations, provided that the remaining portion of any
Bond tendered in part must also be in an Authorized Denomination) purchased at
the Purchase Price on the following Purchase Dates:

(i) Bonds accruing interest at Daily Rates may be tendered for purchase at a
Purchase Price equal to 100% of the principal amount thereof plus accrued but
unpaid interest payable in immediately available funds on any Business Day prior
to conversion from a Daily Rate Period to a different Rate Period, upon
personal, Electronic or telephonic notice of tender given to the Paying Agent,
directly or through a DTC Participant, not later than 9:15 a.m., New York City
time, on the Purchase Date.

(ii) Bonds accruing interest at Weekly Rates may be tendered for purchase at a
Purchase Price equal to 100% of the principal amount thereof plus accrued but
unpaid interest payable in immediately available funds on any Business Day prior
to conversion from a Weekly Rate Period to a different Rate Period upon written
or Electronic notice of tender to the Paying Agent, directly or through a DTC
Participant, not later than 5:00 p.m., New York City time, on a Business Day not
fewer than seven days prior to the Purchase Date.

(iii) Bonds accruing interest at a Term Rate may be tendered for purchase on the
commencement date of the succeeding Rate Period for such Bonds at a Purchase
Price equal to 100% of the principal amount thereof payable in immediately
available funds upon written or Electronic notice of tender to the Paying Agent,
directly or through the DTC Participant, not later than 5:00 p.m., New York City
time, on a Business Day which is not fewer than seven days prior to the Purchase
Date, it being understood that pursuant to Section 4.2(b) hereof, the Bonds may
also be subject to mandatory tender on such date, in which case the provisions
of Section 4.2(b) hereof shall govern the purchase.

(b) Notice of Tender. Each notice of tender:

(i) shall, in the case of a written notice, be delivered to the Paying Agent at
its Tender Office and be in form satisfactory to the Paying Agent;

(ii) shall state, whether delivered personally, in writing, Electronically or by
telephone (A) the principal amount of the Bond to which the notice relates,
(B) that the Owner or beneficial owner irrevocably demands purchase of such Bond
or a specified portion thereof in an Authorized Denomination, (C) that any
portion of such Bond not tendered is in an Authorized Denomination (D) the date
on which such Bond or portion is to be purchased, and (D) payment instructions
with respect to the Purchase Price; and

(iii) shall automatically constitute, whether delivered personally, in writing,
Electronically or by telephone (A) an irrevocable offer to sell the Bond (or
portion thereof) to which the notice relates on the Purchase Date at a Purchase
Price equal to the principal

 

-30-

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

amount of such Bond (or portion thereof) plus, with respect to Bonds accruing
interest at a Daily Rate or a Weekly Rate, any interest thereon accrued but
unpaid as of the Purchase Date, (B) an irrevocable authorization and instruction
to the Paying Agent to effect transfer of such Bond (or portion thereof) upon
payment of the Purchase Price to the Paying Agent on the Purchase Date, (C) an
irrevocable authorization and instruction to the Paying Agent to effect the
exchange of the Bond to be purchased in whole or in part for other Bonds in an
equal aggregate principal amount so as to facilitate the sale of such Bond (or
portion thereof to be purchased), and (D) an acknowledgment that such Owner or
beneficial owner will have no further rights with respect to such Bond (or
portion thereof) upon payment of the Purchase Price thereof to the Paying Agent
on the Purchase Date, except for the right of such Owner or beneficial owner to
receive such Purchase Price upon delivery of such Bond to the Paying Agent, and
that after the Purchase Date such Owner or beneficial owner will hold any
undelivered certificate as agent for the Paying Agent. The determination of the
Paying Agent as to whether a notice of tender has been properly delivered
pursuant to the foregoing shall be conclusive and binding upon the Owner or
beneficial owner.

(c) Bonds to be Remarketed. Not later than 11:00 a.m., New York City time, on
the Business Day immediately following the date of receipt of any notice of
tender (or immediately upon such receipt, in the case of Bonds accruing interest
at Daily Rates), the Paying Agent shall notify, by telephone, promptly confirmed
in writing, the Company, the Trustee and the Remarketing Agent of the principal
amount of Bonds (or portions thereof) to be purchased and the Purchase Date.

Section 4.2 Mandatory Tenders for Purchase.

(a) Commercial Paper Rate Bonds. Each Bond accruing interest at a Commercial
Paper Rate shall be subject to mandatory tender for purchase on each Interest
Payment Date applicable to such Bond, at a Purchase Price equal to 100% of the
principal amount thereof, plus interest accrued but unpaid during such
Commercial Paper Rate Period. The Registered Owner of any Bond accruing interest
at a Commercial Paper Rate shall provide the Paying Agent with written payment
instructions for the Purchase Price of its Bond on or before tender thereof to
the Paying Agent.

(b) Conversions between Interest Rate Periods. Bonds to be converted from one
Interest Rate Period to a different Interest Rate Period (except conversions
from the Daily Rate to the Weekly Rate or from the Weekly Rate to the Daily
Rate) or from a Term Rate Period to a Term Rate Period of different duration,
are subject to mandatory tender for purchase on the Conversion Date at a
Purchase Price equal to 100% of the principal amount thereof plus accrued but
unpaid interest; provided that the Purchase Price for Bonds converted from a
Term Rate Period on a date when such Bonds are also subject to optional
redemption at a premium shall include an amount equal to the premium that would
be payable if such Bonds were redeemed on such date.

(c) Prior to Expiration or Replacement of Letter of Credit. The Bonds are
subject to mandatory tender for purchase (i) on the Interest Payment Date which
is at least two (2) Business Days next preceding the Expiration Date of the
current Letter of Credit unless at least 25 days prior to such Interest Payment
Date the Trustee has received notice from the Bank that the Letter of Credit has
been extended, and (ii) on any Interest Payment Date on which the current Letter
of Credit is replaced with an Alternate Credit Facility pursuant to Section 7.2,
in each case at a Purchase Price equal to 100% of the principal amount thereof
plus accrued but unpaid interest, plus the premium, if any, which would be
payable if the Bonds were redeemed on the mandatory tender date.

 

-31-

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

(d) Notice. The Paying Agent shall give notice of mandatory tender for purchase
other than pursuant to Section 4.2(a) (for which no notice of mandatory tender
shall be required) to the Registered Owners of Bonds by first class mail, not
less than 10 days before the mandatory tender date. If the Bonds are in
certificated form, such notice shall include information with respect to
required delivery of Bond certificates and payment of the Purchase Price.

Section 4.3 Remarketing and Purchase.

(a) Remarketing of Tendered Bonds. Unless otherwise instructed by the Company,
but subject to the provisions of Sections 4.3(b)(v) and 4.3(b)(vi) hereof, the
Remarketing Agent shall offer for sale and use its best efforts to find
purchasers for all Bonds or portions thereof for which notice of tender has been
received pursuant to Section 4.1(c) or which are subject to mandatory tender.
While the Bonds are in book-entry only form, the Paying Agent will make payment
of the Purchase Price for tendered Bonds in accordance with the procedures
established by the Securities Depository. If the book-entry only system is not
in effect, the terms of any sale by the Remarketing Agent shall provide for the
payment of the Purchase Price for tendered Bonds by the Remarketing Agent to the
Paying Agent (i) in immediately available funds at or before 3:00 p.m., New York
City time, on the Purchase Date, in the case of Bonds accruing interest at
Commercial Paper Rates, (ii) in immediately available funds at or before 1:00
p.m., New York City time, on the Purchase Date, in the case of Bonds accruing
interest at Daily Rates or Weekly Rates, and (iii) in immediately available
funds at or before 12:00 noon, New York City time, on the Purchase Date, in the
case of Bonds accruing interest at Term Rates. The Remarketing Agent shall not
sell any Bond as to which a notice of conversion from one type of Rate Period to
another has been given by the Trustee unless the Remarketing Agent has advised
the Person to whom the sale is made of the conversion. The Remarketing Agent
shall remarket all Bonds pursuant to this Section at a price of 100% of the
principal amount thereof plus accrued but unpaid interest, if any. The
Remarketing Agent shall not remarket any Bonds pursuant to this Section if an
Event of Default shall have occurred and be continuing hereunder with respect to
the Bonds.

(b) Purchase of Tendered Bonds.

(i) Notice. At or before 3:00 p.m., New York City time, on the Business Day
immediately preceding the Purchase Date of tendered Bonds bearing interest at
Term Rates (or 9:30 a.m., New York City time, on the Purchase Date in the case
of Bonds accruing interest at Daily, Weekly or Commercial Paper Rates), the
Remarketing Agent shall give notice by telegram, telex, Electronically or by
other similar communication, and by telephone, to the Trustee and the Paying
Agent of the principal amount of tendered Bonds which were remarketed. Not later
than 4:00 p.m. New York City time, on the Business Day immediately preceding the
Purchase Date for Bonds bearing interest at Term Rates (or 10:15 a.m., New York
City time, on the Purchase Date in the case of Bonds accruing interest at Daily,
Weekly or Commercial Paper Rates), New York City time, on the date of receipt of
such notice the Trustee shall give notice by telephone, telegram, telecopy,
Electronically or by other similar communication to the Paying Agent, the Bank,
and the Company, specifying

 

-32-

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

the principal amount of tendered Bonds as to which the Remarketing Agent has not
found a purchaser at that time. At or before 3:00 p.m., New York City time, on
the Business Day prior to the Purchase Date to the extent known to the
Remarketing Agent, but in any event, no later than 1:00 p.m., New York City
time, on the Purchase Date (or two Business Days prior to the Purchase Date in
the event tendered Bonds accrue interest at Term Rates), the Remarketing Agent
shall give notice to the Paying Agent by telephone (promptly confirmed in
writing or Electronically) of the names, addresses and taxpayer identification
numbers of the purchasers, the denominations of Bonds to be delivered to each
purchaser and, if available, payment instructions for regularly scheduled
interest payments, or of any changes in any such information previously
communicated.

(ii) Sources of Payments; Drawings on the Letter of Credit. The Remarketing
Agent shall cause to be paid to the Paying Agent on the Purchase Date of
tendered Bonds, all amounts representing proceeds of the remarketing of such
Bonds to Persons other than the Issuer, the Company, the General Partner, or an
Affiliate thereof, as set forth in the notice from the Remarketing Agent under
Section 4.3(b)(i), such payments to be made in the manner and at the time
specified in Section 4.3(a) above. If such amounts set forth in the notice from
the Remarketing Agent to the Paying Agent under Section 4.3(b)(i) above will not
be sufficient to pay the Purchase Price on the Purchase Date, the Paying Agent
shall give notice to the Trustee to draw under the Letter of Credit and the
Trustee shall by 10:30 a.m., New York City time, on the Purchase Date draw under
the Letter of Credit, if any, then held by the Trustee in accordance with its
terms in a manner so as to furnish immediately available funds by 1:00 p.m., New
York City time, on such Purchase Date, in an amount sufficient, together with
the remarketing proceeds available for such purchase, to enable the Paying Agent
to pay the Purchase Price of Bonds to be purchased on such Purchase Date. If no
Letter of Credit is then held by the Trustee, the Company shall deliver or cause
to be delivered such amounts and at such times so that there will be delivered
to the Paying Agent (A) immediately available funds in an amount equal to such
deficiency prior to 2:30 p.m., New York City time, on the Purchase Date of
tendered Bonds accruing interest at Daily Rates (3:00 p.m., New York City time,
in the case of Commercial Paper Rate Bonds), (B) immediately available funds in
an amount equal to such deficiency prior to 1:15 p.m., New York City time, on
the Purchase Date of tendered Bonds accruing interest at Weekly Rates, and
(C) immediately available funds in an amount equal to such deficiency prior to
12:15 p.m., New York City time, on the Purchase Date of tendered Bonds accruing
interest at Term Rates (the obligation of the Company to deliver such moneys not
being conditioned on receipt by the Company of the notice from the Trustee
pursuant to Section 4.3(b)(i) above). All moneys received by the Paying Agent as
remarketing proceeds or from drawings by the Trustee on the Letter of Credit and
additional amounts, if any, received from the Company, as the case may be, shall
be deposited by the Paying Agent in the appropriate account of the Bond Purchase
Fund to be used solely for the payment of the Purchase Price of tendered Bonds
and shall not be commingled with other funds held by the Paying Agent and shall
not be invested.

(iii) Payments by the Paying Agent. At or before 2:30 p.m., New York City time,
on the Purchase Date for tendered Bonds and upon receipt by the Paying Agent of
100% of the aggregate Purchase Price of the tendered Bonds, the Paying Agent
shall pay or remit the

 

-33-

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

Purchase Price of such Bonds to the Registered Owners thereof. Such payments
shall be made in immediately available funds (or by wire transfer). The Paying
Agent shall make payment of the Purchase Price by applying in order of priority
(A) first, moneys paid to it by the Remarketing Agent as proceeds of the
remarketing of such Bonds by the Remarketing Agent, (B) second, proceeds of a
drawing on the Letter of Credit, and (c) third, other moneys made available by
the Company.

(iv) Registration and Delivery of Tendered or Purchased Bonds. On the date of
purchase, the Paying Agent shall register and deliver (or hold) or cancel all
Bonds purchased on any Purchase Date as follows: (A) Bonds purchased or
remarketed by the Remarketing Agent shall be registered and made available to
the Remarketing Agent by 2:15 p.m., New York City time, in accordance with the
instructions of the Remarketing Agent and (B) Bonds purchased with proceeds of a
drawing on the Letter of Credit shall be held as Bank Bonds in accordance with
subparagraph (v) below, and (C) Bonds purchased with amounts provided by the
Company shall be registered in the name of the Company and shall be delivered to
the Trustee to be held in trust by the Trustee on behalf of the Company and
shall not be released from such trust unless the Trustee shall have received
written instructions from the Company. Notwithstanding anything herein to the
contrary, so long as the Bonds are held under the book-entry only system in
accordance with Section 2.13 hereof, Bonds will not be delivered as set forth
above; rather, transfers of beneficial ownership of the Bonds to the Person
indicated above will be effected on the registration books of the Securities
Depository pursuant to its rules and procedures.

