Financing Agreement

Dated as of April 1, 2007

By and Between

Washoe County, Nevada

and

Sierra Pacific Power Company

Relating To
Water Facilities Refunding Revenue Bonds
(Sierra Pacific Power Company Project)
Series 2007B

 
The amounts payable to the Issuer (except for amounts payable to, and certain
rights and privileges of, the Issuer under Sections 4.2(e), 4.2(g) and 6.4
hereof and any rights of the Issuer to receive any notices, certificates,
requests, requisitions or communications hereunder) and certain other rights of
the Issuer under this Financing Agreement have been pledged and assigned under
the Indenture of Trust dated as of April 1, 2007, between the Issuer and The
Bank of New York, as Trustee.

2220663.01.02.doc
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Financing Agreement
______________
 
Table of Contents
 
(This Table of Contents is not a part of this Agreement
and is only for convenience of reference).
 
Section HeadingPage
 
Article I
Definitions
 

 
 
Article II
Representations
 

 

 
Section 2.1.
 Representations and Covenants by the Issuer

 
Section 2.2.
 Representations by the Company

 
Article III
Issuance of the Bonds
 

 

 
Section 3.1.
 
 Agreement to Issue Bonds; Application of Bond Proceeds

 
Section 3.2.
 Deposit of Additional Funds by Company; Redemption of Prior Bonds

 
Section 3.3.
 Investment of Moneys in the Bond Fund and the Prior Bonds Redemption Fund

 
Section 3.4.
 
 Tax Exempt Status of Bonds

 
Article IV
Loan and Provisions for Repayment
 

 

 
Section 4.1.
 
 Loan of Bond Proceeds

 
Section 4.2.
 
 Loan Repayments and Other Amounts Payable

 
Section 4.3.
 No Defense or Set-Off

 
Section 4.4.
 
 Payments Pledged and Assigned

 
Section 4.5.
 
 Payment of the Bonds and Other Amounts

 
Article V
Special Covenants and Agreements
 

 

 
Section 5.1.
 Company to Maintain its Corporate Existence; Conditions Under Which Exceptions
Permitted

 
Section 5.2.
 
 Annual Statement

 
Section 5.3.
 
 Reserved

 
Section 5.4.
 
 Recordation and Other Instruments

 
Section 5.5.
 No Warranty by the Issuer

 
Section 5.6.
 Agreement as to Ownership of the Project

 
Section 5.7.
 
 Company to Furnish Notice of Rate Period Adjustments; Liquidity Facility
Requirements; ARS Rate Period Provisions

 
Section 5.8.
 
 Information Reporting, Etc.

 
Section 5.9.
 
 Limited Liability of Issuer

 
Section 5.10.
 
 Reserved

 
Section 5.11.
 
 Indenture Covenants

 
Article VI
Events of Default and Remedies
 

 

 
Section 6.1.
 
 Events of Default Defined

 
Section 6.2.
 
 Remedies on Default

 
Section 6.3.
 
 No Remedy Exclusive

 
Section 6.4.
 
 Agreement to Pay Fees and Expenses of Counsel

 
Section 6.5.
 
 No additional Waiver Implied by One Waiver, Consents to Waivers

 
Article VII
Options and Obligations of Company; Prepayments; Redemption of Bonds
 

 

 
Section 7.1.
 
 Option to Prepay

 
Section 7.2.
 
 Obligation to Prepay

 
Section 7.3.
 
 Notice of Prepayment

 
Article VIII
Miscellaneous
 

 

 
Section 8.1.
 
 Notices

 
Section 8.2.
 
 Assignments

 
Section 8.3.
 Severability

 
Section 8.4.
 
 Execution of Counterparts

 
Section 8.5.
 
 Amounts Remaining in Bond Fund

 
Section 8.6.
 
 Amendments, Changes and Modifications

 
Section 8.7.
 
 Governing Law

 
Section 8.8.
 
 Authorized Issuer and Company Representatives

 
Section 8.9.
 
 Term of the Agreement

 
Section 8.10.
 
 Cancellation at Expiration of Term

 
Section 8.11.
 
 Bond Insurance

 
Signature

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This Financing Agreement made and entered into as of April 1, 2007, by and
between Washoe County, Nevada, a political subdivision of the State of Nevada,
party of the first part (hereinafter referred to as the “Issuer”), and Sierra
Pacific Power Company, a corporation duly organized and existing under the laws
of the State of Nevada, party of the second part (hereinafter referred to as the
“Company”),
 
W i t n e s s e t h:
 
In consideration of the respective representations and agreements hereinafter
contained, the parties hereto agree as follows (provided, that in the
performance of the agreements of the Issuer herein contained, any obligation it
may thereby incur shall not constitute or give rise to a pecuniary liability or
a charge upon its general credit or against its taxing powers but shall be
payable solely out of the Revenues (as hereinafter defined) derived from this
Financing Agreement and the Bonds, as hereinafter defined):
 
Article I
 
Definitions
 
The following terms shall have the meanings specified in this Article unless the
context clearly requires otherwise. The singular shall include the plural and
the masculine shall include the feminine.
 
“Act” means the County Economic Development Revenue Bond Law, as amended,
contained in Sections 244A.669 to 244A.763, inclusive, of the Nevada Revised
Statutes.
 
“Administrative Expenses” means the reasonable and necessary expenses (including
the reasonable value of employee services and fees of Counsel) incurred by the
Issuer in connection with the Bonds, this Agreement, the Indenture and any
transaction or event contemplated by this Agreement or the Indenture.
 
“Agreement” means this Financing Agreement by and between the Issuer and the
Company, as from time to time amended and supplemented.
 
“Auction Agent” means the auction agent appointed in accordance with the
provisions of the Indenture.
 
“Authorized Company Representative” means any person who, at the time, shall
have been designated to act on behalf of the Company by a written certificate
furnished to the Issuer, the Remarketing Agent and the Trustee containing the
specimen signature of such person and signed on behalf of the Company by any
officer of the Company. Such certificate may designate an alternate or
alternates.
 
“Authorized Issuer Representative” means any person at the time designated to
act on behalf of the Issuer by a written certificate furnished to the Company
and the Trustee containing the specimen signature of such person and signed on
behalf of the Issuer by its Chairman. Such certificate may designate an
alternate or alternates.
 
“Bankruptcy Code” means the United States Bankruptcy Reform Act of 1978, as
amended from time to time, or any substitute or replacement legislation.
 
“Bond” or “Bonds” means the Issuer’s bonds identified in Section 2.02 of the
Indenture.
 
“Bond Counsel” means the Counsel who renders the opinion as to the tax-exempt
status of interest on the Bonds or other nationally recognized municipal bond
counsel mutually acceptable to the Issuer and the Company.
 
“Bond Fund” means the fund created by Section 6.02 of the Indenture.
 
“Code” means the United States Internal Revenue Code of 1986, as amended, and
regulations promulgated or proposed thereunder.
 
“Company” means Sierra Pacific Power Company, a Nevada corporation, and its
successors and assigns and any surviving, resulting or transferee corporation as
permitted in Section 5.1 hereof.
 
