Document:

Exhibit 10.4.34

                                                                  EXECUTION COPY

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                             PROJECT LEASE AGREEMENT

                            Dated as of May 18, 2005

                                     between

                                SE PUNA, L.L.C.,

                                as Owner Lessor,

                                       and

                            PUNA GEOTHERMAL VENTURE,

                                    as Lessee

                       PUNA GEOTHERMAL GENERATION PROJECT

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CERTAIN OF THE RIGHT, TITLE AND INTEREST OF THE OWNER LESSOR IN AND TO THIS
PROJECT LEASE AGREEMENT AND THE RENT DUE AND TO BECOME DUE HEREUNDER HAVE BEEN
ASSIGNED AS COLLATERAL SECURITY TO, AND ARE SUBJECT TO A SECURITY INTEREST IN
FAVOR OF, UNION BANK OF CALIFORNIA, N.A., NOT IN ITS INDIVIDUAL CAPACITY BUT
SOLELY AS INDENTURE TRUSTEE UNDER AN INDENTURE OF TRUST AND SECURITY AGREEMENT,
DATED AS OF MAY 18, 2005 BETWEEN SAID INDENTURE TRUSTEE, AS SECURED PARTY, AND
THE OWNER LESSOR, AS DEBTOR. SEE SECTION 20 HEREOF FOR INFORMATION CONCERNING
THE RIGHTS OF THE ORIGINAL HOLDER AND THE HOLDERS OF THE VARIOUS COUNTERPARTS
HEREOF.

                                Table of Contents

                                                                            Page
                                                                            ----
SECTION 1. DEFINITIONS...................................................     1

SECTION 2. LEASE OF THE PROJECT..........................................     1

   Section 2.1.     Lease................................................     1

SECTION 3. BASIC LEASE TERM AND RENT.....................................     2

   Section 3.1.     Basic Lease Term.....................................     2
   Section 3.2.     Rent.................................................     2
   Section 3.3.     Supplemental Lease Rent..............................     3
   Section 3.4.     Adjustment of Lease Schedules; Minimum Rent..........     3
   Section 3.5.     Manner of Payments...................................     5

SECTION 4. DISCLAIMER OF WARRANTIES; RIGHT OF QUIET ENJOYMENT............     6

   Section 4.1.     Disclaimer of Warranties.............................     6
   Section 4.2.     Quiet Enjoyment......................................     7

SECTION 5. RETURN OF PROJECT.............................................     7

   Section 5.1.     Return...............................................     7
   Section 5.2.     Condition Upon Return................................     8
   Section 5.3.     Environmental Reports; Clean-up......................     9
   Section 5.4.     Expenses.............................................    10

SECTION 6. LIENS.........................................................    10

SECTION 7. MAINTENANCE; REPLACEMENTS OF COMPONENTS.......................    10

   Section 7.1.     Maintenance..........................................    10
   Section 7.2.     Replacement of Components............................    11

SECTION 8. MODIFICATIONS.................................................    12

   Section 8.1.     Required Modifications...............................    12
   Section 8.2.     Optional Modifications...............................    12
   Section 8.3.     Modifications Subject to Head Lease..................    12
   Section 8.4.     Purchase of Removable Modifications and Expansion
                    Project..............................................    13

SECTION 9. NET LEASE.....................................................    13

SECTION 10. EVENTS OF LOSS...............................................    15

   Section 10.1.    Occurrence of Events of Loss.........................    15
   Section 10.2.    Application of Payments..............................    17
   Section 10.3.    Conditions to Lessee's Right to Rebuild or Replace...    17
   Section 10.4.    Application of Payments Not Relating to an Event of
                    Loss.................................................    20
   Section 10.5.    Partial Casualties...................................    21

SECTION 11. INSURANCE....................................................    22

SECTION 12. INSPECTION...................................................    22

SECTION 13. TERMINATION OPTION FOR BURDENSOME EVENTS.....................    22

   Section 13.1.    Election to Terminate................................    22
   Section 13.2.    Solicitation of Offers; Payments Upon Termination....    23
   Section 13.3.    Procedure for Exercise of Termination Option.........    25

SECTION 14. TERMINATION FOR OBSOLESCENCE.................................    26

   Section 14.1.    Termination..........................................    26
   Section 14.2.    Solicitation of Offers...............................    27
   Section 14.3.    Right of Owner Lessor to Retain the Owner Lessor's
                    Leasehold Interest...................................    27
   Section 14.4.    Procedure for Exercise of Termination Option.........    28

SECTION 15. LEASE RENEWAL................................................    30

   Section 15.1.    Wintergreen Renewal Lease Term.......................    30
   Section 15.2.    Fair Market Value Renewal Lease Terms................    30
   Section 15.3.    Renewal Lease Rent for the Renewal Lease Term........    31
   Section 15.4.    Determination of Fair Market Rental Value............    31
   Section 15.5.    Termination Value During Renewal Lease Terms.........    32

SECTION 16. EVENTS OF DEFAULT............................................    32

SECTION 17. REMEDIES.....................................................    34

   Section 17.1.    Remedies for Lease Event of Default..................    34
   Section 17.2.    Cumulative Remedies..................................    37
   Section 17.3.    No Delay or Omission to be Construed as Waiver.......    37
   Section 17.4.    Limited Recourse.....................................    37

SECTION 18. SUBLEASE.....................................................    38

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SECTION 19. OWNER LESSOR'S RIGHT TO PERFORM..............................    38

SECTION 20. SECURITY FOR OWNER LESSOR'S OBLIGATION TO THE INDENTURE
            TRUSTEE......................................................    39

SECTION 21. PURCHASE OPTIONS.............................................    39

   Section 21.1.    Election of Purchase Options.........................    39
   Section 21.2.    Purchase Option Payments.............................    39
   Section 21.3.    Assumption of the Senior Notes.......................    40

SECTION 22. MISCELLANEOUS................................................    41

   Section 22.1.    Amendments and Waivers...............................    41
   Section 22.2.    Notices..............................................    41
   Section 22.3.    Survival.............................................    42
   Section 22.4.    Successors and Assigns...............................    42
   Section 22.5.    True Lease...........................................    42
   Section 22.6.    Governing Law........................................    42
   Section 22.7.    Severability.........................................    42
   Section 22.8.    Counterparts.........................................    43
   Section 22.9.    Headings and Table of Contents.......................    43
   Section 22.10.   Further Assurances...................................    43
   Section 22.11.   Effectiveness........................................    43
   Section 22.12.   Limitation of Liability..............................    43
   Section 22.13.   Entire Agreement.....................................    43

SCHEDULE 1 -- INSURANCE
EXHIBIT A -- FORM OF PROJECT LEASE SUPPLEMENT

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                         PROJECT LEASE AGREEMENT

     This PROJECT LEASE AGREEMENT, dated as of May 18, 2005 (this "Project
Lease"), is between SE PUNA, L.L.C., a Delaware limited liability company (the
"Owner Lessor"), and PUNA GEOTHERMAL VENTURE, a Hawaii general partnership (the
"Lessee").

                                   WITNESSETH:

     WHEREAS, pursuant to the Head Lease, the Owner Lessor has leased the
Project from the Lessee for the Head Lease Term;

     WHEREAS, pursuant to this Project Lease, the Owner Lessor desires to lease
the Project to the Lessee for the Basic Lease Term and the Renewal Lease Terms,
if any, provided herein, and the Lessee desires to lease the Project from the
Owner Lessor on such terms;

     WHEREAS, the Project is located on the Project Site (as more particularly
described on Exhibit A hereto), but the Project does not include the Project
Site or any part thereof, and no part of the Project Site is being leased to the
Lessee under this Project Lease; and

     WHEREAS, pursuant to the Sublease of the Power Plant Sublease, the Lessee
is subleasing the Project Site to the Owner Lessor for a term equal to the term
of the Head Lease and pursuant to the Sub-Sublease of Power Plant Sublease, the
Owner Lessor is sub-subleasing the Project Site to the Lessee for a term equal
to the Basic Lease Term, including any Renewal Lease Term;

     NOW, THEREFORE, in consideration of the foregoing premises, the mutual
agreements herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:

SECTION 1. DEFINITIONS

     Unless the context hereof shall otherwise require, capitalized terms used
in this Project Lease, including the foregoing recitals, and not otherwise
defined herein shall have the respective meanings specified in Appendix A to the
Participation Agreement, dated as of May 18, 2005, among the Lessee, the Owner
Lessor, SE Puna Lease, L.L.C., as Equity Investor, Wilmington Trust Company, in
its individual capacity, the Noteholders named therein and Union Bank of
California, N.A., as Indenture Trustee. The general provisions of such Appendix
A shall apply to this Project Lease.

SECTION 2. LEASE OF THE PROJECT

     Section 2.1. Lease. The Owner Lessor hereby leases the Project (such lease
to be evidenced by the execution and delivery of Project Lease Supplement No. 1
or, if executed, Project Lease Supplement No. 2 in respect thereof), upon the
terms and conditions set forth herein and in Project Lease Supplement No. 1 or,
if executed, Project Lease Supplement No. 2, to the Lessee for the Basic Lease
Term and, subject to the Lessee's exercise of the renewal option or options in
Section 15, one or more Renewal Lease Terms, as the case may be, and the

Lessee hereby leases the Project, upon the terms and conditions set forth herein
and in Project Lease Supplement No. 1 or, if executed, Project Lease Supplement
No. 2, from the Owner Lessor for such term. The Lessee and the Owner Lessor
understand and agree that this Project Lease is subject to the Permitted
Encumbrances. The Project shall be subject to the terms of this Project Lease
from the date on which this Project Lease is executed and delivered.

SECTION 3. BASIC LEASE TERM AND RENT

          Section 3.1. Basic Lease Term. The basic lease term of this Project
Lease for the Project (the "Basic Lease Term") shall commence on the Closing
Date and shall terminate at 11:59 p.m. (New York City time) on January 3, 2028
(the "Basic Lease Term Expiration Date"), subject to earlier termination in
whole pursuant to Section 10, 13, 14, 17 or 22 hereof.

          Section 3.2. Rent.

          (a) Payment of Rent. The Lessee hereby agrees to pay to the Owner
Lessor Periodic Lease Rent, payable with respect to the Basic Lease Term for the
lease of the Project. Renewal Lease Rent shall be paid on the dates and in the
amounts set forth in Section 15. All Periodic Lease Rent and Renewal Lease Rent
to be paid pursuant to this Section 3.2 shall be payable in the manner set forth
in Section 3.5.

          (b) Allocation of Rent. The Periodic Lease Rent allocated to each
Rental Period for the use by the Lessee of the Project shall be an amount equal
to the Allocated Rent. Notwithstanding that Periodic Lease Rent is payable in
accordance with Section 3.2(a) hereof and without limiting the Lessee's payment
obligations under Section 3.2(a), the Allocated Rent calculated pursuant to this
Section 3.2(b) shall represent and be the amount of Periodic Lease Rent for
which the Lessee becomes liable on account of the use of the Project for each
calendar year included in whole or in part in the Basic Lease Term.

          (c) Section 467 Loan, Etc. It is the intention of the Owner Lessor and
the Lessee that the allocation of Periodic Lease Rent to each Rental Period as
provided in Section 3.2(b) constitutes a specific allocation of fixed rent
within the meaning of Treasury Regulation Section 1.467-1(c)(2)(ii) with the
effect that the Owner Lessor and the Lessee, on any federal income tax returns
filed by them (or on any federal income tax returns (and any state and local
income tax returns that follow the reporting on the relevant party's federal
income tax return) on which their income is included), shall accrue the amounts
of rental income and rental expense, respectively, set forth for each Rental
Period in an amount equal to the Proportional Rent. In addition, (i) if, with
respect to any Rental Period, the percentage set forth for such Rental Period
under the caption "Section 467 Interest Percentage" set forth in Schedule 2 to
Project Lease Supplement No. 1 (or if executed, Project Lease Supplement No. 2)
is positive, the Owner Lessor shall deduct interest expense and the Lessee shall
accrue interest income with respect to such period in an amount equal to the
product of the Head Lease Rent multiplied by such percentage ("Lessor Section
467 Interest") and (ii) if, with respect to any Rental Period, the percentage
set forth for such Rental Period under the caption "Section 467 Interest
Percentage" set forth in Schedule 2 to Project Lease Supplement No. 1 (or if
executed, Project Lease Supplement No. 2) is in parentheses, the Owner Lessor
shall accrue interest income and the Lessee shall deduct interest expense with
respect to such period in an amount equal to the

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product of the Head Lease Rent multiplied by such percentage ("Lessee Section
467 Interest"). All Section 467 Interest and principal in respect thereof,
Proportional Rent and Allocated Rent is already included as part of Periodic
Lease Rent and Termination Values, is payable as a portion thereof, and has been
taken into account in the calculation of the percentage set forth under the
heading "Periodic Lease Rent Percentage" on Schedule 1 to Project Lease
Supplement No. 1 (or if executed, Project Lease Supplement No. 2) or under the
heading "Termination Value Percentage" on Schedule 3 to Project Lease Supplement
No. 1 (or if executed, Project Lease Supplement No. 2). In no event shall any
Section 467 Interest or principal in respect thereof, Proportional Rent and/or
Allocated Rent be separately payable (including upon any termination of this
Project Lease, and regardless of whether or not Termination Value shall be
payable in connection with any such termination), it being agreed and understood
that these items represent characterizations for federal income tax purposes
only, including in the case of any termination of this Project Lease pursuant to
Sections 10, 13, 14 and 17 where Termination Value is not payable.

          Section 3.3. Supplemental Lease Rent. The Lessee also agrees to pay to
the Owner Lessor, or to any other Person entitled thereto as expressly provided
herein or in any other Operative Document, as appropriate, any and all
Supplemental Lease Rent, promptly as the same shall become due and owing, or
where no due date is specified, promptly after demand by the Person entitled
thereto, and in the event of any failure on the part of the Lessee to pay any
Supplemental Lease Rent, the Owner Lessor shall have all rights, powers and
remedies provided for herein or by law or equity or otherwise for the failure to
pay Periodic Lease Rent or Renewal Lease Rent. The Lessee will also pay as
Supplemental Lease Rent, to the extent permitted by Applicable Law, an amount
equal to interest at the Overdue Rate on any part of any payment of Periodic
Lease Rent or Renewal Lease Rent not paid when due for any period for which the
same shall be overdue and on any Supplemental Lease Rent not paid when due
(whether on demand or otherwise) for the period from such due date until the
same shall be paid. The Lessee also agrees to pay as Supplemental Lease Rent an
amount equal to any premium, including Make Whole Premium, required to be paid
pursuant to the Indenture or any Senior Note (other than any Make Whole Premium
which may be payable after an assumption of the Senior Notes by the Equity
Investor pursuant to Section 11.4 of the Participation Agreement after the
termination of this Project Lease) and any amount required to be paid as
compensation by the Owner Lessor pursuant to Section 5.4(A) of the Indenture.
All Supplemental Lease Rent to be paid pursuant to this Section 3.3 shall be
payable in the manner set forth in Section 3.5.

          Section 3.4. Adjustment of Lease Schedules; Minimum Rent.

          (a) The Lessee and the Owner Lessor agree that Periodic Lease Rent,
Allocated Rent, FPPO Price, EBO Price, Proportional Rent, Section 467 Interest
and principal in respect thereof, and Termination Values shall be adjusted,
either upwards or downwards, to reflect (i) the issuance of any Additional
Senior Notes pursuant to Section 2.12 of the Indenture in connection with a
refunding or refinancing of the Senior Notes pursuant to Section 11.3 of the
Participation Agreement (ii) the issuance of Additional Senior Notes pursuant to
Section 2.12 of the Indenture in connection with the financing of Modifications
pursuant to Section 11.1 of the Participation Agreement and (iii) any payment of
Head Lease Rent pursuant to Section 11.2(c) of the Participation Agreement. In
the event of a refinancing of the Senior Notes and issuance of

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Additional Senior Notes pursuant to clause (i) above, the Periodic Lease Rent
and Allocated Rent shall change solely to reflect the change in interest payable
on the Additional Senior Notes issued from the interest on the Senior Notes
being refunded or refinanced. In the event that the Lessee obtains supplemental
financing pursuant to clause (ii) above, Periodic Lease Rent and Allocated Rent
shall change solely to reflect the increased debt service payable on the Senior
Notes as a result of the issuance of Additional Senior Notes.

          (b) Any adjustments pursuant to this Section 3.4 shall be calculated
to preserve the Equity Investor's Net Economic Return through the end of the
Basic Lease Term and to maintain a minimum Projected Lease Rent Coverage Ratio
of 1.40 to 1.00 on each Rent Payment Date during the remainder of the Basic
Lease Term; provided, however, that to the extent consistent with preserving the
Equity Investor's Net Economic Return, all adjustments shall be calculated to
preserve operating lease treatment for the Lessee under GAAP and to minimize, to
the extent possible, the internal rate of return of the Periodic Lease Rents and
the present value of the Periodic Lease Rent through the end of the Basic Lease
Term. Adjustments will be made using the same method of computation and
assumptions, including Tax Assumptions and Pricing Assumptions originally used
(other than those that have changed as the result of the event giving rise to
the adjustment) in the calculation of the Periodic Lease Rent, Allocated Rent,
Section 467 Loan Balance, Section 467 Loan Interest and Termination Values and
to comply with law including Section 467 of the Code (except to the extent that
the original transaction did not comply therewith). The adjustments contemplated
by this Section 3.4 will result in corresponding adjustments to Allocated Rent,
Proportional Rent, Section 467 Loan Balances, Section 467 Interest and
Termination Values.

