Document:

Security Agreement

	

SECURITY AGREEMENT 

        THIS
SECURITY AGREEMENT (this “Agreement”) is made as of this 27th day of
December, 2002 by and between DISCOVERY TOYS, INC. (the
“Borrower”), a California corporation, with an address at 6400 Brisa
Street, Livermore, CA 94550 and AVON PRODUCTS, INC. (the
“Creditor”), a New York corporation, with an address at 1345 Avenue of
the Americas, New York, NY 10105. 

        Under
the terms hereof, the Creditor desires to obtain and the Borrower desires to grant the
Creditor security for all of the Obligations (as hereinafter defined). 

        NOW,
THEREFORE, the Borrower and the Creditor, intending to be legally bound, hereby agree
as follows: 

      1.     
Definitions. 

        “Bank
Control Agreement” shall have the meaning set forth in Section 8(d) herein. 

        “Chattel
Paper” shall have the meaning set forth in the UCC. 

        “Collateral”
shall mean and include all of the following assets, properties, rights and interests of
Borrower, including, without limitation, all such items referenced in the Perfection
Certificate, but excluding any Equipment covered by a Certificate of Title whether now
owned and existing or hereafter arising, acquired or created, and wherever located: 

             (i) 
all Receivables; 

             (ii) 
all Equipment; 

             (iii) 
all General Intangibles; 

             (iv) 
all Inventory; 

             (v) 
all Investment Property;

             (vi) 
all Subsidiary Stock;

	

             (vii) 
any and all balances, credits, deposits, accounts, or moneys of or in
          Borrower’s name in the possession or control of, or in transit to, any
          financial institution (including, without limitation, all sums on deposit
          therein from time to time and all securities, instruments and accounts in which
          such sums are invested from time to time); 

             (viii) 
all of Borrower’s right, title and interest in and to (a) its respective
          goods and other property including, but not limited to all merchandise returned
          or rejected by Customers, relating to or securing any of the Receivables; (b)
          all of the Borrower’s rights as a cosignor, a consignee, an unpaid vendor,
          mechanic, artisan, or other lienor, including stoppage in transit, setoff,
          detinue, replevin, reclamation and repurchase; (c) all additional amounts due to
          Borrower from any Customer relating to the Receivables; (d) other property,
          including warranty claims, relating to any goods securing this Agreement; (e)
          all of Borrower’s contract rights, rights of payment which have been earned
          under a contract right, instruments, documents, chattel paper, warehouse
          receipts, Deposit Accounts, money, Security Account, securities, letter of
          credit rights, supporting obligations, commercial tort claims and financial
          assets; (f) if and when obtained by Borrower, all real and personal property of
          third parties in which Borrower has been granted a lien or security interest as
          security for the payment or enforcement of Receivables; and (g) any other goods,
          personal property or real property now owned or hereafter acquired in which
          Borrower has expressly granted a security interest or may in the future grant a
          security interest to Creditor hereunder, or in any amendment or supplement
          hereto or thereto, or under any other agreement between Creditor and Borrower; 

             (ix) 
all of Borrower’s ledger sheets, ledger cards, files, correspondence,
          records, books of account, business papers, computers, computer software
          (whether owned by Borrower or in which it has an interest), computer programs,
          tapes, disks and documents relating to (i), (ii), (iii), (iv), (v), (vi), (vii)
          or (viii) of this Paragraph; and 

             (xvii) 
all proceeds and products of (i), (ii), (iii), (iv), (v), (vi), (vii), (viii) or
          (ix) in whatever form, including, but not limited to: cash, deposit accounts
          (whether or not comprised solely of proceeds), certificates of deposit,
          insurance proceeds (including hazard, flood and credit insurance), negotiable
          instruments and other instruments for the payment of money, chattel paper,
          security agreements, documents, eminent domain proceeds, condemnation proceeds
          and tort claim proceeds. 

        “Customers”
shall mean and include the account debtor with respect to any Receivable and/or the
prospective purchaser of goods, services or both with respect to any contract or contract
right, and/or any party who enters into or proposes to enter into any contract or other
arrangement with Borrower, pursuant to which Borrower is to deliver any personal property
or perform any services. 

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        “Deposit
Accounts” shall have the meaning set forth in the UCC and shall include the deposit
accounts listed in the Perfection Certificate, provided that the term applies only to a
Deposit Account with an annual balance of $100,000 or more. 

        “Equipment”
shall mean and include all of Borrower’s goods (other than Inventory) whether now
owned or hereafter acquired and wherever located including, without limitation, all
equipment, machinery, apparatus, motor vehicles, fittings, furniture, furnishings,
fixtures, parts, accessories and all replacements and substitutions therefor or accessions
thereto. 

        “General
Intangibles” shall mean and include all of Borrower’s general intangibles,
whether now owned or hereafter acquired including, without limitation, all payment
intangibles, all choses in action, causes of action, corporate or other business records,
inventions, designs, patents, patent applications, equipment formulations, manufacturing
procedures, quality control procedures, trademarks, trademark applications, service marks,
trade secrets, goodwill, copyrights, design rights, software, computer information, source
codes, codes, records and dates, registrations, licenses, franchises, Customer lists, tax
refunds, tax refund claims, computer programs, all claims under guaranties, security
interests or other security held by or granted to Borrower to secure payment of any of the
Receivables by a Customer (other than to the extent covered by Receivables) all rights of
indemnification and all other intangible property of every kind and nature (other than
Receivables). 

        “Inventory”
 shall mean and include all of Borrower’s now owned or hereafter acquired goods,
merchandise and other personal property, wherever located, to be furnished under any
consignment arrangement, contract of service or held for sale or lease, all raw materials,
work in process, finished goods and materials and supplies of any kind, nature or
description which are or might be used or consumed in Borrower’s business or used in
selling or furnishing such goods, merchandise and other personal property, and all
documents of title or other documents representing them. 

        “Investment
Property” shall mean and include all of Borrower’s now owned or hereafter
acquired securities (whether certificated or uncertificated), securities entitlements,
securities accounts, commodities contracts and commodities accounts. 

        “Lien”
 shall mean any mortgage, deed of trust, pledge, hypothecation, assignment, security
interest, lien (whether statutory or otherwise), charge, claim or encumbrance, or
preference, priority or other security agreement or preferential arrangement held or
asserted in respect of any asset of any kind or nature whatsoever including, without
limitation, any conditional sale or other title retention agreement, any lease having
substantially the same economic effect as any of the foregoing, and the filing of, or
agreement to give, any financing statement under the Uniform Commercial Code or comparable
law of any jurisdiction. 

        “Lien
Intercreditor Agreement” shall mean the Lien Intercreditor Agreement between
between PNC Bank, National Association, a national banking association, as agent for the
Bank Lenders referred to therein and Avon Products, Inc., a New York corporation and any
other such agreement Creditor is required to enter into with a substitute or additional
lender or lenders holding Senior Debt pursuant to Section 24. 

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“Obligations” shall include all loans, advances, debts, liabilities, obligations, covenants and duties
owing from the Borrower to the Creditor or to any other direct or indirect subsidiary of
Creditor, of any kind or nature, present or future (including any interest accruing
thereon after maturity, or after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding relating to the
Borrower, whether or not a claim for post-filing or post-petition interest is allowed in
such proceeding), whether or not evidenced by any note, guaranty or other instrument,
whether arising under any agreement, instrument or document, whether or not for the
payment of money, whether arising by reason of an extension of credit, opening of a letter
of credit, loan, equipment lease or guarantee, under any interest or currency swap,
future, option or other interest rate protection or similar agreement, or in any other
manner, whether arising out of overdrafts on deposit or other accounts or electronic funds
transfers (whether through automated clearing houses or otherwise) or out of the
Creditor’s non-receipt of or inability to collect funds or otherwise not being made
whole in connection with depository transfer check or other similar arrangements, whether
direct or indirect (including those acquired by assignment or participation), absolute or
contingent, joint or several, due or to become due, now existing or hereafter arising, and
any amendments, extensions, renewals or increases and all costs and expenses of the
Creditor incurred in the documentation, negotiation, modification, enforcement, collection
or otherwise in connection with any of the foregoing, including reasonable attorneys’
fees and expenses. 

        “Perfection
Certificate” shall mean the Perfection Certificate in the form substantially as
set forth in Exhibit A hereto and any supplement thereto as may be executed from time to
time as provided herein. 

        “Permitted
Encumbrances” shall mean (a) Liens in favor of PNC for the benefit of PNC; (b)
Liens in favor of a Senior Lender for Senior Debt; (c) Liens in favor of Creditor for the
benefit of Creditor; (d) Liens for taxes, assessments or other governmental charges not
delinquent, or, being contested in good faith and by appropriate proceedings and with
respect to which proper reserves have been taken by Borrower; provided,
that, the Lien shall have no effect on the priority of the Liens in favor of PNC, a
Senior Lender or Creditor or the value of the assets in which PNC, a Senior Lender or
Creditor have such a Lien and a stay of enforcement of any such Lien shall be in effect;
(e) deposits or pledges to secure obligations under worker’s compensation, social
security or similar laws, or under unemployment insurance; (f) deposits or pledges to
secure bids, tenders, contracts (other than contracts for the payment of borrowed money),
leases, statutory obligations, performance, customs, surety and appeal bonds and other
obligations of like nature arising in the ordinary course of Borrower’s business; (g)
judgment Liens that have been stayed or bonded and mechanics’, workers’,
materialmen’s or other like Liens arising in the ordinary course of Borrower’s
business with respect to obligations which are not due or which are being contested in
good faith by Borrower; (h) Liens placed upon fixed assets (and proceeds thereof)
hereafter acquired to secure all or a portion of the purchase price thereof, provided that
(x) any such lien shall not encumber any other property of Borrower and (y) the aggregate
amount of indebtedness secured by such Liens incurred as a result of such purchases during
any fiscal year shall not exceed the sum of Five Hundred Thousand Dollars ($500,000.00 or
such greater amount as the holders of Senior Debt shall approve); (i) other Liens
incidental to the conduct of Borrower’s business or the ownership of its property and
assets which were not incurred in connection with the borrowing of money or the obtaining
of advances or credit, and which do not in the aggregate materially detract from
PNC’s, a Senior Lender’s or Creditor’s rights in and to the Collateral or
the value of Borrower’s property or assets or which do not materially impair the use
thereof in the operation of Borrower’s business; (j) Liens disclosed on Exhibit B;
and (k) easements, rights-of-way, restrictions and other similar encumbrances which do not
materially detract from the value of the property subject thereto or materially interfere
with the ordinary conduct of the business of Borrower. 

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        “Person”
shall mean an individual, partnership, a corporation, a business trust, a joint stock
company, limited liability company, a trust, an unincorporated association, a joint
venture, a governmental body or any other entity of whatever nature. 

        “PNC”
shall mean PNC Bank, National Association and any replacement lender under that certain
Revolving Credit and Security Agreement dated as of June 1, 1999 between PNC, as lender
and as agent for the lenders, and Borrower. 

        “PNC
Documents” shall mean all documents, instruments and agreements between PNC and
Borrower executed in connection with that certain Revolving Credit and Security Agreement
dated as of June 1, 1999 between PNC, as lender and as agent for the lenders, and
Borrower, as amended from time to time. 

        “Receivables”
 shall mean and include, as to Borrower, all of Borrower’s accounts, contract
rights, instruments (including those evidencing indebtedness owed to Borrower by its
Affiliates), documents, chattel paper (including electronic chattel paper), general
intangibles relating to accounts, drafts and acceptances, credit card receivables and all
other forms of obligations owing to Borrower arising out of or in connection with the sale
or lease of Inventory or the rendition of services, all supporting obligations, guarantees
and other security therefor, whether secured or unsecured, now existing or hereafter
created, and whether or not specifically sold or assigned to Creditor hereunder. 

        “Securities
Account” shall have the meaning set forth in the UCC and shall include the
securities accounts listed in the Perfection Certificate. 

        “Securities
Control Agreement” shall have the meaning set forth in Section 8(e)(i) herein. 

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        “Senior
Debt” shall mean and include the outstanding principal of, premium, if any, and
interest on all indebtedness of Borrower (including any interest accruing thereon after
maturity or after the filing of any petition in bankruptcy, or the commencement of any
insolvency, reorganization or like proceeding relating to the Borrower, whether or not a
claim for post-filing or post-petition interest is allowed in such proceeding) to: (i)
PNC, as agent for the lenders, under the PNC Documents, on the terms and conditions
available under the PNC Documents and up to the maximum amount of Seven Million Dollars
($7,000,000.00); or (ii) any other lender or lenders under any substitute working capital,
letter of credit, surety or other like facility made available to Borrower from time to
time, up to an aggregate maximum amount of Seven Million Dollars ($7,000,000.00) as to all
such lenders at any given time; or (iii) any renewals, extensions, deferrals or
replacements of any such indebtedness referred to in clause (i) or (ii) above up to a
maximum amount of Seven Million Dollars ($7,000,000) as t oall such renewals, extensions,
deferrals or replacements. 

        “Senior
Lender” shall mean PNC or any other lender or lenders holding Senior Debt. 

        “Subsidiary”
of any Person shall mean a corporation or other entity of whose shares of stock or other
ownership interests having ordinary voting power (other than stock or other ownership
interests having such power only by reason of the happening of a contingency) to elect a
majority of directors of such corporation, or other Persons performing similar functions
for such entity, are owned, directly or indirectly by such Person. 