“Counsel” means an attorney at law or a firm of attorneys (who may be an
employee of or counsel to the Issuer or the Company or the Trustee) duly
admitted to the practice of law before the highest court of any state of the
United States of America or of the District of Columbia.
 
“Delivery Agreement” means the Delivery Agreement dated the Dated Date, between
the Company and the Trustee, as amended, supplemented or restated from time to
time, pursuant to which the Company will issue to the Trustee the G&R Notes at
the time of the initial authentication and delivery of the Bonds.
 
“Extraordinary Services” and “Extraordinary Expenses” means all services
rendered and all expenses (including fees and expenses of Counsel) incurred
under the Indenture and the Tax Agreement other than Ordinary Services and
Ordinary Expenses.
 
“Force Majeure” means acts of God, strikes, lockouts or other industrial
disturbances; acts of public enemies; orders or restraints of any kind of the
governments of the United States or of the State, or any of their departments,
agencies or officials, or any civil or military authority; insurrections; riots;
landslides; lightning; earthquakes; fires; tornadoes; volcanoes; storms;
droughts; floods; explosions, breakage, or malfunction or accident to machinery,
transmission lines, pipes or canals, even if resulting from negligence; civil
disturbances; or any other cause not reasonably within the control of the
Company.
 
“G&R Indenture” means the General and Refunding Mortgage Indenture dated as of
May 1, 2001 between the Company and the G&R Trustee, as amended and
supplemented.
 
“G&R Notes” means the Company’s $40,000,000 General and Refunding Mortgage Note,
Series O, No. O-2, due March 1, 2036.
 
“G&R Trustee” means The Bank of New York, as trustee under the G&R Indenture or
any successor trustee.
 
“Governing Body” means the Board of County Commissioners of the Issuer.
 
“Hereof,” “herein,” “hereunder” and other words of similar import refer to this
Agreement as a whole.
 
“Indenture” means the Indenture of Trust relating to this Agreement between the
Issuer and The Bank of New York, as Trustee, of even date herewith, pursuant to
which the Bonds are authorized to be issued, including any indentures
supplemental thereto or amendatory thereof.
 
“Issuer” means Washoe County, Nevada, and any successor body to the duties or
functions of the Issuer.
 
“Ordinary Services” and “Ordinary Expenses” means those services normally
rendered and those expenses including fees and expenses of Counsel, normally
incurred by a trustee or paying agent under instruments similar to the Indenture
and the Tax Agreement.
 
“Owner” or “owner of Bonds” means the Person or Persons in whose name or names a
Bond shall be registered on books of the Issuer kept by the Registrar for that
purpose in accordance with the terms of the Indenture.
 
“Person” means natural persons, firms, partnerships, associations, corporations,
trusts and public bodies.
 
“Prior Bond Fund” means the fund established pursuant to Section 6.02 of the
Prior Indenture.
 
“Prior Bonds” means the Issuer’s Water Facilities Refunding Revenue Bonds
(Sierra Pacific Power Company Project) Series 2001, currently outstanding in the
aggregate principal amount of $80,000,000.
 
“Prior Indenture” means the Indenture of Trust dated as of March 1, 2001 between
the Issuer and the Prior Trustee pursuant to which the Prior Bonds were issued.
 
“Prior Trustee” means The Bank of New York, as trustee under the Prior
Indenture.
 
“Project” means the Project as defined in the Project Certificate.
 
“Project Certificate” means the Company’s Project and Refunding Certificate,
delivered concurrently with the issuance of the Bonds, with respect to certain
facts which are within the knowledge of the Company and certain reasonable
assumptions of the Company, to enable Chapman and Cutler LLP, as Bond Counsel,
to determine that interest on the Bonds is not includable in the gross income of
the Owners of the Bonds for federal income tax purposes.
 
“Rebate Fund” means the Rebate Fund, if any, created and established pursuant to
the Tax Agreement.
 
“Regulated Utility Company” means a corporation (or a limited liability company)
engaged in the distribution of electricity, gas and/or water and which is
regulated by the applicable public service commissions in all of the states that
comprise its service area.
 
“Remarketing Agent” means the remarketing agent, if any, appointed in accordance
with Section 4.08 of the Indenture and any permitted successor thereto.
 
“Reorganization” means any reorganization, consolidation or merger of the
Company or its affiliates, or any transfer or lease of a substantial portion of
the assets of the Company or its affiliates, as a result of which the obligor
under the Agreement or the obligor on the G&R Notes ceases to be a Regulated
Utility Company.
 
“State” means the State of Nevada.
 
“Tax Agreement” means the Tax Exemption Certificate and Agreement with respect
to the Bonds, dated the date of delivery of the Bonds, among the Company, the
Issuer and the Trustee, as from time to time amended and supplemented.
 
“Trust Estate” means the property conveyed to the Trustee pursuant to the
Granting Clauses of the Indenture.
 
“Trustee” means The Bank of New York, as Trustee under the Indenture, and any
successor Trustee appointed pursuant to Section 10.06 or 10.09 of the Indenture
at the time serving as Trustee thereunder, and any separate or co-trustee
serving as such thereunder.
 
All other terms used herein which are defined in the Indenture shall have the
same meanings assigned them in the Indenture unless the context otherwise
requires.
 
Article II
 
Representations
 
Section 2.1.Representations and Covenants by the Issuer. The Issuer makes the
following representations and covenants as the basis for the undertakings on its
part herein contained:
 
(a)The Issuer is a duly organized and existing political subdivision of the
State of Nevada. Under the provisions of the Act, the Issuer is authorized to
enter into the transactions contemplated by this Agreement, the Indenture and
the Tax Agreement and to carry out its obligations hereunder and thereunder. The
Issuer has duly authorized the execution and delivery of this Agreement, the
Indenture and the Tax Agreement.
 
(b)The Bonds are to be issued under and secured by the Indenture, pursuant to
which certain of the Issuer’s interests in this Agreement and the Revenues
derived by the Issuer pursuant to this Agreement will be pledged and assigned as
security for payment of the principal of, premium, if any, and interest on, the
Bonds.
 
(c)The Governing Body of the Issuer has found that the issuance of the Bonds
will further the public purposes of the Act.
 
(d)The Issuer has not assigned and will not assign any of its interests in this
Agreement other than pursuant to the Indenture.
 
(e)No member of the Governing Body of the Issuer, nor any other officer of the
Issuer, has any interest, financial (other than ownership of less than one-tenth
of one percent (.1%) of the publicly traded securities issued by the Company or
its affiliated corporations), employment or other, in the Company or in the
transactions contemplated hereby.
 
Section 2.2.Representations by the Company. The Company makes the following
representations as the basis for the undertakings on its part herein contained:
 
(a)The Company is a corporation duly incorporated under the laws of the State
and is in good standing in the State, is qualified to do business as a foreign
corporation in all other states and jurisdictions wherein the nature of the
business transacted by the Company or the nature of the property owned or leased
by it makes such licensing or qualification necessary, and has the power to
enter into and by proper corporate action has been duly authorized to execute
and deliver this Agreement and the Tax Agreement.
 