          (c) Anything herein or in any other Operative Document to the contrary
notwithstanding, Periodic Lease Rent payable on any Rent Payment Date, whether
or not adjusted in accordance with this Section 3.4, shall, in the aggregate, be
in an amount at least sufficient to pay in full principal and interest payable
on the Senior Notes on such Rent Payment Date (except principal and interest
payable upon an Indenture Event of Default that is not caused by a Lease Event
of Default). Anything herein or in any other Operative Document to the contrary
notwithstanding, Termination Values, the EBO Price and the FPPO Price payable on
any date under this Project Lease, whether or not adjusted in accordance with
this Section 3.4, shall be, together with all other Rent due and owing on such
date, exclusive of any portion thereof that is an Excepted Payment, in an amount
at least sufficient to pay in full the principal of, premium, if any, and
interest payable on the Senior Notes on such date.

          (d) Any adjustment pursuant to this Section 3.4 shall initially be
computed by the Equity Investor, subject to the verification procedure described
in this Section 3.4(d). Once computed, the results of such computation shall
promptly be delivered by the Equity Investor to the Lessee. Within 20 days after
the receipt of the results of any such adjustment, the Lessee may request that a
nationally recognized firm of accountants or lease advisors selected by the
Equity Investor and reasonably satisfactory to the Lessee (the "Verifier")
verify, after consultation with the Equity Investor and the Lessee, the accuracy
of such adjustment in accordance with this Section 3.4. The Equity Investor and
the Lessee hereby agree, (i) each shall have the right to communicate with the
Verifier, and (ii) subject to the execution by the Verifier of an appropriate
confidentiality agreement, to provide the Verifier with all information and

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materials (other than income tax returns) as shall be necessary in connection
therewith. If the Verifier confirms that such adjustment is in accordance with
this Section 3.4, it shall so certify to the Lessee, the Owner Lessor and the
Equity Investor and such certification shall be final, binding and conclusive on
the Lessee, the Equity Investor and the Owner Lessor. If the Verifier concludes
that such adjustment is not in accordance with this Section 3.4, and the
adjustments to Periodic Lease Rent, Allocated Rent, Proportional Rent, Section
467 Loan Balance, Section 467 Interest or Termination Value calculated by the
Verifier are different from those calculated by the Equity Investor, then it
shall so certify to the Lessee, the Owner Lessor and the Equity Investor and the
Verifier's calculation shall be final, binding and conclusive on the Lessee, the
Owner Lessor and the Equity Investor. If the Lessee does not request
verification of any adjustment within the period specified above, the
computation provided by the Equity Investor shall be final, binding and
conclusive on the Lessee, the Owner Lessor and the Equity Investor. The final
determination of any adjustment hereunder shall be set forth in an amendment to
this Project Lease, executed and delivered by the Owner Lessor and the Lessee
and consented to by the Equity Investor; provided, however, that any omission to
execute and deliver such amendment shall not affect the validity and
effectiveness of any such adjustment. The reasonable fees, costs and expenses of
the Verifier in verifying an adjustment pursuant to this Section 3.4 shall be
paid by the Lessee; provided, however, that, in the event that such Verifier
determines that the present value of Periodic Lease Rent to be made under this
Project Lease as calculated by the Equity Investor is greater than the present
value of the correct Periodic Lease Rent as certified by the Verifier, in each
case, discounted semiannually on each Rent Payment Date at the Discount Rate, by
more than six basis points, then such expenses of the Verifier shall be paid by
the Equity Investor. Notwithstanding anything herein to the contrary, the sole
responsibility of the Verifier shall be to verify the calculations hereunder and
matters of interpretation of this Project Lease or any other Operative Document
shall not be within the scope of the Verifier's responsibilities. In addition,
notwithstanding any other provisions in the Operative Documents, in no event
shall the EBO Price be adjusted to an amount that is less than the greatest of
(A) the Termination Value for the Project computed as of the EBO Date, (B) the
estimated fair market value of the Project on the EBO Date (as set forth in the
appraisal received pursuant to Section 4(n) of the Participation Agreement or
this Section 3.4, as the case may be), and (C) the present value as of the EBO
Date of the sum of (i) the then remaining scheduled Periodic Lease Rent payments
through the end of the Basic Lease Term as set forth in such appraisal, and (ii)
the FPPO Price (the present value calculation described in this clause (C) shall
be determined utilizing a semi-annual compounded discount rate equal to the
Discount Rate.

          Section 3.5. Manner of Payments. All Rent (whether Periodic Lease
Rent, Renewal Lease Rent or Supplemental Lease Rent) shall be paid by the Lessee
in lawful currency of the United States of America in immediately available
funds to the recipient not later than 1:00 p.m. (New York City time) on the date
due. All Rent payable to the Owner Lessor by the Lessee (other than Excepted
Payments) shall be paid by the Lessee to the Owner Lessor by payment to the
Owner Lessor's Account, or to such other place as the Owner Lessor shall notify
the Lessee in writing; provided, however, that so long as the Lien of the
Indenture has not been terminated and fully discharged, the Owner Lessor hereby
irrevocably directs (it being agreed and understood that such direction shall be
deemed to have been revoked after the Lien of the Indenture shall have been
terminated and fully discharged in accordance with its terms), and the Lessee
agrees, that all payments of Rent (other than Excepted Payments) payable to the
Owner

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Lessor shall be paid to such place as the Indenture Trustee shall notify the
Lessee in writing pursuant to the Indenture. Payments constituting Excepted
Payments shall be made to the Person entitled thereto at the address for such
Person set forth in the Participation Agreement, or to such other place as such
Person shall notify the Lessee in writing.

SECTION 4. DISCLAIMER OF WARRANTIES; RIGHT OF QUIET ENJOYMENT

          Section 4.1. Disclaimer of Warranties.

          (a) Without waiving any claim the Lessee may have against any
manufacturer, vendor or contractor, THE LESSEE ACKNOWLEDGES AND AGREES SOLELY
FOR THE BENEFIT OF THE OWNER LESSOR, THE EQUITY INVESTOR AND THE INDENTURE
TRUSTEE THAT (i) THE PROJECT AND EACH COMPONENT THEREOF IS OF A SIZE, DESIGN,
CAPACITY AND MANUFACTURE ACCEPTABLE TO THE LESSEE, (ii) THE LESSEE IS SATISFIED
THAT THE PROJECT AND EACH COMPONENT THEREOF IS SUITABLE FOR THEIR RESPECTIVE
PURPOSES, (iii) NEITHER THE OWNER LESSOR NOR THE EQUITY INVESTOR IS A
MANUFACTURER OR A DEALER IN PROPERTY OF SUCH KIND, (iv) THE PROJECT IS LEASED
HEREUNDER TO THE EXTENT PROVIDED HEREBY FOR THE BASIC LEASE TERM AND THE RENEWAL
LEASE TERMS, IF ANY, SPECIFIED HEREIN SUBJECT TO ALL APPLICABLE LAWS NOW IN
EFFECT OR HEREAFTER ADOPTED, INCLUDING (1) ZONING REGULATIONS, (2) ENVIRONMENTAL
LAWS OR (3) BUILDING RESTRICTIONS, AND IN THE STATE AND CONDITION OF EVERY PART
THEREOF WHEN THE SAME FIRST BECAME SUBJECT TO THIS PROJECT LEASE WITHOUT
REPRESENTATION OR WARRANTY OF ANY KIND BY THE OWNER LESSOR OR THE EQUITY
INVESTOR AND (v) THE OWNER LESSOR LEASES FOR THE BASIC LEASE TERM AND THE
RENEWAL LEASE TERMS, IF ANY, SPECIFIED HEREIN AND THE LESSEE TAKES THE PROJECT
UNDER THIS PROJECT LEASE "AS-IS," "WHERE-IS" AND "WITH ALL FAULTS," AND THE
LESSEE ACKNOWLEDGES THAT NONE OF THE OWNER LESSOR, THE EQUITY INVESTOR OR THE
INDENTURE TRUSTEE MAKES NOR SHALL BE DEEMED TO HAVE MADE, AND EACH EXPRESSLY
DISCLAIMS, ANY AND ALL RIGHTS, CLAIMS, WARRANTIES OR REPRESENTATIONS, EITHER
EXPRESS OR IMPLIED, AS TO THE VALUE, CONDITION, FITNESS FOR ANY PARTICULAR
PURPOSE, DESIGN, OPERATION, MERCHANTABILITY THEREOF OR AS TO THE TITLE OF THE
PROJECT OR THE OWNER LESSOR'S LEASEHOLD INTEREST, THE QUALITY OF THE MATERIAL OR
WORKMANSHIP THEREOF OR CONFORMITY THEREOF TO SPECIFICATIONS, FREEDOM FROM
PATENT, COPYRIGHT OR TRADEMARK INFRINGEMENT, THE ABSENCE OF ANY LATENT OR OTHER
DEFECT, WHETHER OR NOT DISCOVERABLE, OR AS TO THE ABSENCE OF ANY OBLIGATIONS
BASED ON STRICT LIABILITY IN TORT OR ANY OTHER EXPRESS OR IMPLIED REPRESENTATION
OR WARRANTY WHATSOEVER WITH RESPECT THERETO, except that the Owner Lessor
represents and warrants that on the Closing Date, the Project will be free of
Owner Lessor's Liens. It is agreed that all such risks, as between the Owner
Lessor and the Equity Investor on the one hand and the Lessee on the other hand
are to be borne by the Lessee with respect to acts, occurrences or omissions
during the Project Lease Term. None of the

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Owner Lessor, the Equity Investor or the Indenture Trustee shall have any
responsibility or liability to the Lessee or any other Person with respect to
any of the following: (x) any liability, loss or damage caused or alleged to be
caused directly or indirectly by the Project or any Component or by any
inadequacy thereof or deficiency or defect therein or by any other circumstances
in connection therewith; (y) the use, operation or performance of the Project or
any Component thereof or any risks relating thereto; or (z) the delivery,
operation, servicing, maintenance, repair, improvement, replacement or
decommissioning of the Project or any Component thereof. The provisions of this
paragraph (a) of this Section 4.1 have been negotiated, and, except to the
extent otherwise expressly stated herein or in Sections 3.2(f) and 3.4(f) of the
Participation Agreement, the foregoing provisions are intended to be a complete
exclusion and negation of any representations or warranties of the Owner Lessor
and the Equity Investor, express or implied, with respect to the Project or any
Components thereof that may arise pursuant to any Applicable Law now or
hereafter in effect or otherwise.

          (b) During the Project Lease Term, so long as no Lease Event of
Default shall have occurred and be continuing, the Owner Lessor hereby appoints
irrevocably and constitutes the Lessee its agent and attorney-in-fact, coupled
with an interest, to assert and enforce, from time to time, in the name and for
the account of the Owner Lessor and the Lessee, as their interests may appear,
but in all cases at the sole cost and expense of the Lessee, whatever claims and
rights the Owner Lessor may have in respect of the Project or any Component
thereof against any manufacturer, vendor or contractor or under any express or
implied warranties relating to the Project or any Component thereof.

          Section 4.2. Quiet Enjoyment. The Owner Lessor agrees that,
notwithstanding any provision of any other Operative Document, so long as no
Lease Event of Default shall have occurred and be continuing, the Owner Lessor
shall not interfere with or interrupt the quiet enjoyment of the use, operation
and possession by the Lessee of the Project or Modifications thereto during the
Project Lease Term.

SECTION 5. RETURN OF PROJECT

          Section 5.1. Return. Unless the Lessee shall have purchased the Owner
Lessor's Leasehold Interest in accordance with Section 22 hereof, upon
expiration or early termination of this Project Lease, the Lessee, at its own
expense, shall return the Project (together with any Modifications, title to
which shall have vested in the Owner Lessor pursuant to the first sentence of
Section 8.3) to the Owner Lessor or any transferee or assignee of the Owner
Lessor by surrendering the Project into the possession of the Owner Lessor or
such transferee or assignee at the Project Site subject to the return conditions
set forth in Sections 5.2 and 5.3. In connection with such return, the Lessee
shall:

               (i) assign, to the extent permitted by Applicable Law, and shall
          cooperate with all reasonable requests of the Equity Investor, the
          Owner Lessor or any transferee or assignee of either of such parties
          for purposes of obtaining, or enabling the Equity Investor, the Owner
          Lessor or such transferees or assignees to obtain, any and all
          Governmental Approvals and licenses, permits, approvals and consents
          of any other Persons that are or will be required to be obtained by
          the Equity

                                       7

          Investor, the Owner Lessor or such transferee or assignee in
          connection with the use, operation or maintenance of the Project on or
          after such return in compliance with Applicable Law; provided that if
          any such Governmental Approval or other license, permit, approval or
          consent also relates to any other facilities, the Lessee and the Owner
          Lessor shall enter into mutually satisfactory arrangements so that the
          Project and such other facilities may each be owned, operated and
          maintained in a commercially reasonable manner;

               (ii) provide the Owner Lessor or a transferee or assignee of
          Owner Lessor copies of all documents (including all Governmental
          Approvals and related materials), instruments, plans, maps,
          specifications, manuals, drawings and other documentary materials
          relating to the installation, maintenance, operation, construction,
          design, modification and repair of the Project as shall be in the
          Lessee's possession and shall be reasonably appropriate or necessary
          for the continued operation of the Project; and

               (iii) assign to the Owner Lessor, or its designee, any Project
          Document requested by the Owner Lessor by an appropriate instrument of
          transfer in form and substance reasonably satisfactory to the Owner
          Lessor and prepared by and at the expense of the Lessee.

Upon such return, the right to use the Project granted hereunder for the benefit
of the Lessee shall cease and terminate.

          Section 5.2. Condition Upon Return. At the time of the return of the
Project by the Lessee to the Owner Lessor or any transferee or assignee of the
Owner Lessor pursuant to Section 5.1, the following conditions shall be complied
with, all at the Lessee's sole cost and expense; provided that clauses (a), (b)
and (d) shall not apply to any return pursuant to Section 10 and clause (b)
(solely with respect to compliance with Section 8) shall not apply to any
termination pursuant to Section 14:

          (a) the Project shall be in at least as good condition as it would
have been in if it had been maintained in the manner required by the terms of
this Project Lease and shall be free and clear of all Liens (other than
Permitted Liens described in clause (a)-(c), (f), (g) and (j) of the definition
thereof);

          (b) the Project shall be in compliance with Sections 7 and 8;

          (c) no Component shall be a temporary component and any replacement
component shall satisfy the standards of Section 7.2;

          (d) if this Project Lease is being terminated and the Owner Lessor's
Leasehold Interest is being transferred to a third party pursuant to Section 13
or Section 14, the Lessee, at the request of the Owner Lessor, shall enter into
arrangements with such third party reasonably acceptable to such third party to
permit such third party access to and use of the Project and the Project Site;
and

                                       8

          (e) the Lessee, at the request of the Owner Lessor made in accordance
with Section 8.4, shall sell to the Owner Lessor (or its transferee or assignee)
on the date set forth in Section 8.4 at the then Fair Market Sales Value thereof
each Removable Modification to the Project requested by the Owner Lessor, and/or
the Expansion Project, subject in each case to all existing Liens. The fees and
expenses of the Independent Appraiser(s) incurred pursuant to this clause (e)
shall be paid by the Owner Lessor. If the Owner Lessor determines not to
purchase any Removable Modification (which may include the Expansion Project)
the Lessee, at its expense, shall remove such Removable Modification from the
Project Site no later than the expiration or termination date of the Project
Lease without damaging or otherwise adversely affecting the Project.

          Section 5.3. Environmental Reports; Clean-up.

          (a) In connection with the return of the Project to the Owner Lessor
pursuant to this Section 5, the Lessee shall, at its own expense, provide the
Owner Lessor and, so long as the Lien of the Indenture shall not have been
terminated and fully discharged, the Indenture Trustee (i) not earlier than nine
(9) months nor later than three (3) months prior to the expiration date of the
Basic Lease Term or the last Renewal Lease Term elected by the Lessee, (ii) in
connection with any return pursuant to Section 10, 13 or 14, no later than three
(3) months prior to the expiration of this Project Lease or (iii) in connection
with any return pursuant to Section 17, as promptly as possible after such
return (but, so long as reasonable access is provided, within 45 days after such
return), a phase I environmental report including a compliance with
Environmental Laws audit (together referred to as "phase I survey") addressed to
the Owner Lessor and, so long as the Lien of the Indenture has not been
terminated and fully discharged, the Indenture Trustee, as to the environmental
condition of the Project, the presence or absence of any Environmental
Conditions and compliance or noncompliance with applicable Environmental Laws.
Such phase I survey shall have been performed not earlier than 90 days prior to
the date such phase I survey is provided to the Owner Lessor, by a reputable
environmental consulting firm (selected by the Lessee and reasonably acceptable
to the Equity Investor), and shall be in form and scope reasonably satisfactory
to the Equity Investor and, if the Lien of the Indenture shall not have been
terminated and fully discharged, the Indenture Trustee. The phase I survey will
only be expanded to a phase II environmental survey if and only if, as a result
of the phase I survey, facts are revealed that would reasonably require further
investigation in order to assess the environmental condition of the Project, the
presence or absence of any Environmental Conditions, or compliance or
noncompliance with applicable Environmental Laws. The provisions of such
environmental surveys shall not relieve the Lessee of any indemnification
obligation or liability with respect to Environmental Conditions existing at the
time of such return, whether known or unknown, in respect of the Project.