        “Subidiary
Stock” shall mean all of the issued and outstanding shares of stock owned by
Borrower or any Subsidiary of Borrower. 

        “UCC”
shall mean the Uniform Commercial Code, as adopted and enacted and as in effect from time
to time in the State whose law governs pursuant to the Section of this Agreement entitled
Governing Law and Jurisdiction. Terms used herein which are defined in the UCC and not
otherwise defined herein shall have the respective meanings ascribed to such terms in the
UCC. 

         2.       
          Grant of Security Interest. To secure the prompt payment and
          performance to the Creditor of the Obligations, the Borrower, as debtor, hereby
          assigns and grants to the Creditor, as secured party, a continuing lien on and
          security interest in and to all of its Collateral, whether now owned or existing
          or hereafter acquired or arising and wheresoever located. 

         3.       
          Change in Name or Locations. The Borrower hereby agrees that if the
          location of the Collateral changes from the locations listed on the Perfection
          Certificate and made part hereof, or if the Borrower changes its name or form or
          jurisdiction of organization, or establishes a name in which it may do business
          that is not listed as a tradename on the Perfection Certificate, the Borrower
          will immediately notify the Creditor in writing of the additions or changes. The
          Borrower’s chief executive office, form of organization and jurisdiction of
          organization are also shown on the Perfection Certificate. 

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         4.       
          Representations and Warranties. The Borrower represents and warrants
          to the Creditor that: 

        (a) the
Borrower has good, marketable and indefeasible title to the Collateral, has not made any
prior sale, pledge, encumbrance, assignment or other disposition of any of the Collateral,
and the Collateral is free from all encumbrances and rights of setoff, with the exception
of Permitted Encumbrances. No effective financing statement or other public notice with
respect to all or any part of the Collateral is on file or of record in any public office,
except such as have been filed in favor of the Creditor pursuant to this Agreement and
such as have been filed in favor of PNC pursuant to the PNC Documents or other creditors
holding Permitted Encumbrances; 

        (b) each
account and general intangible, if included in the definition of Collateral, is genuine
and enforceable in accordance with its terms; 

        (c) at
the time any account or general intangible becomes subject to this Agreement, such account
or general intangible will be a good and valid account representing a bona fide sale of
goods or services by the Borrower and such goods will have been shipped to the respective
account debtors or the services will have been performed for the respective account
debtors, and no such account or general intangible will be subject to any claim for
credit, allowance or adjustment by any account debtor or any setoff, defense or
counterclaim; 

             (d) 
the Borrower (i) is duly organized and validly existing under the laws of the
          jurisdiction of its organization, (ii) has all requisite power and authority
          enter into this Agreement and to carry out the obligations hereunder, and (iii)
          has duly executed and delivered this Agreement. This Agreement and each other
          document, statement, or instrument relating hereto, when executed and delivered
          by the Borrower, will constitute, a legal, valid and binding obligation of the
          Borrower, enforceable in accordance with its terms, subject to applicable
          bankruptcy, insolvency, reorganization, moratorium or other laws affecting
          creditors’ rights generally and subject to general principles of equity,
          regardless of whether considered in a proceeding in equity or at law; 

             (e) 
          No authorization, approval or other action by, and no notice to or filing with,
          any governmental authority is required for either (i) the pledge or grant by the
          Borrower of the Liens purported to be created in favor of Creditor hereunder, or
          (ii) the exercise by the Creditor of any rights or remedies in respect of any
          Collateral other than any filing of UCC financing statements that may be
          required to perfect the security interest granted hereunder. 

             (f) 
Except property where delivery of the property is required to perfect a security
          interest, the security interests granted pursuant to this Agreement (a) upon
          completion of the filings and other actions specified in Section III.B of the
          Perfection Certificate, will constitute valid perfected security interests in
          all of the Collateral in favor of the Creditor as collateral security for the
          Obligations, enforceable in accordance with the terms hereof against all
          creditors of the Borrower and any persons purporting to purchase any Collateral
          from the Borrower; and (b) are prior to all other Liens on the Collateral in
          existence on the date hereof except for Liens in favor of any Senior Lender that
          have priority over the Liens on the Collateral or other creditors having a
          Permitted Encumbrance. 

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             (g) 
          The Perfection Certificate will be responsive in all material respects to the
          requirements thereof as of the date thereof and will be true and correct in all
          material respects as of the date thereof to the knowledge of the Borrower. If
          the Borrower becomes aware that the then current Perfection Certificate was
          incorrect in any material respect as of the date thereof, the Borrower will
          promptly notify Creditor and provide a corrected Perfection Certificate. 

         5.       
          Borrower’s Covenants. The Borrower covenants as to the
          following: 

             (a) 
the Borrower shall, from time to time and at all reasonable times allow the
          Creditor, by or through any of its officers, agents, attorneys, or accountants,
          to examine or inspect the Collateral and obtain valuations and audits of the
          Collateral, at the Borrower’s expense, wherever located. The Borrower shall
          do, obtain, make, execute and deliver all such additional and further acts,
          things, deeds, assurances and instruments as the Creditor may require to vest in
          and assure to the Creditor its rights hereunder and in or to the Collateral, and
          the proceeds thereof, including waivers from landlords, warehousemen and
          mortgagees; 

             (b) 
the Borrower shall keep the Collateral in good order and repair at all times and
          immediately notify the Creditor of any event causing a material loss or decline
          in value of the Collateral, whether or not covered by insurance, and the amount
          of such loss or depreciation; 

             (c) 
the Borrower shall only use or permit the Collateral to be used in accordance
          with all applicable federal, state, county and municipal laws and regulations;
          and 

             (d) 
the Borrower shall have and maintain insurance at all times with respect to all
          Collateral against risks of fire (including so-called extended coverage), theft,
          sprinkler leakage, and other risks (including risk of flood if any Collateral is
          maintained at a location in a flood hazard zone) as the Creditor may require, in
          such form, in such amount, for such period and written by such companies as may
          be satisfactory to the Creditor in its sole discretion. Each such casualty
          insurance policy shall contain a standard Lender’s Loss Payable Clause
          issued in favor of PNC, any other Senior Lender and the Creditor under which all
          losses thereunder shall be paid to PNC, any other Senior Lender and the Creditor
          in accordance with the provisions of the Lien Intercreditor Agreement. Such
          policies shall expressly provide that the requisite insurance cannot be altered
          or canceled without at least thirty (30) days prior written notice to the
          Creditor and shall insure the Creditor notwithstanding the act or neglect of the
          Borrower. Upon the Creditor’s demand, the Borrower shall furnish the
          Creditor with duplicate original policies of insurance or such other evidence of
          insurance as the Creditor may require. In the event of failure to provide
          insurance as herein provided, the Creditor may, at its option, obtain such
          insurance and the Borrower shall pay to the Creditor, on demand, the cost
          thereof. Proceeds of insurance may be applied by the Creditor to reduce the
          Obligations or to repair or replace Collateral, all in the Creditor’s sole
          discretion. 

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             (e) 
the Borrower shall defend title, at its own cost and expense, to the
          Collateral pledged by it hereunder and the security interest therein and Lien
          thereon granted to Creditor and the priority thereof against all claims and
          demands of all persons, at its own cost and expense, at any time claiming
          (except to the extent related to a Lien in favor of a Senior Lender or in favor
          of a creditor with a Permitted Encumbrance) any interest therein adverse to the
          Creditor. 

             (f) 
the Borrower shall not, so long as any of the Obligations remain unpaid,
          execute, authorize or permit to be filed in any public office any financing
          statement (or similar statement or instrument of registration under the law of
          any jurisdiction) or statements relating to any Collateral, except, in each
          case, financing statements filed or to be filed in respect of and covering the
          security interests granted by the Borrower to a Senior Lenders or the Creditor,
          or creditors granted Permitted Encumbrances. 

             (g) 
the Borrower shall mark its books and records as may be necessary or appropriate
          to evidence, protect and perfect Creditor’s security interest and shall
          cause its financial statements to reflect such security interest. 

         6.       
          Negative Pledge; No Transfer. Except to a Senior Lender or as
          otherwise herein provided, the Borrower will not sell or offer to sell or
          otherwise transfer or grant or allow the imposition of a lien or security
          interest upon the Collateral (except for sales of inventory and collections of
          accounts in the Borrower’s ordinary course of business and the Permitted
          Encumbrances) or use any portion thereof in any manner inconsistent with this
          Agreement or with the terms and conditions of any policy of insurance thereon. 

    7.     
Covenants for Accounts. 

             (a) 
The Borrower will, on the Creditor’s demand, if all of Borrower’s
          obligations pursuant to the Senior Debt have been satisfied or any security
          interest in the Collateral granted under the PNC Documents and any other Senior
          Lender loan documents has been released, make notations on its books and records
          showing the Creditor’s security interest and make available to the Creditor
          shipping and delivery receipts evidencing the shipment of the goods that gave
          rise to an account, completion certificates or other proof of the satisfactory
          performance of services that gave rise to an account, a copy of the invoice for
          each account and copies of any written contract or order from which an account
          arose. The Borrower shall, if all of Borrower’s obligations pursuant to the
          Senior Debt have been satisfied or any security interest in the Collateral
          granted under the PNC Documents and any other Senior Lender loan documents has
          been released, promptly notify the Creditor if an account becomes evidenced or
          secured by an instrument or chattel paper and upon the Creditor’s request,
          will promptly deliver any such instrument or chattel paper to the Creditor,
          including any letter of credit delivered to the Borrower to support a shipment
          of inventory by the Borrower. 

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             (b) 
If all of Borrower’s obligations pursuant to the Senior Debt have been
          satisfied and any security interest in the Collateral granted under the PNC
          Documents and any other Senior Lender loan documents has been released, the
          Borrower will promptly advise the Creditor whenever an account debtor refuses to
          retain or returns any goods with a sale price of $100,000 or more from the sale
          of which an account arose and will comply with any instructions that the
          Creditor may give regarding the sale or other disposition of such returns. From
          time to time with such frequency as the Creditor may request, the Borrower will
          report to the Creditor all credits given to account debtors on all accounts. 

             (c) 
If all of Borrower’s obligations pursuant to the Senior Debt have been
          satisfied or any security interest in the Collateral granted under the PNC
          Documents and any other Senior Lender loan documents has been released, the
          Borrower will immediately notify the Creditor if any account in the amount of
          $25,000 or more arises out of contracts with the United States or any
          department, agency or instrumentality thereof, and will execute any instruments
          and take any steps required by the Creditor so that all monies due and to become
          due under such contract shall be assigned to the Creditor and notice of the
          assignment given to and acknowledged by the appropriate government agency or
          authority under the Federal Assignment of Claims Act. 

             (d) 
At any time after the occurrence of an Event of Default, and if all of
          Borrower’s obligations pursuant to the Senior Debt have been satisfied or
          any security interest in the Collateral granted under the PNC Documents and any
          other Senior Lender loan documents has been released, the Creditor may direct
          any persons who are indebted to the Borrower on any Collateral consisting of
          accounts or general intangibles to make payment directly to the Creditor of the
          amounts due, without notice to Borrower. The Creditor is authorized to give
          receipts to such account debtors for any such payments and the account debtors
          will be protected in making such payments to the Creditor. 

    8.     
Further Assurances. 

             (a) 
UCC Filings. At the Creditor’s request, the Borrower will join with
          the Creditor in executing one or more financing, continuation or amendment
          statements pursuant to the UCC in form satisfactory to the Creditor and will pay
          the cost of preparing and filing the same in all jurisdictions in which such
          filing is deemed by the Creditor to be necessary or desirable in order to
          perfect, preserve and protect its security interests. The Borrower authorizes
          the Creditor to file financing, continuation or amendment statements pursuant to
          the UCC with respect to all or any part of the Collateral without the
          Borrower’s signature, where permitted by law. A carbon, photographic or
          other copy of this Agreement or of a UCC financing statement may be filed as and
          in lieu of a UCC financing statement. As of the date hereof, the Borrower shall
          execute and deliver the Perfection Certificate to the Creditor. Furthermore,
          within thirty (30) days of the end of each fiscal quarter of the Borrower, the
          Borrower shall execute and deliver a supplement to the Perfection Certificate in
          form and substance as set forth in Schedule I to the Perfection Certificate. 

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             (b) 
Intellectual Property Filings. The Borrower hereby irrevocably authorizes
          the Creditor to file documents with the United States Patent and Trademark
          Office or United States Copyright Office (or any successor office or any similar
          office in any other country) for the purpose of perfecting, confirming,
          continuing, enforcing or protecting the security interest granted by the
          Borrower hereunder and naming the Borrower, as debtor, and Creditor, as secured
          party. 

             (c) 
Instruments and Tangible Chattel Paper. If any amount payable under or in
          connection with any of the Collateral shall be evidenced by any instrument or
          tangible chattel paper, the Borrower acquiring such instrument or tangible
          chattel paper shall forthwith endorse, assign and deliver the same to the
          Creditor, accompanied by such instruments of transfer or assignment duly
          executed in blank as the Creditor may from time to time specify and which are
          satisfactory to holders of Senior Debt. 