(b)Neither the execution and delivery of this Agreement or the Tax Agreement,
the consummation of the transactions contemplated hereby and thereby, nor the
fulfillment of or compliance with the terms and conditions of this Agreement and
the Tax Agreement, conflicts with or results in a breach of any of the terms,
conditions or provisions of any corporate restriction or any agreement or
instrument to which the Company is now a party or by which it is bound, or
constitutes a default under any of the foregoing, or results in the creation or
imposition of any lien, charge or encumbrance whatsoever upon any of the
property or assets of the Company under the terms of any instrument or agreement
other than the Indenture.
 
(c)The statements, information and descriptions contained in the Project
Certificate and the Tax Agreement, as of the date hereof and at the time of the
delivery of the Bonds to the Underwriter, are and will be true, correct and
complete, do not and will not contain any untrue statement or misleading
statement of a material fact, and do not and will not omit to state a material
fact required to be stated therein or necessary to make the statements,
information and descriptions contained therein, in the light of the
circumstances under which they were made, not misleading.
 
Article III
 
Issuance of the Bonds
 
Section 3.1.Agreement to Issue Bonds; Application of Bond Proceeds. In order to
provide funds to lend to the Company to refund a portion of the Prior Bonds as
provided in Section 4.1 hereof, the Issuer agrees that it will issue under the
Indenture, sell and cause to be delivered to the Underwriter, its Bonds in the
aggregate principal amount of $40,000,000, bearing interest and maturing as set
forth in the Indenture. The Issuer will thereupon deposit the proceeds received
from the sale of the Bonds as follows: (1) in the Bond Fund, a sum equal to the
accrued interest, if any, paid by the Underwriter; and (2) $40,000,000 in the
Prior Bonds Redemption Fund to be remitted by the Trustee to the Prior Trustee
as provided in Section 6.07 of the Indenture for deposit in the Prior Bond Fund
to be used to pay to the owners thereof $40,000,000 of the principal of the
Prior Bonds upon redemption thereof.
 
Section 3.2.Deposit of Additional Funds by Company; Redemption of Prior Bonds.
The Company covenants that such additional amounts as may be required to redeem
the Prior Bonds in accordance with Section 3.1 hereof will be timely deposited
with the Prior Trustee pursuant to the Prior Indenture for such purpose. Income
derived from the investment of the proceeds of the Bonds deposited in the Prior
Bonds Redemption Fund will be used, to the extent available, to satisfy the
obligations of the Company specified in this Section 3.2. The Company covenants
that it will cause the Prior Bonds to be redeemed within 90 days after the
issuance and delivery of the Bonds.
 
Section 3.3.Investment of Moneys in the Bond Fund and the Prior Bonds Redemption
Fund. Except as otherwise herein provided, any moneys held as a part of the Bond
Fund and the Prior Bonds Redemption Fund shall be invested or reinvested by the
Trustee at the specific written direction of an Authorized Company
Representative as to specific investments, to the extent permitted by law, in:
 
(a)bonds or other obligations of the United States of America;
 
(b)bonds or other obligations, the payment of the principal of and interest on
which is unconditionally guaranteed by the United States of America;
 
(c)obligations issued or guaranteed as to principal and interest by any agency
or person controlled or supervised by and acting as an instrumentality of the
United States of America pursuant to authority granted by the Congress of the
United States of America;
 
(d)obligations issued or guaranteed by any state of the United States of
America, or any political subdivision of any such state, or in funds consisting
of such obligations to the extent described in Section 1.148-8(e)(3)(iii) of the
1992 Treasury Regulations;
 
(e)prime commercial paper;
 
(f)prime finance company paper;
 
(g)bankers’ acceptances drawn on and accepted by commercial banks;
 
(h)repurchase agreements fully secured by obligations issued or guaranteed as to
principal and interest by the United States of America or by any person
controlled or supervised by and acting as an instrumentality of the United
States of America pursuant to authority granted by the Congress of the United
States of America;
 
(i)certificates of deposit issued by commercial banks, including banks domiciled
outside of the United States of America; and
 
(j)units of taxable government money market portfolios composed of obligations
guaranteed as to principal and interest by the United States of America or
repurchase agreements fully collateralized by such obligations.
 
The investments so purchased shall be held by the Trustee and shall be deemed at
all times a part of the fund and the accounts therein, if any, for which they
were made and the interest accruing thereon and any profit realized therefrom
shall be credited to such fund and the accounts therein, if any, subject to the
provisions of the Tax Agreement. The Company agrees that to the extent any
moneys in the Bond Fund represent moneys held for the payment of particular
Bonds, or to the extent that any moneys are held for the payment of the purchase
price of Bonds pursuant to Article IV of the Indenture, such moneys shall not be
invested.
 
Section 3.4.Tax Exempt Status of Bonds. The Company covenants and agrees that it
has not taken or permitted and will not take or permit any action which results
in interest paid on the Bonds being included in gross income of the holders or
beneficial owners of the Bonds for purposes of federal income taxation (other
than a holder or beneficial owner who is a “substantial user” of the Project or
a “related person” within the meaning of Section 147(a) of the Code). The
Company covenants that none of the proceeds of the Bonds or the payments to be
made under this Agreement, or any other funds which may be deemed to be proceeds
of the Bonds pursuant to Section 148(a) of the Code, will be invested or used in
such a way, and that no actions will be taken or not taken, as to cause the
Bonds to be treated as “arbitrage bonds” within the meaning of Section 148(a) of
the Code. Without limiting the generality of the foregoing, the Company
covenants and agrees that it will comply with the provisions of the Tax
Agreement and the Project Certificate.
 
For purposes of the immediately preceding paragraph, the Company will be deemed
to have taken or permitted or omitted to take any action which is taken or
permitted or omitted by Truckee Meadows Water Authority, the owner of the
Project, or any subsequent owner or operator of the Project or portion thereof.
The Company has received a certificate dated the Dated Date from Truckee Meadows
Water Authority with respect to the Project. This certificate is attached to the
Project Certificate.
 
Article IV
 
Loan and Provisions for Repayment
 
Section 4.1.Loan of Bond Proceeds. (a) The Issuer agrees, upon the terms and
conditions in this Agreement, to lend to the Company the proceeds (exclusive of
accrued interest, if any) received by the Issuer from the sale of the Bonds in
order to refund a portion of the Prior Bonds, and the Company agrees to apply
the gross proceeds of such loan to the refunding of a portion of the Prior Bonds
as set forth in Sections 3.1 and 3.2 hereof.
 
(b)The Issuer and the Company expressly reserve the right to enter into, to the
extent permitted by law, an agreement or agreements other than this Agreement,
with respect to the issuance by the Issuer, under an indenture or indentures
other than the Indenture, of obligations to provide additional funds to refund
all or any principal amount of the Bonds.
 
Section 4.2.Loan Repayments and Other Amounts Payable. (a) On each date provided
in or pursuant to the Indenture for the payment (whether at maturity or upon
redemption or acceleration) of principal of, and premium, if any, and interest
on, the Bonds, until the principal of, and premium, if any, and interest on, the
Bonds shall have been fully paid or provision for the payment thereof shall have
been made in accordance with the Indenture, the Company shall pay to the Trustee
in immediately available funds, for deposit in the Bond Fund, as a repayment
installment of the loan of the proceeds of the Bonds pursuant to Section 4.1(a)
hereof, a sum equal to the amount payable on such date (whether at maturity or
upon redemption or acceleration) as principal of, and premium, if any, and
interest on, the Bonds as provided in the Indenture; provided, however, that the
obligation of the Company to make any such repayment installment shall be
reduced by the amount of any moneys then on deposit in the Bond Fund and
available for such payment; and provided further, that the obligation of the
Company to make any such payment shall be deemed to be satisfied and discharged
to the extent provided for under a liquidity facility (if applicable) or under
the G&R Notes.
 