(v) Bank Bonds. Bonds purchased with proceeds of a drawing on the Letter of
Credit pursuant to this Section shall be acquired for the benefit of the Bank
and the Bank shall be the beneficial owner of such Bonds, which shall constitute
“Bank Bonds” and shall be held by the Trustee as fiduciary for the Bank (and
shall be shown as Bank Bonds on the Bond Register maintained by the Trustee or,
if the Bonds are held in the Book-Entry System, such Bank Bonds shall be
recorded in the books of the Securities Depository for the account of the
Trustee, as custodian for the Bank) in accordance with the provisions of this
Indenture and the Reimbursement Agreement unless and until (A) the Trustee has
received written confirmation from the Bank that the Letter of Credit has been
reinstated with respect to such drawing or (B) the Bank has notified the Trustee
by telephone (thereafter promptly confirmed in writing) that such Bonds have
been conveyed pursuant to the Reimbursement Agreement to the Company and are no
longer Bank Bonds. Pending reinstatement of the Letter of Credit or conveyance
of the Bank Bonds to the Company, the Bank shall be entitled to receive all
payments of principal of and interest on Bank Bonds and such Bonds shall not be
transferable or deliverable to any party (including the Company) except the
Bank. Notwithstanding the foregoing, if the Letter of Credit is not reinstated
in an amount equal to the unpaid principal of the outstanding Bonds, including
any Bank Bonds, but excluding any Company Bonds, and, subject to the limitations
set forth in the Letter of Credit, accrued interest thereon, no Letter of Credit
funds shall be used to make the principal and interest payments on the Bank
Bonds. The Remarketing Agent shall continue to use its best efforts to arrange
for the sale of any Bank Bonds; provided that the Remarketing Agent shall not
offer for sale any Bank Bond unless and until the Trustee has received written
confirmation from the Bank that the Letter of Credit has been reinstated in full
to the amount available to

 

-34-

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

be drawn under the Letter of Credit with respect to the Bonds . While any Bank
Bonds are Outstanding, any payment of interest with respect to such Bank Bonds
shall be as set forth in the Reimbursement Agreement, provided, however, that
such rate of interest shall be the lesser of what is set forth in the
Reimbursement Agreement or the maximum interest rate which, at any point in
time, if borne by the Bonds through the Maturity Date, would result in a “net
effective interest rate” (as defined and calculated in accordance with the
provisions of Chapter 1204, Texas Government Code) which does not exceed fifteen
percent (15%) per annum.

Notwithstanding anything to the contrary in this subsection, if and for so long
as the Bonds are to be registered in accordance with Section 2.13 hereof, the
registration requirements under this subsection (v) shall be deemed satisfied if
Bank Bonds are (1) registered in the name of the Securities Depository or its
nominee in accordance with Section 2.13 hereof, (2) credited on the books of the
Securities Depository to the account of the Trustee (or its nominee) and
(3) further credited on the books of the Trustee (or such nominee) to the
account of the Bank (or its designee).

(vi) Resale of Bonds Purchased by the Company. In the event that any Bonds are
registered to the Company pursuant to subparagraph (iv) above to the extent
requested by the Company, the Remarketing Agent shall offer for sale and use its
best efforts to sell such Bonds at a price equal to the principal amount thereof
plus accrued interest, with the interest rate thereon to be determined in
accordance with the provisions of Section 3.2(a) hereof, provided that the
Remarketing Agent shall not offer for sale any Company Bond, so long as any Bank
Bond is outstanding; further provided, that the Remarketing Agent shall not
offer for sale any Company Bond unless and until the Trustee has received
written confirmation from the Bank that the Letter of Credit has been reinstated
in full to the amount available to be drawn under the Letter of Credit with
respect to the Bonds; and further provided that the Remarketing Agent shall not
offer for sale any Company Bond unless and until a Favorable Opinion of Special
Tax Counsel is delivered which, in addition to the general requirements thereof,
as specified in the definition of Favorable Opinion, shall address itself to the
status of such Bonds as Company Bonds, and previously as Bank Bonds (if such be
the case), and state that upon the remarketing thereof such Bonds will be
“qualified tender bonds” under the Code.

(vii) Delivery of Tendered Bonds; Effect of Failure to Surrender Bonds. All
Bonds to be purchased on any date shall be required to be delivered to the
Principal Office of the Paying Agent at or before (A) 1:00 p.m., New York City
time, on the Purchase Date in the case of Bonds accruing interest at Commercial
Paper Rates or Daily Rates; (B) 12:00 noon, New York City time, on the Purchase
Date in the case of Bonds accruing interest at Weekly Rates; or (C) 2:00 p.m.,
New York City time, on the Purchase Date in the case of Bonds accruing interest
at Term Rates. If the Owner of any Bond (or portion thereof) in certificated
form that is subject to optional or mandatory purchase pursuant to this Article
fails to deliver such Bond to the Trustee for purchase on the Purchase Date, and
if the Paying Agent is in receipt of the Purchase Price therefor, such Bond (or
portion thereof) shall nevertheless be deemed purchased on the Purchase Date
thereof and ownership of such Bond (or portion thereof) shall be transferred to
the purchaser thereof as provided in subsection (iv) above.

 

-35-

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

Any Owner who fails to deliver such Bond for purchase shall have no further
rights thereunder except the right to receive the Purchase Price thereof upon
presentation and surrender of said Bond to the Paying Agent. The Paying Agent
shall, as to any tendered Bonds which have not been delivered to it (1) promptly
notify the Remarketing Agent of such nondelivery, and (2) place or cause to be
placed a stop transfer against an appropriate amount of Bonds registered in the
name of such Registered Owner(s) on the Bond Register. The Paying Agent shall
place or cause to be placed such stop(s) commencing with the lowest serial
number Bond registered in the name of such Registered Owner(s) until stop
transfers have been placed against an appropriate amount of Bonds until the
appropriate tendered Bonds are delivered to the Paying Agent. Upon such
delivery, the Paying Agent shall make or cause the Bond Registrar to make any
necessary adjustments to the Bond Register. Notwithstanding anything herein to
the contrary, so long as the Bonds are held under the book-entry only system in
accordance with Section 2.13 hereof, Bonds will not be delivered as set forth
above; rather, transfers of beneficial ownership of the Bonds to the Person
indicated above will be effected on the registration books of the Securities
Depository pursuant to its rules and procedures.

Section 4.4 Bond Purchase Fund. There is hereby created with the Paying Agent a
segregated trust fund to be designated the “Bond Purchase Fund”. The Bond
Purchase Fund shall consist of the sub-accounts to be designated respectively
the “Remarketing Account,” the “Letter of Credit Purchase Account,” and the
“Company Purchase Account”.

The Paying Agent shall deposit or cause to be deposited into the Remarketing
Account, when and as received, all moneys delivered to the Paying Agent as and
for the Purchase Price of remarketed Bonds by or on behalf of the Remarketing
Agent. The Paying Agent shall disburse moneys from the Remarketing Account to
pay the Purchase Price of Bonds properly tendered for purchase upon surrender of
such Bonds.

The Trustee shall deposit or cause to be deposited into the Letter of Credit
Purchase Account, when and as received, all proceeds from a drawing on the
Letter of Credit pursuant to Section 4.3(b)(ii). The Paying Agent shall disburse
moneys from the Letter of Credit Purchase Account to pay the Purchase Price of
Bonds properly tendered for purchase upon surrender of such Bonds; provided that
the Trustee shall not draw on the Letter of Credit to pay the Purchase Price of
Bank Bonds or Company Bonds.

The Trustee or Paying Agent, as the case may be, shall deposit or cause to be
deposited into the Company Purchase Account, when and as received, all moneys
delivered to the Trustee or the Paying Agent, as the case may be, by or for the
account of the Company as Purchase Price Payments pursuant to Section 4.3(b)(ii)
hereof and Sections 5.04 (d) and 5.09 of the Agreement. The Paying Agent shall
disburse moneys from the Company Purchase Account to pay the Purchase Price of
Bonds properly tendered for purchase by or on behalf of the Company upon
surrender of such Bonds.

The funds held by the Paying Agent in the Bond Purchase Fund shall not be
considered Revenues as that term is defined herein and shall not constitute part
of the Trust Estate which is subject to the lien of this Indenture. The moneys
in the Bond Purchase Fund shall be used solely to pay the Purchase Price of
Bonds as aforesaid (or to reimburse the Bank for drawings under the Letter

 

-36-

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

of Credit for such purpose) and may not be used for any other purposes. It shall
be the duty of the Paying Agent to hold the moneys in the Bond Purchase Fund
uninvested, without liability for interest thereon, for the benefit of the
Registered Owners of Bonds which have been properly tendered for purchase or
deemed tendered on the Purchase Date, and if sufficient funds to pay the
Purchase Price for such tendered Bonds shall be held by the Paying Agent in the
Bond Purchase Fund for the benefit of the Registered Owners thereof, each such
Registered Owner shall thereafter be restricted exclusively to the Bond Purchase
Fund for any claim of whatever nature on such Registered Owner’s part under this
Indenture or on, or with respect to, such tendered Bond. Funds held in the Bond
Purchase Fund for the benefit of Registered Owners of untendered Bonds shall be
held in trust and not invested. The provisions of Section 17.2 hereof shall
govern any funds held in the Bond Purchase Fund for such Registered Owners of
the Bonds which remain unclaimed for a period of two years after the applicable
Purchase Date.

ARTICLE V.

CUSTODY AND APPLICATION OF PROCEEDS OF BONDS

Section 5.1 Creation of Construction Fund. There is hereby created and ordered
to be established with the Trustee a Construction Fund.

Section 5.2 Payments into Construction Fund. The proceeds from the issuance and
sale of the Bonds shall be deposited into the Construction Fund. All income or
other gain from the investment of moneys in the Construction Fund shall be
retained therein and any loss resulting from the sale of any investment shall be
charged to such Construction Fund.

Section 5.3 Disbursements from Construction Fund. Moneys in the Construction
Fund shall be disbursed by the Trustee to pay Project Costs or to reimburse the
Company for Project Costs paid by it, all in accordance with and pursuant to the
provisions of the Agreement. The Trustee shall keep and maintain adequate
records pertaining to the Construction Fund and all disbursements therefrom and
shall file an accounting thereof if and when requested in writing by the Issuer
or the Company.

Section 5.4 Balance in Construction Fund. Any amounts remaining in the
Construction Fund after delivery of the Completion or Termination Certificate
(as defined in the Agreement) shall be used by the Trustee as provided in
Sections 3.03(e) and 3.04(b) of the Agreement.

Section 5.5 Acceleration of Bonds. In the event that the principal of the Bonds
shall have become due and payable pursuant to Section 11.2 hereof, subject to
Section 8.4 hereof, any amounts held in or on deposit in the Construction Fund
shall be transferred by the Trustee to the Bond Fund.

ARTICLE VI.

REVENUES AND APPLICATION THEREOF

Section 6.1 Revenues to be Paid Over to the Trustee. The Issuer has caused the
Revenues to be paid directly to the Trustee.

 

-37-

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

Section 6.2 Bond Fund.

(a) There is hereby established with the Trustee a Bond Fund, within which there
is hereby established a Company Debt Service Account and a Letter of Credit Debt
Service Account.

(b) The Trustee shall maintain the Bond Fund as follows:

(i) The Trustee shall deposit into the Company Debt Service Account all
Installment Sale Payments, any accrued interest received from the sale of the
Bonds, and all other amounts received by the Trustee from the Company or for the
account of the Company pursuant to the Agreement, and all payments under and
pursuant to the provisions of this Indenture or any of the provisions of the
Agreement, when accompanied by written directions from the Person depositing
such moneys that such moneys are to be paid into Company Debt Service Account of
the Bond Fund.

(ii) The Trustee shall deposit into the Letter of Credit Debt Service Account
all moneys received by the Trustee from drawings under the Letter of Credit to
pay principal of, premium, if any, and interest on the Bonds.

(iii) Moneys in the Letter of Credit Debt Service Account shall be applied to
the payment when due of principal of, premium, if any, and interest on the Bonds
(other than Company Bonds or, except as such funds are expressly contemplated to
be applied to the payment of the principal of Bank Bonds and accrued interest
thereon under Section 4.3(b)(v), Bank Bonds) prior to the payment of any moneys
under subsection 6.2(b)(iv).

(iv) Moneys in the Company Debt Service Account shall be applied to the
following in the order of priority indicated:

(A) if the Bank has honored in full a draw under the Letter of Credit, and to
the extent the Bank has not been reimbursed in accordance with the provisions of
the Reimbursement Agreement, the reimbursement of the Bank when due for moneys
drawn under the Letter of Credit and deposited in the Letter of Credit Debt
Service Account for payment of principal of, premium, if any, on and interest on
the Bonds;

(B) when insufficient moneys have been received under the Letter of Credit for
application pursuant to subsection 6.2(b)(iii), the payment when due of
principal of, premium, if any, on and interest on the Bonds, other than Company
Bonds or Bank Bonds;

(C) the payment when due of principal of, premium, if any, on and interest on
Bank Bonds; and

(D) the payment when due of principal of, premium, if any, on and interest on
Company Bonds, provided that if the Trustee shall have received written notice
from the Bank that any amounts are due and owing to the Bank under the
Reimbursement Agreement, such payments shall be made to the Bank for the account
of the Company.

 

-38-

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

(v) Before 2:00 p.m., New York City time, on the Business Day immediately
preceding each Interest Payment Date, each redemption date and the Maturity Date
of the Bonds, the Trustee shall present the requisite certificate for a drawing
on the Letter of Credit so as to comply with the provisions of the Letter of
Credit for payment to be made in sufficient time for the Trustee to receive the
proceeds of such drawing at or before 11:00 a.m., New York City time, on such
Interest Payment Date, redemption date or Maturity Date, as the case may be, to
pay principal of, premium, if any, and interest on the Bonds due on such date.
In addition, the Trustee shall draw on the Letter of Credit pursuant to its
terms in accordance with and in order to satisfy the requirements of
Section 11.2. Promptly upon presenting the requisite documents for a drawing on
the Letter of Credit, the Trustee shall give notice to the Company by telephone,
promptly confirmed in writing, of the amount so drawn. The Trustee shall
promptly notify the Company by oral or telephonic communication confirmed in
writing if the Bank fails to transfer funds in accordance with the Letter of
Credit upon the presentment of the requisite certificate. In calculating the
amount to be drawn on the Letter of Credit for the payment of principal of,
premium, if any, and interest on the Bonds, whether on an Interest Payment Date,
at maturity or upon redemption or acceleration, the Trustee shall not take into
account the potential receipt of funds from the Company under the Agreement on
such Interest Payment Date, or the existence of any other moneys in the Bond
Fund, but shall draw on the Letter of Credit for the full amount of principal
of, premium, if any, and interest coming due on the Bonds (other than Bank Bonds
or Company Bonds).

Anything in this Indenture to the contrary notwithstanding, instructions
permitted or required to be submitted to the Trustee pursuant to the terms of
this Indenture, the Agreement, a Requisition Certificate or any other document,
including, but not limited to, instructions for the transfer and disbursements
of monies (by wire or otherwise) deposited in the Funds or Accounts established
under this Indenture, may be submitted to the Trustee by facsimile and shall be
subject to confirmation in accordance with the Trustee’s ordinary business
practices.