             (d) 
Deposit Accounts. From and after the date in which all of Borrower’s
          obligations pursuant to the Senior Debt loan documents have been
          satisfied and any security interest in the Collateral granted under the PNC
          Documents and any other Senior Lender loan documents has been released ( the
          “Release Date”), except with respect to Deposit Accounts subject to
          certain Permitted Encumbrances for which “control” as defined by the
          UCC cannot be established as a matter of law (“Excluded
          Accounts”),, for each Deposit Account that the Borrower at any time
          opens or maintains, the Borrower shall notify the Creditor thereof and shall
          take such actions and execute and deliver such documents as may be reasonably
          required so that within 45 days of the Release Date (the “Effective
          Date”), Creditor shall have “control” with regard to all Deposit
          Accounts maintained by the Borrower as of the Effective Date either by (i)
          pursuant to a deposit account control agreement, in form and substance
          satisfactory to the Creditor, ( a ” Bank Control Agreement”) causing
          the depository bank to direct the disposition of funds from time to time
          credited to such Deposit Account, without further consent of the Borrower or any
          other person, (ii) by arranging for the Creditor to become the customer
          of the bank with respect to the Deposit Account or (iii) in the case of any
          Deposit Account maintained with a Bank that will not execute a Bank Control
          Agreement, transferring all funds therein to a Bank that does execute a Bank
          Control Agreement and closing any Deposit Account with a Bank that does not
          execute a Bank Control Agreement, with the Borrower being permitted, so long as
          no Default or Event of Default exists and is continuing, to exercise rights to
          withdraw funds from such Deposit Account and the Creditor shall have no right to
          take any action with respect to any such Deposit Account unless there is a
          Default or Event of Default. From the Release Date until such time as the
          Creditor shall have “control” of the applicable Deposit Accounts
          (subject to the 45 day period set forth above and to Excluded Accounts),
          Borrower covenants to keep such Deposit Accounts (other than Excluded Accounts)
          free and clear of any liens and shall not allow any other creditor or third
          party to establish “control” over such Deposit Accounts( other than
          Eccluded Accounts). The Borrower will represent and warrant to the Creditor on
          the Release Date that, as of the Release Date, it maintains no Deposit Accounts
          other than (i) Excluded Accounts or (ii) those for which the Borrower will
          provide control thereof to the Creditor pursuant to this Section 8(d). With
          respect to Deposit Accounts opened prior to the Release Date (except for
          Excluded Accounts), the Borrower agrees to use commercially reasonable efforts
          to obtain and will sign with each institution where such a Deposit Account is
          maintained a Bank Control Agreement as provided above. With respect to a Deposit
          Account opened on or after the Release Date (except for Excluded Accounts), the
          Borrower will require as a condition to opening the Deposit Account the
          execution of a Bank Control Agreement that will be in full force and effect upon
          execution by the parties thereto. If the Borrower is in compliance with this
          Subsection (d), it shall not be a Default or Event of Default that a Bank
          Control Agreement is not in effect with respect to a Deposit Account. 

11

	

        (e) 
Investment Property.

               (i)       
          If the Borrower shall at any time hold or acquire any certificated securities
          constituting Investment Property, the Borrower shall promptly endorse, assign
          and deliver the same to the Creditor, accompanied by such instruments of
          transfer or assignment duly executed in blank, all in form and substance
          satisfactory to the Creditor and holders of Senior Debt that are parties to the
          Lien Intercreditor Agreement. If any securities now or hereafter acquired by the
          Borrower constituting Investment Property are uncertificated and are issued to
          the Borrower or its nominee directly by the issuer thereof, the Borrower shall
          immediately notify the Creditor thereof and the Borrower shall either (A)
          pursuant to a securities account control agreement, in form and substance
          satisfactory to the Creditor, (a “Securities Control Agreement”) cause
          the issuer to agree to comply with instructions from the Creditor as to such
          securities, without further consent of the Borrower, such nominee or any other
          person (other than the Senior Lenders, while any Senior Debt is outstanding), or
          (B) arrange for the Creditor to become the registered owner of the securities.
          If any securities constituting Investment Property, whether certificated or
          uncertificated, or other Investment Property now or hereafter acquired by the
          Borrower is held by the Borrower or its nominee through a securities
          intermediary or commodity intermediary, the Borrower shall promptly notify the
          Creditor thereof and, either (A) pursuant to a Securities Control Agreement
          cause such securities intermediary or commodity intermediary, as the case may
          be, to agree to comply with entitlement orders or other instructions from the
          Creditor to such securities intermediary as to such securities or other
          Investment Property, or to apply any value distributed on account of any
          commodity contract as directed by the Creditor to such commodity intermediary,
          as the case may be, in each case without further consent of the Borrower, such
          nominee or any other person (other than the Senior Lenders, while any Senior
          Debt is outstanding), or (B) subject to the Lien Intercreditor Agreement in the
          case of financial assets constituting Investment Property or other Investment
          Property held through a securities intermediary, arrange for the Creditor to
          become the entitlement holder with respect to such Investment Property, with the
          Borrower being permitted, so long as no Default or Event of Default has occurred
          and is continuing, to exercise rights to withdraw or otherwise deal with such
          Investment Property pursuant to an agreement in form and substance satisfactory
          to the Creditor subject in any case to the terms of the Lien Intercreditor
          Agreement. The Borrower represents and warrants to the Creditor that, as of the
          date hereof, the Borrower maintains no securities accounts or commodity accounts
          with any securities intermediary or commodity intermediary other than (i) as set
          forth in Section II.E of the Perfection Certificate or (ii) those for which the
          Borrower has provided notice thereof to the Creditor pursuant to the preceding
          sentence. Subject to the provisions of this Section (8)(e)(i), each such
          securities account or commodities account is subject to a Securities Control
          Agreement that is in full force and effect. 

12

	

               (ii)       
          As between the Creditor and the Borrower, the Borrower shall bear the investment
          risk with respect to the Investment Property, and the risk of loss of, damage
          to, or the destruction of the Investment Property, whether in the possession of,
          or maintained as a security entitlement by, or subject to the control of, the
          Senior Lenders, the Creditor, a securities intermediary, commodities
          intermediary, the Borrower or any other person; provided that, nothing contained
          in this Section 3.04(e)(ii) shall release or relieve any securities intermediary
          or commodities intermediary of its duties and obligations to the Borrower or any
          other person under any Securities Control Agreement or under applicable law. The
          Borrower shall promptly pay all taxes, fees, expense or other charges of
          whatever kind or nature with respect to the Investment Property pledged by it or
          this Agreement. In the event the Borrower shall fail to make such payment
          contemplated in the immediately preceding sentence, the Creditor may do so for
          the account of the Borrower shall promptly reimburse and indemnify the Creditor
          from all costs and expenses incurred by the Creditor under this Section
          8(e)(ii). 

             (f) 
Electronic Chattel Paper and Transferable Records. If any amount payable under
          or in connection with any of the Collateral shall be evidenced by any electronic
          chattel paper or any “transferable record,” as that term is defined in
          Section 201 of the Federal Electronic Signatures in Global and National Commerce
          Act, or in Section 16 of the Uniform Electronic Transactions Act as in effect in
          any relevant jurisdiction, the Borrower acquiring such electronic chattel paper
          or transferable record shall promptly notify the Creditor thereof and, at the
          request of the Creditor, shall take such action as the Creditor may request to
          vest in the Creditor control under UCC Section 9-105 of such electronic chattel
          paper or control under Section 201 of the Federal Electronic Signatures in
          Global and National Commerce Act or, as the case may be, Section 16 of the
          Uniform Electronic Transactions Act, as so in effect in such jurisdiction, of
          such transferable record subject to the Lien Intercreditor Agreement. The
          Creditor agrees with the Borrower that the Creditor will arrange, pursuant to
          procedures satisfactory to the Creditor and the holders of Senior Debt that are
          parties to the Lien Intercreditor Agreement and so long as such procedures will
          not result in the Creditor’s loss of control, for the Borrower to make
          alterations to the Electronic Chattel Paper or transferable record permitted
          under UCC Section 9-105 or, as the case may be, Section 201 of the Federal
          Electronic Signatures in Global and National Commerce Act of Section 16 of the
          Uniform Electronic Transactions Act for a party in control to allow without loss
          of control, unless an Event of Default has occurred and is continuing or would
          occur after taking into account any action by the Borrower with respect to such
          electronic chattel paper or transferable record. 

13

	

             (g) 
Letter-of-Credit Rights. If the Borrower is at any time a beneficiary under a
          letter of credit in excess of $1.0 million now or hereafter issued in favor of
          the Borrower, the Borrower shall promptly notify the Creditor thereof and, at
          the request of the Creditor, the Borrower shall, pursuant to an agreement in
          form and substance satisfactory to the Creditor subject to the Lien
          Intercreditor Agreement, either (i) arrange for the issuer and any confirmer of
          such letter of credit to consent to an assignment to the Creditor of the
          proceeds of any drawing under the letter of credit or (ii) arrange for the
          Creditor to become the transferee beneficiary of the letter of credit. 

             (h) 
Commercial Tort Claims. At anytime after the Senior Debt is satisfied in full if
          the Borrower shall at any time hold or acquire a commercial tort claim relating
          to any of the Collateral, the Borrower shall promptly notify the Creditor in
          writing signed by the Borrower of the brief details thereof and grant to the
          Creditor in such writing a security interest therein and in the Proceeds
          thereof, all in accordance with this Agreement, with such writing to be in form
          and substance satisfactory to the Creditor. 

         9.       
          Events of Default. The Borrower shall, at the Creditor’s option,
          be in default under this Agreement upon the happening of any of the following
          events or conditions (each, an “Event of Default”): 

             (a) 
any Event of Default (as defined in any of the Obligations); 

             (b) 
any default under any of the Obligations that does not have a defined set of
          Events of Default and the lapse of any notice or cure period provided in such
          Obligations with respect to such default or if none the failure to cure upon
          thirty (30) days prior written notice of such default by the Creditor to the
          Borrower; 

             (c) 
the failure by the Borrower to perform any of its obligations under this
          Agreement after thirty (30) days prior written notice of such default by the
          Creditor to the Borrower and the Borrower’s failure to cure such default; 

             (d) 
falsity, inaccuracy or material breach by the Borrower of any written material
          warranty, representation or statement made or furnished to the Creditor by or on
          behalf of the Borrower; 

             (e) 
an uninsured material loss, theft, damage, or destruction to any of the
          Collateral, or the entry of any judgment or judgments against the Borrower for
          an aggregate amount in excess of Two Hundred Thousand Dollars ($200,000.00)
          which within forty (40) days of such entry is not either satisfied, stayed or
          discharged of record, or any lien against or the making of any levy, seizure or
          attachment of or on the Collateral in an amount in excess of Two Hundred
          Thousand Dollars ($200,000.00); 

14

	

             (f) 
except as permitted or contemplated by this Agreement the failure of the
          Creditor to have a perfected second priority security interest in the
          Collateral; 

             (g) 
any indication or evidence received by the Creditor that the Borrower may have
          directly or indirectly been engaged in any type of activity which, in the
          Creditor’s discretion, might result in the forfeiture of any property of
          the Borrower to any governmental entity, federal, state or local with a value of
          Two Hundred Thousand ($200,000.00) or more; 

             (h) 
any event of default under the Senior Debt which is not cured within the time
          provided therefor or waived by the holders of the Senior Debt; 

             (i) 
any order, judgment or decree shall be entered, without Borrower’s
          application, approval or consent, by any court of competent jurisdiction,
          approving a petition seeking reorganization of Borrower or of all or a
          substantially part of its assets, or appointing a receiver, custodian, trustee,
          intervenor or liquidator therefor, or such a petition seeking reorganization or
          liquidation shall be filed against Borrower and such order, judgment or decree
          shall continue unstayed and in effect for a period of sixty (60) days; or 

             (j) 
Borrower shall: (I) apply for or consent to the appointment of a receiver,
          trustee or liquidator of any material part of its property; (II) admit in
          writing its inability to pay debts as they mature; (III) make a general
          assignment for the benefit of creditors; (IV) be adjudicated bankrupt or
          insolvent; (V) file a voluntary petition in bankruptcy or a petition or an
          answer seeking an arrangement with creditors or take advantage of any
          bankruptcy, insolvency, readjustment of debt, dissolution or liquidation law, or
          an answer admitting the material allegations of a petition filed against it in
          any proceeding under any such law; or (VI) take any action for the purpose of
          effectuating any of the foregoing. 