(b)The Company shall pay to the Trustee amounts equal to the amounts to be paid
by the Trustee for the purchase of Bonds pursuant to Article IV of the
Indenture. Such amounts shall be paid by the Company to the Trustee in
immediately available funds on the date such payments pursuant to Section 4.05
of the Indenture are to be made; provided, however, that the obligation of the
Company to make any such payment shall be deemed to be satisfied and discharged
to the extent moneys are available from the source described in clause (i) of
Section 4.05(a) of the Indenture and to the extent moneys are available under
any liquidity facility (if applicable).
 
(c)The Company agrees to pay to the Trustee (i) the fees of the Trustee for the
Ordinary Services rendered by it and an amount equal to the Ordinary Expenses
incurred by it under the Indenture and the Tax Agreement, as and when the same
become due, and (ii) the reasonable fees, charges and expenses of the Trustee
for reasonable Extraordinary Services and Extraordinary Expenses, as and when
the same become due, incurred under the Indenture and the Tax Agreement. The
Company agrees that the Trustee, its officers, agents, servants and employees,
shall not be liable for, and agrees that it will at all times indemnify and hold
harmless the Trustee, its officers, agents, servants and employees against, and
pay all expenses of the Trustee, its officers, agents, servants and employees,
relating to any lawsuit, proceeding or claim and resulting from any action or
omission taken or made by or on behalf of the Trustee, its officers, agents,
servants and employees pursuant to this Agreement, the Indenture or the Tax
Agreement, that may be occasioned by any cause (other than the negligence or
willful misconduct of the Trustee, its officers, agents, servants and
employees). In case any action shall be brought against the Trustee in respect
of which indemnity may be sought against the Company, the Trustee shall promptly
notify the Company in writing and the Company shall be entitled to assume
control of the defense thereof, including the employment of Counsel reasonably
satisfactory to the Trustee and the payment of all expenses. The Trustee shall
have the right to employ separate Counsel in any such action and participate in
the defense thereof, but the fees and expenses of such Counsel shall be paid by
the Trustee unless (i) the employment of such Counsel has been authorized by the
Company, (ii) the Trustee has determined (which determination may be based upon
an opinion of counsel delivered to the Trustee and furnished to the Company)
that there may be a conflict of interest of such Counsel retained by the Company
between the Company and the Trustee in the conduct of such defense, (iii) the
Company ceases or terminates the employment of such Counsel retained by the
Company or (iv) such Counsel retained by the Company withdraws with respect to
such defense. The Company shall not be liable for any settlement of any such
action without its consent, but if any such action is settled with the consent
of the Company or if there be final judgment for the plaintiff in any such
action, the Company agrees to indemnify and hold harmless the Trustee from and
against any loss or liability by reason of such settlement or final judgment.
The Company agrees that the indemnification provided herein shall survive the
termination of this Agreement or the Indenture or the resignation of the
Trustee. For purposes of this Section 4.2(c), the Trustee is deemed a third
party beneficiary of this Agreement.
 
(d)The Company agrees to pay all costs incurred in connection with the issuance
of the Bonds from sources other than Bond proceeds and the Issuer shall have no
obligation with respect to such costs.
 
(e)The Company agrees to indemnify and hold harmless the Issuer and any member,
officer, official or employee of the Issuer against any and all losses, costs,
charges, expenses, judgments and liabilities created by or arising out of this
Agreement, the Indenture, the Remarketing Agreement, the Auction Agreement, the
Bond Purchase Agreement, any Broker-Dealer Agreement or the Tax Agreement or
otherwise incurred in connection with the issuance of the Bonds. The Company
agrees to pay the Issuer its Closing Fee in connection with the issuance of the
Bonds in the amount of $40,000. The Issuer may submit to the Company periodic
statements, not more frequently than monthly, for its Administrative Expenses
and the Company shall make payment to the Issuer of the full amount of each such
statement within 30 days after the Company receives such statement.
 
(f)The Company agrees to pay (i) to the Remarketing Agent the reasonable fees,
charges and expenses of such Remarketing Agent and (ii) to the Auction Agent the
reasonable fees, charges and expenses of such Auction Agent, and the Issuer
shall have no obligation or liability with respect to the payment of any such
fees, charges or expenses.
 
(g)In the event the Company shall fail to make any of the payments required by
(a) or (b) of this Section 4.2, the payment so in default shall continue as an
obligation of the Company until the amount in default shall have been fully paid
and the Company will pay interest to the extent permitted by law, on any overdue
amount at the rate of interest borne by the Bonds on the date on which such
amount became due and payable until paid. In the event that the Company shall
fail to make any of the payments required by (c), (d), (e) or (f) of this
Section 4.2, the payment so in default shall continue as an obligation of the
Company until the amount in default shall have been fully paid, and the Company
agrees to pay the same with interest thereon to the extent permitted by law at a
rate 1% above the rate of interest then charged by the Trustee on 90-day
commercial loans to its prime commercial borrowers until paid.
 
Section 4.3.No Defense or Set-Off. The obligation of the Company to make the
payments pursuant to this Agreement shall be absolute and unconditional without
defense or set-off by reason of any default by the Issuer under this Agreement
or under any other agreement between the Company and the Issuer or for any other
reason, it being the intention of the parties that the payments required
hereunder will be paid in full when due without any delay or diminution
whatsoever.
 
Section 4.4.Payments Pledged and Assigned. It is understood and agreed that all
payments required to be made by the Company pursuant to Section 4.2 hereof
(except payments made to the Trustee pursuant to Section 4.2(c) hereof, to the
Remarketing Agent and the Auction Agent pursuant to Section 4.2(f) hereof, to
the Issuer pursuant to Section 4.2(e) hereof and to any or all the Issuer and
the Trustee and the Remarketing Agent pursuant to Section 4.2(g) hereof) and
certain rights of the Issuer hereunder are pledged and assigned by the
Indenture. The Company consents to such pledge and assignment. The Issuer hereby
directs the Company and the Company hereby agrees to pay or cause to be paid to
the Trustee all said amounts except payments to be made to the Remarketing Agent
and the Auction Agent pursuant to Section 4.2(f) hereof and payments to be made
to the Issuer pursuant to Sections 4.2(e) and (g) hereof. The Project will not
constitute any part of the security for the Bonds, except to the extent that the
Trustee as holder of G&R Notes has a lien on property under the G&R Indenture.
 
Section 4.5.Payment of the Bonds and Other Amounts. The Bonds and interest and
premium, if any, thereon shall be payable solely from (i) payments made by the
Company to the Trustee under Section 4.2(a) hereof and (ii) other moneys on
deposit in the Bond Fund and available therefor.
 