Section 6.3 Revenues to Be Held for All Bondholders; Certain Exceptions. Until
applied as provided in this Indenture to the payment of Bonds or transferred to
the Company pursuant to Section 17.2, Revenues shall be held by the Trustee in
trust in the Bond Fund for the benefit of the owners of all Outstanding Bonds,
except that any portion of the Revenues representing principal or redemption
price of any Bonds, and interest on any Bonds previously matured or called for
redemption in accordance with Article IX of this Indenture, shall be held for
the benefit of the owners or the former owners of such Bonds only.

Section 6.4 Amounts Remaining in Bond Fund. Any amounts remaining in the Bond
Fund after payment in full of (i) the Bonds (or the provision for payment
thereof having been made in accordance with the provisions hereof), (ii) all
Administration Expenses, and (iii) all other amounts required to be paid under
the Agreement and this Indenture, including fees and expenses of the Trustee,
subject to any applicable provisions of Texas law, including Title 6 of the
Texas Property Code, shall be paid to the Bank, to the extent of any amount
certified in writing by the Bank as due from the Company under the Reimbursement
Agreement, and the balance, if any, then to the Company.

 

-39-

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

ARTICLE VII.

LETTER OF CREDIT

Section 7.1 Extension in Anticipation of Expiration. At least 25 days prior to
the Interest Payment Date next preceding the Expiration Date of the current
Letter of Credit, the Company may provide for the delivery to the Trustee of an
amendment to the Letter of Credit which extends the Expiration Date to a date
that is not earlier than one year (or such shorter period as shall be acceptable
to the Trustee) from its then current Expiration Date. If the Letter of Credit
is so extended, the mandatory tender for purchase pursuant to clause (c) of
Section 4.2 shall not occur. If the Letter Credit is not so extended 25 days
preceding the Interest Payment Date next preceding the Expiration Date of the
Letter of Credit, the Trustee shall direct the Paying Agent to take all action
necessary to call the Bonds for mandatory tender for purchase pursuant to clause
(c) of Section 4.2 on the Interest Payment Date next preceding such Expiration
Date; provided that if the Company shall have notified the Trustee in writing 45
days (or such shorter period, not less than 30 days, as shall be acceptable to
the Trustee) preceding the Interest Payment Date next preceding the Expiration
Date of the Letter of Credit, that it expects to meet all the conditions for the
delivery of an amendment extending the existing Letter of Credit, on or before
the Interest Payment Date next preceding the Expiration Date of the existing
Letter of Credit, then the notice of mandatory tender for purchase pursuant to
clause (c) of Section 4.2 shall state that it is subject to rescission, and the
Paying Agent, at the direction of the Trustee, shall rescind such notice, if
such conditions are so met by noon, New York City time, on the third Business
Day prior to such Interest Payment Date (in which case such mandatory purchase
shall not occur).

Section 7.2 Alternate Credit Facility. The Company may provide for the delivery
to the Trustee on any Interest Payment Date on which the Bonds are callable for
optional redemption pursuant to Section 9.1(a), of (i) an Alternate Credit
Facility which shall have terms which are the same in all material respects
(except as to Expiration Date and except any changes pursuant to this Indenture
with respect to interest or premium coverage in connection with a concurrent
interest rate reset or conversion) as the current Letter of Credit, which shall
have an Expiration Date that is not less than one year from the date of its
delivery and not sooner than the Expiration Date of the current Letter of Credit
then in effect, (ii) an opinion of counsel to the Bank with respect to the
validity, binding effect and enforceability of such Alternate Credit Facility,
and (iii) a Favorable Opinion which shall include an opinion to the effect that
the delivery of the Alternate Credit Facility complies with the requirements of
the Indenture; provided that the Bonds will be subject to mandatory tender for
purchase pursuant to Section 4.2(c) on the date of any such replacement; and
provided further that if the Purchase Price payable upon such mandatory tender
for purchase includes any premium, the Trustee will not accept the Alternate
Credit Facility unless the Company has provided to the Trustee written
confirmation from the Bank which issued the Letter of Credit then in effect that
the Trustee can draw under such Letter of Credit on the proposed replacement
date in an aggregate amount sufficient to cover the entire Purchase Price,
including premium, if any. If the requirements set forth in this Section are
met, then the Trustee shall accept such Alternate Credit Facility on the
Interest Payment Date on which the replacement is to occur and, after any draws
on the Letter of Credit then in effect required to be made on or before the date
of such replacement have been honored, shall promptly surrender for cancellation
the previously held Letter of Credit to the issuer thereof in accordance with
the terms of such Letter of Credit. The Alternate Credit Facility and the
opinions described above must be delivered to the Trustee at least 25 days prior
to the proposed

 

-40-

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

replacement date; provided that if such items have not been delivered to the
Trustee, but the Company shall have notified the Trustee in writing 45 days (or
such shorter period, not less than 30 days, as shall be acceptable to the
Trustee) prior to the proposed replacement date, that it expects to meet all of
such conditions for the delivery of an Alternate Credit Facility from a Bank
identified in such notice on or before the proposed replacement date, then the
notice of mandatory tender for purchase shall state that it is subject to
rescission, and the Trustee shall rescind such notice if such conditions are not
so met by noon, New York City time, on the third Business Day prior to such
replacement date (in which case the current Letter of Credit shall remain in
effect until the replacement date).

Section 7.3 Notice to Holders. The Trustee shall give notice to the Registered
Owners, in the name of the Issuer, of the proposed replacement of the current
Letter of Credit with an Alternate Credit Facility and of the related mandatory
tender for purchase, by first class mail, not less than 10 days prior to the
Interest Payment Date next preceding the proposed replacement date.

Section 7.4 Reduction. In each case that Bonds are redeemed or deemed to have
been paid pursuant to Article XVI, the Trustee shall take such action as may be
permitted under the Letter of Credit to reduce the amount available thereunder
to an amount equal to the principal amount of the outstanding Bonds, plus
interest for 106 days if the Bonds bear interest at a Daily or Weekly Rate, 275
days (or such fewer number of days as may be determined by the Company) if the
Bonds bear interest at a Commercial Paper Rate or 185 days if the Bonds bear
interest at a Term Rate, plus, in each case, an amount equal to interest for the
number of days, if any, allowed for reinstatement of interest under the Letter
of Credit, and, in the case of a Term Rate, premium, if applicable; provided
that such action by the Trustee shall not be required if the Letter of Credit so
reduces automatically pursuant to its terms. Upon reduction of the amount
available under the Letter of Credit pursuant to the terms of the Letter of
Credit and this Section as a result of redemption of Bonds, the Bank shall have
the right, at its option, to require the Trustee to accept in substitution
therefor a substitute Letter of Credit in the same form, dated the date of such
substitution, for an amount equal to the amount available under the Letter of
Credit as so reduced, but otherwise having terms identical to the then
outstanding Letter of Credit and upon receipt of such substitute Letter of
Credit, to promptly surrender the outstanding Letter of Credit to the Bank.

Section 7.5 Other Credit Enhancement; No Credit Enhancement. Nothing in this
Article VII shall limit the Company’s right, upon conversion of the Bonds to a
Term Rate, to provide other credit enhancement (such as a letter of credit not
meeting the requirement of this Article VII or bond insurance) or no credit
enhancement as security for the Bonds upon conversion of the Bonds to a Term
Rate; provided that if no Letter of Credit is in effect, the Bonds shall have
been rated in one of the four highest rating categories of a Rating Agency and
further provided that any such credit enhancement shall have administrative
provisions reasonably satisfactory to the Trustee and the Company shall have
furnished to the Trustee with respect thereto a Favorable Opinion.

 

-41-

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

ARTICLE VIII.

INVESTMENT OR DEPOSIT OF MONEYS

Section 8.1 Deposits.

(a) All moneys received by the Trustee under this Indenture shall be deposited
with the Trustee, until or unless invested or deposited as provided in
Section 8.2 or as otherwise provided herein. All deposits with the Trustee shall
be secured as required by applicable law for such trust deposits. The Trustee
may deposit such moneys with any other depository which is authorized to receive
them and is subject to supervision by public banking authorities. The moneys on
deposit in the Bond Purchase Fund or in the Letter of Credit Debt Service
Account shall not be invested.

(b) Obligations purchased as an investment of moneys in any fund or account
shall be deemed at all times a part of such fund or account. Any profit and
income realized from such investments shall be credited to such fund or account
and any loss shall be charged to such fund or account.

Section 8.2 Investment or Deposit of Bond Fund. At the written direction of the
Authorized Company Representative, the Trustee shall invest moneys held in the
Bond Fund, except moneys held in the Letter of Credit Debt Service Account, in
noncallable Governmental Obligations maturing not later than 30 days after such
investment but in any case on or before the date or dates when the payments in
respect of principal of or interest on the Bonds for which such moneys are held
are to become due. Any such investments shall be held by or under the control of
the Trustee and shall be deemed at all times a part of the Bond Fund.

The interest and income received upon such investments of the Bond Fund and any
interest paid by the Trustee or any other depository and any profit or loss
resulting from the sale of any investment shall be added or charged to the
extent received or paid and available for payment of amounts due on the Bonds,
to the payment of the next-succeeding payment due on account of the Bonds and to
the extent so applied, shall constitute payment in respect of the Agreement
(notice of which payment shall be given by the Trustee to the Company), and any
realized loss shall be made up by the Company (the direction of the Company to
make investments as aforesaid shall be deemed to include an agreement so to do).

Section 8.3 Investment of Moneys in the Construction Fund.

(a) Moneys held for the credit of the Construction Fund shall, upon written
direction by the Authorized Company Representative, be invested and reinvested
by the Trustee in any one or more of the following obligations or securities, to
the extent permitted by State law, on which neither the Company nor any of its
Affiliates is the obligor: (i) Governmental Obligations; (ii) interest bearing
deposit accounts (which may be represented by certificates of deposit) or demand
accounts in national or state banks (which may include the Trustee or its
Affiliates, the Authenticating Agent, any Paying Agent, and the Bond Registrar)
having a combined capital and surplus of not less than $10,000,000, or savings
and loan associations having total assets of not less than $20,000,000;
(iii) bankers’ acceptances drawn on and accepted by commercial banks (which may
include the Trustee, the Authenticating Agent, any Paying Agent, and the Bond
Registrar or any of their Affiliates) having a combined capital and surplus of
not less than $10,000,000; (iv) direct obligations of, or obligations the
principal of and interest on which are unconditionally guaranteed by, any State
of the United States of America, the District of Columbia or the Commonwealth of
Puerto Rico, or any political subdivision of any of the foregoing, which are
rated in any of the three highest rating categories by a Rating Service;
(v) obligations of any agency or instrumentality of the United States

 

-42-

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

of America; (vi) commercial or finance company paper which is rated in any of
the three highest rating categories by a Rating Service; (vii) corporate debt
securities rated in any of the three highest rating categories by a Rating
Service; (viii) no load, open end, diversified money market mutual funds
registered under the Investment Company Act of 1940, as amended, that seek to
maintain a stable net asset value equal to $1.00 per unit as an investment
objective; (ix) money market mutual funds; (x) guaranteed investment contracts
entered into with any financial institution, including the Trustee and any of
its Affiliates, the long-term debt securities of which are rated in any of the
three highest rating categories by a Rating Service or, with respect to
guaranteed investment contracts having a final maturity of not more than one
month from the date of acquisition, the short-term debt securities of which are
rated in the highest short term rating category by a Rating Service; and
(xi) repurchase agreements with banking or financial institutions having a
combined capital and surplus of not less than $10,000,000 (which may include the
Trustee, any Paying Agent, the Authenticating Agent and the Bond Registrar or
any of their Affiliates) with respect to any of the foregoing obligations or
securities. As used above, the reference to rating categories shall mean generic
categories which may include numerical or other qualifications of ratings within
each such generic rating category such as “+” or “-”. Such investments shall
have maturity dates, or shall be subject to redemption by the holder at the
option of the holder, on or prior to the dates the moneys invested therein will
be needed as reflected by a statement of the Authorized Company Representative,
which statement must be on file with the Trustee prior to any investment.

(b) The Trustee may make any and all such investments through its own investment
department or that of its Affiliates or subsidiaries.

(c) The Trustee shall have no responsibility with respect to the compliance by
the Company with respect to any covenant herein regarding investments made in
accordance with this Article, other than to use its best reasonable efforts to
comply with instructions from the Company regarding such investments. Since the
investments permitted by this Section have been included at the request of the
Company and the making of such investments will be subject to the Company’s
direction, the Trustee specifically disclaims any obligation to the Company for
any loss arising from, or tax consequences of, investments made pursuant to the
provisions of this Section or from the failure of the Company to give investment
instructions or for any determination that such investments are permitted by
State law.

Section 8.4 Covenants Regarding Rebate. A special Rebate Fund is hereby
established by the Issuer as provided in the Tax Agreement. The Rebate Fund
shall be for the sole benefit of the United States of America and shall not be
subject to the claim of any other Person, including without limitation the
Bondholders. The Rebate Fund is established for the purpose of complying with
section 148 of the Code and the Treasury Regulations promulgated pursuant
thereto. The money deposited in the Rebate Fund, together with all investments
thereof and investment income therefrom, shall be held in trust and applied
solely as provided in this Section. The Rebate Fund is not a portion of the
Trust Estate and is not subject to the lien of this Indenture. Notwithstanding
the foregoing, the Trustee with respect to the Rebate Fund is afforded all the
rights, protections and immunities otherwise accorded to it hereunder. In
furtherance of the foregoing, the Company will satisfy its obligations under
section 148(f) of the Code as set forth in the Tax Agreement, unless the Company
provides written instructions to the Trustee that it has met or expects to meet
one of the exceptions available under such section of the Code.

 

-43-

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

Section 8.5 Tax-Exempt Status of the Bonds. The Issuer will not knowingly take
any action or omit to take any action, which action or omission will adversely
affect the exclusion from gross income for federal income tax purposes of
interest on the Bonds, and in the event of such action or omission will
promptly, upon receiving knowledge thereof, take all lawful actions, based on
advice of Counsel and at the expense of the Company, as may rescind or otherwise
negate such action or omission.

ARTICLE IX.