          (b) If the phase I survey (and phase II environmental survey, if
necessary) delivered pursuant to Section 5.3(a) indicates that any action
(including cleaning, investigation, abatement, correction, removal or
remediation) is then required under any then applicable Environmental Laws
(whether indicated in the phase I survey or phase II environmental survey or
otherwise and including any action then required under applicable Environmental
Laws for the Project to be then in compliance with such Laws), the Lessee shall,
at its own expense, within 90 days of the Owner Lessor having received such
survey provide the Owner Lessor and, so long

                                       9

as the Lien of the Indenture shall not have been terminated and fully
discharged, the Indenture Trustee, with a remediation plan reasonably
satisfactory to the Equity Investor and, if the Lien of the Indenture shall not
have been terminated and fully discharged, the Indenture Trustee, designed to
effect compliance with applicable Environmental Laws and the return conditions
set forth in this Section 5 as promptly as is reasonably practical (and in any
event prior to the expiration of the Project Lease Term) and without materially
adversely affecting the continued operation of the Project. To the extent that
any action (including cleaning, investigation, abatement, correction, removal or
remediation) required to be taken under this Section 5.3(b) cannot reasonably be
completed prior to expiration or termination of this Project Lease, the Lessee
shall complete such action (including cleaning, investigation, abatement,
correction, removal or remediation) as promptly thereafter as is reasonably
practical, and in addition the Lessee shall provide to the Owner Lessor and, so
long as the Lien of the Indenture shall not have been terminated and fully
discharged, the Indenture Trustee, (x) adequate financial assurance during such
period following such expiration or termination of this Project Lease or (y) an
agreement from an entity that meets the Minimum Credit Rating that such
obligations shall be satisfied. The obligations of the Lessee set forth in this
Section 5.3(a) and (b) shall survive the termination of this Project Lease and
the expiration of the Project Lease Term.

          Section 5.4. Expenses. The Lessee agrees to pay or reimburse, on an
After-Tax Basis, on demand, all reasonable costs and expenses incurred by the
Owner Lessor, the Equity Investor, the Indenture Trustee and any Noteholder in
connection with any return contemplated by this Section 5.

SECTION 6. LIENS

     The Lessee will not directly or indirectly create, incur, assume or suffer
to exist any Lien on or with respect to the Project (or any Component thereof),
the Project Site, the Lessee's Interest in the Geothermal Resource or the Owner
Lessor's interest therein, except Permitted Liens, and the Lessee shall promptly
notify the Owner Lessor of the imposition of any such Lien of which the Lessee
is aware and shall promptly, at its own expense, take such action as may be
necessary to fully discharge and release any such Lien.

SECTION 7. MAINTENANCE; REPLACEMENTS OF COMPONENTS

          Section 7.1. Maintenance. The Lessee, at its own cost and expense,
will (a) cause the Project to be maintained in good condition, repair and
working order (ordinary wear and tear excepted) and in any event in all material
respects (i) in accordance with Prudent Industry Practice, (ii) in compliance
with all Applicable Laws of any Governmental Entity having jurisdiction,
including all Environmental Laws (provided, however, that the Lessee may, in
good faith and by appropriate proceedings, diligently contest the validity or
application of any Applicable Law in any reasonable manner which does not
involve any danger of (A) foreclosure, sale, forfeiture or loss of, or
imposition of a Lien (other than a de minimis Lien) on, such Project, (B) impair
(other than in a de minimis fashion) the use, operation or maintenance of such
Project in any respect, (C) any criminal liability being incurred by the Equity
Investor, the Owner Lessor, the Indenture Trustee or any Noteholder, (D) the
Equity Investor, the Owner Lessor, the Indenture Trustee or any Noteholder being
subject to any unindemnified civil liability or of the

                                       10

Equity Investor or the Owner Lessor being subject to regulation as a public
utility under Applicable Law or (E) any Material Adverse Effect); and (iii) in
accordance with the terms of all insurance policies required to be maintained
pursuant to Section 11 and (b) cause to be made, at its own cost and expense,
all repairs, renewals, replacements, betterments and improvements thereof, all
as may be necessary so that the Project may be operated in accordance with its
intended purposes.

          Section 7.2. Replacement of Components. In the ordinary course of
maintenance, service, repair or testing of the Project or any Component the
Lessee, at its own cost and expense, may remove or cause or permit to be removed
from the Project any Component; provided, however, that the Lessee shall (a)
cause such Component to be replaced by a replacement Component which shall be
free and clear of all Liens (except Permitted Liens described in clauses
(a)-(c), (e) (solely for amounts not yet delinquent), (f), (g) or (j) of the
definition thereof) and in at least as good operating condition as the Component
replaced, assuming that the Component replaced was maintained in accordance with
this Project Lease (each such replacement Component being herein referred to as
a "Replacement Component") and (b) cause such replacement to be performed in a
manner which does not (i) decrease by more than a de minimis amount the current
or residual value, remaining useful life or utility of the Project below the
current or residual value, the remaining useful life or the utility thereof
immediately prior to such replacement (assuming the Project and such Component
thereof was then in the condition required to be maintained by the terms of this
Project Lease), (ii) cause the Project to become "limited-use" property within
the meaning of Rev. Proc. 2001-28, 2001-1 C.B. 1156 or (iii) cause the Lessee or
the Owner Lessor to be in default under any applicable term or provision of any
Operative Document. If any Component to the Project that is subject to this
Project Lease is at any time removed from the Project, such Component shall
remain subject to this Project Lease, wherever located, until such time as such
Component shall be replaced by a Replacement Component which has been
incorporated in the Project and which meets the requirements for Replacement
Components specified above. Immediately upon any Replacement Component becoming
incorporated in the Project, without further act (and at no cost to the Owner
Lessor and with no adjustment to the Head Lease Rent, Periodic Lease Rent,
Allocated Rent, Proportional Rent or Renewal Lease Rent), (x) the replaced
Component shall no longer be subject to this Project Lease, (y) such replaced
Component shall be free and clear of all rights of the Owner Lessor and the
Indenture Trustee, and (z) the Replacement Component shall become subject to the
Head Lease and this Project Lease and, so long as the Lien of the Indenture
shall not have been terminated and fully discharged, the Lien of the Indenture,
and (ii) be deemed a part of the Project for all purposes of this Project Lease.
Notwithstanding anything in this Section 7.2 or elsewhere in this Project Lease
to the contrary, if the Lessee has determined that a Component is surplus or
obsolete, it shall have the right to remove such Component without replacing it;
provided, that no such Component may be so removed without being replaced if
such removal would decrease by more than a de minimis amount the current or
residual value, remaining useful life or utility of the Project below the
current or residual value, the remaining useful life or the utility thereof
immediately prior to such removal (assuming the Project was then in the
condition required to be maintained by the terms of this Project Lease) or cause
the Project to become "limited-use" property within the meaning of Rev. Proc.
2001-28, 2001-1 C.B. 1156.

                                       11

SECTION 8. MODIFICATIONS

          Section 8.1. Required Modifications. The Lessee, at its own cost and
expense, shall make or cause to be made all Modifications to the Project as are
required (a) by Applicable Law (provided, however, that the Lessee may, in good
faith and by appropriate proceedings, diligently contest the validity or
application of any Applicable Law in any reasonable manner which (i) does not
involve any danger of foreclosure, sale, forfeiture or loss of, or imposition of
a Lien on, the Project or any material part thereof or impair the use, operation
or maintenance of the Project in any material respect, and (ii) could not result
in any criminal liability being incurred by, or could not reasonably be expected
to have any material adverse effect on the interests of, the Equity Investor (or
any Affiliate thereof) or the Owner Lessor, including subjecting the Equity
Investor (or any Affiliate thereof) or the Owner Lessor to regulation as a
public utility under Applicable Law solely as a result of such contest;
provided, that no such contest may extend beyond the expiration or early
termination of this Project Lease) or (b) to maintain in effect any insurance
required to be maintained by the Lessee under any Operative Document
Modifications (each, a "Required Modification"). In connection with the making
of any Required Modification, the Lessee shall procure all consents (including,
to the extent applicable, consents from the Power Purchaser under the Power
Purchase Agreement) and approvals from any Governmental Entity having
jurisdiction.

          Section 8.2. Optional Modifications. The Lessee at any time may, at
its own cost and expense, make or cause or permit to be made any Modification to
the Project as the Lessee considers necessary or desirable in the proper conduct
of its business (any such Modification that is not a Required Modification being
referred to as an "Optional Modification"), provided that the Lessee shall not
make and shall prevent from being made any Optional Modification to the Project
that would (i) decrease by more than a de minimis amount the current or residual
value, utility or remaining useful life of the Project below the current or
residual value, utility or remaining useful life of the Project immediately
prior to such Modification assuming the Project was then in the condition
required to be maintained by the terms of this Project Lease or (ii) cause the
Project to become "limited-use" property, within the meaning of Rev. Proc.
2001-28, 2001-1 C.B. 1156, and no such Optional Modification shall be made
unless (x) the Lessee provides to the Owner Lessor and, so long as the Lien of
the Indenture shall not have been terminated and fully discharged, the Indenture
Trustee a certification from the Geothermal Consultant that such Modification is
not reasonably expected materially and adversely to affect the Owner Lessor's
rights under the Sublease of Resource Sublease or otherwise materially reduce or
impair the Geothermal Resource available to the Lessee pursuant to the Resource
Sublease Partial Assignment for the purpose of satisfying its obligations under
the Power Purchase Agreement, (y) the Lessee shall have received all consents
(including, to the extent applicable, consents from the Power Purchaser under
the Power Purchase Agreement) and approvals from any Governmental Entity having
jurisdiction and (z) such Modification could not reasonably be expected to have
a Material Adverse Effect (collectively, the "Improvement Conditions").

          Section 8.3. Modifications Subject to Head Lease. All (a) Required
Modifications (including Severable Modifications that are Required
Modifications), (b) Nonseverable Modifications and (c) Modifications financed by
the Owner Lessor by an

                                       12

Additional Equity Investment or a Supplemental Financing pursuant to Section
11.1 of the Participation Agreement shall (without adjustment to the Head Lease
Rent (except as set forth in Section 11.2 of the Participation Agreement) or,
except as provided herein or in Section 11.2 of the Participation Agreement,
Periodic Lease Rent, Allocated Rent, Proportional Rent or Renewal Lease Rent)
immediately (i) become subject to the Head Lease and this Project Lease and, so
long as the Lien of the Indenture shall not have been terminated and fully
discharged, the Owner Lessor's Leasehold Interest therein shall immediately
become subject to the Lien of the Indenture, and (ii) be deemed part of the
Project for all purposes of this Project Lease and the other Operative
Documents. The Lessee, at its own cost and expense, shall take such steps as the
Owner Lessor and, so long as the Lien of the Indenture shall not have been
terminated and fully discharged, the Indenture Trustee may reasonably require
from time to time to confirm that such Modifications are subject to the Head
Lease and this Project Lease and, so long as the Lien of the Indenture shall not
have been terminated and fully discharged, the Owner Lessor's interest therein
are subject to the Lien of the Indenture. Optional Modifications which are
Severable Modifications and which are not financed by the Owner Lessor by an
Additional Equity Investment or a Supplemental Financing pursuant to Section
11.1 of the Participation Agreement are referred to herein as "Removable
Modifications"). All Modifications other than Removable Modifications shall
become subject to the Head Lease, this Project Lease and the Lien of the
Indenture. The parties agree that the Well Improvements are Nonseverable
Modifications.

          Section 8.4. Purchase of Removable Modifications and Expansion
Project. Unless this Project Lease shall have sooner terminated, not later than
twenty (20) days prior to the Basic Lease Term Expiration Date (or any Renewal
Term then in effect), the Lessee shall notify the Owner Lessor of all Removable
Modifications which have not been removed from the Project. The Owner Lessor
shall have the right to purchase any Removable Modifications made to the Project
including those with respect to the Expansion Project which have not been
removed from the Project. The Owner Lessor may only exercise the purchase option
described in the immediately preceding sentence by irrevocable written notice to
the Lessee. The purchase price for Removable Modifications and the Expansion
Project to be purchased by the Owner Lessor shall be the then Fair Market Sales
Value as determined pursuant to Section 5.2(e). The Lessee may, at the Lessee's
cost and expense, remove any Removable Modifications, including the Expansion
Project that the Owner Lessor has not elected to purchase. The Lessee shall (at
the Lessee's cost and expense) repair any damage to the Project caused by the
removal by the Lessee of any Removable Modification including those with respect
to the Expansion Project. Any Removable Modification to the Project including
those with respect to the Expansion Project which are not removed by the Lessee
at or prior to the expiration or early termination of the Project Lease shall
become subject to the Head Lease (at no cost to the Owner Lessor).

SECTION 9. NET LEASE

     This Project Lease is a "net lease" and the Lessee's obligation to pay all
Rent, including Periodic Lease Rent, Renewal Lease Rent and Supplemental Rent
payable hereunder, (and the accrual of Allocated Rent) shall be absolute and
unconditional under any and all circumstances and shall not be terminated,
extinguished, diminished, lost, setoff (except as expressly provided herein) or
otherwise impaired by any circumstance of any character, including by (i) any
claim, setoff, counterclaim, recoupment, defense or other right which the Lessee
may have against the

                                       13

Owner Lessor, the Equity Investor, the Indenture Trustee, any of their
respective Affiliates or any other Person, including any claim as a result of
any breach by any of said parties of any covenant or provision in this Project
Lease or any other Operative Document, (ii) any lack or invalidity of title or
any defect in the title, condition, design, operation, merchantability or
fitness for use of the Project or any Component or any portion of any thereof,
or any eviction by paramount title or otherwise, or any unavailability of the
Project, the Lessee's interest in the Geothermal Resource, the Project Site, any
Component or any portion of either thereof, any other portion of the Project, or
any part thereof, (iii) any loss, theft or destruction of, or damage to, the
Project or any Component or any portion of any thereof or interruption or
cessation in the use or possession thereof or any part thereof by the Lessee for
any reason whatsoever and of whatever duration, (iv) the condemnation,
requisitioning, expropriation, seizure or other taking of title to or use of the
Project Site, the Project, the Lessee's interest in the Geothermal Resource, any
Component or any portion thereof by any Governmental Entity or otherwise, (v)
the invalidity or unenforceability (or allegation of invalidity or
unenforceability) or lack of due authorization or other infirmity of this
Project Lease or any other Operative Document, (vi) the lack of right, power or
authority of the Owner Lessor to enter into this Project Lease or any other
Operative Document, (vii) any ineligibility of the Project or any Component or
any portion of any thereof for any particular use, whether or not due to any
failure of the Lessee to comply with any Applicable Law, (viii) any event of
"force majeure" or any frustration of purpose, (ix) any legal requirement
similar or dissimilar to the foregoing, any present or future law to the
contrary notwithstanding, (x) any insolvency, bankruptcy, reorganization or
similar proceeding by or against the Lessee or any other Person, (xi) any Lien
of any Person with respect to the Project Site, the Project, any Component or
any portion of any thereof or any part thereof, (xii) any prohibition,
limitation or restriction of Lessee's use of all or any part of the Project, the
Project Site or any portion thereof or any interest therein or the interference
with such use by any Person, (xiii) the termination or loss of the Project Site
or any portion thereof, any other lease, sublease, right-of-way, easement or
other interest in personal or real property upon or to which any portion of the
Project is located, attached or appurtenant or in connection with which any
portion of the Project is used or otherwise affects or may affect the Project or
any right thereto, (xiv) any defect in the title to, or the existence of any
Lien with respect to the Project or any act of circumstances that may constitute
an eviction or constructive eviction, failure of consideration or commercial
frustration of purpose, (xv) any breach, default or misrepresentation by Owner
Lessor or any other Person under this Project Lease or any of the other
Operative Documents, (xvi) any failure, omission or delay on the part of any
Person to exercise any right, power or remedy under any Operative Document,
(xvii) the taking or omission of any of the actions referred to in any of the
Operative Documents or (xviii) any other cause, whether similar or dissimilar to
the foregoing, any present or future law notwithstanding; except as expressly
set forth herein or in any other Operative Document, it being the intention of
the parties hereto that all Rent, including all Periodic Lease Rent, Renewal
Lease Rent and Supplemental Rent payable hereunder, shall continue to be payable
by the Lessee hereunder, and Allocated Rent shall continue to accrue in each
case and in all events in the manner and at times provided for herein. Such
Rent, including Periodic Lease Rent or Renewal Lease Rent and Supplemental Lease
Rent shall not be subject to any abatement and the payments thereof shall not be
subject to any setoff or reduction for any reason whatsoever, including any
present or future claims of the Lessee or any other Person against the Owner
Lessor or any other Person under this Project Lease or otherwise. To the extent
permitted by Applicable Law, the Lessee hereby waives any and all rights which
it may

                                       14

now have or which at any time hereafter may be conferred upon it, by
statute or otherwise, to terminate, cancel, quit or surrender this Project Lease
except in accordance with Section 10, 13, 14 or 22. If for any reason whatsoever
this Project Lease shall be terminated in whole or in part by operation of law
or otherwise, except as specifically provided herein, the Lessee nonetheless
agrees, to the extent permitted by Applicable Law, to pay to the Owner Lessor an
amount equal to each installment of Periodic Lease Rent (or, in connection with
a termination of a Renewal Lease Term, Renewal Lease Rent) and all Supplemental
Lease Rent due and owing, at the time such payment would have become due and
payable in accordance with the terms hereof had this Project Lease not been so
terminated. Nothing contained herein shall be construed to waive any claim which
the Lessee might have under any of the Operative Documents or otherwise or to
limit the right of the Lessee to make any claim it might have against the Owner
Lessor or any other Person or to pursue such claim in such manner as the Lessee
shall deem appropriate.