Payments of principal of, and premium, if any, or interest on, the Bonds with
moneys in the Bond Fund constituting proceeds from the sale of the Bonds or
earnings on investments made under the provisions of the Indenture shall be
credited against the obligation to pay required by Section 4.2(a) hereof.
 
Whenever any Bonds are redeemable in whole or in part at the option of the
Company, the Trustee, on behalf of the Issuer, shall redeem the same upon the
request of the Company and such redemption (unless conditional) shall be made
from payments made by the Company to the Trustee under Section 4.2(a) hereof
equal to the redemption price of such Bonds.
 
Whenever payment or provision therefor has been made in respect of the principal
of, or premium, if any, or interest on, all or any portion of the Bonds in
accordance with the Indenture (whether at maturity or upon redemption or
acceleration or upon provision for payment in accordance with Article VIII of
the Indenture), payments shall be deemed paid to the extent such payment or
provision therefor has been made and is considered to be a payment of principal
of, or premium, if any, or interest on, such Bonds. If such Bonds are thereby
deemed paid in full, the Trustee shall notify the Company and the Issuer that
such payment requirement has been satisfied. Subject to the foregoing, or unless
the Company is entitled to a credit under this Agreement or the Indenture, all
payments shall be in the full amount required by Section 4.2(a) hereof.
 
Article V
 
Special Covenants and Agreements
 
Section 5.1.Company to Maintain its Corporate Existence; Conditions Under Which
Exceptions Permitted. The Company agrees that during the term of this Agreement,
it will maintain its corporate existence and its good standing in the State,
will not dissolve or otherwise dispose of all or substantially all of its assets
and will not consolidate with or merge into another corporation unless the
acquirer of its assets or the corporation with which it shall consolidate or
into which it shall merge shall (i) be a corporation organized under the laws of
one of the states of the United States of America, (ii) be qualified to do
business in the State, and (iii) assume in writing all of the obligations of the
Company under this Agreement and the Tax Agreement. Any transfer of all or
substantially all of the Company’s generation assets shall not be deemed to
constitute a “disposition of all or substantially all of the Company’s assets”
within the meaning of the preceding paragraph. Any such transfer of the
Company’s generation assets shall not relieve the Company of any of its
obligations under this Agreement.
 
The Company hereby agrees that so long as any of the Bonds are insured by a Bond
Insurance Policy issued by the Bond Insurer and the Bond Insurer shall not have
failed to comply with its payment obligations under such Policy, in the event of
a Reorganization, unless otherwise consented to by the Bond Insurer, the
obligations of the Company under, and in respect of, the Bonds, the G&R Notes,
the G&R Indenture and the Agreement shall be assumed by, and shall become direct
and primary obligations of, a Regulated Utility Company such that at all times
the obligor under this Agreement and the obligor on the G&R Notes is a Regulated
Utility Company. The Company shall deliver to the Bond Insurer a certificate of
the president, any vice president or the treasurer and an opinion of counsel
reasonably acceptable to the Bond Insurer stating in each case that such
Reorganization complies with the provisions of this paragraph.
 
The Company need not comply with any of the provisions of this Section 5.1 if,
at the time of such merger or consolidation, the Bonds will be defeased as
provided in Article VIII of the Indenture. The Company need not comply with the
provisions of the second paragraph of this Section 5.1 if the Bonds are redeemed
as provided in Section 3.01(B)(3) of the Indenture or if the Bond Insurance
Policy is terminated as described in Section 3.06 of the Indenture in connection
with a purchase of the Bonds by the Company in lieu of their redemption.
 
Section 5.2.Annual Statement. The Company agrees to have an annual audit made by
its regular independent certified public accountants and to furnish the Trustee
(within 30 days after receipt by the Company) with a balance sheet and statement
of income and surplus showing the financial condition of the Company and its
consolidated subsidiaries, if any, at the close of each fiscal year and the
results of operations of the Company and its consolidated subsidiaries, if any,
for each fiscal year, accompanied by a report of said accountants that such
statements have been prepared in accordance with generally accepted accounting
principles. The Company’s obligations under this Section 5.2 may be satisfied by
delivering a copy of the Company’s Annual Report on Form 10-K to the Trustee
within 10 days after it is filed with the Securities and Exchange Commission.
 
Delivery of such reports, information and documents to the Trustee is for
informational purposes only and the Trustee’s receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company’s
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on officer’s certificates).
 
Section 5.3.Reserved.
 
Section 5.4.Recordation and Other Instruments. The Company shall cause such
security agreements, financing statements and all supplements thereto and other
instruments as may be required from time to time to be kept, to be recorded and
filed in such manner and in such places as may be required by law in order to
fully preserve, protect and perfect the security of the Owners of the Bonds and
the rights of the Trustee, and to perfect the security interest created by the
Indenture. The Company agrees to abide by the provisions of Section 5.11 of the
Indenture to the extent applicable to the Company.
 
Section 5.5.No Warranty by the Issuer. The Issuer makes no warranty, either
express or implied, as to the Project.
 
Section 5.6.Agreement as to Ownership of the Project. The Issuer and the Company
agree that title to the Project shall not be in the Issuer, and that the Issuer
shall have no interest in the Project.
 
Section 5.7.Company to Furnish Notice of Rate Period Adjustments; Liquidity
Facility Requirements; ARS Rate Period Provisions.  The Company is hereby
granted the option to designate from time to time changes in Rate Periods (and
to rescind such changes) in the manner and to the extent set forth in
Section 2.03 of the Indenture. In the event the Company elects to exercise any
such option, the Company agrees that it shall cause notices of adjustments of
Rate Periods (or rescissions thereof) to be given to the Issuer, the Trustee and
the Remarketing Agent in accordance with Section 2.03(a), (b), (c), (d) or (e)
of the Indenture, and a copy of each such notice shall also be given at such
time to S&P and Moody’s.
 
The Company hereby agrees that, so long as the Bonds are insured by a Bond
Insurance Policy issued by the Bond Insurer and notwithstanding the provisions
of Section 2.03 of the Indenture, it shall not give notice of its intention to
adjust the Rate Period for the Bonds to a Daily Rate Period, a Weekly Rate
Period or a Flexible Rate Period until the Company shall provide a liquidity
facility reasonably acceptable to the Bond Insurer from a liquidity facility
provider reasonably acceptable to the Bond Insurer in accordance with the Bond
Insurer’s liquidity facility requirements to be effective on the related date of
adjustment.
 
If during any ARS Rate Period (i) consisting of Auction Periods of 35 days or
less, the Bonds shall bear interest at the Maximum Rate for a period in excess
of 180 days, or (ii) consisting of one Auction Period of 180 days or more, the
Bonds shall bear interest at the Maximum Rate for such Period, the Company shall
notify the Bond Insurer in writing of such event and agrees to cooperate with
the Bond Insurer to take all steps reasonably necessary to adjust the Rate
Period on the Bonds as soon as reasonably practicable in accordance with the
provisions of the Indenture to the Rate Period which the Remarketing Agent
advises the Company and the Bond Insurer will be the lowest interest rate
(taking into account all relevant costs) which would enable the Remarketing
Agent to sell all the Bonds on the date of such adjustment at a price equal to
100% of the principal amount thereof (the “Lowest Interest Rate Period”). If at
such time the Company shall be in default under the Agreement but the Bond
Insurer shall not have failed to comply with its payment obligations under the
Bond Insurance Policy, the Bond Insurer may, in its discretion, direct the
Company to provide notice of the adjustment of the Rate Period on the Bonds to
the Lowest Interest Rate Period in accordance with the provisions of Section
2.03 of the Indenture.
 