REDEMPTION OF BONDS

Section 9.1 Bonds Subject to Redemption. The Bonds shall be subject to
redemption prior to maturity as set forth below:

(a) Optional Redemption. The Bonds shall be subject to redemption at the option
of the Issuer, in whole or in part, and if in, part in Authorized Denominations,
at the direction of the Company, from funds available for such purpose in the
Bond Fund, as follows:

(i) If the Bonds accrue interest at Commercial Paper, Daily or Weekly Rates, the
Bonds shall be subject to optional redemption in whole on any Business Day or in
part on any Interest Payment Date (with respect to a Bond bearing interest at
the Commercial Paper Rate, on the Interest Payment Date applicable to that Bond)
at an optional redemption price equal to 100% of the principal amount thereof,
together with accrued but unpaid interest to the redemption date.

 

-44-

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

(ii) If the Bonds accrue interest at a Term Rate, the Bonds shall be subject to
optional redemption (A) at any time on and after the dates and at the optional
redemption prices set forth below, together with accrued but unpaid interest, if
any, to the redemption date and (B) on the day after the end of each Term Rate
Period at the redemption price of 100% of the principal amount thereof, together
with accrued but unpaid interest, if any, to the redemption date:

 

Length of Term Rate Period

  

Commencement of

Redemption Period

  

Redemption Prices

Greater than or equal to 15 years    Tenth anniversary of the commencement of
such Term Rate Period    101%, declining by 0.5% on each succeeding anniversary
of the first day of the redemption period until reaching 100% and thereafter at
100% Less than 15 years and greater than or equal to 10 years    Eighth
anniversary of the commencement of such Term Rate Period    101%, declining by
0.5% on each succeeding anniversary of the first day of the redemption period
until reaching 100% and thereafter at 100% Less than 10 years but greater than 5
years    Fifth anniversary of the commencement of such Term Rate Period   
100.5%, declining by 0.25% on each succeeding anniversary of the first day of
the redemption period until reaching 100% and thereafter at 100% Less than or
equal to 5 years    Bonds not subject to optional redemption during such Term
Rate Period    (Not applicable)

In connection with a conversion of the Bonds to the Term Rate, the Remarketing
Agent, upon the request of the Company (which request shall not unreasonably be
refused) and in order to achieve the lowest interest rate which, in the judgment
of the Remarketing Agent, on the basis of current financial market conditions as
to interest rates and redemption periods, would permit the sale of the Bonds so
converted at par plus accrued but unpaid interest, may deliver to the Issuer and
the Trustee an alternative redemption schedule to that shown above, provided
that the Company delivers to the Issuer, the Remarketing Agent, the Bank, and
the Trustee a Favorable Opinion with respect to the alternative schedule of
redemption. Prior to such conversion, at the expense of the Company, the Trustee
shall insert or cause to be inserted the appropriate optional redemption
provisions as described above in the form of Bonds. After the Conversion Date
succeeding the delivery of such alternative schedule and Favorable Opinion, the
Bonds shall be subject to redemption in accordance with the provisions of such
alternative schedule.

If a Letter of Credit is then in effect and the redemption price includes any
premium, the right of the Company to direct an optional redemption is subject to
the condition that the Trustee has received, prior to the date on which notice
of redemption is required to be given to Registered Owners, written confirmation
from the Bank that it can draw under the Letter of Credit on the proposed
redemption date in an aggregate amount sufficient to cover the principal of and
premium and interest due on the redemption date.

(b) Extraordinary Mandatory Redemption. The Bonds shall be subject to mandatory
redemption, at a redemption price equal to the principal amount being redeemed
plus accrued but unpaid interest to the redemption date, on the one hundred
eightieth day (or such earlier date as may be designated in writing by the
Company) after a final determination by a court of competent jurisdiction or an
administrative agency, or receipt by the Company of an opinion of Bond Counsel

 

-45-

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

or Special Tax Counsel obtained by the Company, to the effect that as a result
of a failure by the Company to perform or observe any covenant, agreement or
representation contained in the Agreement or as a result of the inaccuracy of
any representation made by the Company under this Indenture, the Agreement, the
Project Certificate or the Tax Agreement, the interest payable on the Bonds is
or will be included in the gross income of the owners thereof for federal income
tax purposes, other than any owner who is a “substantial user” of the Project or
a “related Person” within the meaning of Section 147(a) of the Code. No
determination by any court or administrative agency will be considered final
unless the Company has participated in the proceeding which resulted in such
determination, either directly or, at the option of the Company, through a
Bondholder, to a degree it reasonably deems sufficient and until the conclusion
of any appellate review sought by any party to such proceeding or the expiration
of the time for seeking such review. Subject to the foregoing provisions of this
Section 9.1(b), the Bonds shall be redeemed in whole unless, in the opinion of
Bond Counsel or Special Tax Counsel mutually acceptable to the Issuer, the
Trustee and the Company, the redemption of a portion of such Bonds would have
the result that interest payable on the Bonds remaining outstanding after such
redemption would not be includable in the gross income for federal income tax
purposes of any owner of any such Bonds. Any such partial redemption shall be by
lot in such amount as is necessary to accomplish such result.

Payment of the redemption price upon the mandatory redemption of the Bonds
pursuant to this Section 9.1(b) shall constitute the total compensation due from
the Company as a result of the occurrence of any event causing such redemption,
and neither the Issuer nor the Company shall be deemed to be in default under
the Agreement or this Indenture by reason of the occurrence of any such event
nor shall such redemption of the Bonds constitute an acceleration of
indebtedness of the Issuer or the Company.

(c) Extraordinary Optional Redemption. If the Bonds accrue interest at a Term
Rate, the Bonds shall be subject to optional redemption by the Issuer, at the
direction of the Company, in whole but not in part, at any time, at a redemption
price equal to the principal amount being redeemed plus accrued but unpaid
interest to the redemption date upon receipt by the Trustee of a written notice
from the Company stating that any of the following events has occurred:

(i) the Company shall have determined that the completion or operation of the
Project or the Plant is impracticable, uneconomical or undesirable for any
reason;

(ii) all or substantially all of the Project or the Plant shall have been
condemned or taken by eminent domain; or

(iii) the construction or operation of the Project or the Plant shall have been
enjoined or shall have otherwise been prohibited by, or shall conflict with, any
order, decree, rule or regulation of any court or of any federal, state or local
regulatory body, administrative agency or other governmental body.

Section 9.2 Company Direction of Optional Redemption. The Trustee shall call
Bonds for optional redemption when and only when it shall have been notified in
writing by the Company to do so. The Company will give written notice of any
optional redemption to the Trustee and the Issuer as provided in Section 9.4 of
this Indenture.

 

-46-

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

Section 9.3 Selection of Bonds to be Called for Redemption; Identification of
Redeemed Bonds. Except as otherwise provided herein or in the Bonds, if less
than all the Bonds are to be redeemed, the particular Bonds to be called for
redemption shall be selected by lot or any other method determined by the
Trustee to be fair and reasonable; provided that the Company may, from time to
time, request the redemption of Bank Bonds exclusively, by notice to the Trustee
designating such Bonds to be redeemed; and further provided, however, that if,
as stated in a certificate of the Company delivered to the Trustee, the Company
shall have offered to purchase all Bonds then Outstanding and less than all of
such Bonds shall have been tendered to the Company for such purchase, the
Trustee, at the written direction of the Company, shall select for redemption
all such Bonds which have not been so tendered. If less than all the Bonds are
to be redeemed, the Bonds that remain outstanding must be in Authorized
Denominations. Upon the payment of the redemption price of the Bonds being
redeemed, each check or other transfer of funds issued for such purpose shall
bear the CUSIP number identifying, by issue and maturity, the Bonds being
redeemed with the proceeds of such check or other transfer, provided that
neither the Issuer, the Company, nor the Trustee shall be deemed to have made
any representation as to the correctness of such CUSIP number.

Section 9.4 Notice of Redemption.

(a) The Company shall deliver written and telephone notice to the Trustee, and
written notice to the Issuer, the Bank, and the Remarketing Agent, of its
intention to prepay the principal of, premium, if any, and interest on the Bonds
and cause the Bonds to be called for redemption at least seven (7) Business Days
prior to the date the Trustee gives notice to the Registered Owners of the Bonds
of the proposed redemption of the Bonds. The Trustee shall, at the expense of
the Company, cause notice of any redemption of Bonds hereunder, which notice
shall be prepared by the Company, to be mailed by first class mail, postage
prepaid (except when DTC is the Registered Owner of all of the Bonds and except
for Persons or entities owning or providing evidence of ownership satisfactory
to the Trustee of a legal or beneficial ownership in at least $1,000,000 of
principal amount of Bonds who so request, in which cases, by certified mail,
return receipt requested), to the Registered Owners of all Bonds to be redeemed
at the registered addresses appearing in the Bond Register kept for such purpose
pursuant to Article II hereof. Each such notice shall (i) be mailed at least 15
days prior to the redemption date for Daily, Weekly and Commercial Paper Rate
Bonds and at least 30 days prior to the redemption date for Term Rate Bonds,
(ii) identify the Bonds to be redeemed if less than all Bonds are to be redeemed
(specifying the CUSIP numbers, if any, assigned to the Bonds), (iii) specify the
redemption date and the redemption price, (iv) state whether the notice is
conditional or not as permitted by paragraph (b) of hereof, and (v) state that
on the redemption date the Bonds called for redemption will be payable at the
designated office of the Trustee, that from that date interest will cease to
accrue and that no representation is made as to the accuracy or correctness of
the CUSIP numbers printed therein or on the Bonds; provided, however, that so
long as DTC or its nominee is the sole Registered Owner of the Bonds under the
Book-Entry Only System, redemption notices will be sent by the Trustee to Cede &
Co. pursuant to the procedures set forth in the DTC Letter. Any failure on the
part of DTC or a DTC Participant to give such notice to any beneficial owner or
any defect therein shall not affect the sufficiency or validity of any
proceedings for the redemption of the Bonds. No defect affecting any Bond,
whether in the notice of redemption or mailing thereof (including any failure to
mail such notice), shall affect the validity of the redemption proceedings for
any other Bonds.

 

-47-

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

(b) Conditional Notice. If at the time of mailing of notice of an optional
redemption there shall not have been deposited with the Trustee immediately
available funds sufficient to redeem all the Bonds called for redemption, such
notice may state that it is conditional, that is, subject to the deposit of the
redemption moneys with the Trustee on or prior to the redemption date, and such
notice shall be of no effect unless such moneys are so deposited on or prior to
the redemption date. If such redemption is not effectuated, the Trustee shall,
within five days thereafter, give notice in the manner in which the notice of
redemption was given that such moneys were not so received and shall rescind the
redemption.

(C) ADDITIONAL NOTICE OF REDEMPTION. IN ADDITION TO THE REDEMPTION NOTICE
REQUIRED ABOVE, IF THERE IS MORE THAN ONE REGISTERED OWNER OF THE BONDS, FURTHER
NOTICE (THE “ADDITIONAL NOTICE”) SHALL BE GIVEN BY THE TRUSTEE AS SET OUT BELOW.
NO DEFECT IN THE ADDITIONAL NOTICE NOR ANY FAILURE TO GIVE ALL OR ANY PORTION OF
THE ADDITIONAL NOTICE SHALL IN ANY MANNER DEFEAT THE EFFECTIVENESS OF A CALL FOR
REDEMPTION IF NOTICE IS GIVEN AS PRESCRIBED IN PARAGRAPH (A) ABOVE.

(i) Each Additional Notice shall contain the information required in paragraph
(a) above for an official notice of redemption plus (A) the date of the Bonds as
originally issued; (B) the interest rate determination method for, or the rate
of interest borne by each Bond being redeemed; (C) the maturity date of each
Bond being redeemed; and (D) any other descriptive information needed to
identify accurately the Bonds being redeemed.

(ii) Each Additional Notice shall be published, at the expense of the Company,
one time in a financial newspaper or journal which regularly carries notices of
redemption of other obligations similar to the Bonds, such publication to be
made at least 30 days (15 days in the case of Bonds accruing interest at Daily,
Weekly or Commercial Paper Rates) prior to the date fixed for redemption.

(iii) Each Additional Notice shall be sent at least 30 days (15 days in the case
of Bonds accruing interest at Daily, Weekly or Commercial Paper Rates) before
the redemption date by registered or certified mail, facsimile, or overnight
delivery service to DTC and to such other registered securities depositories as
may be specified by the Company to the Trustee in writing and to one or more
national information services that disseminate notices of redemption of
obligations such as the Bonds as shall be specified by the Company to the
Trustee in writing.

(iv) The Trustee’s agreement to give the Additional Notices specified in this
subsection (c) is made as a matter of courtesy and accommodation only and the
Trustee shall incur no liability to any Person for its failure to give such
additional notices.

(d) Notwithstanding the provisions of Section 9.1(a) or 9.4(a) above, (i) no
notice of redemption under Section 9.4(a) shall be required with respect to any
Bond which is subject to mandatory tender on the date fixed for redemption and
(ii) if all of the outstanding Bonds to be redeemed are subject to mandatory
tender on the date fixed for redemption, the Company shall direct

 

-48-

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

the redemption of such Bonds by the Issuer and give the Trustee written notice
of such direction not less than ten (10) days prior to the date fixed for
redemption of such Bonds.

ARTICLE X.

COVENANTS OF THE ISSUER

Section 10.1 Payment of Principal of, Premium, if any, and Interest on Bonds;
Appointment of Paying Agent. The Issuer covenants that it will promptly pay or
cause to be paid, the principal of, premium, if any, and interest on every Bond
issued under this Indenture at the place, on the dates and in the manner
provided herein and in the Bond according to the true intent and meaning
thereof; provided, however, that the obligation of the Issuer hereunder to make
or cause to be made any payment to the Trustee in respect of the principal of,
premium, if any, or interest on the Bonds shall be reduced by the amount of
moneys, if any, on deposit in the Bond Fund or Construction Fund and available
to be applied by the Trustee toward the payment of the principal of, premium, if
any, or interest on the Bonds. The principal of, premium, if any, and interest
(except interest paid from the proceeds from the sale of the Bonds) are payable
solely from the Trust Estate, including Revenues, which Revenues are
specifically pledged and assigned for the payment thereof in the manner and to
the extent herein specified, and nothing in the Bonds or this Indenture should
be considered as assigning or pledging any funds or assets of the Issuer other
than the Trust Estate in the manner and to the extent herein specified. Anything
in this Indenture to the contrary notwithstanding, it is understood that
whenever the Issuer makes any covenant involving financial commitments, it
pledges no funds or assets other than the Trust Estate in the manner and to the
extent herein specified, but nothing herein shall be construed as prohibiting
the Issuer from using any other funds or assets.