         10.       
          Remedies. Upon the occurrence of any such Event of Default and at any
          time thereafter, the Creditor may declare all Obligations secured hereby
          immediately due and payable and shall have, in addition to any remedies provided
          herein or by any applicable law or in equity, all the remedies of a secured
          party under the UCC. The Creditor’s remedies include, but are not limited
          to, the right to (a) peaceably by its own means or with judicial assistance
          enter the Borrower’s premises and take possession of the Collateral without
          prior notice to the Borrower or the opportunity for a hearing, (b) render the
          Collateral unusable, (c) dispose of the Collateral on the Borrower’s
          premises, (d) require the Borrower to assemble the Collateral and make it
          available to the Creditor at a place designated by the Creditor, and (e) notify
          the United States Postal Service to send the Borrower’s mail to the
          Creditor. Unless the Collateral is perishable or threatens to decline speedily
          in value or is of a type customarily sold on a recognized market, the Creditor
          will give the Borrower reasonable notice of the time and place of any public
          sale thereof or of the time after which any private sale or any other intended
          disposition thereof is to be made. The requirements of commercially reasonable
          notice shall be met if such notice is sent to the Borrower at least five (5)
          days before the time of the intended sale or disposition. Expenses of retaking,
          holding, preparing for sale, selling or the like shall include the
          Creditor’s reasonable attorney’s fees and legal expenses, incurred or
          expended by the Creditor to enforce any payment due it under this Agreement
          either as against the Borrower, or in the prosecution or defense of any action,
          or concerning any matter growing out of or connection with the subject matter of
          this Agreement and the Collateral pledged hereunder. The Borrower waives all
          relief from all appraisement or exemption laws now in force or hereafter
          enacted. The Creditor’s right to exercise the foregoing remedies shall
          be subject to the terms of the Lien Intercreditor Agreement or the terms of any
          Permitted Encumbrance. 

15

	

         11.       
          Power of Attorney. The Borrower does hereby make, constitute and
          appoint any officer or agent of the Creditor as the Borrower’s true and
          lawful attorney-in-fact, with power to (a) endorse the name of the Borrower
          or any of the Borrower’s officers or agents upon any notes, checks, drafts,
          money orders, or other instruments of payment or Collateral that may come into
          the Creditor’s possession in full or part payment of any Obligations; (b)
          sue for, compromise, settle and release all claims and disputes with respect to,
          the Collateral; and (c) sign, for the Borrower, financing, continuation or
          amendment statements pursuant to the UCC, or supplemental intellectual property
          security agreements; granting to the Borrower’s said attorney full power to
          do any and all things necessary to be done in and about the premises as fully
          and effectually as the Borrower might or could do. The Borrower hereby ratifies
          all that said attorney shall lawfully do or cause to be done by virtue hereof.
          This power of attorney is coupled with an interest, and is irrevocable. The
          aforesaid power of attorney can only be exercised by Creditor if all of
          Borrower’s obligations pursuant to the Senior Debt have been satisfied or
          any security interest in the Collateral granted under the PNC Documents and any
          other Senior Lender loan documents has been released and with respect to
          property subject to a Permitted Encumbrance, the approval of the holder of the
          Permitted Encumbrance. 

         12.       
          Payment of Expenses. At its option, the Creditor may discharge taxes,
          liens, security interests or such other encumbrances as may attach to the
          Collateral, may pay for required insurance on the Collateral and may pay for the
          maintenance, appraisal or reappraisal, and preservation of the Collateral, as
          determined by the Creditor to be necessary. The Borrower will reimburse the
          Creditor on demand for any payment so made or any expense incurred by the
          Creditor pursuant to the foregoing authorization, and the Collateral also will
          secure any advances or payments so made or expenses so incurred by the Creditor. 

         13.       
          Notices. All notices, demands, requests, consents, approvals and
          other communications required or permitted hereunder must be in writing and will
          be effective upon receipt. Such notices and other communications may be hand
          delivered, sent by facsimile transmission with confirmation of delivery and a
          copy sent by first-class mail, or sent by nationally recognized overnight
          courier service, to a party’s address set forth above or to such other
          address as any party may give to the other in writing for such purpose. 

         14.       
          Preservation of Rights. No delay or omission on the Creditor’s
          part to exercise any right or power arising hereunder will impair any such right
          or power or be considered a waiver of any such right or power, nor will the
          Creditor’s action or inaction impair any such right or power. The
          Creditor’s rights and remedies hereunder are cumulative and not exclusive
          of any other rights or remedies that the Creditor may have under other
          agreements, at law, or in equity. 

16

	

         15.       
          Illegality. In case any one or more of the provisions contained in
          this Agreement should be invalid, illegal or unenforceable in any respect, the
          validity, legality and enforceability of the remaining provisions contained
          herein shall not in any way be affected or impaired thereby. 

         16.       
          Changes in Writing. No modification, amendment or waiver of any
          provision of this Agreement nor consent to any departure by the Borrower
          therefrom will be effective unless made in a writing signed by the Creditor, and
          then such waiver or consent shall be effective only in the specific instance and
          for the purpose for which given. No notice to or demand on the Borrower in any
          case will entitle the Borrower to any other or further notice or demand in the
          same, similar or other circumstance. 

         17.       
          Entire Agreement. This Agreement (including the documents and
          instruments referred to herein) constitutes the entire agreement and supersedes
          all other prior agreements and understandings, both written and oral, between
          the parties with respect to the subject matter hereof. 

         18.       
          Counterparts. This Agreement may be signed in any number of
          counterpart copies and by the parties hereto on separate counterparts, but all
          such copies shall constitute one and the same instrument. Delivery of an
          executed counterpart of signature page to this Agreement by facsimile
          transmission shall be effective as delivery of a manually executed counterpart.
          Any party so executing this Agreement by facsimile transmission shall promptly
          deliver a manually executed counterpart, provided that any failure to do so
          shall not affect the validity of the counterpart executed by facsimile
          transmission. 

         19.       
          Successors and Assigns. This Agreement will be binding upon and inure
          to the benefit of the Borrower and the Creditor and their respective heirs,
          executors, administrators, successors and assigns; provided, however,
          that the Borrower may not assign this Agreement in whole or in part without the
          Creditor’s prior written consent and the Creditor at any time may assign
          this Agreement in whole or in part. 

         20.       
          Interpretation. In this Agreement, unless the Creditor and the
          Borrower otherwise agree in writing, the singular includes the plural and the
          plural the singular; words importing any gender include the other genders;
          references to statutes are to be construed as including all statutory provisions
          consolidating, amending or replacing the statute referred to; the word
          “or” shall be deemed to include “and/or”, the words
          “including”, “includes” and “include” shall be
          deemed to be followed by the words “without limitation”; references to
          articles, sections (or subdivisions of sections) or exhibits are to those of
          this Agreement unless otherwise indicated. Section headings in this Agreement
          are included for convenience of reference only and shall not constitute a part
          of this Agreement for any other purpose. If this Agreement is executed by more
          than one Borrower, the obligations of such persons or entities will be joint and
          several. 

17

	

         21.       
          Indemnity. The Borrower agrees to indemnify each of the Creditor, its
          directors, officers and employees and each legal entity, if any, who controls
          the Creditor (the “Indemnified Parties”) and to hold each
          Indemnified Party harmless from and against any and all claims, damages, losses,
          liabilities and expenses (including all fees and charges of internal or external
          counsel with whom any Indemnified Party may consult and all expenses of
          litigation or preparation therefor) which any Indemnified Party may incur or
          which may be asserted against any Indemnified Party as a result of the execution
          of or performance under this Agreement; provided, however, that
          the foregoing indemnity agreement shall not apply to claims, damages, losses,
          liabilities and expenses solely attributable to an Indemnified Party’s
          gross negligence or willful misconduct. The indemnity agreement contained in
          this Section shall survive the termination of this Agreement. The Borrower may
          participate at its expense in the defense of any such claim. 

         22.       
          Governing Law and Jurisdiction. This Agreement has been delivered to
          and accepted by the Creditor and will be deemed to be made in the State of New
          York. THIS AGREEMENT WILL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF
          THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
          YORK. The Borrower hereby irrevocably consents to the exclusive jurisdiction
          of any state or federal court in the State of New York; provided that nothing
          contained in this Agreement will prevent the Creditor from bringing any action,
          enforcing any award or judgment or exercising any rights against the Borrower
          individually, against any security or against any property of the Borrower
          within any other county, state or other foreign or domestic jurisdiction. The
          Creditor and the Borrower agree that the venue provided above is the most
          convenient forum for both the Creditor and the Borrower. The Borrower waives any
          objection to venue and any objection based on a more convenient forum in any
          action instituted under this Agreement. 

         23.       
          WAIVER OF JURY TRIAL. EACH OF THE BORROWER AND THE CREDITOR
          IRREVOCABLY WAIVES ANY AND ALL RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY
          ACTION, PROCEEDING OR CLAIM OF ANY NATURE RELATING TO THIS AGREEMENT, ANY
          DOCUMENTS EXECUTED IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION
          CONTEMPLATED IN ANY OF SUCH DOCUMENTS. THE BORROWER AND THE CREDITOR ACKNOWLEDGE
          THAT THE FOREGOING WAIVER IS KNOWING AND VOLUNTARY. 

         24.       
          Substitute or Additional Holders. Creditor or any other holder of an
          Obligation, including the Note in the amount of $3,500,000 of the Borrower to
          the order of the Creditor, shall execute an agreement with any holder of Senior
          Debt in form and substance similar to the Lien Intercreditor Agreement at the
          request of the Borrower or any such holder of Senior Debt. 

{END OF TEXT;
SIGNATURE PAGE FOLLOWS} 

18

	

        WITNESS
the due execution hereof as a document under seal, as of the date first written above. 

	

WITNESS / ATTEST:

By:  JACK B. HOOD
——————————————

Print Name:   Jack B. Hood

Title:              CFO		BORROWER:

DISCOVERY TOYS, INC.

By:  JAMES M. CASCINO
——————————————

       James M. Cascino
       Chief Executive Officer

	

WITNESS / ATTEST:

By:  MARGARET A. AUPKE

——————————————

Name:  Margaret A. Aupke

Title:    Assistant Treasurer		CREDITOR:

AVON PRODUCTS, INC.

By:  DENNIS LING
——————————————

Name:  Dennis Ling

Title:    Group Vice President, Finance & Treasurer

	

19

	

EXHIBIT “A” 

TO SECURITY AGREEMENT 

FORM OF PERFECTION
CERTIFICATE 

        This
Perfection Certificate, dated as of December 27, 2002 (this
“Certificate”), is delivered in accordance with the Security Agreement,
dated as of December 27, 2002 (as amended, restated, supplemented or otherwise modified
from time to time, the “Security Agreement”), by and between DISCOVERY
TOYS, INC. (the “Borrower”) and AVON PRODUCTS, INC. (the
“Creditor”). Undefined capitalized terms used herein have the meanings
assigned to such terms in the Security Agreement. 

        The
undersigned hereby certifies to Creditor that he is the [________] of Borrower, and that
as such he is qualified to deliver this Certificate, and further certifies as follows: 

               	I. 	  	
                    Names/Locations. 

                    

               	A. 	  	
                    Legal Name, Organization, Jurisdiction of Organization and Organizational
                    Identification Number. The full and exact legal name (as it
                    appears in the articles of incorporation (as amended to date), the type of
                    organization, the jurisdiction of organization (or formation, as applicable),
                    and the organizational identification number of the Borrower is as follows: 

                    

					
	
Borrower	Organization
Type	Jurisdiction
of Formation	Organizational
ID	Federal
Employer ID
	 	 	 	 	 

               	B. 	  	
                    Trade Names. Set forth below for the Borrower is a complete list of
                    all trade or assumed names associated with the Borrower, whether currently used,
                    used during the past five years, or by which the Borrower is or was known or
                    transacted any business (other than the name identified in Section I.A of
                    this Certificate): 

                    

			
	Borrower	Trade/Assumed Name	Prior Trade/Assumed Name
	 	 	 

               	C. 	  	
                    Changes in Names, Jurisdiction of Organization or Corporate
                    Structure. Except as set forth below, the Borrower has not changed its
                    name, jurisdiction of organization or corporate structure in any way (whether by
                    merger, consolidation, change in corporate form, change in jurisdiction of
                    organization or otherwise) within the past five years: 

                    

			
	Borrower	Date of Change	Description of Change
	 	 	 

               	D. 	  	
                    Chief Executive Offices and Mailing Addresses. For the Borrower, the
                    address of its chief executive office, and its preferred mailing address (if
                    different from the address of the chief executive office), is set forth below: 

                    

			
	Borrower	Address of Chief Executive Office	Mailing Address (if 
different from CEO
address)
	 	 	 

               	E.	  	
                    Prior Addresses. Except as set forth below, the Borrower has not
                    changed its chief executive office within the past five years: 

                    

		
	Borrower	Prior Address
	 	 

               	F.	  	
                    Acquisitions of Equity Interests or Assets. Except as set forth
                    below, the Borrower has not acquired Equity Interests of another person or
                    substantially all the assets of another person within the past five years: 

                    

			
	Borrower	Date of Acquisition	Description of Acquisition
	 	 	 

               	II. 	  	
                    Information regarding Securities Agreement Collateral. 

                    

               	A. 	  	
                    Tangible Personal Property. For the Borrower, a complete list of the
                    locations where the Borrower currently maintains, or has maintained within the
                    past five years, any of its tangible personal property (including Goods,
                    Inventory and Equipment) (whether or not in the possession of the Borrower) are
                    set forth below: 

                    

				
	Borrower	Location Address	County	Description of Assets
	 	 	 	 

               	B. 	  	
                    Warehousemen and Bailees. Except as set forth below, no persons
                    (including warehousemen and bailees) other than the Borrower have possession of
                    any of such Loan Party’s personal property: 

                    

				
	Borrower	Location Address	County	Description of Assets and Value
	 	 	 	 

               	C. 	  	
                    Fixtures/Real Property. Set forth below is a complete list of
                    locations where the Borrower owns or leases any real property: 

                    

				
	Borrower	Address	County	If owned, so indicate -

otherwise
provide
Name/Address of
record owner
	 	 	 	 

               	D. 	  	
                    Securities Collateral. For the Borrower, set forth below is a list of
                    all Equity Interests owned together with the type of organization that issued
                    such Equity Interests (e.g., corporation, limited liability company,
                    partnership or trust): 

                    

								
	Borrower	Issuer	Type
of
Org.	# of 
Shares
Owned	Total
Shares
Out-
stand
-ing	% of
Interest
Pledged	Cert. #
(if un-
certif'd,
so indicate)	Par Value
	 	 	 	 	 	 	 	 

               	E. 	  	
                    Securities Accounts. For the Borrower, set forth below is a list of
                    all Securities Accounts in which such Loan Party maintains securities or other
                    Financial Assets: 

                    

			
	Borrower	Type of Account	Name/Address of 
Financial Institution
	  	 	 

               	F. 	  	
          Deposit Accounts. With respect to the Borrower, set forth below is a
          list of all Deposit Accounts: 

                    

			
	Borrower	Type of Account	Name/Address of 
Financial Institution
	 	 	 

               	G. 	  	
          Debt Instruments. Set forth below is a list of all Instruments owed
          to the Borrower: 

                    

					
	Borrower	Issuer	Principal Amount 	Date of Issuance	Interest Rate	Maturity Date
	 	 	 	 	 	 

               	H. 	  	
                    Intercompany Indebtedness. Set forth below is a complete and accurate
                    list of all Intercompany Indebtedness as of the Closing Date: 

                    

					
	Borrower	Issuer	Principal Amount 	Date of Issuance	Description
	 	 	 	 	 	 

               	I. 	  	
                    Intellectual Property. For the Borrower, set forth below is a list of
                    all copyrights, patents, trademarks, and other intellectual property owned or
                    used, or hereafter adopted, held or used: 

                    

					
	Borrower	Copyright	Filing Date	Status	Reg. No.
	 	 	 	 	 