Section 5.8.Information Reporting, Etc. The Issuer covenants and agrees that,
upon the direction of the Company or Bond Counsel, it will mail or cause to be
mailed to the Secretary of the Treasury (or his designee as prescribed by
regulation, currently the Internal Revenue Service Center, Ogden, Utah 84201) a
statement setting forth the information required by Section 149(e) of the Code,
which statement shall be in the form of the Information Return for Tax-Exempt
Private Activity Bond Issues (Form 8038) of the Internal Revenue Service (or any
successor form) and which shall be completed by the Company and Bond Counsel
based in part upon information supplied by the Company and Bond Counsel.
 
Section 5.9.Limited Liability of Issuer. Any obligation or liability of the
Issuer created by or arising out of this Agreement or otherwise incurred in
connection with the issuance of the Bonds (including without limitation any
liability created by or arising out of the representations, warranties or
covenants set forth herein or otherwise) shall not impose a debt or pecuniary
liability upon the Issuer or the State or any political subdivision thereof, or
a charge upon the general credit or taxing powers of any of the foregoing, but
shall be payable solely out of the Revenues or other amounts payable by the
Company to the Issuer hereunder or otherwise (including without limitation any
amounts derived from indemnifications given by the Company).
 
Neither the issuance of the Bonds nor the delivery of this Agreement shall,
directly or indirectly or contingently, obligate the Issuer or the State or any
political subdivision thereof to levy any form of taxation therefor or to make
any appropriation for their payment. Nothing in the Bonds or in the Indenture or
this Agreement or the proceedings of the Issuer authorizing the Bonds or in the
Act or in any other related document shall be construed to authorize the Issuer
to create a debt of the Issuer or the State or any political subdivision thereof
within the meaning of any constitutional or statutory provision of the State.
The principal of, and premium, if any, and interest on, the Bonds shall be
payable solely from the funds pledged for their payment in accordance with the
Indenture and available therefor under this Agreement. Neither the State nor any
political subdivision thereof shall in any event be liable for the payment of
the principal of, premium, if any, or interest on, the Bonds or for the
performance of any pledge, obligation or agreement of any kind whatsoever which
may be undertaken by the Issuer. No breach of any such pledge, obligation or
agreement may impose any pecuniary liability upon the Issuer or the State or any
political subdivision thereof, or any charge upon the general credit or against
the taxing power of the Issuer or the State or any political subdivision
thereof.
 
Section 5.10.Reserved.
 
Section 5.11.Indenture Covenants. The Company covenants to observe and perform
all of the obligations imposed on it under the Indenture.
 
Article VI
 
Events of Default and Remedies
 
Section 6.1.Events of Default Defined. The following shall be “events of
default” under this Agreement and the terms “event of default” or “default”
shall mean, whenever they are used in this Agreement, any one or more of the
following events:
 
(a)Failure by the Company to pay when due any amounts required to be paid under
Section 4.2(a) hereof, which failure results in an event of default under
subparagraph (a) or (b) of Section 9.01 of the Indenture; or
 
(b)Failure by the Company to pay or cause to be paid any payment required to be
paid under Section 4.2(b) hereof, which failure results in an event of default
under subparagraph (c) of Section 9.01 of the Indenture; or
 
(c)Failure by the Company to observe and perform any covenant, condition or
agreement on its part to be observed or performed in this Agreement, other than
as referred to in (a) and (b) above, for a period of 90 days after written
notice, specifying such failure and requesting that it be remedied and stating
that such notice is a “Notice of Default” hereunder, given to the Company by the
Trustee or to the Company and the Trustee by the Issuer, unless the Issuer and
the Trustee shall agree in writing to an extension of such time prior to its
expiration; provided, however, if the failure stated in the notice cannot be
corrected within the applicable period, the Issuer and the Trustee will not
unreasonably withhold their consent to an extension of such time if corrective
action is instituted within the applicable period and diligently pursued until
the failure is corrected and such corrective action or diligent pursuit is
evidenced to the Trustee by a certificate of an Authorized Company
Representative; or
 
(d)A proceeding or case shall be commenced, without the application or consent
of the Company, in any court of competent jurisdiction seeking (i) liquidation,
reorganization, dissolution, winding-up or composition or adjustment of debts,
(ii) the appointment of a trustee, receiver, custodian, liquidator or the like
of the Company or of all or any substantial part of its assets, or (iii) similar
relief under any law relating to bankruptcy, insolvency, reorganization,
winding-up or composition or adjustment of debts, and such proceeding or cause
shall continue undismissed, or an order, judgment, or decree approving or
ordering any of the foregoing shall be entered and shall continue in effect for
a period of 90 days; or an order for relief against the Company shall be entered
against the Company in an involuntary case under the Bankruptcy Code (as now or
hereafter in effect) or other applicable law; or
 
(e)The Company shall admit in writing its inability to pay its debts generally
as they become due or shall file a petition in voluntary bankruptcy or shall
make any general assignment for the benefit of its creditors, or shall consent
to the appointment of a receiver or trustee of all or substantially all of its
property, or shall commence a voluntary case under the Bankruptcy Code (as now
or hereafter in effect), or shall file in any court of competent jurisdiction a
petition seeking to take advantage of any other law relating to bankruptcy,
insolvency, reorganization, winding-up or composition or adjustment of debts, or
shall fail to controvert in a timely or appropriate manner, or acquiesce in
writing to, any petition filed against it in an involuntary case under such
Bankruptcy Code or other applicable law; or
 
(f)Dissolution or liquidation of the Company; provided that the term
“dissolution or liquidation of the Company” shall not be construed to include
the cessation of the corporate existence of the Company resulting either from a
merger or consolidation of the Company into or with another corporation or a
dissolution or liquidation of the Company following a transfer of all or
substantially all of its assets as an entirety, under the conditions permitting
such actions contained in Section 5.1 hereof; or
 
(g)The occurrence of an “event of default” under the Indenture.
 
The foregoing provisions of Section 6.1(c) are subject to the following
limitations: If by reason of Force Majeure the Company is unable in whole or in
part to carry out its agreements on its part herein contained, other than the
obligations on the part of the Company contained in Article IV and Section 6.4
hereof, the Company shall not be deemed in default during the continuance of
such inability. The Company agrees, however, to remedy with all reasonable
dispatch the cause or causes preventing the Company from carrying out its
agreements; provided that the settlement of strikes, lockouts and other
industrial disturbances shall be entirely within the discretion of the Company
and the Company shall not be required to make settlement of strikes, lockouts
and other industrial disturbances by acceding to the demands of the opposing
party or parties when such course is in the sole judgment of the Company
unfavorable to the Company.
 