The Issuer shall, with the approval of the Company, appoint one or more Paying
Agents for such purpose, each such agent to be a national banking association, a
bank and trust company or a trust company. The Issuer hereby appoints the
Trustee as Paying Agent, such appointment and designation to remain in effect
until notice of change is filed with the Trustee. The Trustee hereby accepts
such appointment and designation as Paying Agent and shall perform the duties of
Paying Agent hereunder. The Issuer shall give prompt written notice to the
Trustee of the designation of each such Paying Agent and of its designated
office location for purposes of such agency, and of any change in the Paying
Agent or of its designated office location. Any Paying Agent other than the
Trustee shall be a Person which meets the requirements for qualifications of a
Paying Agent imposed by Section 13.2 hereof.

Section 10.2 Compliance with Laws. The Issuer covenants that it will faithfully
perform at all times any and all covenants, undertakings, stipulations and
provisions contained in this Indenture, in any and every Bond executed,
authenticated and delivered hereunder and in all resolutions pertaining thereto.
The Issuer covenants that it is duly authorized under the Constitution and laws
of the State, including particularly and without limitation the Acts, to issue
Bonds authorized hereby and to execute this Indenture and to make the pledge and
covenants in the manner and to the extent herein set forth; that all action on
its part for the issuance of the Bonds and the execution and delivery of this
Indenture has been duly and effectively taken; and that the Bonds in the hands
of the holders and owners thereof are and will be valid and enforceable
obligations of the Issuer according to the import thereof.

 

-49-

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

Section 10.3 Enforcement of Agreement; Prohibition Against Amendments of
Agreement; Notice of Default. The Issuer shall cooperate with the Trustee in
enforcing the payment of all amounts under the Agreement and shall require the
Company to perform its obligations under the Agreement. So long as no Event of
Default hereunder shall have occurred and be continuing, the Issuer may exercise
all its rights under the Agreement as amended or supplemented from time to time,
including the right to amend the Agreement; provided that it shall not amend the
Agreement without the consent of the Trustee pursuant to Section 15.3. The
Issuer shall give prompt written notice to the Trustee of any default known to
the Issuer hereunder and under the Agreement.

Section 10.4 Further Assurances. Except to the extent otherwise provided in this
Indenture, the Issuer shall not enter into any contract or take any action by
which the rights of the Trustee, the Bondholders or the Company may be impaired
and shall, from time to time, execute and deliver such further instruments and
take such further action as may be required to carry out the purposes of this
Indenture and the Agreement.

Section 10.5 Administration Expenses. It is understood and agreed that pursuant
to the provisions of Sections 5.04 (a), (b) and (e), 5.06, and 5.07 of the
Agreement, the Company agrees to pay the Administration Expenses. All such
payments under the Agreement which are received by the Trustee shall not be paid
into the Bond Fund, but shall be segregated by the Trustee and expended solely
for the purpose for which such payments are received.

Section 10.6 Moneys to be Held in Trust. All moneys required to be deposited
with or paid to the Trustee or any Paying Agent for deposit into the Bond Fund,
the Bond Purchase Fund or the Construction Fund under any provision of this
Indenture and all moneys withdrawn from the Bond Fund and held by any Paying
Agent, shall be held by the Trustee or such Paying Agent in trust, and except
for moneys deposited in the Bond Purchase Fund, or deposited with or paid to the
Trustee for the redemption of Bonds, notice of which redemption has been duly
given, and for moneys deposited with or paid to the Trustee pursuant to Article
XVI hereof, shall, while held by the Trustee or any Paying Agent, constitute
part of the Trust Estate and be subject to the lien hereof. Any moneys received
by or paid to the Trustee pursuant to any provision of the Agreement calling for
the Trustee to hold, administer and disburse the same in accordance with the
specific provisions of the Agreement shall be held, administered and disbursed
pursuant to such provisions. The Issuer agrees that if it shall receive any
moneys pursuant to applicable provisions of the Agreement, it will forthwith
upon receipt thereof pay the same over to the Trustee to be held, administered
and disbursed by the Trustee in accordance with the provisions of the Agreement
pursuant to which the Issuer may have received the same. Furthermore, if for any
reason the Agreement ceases to be in force and effect while any Bonds are
outstanding, the Issuer agrees that if it shall receive any moneys derived from
the Project, it will forthwith upon receipt thereof pay the same over to the
Trustee to be held, administered and disbursed by the Trustee in accordance with
provisions of the Agreement that would be applicable if the Agreement were then
in force and effect, and if there be no such provisions which would be so
applicable, then the Trustee shall hold, administer and disburse such moneys
solely for the discharge of the Issuer’s obligations under this Indenture.

Section 10.7 Rights of Company Under Agreement. Nothing herein contained shall
be deemed to impair the rights and privileges of the Company set forth in the
Agreement. The Issuer and the Trustee agree that the Company in its own name or
in the name of the Issuer may enforce all

 

-50-

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

of the rights of the Issuer, all obligations of the Trustee, and all of the
Company’s rights provided for in this Indenture.

ARTICLE XI.

EVENTS OF DEFAULT AND REMEDIES

Section 11.1 Events of Default Defined. Each of the following shall be an “Event
of Default” hereunder:

(a) Payment of the principal or, subject to the provisions of Section 9.4(b)
hereof, redemption price of any Bond, is not made when it becomes due and
payable at maturity or upon non-conditional call for redemption; or

(b) Payment of any interest on any Bond is not made (i) within one (1) Business
Day after it becomes due and payable, if no Letter of Credit is in effect, or
(ii) when it becomes due and payable, if a Letter of Credit is in effect; or

(c) The occurrence and continuance of any “Event of Default” under the
Agreement; or

(d) Default in the payment of any other amount required to be paid under this
Indenture or in the performance or observance of any other of the covenants,
agreements or conditions contained in this Indenture, or in the Bonds issued
under this Indenture, and continuance thereof for a period of ninety (90) days
after written notice specifying such failure and requesting that it be remedied
shall have been given to the Issuer and the Company by the Trustee, which may
give such notice in its discretion and shall give such notice at the written
request of the holders of not less than twenty-five percent (25%) in principal
amount of the Bonds then outstanding, unless the Trustee, or the Trustee and
holders of a principal amount of Bonds not less than the principal amount of
Bonds the holders of which requested such notice, as the case may be, shall
agree in writing to an extension of such period prior to its expiration;
provided, however, that the Trustee, or the Trustee and the holders of such
principal amount of Bonds, as the case may be, shall be deemed to have agreed to
an extension of such period, not to exceed 180 days, if corrective action is
instituted by the Issuer, or the Company on behalf of the Issuer, within such
period and is being diligently pursued; or

(e) If Payment of the Purchase Price of any Bond required to be purchased
pursuant to Section 4.3 is not made when such payment becomes due and payable;
or

(f) Receipt by the Trustee of a written notice from the Bank stating that an
event of default has occurred under the Reimbursement Agreement and directing
the Trustee to declare the principal of the outstanding Bonds immediately due
and payable; or

(g) Receipt by the Trustee of a written notice from the Bank pursuant to the
Letter of Credit that amounts available to pay interest under the Letter of
Credit will not be reinstated following a drawing thereunder to pay interest.

Section 11.2 Acceleration and Annulment Thereof. If any Event of Default occurs
and is continuing, the Trustee (upon written demand of the Bank, if the Bank is
not in default in its payment obligations under the Letter of Credit) may, and
upon written request of the owners of at least 25% in

 

-51-

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

principal amount of all Bonds then Outstanding (and, so long as the Bank has not
wrongfully dishonored any drawing under the Letter of Credit, with the written
consent of the Bank), or with respect to an Event of Default under subsection
11.1(f) or (g) hereof, shall, by notice in writing to the Issuer, the Bank and
the Company, declare the principal of all Bonds then Outstanding to be
immediately due and payable; and upon such declaration the said principal,
together with interest accrued but unpaid thereon to the date of such
declaration, shall become due and payable immediately at the place of payment
provided therein, anything in the Indenture or in the Bonds to the contrary
notwithstanding. Upon the occurrence of any acceleration hereunder, the Trustee
shall immediately declare all payments under the Agreement pursuant to
Section 5.03 thereof to be due and payable immediately.

Immediately after any acceleration hereunder, the Trustee, to the extent it has
not already done so, shall notify in writing the Issuer, the Company, the Paying
Agent, the Bank, the Remarketing Agent, and any Rating Service then maintaining
a rating on the Bonds, of the occurrence of such acceleration. Upon the
occurrence of any acceleration hereunder, the Trustee shall notify by first
class mail, postage prepaid, the owners of all Bonds Outstanding of the
occurrence of such acceleration.

Upon any such declaration hereunder, the Trustee shall immediately, on the date
of such declaration, draw upon the Letter of Credit to the full extent permitted
by the terms thereof (such drawing to include amounts in respect of interest
accruing on the Bonds through the date of declaration). Upon receipt by the
Trustee of payment of the full amount drawn on the Letter of Credit and provided
sufficient moneys are available in the Bond Fund to pay pursuant to Section 6.2
all sums due on the Bonds, (i) interest on the Bonds shall cease to accrue on
the date of such declaration and (ii) the Bank shall succeed to and be
subrogated to the right, title and interest of the Trustee and the Registered
Owners in and to the Agreement, all funds held under this Indenture (except any
funds held in the Rebate Fund or the Bond Fund or the Bond Purchase Fund which
are identified for the payment of the Bonds or of the Purchase Price of
undelivered Bonds) and any other security held for the payment of the Bonds, all
of which, upon payment of any fees and expenses due and payable to the Trustee
pursuant to the Agreement or this Indenture, shall be assigned by the Trustee to
the Bank.

If, after the principal of the Bonds has become due and payable, all arrears of
interest upon the Bonds are paid, and the Company also performs all other things
in respect to which it may have been in default hereunder and under the
Agreement and pays the reasonable charges of the Trustee and the Bondholders,
including reasonable and necessary attorneys’ fees and expenses, then, and in
every such case, the owners of a majority in principal amount of the Bonds then
Outstanding, by notice to the Issuer and to the Trustee, may annul such
acceleration and its consequences, and such annulment shall be binding upon the
Trustee and upon all owners of Bonds issued hereunder; provided that there shall
be no annulment of any declaration resulting from (A) any Event of Default
specified in subsection 11.1(f) without the prior written consent of the Bank,
which consent shall also rescind the Event of Default under the Reimbursement
Agreement, and (B) any Event of Default which has resulted in a drawing under
the Letter of Credit or any Event of Default specified in Section 11.1(g) unless
the Trustee has received written notice from the Bank that the Letter of Credit
has been fully reinstated and that the expiration event has been rescinded or an
Alternate Credit Facility has been provided pursuant to Article VII hereof. No
such annulment shall extend to or

 

-52-

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

affect any subsequent default or impair any right or remedy consequent thereon.
The Trustee shall forward a copy of any notice from Bondholders received by it
pursuant to this paragraph to the Company. Immediately upon such annulment, the
Trustee shall cancel, by notice to the Company, any demand for prepayment of all
amounts due under the Agreement made by the Trustee pursuant to this Section.
The Trustee shall promptly give written notice of such annulment to the Issuer,
the Company, the Paying Agent, the Remarketing Agent, and, if notice of the
acceleration of the Bonds shall have been given to the Bondholders, shall give
notice thereof to the Bondholders.

Section 11.3 Other Remedies. If any Event of Default occurs and is continuing,
the Trustee, before or after the principal of the Bonds becomes immediately due
and payable, may enforce each and every right granted to it under the Agreement
and any supplements or amendments thereto. In exercising such rights and the
rights given the Trustee under this Article, the Trustee shall take such action
as, in the judgment of the Trustee applying the standards described in
Section 12.6, would best serve the interests of the Bondholders.

Section 11.4 Legal Proceedings by Trustee. If any Event of Default has occurred
and is continuing, the Trustee in its discretion may, and upon the written
request of the owners of a majority in principal amount of all Bonds then
Outstanding and receipt of indemnity to its satisfaction shall, subject to the
provisions of Article XII hereof, in its own name:

(a) By mandamus, or other suit, action or proceeding at law or in equity,
enforce all rights of the Bondholders, including the right to require the Issuer
to enforce any rights under the Agreement and to require the Issuer to carry out
any other provisions of this Indenture for the benefit of the Bondholders and to
perform its duties under the Acts;

(b) Bring suit to enforce the Bonds;

(c) By action or suit in equity require the Issuer to account as if it were the
trustee of an express trust for the Bondholders; and

(d) By action or suit in equity enjoin any acts or things which may be unlawful
or in violation of the rights of the Bondholders.

Section 11.5 Discontinuance of Proceedings by Trustee. If any proceeding
commenced by the Trustee on account of any Event of Default is discontinued or
is determined adversely to the Trustee, then the Company, the Issuer, the
Trustee and the Bondholders shall be restored to their former positions and
rights hereunder as though no such proceedings had been commenced.

Section 11.6 Bondholders May Direct Proceedings. The owners of a majority in
principal amount of the Bonds then Outstanding shall have the right, after
furnishing indemnity satisfactory to the Trustee, to direct the method and place
of conducting all remedial proceedings by the Trustee hereunder, provided that
(i) such directions shall not be otherwise than in accordance with law or the
provisions of this Indenture, (ii) the Trustee shall have the right to decline
to follow any such direction which in the opinion of the Trustee would be
unjustly prejudicial to Bondholders not parties to such direction or which could
involve the Trustee in personal liability, and (iii) if a Letter

 

-53-

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

of Credit is in effect and no default has occurred and is continuing thereunder,
then the Bank shall have the right to give such direction in lieu of such
Bondholders.

Section 11.7 Limitations on Actions by Bondholders. No Bondholder shall have any
right to pursue any remedy hereunder unless:

(a) the Trustee shall have been given written notice of an Event of Default,

(b) the owners of at least a majority in principal amount of all Bonds then
Outstanding shall have requested the Trustee, in writing, to exercise the powers
hereinabove granted or to pursue such remedy in its or their name or names,

(c) the Trustee shall have been furnished indemnity satisfactory to it against
reasonable costs, expenses and liabilities, including, without limitation,
reasonable costs and expenses of its Counsel, except that no offer of
indemnification shall be required for a declaration of acceleration under
Section 11.2, and

(d) the Trustee shall have failed to comply with such request within a
reasonable time.

Notwithstanding the foregoing provisions of this Section or any other provision
of this Indenture, the obligation of the Issuer shall be absolute and
unconditional to pay hereunder, but solely from the Revenues and other funds
pledged under this Indenture, the principal or redemption price of, and interest
on, the Bonds to the respective owners thereof on the respective due dates
thereof, and nothing herein shall affect or impair the right of action, which is
absolute and unconditional, of such owners to enforce such payment.