					
	Borrower	Patentt	Filing Date	Status	Reg. No.
	 	 	 	 	 

					
	Borrower	Trademark	Filing Date	Status	Reg. No.
	 	 	 	 	 

               	J. 	  	
                    Commercial Tort Claims. For the Borrower, set forth below is a
                    complete list of all commercial tort claims held by the Borrower, including a
                    brief description of each. 

                    

			
	Borrower	Claim	Description
	 	 	 

               	III. 	  	
                    Search Reports; Filing Locations. 

                    

               	A. 	  	
                    File Search Reports. As of the Closing Date, file search reports have
                    been obtained from each UCC filing office identified with respect to the
                    Borrower, and such search reports reflect no Liens against any of the Collateral
                    other than those permitted under the Security Agreement and the PNC Documents. 

                    

				
	Borrower	Type of Filing	Filing Office	Jurisdiction
	 	 	 	 

               	B. 	  	
                    Schedule of Filings. Set forth below, with respect to the filings
                    described in Section 8 of the Security Agreement, is a list of each filing and
                    the filing office in which such filing is to be made. All such filings have been
                    delivered to the Creditor for filing, or have been filed contemporaneously with
                    the delivery of this Perfection Certificate, or shall be filed promptly after
                    the date hereof, in each case unless otherwise specified. 

                    

				
	Borrower	Type of Filing	Filing Office	Jurisdiction
	 	 	 	 

	

        IN
WITNESS WHEREOF, the undersigned hereto has executed this Perfection Certificate as of the
date first written above. 

	
		

By:  
——————————————

Name:  
Title:      

	

EXHIBIT “B” 

TO SECURITY AGREEMENT 

		
	Permitted liens:	 
	 	 
	Secured Party:	Yale Financial Services, Inc.
	Collateral:	New Yale Forklift ERC040A with battery & charger
 and all accessions, additions, replacements and substitutions thereto and therefor, and all proceeds (including insurance proceeds) thereof.
	Filing No.:	Original - 1993258216
	Filing Date:	12/23/1993
	 	 
	Secured Party:	Yale Financial Services, Inc.
	Collateral:	New Yale Forklift ERC040A with battery & charger and all accessions, additions, replacements and substitutions thereto and therefor,
and all proceeds (including insurance proceeds) thereof.
	Filing No.:	Continuation - 1998184C0194
	Filing Date:	07/02/1998
	 	 
	Secured Party:	PNC Bank, National Association
	Collateral:	Blanket lien
	Filing No.:	Original - 199914060939
	Filing Date:	05/19/1999
	 	 
	Secured Party:	PNC Bank, National Association
	Collateral:	Blanket lien
	Filing No.:	Amendment - 2002122C0155
	Filing Date:	05/01/2002INDENTURE OF MORTGAGE 05/01/1992

  
 Exhibit 4.1 
  
 THIS INSTRUMENT GRANTS A SECURITY INTEREST BY A PUBLIC UTILITY 
 THIS INSTRUMENT
CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS 
  
 
 
 OLD DOMINION ELECTRIC COOPERATIVE, 
  
 GRANTOR, 
  
 TO 
  
 SUNTRUST BANK 
 (Successor by Merger to Crestar Bank), 
  
 TRUSTEE 
  
 
 
 FOURTEENTH SUPPLEMENTAL INDENTURE 
 Dated as of December 1, 2002 

 
 
 
 Supplemental to the Indenture of Mortgage
and Deed of Trust 
 Dated as of May 1, 1992 
  
 
 
 A Mortgage of Both Real and Personal Property 
  

  
 FOURTEENTH SUPPLEMENTAL INDENTURE 
  
 THIS FOURTEENTH SUPPLEMENTAL INDENTURE, dated as of December 1, 2002 (the “Fourteenth Supplemental
Indenture”), between OLD DOMINION ELECTRIC COOPERATIVE, a Virginia utility aggregation cooperative (the “Company”), whose mailing address and address of its chief executive office is Innsbrook Corporate Center, 4201
Dominion Boulevard, Glen Allen, Virginia 23060, and SUNTRUST BANK, a Georgia banking corporation and successor by merger to Crestar Bank, as trustee (the “Trustee”), having a corporate trust office at 919 East Main Street,
10th Floor, Corporate Trust Administration, Richmond, Virginia 23219. 
  
 WHEREAS, the Company has heretofore
executed and delivered an Indenture of Mortgage and Deed of Trust, dated as of May 1, 1992 (the “Original Indenture”), to secure, as provided therein, Bonds, to be issued in one or more series as provided in the Original Indenture,
as supplemented, modified or amended (the Original Indenture as so supplemented, modified or amended and in effect from time to time, the “Indenture”); and 
  
 WHEREAS, the Original Indenture was recorded among the land records in the counties of Halifax, Louisa, Spotsylvania and Orange, Virginia, and a UCC Form 1
concerning the Original Indenture was recorded among the financing statement records at the Virginia State Corporation Commission and the Counties of Henrico, Halifax, Louisa, Spotsylvania and Orange, Virginia; and 
  
 WHEREAS, each previous supplemental indenture to the Original Indenture heretofore was recorded among the land records for the
counties of Halifax, Louisa, Spotsylvania and Orange, Virginia and among the financing statement records at the Virginia State Corporation Commission and the Counties of Henrico, Halifax, Louisa, Spotsylvania and Orange, Virginia (other than the
Thirteenth Supplemental Indenture which was not recorded among the financing statement records of the County of Henrico), which are all of the recording offices (excluding the County of Henrico) in which this Fourteenth Supplemental Indenture will
be recorded; and 
  
 WHEREAS, the Board of Directors of the Company has established the 2002 Series B Bonds
and the Board of Directors of the Company has authorized the issuance thereof, and the Company has complied or will comply with all provisions required to issue Additional Bonds provided for in the Indenture; and 
  
 WHEREAS, the Company desires to execute and deliver this Fourteenth Supplemental Indenture, in accordance with the provisions of
the Indenture, for the purposes of (i) providing for the creation of a new series of Bonds, designating the series to be created and specifying the form and provisions of the Bonds of such new series and (ii) amending certain provisions of the
Indenture pursuant to Section 13.02 of the Indenture, effective upon obtaining the required consents from the Holders pursuant to such section; and 
  
 WHEREAS, Section 13.01 of the Indenture provides that, without the consent of the Holders of any of the Bonds at any time Outstanding, the Company, when authorized by a Board Resolution, and the
Trustee may enter into a Supplemental Indenture for the purpose and subject to the conditions set forth in said Section 13.01; 
  
 WHEREAS, Section 13.02 of the Indenture provides that, with the consent of a specified number of Holders of the Bonds of all series then Outstanding affected, the Company, when
 

 
authorized by a Board Resolution, and the Trustee may enter into a Supplemental Indenture for the purposes and subject to the conditions set forth in such Section 13.02; and 

 
 WHEREAS, the Company, as authorized by the consent of the Board of Directors, proposes to supplement and amend the
Indenture as provided herein in compliance with Section 13.02 thereof; and 
  
 WHEREAS, all acts and
proceedings required by law and by the Amended and Restated Articles of Incorporation and Bylaws, as amended and restated, of the Company necessary to secure the payment of the principal and Redemption Price of and interest on the 2002 Series B
Bonds, to make the 2002 Series B Bonds to be issued hereunder, when executed by the Company, authenticated and delivered by the Trustee and duly issued, the valid, binding and legal obligations of the Company, and to constitute the Indenture a valid
and binding mortgage for the security of all of the Bonds prior to the Release Date, in accordance with its and their terms, have been done and taken; and the execution and delivery of this Fourteenth Supplemental Indenture has been in all respects
duly authorized; 
  
 NOW, THEREFORE, THIS FOURTEENTH SUPPLEMENTAL INDENTURE WITNESSETH, that, to secure the
payment of the principal of (and premium, if any) and interest on the Outstanding Secured Bonds until the Release Date, to confirm the lien of the Indenture upon the Trust Estate mentioned therein including all property purchased, constructed or
otherwise acquired by the Company since the date of execution of the Original Indenture until the Release Date, to secure performance of the covenants therein and herein contained, to declare the terms and conditions on which the Outstanding Secured
Bonds are secured, and in consideration of the premises thereof and hereof, the Company by these presents does grant, bargain, sell, alienate, remise, release, convey, assign, transfer, mortgage, hypothecate, pledge, set over and confirm to the
Trustee, in trust, all property, rights, privileges and franchises (other than Excepted Property) of the Company of the character described in the Granting Clauses of the Indenture, including all such property, rights, privileges and franchises
acquired since the date of execution of the Original Indenture, including, without limitation, all of those fee and leasehold interests in real property, if any, which may hereafter be constructed or acquired by it, but subject to all exceptions,
reservations and matters of the character therein referred to, and expressly excepting and excluding from the lien and operation of the Indenture all properties of the character specifically excepted by paragraphs (A) through (K) of “Excepted
Property” in the Indenture to the extent contemplated thereby, and all property heretofore released or otherwise disposed of pursuant to the provisions of the Indenture. 
  
 PROVIDED, HOWEVER, that (i) if, upon the occurrence of an Event of Default, the Trustee, or any separate trustee or co-trustee appointed under Section 10.14 of the
Indenture or any receiver appointed pursuant to statutory provision or order of court, shall have entered into possession of all or substantially all of the Trust Estate, all the Excepted Property described or referred to in paragraphs (A) through
(G), inclusive, of “Excepted Property” in the Indenture then owned or thereafter acquired by the Company shall immediately, and, in the case of any Excepted Property described or referred to in paragraphs (H) through (J) inclusive, of
“Excepted Property” in the Indenture, upon demand of the Trustee or such other trustee or receiver, become subject to the lien of the Indenture to the extent permitted by law, and the Trustee or such other trustee or receiver may, to the
extent permitted by law, at the same time likewise take possession thereof, and (ii) whenever all Events of Default shall have been cured and the possession of all or substantially all of the Trust Estate shall have been restored to the Company,
such Excepted Property shall again be
 

 
 3 

 
excepted and excluded from the lien of the Indenture to the extent and otherwise as hereinabove set forth and as set forth in the Indenture. 
  

The Company may, however, pursuant to Granting Clause Third of the Indenture, subject any Excepted Property to the lien of the Indenture, whereupon the same shall
cease to be Excepted Property. 
  
 TO HAVE AND TO HOLD all said property, rights, privileges and franchises of
every kind and description, real, personal or mixed, hereby and hereafter (by Supplemental Indenture or otherwise) granted, bargained, sold, alienated, remised, released, conveyed, assigned, transferred, mortgaged, hypothecated, pledged, set over or
confirmed as aforesaid, or intended, agreed or covenanted so to be, together with all the appurtenances thereto appertaining unto the Trustee and its successors and assigns forever. 
  
 SUBJECT, HOWEVER, to (i) Permitted Encumbrances, (ii) to the extent permitted by Section 14.06 of the Indenture, as to property acquired since the date of execution
of the Original Indenture, (a) any duly recorded or perfected prior mortgage or other lien that may exist thereon at the date of the acquisition thereof by the Company, and (b) purchase money mortgages created by the Company at the time of
acquisition thereof, and (iii) defects of title to and encumbrances on property described in Article IV of the First Supplemental Indenture. 
  