Section 6.2.Remedies on Default. Whenever any event of default referred to in
Section 6.1 hereof shall have happened and be continuing, the Trustee, as
assignee of the Issuer:
 
(a)shall, by notice in writing to the Company, declare the unpaid indebtedness
under Section 4.2(a) hereof to be due and payable immediately, if concurrently
with or prior to such notice the unpaid principal amount of the Bonds shall have
been declared to be due and payable, and upon any such declaration the same
(being an amount sufficient, together with other moneys available therefor in
the Bond Fund, to pay the unpaid principal of, premium, if any, and interest
accrued on, the Bonds) shall become and shall be immediately due and payable as
liquidated damages; and
 
(b)may take whatever action at law or in equity as may appear necessary or
desirable to collect the payments and other amounts then due and thereafter to
become due hereunder or to enforce performance and observance of any obligation,
agreement or covenant of the Company under this Agreement.
 
Any amounts collected pursuant to action taken under this Section 6.2 shall be
paid into the Bond Fund (unless otherwise provided in this Agreement) and
applied in accordance with the provisions of the Indenture. No action taken
pursuant to this Section 6.2 shall relieve the Company from the Company’s
obligations pursuant to Section 4.2 hereof.
 
No recourse shall be had for any claim based on this Agreement against any
officer, director or stockholder, past, present or future, of the Company as
such, either directly or through the Company, 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.
 
Nothing herein contained shall be construed to prevent the Issuer from enforcing
directly any of its rights under Sections 4.2(e), 4.2(g) and 6.4 hereof.
 
The Company shall promptly notify the Issuer of any action taken by the Company
under the grant of authority from the Issuer under the last paragraph of
Section 9.01 of the Indenture.
 
Section 6.3.No Remedy Exclusive. No remedy herein conferred upon or reserved to
the Issuer is intended to be exclusive of any other available remedy or
remedies, but each and every such remedy shall be cumulative and shall be in
addition to every other remedy given under this Agreement or now or hereafter
existing at law or in equity or by statute. No delay or omission to exercise any
right or power accruing upon any default shall impair any such right or power or
shall be construed to be a waiver thereof, but any such right and power may be
exercised from time to time and as often as may be deemed expedient. In order to
entitle the Issuer or the Trustee to exercise any remedy reserved to it in this
Article, it shall not be necessary to give any notice, other than such notice as
may be herein expressly required. Subject to the provisions of the Indenture and
hereof, such rights and remedies as are given the Issuer hereunder shall also
extend to the Trustee. The Owners of the Bonds, subject to the provisions of the
Indenture, shall be entitled to the benefit of all covenants and agreements
herein contained.
 
Section 6.4.Agreement to Pay Fees and Expenses of Counsel. In the event the
Company should default under any of the provisions of this Agreement and the
Issuer or the Trustee should employ Counsel or incur other expenses for the
collection of the indebtedness hereunder or the enforcement of performance or
observance of any obligation or agreement on the part of the Company herein
contained, the Company agrees that it will on written demand therefor pay to the
Trustee or the Issuer (or to the Counsel for either of such parties if directed
by such party), the reasonable fees and expenses of such Counsel and such other
expenses so incurred by or on behalf of the Issuer or the Trustee.
 
Section 6.5.No Additional Waiver Implied by One Waiver; Consents to Waivers. In
the event any agreement contained in this Agreement should be breached by either
party and thereafter waived by the other party, such waiver shall be limited to
the particular breach so waived and shall not be deemed to waive any other
breach hereunder. No waiver shall be effective unless in writing and signed by
the party making the waiver. The Issuer shall have no power to waive any default
hereunder by the Company without the consent of the Trustee to such waiver. The
Trustee shall have the power to waive any default by the Company hereunder,
except a default under Section 3.4, 4.2(e), 4.2(g) or 6.4 hereof, in so far as
it pertains to the Issuer, without the prior written concurrence of the Issuer.
Notwithstanding the foregoing, if, after the acceleration of the maturity of the
outstanding Bonds by the Trustee pursuant to Section 9.02 of the Indenture, (i)
all arrears of principal of and interest on the outstanding Bonds and interest
on overdue principal and (to the extent permitted by law) on overdue
installments of interest at the rate of interest borne by the Bonds on the date
on which such principal or interest became due and payable and the premium, if
any, on all Bonds then Outstanding which have become due and payable otherwise
than by acceleration, and all other sums payable under the Indenture, except the
principal of and the interest on such Bonds which by such acceleration shall
have become due and payable, shall have been paid, (ii) all other things shall
have been performed in respect of which there was a default, (iii) there shall
have been paid the reasonable fees and expenses of the Trustee and of the Owners
of such Bonds, including reasonable attorneys’ fees paid or incurred and (iv)
such event of default under the Indenture shall be waived in accordance with
Section 9.09 of the Indenture with the consequence that such acceleration under
Section 9.02 of the Indenture is rescinded, then the Company’s default hereunder
shall be deemed to have been waived and its consequences rescinded and no
further action or consent by the Trustee or the Issuer shall be required;
provided that there has been furnished an opinion of Bond Counsel to the effect
that such waiver will not adversely affect the exemption from federal income
taxes of interest on the Bonds.
 
Article VII
 
Options and Obligations of Company;
 
Prepayments; Redemption of Bonds
 
Section 7.1.Option to Prepay. The Company shall have, and is hereby granted, the
option to prepay the payments due hereunder in whole or in part at any time or
from time to time (a) to provide for the redemption of Bonds pursuant to the
provisions of Section 3.01(A) of the Indenture or (b) to provide for the
defeasance of the Bonds pursuant to Article VIII of the Indenture. In the event
the Company elects to provide for the redemption of Bonds as permitted by this
Section, the Company shall notify and instruct the Trustee in accordance with
Section 7.3 hereof to redeem all or any portion of the Bonds in advance of
maturity. If the Company so elects, any redemption of Bonds pursuant to
Section 3.01(A) of the Indenture may be made conditional.
 
Section 7.2.Obligation to Prepay. The Company covenants and agrees that if all
or any part of the Bonds are unconditionally called for redemption in accordance
with the Indenture or become subject to mandatory redemption (except as
otherwise provided in Section 3.02 of the Indenture), it will prepay the
indebtedness hereunder in whole or in part in an amount sufficient to redeem
such Bonds on the date fixed for the redemption of such Bonds.
 
Section 7.3.Notice of Prepayment. Upon the exercise of the option granted to the
Company in Section 7.1 hereof, or upon the Company having knowledge of the
occurrence of any event requiring mandatory redemption of the Bonds in
accordance with Section 3.01(B) of the Indenture, the Company shall give written
notice to the Issuer, the Remarketing Agent, the Auction Agent, the Trustee and
the Broker-Dealers. The notice shall provide for the date of the application of
the prepayment made by the Company hereunder to the retirement of the Bonds in
whole or in part pursuant to call for redemption and shall be given by the
Company not less than five Business Days prior to the date notice of such
redemption must be given by the Trustee to the Bondholders as provided in
Section 3.02 of the Indenture or such later date as is acceptable to the Trustee
and the Issuer.
 