Section 11.8 Trustee May Enforce Rights Without Possession of Bonds. All rights
under the Indenture and the Bonds may be enforced by the Trustee without the
possession of any Bonds or the production thereof at the trial or other
proceedings relative thereto, and any proceeding instituted by the Trustee shall
be brought in its name for the ratable benefit of the owners of the Bonds.

Section 11.9 Remedies Not Exclusive. No remedy herein conferred is intended to
be exclusive of any other remedy or remedies, and each remedy is in addition to
every other remedy given hereunder or now or hereafter existing at law or in
equity or by statute.

Section 11.10 Delays and Omissions Not to Impair Rights. No delays or omission
in respect of exercising any right or power accruing upon any default shall
impair such right or power or be a waiver of such default, and every remedy
given by this Article may be exercised from time to time and as often as may be
deemed expedient.

Section 11.11 Application of Moneys in Event of Default. Any moneys received by
the Trustee under this Article shall be applied in the following order;
provided, however, that all moneys received by the Trustee pursuant to any
drawing made upon the Letter of Credit pursuant to Section 11.2 shall be applied
by the Trustee to and only to the payment of principal of and interest on the
Bonds (other than Bank Bonds and Company Bonds):

(a) To the payment of the reasonable costs and expenses of the Trustee,
including reasonable Counsel fees and expenses, any disbursements of the Trustee
with interest thereon at the prime rate of the Trustee (or its primary banking
Affiliate) and its reasonable compensation; and

 

-54-

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

(b) To the payment of principal or redemption price (as the case may be) and
interest then owing on the Bonds, and in case such moneys shall be insufficient
to pay the same in full, then to the payment of principal or redemption price
and interest ratably, without preference or priority of one over another or of
any installment of interest over any other installment of interest; and

(c) To the payment of reasonable costs and expenses of the Issuer, including
reasonable counsel fees, incurred in connection with the Event of Default.

The surplus, if any, shall to the extent of any unreimbursed drawing under the
Letter of Credit, or other obligations owing to the Bank under the Reimbursement
Agreement, be paid to the Bank, and any remaining amounts be paid to the
Company.

Funds on deposit in the Bond Purchase Fund shall be applied in accordance with
Section 4.4 hereof.

Section 11.12 Trustee and Bondholders Entitled to All Remedies Under the Act. It
is the purpose of this Article to provide such remedies to the Trustee and the
Bondholders as may be lawfully granted under the provisions of the Act, but
should any remedy herein granted be held unlawful, the Trustee and the
Bondholders shall nevertheless be entitled to every other remedy granted
hereunder and every remedy provided by the Act. It is further intended that,
insofar as lawfully possible, the provisions of this Article shall apply to and
be binding upon any trustee or receiver appointed under applicable law.

ARTICLE XII.

THE TRUSTEE

Section 12.1 Acceptance of Trust. The Trustee accepts and agrees to execute the
trusts hereby created, but only upon the additional terms set forth in this
Article XII, to all of which the parties hereto, the Company, and the
Bondholders agree.

Section 12.2 No Responsibility for Recitals, etc. The recitals, statements and
representations in this Indenture or in the Bonds, save only the Trustee’s
Certificate of Authentication upon the Bonds, have been made by the Issuer and
not by the Trustee; and the Trustee shall be under no responsibility for the
correctness thereof, or for the validity, priority, recording or re-recording,
filing or re-filing of this Indenture or the Agreement or any other document,
including any financing statements, amendments thereto or continuation
statements, or for insuring or monitoring the insuring of the Project or
collecting any insurance moneys, or for the validity of the execution by the
Issuer of this Indenture or of any supplements thereto or instruments of further
assurance, or for the validity or sufficiency of the security afforded by this
Indenture or the Bonds issued hereunder or intended to be secured hereby, or as
to the maintenance of the security hereof. The Trustee shall not be bound to
ascertain or inquire as to the performance or observance of any covenants,
conditions or agreements on the part of the Issuer or on the part of the Company

 

-55-

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

hereunder or under the Agreement, except as expressly provided herein or in the
Agreement. The Trustee shall not be required to give any bond or surety under
this Indenture.

The Trustee shall not be accountable for the application of the proceeds of any
Bonds authenticated or delivered hereunder which has been made by or on behalf
of the Company or the Issuer or for the use of any moneys disbursed by it in
accordance with the requirements of this Indenture and the Agreement.

Section 12.3 Trustee May Act Through Agents; Answerable Only for Willful
Misconduct or Negligence. The Trustee may exercise any powers hereunder and
perform any duties required of it through attorneys, agents, officers or
employees, and shall be entitled to rely on the advice of Counsel concerning all
questions hereunder. The Trustee shall not be answerable for the default,
negligence or misconduct of any attorney or agent selected by it with reasonable
care. Except as otherwise provided herein, the Trustee shall not be answerable
for the exercise of any discretion or power under this Indenture nor for
anything whatsoever in connection with the trust hereunder, except only its own
willful misconduct or negligence.

Section 12.4 Compensation. The Issuer shall cause the Company to pay the Trustee
reasonable compensation for its services hereunder, and also all its reasonable
expenses and disbursements, including the reasonable fees, costs and expenses of
its Counsel. If the Company shall have failed to make any such payment within a
reasonable time, the Trustee shall have, in addition to any other rights
hereunder, a claim, prior to the Bondholders, for the payment of its
compensation and the reimbursement of its expenses and any advances made by it
upon the moneys and obligations in the Bond Fund, except for moneys or
obligations held by the Trustee for the payment of particular Bonds or proceeds
of any drawing under the Letter of Credit.

Section 12.5 Notice of Default; Right to Investigate. The Trustee shall, within
30 days after the occurrence thereof, give written notice by first class mail to
registered owners of Bonds and the Bank of all Events of Default known to the
Trustee, unless such Events of Default have been remedied; provided that in the
case of an Event of Default under Section 11.1(c) or Section 11.1(d), the
Trustee may withhold such notice to the Bondholders so long as it in good faith
determines that such withholding is in the interest of the Bondholders. The
Trustee shall not be deemed to have notice of any Event of Default under
Section 11.1(c) or (d) (other than payment defaults under Sections 6.01(a), (b),
and (c) of the Agreement) unless notified in writing of such Default by the
owners of at least 25% in principal amount of all Bonds then Outstanding or the
Bank. The Trustee may, however, at any time require of the Issuer full
information as to the performance of any covenant hereunder; and, if information
satisfactory to it is not forthcoming, the Trustee may make or cause to be made,
at the expense of the Company, an investigation into the affairs of the Issuer
related to this Indenture. Copies of any notice required by this Section 12.5
shall also be sent to the Remarketing Agent and each Paying Agent.

Section 12.6 Obligation to Act. Except during the continuance of an Event of
Default of which the Trustee has notice or is deemed to have notice pursuant to
Section 12.5 hereof, the Trustee shall undertake 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.
If any Event of Default of which the Trustee has notice or is deemed to have
notice

 

-56-

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

pursuant to Section 12.5 hereof shall have occurred and be continuing, the
Trustee shall exercise such of the rights and remedies vested in it by this
Indenture and shall use the same degree of care in their exercise as a prudent
person would exercise or use in the circumstances in the conduct of his own
affairs. The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
the Bondholders pursuant to this Indenture unless such Bondholders shall have
furnished to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred in compliance with such request
or direction. Notwithstanding the foregoing, the Trustee will be obligated to
declare an acceleration required by Section 11.2 and draw on the Letter of
Credit and pay the Bondholders pursuant to that acceleration regardless of
whether the Trustee has received such indemnity.

Section 12.7 Reliance. The Trustee may rely and act on any requisition,
resolution, notice, telegram, request, consent, direction, waiver, certificate,
statement, affidavit, voucher, bond, or other paper or document which it in good
faith believes to be genuine and to have been passed or signed by the proper
Persons or to have been prepared and furnished pursuant to any of the provisions
of the Indenture, including without limitation, any direction of the Paying
Agent to draw on the Letter of Credit; and the Trustee shall be under no duty to
make any investigation as to any statement contained in any such instrument, but
may accept the same as conclusive evidence of the accuracy of such statement.
Any request or direction of the Issuer shall be sufficiently evidenced by a
writing signed by an Authorized Issuer Representative and any request or
direction of the Company shall be sufficiently evidenced by a writing signed by
an Authorized Company Representative.

Section 12.8 Trustee May Deal in Bonds. The Trustee and any of its Affiliates
may in good faith buy, sell, own, hold and deal in any of the Bonds and may join
in any action which any Bondholders may be entitled to take with like effect as
if the Trustee were not a party to this Indenture. The Trustee and any of its
Affiliates may also engage in or be interested in any financial or other
transaction with the Issuer or the Company.

Section 12.9 Construction of Ambiguous Provisions. The Trustee may construe any
ambiguous or inconsistent provisions of the Indenture, and any construction by
the Trustee shall be binding upon the Bondholders.

Section 12.10 Resignation of Trustee. The Trustee may resign and be discharged
of the trusts created by the Indenture by written resignation filed with the
Issuer, the Bank, and the Company not fewer than 60 days before the date when it
is to take effect; provided notice of such resignation is mailed to the owners
of the Bonds not fewer than three weeks prior to the date when the resignation
is to take effect. Such resignation shall take effect only upon the appointment
and acceptance of a successor trustee.

Section 12.11 Removal of Trustee. Any Trustee hereunder may be removed at any
time by an instrument appointing a successor to the Trustee so removed, executed
by either (a) the Company, if and so long as no Default under the Agreement has
occurred and is continuing, or (b) the owners of a majority in principal amount
of the Bonds then Outstanding and filed with the Trustee, the Issuer and the
Bank. Such removal shall take effect only upon the appointment and acceptance of
a successor trustee.

 

-57-

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

Section 12.12 Appointment of Successor Trustee. If the Trustee or any successor
trustee resigns or is removed or dissolved, or if its property or business is
taken under the control of any state or federal court or administrative body, a
vacancy shall forthwith exist in the office of the Trustee, and the Issuer, at
the expense and direction of the Company, shall appoint a successor which shall
mail notice of such appointment to the registered owners of the Bonds. If the
Issuer fails to make such appointment promptly, the owners of a majority in
principal amount of the Bonds then Outstanding may do so. If a successor trustee
does not take office within 60 days after the retiring Trustee resigns or is
removed, the retiring Trustee, the Company, the Issuer, or the holders of at
least 25% in principal amount of the outstanding Bonds may, at the expense of
the Company, petition a court of competent jurisdiction for the appointment of a
successor trustee.

Section 12.13 Qualification of Successor. A successor trustee shall be a
national banking association, a state bank with trust powers, a bank and trust
company, or a trust company, in any case having capital and surplus of at least
$50,000,000 and rated Baa/P-3 or better by Moody’s or be otherwise acceptable to
Moody’s if the Bonds are then rated by Moody’s or BBB- or better by S&P or be
otherwise acceptable by S&P if the Bonds are then rated by S&P, if there be one
able and willing to accept the trust on reasonable and customary terms.

Section 12.14 Instruments of Succession. Any successor trustee shall execute,
acknowledge and deliver to the Issuer an instrument accepting such appointment
hereunder; and thereupon such successor trustee, without any further act, deed
or conveyance, shall become fully vested with all the estates, properties,
rights, powers, trusts, duties and obligations of its predecessor in the trust
hereunder, with like effect as if originally named Trustee herein. The Trustee
ceasing to act hereunder shall pay over to the successor trustee all moneys held
by it hereunder and shall transfer to such successor trustee the Letter of
Credit, if any; and, upon request of the successor trustee, the Trustee ceasing
to act and the Issuer shall execute and deliver an instrument transferring to
the successor trustee all the estates, properties, rights, powers and trusts
hereunder of the Trustee ceasing to act.

Section 12.15 Merger of Trustee. Any corporation or association into which any
Trustee hereunder may be merged or with which it may be consolidated, or any
corporation or association resulting from any merger or consolidation to which
any Trustee hereunder shall be a party, or any corporation or association to
which the Trustee may sell or otherwise transfer all or substantially all of its
corporate trust business, shall be the successor trustee under the Indenture,
without the execution or filing of any paper or any further act on the part of
the parties hereto, anything herein to the contrary notwithstanding; provided,
however, that any such successor shall be otherwise qualified under
Section 12.13.

Section 12.16 Trustee Not Required to Expend or Risk Own Funds. No provision of
this Indenture shall require the Trustee to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if it shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.

Section 12.17 Right of Trustee to Pay Taxes and Other Charges. In case any tax,
assessment or governmental or other charge upon any part of the trust estate is
not paid as required herein, the

 

-58-

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

Trustee may pay such tax, assessment or governmental or other charge, without
prejudice, however, to any rights of the Trustee or the Bondholders hereunder
arising in consequence of such failure; and any amount at any time so paid under
this Section 12.17, with interest thereon from the date of payment at the prime
rate of the Trustee (or its primary banking Affiliate), shall become so much
additional indebtedness secured by this Indenture, and the same shall be paid
out of the proceeds of Revenues collected from the property herein conveyed, if
not otherwise caused to be paid; but the Trustee shall be under no obligation to
make any such payment unless it shall have been requested to do so by the owners
of at least 25% in aggregate principal amount of all Bonds then Outstanding and
shall have been provided with adequate funds for the purpose of such payment.

Section 12.18 Trust Estate May be Vested in Separate or Co-Trustee. It is the
purpose of this Indenture that there shall be no violation of any law of any
jurisdiction (including particularly the law of the State) denying or
restricting the right of banking corporations or associations to transact
business as trustee in such jurisdiction. It is recognized that in case of
litigation under this Indenture or the Agreement, and in particular in case of
the enforcement of either on default, or in case the Trustee deems that by
reason of any present or future law of any jurisdiction it may not exercise any
of the powers, rights or remedies herein granted to the Trustee or hold title to
the trust estate, in trust, as herein granted, or take any other action which
may be desirable or necessary in connection therewith, it may be necessary that
the Trustee appoint an additional individual or institution as a separate or
co-trustee. The expense of any separate or co-trustee shall be borne by the
Company. The following provisions of this Section 12.18 are adapted to these
ends.

In the event that the Trustee appoints an additional individual or institution
as a separate or co-trustee, each and every remedy, power, right, claim, demand,
cause of action, immunity, estate, title, interest and lien expressed or
intended by this Indenture to be exercised by or vested in or conveyed to the
Trustee with respect thereto shall be exercisable by and vested in such separate
or co-trustee but only to the extent necessary to enable such separate or
co-trustee to exercise such powers, rights and remedies, and every covenant and
obligation necessary to the exercise thereof by such separate or co-trustee
shall run to and be enforceable by either of them.