SECTION 10. EVENTS OF LOSS

          Section 10.1. Occurrence of Events of Loss. (a) The Owner Lessor will
promptly notify, or will cause the Equity Investor to promptly notify, the
Lessee upon obtaining Actual Knowledge of any event that upon election of the
Equity Investor would result in a Regulatory Event of Loss; provided that the
failure to deliver such notice shall not result in any liability to the Owner
Lessor or the Equity Investor. If an Event of Loss described in clause (a) or
(b) of the definition of such term shall occur or an event shall occur which
could become an Event of Loss as described in clause (c) of such term, then the
Lessee shall promptly notify the Owner Lessor and, so long as the Lien of the
Indenture shall not have been terminated and fully discharged, the Indenture
Trustee of the occurrence thereof. In the case of an Event of Loss described in
clause (a) or (b) of the definition thereof, the Lessee may elect to rebuild or
replace the damaged Project, provided (i) no Lease Default or Lease Event of
Default has occurred and is continuing (other than any Lease Default or Lease
Event of Default that would be cured by such rebuilding), (ii) notice of such
election has been given to the Owner Lessor and, so long as the Lien of the
Indenture shall not have been terminated and fully discharged, the Indenture
Trustee within 30 days of the date of the occurrence of the Event of Loss and
(iii) the conditions set forth in Section 10.3(a) shall have been satisfied.

     If the Lessee fails to duly satisfy the conditions set forth in Section
10.3(a), the Lessee will be deemed to have made the election to terminate this
Project Lease pursuant to Section 10.1(b) as of the end of the 30 day period
referred to in the previous paragraph. If the Lessee satisfies the conditions in
Section 10.3(a), but fails to satisfy the conditions in Section 10.3(b), (c) or
(d), the Lessee will be deemed to have elected the termination option as of the
last day of the month in which the Owner Lessor has given notice of such
failure.

          (b) If (i) an Event of Loss described in clause (a) or (b) of the
definition of such term shall have occurred and the Lessee shall have elected
(or shall be deemed to have elected) not to rebuild or replace the Project
pursuant to Section 10.1(a) hereof, or (ii) an Event of Loss described in clause
(c) of the definition of Event of Loss shall occur or (iii) a Regulatory Event
of Loss shall occur, then, (x) in the case of clause (i) above, on the next
Termination Date occurring at least 30 days after such election or deemed
election or (y) in the case of clause (ii) above, on the Termination Date next
occurring (1) at least six months after the occurrence of

                                       15

such Event of Loss or (2) if earlier, at least 30 days after receipt of Casualty
Insurance Proceeds or Requisition Proceeds in respect of such Event of Loss, or
(z) in the case of clause (iii) above, on the Termination Date next occurring at
least three months after the occurrence of such Regulatory Event of Loss the
Lessee shall terminate this Project Lease. In connection with any such
termination arising as a result of an Event of Loss described in clause (a), (b)
or (c) of the definition thereof, if the Lessee shall have elected not to
rebuild or replace the Project, the Owner Lessor may elect to retain the Project
and pay the outstanding principal and accrued and unpaid interest on the Senior
Notes; provided however, that if the Owner Lessor elects to retain the Project
it shall notify the Lessee at least 30 days prior to such Termination Date and
shall deliver to the Indenture Trustee a letter of credit of an Acceptable
Letter of Credit Provider with a maximum drawing amount equal to not less than
the principal and interest which would be payable on the Senior Notes. If the
Owner Lessor elects to retain the Project as provided above, then the Lessee
shall, on such Termination Date, pay to the Owner Lessor (A) all amounts of any
unpaid Periodic Lease Rent and Renewal Lease Rent due on or before such
Termination Date, plus (B) all amounts of Supplemental Lease Rent (including
reasonable documented out-of-pocket costs and expenses incurred in connection
with such Event of Loss by the Owner Lessor, the Equity Investor, and the
Indenture Trustee) due and payable on or before such Termination Date. If the
Owner Lessor fails to elect to retain the Project as provided above, Lessee
shall offer (and unless the Lessor elects to retain the Project, such offer
shall be deemed accepted) to purchase, subject to the rights of any insurers
under policies maintained by the Lessee, on such Termination Date the Owner
Lessor's Leasehold Interest by paying or causing to be paid (1) the Termination
Value determined as of such Termination Date, plus (2) any unpaid Periodic Lease
Rent and Renewal Lease Rent due on or before such Termination Date, plus (3) all
other Supplemental Lease Rent (including reasonable documented out-of-pocket
costs and expenses incurred in connection with such Event of Loss by the Owner
Lessor, the Equity Investor and the Indenture Trustee) due and payable on or
prior to such Termination Date. Upon the payment of all sums required to be paid
pursuant to this Section 10.1(b), (i) Allocated Rent shall cease to accrue and
the obligation to pay Periodic Lease Rent or Renewal Lease Rent shall cease,
(ii) the Lessee shall cease to have any other liability to the Owner Lessor, the
Equity Investor, or the Indenture Trustee except for Supplemental Lease Rent and
other obligations (including those under Sections 9.1 and 9.2 of the
Participation Agreement and the Tax Indemnity Agreement) surviving pursuant to
the express terms of any Operative Document, (iii) the Owner Lessor shall pay
the outstanding principal and accrued and unpaid interest on the Senior Notes,
(iv) this Project Lease, the Head Lease, the Sublease of the Power Plant
Sublease and the Real Estate Documents related thereto shall terminate, (v) the
Owner Lessor shall, at the Lessee's cost and expense, execute and deliver to the
Lessee a release and termination of this Project Lease, the Head Lease, the
Sublease of the Power Plant Sublease and the Real Estate Documents related
thereto, (vi) the Owner Lessor shall transfer (by an appropriate instrument of
transfer in form and substance reasonably satisfactory to the Owner Lessor and
prepared by and at the expense of the Lessee) the Owner Lessor's Leasehold
Interest to the Lessee on an "as is, where is" and "with all faults" basis,
without representations or warranties other than a warranty as to the absence of
Owner Lessor's Liens and a warranty of the Equity Investor as to the absence of
Equity Investor's Liens and (vii) the Owner Lessor shall use all reasonable
efforts to cause the Indenture Trustee to discharge the Lien of the Indenture
and shall execute and deliver appropriate releases and other documents or
instruments necessary or desirable to effect the foregoing, all to be prepared,
filed and recorded (as appropriate) at the cost and expense of the Lessee.

                                       16

          Section 10.2. Application of Payments.

          (a) All Requisition Proceeds received at any time by the Owner Lessor
or the Lessee from any Governmental Entity as a result of the occurrence of an
Event of Loss described in clause (c) of the definition of Event of Loss and all
Casualty Insurance Proceeds received as a result of the occurrence of an Event
of Loss described in clause (a) or (b) of the definition of Event of Loss shall
be applied as follows:

               (i) in the event that the Owner Lessor elects to retain the
          Project pursuant to Section 10.1(b), all such Requisition Proceeds and
          all Casualty Insurance Proceeds shall be promptly paid to the Owner
          Lessor;

               (ii) in the event that the Owner Lessor elects not to retain the
          Project pursuant to Section 10.1(b), then all such payments received
          at any time by the Lessee shall be promptly paid to the Owner Lessor
          or if the Lien of the Indenture shall not have been terminated and
          fully discharged, to or at the direction of the Indenture Trustee, for
          application pursuant to the following provisions of this Section 10.2:

                    (A) so much of such payments as shall not exceed the Rent
               required to be paid by the Lessee pursuant to Section 10.1(b)
               shall be applied in reduction of the Lessee's obligation to pay
               such amount if not already paid by the Lessee or, if already paid
               by the Lessee, shall, so long as no Lease Default or Lease Event
               of Default shall have occurred and be continuing, be applied to
               reimburse the Lessee for its payment of the Termination Value
               portion of such amount; and

                    (B) the balance, if any, of such payments remaining
               thereafter shall be apportioned between the Owner Lessor and the
               Lessee as their interests may appear.

     Notwithstanding the foregoing, if the Lessee shall have decided to rebuild
or replace the Project pursuant to Section 10.1(a), any Casualty Insurance
Proceeds received by the Owner Lessor, the Indenture Trustee or the Lessee as a
result of the occurrence of an Event of Loss described in clause (a) or (b) of
the definition of Event of Loss shall be paid to the Depositary Bank, deposited
into the Loss Proceeds Account and applied as provided in the Depositary
Agreement.

          Section 10.3. Conditions to Lessee's Right to Rebuild or Replace. (a)
The Lessee's right to rebuild or replace the Project pursuant to Section 10.1(a)
shall be subject to the fulfillment, at the Lessee's sole cost and expense, of
the conditions contained in said clause (a), and the following additional
conditions:

               (i) receipt by the Equity Investor and, so long as the Lien of
          the Indenture shall not have been terminated and fully discharged, the
          Indenture Trustee, on or prior to the date on which the election to
          rebuild has been delivered pursuant to the third sentence of Section
          10.1(a), of: (A) a report of the Engineering Consultant

                                       17

          or another independent engineer, such other engineer and such report
          to be satisfactory to the Equity Investor and, so long as the Lien of
          the Indenture has not been terminated and fully discharged, the
          Indenture Trustee (and if the Lessee's interest in the Geothermal
          Resource is affected by such Event of Loss a report of the Geothermal
          Consultant or another independent geothermal consultant, such other
          geothermal consultant and such report to be satisfactory to the Equity
          Investor and, so long as the Lien of the Indenture shall not have been
          terminated and fully discharged, the Indenture Trustee) to the effect
          that (1) the rebuilding or replacement of the Project is
          technologically feasible and economically viable with the Casualty
          Insurance Proceeds paid or payable as a result of such damage to the
          Project together with all funds that the Lessee has agreed in writing
          to provide (in form and substance satisfactory to the Owner Lessor
          and, so long as the Lien of the Indenture shall not have been
          terminated and fully discharged, the Indenture Trustee), the
          availability of such funds as required to be guaranteed by an
          Acceptable Letter of Credit Provider whose right to reimbursement
          shall be limited to funds of the Lessee which are not subject to the
          Liens created under the Depositary Agreement, (2) it is reasonable to
          expect that such rebuilding or replacement can be completed within
          eighteen months from the date on which the Event of Loss occurred (the
          "Rebuilding Measuring Date") but, in any event, no later than the last
          day of the Project Lease Term unless Section 15.6 shall be applicable
          and (3) it is reasonable to assume that the total net energy produced
          by the Project at 12 and 18 months, respectively, after the Rebuilding
          Measuring Date is equal to 40% and 100%, respectively, of the total
          net energy produced by the Project in the last full calendar year
          immediately preceding the Event of Loss, and (B) an appraisal of an
          appraiser selected by the Lessee, such appraiser and such appraisal to
          be reasonably acceptable to the Equity Investor and, so long as the
          Lien of the Indenture shall not have been terminated and fully
          discharged, the Indenture Trustee, to the effect that the Project,
          after completion of the rebuilding or replacement, will have at least
          the same current and residual value, utility and remaining useful life
          as the Project immediately prior to the Event of Loss (assuming the
          Project was then in the condition required by the terms of this
          Project Lease), and (C) an Officer's Certificate of the Lessee, which
          shall be reasonably satisfactory as to form and substance to the
          Equity Investor and, so long as the Lien of the Indenture shall not
          have been terminated and fully discharged, the Indenture Trustee, to
          the effect that (1) no Lease Default or Lease Event of Default shall
          have occurred and be continuing, (2) the Lessee has adequate financial
          resources, from insurance proceeds or otherwise, to complete such
          rebuilding or replacement and to perform its other obligations under
          the Operative Documents, including the payment of Rent, (3) the Power
          Purchase Agreement will stay in effect during the period of rebuilding
          or replacement, (4) the Lease Rent Coverage Ratio during the period of
          rebuilding or replacement will be not less than 1.00 to 1.00 (taking
          into account all proceeds received from Business Interruption
          insurance) and (5) such rebuilding will not result in the Project
          being "limited use" property within the meaning of Rev. Proc. 2001-28,
          2001-1 C.B. 1156.

               (ii) receipt by the Equity Investor on or prior to the date on
          which the election to rebuild or replace has been delivered pursuant
          to the third sentence of

                                       18

          Section 10.1(a), of (A) a legal opinion of independent tax counsel
          selected by the Equity Investor and reasonably satisfactory to the
          Lessee to the effect that such rebuilding or replacement will not
          result in any incremental tax risks to the Equity Investor, and (B) an
          indemnity (with verification, tax savings, and contest rights
          provisions substantially the same as those set forth in the Tax
          Indemnity Agreement) against any tax risks resulting from the rebuild
          or replacement of the Project in form and substance reasonably
          satisfactory to the Equity Investor from the Lessee;

               (iii) no material adverse accounting effect on the Equity
          Investor shall be caused by such rebuilding or replacement; and

               (iv) the Lessee shall have demonstrated to the reasonable
          satisfaction of the Owner Lessor and, so long as the Lien of the
          Indenture shall not have been terminated and fully discharged, the
          Indenture Trustee (A) the absence of any Lease Default or Lease Event
          of Default (other than any Lease Default or Lease Event of Default
          that would be cured by such rebuilding), and (B) that all Governmental
          Approvals required in connection with the work done or proposed to be
          done have been obtained or can reasonably be expected to be obtained
          on or prior to the date required in connection therewith.

          (b) If the conditions to the rebuilding or replacement of the Project
set forth in paragraph (a) of this Section 10.3 have been fulfilled, the Lessee
shall cause the rebuilding or replacement to commence as soon as practicable,
and in any event within twelve (12) weeks of the Rebuilding Measuring Date and
will cause work on such rebuilding or replacement to proceed diligently
thereafter. As the rebuilding or replacement of the Project progresses, title to
the rebuilt or replacement Project shall vest in the Lessee and become subject
to the Head Lease and such interest of the Owner Lessor shall become subject to
this Project Lease and, so long as the Lien of the Indenture shall not have been
terminated and fully discharged, the Lien of the Indenture automatically without
any further act by any Person.

          (c) Casualty Insurance Proceeds shall be released to pay costs of
rebuilding or replacement only if accompanied by an Officer's Certificate of the
Lessee which demonstrates that the rebuilding or replacement is proceeding in a
manner consistent with the requirements of Section 10.3(a), including in
conformity with the construction schedule described in the report of the
Engineering Consultant delivered pursuant thereto.

          (d) On the date of the completion of such rebuilding or replacement of
the Project which shall occur within eighteen (18) months of the Rebuilding
Measuring Date (the "Rebuilding Closing Date") the following documents shall be
duly authorized, executed and delivered and, if appropriate, filed for
recordation by the respective party or parties thereto and shall be in full
force and effect, and an executed counterpart of each thereto shall be delivered
to the Owner Lessor and, so long as the Lien of the Indenture shall not have
been terminated and fully discharged, the Indenture Trustee:

               (i) with respect to the Project, supplements to the Head Lease
          and this Project Lease subjecting such rebuilt or replacement facility
          to the Head Lease and this Project Lease (at no cost to the Owner
          Lessor with no change in Head Lease

                                       19

          Rent, Allocated Rent, Proportional Rent or the Periodic Lease Rent or
          Renewal Lease Rent as a result of such rebuilding or replacement);

               (ii) supplements to the Indenture subjecting such rebuilt or
          replacement facility to the Lien of the Indenture (at Lessee's sole
          cost and expense);

               (iii) such recordings and filings as may be reasonably requested
          by the Equity Investor or the Indenture Trustee to be made or filed;

               (iv) an opinion of counsel of the Lessee, such counsel and such
          opinion to be reasonably satisfactory to the Equity Investor and, so
          long as the Lien of the Indenture shall not have been terminated and
          fully discharged, the Indenture Trustee to the effect that (A) the
          supplements to the Head Lease and this Project Lease or other
          documents required by clause (i) above constitute effective
          instruments for subjecting such rebuilt or replacement facility to the
          Head Lease and this Project Lease, (B) the supplements to the
          Indenture required by clause (ii) above, if any, constitute effective
          instruments for subjecting such rebuilt or replacement facility to the
          Lien of the Indenture, and (C) all filings and other action necessary
          to perfect and protect the Owner Lessor's and, if applicable, the
          Indenture Trustee's interest in such rebuilt or replacement facility
          have been accomplished;

               (v) an appraisal by an Independent Appraiser, certifying that the
          rebuilt or replacement facility has a current and residual value,
          remaining useful life and utility at least equal to the current and
          residual value, remaining useful life and utility that the Project
          would have had on the Rebuilding Closing Date had such Event of Loss
          not occurred (assuming the Project would then be in the condition and
          repair required to be maintained by the terms of this Project Lease)
          and the Project is not "limited-use" property within the meaning of
          Rev. Proc. 2001-28, 2001-1 C.B. 1156;

               (vi) a report by an Engineering Consultant certifying that the
          rebuilt or replacement facility is in a state of repair and condition
          required by this Project Lease; and

               (vii) satisfactory evidence as to the compliance with Section 11
          of this Project Lease with respect to the rebuilt or replacement
          facility.

          (e) Whether or not the transactions contemplated by this Section 10.3
are consummated, the Lessee agrees to pay or reimburse, on an After-Tax Basis,
any costs or expenses (including reasonable legal fees and expenses) incurred by
the Owner Lessor, the Equity Investor, the Indenture Trustee and the Noteholders
in connection with the transactions contemplated by this Section 10.3.

          Section 10.4. Application of Payments Not Relating to an Event of
Loss.