 BUT IN TRUST, NEVERTHELESS, with power of sale, for the equal and proportionate benefit and security of the Holders from time to time of all the Outstanding Secured Bonds without any priority of
any such Bond over any other such Bond and for the enforcement of the payment of such Bonds in accordance with their terms. 
  
 UPON CONDITION that, until the happening of an Event of Default and subject to the provisions of Article Six of the Indenture, the Company shall be permitted to possess and use the Trust Estate, except cash, securities and
other personal property deposited, or required to be deposited, with the Trustee and to explore for, mine, extract and dispose of coal, ore, gas, oil and other minerals, to harvest standing timber and to receive and use the rents, issues, profits,
revenues and other income, products and proceeds of the Trust Estate. 
  
 AND IT IS HEREBY COVENANTED AND
DECLARED that all the Bonds are to be authenticated and delivered and the Trust Estate is to be held and applied by the Trustee, subject to the further covenants, conditions and trusts set forth in the Indenture, and the Company does hereby
covenant and agree to and with the Trustee, for the equal and proportionate benefit of all Holders of the Bonds as follows: 
  
 ARTICLE I 
  
 TERMS AND ISSUE OF THE 2002 SERIES B BONDS 
  
 Section 1.01.    General.    There is hereby established under the Indenture, as
further amended by this Fourteenth Supplemental Indenture, a series of Bonds, known as and entitled “2002 Series B Bonds” (collectively, the “2002 Series B Bonds”). The aggregate principal amount of 2002 Series B Bonds
which may be authenticated and delivered and Outstanding is limited to THREE HUNDRED MILLION AND NO/00 DOLLARS ($300,000,000.00). The 2002 Series B Bonds will mature on December 1, 2028. The Trustee is hereby appointed as Authenticating Agent for
the 2002 Series B Bonds. 

 
 4 

  
 The 2002 Series B Bonds shall be issuable without coupons and in denominations of
$1,000 and integral multiples thereof. The 2002 Series B Bonds shall bear interest from their date of issuance, payable semi-annually on June 1 and December 1 of each year thereafter at the rate of 6.21%. Interest on the 2002 Series B Bonds shall be
computed on the basis of a 360-day year of twelve 30-day months for the actual number of days lapsed. 
  
 The
principal and the Redemption Price of and interest on the 2002 Series B Bonds shall be payable to the registered owner of the 2002 Series B Bonds or its assignee in accordance with the provisions of the Indenture on the applicable Interest Payment
Date or Redemption Date. Interest on the 2002 Series B Bonds shall be payable without presentation of the 2002 Series B Bonds for payment. Payment of the principal and Redemption Price of and interest on any 2002 Series B Bond shall be payable at
the office of the Trustee in Richmond, Virginia. Such location is the Place of Payment. 
  
 The Regular Record Date
(referred to in Section 3.09 of the Indenture) for the payment of interest on the 2002 Series B Bonds shall be the fifteenth day (whether or not a business day) of the calendar month next preceding such Interest Payment Date. 

 
 Section 1.02.    Sinking Fund Redemption. 
  
 (a)    The 2002 Series B Bonds are subject to redemption on December 1 on each year, commencing with the year 2005 and
ending with the year 2027, through operation of the sinking fund for the the 2002 Series B Bonds, at a Redemption Price equal to 100% of the principal amount being redeemed, plus accrued interest through the Redemption Date (subject to the right of
holders of record on the relevant record date to receive interest due on an interest payment date that is on or prior to the Redemption Date). As a sinking fund for the 2002 Series B Bonds, the Company shall redeem on December 1 in each year
beginning with the year 2005 and ending with the year 2027 the aggregate principal amount of the 2002 Series B Bonds specified in the following table: 

 
 5 

  
 
	 Year
 	    	 Aggregate Principal
 Amount of 2002 Series B
 Bonds
 

	 December 1, 2005
 	    	 $
 	 12,500,000
 
	 December 1, 2006
 	    	 $
 	 12,500,000
 
	 December 1, 2007
 	    	 $
 	 12,500,000
 
	 December 1, 2008
 	    	 $
 	 12,500,000
 
	 December 1, 2009
 	    	 $
 	 12,500,000
 
	 December 1, 2010
 	    	 $
 	 12,500,000
 
	 December 1, 2011
 	    	 $
 	 12,500,000
 
	 December 1, 2012
 	    	 $
 	 12,500,000
 
	 December 1, 2013
 	    	 $
 	 12,500,000
 
	 December 1, 2014
 	    	 $
 	 12,500,000
 
	 December 1, 2015
 	    	 $
 	 12,500,000
 
	 December 1, 2016
 	    	 $
 	 12,500,000
 
	 December 1, 2017
 	    	 $
 	 12,500,000
 
	 December 1, 2018
 	    	 $
 	 12,500,000
 
	 December 1, 2019
 	    	 $
 	 12,500,000
 
	 December 1, 2020
 	    	 $
 	 12,500,000
 
	 December 1, 2021
 	    	 $
 	 12,500,000
 
	 December 1, 2022
 	    	 $
 	 12,500,000
 
	 December 1, 2023
 	    	 $
 	 12,500,000
 
	 December 1, 2024
 	    	 $
 	 12,500,000
 
	 December 1, 2025
 	    	 $
 	 12,500,000
 
	 December 1, 2026
 	    	 $
 	 12,500,000
 
	 December 1, 2027
 	    	 $
 	 12,500,000
 

 
  
 The principal amount of the 2002 Series B Bonds acquired and
surrendered for cancellation or redeemed by the Company (otherwise than through operation of the sinking fund) shall be credited against sinking fund payments for the 2002 Series B Bonds (including, for purposes of this paragraph, as a sinking fund
payment, $12,500,000 principal amount of 2002 Series B Bonds not to be redeemed through operation of the sinking fund but to be repaid at maturity on December 1, 2028) in proportion to the respective amounts of such required sinking fund payments.

  
 (b)    The particular 2002 Series B Bonds to be redeemed through sinking fund payments, as
provided in this Section 1.02, shall be selected by the Trustee from the Outstanding 2002 Series B Bonds which have not been previously been called for redemption by prorating, as nearly as may be subject to adjustment as provided in Section 15.03
of the Indenture, the principal amount of the 2002 Series B Bonds to be redeemed among the Holders thereof in proportion to the aggregate principal amount thereof registered in their respective names; EXCEPT that, if there shall have been previously
filed with the Trustee an Act of all of the Holders thereof satisfactory to the Trustee specifying the method of selecting the 2002 Series B Bonds to be redeemed, such selection shall be made by the Trustee in accordance with the terms of such Act.

  
 Section 1.03.    Make-Whole Redemption. 
  
 (a)    The 2002 Series B Bonds are subject to redemption, as a whole or in part, on any date (whether or not an
Interest Payment Date) at the election of the Company at a Redemption Price equal to the greater of (i) 100% of the principal amount of the 2002 Series B Bonds being redeemed plus all accrued, but not yet due and payable, interest to the Redemption
Date; and (ii) the sum of the present values of all principal and interest payments scheduled to become due after the
 

 
 6 

 
date of such redemption in respect of the 2002 Series B Bonds being redeemed discounted on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) and calculated using a
discount rate equal to the sum of (A) the yield to maturity on the U.S. Treasury security having an average life equal to the remaining average life of the 2002 Series B Bonds to be redeemed and trading in the secondary market at the price closest
to par, and (B) twenty (20) basis points; PROVIDED, HOWEVER, that if there is no U.S. Treasury security having an average life equal to the remaining average life of the 2002 Series B Bonds to be redeemed, such discount rate shall be calculated
using a yield to maturity interpolated or extrapolated on a straight-line basis (rounding to the nearest calendar month, if necessary) from the yields to maturity of two U.S. Treasury securities having average lives most closely corresponding to the
remaining life of the 2002 Series B Bonds to be redeemed and trading in the secondary market at the prices closest to par. In addition, any interest due and payable but unpaid on 2002 Series B Bonds being redeemed shall be paid on the Redemption
Date therefor. 
  
 (b)    The calculations set forth in paragraph (a) above of this Section 1.03
shall be determined on the third business day prior to the scheduled Redemption Date by an investment banking institution of national standing in the United States selected by the Company or, if the Trustee does not receive notice of such selection
at least ten days prior to a scheduled Redemption Date or if an Event of Default under the Indenture shall have occurred and be continuing, selected by the Trustee. 
  
 (c)    If less than all the 2002 Series B Bonds are to be redeemed pursuant to this Section 1.03, the particular 2002 Series B Bonds to be redeemed
shall be selected not more than sixty (60) days prior to the Redemption Date by the Trustee from the Outstanding Obligations of such series or maturity within a series which have not previously been called for redemption by such method as the
Trustee shall deem fair and appropriate. In any such selection pursuant to this Section, the Trustee shall make such adjustments, reallocations and eliminations as it shall deem proper to the end that the principal amount the 2002 Series B Bonds so
selected shall be equal to $1,000, or an integral multiple thereof. The Trustee in its discretion may determine the particular 2002 Series B Bonds (if there is more than one) registered in the name of any Holder which are to be redeemed, in whole or
in part. In any case where any of the 2002 Series B Bonds are registered in the same name, the Trustee in its discretion may treat the aggregate principal amount so registered as if it were represented by one 2002 Series B Bond. 

 
 The Trustee shall promptly notify the Company in writing of the 2002 Series B Bonds selected for redemption and, in the case of
any 2002 Series B Bonds selected for partial redemption, the principal amount thereof to be redeemed. 
  
 (d)    Upon receipt of a notice from the Company of its intent to effect an optional redemption of the 2002 Series B Bonds, the Trustee shall cause notice of such redemption to be given to each Holder of the 2002
Series B Bonds then Outstanding at its address as the same shall last appear upon the Bond Register, by first class mail at least 30 and no more than 60 days prior to the Redemption Date; provided that so long as the Book-Entry System is
maintained in effect, notice of redemption shall be given to the registered Holders at the time and in the manner required in the DTC Letter of Representations executed in connection with the issuance and sale of the 2002 Series B Bonds (as amended
and in effect from time to time, the “2002 Series B DTC Letter of Representations”), and the Trustee shall not be required to give any other notice of redemption otherwise required herein. The notice of redemption shall specify the
Redemption Date, the place or places of payments, that payment will be made only upon the presentation and surrender of the
 

 
 7 

 
2002 Series B Bonds to be redeemed, that interest, if any, accrued to the Redemption Date will be paid as specified in such notice and that on and after such date interest thereon shall cease to
accrue. 
  
 (e)    Except as provided in Section 1.02 and Section 1.03, the 2002 Series B Bonds
are not redeemable at any time prior to their Stated Maturity. 
  
 (f)    Notwithstanding
anything to the contrary contained herein or in the Indenture, if, at the time the Company gives notice to the Trustee of a redemption as provided for in this Section 1.03 the Trustee does not have on deposit sufficient available funds designated
for the purpose of paying the principal of, premium, if any, and interest accrued and to accrue through the applicable Redemption Date on the 2002 Series B Bonds so called for redemption, then the Company’s notice of redemption is conditional
and revocable, that is, the Company is under no obligation to provide, or cause to be provided, to the Trustee funds to effect such redemption and, if the Company does not elect to do so by 2:00 p.m., New York City time, on the Redemption Date, then
the 2002 Series B Bonds called for redemption shall not be redeemed pursuant to this notice of redemption or the notice of redemption given by the Trustee pursuant to the Indenture. The Company will not be liable to any holder of the 2002 Series B
Bonds if the Company does not provide, or cause to be provided, funds sufficient to effect redemption of any such 2002 Series B Bonds with the result that such 2002 Series B Bonds are not redeemed on the Redemption Date specified in such notices.
If, at the time the Company gives this notice, the Trustee has on deposit sufficient funds designated for the purpose of and to effect such redemption, then the Company’s notice is unconditional and irrevocable and the 2002 Series B Bonds
specified in the Company’s notice and given by the Trustee pursuant to the Indenture shall become due and payable at the specified Redemption Price on the specified Redemption Date. 
  
 Section 1.04.    Exchangeability.    When the 2002 Series B Bonds are held in a Book-Entry System, the delivery of
2002 Series B Bonds, exchanges, transfers and assignments of the 2002 Series B Bonds and issuance of the 2002 Series B Bonds shall be determined by the provisions of the 2002 Series B DTC Letter of Representations. 
  
 Subject to Section 3.07 of the Indenture, all 2002 Series B Bonds not held in the Book-Entry System shall be fully interchangeable, and,
upon surrender at the office or agency of the Trustee in a Place of Payment therefor, shall be exchangeable for other 2002 Series B Bonds of the same maturity but of a different authorized denomination or denominations, as requested by the Holder
surrendering the same. The Company will execute, and the Trustee shall authenticate and deliver, 2002 Series B Bonds whenever the same are required for any such exchange. 
  
 Section 1.05.    Book-Entry System, Certificates, Registration and Payment.    When the 2002 Series B Bonds are held
in a Book-Entry System, 2002 Series B Bonds shall (except to the extent otherwise required by the 2002 Series B DTC Letter of Representations) be evidenced by one or more certificates, in an amount equal to the aggregate principal amount of such
maturity of 2002 Series B Bonds. 
  