Should any deed, conveyance or instrument in writing from the Issuer be required
by the separate trustee or co-trustee so appointed by the Trustee for more fully
and certainly vesting in and confirming to him such properties, rights, powers,
trusts, duties and obligations, any and all such deeds, conveyances and
instruments in writing shall, on request, be executed, acknowledged and
delivered by the Issuer. In case any separate trustee or co-trustee, or a
successor to either, shall become incapable of acting, resign or be removed, all
the estate properties, rights, powers, trusts, duties and obligations of such
separate trustee or co-trustee, so far as permitted by law, shall vest in and be
exercised by the Trustee until the appointment of a new trustee or successor to
such separate trustee or co-trustee.

Section 12.19 Reliance Upon Counsel. The Trustee may consult with Counsel
satisfactory to it, and the opinion of such Counsel selected by the Trustee
shall be full and complete authorization and protection in respect of any action
taken or suffered by such Trustee hereunder in good faith and in reliance
thereon.

 

-59-

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

Section 12.20 No Implied Duties. The Trustee shall be obligated to perform such
duties and only such duties as are herein and in the Bonds specifically set
forth and as are required by applicable law and no implied duties or obligations
of the Trustee shall be read into this Indenture or the Bonds. The permissive
right of the Trustee to do things enumerated in this Indenture or in the
Agreement shall not be construed as a duty.

Section 12.21 Certain Other Rights of the Trustee. 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,
direction, consent, order, or other paper or document, but the Trustee, in its
discretion, may make such further inquiry or investigation into such facts or
matters as it may see fit, and if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled, upon reasonable notice
and during regular business hours, to examine the books and records of the
Issuer and the Company. Except as otherwise expressly provided hereunder, the
Trustee shall not be required to give or furnish any notice, demand, report,
reply, statement, advice or opinion to any Bondholder or the Company or any
other Person, and the Trustee shall not incur any liability for its failure or
refusal to give or furnish the same unless obligated or required to do so by
express provisions hereof. The Trustee shall not be liable with respect to any
action taken or omitted to be taken at the direction of the Bondholders of a
majority in aggregate principal amount of the Outstanding Bonds permitted to be
given by them under this Indenture. The Trustee shall have no responsibility
with respect to any information in any offering memorandum or other disclosure
material distributed with respect to the Bonds or for compliance with securities
laws in connection with the issuance and sale of the Bonds. The Trustee shall
have no responsibility with respect to compliance by the Issuer or the Company
with section 148 of the Code and any covenant in this Indenture or in the
Agreement regarding yields on investments.

Section 12.22 Reporting Requirements. To the extent required by the Code or the
treasury regulations, the Trustee shall report to the holders and the Internal
Revenue Service, or assure that such reports are made, the amount of interest
paid or the amount treated as interest accrued on the Bonds which is required to
be reported by the holders on their returns of federal income tax.

ARTICLE XIII.

THE REMARKETING AGENT AND THE PAYING AGENT

Section 13.1 The Remarketing Agent.

(a) The initial Remarketing Agent under this Indenture shall be Thornton Farish,
Inc. The Remarketing Agent, by written instrument delivered to the Issuer, the
Trustee and the Company, shall accept the duties and obligations imposed on it
under this Indenture and shall become a party to the Remarketing Agreement.

(b) In addition to the other obligations imposed on the Remarketing Agent
hereunder, the Remarketing Agent shall agree to keep such books and records as
shall be consistent with prudent industry practice and make such books and
records available for inspection by the Issuer, the Trustee and the Company at
all reasonable times.

 

-60-

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

(c) The Remarketing Agent may resign or be removed by the Company as provided in
the Remarketing Agreement. Upon resignation or removal of the Remarketing Agent,
the Company shall appoint a successor Remarketing Agent to act in such capacity
and shall give prompt written notice of such appointment to the Issuer, the
Trustee and the Paying Agent. Any successor Remarketing Agent shall be a
nationally recognized broker-dealer who engages in the remarketing of securities
similar to the Bonds and has outstanding debt obligations assigned ratings no
lower than Baa3/P-3 or better by Moody’s, if the Bonds are then rated by
Moody’s, or BBB- by S&P, if the Bonds are then rated by S&P, or be otherwise
acceptable to Moody’s, if the Bonds are then rated by Moody’s, and to S&P, if
the Bonds are then rated by S&P.

(d) In the event that the Company shall fail to appoint a successor Remarketing
Agent, upon the resignation or removal of the Remarketing Agent or upon its
dissolution, insolvency or bankruptcy, the Trustee shall either appoint a
Remarketing Agent or itself act as Remarketing Agent until the appointment of a
successor Remarketing Agent in accordance with this Section; provided, however,
that the Trustee, in its capacity as Remarketing Agent, shall not be required to
sell Bonds or to determine the interest rates for the Bonds.

Section 13.2 The Paying Agent.

(a) The Paying Agent shall agree to

(i) hold all sums held by it for the payment of the principal or redemption
price of, or interest on, Bonds in trust for the benefit of the owners of such
Bonds until such sums shall be paid to such owners or otherwise disposed of as
herein provided,

(ii) at any time during the continuance of any default in the payment of
principal or redemption price of or interest on the Bonds, upon the written
request of the Trustee, forthwith pay to the Trustee all sums so held in trust
by such Paying Agent,

(iii) hold all Bonds delivered to it pursuant to Sections 4.1 and 4.2, as agent
and bailee of, and in escrow for the benefit of, the respective owners thereof
until moneys representing the Purchase Price of such Bonds shall have been
delivered to or for the account of or to the order of such owners;

(iv) hold all moneys (without investment thereof) delivered to it hereunder for
the purchase of Bonds pursuant to Sections 4.1 and 4.2, as agent and bailee of,
and in escrow for, and for the benefit of, the Person or entity which shall have
so delivered such moneys until the Bonds purchased with such moneys shall have
been delivered to or for the account of such Person or entity;

(v) hold Bonds for the account of the Company as contemplated by Section 4.3
hereof; and

(vi) keep such books and records as shall be consistent with prudent corporate
trust industry practice and to make such books and records available for
inspection by the Issuer, the Trustee and the Company at all reasonable times.

 

-61-

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

(b) The Paying Agent shall be a corporation or association duly organized under
the laws of the United States of America or any state or territory thereof, or a
bank or trust company having a combined capital stock, surplus and undivided
profits of at least $50,000,000 and authorized by law to perform all the duties
imposed upon it by this Indenture. The Paying Agent may at any time resign and
be discharged of the duties and obligations created by this Indenture by giving
at least 60 days’ notice to the Issuer, the Trustee, the Company, and the
Remarketing Agent. In the event that the Issuer, at the request of the Company,
shall fail to appoint a successor Paying Agent, upon the resignation or removal
of the Paying Agent, the Trustee shall either appoint a Paying Agent or itself
act as Paying Agent until the appointment of a successor Paying Agent. Any
successor Paying Agent shall either be rated Baa/P-3 or better by Moody’s or be
otherwise acceptable to Moody’s if the Bonds are then rated by Moody’s or to
S&P, if the Bonds are then rated by S&P. The Paying Agent may be removed at any
time by an instrument signed by the Company, filed with the Issuer, the Trustee,
and the Remarketing Agent.

In the event of the resignation or removal of the Paying Agent, the Paying Agent
shall deliver any Bonds and moneys held by it in such capacity to its successor
or, if there is no successor, to the Trustee.

(c) The Paying Agent in performing its duties hereunder shall be entitled to the
same protective provisions in the performance of its duties as are specified in
Article XII of this Indenture with respect to the Trustee hereunder to the same
extent and as fully for all intents and purposes as though the Paying Agent had
been expressly named therein in place of such Trustee and as though the
applicable provisions of Article XII of this Indenture had been set forth herein
at length.

Section 13.3 Notices. The Trustee shall, within 30 days of the resignation or
removal of the Remarketing Agent or the Paying Agent or the appointment of a
successor Remarketing Agent or Paying Agent, of which it has actual knowledge,
give notice thereof by first class mail, postage prepaid, to the owners of the
Bonds.

ARTICLE XIV.

ACTS OF BONDHOLDERS; EVIDENCE OF OWNERSHIP

Section 14.1 Acts of Bondholders; Evidence of Ownership. Except as otherwise
stated herein, any action to be taken by Bondholders may be evidenced by one or
more concurrent written instruments of similar tenor signed or executed by such
Bondholders in person or by an agent duly appointed in writing. The fact and
date of the execution by any Person of any such instrument may be proved by
acknowledgment before a notary public or other officer empowered to take
acknowledgments or by an affidavit of a witness to such execution. Where such
execution is by an officer of a corporation or a member of a partnership, on
behalf of such corporation or partnership, such certificate or affidavit shall
also constitute sufficient proof of his authority. The fact and date of the
execution of any such instrument or writing, or the authority of the Person
executing the same, may also be proved in any other manner which the Trustee
deems sufficient. The ownership of the Bonds shall be proved by the Bond
Register. Any action by the owner of any Bond shall bind all future owners of
the same Bond in respect of anything done or suffered by the Issuer or the
Trustee in pursuance thereof.

 

-62-

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

ARTICLE XV.

AMENDMENTS AND SUPPLEMENTS

Section 15.1 Amendments and Supplements Without Bondholders’ Consent. This
Indenture may be amended or supplemented at any time and from time to time,
without the consent of the Bondholders, but with the consent of the Remarketing
Agent or the Paying Agent, as the case may be, if the amendment or supplement
would materially adversely affect or alter the duties or obligations of the
Remarketing Agent or the Paying Agent under this Indenture, by a supplemental
indenture authorized by a resolution of the Issuer and filed with the Trustee,
for one or more of the following purposes:

(a) to add additional covenants of the Issuer or to surrender any right or power
herein conferred upon the Issuer;

(b) for any purpose not inconsistent with the terms of this Indenture or to cure
any ambiguity or to correct or supplement any provision contained herein or in
any supplemental indenture which may be defective or inconsistent with any other
provision contained herein or in any supplemental indenture, or to make such
other provisions in regard to matters or questions arising under this Indenture
which shall not adversely affect the interests of the owners of the Bonds;

(c) to permit the Bonds to be converted to certificateless securities or vice
versa or securities represented by a master certificate held in trust, ownership
of which, in either case, is evidenced by book entries on the books of the Bond
Registrar, for any period of time, or to conform to the procedures of the
Securities Depository to effect the book-entry system set forth in Section 2.13
hereof;

(d) to permit the appointment of a co-trustee under this Indenture;

(e) to authorize different authorized denominations of the Bonds and to make
correlative amendments and modifications to this Indenture regarding
exchangeability of Bonds of different Authorized Denominations, redemptions of
portions of Bonds of particular Authorized Denominations and similar amendments
and modifications of a technical nature;

(f) to modify, alter, supplement or amend this Indenture in such manner as shall
permit the qualification hereof under the Trust Indenture Act of 1939, as from
time to time amended;

(g) to modify, alter, amend or supplement this Indenture in any other respect
which is not materially adverse to the Bondholders;

(h) to provide for an Alternate Credit Facility or any other credit enhancement
permitted by the terms of this Indenture or to subject to this Indenture
additional revenues, properties, or collateral;

(i) to modify the provisions for optional redemption at the commencement of a
Term Rate pursuant to Section 9.1(a) hereof;

(j) to change any of the times specified herein; and

 

-63-

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

(k) to conform to the requirements of any Rating Service.

Before the Issuer and the Trustee shall enter into any supplemental indenture
pursuant to this Section, there shall have been delivered to the Trustee a
Favorable Opinion stating the requirements of such opinion and also stating that
such supplemental indenture will, upon the execution and delivery thereof, be
valid and binding upon the Issuer in accordance with its terms and that such
supplement is permitted under this Section 15.1.

Section 15.2 Amendments and Supplements With Bondholders’ Consent. This
Indenture may be amended or supplemented at any time or from time to time,
except with respect to (i) the principal, redemption price (other than pursuant
to Section 15.1(ix)), Purchase Price and interest payable upon any Bonds,
(ii) the Interest Payment Dates, the dates of maturity or the redemption or
purchase provisions of any Bonds, and (iii) this Article, by a supplemental
indenture consented to by the Company, and if the amendment or supplement would
materially adversely affect or alter the duties or obligations of the
Remarketing Agent or the Paying Agent under this Indenture, with the consent of
the Remarketing Agent or the Paying Agent, as the case may be, or if the
amendment or supplement would materially adversely affect or alter the rights of
the Bank under this Indenture, with the consent of the Bank, and approved by the
owners of at least a majority in aggregate principal amount of the Bonds then
Outstanding which would be affected by the action proposed to be taken. This
Indenture may be amended with respect to the matters enumerated in clauses
(i) through (iii) of the preceding sentence with the unanimous consent of all
Bondholders, the Company and the Paying Agent, the Bank or the Remarketing
Agent, if required by the preceding sentence of this Section.

Before the Issuer and the Trustee shall enter into any supplemental indenture
pursuant to this Section, there shall have been delivered to the Trustee a
Favorable Opinion stating the requirements of such opinion and also stating that
such supplemental indenture will, upon the execution and delivery thereof, be
valid and binding upon the Issuer in accordance with its terms and that such
supplement is permitted under this Section 15.2.

Section 15.3 Amendment of Agreement. The Issuer and the Company may enter into,
with the consent of the Trustee and the Bank, if any, but without the consent of
the holders of the Bonds, any amendment, change or modification of the Agreement
to cure any ambiguity, formal defect, omission or inconsistent provisions or to
make any other change that does not adversely affect the interest of the
Bondholders. If the Issuer and the Company propose to amend the Agreement in
such a manner as would, in the judgment of the Trustee, adversely affect the
interests of the Bondholders, the Trustee shall notify Bondholders of the
proposed amendment and may consent thereto with the consent of at least a
majority in aggregate principal amount of the Bonds then Outstanding which would
be affected by the action proposed to be taken; provided, that the Trustee shall
not, without the unanimous consent of the owners of all Bonds then Outstanding,
consent to any amendment which would (i) decrease the payments payable, or
change the date payments are so payable, under Section 5.03 or Section 5.09 of
the Agreement, (ii) reduce the stated term of the Agreement, (iii) reduce the
Company’s obligations under Section 5.03 or Section 5.09 of the Agreement, or
(iv) reduce the aforesaid aggregate principal amount of the Bonds, the owners of
which are required to consent to such an amendment.

 

-64-

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

Section 15.4 Trustee Authorized to Join in Amendments and Supplements; Reliance
on Counsel. The Trustee is authorized to join with the Issuer in the execution
and delivery of any supplemental indenture or amendment permitted by this
Article and in so doing shall be fully protected by a Favorable Opinion that
such supplemental indenture or amendment is so permitted and has been duly
authorized by the Issuer and that all things necessary to make it a valid and
binding agreement have been done.