          (a) In the event that during the Project Lease Term (i) the use of all
or any portion of the Project or the Lessee's interest in the Geothermal
Resource is subject to a seizure,

                                       20

condemnation, confiscation or the taking of or requisition of title to or use
thereof by any Governmental Entity, or (ii) the Lessee is prevented from
operating or maintaining all or any portion of the Project, the Lessee's
interest in the Geothermal Resource or the Project Site as a result of a
seizure, condemnation, confiscation or the taking of or requisition of title to
or use thereof by any Governmental Entity, which in either case does not
constitute an Event of Loss, the Lessee's obligation to pay all installments of
Periodic Lease Rent and Renewal Lease Rent and the accrual of Allocated Rent
shall continue for the duration of such requisitioning or taking. The Lessee
shall be entitled to receive and retain for its own account all Requisition
Proceeds payable for any such period by such Governmental Entity as compensation
for such requisition or taking of possession; provided that such payments shall
be paid to the Depositary Bank, deposited into the Loss Proceeds Account and
applied in accordance with the terms of the Depositary Agreement.

          (b) Any Casualty Insurance Proceeds with respect to the Project
received at any time by the Owner Lessor, the Indenture Trustee or the Lessee
under any of the insurance policies required to be maintained by the Lessee
under Section 11 as a result of any Partial Casualty shall be paid to the
Depositary Bank, deposited into the Loss Proceeds Account and applied in
accordance with the terms of the Depositary Agreement.

          Section 10.5. Partial Casualties.

          (a) Upon the occurrence of any Partial Casualty (other than a
Significant Partial Casualty), the Lessee (unless the Casualty Insurance
Proceeds received with respect to such Partial Casualty is less than $2,500,000,
the obligations of HELCO under the PPA are not affected as a result of any
decision not to cause such rebuilding or replacement to occur in accordance with
this Section 10.5(a) and such Partial Casualty does not (i) decrease by more
than a de minimis amount the current or residual value, remaining useful life or
utility of the Project below the current or residual value, the remaining useful
life or the utility thereof immediately prior to such Partial Casualty (assuming
the Project was then in the condition required to be maintained by the terms of
this Project Lease), (ii) cause the Project to become "limited-use" property
within the meaning of Rev. Proc. 2001-28, 2001-1 C.B. 1156 or (iii) result in a
Default or an Event of Default under any applicable term or provision of any
Operative Document) shall cause the rebuilding or replacement of the Project to
commence as soon as practicable, and in any event within twelve (12) months of
the occurrence of the event that caused such Partial Casualty and will cause
work on such rebuilding or replacement to proceed diligently thereafter. As the
rebuilding or replacement of the project progresses, (i) all such rebuilt or
replacement portions of Project shall become subject to the Head Lease and this
Project Lease, and (ii) so long as the Lien of the Indenture shall not have been
terminated and fully discharged, the Owner Lessor's interest therein shall
become subject to the Lien of the Indenture, automatically without any further
act by any Person. A Partial Casualty which constitutes a Significant Partial
Casualty shall be treated for purposes of this Project Lease as an Event of Loss
described in clauses (a) and (b) of the definition of such term, and, if the
Lessee chooses to rebuild or replace the Project, the provisions of Section 10.3
(a)(i) and (b) shall apply to such Partial Casualty. If the Lessee has failed to
satisfy such provisions of Section 10.3 with respect to a Significant Partial
Casualty, then such Partial Casualty shall be considered an Event of Loss for
purposes hereof, and the provisions of Section 10.1(b) shall apply.

                                       21

          (b) Upon the occurrence of a Partial Casualty (other than a
Significant Partial Casualty), the Lessee shall (i) cause the rebuilding or
replacement of the Owner Lessor's Leasehold Interest to be completed so that the
Project is in as good operating condition as the Project was immediately prior
to such Partial Casualty, assuming that the Project was maintained in accordance
with this Project Lease, (ii) cause such rebuilding or replacement to be
performed in a manner which does not (A) decrease by more than a de minimis
amount the current or residual value, remaining useful life or utility of the
Project below the current or residual value, the remaining useful life or the
utility thereof immediately prior to such replacement (assuming the Project was
then in the condition required to be maintained by the terms of this Project
Lease) or (B) cause the Project to become "limited-use" property within the
meaning of Rev. Proc. 2001-28, 2001-1 C.B. 1156 and (iii) cause the rebuilding
or replacement of the Project to be conducted and completed so as not to cause
the Lessee or the Owner Lessor to be in default under any applicable term or
provision of any Operative Document.

SECTION 11. INSURANCE

     The Lessee will maintain (or cause to be maintained) the insurance required
to be maintained pursuant to Schedule 1 to this Project Lease.

SECTION 12. INSPECTION

     During the Project Lease Term, each of the Equity Investor, the Owner
Lessor, and, so long as the Lien of the Indenture shall not have been terminated
and fully discharged, the Indenture Trustee and each of their representatives
may, during normal business hours, on reasonable notice to the Lessee, for a
reasonable period of time in light of the circumstances and at their own risk
and expense (except, at the expense but not the risk, of the Lessee when a
Significant Lease Default or a Lease Event of Default has occurred and is
continuing), inspect the Project and the records with respect to the operations
and maintenance thereof, in the Lessee's custody or to which the Lessee has
access so long as the Lessee has the opportunity to be present. Any such
inspection will not unreasonably disturb or interfere with the normal operation
or maintenance of the Project or the conduct by the Lessee of its business and
will be in accordance with the Lessee's safety and insurance programs. In no
event shall the Owner Lessor, the Equity Investor or the Indenture Trustee (or,
if applicable, any Noteholder) have any duty or obligation to make any such
inspection and such Persons shall not incur any liability or obligation by
reason of not making any such inspection.

SECTION 13. TERMINATION OPTION FOR BURDENSOME EVENTS

          Section 13.1. Election to Terminate. So long as no Significant Lease
Default or Lease Event of Default shall have occurred and be continuing, the
Lessee shall have the right to, at its option, upon giving prior written notice
to the Owner Lessor and, so long as the Lien of the Indenture shall have been
terminated and fully discharged, the Indenture Trustee no later than 12 months
after the date the Lessee has Actual Knowledge of the occurrence of an event set
forth in clause (a) or (b) below (any such notice, a "Burdensome Termination
Notice"), terminate this Project Lease in whole on the Termination Date
specified in such notice (the "Burdensome Termination Date") (which shall be a
date occurring not more than 90 days after the date of such

                                       22

notice or such longer period (not to exceed twelve (12) months) as may be
required to effect the consummation of such termination) if:

          (a) as a result of a change in Applicable Law, it shall have become
illegal for the Lessee to continue this Project Lease or for the Lessee to make
payments under this Project Lease or the other Operative Documents, and the
transactions contemplated by the Operative Documents cannot be restructured to
comply with such change in Applicable Law in a manner reasonably acceptable to
the Lessee, the Equity Investor, the Owner Lessor, and, so long as the Lien of
the Indenture shall not have been terminated and fully discharged, the Indenture
Trustee; or

          (b) one or more events outside the control of the Lessee or any
Affiliate thereof shall have occurred that will, or can reasonably be expected
to, give rise to an obligation by the Lessee to incur an indemnity obligation
pursuant to the Tax Indemnity Agreement or Section 9.1 or 9.2 of the
Participation Agreement (excluding any such indemnity in respect of Hawaii
General Excise Taxes on Periodic Lease Rent at the rate thereof in effect of the
Closing Date); provided, that (i) such indemnity (and the underlying cost or
Tax) can be avoided in whole or in part if this Project Lease is terminated and
the Owner Lessor sells the Owner Lessor's Leasehold Interest and (ii) the amount
of such avoided payments would exceed (on a present value basis, discounted at
the Discount Rate to the Burdensome Termination Date, compounded on an annual
basis to the Burdensome Termination Date) 2.5% of the Head Lease Rent, and
provided, further, that no such termination option shall exist if the applicable
indemnitee shall waive its right to, or the Equity Investor shall arrange, in
its sole discretion, for payment of (without reimbursement by the Lessee or any
Affiliate thereof), amounts of indemnification payments under the Tax Indemnity
Agreement or Section 9.1 or 9.2 of the Participation Agreement in excess of such
amount as to cause such avoided payments, computed in accordance with the
preceding proviso, not to exceed 2.5% of the Head Lease Rent; or

No termination of this Project Lease pursuant to this Section 13.1 shall become
effective unless the conditions set forth in Section 13.3 are satisfied. In
connection with any termination by the Lessee of the Project Lease pursuant to
this Section 13.1, prior to the date on which notice of prepayment of Senior
Notes has become irrevocable in accordance with the terms of the Indenture, the
Lessee shall provide reasonable assurances to the Indenture Trustee of its
ability to pay the principal, Make Whole Premium, if any, and interest on the
Senior Notes in full on the Burdensome Termination Date. If the Lessee does not
give notice of its exercise of the termination option under this Section 13.1
within twelve (12) months of the date the Lessee receives notice or first has
Actual Knowledge of an event or condition described above, the Lessee will lose
its right to terminate this Project Lease pursuant to this Section 13.1 as a
result of such event or condition.

          Section 13.2. Solicitation of Offers; Payments Upon Termination. (a)
Upon receipt of a termination notice from the Lessee pursuant to Section 13.1,
the Owner Lessor may, but shall be under no obligation to, sell the Owner
Lessor's Leasehold Interest and, at the request of the Owner Lessor, the Lessee
will, as non-exclusive agent for the Owner Lessor, use commercially reasonable
efforts to obtain cash bids for the Owner Lessor's Leasehold Interest. In
connection with such termination, the Lessee may, but shall be under no
obligation to, make

                                       23

an offer to purchase the Owner Lessor's Leasehold Interest. Only bona fide bids,
whether from the Lessee or a third party, to purchase the Owner Lessor's
Leasehold Interest for cash on the Burdensome Termination Date on an "as is,
where is" and "with all faults" basis without any representation, other than by
the Owner Lessor as to the absence of Owner Lessor's Liens and a warranty of the
Equity Investor as to the absence of Equity Investor's Liens, shall be
"Qualifying Cash Bids". All the proceeds of any such sale shall be for the
account of the Owner Lessor; provided that so long as the Lien of the Indenture
shall not have been terminated and fully discharged, the proceeds of such sale
shall be paid directly to or at the direction of the Indenture Trustee. The
Owner Lessor shall be under no obligation to accept any Qualifying Cash Bid. If
the Owner Lessor receives any Qualifying Cash Bids, the Owner Lessor shall be
deemed to have accepted the highest such bid received by 10 Business Days prior
to the Burdensome Termination Date unless the Owner Lessor rejects such bid and
elects to retain the Owner Lessor's Leasehold Interest in writing prior to the
earlier of (x) the expiration date of such bid and (y) the date at least 45 days
prior to the Burdensome Termination Date.

          (b) If the Owner Lessor receives any Qualifying Cash Bid (regardless
of whether or not such Qualifying Cash Bid is accepted by the Owner Lessor) on
the Burdensome Termination Date, the Lessee shall pay the Owner Lessor (i) the
amount, if any, by which the Termination Value determined as of the Burdensome
Termination Date exceeds the sales price of the highest Qualifying Cash Bid
actually received by the Owner Lessor, whether from the Lessee or a third party
(net of the fees, commissions and costs of any broker engaged by the Lessee or
any Affiliate thereof), plus (ii) all other amounts due and payable under
clauses (a), (b) and (c) of Section 13.3; provided that so long as the Lien of
the Indenture shall not have been terminated and fully discharged, such amounts
shall be paid directly to or at the direction of the Indenture Trustee.

          (c) If no Qualifying Cash Bids are received by the Termination Date or
if a Qualifying Cash Bid is accepted (or deemed accepted) by the Owner Lessor
but does not, other than as a result of the Owner Lessor's failure to transfer
the Owner Lessor's Leasehold Interest free and clear of Owner Lessor's Liens or
the Equity Investor's failure to provide a warranty as to the absence of Equity
Investor's Liens, result in a sale of the Owner Lessor's Leasehold Interest, the
Owner Lessor may elect in writing to retain the Owner Lessor's Leasehold
Interest (and to forego its right to receive payment of Termination Value) and
require the Lessee to pay to the Owner Lessor on the Burdensome Termination Date
all amounts due and payable under clauses (a), (b) and (c) of Section 13.3 (but
not Termination Value); provided, however, that the Owner Lessor may not elect
to retain the Owner Lessor's Leasehold Interest unless it shall provide to the
Indenture Trustee an irrevocable commitment to pay, and reasonable assurances of
its ability to pay, the principal, premium and interest on the Senior Notes in
full on the Burdensome Termination Date. In the event the Owner Lessor does not
elect to retain the Owner Lessor's Leasehold Interest, the Lessee may, in its
sole discretion, (except as provided in the last sentence of this last paragraph
(c)), (i) withdraw its Burdensome Termination Notice (provided such withdrawal
is prior to the date on which the notice to prepay Senior Notes is irrevocable
in accordance with the terms of the Indenture), in which event this Project
Lease shall continue, any notice of prepayment of Senior Notes pursuant to the
Indenture shall be withdrawn and the Lessee shall pay on an After-Tax Basis all
reasonable, documented out-of-pocket costs and expenses of the Owner Lessor, the
Equity Investor and the Indenture Trustee in connection with

                                       24

the giving (and subsequent withdrawal) of the Burdensome Termination Notice, or
(ii) as non-exclusive agent for the Owner Lessor, use commercially reasonable
efforts to sell the Owner Lessor's Leasehold Interest, in which case the Lessee
shall be required to pay the Termination Value determined as of the Burdensome
Termination Date plus all amounts due and payable under clauses (a), (b) and (c)
of Section 13.3. If the Lessee does not withdraw its Burdensome Termination
Notice, the Lessee may, but shall be under no obligation to, make an offer (but
will not have the right) to purchase the Project for scrap. If at least one
Qualifying Cash Bid is received and the Owner Lessor does not elect to retain
the Owner Lessor's Leasehold Interest, the Owner Lessor shall sell the Owner
Lessor's Leasehold Interest to the party that submitted the highest Qualifying
Cash Bid on an "as is, where is" and "with all faults" basis, without
representations or warranties other than a warranty as to the absence of Owner
Lessor's Liens and a warranty of the Equity Investor as to the absence of Equity
Investor's Liens. The Lessee shall pay on an After-Tax Basis all reasonable
documented out-of-pocket expenses of the Owner Lessor, the Equity Investor, the
Indenture Trustee and the Noteholders in connection with such sale, and the
Owner Lessor shall pay the net cash proceeds of the sale to the Lessee to the
extent Lessee has paid Termination Value and the amounts under clauses (a), (b)
and (c) of Section 13.3. Notwithstanding the foregoing, if a notice to prepay
Senior Notes has been given in response to a Burdensome Termination Notice, and
such prepayment notice has become irrevocable in accordance with the terms of
the Indenture, the Lessee shall make the election described in clause (ii) above
and, if no Qualifying Cash Bids are received, offer to (but will not have the
right) purchase the Project for scrap on the Burdensome Termination Date.

          Section 13.3. Procedure for Exercise of Termination Option. If the
Lessee shall have exercised its option to terminate this Project Lease under
Section 13.1, on the Burdensome Termination Date specified in the Burdensome
Termination Notice, the Lessee shall pay to the Owner Lessor (a) all
Supplemental Lease Rent (including all reasonable out-of-pocket costs and
expenses of the Owner Lessor, the Equity Investor, the Indenture Trustee and the
Noteholders) due and payable on or prior to the Burdensome Termination Date, (b)
any unpaid Periodic Lease Rent and Renewal Lease Rent due on or before such
Burdensome Termination Date and (c) any premium, including Make Whole Premium,
due on the Senior Notes being prepaid pursuant to this Section 13. All Rent
payments, including payments of Make Whole Premium, under Section 13.2 and this
Section 13.3 shall, so long as the Lien of Indenture shall not have been
terminated and fully discharged be made to or at the direction of the Indenture
Trustee. So long as the Lessee shall not have withdrawn its Burdensome
Termination Notice pursuant to Section 13.2(c)(i), upon payment of all sums
specified in Section 13.2 and this Section 13.3, (i) Allocated Rent shall cease
to accrue and the obligation to pay Periodic Lease Rent or Renewal Lease Rent
shall cease, (ii) the Lessee shall cease to have any liability to the Owner
Lessor, the Equity Investor or the Indenture Trustee, except for Supplemental
Lease Rent and other obligations (including those under Sections 9.1 and 9.2 of
the Participation Agreement and the Tax Indemnity Agreement) surviving pursuant
to the express terms of any Operative Document, (iii) unless the Lessee assumes
the Senior Notes and the obligations and liabilities of the Owner Lessor under
the Indenture, the Owner Lessor shall pay the outstanding principal and accrued
and unpaid interest and Make Whole Premium, if any, on the Senior Notes, (iv)
this Project Lease, the Head Lease (unless the Owner Lessor elects to retain
Owner Lessor's Leasehold Interest) and the Sublease of the Power Plant Sublease
shall terminate, (v) the Owner Lessor shall, at the Lessee's cost and expense,
execute and deliver to the Lessee a release and

                                       25

termination of this Project Lease, the Head Lease (unless the Owner Lessor
elects to retain the Owner Lessor's Leasehold Interest) and the Sublease of the
Power Plant Sublease, (vi) unless the Lessee assumes the Senior Notes and the
obligations and liabilities of the Owner Lessor under the Indenture or purchases
the Owner Lessor's Leasehold Interest in accordance with Section 13.1, the
Lessee will return the Project to the Owner Lessor in accordance with Section 5,
(vii) in connection with any sale of Owner Lessor's Leasehold Interest pursuant
to Section 13.2, such sale shall be made subject to the Lessee's rights to
remove Severable Modifications as permitted in Section 8.4 and the Owner Lessor
shall (unless the Owner Lessor elects to retain the Owner Lessor's Leasehold
Interest) transfer (by an appropriate instrument of transfer in form and
substance reasonably satisfactory to the Owner Lessor and prepared by and at the
expense of the Lessee) the Owner Lessor's Leasehold Interest to the purchaser
pursuant to this Section 13.3 on an "as is, where is" and "with all faults"
basis, without representations or warranties other than a warranty as to the
absence of Owner Lessor's Liens and a warranty of the Equity Investor as to the
absence of Equity Investor's Liens, and (viii) the Owner Lessor shall use all
reasonable efforts to cause the Indenture Trustee to discharge the Lien of the
Indenture, unless the Lessee assumes the Senior Notes and the obligations and
liabilities of the Owner Lessor under the Indenture, and shall execute and
deliver appropriate releases and other documents or instruments necessary or
desirable to effect the foregoing, all to be prepared, filed and recorded (as
appropriate) at the cost and expense of the Lessee. It shall be a condition of
the termination of this Project Lease pursuant to this Section 13 that the
Lessee shall pay all amounts it is obligated to pay under Section 13.2 and this
Section 13.3. If the Lessee fails to consummate the termination option under
this Section 13 after giving notice of its intention to do so, (i) this Project
Lease shall continue, (ii) such failure to consummate shall not constitute a
Lease Default, and (iii) unless such failure is a consequence of a failure of
either the Owner Lessor or the Equity Investor to fulfill its obligations under
this Section 13, the Lessee will lose its right to terminate this Project Lease
pursuant to this Section 13 as a result of the particular event or condition
described in Section 13.1 (a) or (b) then giving rise to the option to terminate
this Project Lease under Section 13.1 during the remainder of the Project Lease
Term, provided that if the notice to prepay Senior Notes given as a result of
the Burdensome Termination Notice has become irrevocable in accordance with the
terms of the Indenture, the Lessee shall make a Supplemental Rent Payment (on an
After-Tax Basis to the Owner Lessor and the Equity Investor) equal to the
principal of, and interest and Make-Whole Premium, if any, on the Senior Notes
which are due and payable on the Burdensome Termination Date. Whether or not
this Project Lease is terminated, the Lessee shall in any event pay all
reasonable out-of-pocket costs and expenses of the Owner Lessor, the Equity
Investor, the Indenture Trustee and the Noteholders in connection with the
exercise by the Lessee of its right to terminate this Project Lease under this
Section 13.