 The principal and Redemption Price of and interest on the 2002 Series B Bonds
shall be payable in lawful money of the United States of America. While the 2002 Series B Bonds are held in the Book-Entry System, payment of the principal and Redemption Price of and interest on the 2002 Series B Bonds shall be made by wire
transfer of Federal Reserve funds or equivalent same-day funds, or in such other manner as permitted by the 2002 Series B DTC Letter of Representations (as the same may be amended from time to time), to the account of Cede & Co. In the event the
2002
 

 
 8 

 
Series B Bonds are not held in the Book-Entry System, (i) interest on the 2002 Series B Bonds shall be payable on each Interest Payment Date by check payable to the Holder (except that if so
instructed in writing by a Holder of $1,000,000 or more of the 2002 Series B Bonds on or prior to the applicable Regular Record Date, such payments shall be made by the wire transfer of Federal funds on the Interest Payment Date), mailed to the
Holder at his or her address as it appears on the Bonds Register on the last day of the calendar month prior to the Interest Payment Date, or in such other manner as such Holder and the Trustee may determine, and (ii) principal shall be payable only
upon presentation and surrender of each 2002 Series B Bond, as the same becomes due, at the office from which the Trustee performs the payment function for 2002 Series B Bonds. Except as may be provided in the 2002 Series B DTC Letter of
Representations with respect to 2002 Series B Bonds then held in the Book-Entry System, payment of principal shall be made only upon presentation and surrender of each 2002 Series B Bond, as the same becomes due, at the office from which the Trustee
performs the payment function for the 2002 Series B Bonds. 
  
 The Trustee shall act as Bond Registrar and shall
maintain registration books for the registration and the registration of transfer of the 2002 Series B Bonds. 
  
 So
long as the 2002 Series B Bonds are held in the Book-Entry System: 
  
 (a)    The registered
Holder of all of the 2002 Series B Bonds shall be DTC, and the 2002 Series B Bonds shall be registered in the name of Cede & Co., as nominee for DTC, pursuant to the 2002 Series B DTC Letter of Representations, and the provisions of such Letter
of Representations shall be incorporated herein by this reference; 
  
 (b)    The Trustee and the
Company may treat DTC (or its nominee) as the sole and exclusive registered Holder of the 2002 Series B Bonds registered in its name for the purposes of payment of the principal and Redemption Price of or interest on the 2002 Series B Bonds,
selecting the 2002 Series B Bonds or portions thereof to be redeemed, giving notice as required under the Indenture, registering the transfer of 2002 Series B Bonds, obtaining any consent or other action to be taken by the Holders and for all other
purposes whatsoever; and neither the Trustee nor the Company shall be affected by any notice to the contrary; 
  
 (c)    Neither the Trustee nor the Company shall have any responsibility or obligation to any person claiming a beneficial ownership interest in the 2002 Series B Bonds under or through DTC or any DTC Participant,
or any other person which is not shown on the Bond Register as being a registered Holder, with respect to the accuracy of any records maintained by DTC or any DTC Participant; the payment by DTC or any DTC Participant of any amount in respect of the
principal or Redemption Price of or interest on the 2002 Series B Bonds; any notice or direction which is permitted or required to be given to or received from Holders under the Indenture; the selection by DTC or any DTC Participant of any Person to
receive payment in the event of a partial redemption of the 2002 Series B Bonds; or any consent given or other action taken by DTC as Holder; nor shall any DTC Participant or any such Person be deemed to be a third party beneficiary of any
Holders’ rights under the Indenture; 
  
 (d)    The Trustee shall pay from moneys available
hereunder all principal and Redemption Price of and interest on the 2002 Series B Bonds only to or upon the order of DTC or its designee, and all such payments shall be valid and effective to fully satisfy and discharge the Company’s
obligations with respect to the principal and Redemption Price of and interest on the 2002 Series B Bonds to the extent of the sum or sums so paid; 

 
 9 

  
 (e)    No person other than DTC shall receive an
authenticated 2002 Series B Bond evidencing the obligation of the Company to make payments of principal and Redemption Price of and interest pursuant to the Indenture; and 
  
 (f)    Upon delivery by DTC to the Trustee of DTC’s written notice to the effect that DTC has determined to substitute a new nominee in place of
Cede & Co., and subject to the provisions of the Indenture with respect to transfers of 2002 Series B Bonds, the term “Cede & Co.” in this Fourteenth Supplemental Indenture shall refer to such new nominee of DTC. 

 
 Section 1.06.    Availability of Bond Certificates.    At any time it
determines that it is in the best interests of the Holders, the Company may notify DTC and the Trustee, whereupon DTC will, if consistent with DTC’s then-current policies, notify the DTC Participants of the availability through DTC of 2002
Series B Bond certificates. In such event, the Company shall prepare and execute and the Trustee shall issue, transfer and exchange, at the expense of the Company, 2002 Series B Bond certificates as requested in writing by DTC in appropriate
amounts. DTC may determine to discontinue providing its services with respect to the 2002 Series B Bonds at any time by giving written notice to the Company and the Trustee and discharging its responsibilities with respect thereto under applicable
law. If DTC resigns as securities depository for the 2002 Series B Bonds, 2002 Series B Bond certificates shall be delivered pursuant to this Section. Under such circumstances (if there is no successor securities depository), the Company and the
Trustee shall be obligated to deliver 2002 Series B Bonds as described in the Indenture, provided that the expense in connection therewith shall be paid by the Company. In the event that certificates for 2002 Series B Bonds are issued, the
provisions of the Indenture shall apply to, among other things, the transfer and exchange of such certificates and the method of payment of principal of and Redemption Price of and interest on such 2002 Series B Bonds. Whenever DTC requests the
Company to do so, the Company will cooperate with DTC in taking appropriate action after written notice (a) to make available one or more separate certificates evidencing the 2002 Series B Bonds to any DTC Participant having 2002 Series B Bonds
credited to its DTC account, or (b) to arrange for another securities depository to maintain custody of certificates evidencing the 2002 Series B Bonds. 
  
 Section 1.07.    Form of 2002 Series B Bonds.    The 2002 Series B Bonds and the Trustee’s authentication certificate to be executed on the
Bonds of such series shall be substantially in the form attached hereto as Exhibit A, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by the Indenture, and may have such letters,
numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the Officers executing such Bonds, as
evidenced by their execution of such Bonds. 
  
 ARTICLE II 
  
 AMENDMENTS TO THE INDENTURE 
  
 Section 2.01.    The amendments to the Indenture set forth in Section 2.02 of this Fourteenth Supplemental Indenture shall become effective pursuant to and in accordance with Section 13.02 of the Indenture.

  
 Section 2.02.    Section 1.01 of the Indenture is amended by deleting the definition
of “Interest Charges” therein and substituting in lieu thereof the following: 

 
 10 

  
 ““Interest Charges” for any period means the total interest
charges (other than capitalized interest charges) of the Company for such period related to all Outstanding Secured Bonds, outstanding Prior Lien Obligations and outstanding indebtedness secured by liens described in clause (23) of the definition of
“Permitted Encumbrances” (in all cases including amortization of debt discount and expense or premium) determined in accordance with Accounting Requirements.” 
  
 ARTICLE III 
  
 PRINCIPAL AMOUNT PRESENTLY TO
BE OUTSTANDING 
  
 Section 3.01.    Principal Amount Presently To Be
Outstanding.    The total aggregate principal amount of Bonds of the Company issued and outstanding and presently to be issued and outstanding under the provisions of and secured by the Indenture will be
[            ] Dollars ($). 
  
 ARTICLE
IV 
  
 MISCELLANEOUS 
  
 Section 4.01.    This Fourteenth Supplemental Indenture is executed and shall be construed as an indenture supplemental and amendatory to the Original Indenture, and shall
form a part thereof, and the Indenture, as hereby supplemented, amended and modified, is hereby confirmed. Except to the extent inconsistent with the express terms hereof, all of the provisions, terms, covenants and conditions of the Indenture shall
be applicable to the 2002 Series B Bonds to the same extent as if specifically set forth herein. All capitalized terms used in this Fourteenth Supplemental Indenture shall be taken to have the same meanings as in the Indenture, except in cases where
the context clearly indicates otherwise. 
  
 Section 4.02.    All recitals in this
Fourteenth Supplemental Indenture are made by the Company only and not by the Trustee; and all of the provisions contained in the Indenture, in respect of the rights, privileges, immunities, powers and duties of the Trustee shall be applicable in
respect hereof as fully and with like effect as if set forth herein in full. 
  
 Section
4.03.    Whenever in this Fourteenth Supplemental Indenture any of the parties hereto is named or referred to, this shall, subject to the provisions of Articles Ten and Twelve of the Indenture, be deemed to include the
successors and assigns of such party, and all the covenants and agreements in this Fourteenth Supplemental Indenture contained by or on behalf of the Company, or by or on behalf of the Trustee shall, subject as aforesaid, bind and inure to the
respective benefits of the respective successors and assigns of such parties, whether so expressed or not. 
  
 Section 4.04.    Nothing in this Fourteenth Supplemental Indenture, expressed or implied, is intended, or shall be construed, to confer upon, or to give to, any person, firm or corporation, other than the
parties hereto and the Holders of the Outstanding Bonds, any right, remedy or claim under or by reason of this Fourteenth Supplemental Indenture or any covenant, condition, stipulation, promise or agreement hereof, and all the covenants, conditions,
stipulations, promises and agreements in this Fourteenth Supplemental Indenture contained by or on behalf of the Company shall be for the sole and exclusive benefit of the parties hereto, and of the Holders of Outstanding Bonds. 

 
 Section 4.05.    This Fourteenth Supplemental Indenture may be executed in several counterparts,
each of such counterparts shall for all purposes be deemed to be an original, and all
 

 
 11 

 
such counterparts, or as many of them as the Company and the Trustee shall preserve undestroyed, shall together constitute but one and the same instrument. 
  
 Section 4.06.    Although this Fourteenth Supplemental Indenture is dated for convenience and for the purpose
of reference as of December 1, 2002, the actual date or dates of execution by the Company and by the Trustee are as indicated by their respective acknowledgments hereto annexed. 
  
 Section 4.07.    To the extent permitted by applicable law, this Fourteenth Supplemental Indenture shall be deemed to be a Security Agreement and
Financing Statement whereby the Company grants to the Trustee, until the Release Date, a security interest in all of the Trust Estate that is personal property or fixtures under the Uniform Commercial Code, as adopted or hereafter adopted in one or
more of the states in which any part of the properties of the Company are situated. The mailing address of the Company, as debtor, is Innsbrook Corporate Center, 4201 Dominion Boulevard, Glen Allen, Virginia 23060, and the mailing address of the
Trustee, as secured party, is SunTrust Bank, Attention: Corporate Trust Administration, 919 East Main Street, 10th Floor, Richmond, Virginia 23219. 
  
 [SIGNATURES APPEAR ON THE FOLLOWING PAGE] 

 
 12 

  
 IN WITNESS WHEREOF, the parties hereto have caused this Fourteenth Supplemental
Indenture to be duly executed as of the day and year first above written. 
  
 
	 
	 Company:
 Innsbrook Corporate Center
 4201 Dominion Boulevard
 Glen Allen, Virginia 23060
 	 	 OLD DOMINION ELECTRIC COOPERATIVE
 
	  	 	 By:    /s/ Daniel M.
Walker                                       
                     
          Name: Daniel M.
Walker
          Title: Senior Vice President
 
	 
	 Trustee:
 919 East Main Street, 10th Floor
 Corporate Trust Administration
 Richmond, Virginia 23219
 	 	 SUNTRUST BANK, as Trustee
 
	  	 	 By:    /s/ Jackie
Shornak                                       
                         
           Name: Jackie Shornak
           Title: Assistant
Vice President
 

 

 
 13 

  
 ACKNOWLEDGMENT 
  
 
	 
	 COMMONWEALTH OF VIRGINIA
 	 	 )
 
	  	 	 )
 
	 CITY/COUNTY OF HENRICO
 	 	 )
 

 
  
 The foregoing instrument was acknowledged before me this 13th day
of December, 2002, by Daniel M. Walker, the Senior Vice President of Old Dominion Electric Cooperative, a Virginia utility aggregation cooperative. 
  
 /s/    Wanda
Gilchrist                                       
                              
 Notary Public 
  
 My Commission expires:    May 31, 2003 

 
 ACKNOWLEDGMENT 
  
 
	 
	 COMMONWEALTH OF VIRGINIA
 	 	 )
 
	  	 	 )
 
	 CITY/COUNTY OF RICHMOND
 	 	 )
 

 
  
 The foregoing instrument was acknowledged before me this 12th day
of December, 2002, by Jackie Shornak, the Assistant Vice President of SunTrust Bank, a Georgia banking corporation, on behalf of the Bank. 
  
 /s/    Kelly
Green                                       
                                  
 Notary Public 
  
 My Commission
expires:    September 30, 2006 

 
 14 

  
 EXHIBIT A 
  
 FORM OF 2002 SERIES B BONDS 
  
 UNLESS THIS CERTIFICATE IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGES OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. 
  