Article VIII
 
Miscellaneous
 
Section 8.1.Notices. (a) Except as otherwise provided herein, all notices,
certificates or other communications hereunder shall be sufficiently given if in
writing and shall be deemed given when mailed by first class mail, postage
prepaid, or by qualified overnight courier service, courier charges prepaid, or
by facsimile (receipt of which is orally confirmed) addressed as follows: if to
the Issuer, at 1001 East Ninth Street, Building A, Room 225, Reno, Nevada 89512,
or to telecopy number (775) 328-2037, Attention: Finance Director; if to the
Company, at 6226 West Sahara Avenue, MS #2, Las Vegas, Nevada  89146, or to
telecopy number (702) 367-5629, Attention: Treasurer; if to the Trustee, at
385 Rifle Camp Road, West Paterson, New Jersey 07424, or to telecopy number
(973) 357-7840, Attention: Corporate Trust Services; if to the Remarketing
Agent, at the address set forth in the Remarketing Agreement, if any; and if to
the Auction Agent, at the address set forth in the Auction Agreement, if any. In
case by reason of the suspension of regular mail service, it shall be
impracticable to give notice by first class mail of any event to the Issuer, to
the Company, to the Remarketing Agent, to the Auction Agent when such notice is
required to be given pursuant to any provisions of this Agreement, then any
manner of giving such notice as shall be satisfactory to the Trustee shall be
deemed to be sufficient giving of such notice. The Issuer, the Company, the
Trustee, the Remarketing Agent and the Auction Agent may, by notice pursuant to
this Section 8.1, designate any different addresses to which subsequent notices,
certificates or other communications shall be sent.
 
(b)The Trustee agrees to accept and act upon instructions or directions pursuant
to this Agreement sent by unsecured e-mail, facsimile transmission or other
similar unsecured electronic methods, provided, however, that (a) the Company
and/or Issuer, subsequent to such transmission of written instructions, shall,
upon request by the Trustee, provide the originally executed instructions or
directions to the Trustee, (b) upon request by the Trustee, such originally
executed instructions or directions shall be signed by a person as may be
designated and authorized to sign for the Company and/or Issuer or in the name
of the Company and/or Issuer, by an authorized representative of the Company
and/or Issuer, and (c) upon the request by the Trustee, the Company and/or
Issuer shall provide to the Trustee an incumbency certificate listing such
designated persons, which incumbency certificate shall be amended whenever a
person is to be added or deleted from the listing.  If the Company and/or Issuer
elects to give the Trustee e-mail or facsimile instructions (or instructions by
a similar electronic method) and the Trustee elects to act upon such
instructions, the Trustee’s reasonable interpretation and understanding of such
instructions shall be deemed controlling. The Trustee shall not be liable for
any losses, costs or expenses arising directly or indirectly from the Trustee’s
reasonable reliance upon and compliance with such instructions notwithstanding
that such instructions conflict or are inconsistent with a subsequent written
instruction.
 
Section 8.2.Assignments. This Agreement may not be assigned by either party
without consent of the other and the Trustee, except that the Issuer shall
assign to the Trustee its rights under this Agreement (except under
Sections 4.2(e), 4.2(g) and 6.4 hereof) as provided by Section 4.4 hereof, and
the Company may assign its rights under this Agreement to any transferee or any
surviving or resulting corporation as provided by Section 5.1 hereof.
 
Section 8.3.Severability. If any provision of this Agreement shall be held or
deemed to be or shall, in fact, be illegal, inoperative or unenforceable, the
same shall not affect any other provision or provisions herein contained or
render the same invalid, inoperative, or unenforceable to any extent whatever.
 
Section 8.4.Execution of Counterparts. This Agreement may be simultaneously
executed in several counterparts, each of which shall be an original and all of
which shall constitute but one and the same instrument.
 
Section 8.5.Amounts Remaining in Bond Fund. It is agreed by the parties hereto
that after payment in full of (i) the Bonds (or provision for payment thereof
having been made in accordance with the provisions of the Indenture), (ii) the
fees, charges and expenses of the Trustee in accordance with the Indenture,
(iii) the Administrative Expenses, (iv) the fees and expenses of the Remarketing
Agent, the Auction Agent and the Issuer and (v) all other amounts required to be
paid under this Agreement and the Indenture, any amounts remaining in the Bond
Fund shall belong to and be paid to the Company by the Trustee.
 
Section 8.6.Amendments, Changes and Modifications. This Agreement may be
amended, changed, modified, altered or terminated only by written instrument
executed by the Issuer and the Company, and only if the written consent of the
Trustee thereto is obtained, and only in accordance with the provisions of
Article XII of the Indenture.
 
Section 8.7.Governing Law. This Agreement shall be governed exclusively by and
construed in accordance with the applicable laws of the State.
 
Section 8.8.Authorized Issuer and Company Representatives. Whenever under the
provisions of this Agreement the approval of the Issuer or the Company is
required to take some action at the request of the other, such approval of such
request shall be given for the Issuer by the Authorized Issuer Representative
and for the Company by the Authorized Company Representative, and the other
party hereto and the Trustee shall be authorized to act on any such approval or
request and neither party hereto shall have any complaint against the other or
against the Trustee as a result of any such action taken.
 
Section 8.9.Term of the Agreement. This Agreement shall be in full force and
effect from its date to and including such date as all of the Bonds issued under
the Indenture shall have been fully paid or retired (or provision for such
payment shall have been made as provided in the Indenture), provided that all
representations and certifications by the Company as to all matters affecting
the tax-exempt status of the Bonds and the covenants of the Company in
Sections 4.2(c), 4.2(d), 4.2(e), 4.2(f) and 4.2(g) hereof shall survive the
termination of this Agreement.
 
Section 8.10.Cancellation at Expiration of Term. At the acceleration,
termination or expiration of the term of this Agreement and following full
payment of the Bonds or provision for payment thereof and of all other fees and
charges having been made in accordance with the provisions of this Agreement and
the Indenture, the Issuer shall deliver to the Company any documents and take or
cause the Trustee to take such actions as may be necessary to effectuate the
cancellation and evidence the termination of this Agreement.
 
Section 8.11.Bond Insurance. The payment of the principal of and interest on the
Bonds when due is to be insured under, and to the extent provided in, the Bond
Insurance Policy, including the endorsements thereto, to be issued by the Bond
Insurer, and the Issuer and the Company agree to be bound by the provisions
contained in Appendix C to the Indenture and the Company agrees to be bound by
the provisions contained in the Insurance Agreement. In the event of any
conflict between the provisions of Appendix C to the Indenture and the
provisions of this Agreement, the provisions of Appendix C shall govern and
control.
 
All references in this Agreement to the Bond Insurer shall only apply so long as
a Bond Insurance Policy issued by the Bond Insurer is in effect for any of the
Bonds (and the Bond Insurer has not failed to comply with its payment
obligations under the Bond Insurance Policy).

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In Witness Whereof, the Issuer and the Company have caused this Agreement to be
executed in their respective corporate names and their respective corporate
seals to be hereunto affixed and attested by their duly authorized officers, all
as of the date first above written.

Washoe County, Nevada

By ______________________________
                             Chairman
          Board of County Commissioners
(SEAL)

Attest:
 
___________________________________
County Clerk

Sierra Pacific Power Company
 
By _____________________________
                   William D. Rogers
      Senior Vice President, Chief Financial
                Officer and Treasurer
(SEAL)

Attest:
 
____________________________________
Secretary