SECTION 14. TERMINATION FOR OBSOLESCENCE

          Section 14.1. Termination. Upon at least six month's prior written
notice to the Owner Lessor, the Equity Investor and, so long as the Lien of the
Indenture has not been terminated and fully discharged, the Indenture Trustee
(which notice shall be accompanied by an Officer's Certificate setting forth in
reasonable detail the basis on which it is exercising this termination option),
the Lessee shall have the option, so long as no Significant Lease Default or
Lease Event of Default shall have occurred and be continuing on the proposed
Obsolescence Termination Date, to terminate this Project Lease on any
Termination Date occurring on or after

                                       26

the seventh anniversary of the Closing Date (the date of termination selected by
the Lessee being the "Obsolescence Termination Date") on the terms and
conditions set forth in this Section 14 if the Lessee determines as certified by
either of the Lessee's partners that the Project is economically or
technologically obsolete or surplus to its needs or is no longer useful in its
trade or business (a) as a result of a change in Applicable Law, regulation or
tariff of general application, or imposition by any Governmental Entity having
or claiming jurisdiction over the Lessee or the Project of any conditions or
requirements (including requiring significant capital improvement to the
Project) upon the availability, continued effectiveness or renewal of any
license or permit required for the ownership or operation of the Project or (b)
for any other reason. No termination of this Project Lease pursuant to this
Section 14.1 shall become effective unless the conditions set forth in Section
14.4 hereof are satisfied.

          Section 14.2. Solicitation of Offers. If the Lessee shall give the
Owner Lessor notice pursuant to Section 14.1 and the Owner Lessor shall not have
elected to retain the Owner Lessor's Leasehold Interest pursuant to Section 14.3
hereof, the Lessee shall, as non-exclusive agent for the Owner Lessor, use its
commercially reasonable efforts to obtain bids for the sale of and, subject to
Section 14.4 hereof, sell such Owner Lessor's Leasehold Interest on the
Obsolescence Termination Date, and all of the proceeds of such sale will be for
the account of the Owner Lessor; provided that so long as the Lien of the
Indenture shall not have been terminated and fully discharged, the proceeds of
such sale shall be paid directly to or at the direction of the Indenture
Trustee. The Owner Lessor shall also have the right, but no obligation, to
obtain bids for the sale of such Owner Lessor's Leasehold Interest either
directly or through agents other than the Lessee. At least 90 days prior to the
Obsolescence Termination Date the Lessee shall certify to the Owner Lessor and
the Indenture Trustee each bid or offer, the amount and terms thereof and the
name and address of the party (which shall not be the Lessee, any Affiliate of
the Lessee or any third party with whom the Lessee or an Affiliate of the Lessee
has an arrangement to use or operate the Project to generate power for the
benefit of the Lessee or such Affiliate after the termination of this Project
Lease) submitting such bid or offer.

          Section 14.3. Right of Owner Lessor to Retain the Owner Lessor's
Leasehold Interest. If the Owner Lessor has provided to the Indenture Trustee an
irrevocable commitment to pay, and reasonable assurances of its ability to pay
the principal of, and interest and Make-Whole Premium, if applicable, on, the
Senior Notes which would be payable on the Obsolescence Termination Date, the
Owner Lessor may irrevocably elect to retain, rather than sell, the Owner
Lessor's Leasehold Interest by giving notice to the Lessee not less than 90 days
after the Lessee elects to terminate this Project Lease under Section 14.1. If
the Owner Lessor elects to retain such Owner Lessor's Leasehold Interest
pursuant to this Section 14.3, on the Obsolescence Termination Date the Lessee
shall pay to the Owner Lessor (a) all Supplemental Lease Rent (including all
reasonable out-of-pocket costs and expenses of the Owner Lessor, the Equity
Investor, the Indenture Trustee and the Noteholders (excluding the fees and
costs of any broker unless engaged by the Lessee on the Owner Lessor's behalf),
but excluding Termination Value) due and payable on or prior to such
Obsolescence Termination Date, (b) any unpaid Periodic Lease Rent and Renewal
Lease Rent due on or before such Obsolescence Termination Date, plus (c) any
premium, including any Make Whole Premium, due on the Senior Notes being prepaid
pursuant to this Section 14, but the Lessee shall not be required to pay
Termination Value. All Rent payments, including payments of Make Whole Premium,
if applicable, under

                                       27

this Section 14.3 shall, so long as the Lien of the Indenture shall not have
been terminated and fully discharged, be made to or at the direction of the
Indenture Trustee. Upon payment of all sums required to be paid pursuant to this
Section 14.3, (i) Allocated Rent shall cease to accrue and the obligation to pay
Periodic Lease Rent and Renewal Lease Rent shall cease, (ii) the Lessee shall
cease to have any liability to the Owner Lessor, the Equity Investor or the
Indenture Trustee with respect to the Project, except for Supplemental Lease
Rent and other obligations (including those under Sections 9.1 and 9.2 of the
Participation Agreement and the Tax Indemnity Agreement) surviving pursuant to
the express terms of any Operative Document, (iii) the Owner Lessor shall pay
the outstanding principal and accrued and unpaid interest (and Make Whole
Premium, if applicable) on the Senior Notes, (iv) this Project Lease and the
Head Lease shall terminate, (v) the Owner Lessor shall, at the Lessee's cost and
expense, execute and deliver to the Lessee a release and termination of this
Project Lease and the Sublease of the Power Plant Sublease, (vi) the Lessee will
return the Project to the Owner Lessor in accordance with Section 5, and (vii)
the Owner Lessor shall use all reasonable efforts to cause the Indenture Trustee
to discharge the Lien of the Indenture and to execute and deliver appropriate
releases and other documents or instruments necessary or desirable to effect the
foregoing, all to be prepared, filed and recorded (as appropriate) at the cost
and expense of the Lessee. It shall be a condition to the termination of this
Project Lease pursuant to this Section 14.3 that the Lessee shall pay all
amounts that it is obligated to pay under this Section 14.3. If the Owner Lessor
shall not have complied with its obligations set forth in the next preceding
sentence, on the Obsolescence Termination Date, the notice of termination shall
be deemed revoked and this Project Lease shall continue in full force and effect
in accordance with its terms (without prejudice to the Lessee's right to
exercise its rights under this Section 14 or the rights of the Noteholders to
exercise their rights under the Indenture if such revocation is given after the
date on which the notice of prepayment of the Senior Notes is irrevocable under
the Indenture).

          Section 14.4. Procedure for Exercise of Termination Option. If the
Owner Lessor has not elected to retain the Owner Lessor's Leasehold Interest in
accordance with Section 14.3 hereof, on the Obsolescence Termination Date the
Owner Lessor shall sell the Owner Lessor's Leasehold Interest under this Section
14.4 hereof to the bidder or bidders (which shall not be the Lessee, any
Affiliate thereof or any third party with whom the Lessee or an Affiliate of the
Lessee has an arrangement to use or operate the Project to generate power for
the benefit of the Lessee or such Affiliate after the termination of this
Project Lease), that shall have submitted the highest cash bid and the net
proceeds of such sale shall be for the account of the Owner Lessor. In addition,
the Lessee shall certify to the Owner Lessor and, so long as the Lien of the
Indenture shall not have been terminated and fully discharged, the Indenture
Trustee that such buyer is not the Lessee, any Affiliate thereof or any third
party with whom the Lessee or an Affiliate of the Lessee has an arrangement to
use or operate the Project to generate power for the benefit of the Lessee or
such Affiliate after the termination of this Project Lease. On the Obsolescence
Termination Date, the Lessee shall pay to the Owner Lessor (a) the excess, if
any, of Termination Value determined as of such Obsolescence Termination Date,
over the total sales price of the Owner Lessor's Leasehold Interest retained by
the Owner Lessor (net of the fees, commissions, costs and other amounts of any
broker engaged by the Lessee or any Affiliate thereof on the Owner Lessor's
behalf), plus (b) any unpaid Periodic Lease Rent and Renewal Lease Rent due on
or before such Obsolescence Termination Date, plus (c) all Supplemental Lease
Rent (including all reasonable out-of-pocket costs and expenses of the Owner
Lessor, the

                                       28

Equity Investor, the Indenture Trustee and the Noteholders (excluding the fees
and costs of any broker unless engaged by the Lessee on the Owner Lessor's
behalf)) due and payable on or prior to such Obsolescence Termination Date, plus
(d) any premium, including Make Whole Premium, if applicable, due on the Senior
Notes being prepaid pursuant to this Section 14. All Rent payments, including
payments of Make Whole Premium, under this Section 14.4 shall, so long as the
Lien of the Indenture shall not have been terminated and fully discharged, be
made to or at the direction of the Indenture Trustee. Upon the payment of all
sums specified in this Section 14.4, (i) Allocated Rent shall cease to accrue
and the obligation to pay Periodic Lease Rent or Renewal Lease Rent shall cease,
(ii) the Lessee shall cease to have any liability to the Owner Lessor, the
Equity Investor or the Indenture Trustee, except for Supplemental Lease Rent and
other obligations (including those under Sections 9.1 and 9.2 of the
Participation Agreement and the Tax Indemnity Agreement) surviving pursuant to
the express terms of any Operative Document, (iii) the Owner Lessor shall pay
the outstanding principal and accrued and unpaid interest (and Make Whole
Premium, if applicable) on the Senior Notes, (iv) this Project Lease and the
Head Lease shall terminate, (v) the Owner Lessor shall, at the Lessee's cost and
expense, execute and deliver to the Lessee a release and termination of this
Project Lease, the Head Lease and the Real Estate Documents, (vi) the Lessee
will return the Project to the Owner Lessor in accordance with Section 5, (vii)
in connection with any sale of the Owner Lessor's Leasehold Interest pursuant to
this Section 14.4, such sale shall be made subject to the Lessee's rights to
remove Severable Modifications as permitted in Section 8.3 and the Owner Lessor
shall transfer (by an appropriate instrument of transfer in form and substance
reasonably satisfactory to the Owner Lessor and prepared and recorded by and at
the expense of the Lessee) the Owner Lessor's Leasehold Interest to the
purchaser pursuant to this Section 14.4 on an "as is, where is" and "with all
faults" basis, without representations or warranties other than a warranty as to
the absence of Owner Lessor's Liens and a warranty from the Equity Investor as
to the absence of Equity Investor's Liens, and (viii) the Owner Lessor shall use
all reasonable efforts to cause the Indenture Trustee to discharge the Lien of
the Indenture and shall execute and deliver appropriate releases and other
documents or instruments necessary or desirable to effect the foregoing, all to
be prepared, filed and recorded (as appropriate) at the sole cost and expense of
the Lessee. Unless the Owner Lessor shall have elected to retain the Owner
Lessor's Leasehold Interest pursuant to Section 14.3 or the Owner Lessor with
the consent of the Lessee shall have entered into a legally binding contract to
sell the Owner Lessor's Leasehold Interest, the Lessee may, at its election,
revoke its notice of termination on at least 30 days' prior notice to the Owner
Lessor and, so long as the Lien of the Indenture shall not have been terminated
and fully discharged, the Indenture Trustee, in which event this Project Lease
shall continue, and the Lessee will reimburse the Owner Lessor, the Equity
Investor, the Indenture Trustee and the Noteholders on an After-Tax Basis for
all reasonable, documented out-of-pocket costs and expenses incurred in
connection with the election (and subsequent revocation) by the Lessee of its
right to terminate this Project Lease under this Section 14; provided, however,
that the Lessee shall not be permitted to initiate a notice to terminate
pursuant to Section 14.1 more than three times during the term of this Project
Lease or more than twice in any five year period. The Owner Lessor shall be
under no duty to solicit bids, to inquire into the efforts of the Lessee to
obtain bids or otherwise take any action in arranging any such sale of the Owner
Lessor's Leasehold Interest other than, if the Owner Lessor has not elected to
retain the Owner Lessor's Leasehold Interest, to transfer the Owner Lessor's
Leasehold Interest in accordance with clause (vii) of this Section 14.4. It
shall be a condition of the Owner Lessor's obligation to consummate

                                       29

a sale of the Owner Lessor's Leasehold Interest that the Lessee shall pay all
amounts it is obligated to pay under this Section 14.4. If no sale shall occur
on the Obsolescence Termination Date, the notice of termination shall be deemed
revoked and this Project Lease shall continue in full force and effect in
accordance with its terms (without prejudice to the Lessee's right to exercise
its rights under this Section 14); provided that if the Lessee has not given a
notice of revocation before the date on which the notice of prepayment of Senior
Notes has become irrevocable in accordance with the terms of the Indenture, the
Lessee shall be obligated to make a Supplemental Rent payment (on an After-Tax
Basis to the Owner Lessor and the Equity Investor) equal to the principal of,
and interest and Make-Whole Premium, if applicable, on the Senior Notes which
are due and payable.

SECTION 15. LEASE RENEWAL

          Section 15.1. Wintergreen Renewal Lease Term. Not earlier than
twenty-four (24) months and not later than eighteen (18) months prior to the
expiration of the Basic Lease Term, the Lessee may deliver to the Owner Lessor
written notice (which notice may be in addition to a notice of the Lessee's
tentative interest in electing an FMV Renewal Lease Term under Section 15.2) of
the Lessee's tentative interest in renewing this Project Lease for a term (the
"Wintergreen Renewal Lease Term") commencing on the day following the last day
of the Basic Lease Term and ending on a date (a) as of which the sum of the
number of years of the proposed Wintergreen Renewal Lease Term and the Basic
Lease Term is not more than seventy-five (75%) of the estimated economic useful
life of the Project measured from the Closing Date, but determined by an
Independent Appraiser (which Independent Appraiser shall be selected by the
Owner Lessor and be reasonably acceptable to the Lessee) in accordance with the
Appraisal Procedure not more than twelve (12) months before the end of the Basic
Lease Term, and (b) as of which the estimated fair market value of the Project
determined, by such Independent Appraiser, subsequent to the Lessee's tentative
election of the Wintergreen Renewal Lease Term (but not earlier than twelve (12)
months prior to the expiration of the Basic Lease Term), shall equal or exceed
twenty percent (20%) of the Head Lease Rent (without taking into account
inflation or deflation subsequent to the Closing Date), provided that no
Wintergreen Renewal Lease Term shall be for a period of less than one (1) year.
Unless the Lessee shall have irrevocably elected to renew this Project Lease for
an FMV Renewal Lease Term under Section 15.2, and provided that no Lease Event
of Default shall have occurred and be continuing on such notice date on or prior
to eighteen (18) months before the expiration of the Basic Lease Term, the
Lessee may deliver to the Owner Lessor a further notice in writing irrevocably
electing to renew this Project Lease for the Wintergreen Renewal Lease Term
determined as aforesaid and, subject to no Significant Lease Default or Lease
Event of Default having occurred and continuing on the last day of the Basic
Lease Term, the Wintergreen Renewal Lease Term shall thereupon take effect as
provided herein. The Independent Appraiser's fees and expenses shall be borne by
the Lessee.