 OLD DOMINION ELECTRIC COOPERATIVE 
  
 2002 Series B Bonds Due December 1,
2028 
  

	No.             
 	$                                     
    
 

 
 Old Dominion Electric Cooperative, a Virginia utility aggregation
cooperative (herein called the “Company,” which term includes any successor corporation under the Indenture of Mortgage and Deed of Trust, dated as of May 1, 1992, as supplemented and amended, for value received, hereby promises to pay to
                    , or registered assigns, the principal sum of
                     Dollars on
                    , 20    , and to pay interest (computed on the basis of a 360-day year of twelve 30-day months)
thereon from the date of issuance or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semi-annually on June 1 and December 1 in each year, commencing on June 1, 2003 at the rate of 6.21% per annum,
until the principal hereof is paid or made available for payment. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Bond (or
one or more Predecessor Bonds) is registered at the close of business on the Regular Record Date for such interest, which shall be the fifteenth day (whether or not a business day), of the calendar month next preceding such Interest Payment Date.
Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Bond (or one or more Predecessor Bonds) is registered
at the close of business on a Special Record Date for the payment of such defaulted interest to be fixed by the Trustee, notice whereof shall be given to Holders of Bonds of this series not more than 15 and not less than 10 days prior to such
Special Record Date, or may be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which Bonds of this series may be listed, and upon such notice as may be required by such exchange, all
as more fully provided in said Indenture. 
  
 Payment of the principal and Redemption Price of and any such interest
on this Bond will be made at the office or agency of the Trustee maintained for that purpose in Richmond, Virginia, in such coin or currency of the United States of America as at the time of payment is legal tender for 

 
 15 

 
payment of public and private debts; PROVIDED, HOWEVER, that (subject to the terms on the reverse hereof) at the option of the Company payment of interest may be made by check mailed to the
address of the Person entitled thereto as such address shall appear in the Bond Register. 
  
 Reference is hereby
made to the further provisions of this Bond set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. 
  
 Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Bond shall not be entitled to
any benefit under the Indenture or be valid or obligatory for any purpose. 
  
 IN WITNESS WHEREOF, the Company has
caused this Bond to be duly executed. 
  
 Dated:                                    
   
  
 
	 OLD DOMINION ELECTRIC COOPERATIVE
 
	 
	 By:
 	 	 SPECIMEN
 

	  	 	 Authorized Officer
 

 
  
 ATTEST: 
  
 
	 
	 

	 Name:
 Title:
 

 
  
  
 [REVERSE OF BOND] 

 
 This is one of the Bonds referred to in and secured by the Indenture of Mortgage and Deed of Trust, dated as of May 1, 1992, by
and between Old Dominion Electric Cooperative and Crestar Bank, as trustee, as the same has been and may be supplemented, modified or amended and effective from time to time prior to the Release Date (the “Original Indenture”), under which
the undersigned now acts as Trustee. From and after the Release Date (as defined in the Eleventh Supplemental Indenture to the Original Indenture), this shall constitute one of the unsecured Obligations referred to in and entitled to the benefits of
that Amended and Restated Indenture, dated as of September 1, 2001, between Old Dominion Electric Cooperative and SunTrust Bank, successor by merger to Crestar Bank, as trustee (the “Restated Indenture”), which Restated Indenture
amends and supersedes the Original Indenture in its entirety from and after the Release Date. The Original Indenture, including all indentures supplemental thereto and effective prior to the Release Date, contains a statement of the description of
the properties thereby mortgaged, pledged and assigned, the nature and extent of the security and the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Bonds and of the
terms upon which the Bonds are, and are to be, authenticated and delivered, in each case prior to the Release Date. The Restated Indenture, including all indentures supplemental thereto, 

 
 16 

 
contains a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Obligations and of the terms upon which
the Obligations are, and are to be, authenticated and delivered from and after the Release Date. From and after the Release Date, the term “Bond” as used in this instrument shall be construed to mean “Obligation” as that term is
used in the Restated Indenture and all indentures supplemental thereto. The term “Indenture” as used herein means the Original Indenture prior to the Release Date and the Restated Indenture from and after the Release Date. This Bond is one
of the series and maturity designated on the face hereof, limited in aggregate principal amount to Three Hundred Million Dollars ($300,000,000). 
  
 The 2002 Series B Bonds are subject to redemption on December 1 on each year, commencing with the year 2005 and ending with the year 2027, through operation of the sinking fund for the the 2002 Series
B Bonds at a Redemption Price equal to 100% of the principal amount being redeemed plus accrued interest through the Redemption Date (subject to the right of holders of record on the relevant record date to receive interest due on an interest
payment date that is on or prior to the Redemption Date). 
  
 As a sinking fund for the 2002 Series B Bonds, the
Company shall redeem on December 1 in each year beginning with the year 2005 and ending with the year 2027 the aggregate principal amount of the 2002 Series B Bonds specified in the following table: 
  
 
	 Year
 
	    	 Aggregate Principal
 Amount of 2002 Series B
 Bonds
 

	 December 1, 2005
 	    	 $12,500,000
 
	 December 1, 2006
 	    	 $12,500,000
 
	 December 1, 2007
 	    	 $12,500,000
 
	 December 1, 2008
 	    	 $12,500,000
 
	 December 1, 2009
 	    	 $12,500,000
 
	 December 1, 2010
 	    	 $12,500,000
 
	 December 1, 2011
 	    	 $12,500,000
 
	 December 1, 2012
 	    	 $12,500,000
 
	 December 1, 2013
 	    	 $12,500,000
 
	 December 1, 2014
 	    	 $12,500,000
 
	 December 1, 2015
 	    	 $12,500,000
 
	 December 1, 2016
 	    	 $12,500,000
 
	 December 1, 2017
 	    	 $12,500,000
 
	 December 1, 2018
 	    	 $12,500,000
 
	 December 1, 2019
 	    	 $12,500,000
 
	 December 1, 2020
 	    	 $12,500,000
 
	 December 1, 2021
 	    	 $12,500,000
 
	 December 1, 2022
 	    	 $12,500,000
 
	 December 1, 2023
 	    	 $12,500,000
 
	 December 1, 2024
 	    	 $12,500,000
 
	 December 1, 2025
 	    	 $12,500,000
 
	 December 1, 2026
 	    	 $12,500,000
 
	 December 1, 2027
 	    	 $12,500,000
 

 
  
 The principal amount of the 2002 Series B Bonds acquired and
surrendered for cancellation or redeemed by the Company (otherwise than through operation of the sinking fund) shall be
 

 
 17 

 
credited against sinking fund payments for the 2002 Series B Bonds (including, for purposes of this paragraph, as a sinking fund payment, $12,500,000 principal amount of 2002 Series B Bonds not
to be redeemed through operation of the sinking fund but to be repaid at maturity on December 1, 2028) in proportion to the respective amounts of such required sinking fund payments. 
  
 The particular 2002 Series B Bonds to be redeemed through sinking fund payments, shall be selected by the Trustee from the Outstanding 2002 Series B Bonds which have not
been previously been called for redemption by prorating, as nearly as may be, the principal amount of the 2002 Series B Bonds to be redeemed among the Holders thereof in proportion to the aggregate principal amount thereof registered in their
respective names; EXCEPT that, if there shall have been previously filed with the Trustee an Act of all of the Holders thereof satisfactory to the Trustee specifying the method of selecting the 2002 Series B Bonds to be redeemed, such selection
shall be made by the Trustee in accordance with the terms of such Act. 
  
 In addition, this Bond is subject to
redemption, as a whole or in part, at the election of the Company at a Redemption Price equal to the greater of (i) 100% of the principal amount of the portion of the Bond being redeemed plus all accrued, but not yet due and payable, interest to the
Redemption Date; and (ii) the sum of the present values of all principal and interest payments scheduled to become due after the date of such redemption in respect of the portion of the Bond being redeemed, discounted on a semi-annual basis
(assuming a 360-day year consisting of twelve 30-day months) and calculated using a discount rate equal to the sum of (1) the yield to maturity on the U.S. Treasury security having an average life equal to the remaining average life of the Bond to
be redeemed and trading in the secondary market at the price closest to par, and (2) twenty (20) basis points; PROVIDED, HOWEVER, that if there is no U.S. Treasury security having an average life equal to the remaining average life of the Bond to be
redeemed, such discount rate shall be calculated using a yield to maturity interpolated or extrapolated on a straight-line basis (rounding to the nearest calendar month, if necessary) from the yields to maturity of two U.S. Treasury securities
having average lives most closely corresponding to the remaining life of the Bond to be redeemed and trading in the secondary market at the prices closest to par. The foregoing calculations shall be made in accordance with the Fourteenth
Supplemental Indenture to the Indenture. In addition, any interest due and payable but unpaid on the portion of this 2002 Series B Bond being redeemed shall be paid on the Redemption Date therefor. 
  
 The calculations set forth in the immediately preceding paragraph shall be determined on the third business day prior to the scheduled
Redemption Date by an investment banking institution of national standing in the United States selected by the Company or, if the Trustee does not receive notice of such selection at least ten days prior to a scheduled Redemption Date or if an Event
of Default under the Indenture shall have occurred and be continuing, selected by the Trustee. 
  
 In the event of a
redemption of all or a portion of this Bond, the Company shall cause notice of such redemption to be given to each Holder of such Bonds to be redeemed at his or her address as the same shall last appear upon the Bond Register, by first class mail at
least 30 and no more than 60 days prior to the Redemption Date; provided that so long as the Bonds to be redeemed are held in a Book-Entry System, notice of redemption shall be given to the registered Holders thereof at the time and in the manner
required in the DTC Letter of Representations executed among the Company, the Trustee and DTC in connection with the issuance and sale of such Bonds, and the Trustee shall not be required to give any other notice of redemption otherwise required in
the Indenture. 

 
 18 

  
 In the event of a redemption of this Bond in part only, a new Bond or Bonds of
this series and maturity for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof. 
  
 Except as otherwise provided above, this Bond is not redeemable at any time prior to its Stated Maturity. 
  
 The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of this Bond under the Indenture at
any time by the Company with the consent of the Holders of a majority in aggregate principal amount of Bonds of all series at the time Outstanding affected by such modification. The Indenture also contains provisions permitting the Holders of a
majority in principal amount of Bonds at the time Outstanding, on behalf of the Holders of all Bonds to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this Bond shall be conclusive and binding upon such Holder and upon all future Holders of this Bond and of any Bond issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Bond. 
  
 No reference herein to the Indenture
and no provision of this Bond or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal and Redemption Price of and interest on this Bond at the times, places and rates, and in
the coin or currency, herein prescribed. 
  
 As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Bond is registrable in the Bond Register, upon surrender of this Bond for registration of transfer at the office or agency maintained by the Bond Registrar in the Place of Payment therefor, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the Company and the Bond Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Bonds of this series and
maturity, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. 
  
 The Bonds of this series and maturity are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to
certain limitations therein set forth, Bonds of this series and maturity are exchangeable for a like aggregate principal amount of Bonds of this series of a different authorized denomination as requested by the Holder surrendering the same.

  
 No service charge shall be made for any such registration of transfer or exchange, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. 
  
 Prior
to due presentment of this Bond for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Bond is registered as the owner hereof for all purposes, whether or not this
Bond be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. 

 
 19 

  
 The Bonds of this series initially shall be held in a Book-Entry System. While
the Bonds or this series are held in the Book-Entry System, payment of the principal and Redemption Price of and interest on such Bonds shall be made by wire transfer of Federal Reserve funds or equivalent same-day funds, or in such other manner as
permitted by the DTC Letter of Representations executed by the Company in connection with such series (as the same may be amended from time to time), to the account of Cede & Co. In the event the Bonds of this series are no longer held in the
Book-Entry System, (i) interest on such Bonds shall be payable on each Interest Payment Date by check payable to the Holder (except that if so instructed in writing by a Holder of $1,000,000 or more of such Bonds on or prior to the applicable
Regular Record Date, such payments shall be made by wire transfer of Federal Reserve funds on the Interest Payment Date), mailed to the Holder at his or her address as it appears on the Bond Register on the last day of the calendar month prior to
the Interest Payment Date, or in such other manner as such Holder and the Trustee may determine, and (ii) principal shall be payable only upon presentation and surrender of each such Bond, as the same becomes due, at the office from which the
Trustee performs the payment function for such Bonds. Except as may be provided in the DTC Letter of Representations with respect to Bonds of this series then held in the Book-Entry System, payment of principal (other than through operation of the
sinking fund) shall be made only upon presentation and surrender of each such Bond, as the same becomes due, at the office from which the Trustee performs the payment function for such Bonds. 
  

All terms used in this Bond which are defined in the Indenture shall have the meanings assigned to them in the Indenture. 

 
 20 

  
 CERTIFICATE OF AUTHENTICATION 
  
 This is one of the Bonds referred to in and secured by the Indenture of Mortgage and Deed of Trust dated as of May 1, 1992 by and between Old Dominion Electric Cooperative
and Crestar Bank, as trustee, as the same may be supplemented, modified or amended and effective from time to time prior to the Release Date (the “Original Indenture”), under which the undersigned now acts as Trustee. From and after the
Release Date, this shall constitute one of the unsecured Obligations referred to in and entitled to the benefits of that Amended and Restated Indenture, dated as of September 1, 2001, between Old Dominion Electric Cooperative and SunTrust Bank,
successor by merger to Crestar Bank, as trustee, which Restated Indenture amends and supersedes the Original Indenture in its entirety from and after the Release Date. 
  
 
	 SUNTRUST BANK, as Trustee
 
	 
	 By:
 	 	 SPECIMEN
 

	  	 	 Authorized Signatory
 

 

 
 21

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