Section 15.5 Consent of Company. Anything herein to the contrary
notwithstanding, so long as no Event of Default under the Agreement has occurred
and is continuing, a supplemental indenture under this Article which affects any
right of the Company shall not become effective unless and until the Company
shall have consented in writing to the execution and delivery of such
supplemental indenture.

Section 15.6 Consent of Bank. Notwithstanding anything herein contained, so long
as a Letter of Credit is held by the Trustee, no supplement or amendment shall
be made to this Indenture or the Agreement without the prior written consent of
the Bank.

ARTICLE XVI.

DEFEASANCE

Section 16.1 Defeasance.

(a) (i) If the Issuer shall pay or cause to be paid to the holders and owners of
the Bonds the principal of and interest to become due thereon at the times and
in the manner stipulated therein, and if the Issuer shall keep, perform and
observe all and singular the covenants and promises in the Bonds and in this
Indenture expressed as to be kept, performed and observed by it or on its part
and shall pay or cause to be paid all other sums payable hereunder by the
Issuer, and (ii) the Bank, if any, shall have provided a written certification
to the effect that the Company shall have paid or caused to be paid all
obligations of the Company to reimburse the Bank for drawings under the
Reimbursement Agreement, with respect to such Bonds, these presents and the
estate and rights hereby granted shall cease, terminate and be void, and
thereupon (A) the Trustee shall cancel and discharge the lien of this Indenture,
and execute and deliver to the Issuer such instruments in writing as shall be
requisite to satisfy the lien hereof, and reconvey to the Issuer the estate
hereby conveyed, and assign and deliver to the Issuer any property at the time
subject to the lien of this Indenture which may then be in its possession,
except moneys or Governmental Obligations held by it for the payment of the
principal of and interest on the Bonds and (B) the Trustee shall cancel the
Letter of Credit and return it to the Bank.

(b) Provision for the payment of Bonds shall be deemed to have been made when
the Trustee holds in the Bond Fund, in trust and irrevocably set aside
exclusively for such payment, (i) moneys sufficient to make such payment of
principal, premium, if any, and interest on the Bonds, and any payment of the
Purchase Price of Bonds pursuant to Sections 4.1 and 4.2; and/or
(ii) noncallable, nonprepayable Governmental Obligations (provided that in
either case the Trustee shall have received a Favorable Opinion) maturing as to
principal and interest in such amounts and at such times as will provide
sufficient moneys (without consideration of any reinvestment thereof) to make
such payment of principal, premium, if any, and interest on the Bonds, and any
payment of the

 

-65-

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

Purchase Price of such Bonds pursuant to Sections 4.1 and 4.2, and which are not
subject to prepayment, redemption or call prior to their stated maturity;
provided that the Trustee and the Rating Service shall have received a Favorable
Opinion to the effect that the Bonds are defeased in accordance with the
requirements of this Article; and provided, further, that if a Letter of Credit
is then held by the Trustee, such payment and any payment of the Purchase Price
of Bonds pursuant to Section 4.1 or 4.2, as applicable, shall be made only from
proceeds of a drawing under the Letter of Credit deposited directly into the
Letter of Credit Debt Service Account or the Letter of Credit Purchase Account,
as applicable, or the Company shall have caused to be delivered to the Trustee
and the Rating Service a Preference Opinion.

No Bonds in respect of which a deposit under clause (i) or (ii) of this
subsection (b) has been made shall be deemed paid within the meaning of this
Article unless the Trustee is satisfied that the amounts deposited are
sufficient to make all payments that might become due on the Bonds, with respect
to which the Trustee may rely on a certificate of independent certified public
accountants, a copy of which certificate shall also be furnished to the Rating
Service, if the Bonds are then rated by the Rating Service; provided that,
notwithstanding any other provision of this Indenture, any Bonds purchased with
such moneys pursuant to Section 4.3 shall be surrendered to the Trustee for
cancellation and shall not be remarketed, and provided further that the Issuer
shall, as a condition to defeasance, obtain written evidence from S&P, if the
Bonds are then rated by S&P, and Moody’s, if the Bonds are then rated by
Moody’s, that such defeasance will not result in a reduction or withdrawal of
the then current rating on the Bonds. Neither the obligations nor moneys
deposited with the Trustee pursuant to this Section shall be withdrawn or used
for any purpose other than, and shall be segregated and held in trust for, the
payment of the principal, redemption price or Purchase Price of and interest on
the Bonds with respect to which such deposit has been made. In the event that
such moneys or obligations are to be applied to the payment of principal or
redemption price of any Bonds more than 60 days following the deposit thereof
with the Trustee, the Trustee shall mail a notice to the owners of the Bonds to
be redeemed or deemed paid or redeemed, stating that such moneys or obligations
have been deposited and identifying the Bonds for the payment of which such
moneys or obligations are being held to all owners of Bonds for the payment of
which such moneys or obligations are being held at their registered addresses
and to S&P, if the Bonds are then rated by S&P, and Moody’s, if the Bonds are
then rated by Moody’s.

(c) Anything in this Indenture to the contrary notwithstanding, all moneys or
Governmental Obligations set aside and held in trust pursuant to the provisions
of this Section 16.1 for the payment of Bonds, the redemption premium, if any,
and interest thereon, shall be applied to and used solely for the payment of the
particular Bonds, the redemption premium, if any, and interest thereon, with
respect to which such money or Governmental Obligations have been so set aside
in trust.

(d) Anything in this Article XVI to the contrary notwithstanding, if moneys or
Governmental Obligations have been deposited or set aside with the Trustee
pursuant to this Article for the payment of the principal, Purchase Price, or
redemption price of the Bonds and the interest thereon and the principal,
Purchase Price or redemption price of such Bonds and the interest thereon shall
not have in fact been actually paid in full, no amendment to the provisions of
this Article shall be made without the consent of the owner of each of the Bonds
affected thereby. Notwithstanding the provisions of this Article XVI, the
obligations under Articles II, VI and IX in respect of the

 

-66-

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

payment provisions for the Bonds, the obligations under Article IV with respect
to the optional and mandatory tender requirements, the obligations under Article
II with respect to the registration of transfer, exchange, registration,
discharge from registration and replacement of Bonds, and under Article VIII in
respect of certain covenants and agreements relating to the tax-exempt status of
the Bonds and the rights of the Trustee under Section 12.4 shall survive the
discharge of the lien of the Indenture.

The Issuer or the Company may at any time surrender to the Trustee for
cancellation by it any Bonds previously authenticated and delivered hereunder,
which the Issuer or the Company may have acquired in any manner whatsoever, and
such Bonds, upon such surrender and cancellation, shall be deemed to be paid and
retired.

ARTICLE XVII.

MISCELLANEOUS

Section 17.1 No Personal Recourse. No recourse shall be had for any claim based
on the Agreement, the Indenture or the Bonds against any member, officer or
employee, past, present or future, of the Issuer or of any successor body as
such, either directly or through the Issuer or any such successor body, under
any constitutional provision, statute or rule of law, or by the enforcement of
any assessment or by any legal or equitable proceeding or otherwise.

Section 17.2 Deposit of Funds for Payment of Bonds. If the principal or
redemption price of any Bonds becoming due, either at maturity or by call for
redemption or otherwise, together with all interest accruing thereon to the due
date, has been paid or provision therefor made in accordance with Section 16.1,
all interest on such Bonds shall cease to accrue on the due date and all
liability of the Issuer with respect to such Bonds shall likewise cease, except
as hereinafter provided. Thereafter the owners of such Bonds shall be restricted
exclusively to the funds so deposited for any claim of whatsoever nature with
respect to such Bonds, and the Trustee shall hold such funds in trust for such
owners.

Other than moneys held in the Letter of Credit Debt Service Account and the
Letter of Credit Purchase Account which shall be distributed pursuant to
Section 6.4 hereof, moneys which remain unclaimed two years after the due date
shall, subject to any applicable provisions of Title 6 of the Texas Property
Code, at the written request of the Company, and if the Company is not, at the
time, to the knowledge of the Trustee, in default with respect to any covenant
in the Agreement or the Bonds, be paid to the Company, and the owners of the
Bonds for which the deposit was made shall thereafter be limited to a claim
against the Company. Such moneys while held by the Trustee shall be held in
trust uninvested or invested in Governmental Obligations maturing the next day.

Section 17.3 Effect of Purchase of Bonds. No purchase of Bonds pursuant to
Article IV shall be deemed to be a payment or redemption of such Bonds or any
portion thereof and such purchase will not operate to extinguish or discharge
the indebtedness evidenced by such Bonds unless such Bonds are purchased by the
Company and delivered to the Trustee with written instructions to effect their
cancellation.

 

-67-

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

Section 17.4 No Rights Conferred on Others. Nothing herein contained shall
confer any right upon any Person other than the parties hereto, the Company, the
Remarketing Agent, the Paying Agent, and the owners of the Bonds.

Section 17.5 Severability. If any term or provision of this Indenture or the
Bonds or the application thereof for any reason or circumstance shall to any
extent be held invalid or unenforceable, the remaining provisions or the
application of such term or provision to Persons and situations other than those
as to which it is held invalid or unenforceable shall not be affected thereby,
and each term and provision hereof and thereof shall be valid and enforced to
the fullest extent permitted by law.

Section 17.6 Notices. Unless otherwise provided hereunder or in the Agreement,
all notices, certificates or other communications hereunder to be given by any
of the following parties to any of the other following parties shall be deemed
to have been sufficiently given and received by such parties only upon actual
receipt thereof and if sent by Electronic notice or by telephone, confirmed in
writing, or by registered mail to the relevant party as follows:

 

Company:    Panda Hereford Ethanol, L.P.    4100 Spring Valley Road, Suite 1001
   Dallas, Texas 75244    Attention: General Counsel    Fax #: (972) 455-3890
Issuer:    Red River Authority of Texas    Hamilton Building, Suite 520    900
8th Street    Wichita Falls, Texas 76301-6894    Attention: President    Fax #:
(940) 723-8531 Trustee, Paying Agent, and Bond Registrar Principal Office and
Paying Agent Tender Office:    The Bank of New York Trust Company, N.A.    600
N. Pearl Street, Suite 420    Dallas, Texas 75201    Attention: Corporate Trust
Services    Fax#: (214) 880-8241 Any Paying Agent other than the Trustee:    At
the address designated in writing to the Issuer and the Trustee

 

-68-

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

Remarketing Agent:       Thornton Farish, Inc.    3500 Eastern Boulevard   
Suite 210    Montgomery, Alabama 36116    Attention: Public Finance Department
   Fax# (334) 272-0897 Bank:    Société Générale    560 Lexington Avenue    New
York, New York 10022    Attention: Jeff Green    Fax#: (212) 278-7428

All notices or other communications by the Trustee to any Bondholder hereunder
shall be deemed to have been sufficiently given and received by such Bondholder
upon the mailing thereof by first class mail.

The Issuer, the Company, the Bank, the Trustee, the Paying Agent, the
Remarketing Agent and the Bond Registrar may, by notice given hereunder,
designate any further or different addresses or fax numbers to which subsequent
notices, certificates or other communications shall be sent.

Section 17.7 Successors and Assigns. All the covenants, promises and agreements
in this Indenture contained by or on behalf of the Issuer, or by or on behalf of
the Trustee, shall bind and inure to the benefit of their respective successors
and assigns, whether so expressed or not.

Section 17.8 Headings for Convenience Only. The descriptive headings in this
Indenture are inserted for convenience only and shall not control or affect the
meaning or construction of any of the provisions hereof.

Section 17.9 Counterparts. The Indenture may be executed in any number of
counterparts, each of which when so executed and delivered shall be an original;
but such counterparts shall together constitute but one and the same instrument.

Section 17.10 Applicable Law. This Indenture shall be governed by and construed
in accordance with the laws of the State; provided, however, that the rights,
duties, immunities and standards of care relating to the Trustee shall be
governed by the law of the jurisdiction in which the Principal Office of the
Trustee is located.

Section 17.11 Notice of Change. The Trustee shall give notice to Moody’s (if the
Bonds are then rated by Moody’s) at 99 Church Street, New York, NY 10007,
Attention: Structured Transactions Group, Corporate Department, and S&P (if the
Bonds are then rated by S&P) at 55 Water Street, New York, New York 10041, of
any of the following events:

(a) a change in the Trustee or Paying Agent;

(b) a change in the Remarketing Agent of which it has received written notice;

 

-69-

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

(c) an amendment to the Indenture or the Agreement;

(d) payment or provision therefor of all the Bonds;

(e) expiration, termination, extension or amendment of the Letter of Credit;

(f) conversion to a Term Rate Period or the use of the Letter of Credit during a
Term Rate Period;

(g) conversion to a Commercial Paper Rate Period of a duration longer than the
number of days of interest included in the then current Letter of Credit, less
the number of days, if any, allowed for any reinstatement of interest under the
Letter of Credit; and

(h) the principal of the Bonds shall have become due and payable pursuant to
Section 11.2 hereof.

Section 17.12 Payments Due on non-Business Days. In any case where the date of
payment of interest on or principal of any Bonds or the date fixed for
redemption of any Bonds or any Purchase Date shall not be a Business Day, then
payment of such interest or principal and any premium or Purchase Price need not
be made by such Paying Agent on such date but may be made on the next succeeding
Business Day with the same force and effect as if made on the date of maturity
or the date fixed for redemption or the Purchase Date, and no interest shall
accrue for the period after such date.

Section 17.13 References to Bank. All provisions hereof regarding consents,
approvals, directions, appointments or requests by, of or to the Bank shall be
deemed not to require or permit such consents, approvals, directions,
appointments or requests and shall be read as if the Bank were not mentioned
herein during any time that either no Letter of Credit is in effect or during
which the Bank is in default in its obligations to make payments under the
Letter of Credit; provided, however, that this Section shall not affect the
rights of the Bank to collect any amounts owed to it.

 

70

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

IN WITNESS WHEREOF, the Issuer has caused these presents to be signed in its
name and behalf by the President of its Board of Directors and its corporate
seal to be hereunto affixed and attested by the Secretary of its Board of
Directors, and, to evidence its acceptance of the trust hereby created, the
Trustee has caused these presents to be signed in its behalf by its duly
authorized officer.

 

Red River Authority of Texas By:   /S/ CLIFF A. SKILES   Cliff A. Skiles  
President, Board of Directors

ATTEST: 

By:

  /S/ CAROL C. GUNN  

Secretary, Board of Directors

[SEAL]

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

The Bank of New York Trust Company, N.A., as Trustee /S/ JOHN STOHLMANN By:  
John Stohlmann Title:    Vice President