          Section 15.2. Fair Market Value Renewal Lease Terms. Not earlier than
thirty-six (36) months and not later than eighteen (18) months prior to the
expiration of the Basic Lease Term, the Wintergreen Renewal Lease Term or any
other Renewal Lease Term, unless a Lease Event of Default shall have occurred
and be continuing, the Lessee may deliver to the Owner Lessor notice (which
notice may be in addition to a notice of the Lessee's tentative interest in

                                       30

electing the Wintergreen Renewal Lease Term) of the Lessee's tentative interest
in renewing this Project Lease for a term (each such term, a "FMV Renewal Lease
Term") commencing on the day following the last day of the Basic Lease Term or a
Renewal Lease Term otherwise expiring and extending for a period equal to three
years; provided that unless such FMV Renewal Lease Term extends to the end of
the useful life of the Project, no such FMV Renewal Lease Term shall extend
beyond the date that is three (3) years prior to the end of the useful life of
the Project (as set forth in the most recent of (a) the Closing Appraisal or (b)
the appraisal obtained in connection with the exercise of the Wintergreen
Renewal Lease Term or the most recent FMV Renewal Lease Term, if any). Unless
the Lessee shall have irrevocably elected to renew this Project Lease for the
Wintergreen Renewal Lease Term pursuant to Section 15.1 (it being understood
that the exercise by the Lessee of its right to renew this Project Lease at the
end of the Basic Lease Term pursuant to Section 15.1 hereof shall not impair its
right to renew this Project Lease at any time thereafter pursuant to this
Section 15.2), and provided that no Lease Event of Default shall have occurred
and be continuing on any such notice date or on the date of expiration of the
Basic Lease Term or the Renewal Lease Term immediately preceding such FMV
Renewal Lease Term, as the case may be, on or prior to eighteen (18) months
before the expiration of the existing Basic Lease Term or the relevant Renewal
Lease Term, as the case may be, the Lessee may deliver to the Owner Lessor a
further notice irrevocably electing to renew this Project Lease for the FMV
Renewal Lease Term tentatively elected as aforesaid and, subject to no
Significant Lease Default or Lease Event of Default having occurred and
continuing on the last day of the Basic Lease Term or the Renewal Lease Term
immediately preceding such FMV Renewal Lease Term, as the case may be, the FMV
Renewal Lease Term shall thereupon take effect as provided herein.

          Section 15.3. Renewal Lease Rent for the Renewal Lease Term.

          (a) Renewal Lease Rent shall be paid on each Rent Payment Date, in
arrears, during each Renewal Lease Term.

          (b) The installment of Renewal Lease Rent payable on each Rent Payment
Date during the Wintergreen Renewal Lease Term is an amount equal to 100% of the
average annual Periodic Lease Rent during the Project Lease Term.

          (c) Renewal Lease Rent payable on each Rent Payment Date during any
FMV Renewal Lease Term shall be the Fair Market Rental Value for the Project as
determined in accordance with Section 15.4.

          Section 15.4. Determination of Fair Market Rental Value. The Fair
Market Rental Value of the Project as of the commencement of any Renewal Lease
Term shall be determined by agreement of the Owner Lessor and the Lessee within
six months after receipt by the Owner Lessor of the tentative notice from the
Lessee of its election to renew pursuant to Section 15.2, (but not more than
twelve (12) months before the commencement of such Renewal Lease Term) or, if
they shall fail to agree within such six-month period, shall be determined by an
Independent Appraiser in accordance with the Appraisal Procedures, which
Independent Appraiser shall be selected by the Owner Lessor and reasonably
acceptable to the Lessee. The appraiser's fees and expenses shall be borne by
the Lessee.

                                       31

          Section 15.5. Termination Value During Renewal Lease Terms. The
amounts which are payable during any Renewal Lease Term in respect of
Termination Value shall be determined on the basis of the Fair Market Sales
Value of the Project as of the commencement of such Renewal Lease Term,
amortized on a straight-line basis over such Renewal Lease Term to the projected
Fair Market Sales Value of the Project as of the expiration of such Renewal
Lease Term, as such Fair Market Sales Value in each case is determined prior to
the commencement of such Renewal Lease Term, plus any amount of Renewal Lease
Rent accrued and unpaid to the date of termination. In determining Fair Market
Sales Value for any Renewal Lease Term, effect shall be given, whether positive
or negative, to the encumbrance on the Project of any FMV Renewal Lease Term
available or in force.

          Section 15.6. Rebuilding Related Extensions. In the event that the
Project has suffered an Event of Loss or Significant Partial Loss and the Lessee
has elected to rebuild the Project pursuant to Section 10.1 but is unable to
satisfy the conditions set forth in Section 10.3 prior to the last day of the
Project Lease Term, then, notwithstanding the provisions of Section 15.2, the
Lessee shall be deemed to have elected the renewal option set forth in Section
15.2. The term of any such renewal shall extend until the date that is 18 months
following the date on which all of the conditions set forth in Section 10.3 are
satisfied. The Fair Market Rental Value payable during any such renewal term
shall be equal to the Fair Market Rental Value of the Project assuming that the
Project had been fully rebuilt on the first day of such renewal term in
accordance with Section 10.3.

SECTION 16. EVENTS OF DEFAULT

     The following events shall constitute a "Lease Event of Default" hereunder
(whether any such event shall be voluntary or involuntary or come about or be
effected by operation of law or pursuant to or in compliance with any judgment,
decree or order of any court or any order, rule or regulation of any
Governmental Entity):

          (a) the Lessee shall fail to make any payment of Periodic Lease Rent,
Renewal Lease Rent or Termination Value (or amounts computed by reference to
Termination Value) after the same shall have become due and payable, and such
failure shall have continued for five (5) Business Days after the same shall
have become due and payable; or

          (b) the Lessee shall fail to make any payment of Supplemental Lease
Rent (other than Excepted Payments, unless the Equity Investor shall have
acknowledged in writing that such failure to pay any such Excepted Payment shall
constitute a default hereunder) after the same shall have become due and such
failure shall have continued for a period of 30 days after receipt by the Lessee
of written notice of such failure from the Equity Investor, the Owner Lessor or
the Indenture Trustee; or

          (c) [intentionally omitted]

          (d) the Lessee or the Pledgor shall fail to perform or observe any
other covenant, obligation or agreement to be performed or observed by it under
this Project Lease or any other Operative Document to which it is a party (other
than any covenant, obligation or agreement referred to in any other clause of
this Section 16 or contained in the Tax Indemnity

                                       32

Agreement or in Section 3.2(c) of this Project Lease or Section 5.31 or 11.2 of
the Participation Agreement), and such failure shall continue unremedied for 30
days after receipt by the Lessee of written notice of such failure from the
Equity Investor, the Owner Lessor or the Indenture Trustee (or, in the case of a
failure described in this clause (d), a longer period, not to exceed (A) in the
case of failure to comply with Governmental Approvals or Applicable Laws, 210
days, so long as the Owner Lessor and the Indenture Trustee receive written
confirmation from the Engineering Consultant that such failure can be cured
within such period; and (B) in all other cases, 180 days, in each case, as long
as the Lessee or the Pledgor is diligently pursuing a cure in good faith and
such failure is capable of being cured); or

          (e) any representation or warranty made by the Lessee or the Pledgor
in the Operative Documents (other than a Tax Representation) shall prove to have
been incorrect as of the date made in any significant respect and shall continue
to be significant and the condition giving rise to such incorrect representation
or warranty is unremedied for a period of 30 days after receipt by the Lessee of
written notice thereof from the Equity Investor, the Owner Lessor or the
Indenture Trustee; provided, however, that if (i) the condition giving rise to
such incorrect representation or warranty is capable of being remedied but not
within such 30-day period, and (ii) such party is diligently proceeding to
remedy such condition, then the period for cure shall be extended for the period
necessary to remedy such condition, but in no event shall the aggregate cure
period under this Section 16(e) exceed 180 days; or

          (f) the bankruptcy, insolvency or reorganization of, or the
appointment of an administrator for, (i) the Power Purchaser and the Power
Purchase Agreement shall not have been replaced with Replacement PPA or (ii) KLP
or KLDC and as a result thereof the Lessee's right to possession of the Project
Site shall have been disturbed; or

          (g) (i) the Lessee or the Pledgor shall commence any case or other
proceeding (A) under any existing or future law of any jurisdiction, domestic or
foreign, relating to bankruptcy, insolvency, reorganization or relief of
debtors, seeking to have an order for relief entered with respect to it, or
seeking to adjudicate it as bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition or
other relief with respect to it or its debts, or (B) seeking appointment of a
receiver, trustee, custodian or other similar official for it or for all or any
substantial part of its assets, or the Lessee or the Pledgor shall make a
general assignment for the benefit of its creditors; or (ii) there shall be
commenced against the Lessee or the Pledgor any case or other proceeding of a
nature referred to in clause (i) above which (A) results in the entry of an
order for relief or any such adjudication or appointment or (B) remains
undismissed, undischarged or unbonded for a period of sixty (60) days; or (iii)
there shall be commenced against the Lessee or the Pledgor any case or other
proceeding seeking issuance of a warrant of attachment, execution, distraint or
similar process against all or any substantial part of its assets which results
in the entry of an order for any such relief which shall not have been vacated,
discharged, or stayed or bonded pending appeal within sixty (60) days from the
entry thereof; or (iv) the Lessee or the Pledgor shall take any action in
furtherance of, or indicating its consent to, approval of, or acquiescence in,
any of the acts set forth in clause (i), (ii) or (iii) above; or (v) the Lessee
or the Pledgor shall generally not, or shall be unable to, or shall admit in
writing its inability to, pay its debts as they become due; or

                                       33

          (h) the dissolution of the Lessee under Applicable Law, including,
without limitation, the dissolution of the Lessee as a result of the bankruptcy,
insolvency or reorganization of any Lessee Partner;

          (i) a final and non-appealable judgment or judgments for the payment
of money in excess of $5,000,000 not covered by insurance shall be rendered
against the Lessee, and such judgment or judgments shall not have been vacated,
stayed, discharged, bonded or satisfied by Lessee or its Affiliates within 30
days from the date of entry thereof; or

          (j) any party to a Project Document shall default in its significant
obligations thereunder and such default remains uncured for the longer of (A)
the period allowed for the cure of such default under the applicable Project
Document and (B) in the case of a default by a party (other than the Lessee) to
a Project Document, 180 days during which the Lessee shall have a right to cure
such default or replace such defaulting party with a Replacement Contract; or

          (k) any significant provision of any Project Document or any
Governmental Approval required to be obtained and/or maintained by the Lessee
shall at any time for any reason cease to be valid and binding or the
enforceability thereof is contested and the applicable Project Document shall
not have been replaced with a Replacement Contract that is on substantially
similar or better terms to the Lessee within 180 days or the applicable
Governmental Approval shall not have been replaced or reinstated within 180
days; or

          (l) (i) the Indenture Trustee shall cease to have a valid first
priority security interest in the Collateral or any part thereof or (ii) the
Owner Lessor shall cease to have a valid first priority security interest in the
property subject to the Lien of any of the Lessee Security Documents or any part
thereof, provided, that upon receipt by the Lessee of written notice of such
cessation from the Equity Investor, the Owner Lessor or the Indenture Trustee,
the Lessee shall have a period of three (3) Business Days to cure such default;
or

          (m) a Change of Control shall have occurred; or

          (n) the occurrence of a Head Lease Event of Default caused by the
Lessee.

SECTION 17. REMEDIES

          Section 17.1. Remedies for Lease Event of Default. Upon the occurrence
of any Lease Event of Default and at any time thereafter so long as the same
shall be continuing (the Owner Lessor acknowledging that in making a
determination that a Lease Event of Default has occurred under Section 16(d) or
(e), to the extent the Lessor exercises discretion in making such determination,
it shall exercise such discretion in a commercially reasonable manner), the
Owner Lessor may, at its option, declare this Project Lease to be in default by
written notice to the Lessee; provided that upon the occurrence of a Lease Event
of Default described in paragraph (g) of Section 16, this Project Lease shall
automatically be deemed to be in default without the need for giving any notice;
and at any time thereafter, so long as the Lessee shall not have remedied all
outstanding Lease Events of Default, the Owner Lessor may do one or more of the
following as the Owner Lessor in its sole discretion shall elect, to the extent
permitted by, and subject to compliance with any mandatory requirements of,
Applicable Law then in effect:

                                       34

          (a) proceed by appropriate court action or actions, either at law or
in equity, to enforce performance by the Lessee, at the Lessee's sole cost and
expense, of the applicable covenants and terms of this Project Lease or to
recover damages for breach thereof;

          (b) by notice in writing to the Lessee, terminate this Project Lease
whereupon all right of the Lessee to the possession and use under this Project
Lease of the Project shall absolutely cease and terminate but the Lessee shall
remain liable as hereinafter provided; and thereupon, the Owner Lessor may
demand that the Lessee, and the Lessee shall upon written demand of the Owner
Lessor and at the Lessee's expense, forthwith return possession of the Project
to the Owner Lessor in the manner and condition required by, and otherwise in
accordance with all of the provisions of Section 5, except those provisions
relating to periods of notice; and the Owner Lessor may thenceforth hold,
possess and enjoy the same free from any right of the Lessee, or its successor
or assigns, to use the Project for any purpose whatever;

          (c) sell the Owner Lessor's Leasehold Interest at public or private
sale, as the Owner Lessor may determine, free and clear of any rights of the
Lessee under this Project Lease and without any duty to account to the Lessee
with respect to such sale or for the proceeds thereof (except to the extent
required by paragraph (f) below if the Owner Lessor elects to exercise its
rights under said paragraph and by Applicable Law), in which event Allocated
Rent shall cease to accrue and the Lessee's obligation to pay Periodic Lease
Rent or Renewal Lease Rent hereunder due for any periods subsequent to the date
of such sale shall terminate (except to the extent that Periodic Lease Rent and
Renewal Lease Rent is to be included in computations under paragraph (e) or (f)
below if the Owner Lessor elects to exercise its rights under said paragraphs);

          (d) hold, keep idle or lease to others the Project as the Owner Lessor
in its sole discretion may determine, free and clear of any rights of the Lessee
under this Project Lease and without any duty to account to the Lessee with
respect to such action or inaction or for any proceeds with respect thereto,
except that the Lessee's obligation to pay Periodic Lease Rent or Renewal Lease
Rent due for any periods subsequent to the date upon which the Lessee shall have
been deprived of possession and use of the Project pursuant to this Section 17
shall be reduced by the net proceeds, if any, received by the Owner Lessor from
leasing the Project to any Person other than the Lessee;

          (e) whether or not the Owner Lessor shall have exercised, or shall
thereafter at any time exercise, any of its rights under paragraph (b) above,
the Owner Lessor, by written notice to the Lessee specifying a Termination Date
that shall be not earlier than 10 days after the date of such notice, may demand
that the Lessee pay to the Owner Lessor, and the Lessee shall pay to the Owner
Lessor, on the Termination Date specified in such notice, any unpaid Periodic
Lease Rent and Renewal Lease Rent due on or before such Termination Date, any
Supplemental Lease Rent due and payable on or prior to such Termination Date,
plus as liquidated damages for loss of a bargain and not as a penalty (in lieu
of the Periodic Lease Rent or Renewal Lease Rent due on and after such
Termination Date), (i) an amount equal to the excess, if any, of the Termination
Value computed as of such Termination Date over the Fair Market Sales Value of
the Project as of such Termination Date, or (ii) an amount equal to the excess,
if any, of Termination Value computed as of such Termination Date over the Fair
Market Rental Value of

                                       35

the Project until the end of the Basic Lease Term or the then current Renewal
Lease Term, after discounting such Fair Market Rental Value semiannually to
present value as of such Termination Date at a rate equal to the Lease Debt
Rate, or (iii) an amount equal to the Termination Value computed as of such
Termination Date; provided that upon payment of such Termination Value by the
Lessee pursuant to this clause (iii) and all other Rent (not otherwise included
in the calculation of such Termination Value) then due and unpaid, or accrued
and unpaid, by the Lessee, then upon any sale of the Owner Lessor's Leasehold
Interest as a result of such exercise of remedies at public or private sale, the
Owner Lessor shall pay over to the Lessee upon consummation of any such sale the
net proceeds of such sale (after deducting from such proceeds all costs and
expenses incurred by the Owner Lessor in connection therewith and all other
amounts that may become payable to the Owner Lessor, the Equity Investor, the
Indenture Trustee or any Noteholder) but not to exceed the sum of such
Termination Value paid by the Lessee plus interest at the Prime Rate (as
published in the Wall Street Journal from time to time) from such Termination
Date until the date of payment of such proceeds to the Lessee and the Lessee
waives all claims against the Owner Lessor and the Equity Investor in connection
with the sale of the Owner Lessor's Leasehold Interest efforts pursuant to this
proviso. Upon payment of such amount under either clause (i), (ii) or (iii) of
this paragraph (e) and all other Rent then due and unpaid, or accrued and
unpaid, by the Lessee, Allocated Rent shall cease to accrue and the Lessee's
obligation to pay Periodic Lease Rent or Renewal Lease Rent hereunder due for
any periods subsequent to the date of such payment shall terminate and this
Project Lease, the Head Lease and the Sublease of the Power Plant Sublease shall
terminate;

          (f) if the Owner Lessor shall have sold the Owner Lessor's Leasehold
Interest pursuant to paragraph (c) above, the Owner Lessor may, if it shall so
elect, demand that the Lessee pay to the Owner Lessor, and the Lessee shall pay
to the Owner Lessor, as liquidated damages for loss of a bargain and not as a
penalty (in lieu of the Periodic Lease Rent or Renewal Lease Rent due for any
periods subsequent to the date of such sale), an amount equal to (i) any unpaid
Periodic Lease Rent and Renewal Lease Rent due on or before the date of such
sale and, plus (ii) if the date is not a Termination Date, the sum of (A)
accrued and unpaid interest on the Senior Notes from the Termination Date next
preceding the date of such sale (after payment of principal, premium and
interest on the Senior Notes on such Termination Date (if such Termination Date
is a Rent Payment Date)) to the date of such sale, plus (B) the product of (x)
the positive or negative difference between the Equity Portion of Termination
Value on the Termination Date next preceding the date of such sale (after any
payment of the Equity Portion of Periodic Lease Rent due on such Termination
Date (if such Termination Date is a Rent Payment Date)) and the Equity Portion
of Termination Value on the Termination Date next succeeding the date of such
sale, and (y) a fraction, the numerator of which is the number of days from the
Termination Date next preceding the date of such sale to the date of such sale,
and the denominator of which is the number of days between the Termination Date
next preceding the date of such sale and the Termination Date next succeeding
the date of such sale, plus (iii) either (A) if the date of such sale is not a
Termination Date, the amount, if any, by which the Termination Value computed as
of the Termination Date next preceding the date of such sale (after deducting
any payment of the Periodic Lease Rent due on such Termination Date (if such
Termination Date is a Rent Payment Date)), exceeds the net proceeds of such sale
or (B) if the date of such sale is a Termination Date, the amount by which the
Termination Value as of the date of sale exceeds the net proceeds of such sale,
together with interest on the amounts payable

                                       36

pursuant to this Section 17.1(f) at the Overdue Rate for the period, if any,
from the date of sale to and including the date of actual payment of all such
amounts to the Owner Lessor; and, upon payment of all such amounts, the Lessee's
obligation to pay Periodic Lease Rent or Renewal Lease Rent for any periods
subsequent to the date of such payment shall terminate and this Project Lease,
the Head Lease and the Sublease of the Power Plant Sublease shall terminate; or

          (g) apply any amounts that are held by the Owner Lessor or the Lease
Indenture Trustee as security for the Lessee's obligations hereunder or under
any Security Document against any amounts owed by the Lessee hereunder or under
any other Operative Document, subject to Section 12.17 of the Participation
Agreement.

     In addition, the Lessee shall be liable, except as otherwise provided
above, for (i) any and all unpaid Periodic Lease Rent and Renewal Lease Rent due
hereunder before or during the exercise of any of the foregoing remedies, and
(ii) on an After-Tax Basis, for legal fees and other costs and expenses incurred
by reason of the occurrence of any Lease Event of Default or the exercise of the
remedies with respect thereto, including the repayment in full of any costs and
expenses necessary to be expended in connection with the return of the Project
in accordance with Section 5 hereof, including, any costs and expenses incurred
by the Owner Lessor, the Equity Investor, the Indenture Trustee and the
Noteholders in connection with retaking constructive possession of, or in
repairing, the Project in order to cause it to be in compliance with all
maintenance standards imposed by this Project Lease.

     All payments of Rent under this Section 17.1 shall, so long as the Lien of
the Indenture shall not have been terminated and fully discharged, be made to or
at the direction of the Indenture Trustee.

          Section 17.2. Cumulative Remedies. The remedies in this Project Lease
provided in favor of the Owner Lessor shall not be deemed exclusive, but shall
be cumulative and shall be in addition to all other remedies in its favor
existing at law or in equity; and the exercise or beginning of exercise by the
Owner Lessor of any one or more of such remedies shall not, except as
specifically provided in this Section 17, preclude the simultaneous or later
exercise by the Owner Lessor of any or all of such other remedies. To the extent
permitted by Applicable Law, the Lessee hereby waives any rights now or
hereafter conferred by statute or otherwise which may require the Owner Lessor
to sell, lease or otherwise use the Project or any Component thereof in
mitigation of the Owner Lessor's damages as set forth in this Section 17 or
which may otherwise limit or modify any of the Owner Lessor's rights and
remedies in this Section 17.

          Section 17.3. No Delay or Omission to be Construed as Waiver. No delay
or omission to exercise any right, power or remedy accruing to the Owner Lessor
upon any breach or default by the Lessee under this Project Lease shall impair
any such right, power or remedy of the Owner Lessor, nor shall any such delay or
omission be construed as a waiver of any breach or default, or of any similar
breach or default hereafter occurring; nor shall any waiver of a single breach
or default be deemed a waiver of any subsequent breach or default.

          Section 17.4. Limited Recourse. Notwithstanding anything else in any
Operative Document to the contrary, if the sole Lease Event of Default is
triggered by the occurrence of (each a "Limited Recourse Event" (x) an event set
forth in Section 16(d) (as it pertains to any

                                       37

covenant, obligation or agreement (other than a payment obligation) of the
Lessee in any Real Estate Document or any Project Document) or (y) an event set
forth in Section 16(e) as it pertains to (i) the representation and warranty of
the Lessee in Section 3.1(c)(iii), 3.1(d)(i)(B) (to the extent such
representation and warranty relates to the Owner Lessor), 3.1(e), 3.1(h)(iii),
and 3.1(x) of the Participation Agreement, or (ii) any representation or
warranty of the Lessee in any Real Estate Document or in any Project Document)
or (z) an event set forth in Section 16(f), (j), (k) and (l) (as it pertains to
any party to a Project Document), or any combination of the foregoing and no
other event that gives rise to a Lease Event of Default has occurred and is
continuing, the Lessee's recourse liability to the Owner Lessor including
recourse with respect to amounts in the Accounts as a consequence of such Lease
Event of Default (including any liability for enforcement costs or losses
arising as a result of such Lease Event of Default and Section 9 of the
Participation Agreement for any Claims arising out of any Limited Recourse
Event) shall be limited to the Limited Recourse Amount (it being understood by
the parties hereto that the limit on the Lessee's recourse liability with
respect to any indemnification provisions shall only pertain to Claims that
directly arise from a Limited Recourse Event). In addition, any amounts owed to
the Owner Lessor which are not paid in full from the Lessee's liability to pay
the Limited Recourse Amount may be realized by the exercise of remedies with
respect to the Collateral under this Section 17. For the avoidance of doubt, the
Owner Lessor (or the Indenture Trustee) shall not be entitled to claim the
excess, if any, of (i) the aggregate of the balances in the Payment Accounts and
the Accounts (other than the Loss Proceeds Account) over (ii) the Limited
Recourse Amount, in each case as of the date of the declaration of a Limited
Recourse Event.

SECTION 18. SUBLEASE

     The Lessee shall not have the right to sublease the Project or assign its
interest in this Project Lease, the Project Documents or the Project Site, in
whole or in part, without the prior consent of the Owner Lessor.

SECTION 19. OWNER LESSOR'S RIGHT TO PERFORM

     If the Lessee fails to make any payment required to be made by it hereunder
or fails to perform or comply with any of its other agreements contained herein
after notice to the Lessee and failure of the Lessee to so perform or comply,
the Owner Lessor may itself, or may cause the Equity Investor to, make such
payment or perform or comply with such agreement in a reasonable manner, but
shall not be obligated hereunder to do so, and the amount of such payment and of
the reasonable expenses of the Owner Lessor or the Equity Investor incurred in
connection with such payment or the performance of or compliance with such
agreement, as the case may be, together with interest thereon at the Overdue
Rate, to the extent permitted by Applicable Law, shall be deemed to be
Supplemental Lease Rent, payable by the Lessee to the Owner Lessor on demand.
Notwithstanding anything to the contrary contained in the foregoing, the
provisions of this Section 19 shall in no event restrict any of the Owner
Lessor's rights following the occurrence of the a Lease Event of Default, it
being agreed and understood that the Owner Lessor shall be entitled to exercise
all of its remedies pursuant to Section 17 upon the occurrence of any such
event.

                                       38

SECTION 20. SECURITY FOR OWNER LESSOR'S OBLIGATION TO THE INDENTURE TRUSTEE

     In order to secure the Senior Notes, the Owner Lessor will assign and grant
a Lien to the Indenture Trustee in and to all of the Owner Lessor's right, title
and interest in, to and under this Project Lease (other than Excepted Payments),
and grant a security interest in favor of the Indenture Trustee in all of the
Owner Lessor's right, title and interest in and to the Owner Lessor's Leasehold
Interest. The Lessee hereby consents to such assignment and to the creation of
such Lien and security interest and acknowledges receipt of copies of the
Indenture and the other Operative Documents, it being understood that such
consent shall not affect any requirement or the absence of any requirement for
any consent of the Lessee under any other circumstances. Unless and until the
Lessee shall have received written notice from the Indenture Trustee that the
Lien of the Indenture has been terminated and fully discharged, the Indenture
Trustee shall have the right to exercise the rights of the Owner Lessor under
this Project Lease to the extent set forth in and subject in each case to the
exceptions set forth in the Indenture. TO THE EXTENT, IF ANY, THAT THIS PROJECT
LEASE CONSTITUTES CHATTEL PAPER (AS SUCH TERM IS DEFINED IN THE UNIFORM
COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE JURISDICTION), NO SECURITY
INTEREST IN THIS PROJECT LEASE MAY BE CREATED THROUGH THE TRANSFER OR POSSESSION
OF ANY COUNTERPART HEREOF OTHER THAN THE ORIGINAL COUNTERPART, WHICH SHALL BE
IDENTIFIED AS THE COUNTERPART CONTAINING THE RECEIPT THEREFOR EXECUTED BY THE
INDENTURE TRUSTEE ON THE SIGNATURE PAGE THEREOF.

SECTION 21. PURCHASE OPTIONS

          Section 21.1. Election of Purchase Options. So long as no Significant
Lease Default or Lease Event of Default shall have occurred and be continuing,
the Lessee shall have the option to purchase the Owner Lessor's Leasehold
Interest from the Owner Lessor (i) on the EBO Date for the EBO Amount (the
"Early Buyout Option") and (ii) on the last day of the Basic Lease Term at the
FPPO Price by giving the Owner Lessor written notice not earlier than
forty-eight (48) months and not later than eighteen 18 months prior to the date
such purchase option may be exercised.

          Section 21.2. Purchase Option Payments.

          (a) On the Purchase Date, the Lessee shall pay to the Owner Lessor, or
at its direction the EBO Amount or the FPPO Price, as applicable.

          (b) On the Purchase Date, the Lessee shall pay to the Owner Lessor (a)
all Supplemental Lease Rent (including all reasonable out-of-pocket costs and
expenses of the Owner Lessor, the Equity Investor, the Indenture Trustee and the
Noteholders) due and payable on or prior to the Purchase Date, and (b) any
unpaid Periodic Lease Rent and Renewal Lease Rent due on or before such Purchase
Date. All Rent payments under this Section 21 shall, so long as the Lien of
Indenture shall not have been terminated and fully discharged, be made to or at
the direction of the Indenture Trustee. Upon payment of all sums specified in
this Section 21.2, (i) Allocated Rent shall cease to accrue and the obligation
to pay Periodic Lease Rent or

                                       39

Renewal Lease Rent shall cease, (ii) the Lessee shall cease to have any
liability to the Owner Lessor with respect to the Project, except for
Supplemental Lease Rent and other obligations (including those under Sections
9.1 and 9.2 of the Participation Agreement and the Tax Indemnity Agreement)
surviving pursuant to the express terms of any Operative Document, (iii) the
Owner Lessor shall pay the outstanding principal, accrued and unpaid interest,
and premium, if any, on the Senior Notes, (iv) this Project Lease, the Head
Lease and the Sublease of Power Plant Sublease shall terminate, (v) the Owner
Lessor shall, at the Lessee's cost and expense, execute and deliver to the
Lessee a release and termination of this Project Lease, the Head Lease and the
Sublease of Power Plant Sublease and (vi) the Owner Lessor shall transfer (by an
appropriate instrument of transfer in form and substance reasonably satisfactory
to the Owner Lessor and prepared by and at the expense of the Lessee) the Owner
Lessor's Leasehold Interest to the Lessee pursuant to this Section 21 on an "as
is, where is" and "with all faults" basis, without representations or warranties
other than a warranty as to the absence of Owner Lessor's Liens and a warranty
of the Equity Investor as to the absence of Equity Investor's Liens, and shall
execute and deliver appropriate releases and other documents or instruments
necessary or desirable to effect the foregoing, all to be prepared, filed and
recorded (as appropriate) at the cost and expense of the Lessee. It shall be a
condition of the termination of this Project Lease pursuant to this Section 21
that the Lessee shall pay all amounts it is obligated to pay under this Section
21.2. If the Lessee fails to consummate any purchase pursuant to the exercise of
the option set forth in Section 21.1(i) hereof, after giving notice of its
intention to do so, (i) this Project Lease shall continue and (ii) such failure
to consummate shall not constitute a Lease Default; provided, however, that,
unless the exercise of the purchase option has been withdrawn before the date on
which any related notice of prepayment of Senior Notes has become irrevocable in
accordance with the terms of the Indenture, the Lessee shall be obligated to
make a Supplemental Rent payment (on an After-Tax Basis to the Owner Lessor and
the Equity Investor) equal to the principal of, and interest and Make-Whole
Premium, if any on the Senior Notes which are due and payable. Whether or not
this Project Lease is terminated and whether or not the Lessee fails to
consummate any purchase pursuant to the exercise of the option set forth in
Section 21.1(i) hereof, the Lessee shall in any event pay all reasonable
out-of-pocket costs and expenses of the Owner Lessor, the Equity Investor, the
Indenture Trustee and the Noteholders in connection with the exercise by the
Lessee of its right to purchase the Owner Lessor's Leasehold Interest under this
Section 21.

          Section 21.3. Assumption of the Senior Notes. Notwithstanding the
provisions of Section 21.2, if (a) the Lessee (or its designee) shall have
executed and delivered an assumption agreement to assume in full the Senior
Notes and the obligations and liabilities of the Owner Lessor under the
Indenture as permitted by and in accordance with Section 2.10(B) of the
Indenture, (b) all other conditions contained in such Section 2.10(B) shall have
been satisfied, and (c) no Significant Lease Default or Lease Event of Default
shall have occurred and be continuing after giving effect to such assumption,
then the amounts otherwise payable by the Lessee pursuant to this Section 21
shall be reduced by the outstanding principal amount of and accrued interest on
the Senior Notes so assumed by the Lessee.

                                       40

SECTION 22. MISCELLANEOUS

          Section 22.1. Amendments and Waivers. No term, covenant, agreement or
condition of this Project Lease may be terminated, amended or compliance
therewith waived (either generally or in a particular instance, retroactively or
prospectively) except by an instrument or instruments in writing executed by
each party hereto.

          Section 22.2. Notices. Unless otherwise expressly specified or
permitted by the terms hereof, all communications and notices provided for
herein to a party hereto shall be in writing or by a telecommunications device
capable of creating a written record, and any such notice shall become effective
(a) upon personal delivery thereof, including by overnight mail or courier
service, (b) in the case of notice by United States mail, certified or
registered, postage prepaid, return receipt requested, upon receipt thereof, or
(c) in the case of notice by such a telecommunications device, upon transmission
thereof, provided such transmission is promptly confirmed by either of the
methods set forth in clauses (a) and (b) above, in each case addressed to such
party and copy party at its address set forth below or in the case of any such
party or copy party hereto, at such other address as such party or copy party
may from time to time designate by written notice to the other party:

If to the Owner Lessor:

     SE Puna, L.L.C.
     c/o Wilmington Trust Company
     Rodney Square North
     1100 North Market Street
     Wilmington, DE 19890-0001
     Telephone No.: (302) 636-6000
     Facsimile No.: (302) 636-4141
     Attention: Corporate Trust Administration

with a copy to the Equity Investor:

     SE Puna Lease, L.L.C.
     c/o Southern Company
     270 Peachtree Street NW
     Atlanta, GA 30303
     Telephone No.: (404) 506-5162
     Facsimile No.: (404) 506-0708
     Attention: Director, Finance and Capital Markets

and to the Indenture Trustee:

     Union Bank of California, N.A.
     475 Sansome Street, 12th Floor
     San Francisco, CA 94111
     Telephone No.: (415) 296-6754

                                       41

     Facsimile No.: (415) 296-6767
     Attention: Corporate Trust Department

If to the Lessee:

     Puna Geothermal Venture
     980 Greg Street
     Sparks, NV 89431
     Telephone No.: (775) 356-9029
     Facsimile No.: (775) 356-9039
     Attention: President

          Section 22.3. Survival. Except for the provisions of Sections 3.3,
3.5, 5, 9 and 17 (and any other provisions hereof which expressly contemplate
that they shall so survive), which shall survive, the warranties and covenants
made by each party hereto shall not survive the expiration or termination of
this Project Lease in accordance with its terms.

          Section 22.4. Successors and Assigns. This Project Lease shall be
binding upon and shall inure to the benefit of, and shall be enforceable by, the
parties hereto and their respective successors and assigns as permitted by and
in accordance with the terms hereof. Except as expressly provided herein or in
the other Operative Documents, neither party hereto may assign its interests or
transfer its obligations herein without the consent of the other party hereto.

          Section 22.5. True Lease. The parties intend that the Owner Lessor (or
the Equity Investor) is the owner and lessor of the Project and that the Lessee
is the lessee thereof for all purposes including Federal income tax purposes
(subject to the Head Lessor's retention of legal title to the Project). Nothing
herein shall be construed to affect the Owner Lessor's status as owner of the
Project or as conveying to the Lessee any right, title or interest in or to the
Project except as lessee only.

          Section 22.6. Governing Law. This Project Lease was negotiated in the
State of New York, and in all respects this Project Lease shall be governed by,
and construed in accordance with, the laws of the State of New York, except that
provisions for the creation and enforcement of any interest in real estate
created hereby shall be governed by and construed according to the laws of the
State of Hawaii, it being understood that, to the fullest extent permitted by
the law of the State of Hawaii, the law of the State of New York shall govern
the validity and enforceability of the representations, warranties, covenants
and obligations of the Lessee and the Owner Lessor under this Project Lease and
all other Operative Documents and all of the obligations arising hereunder or
thereunder.

          Section 22.7. Severability. Any provision of this Project Lease that
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.

                                       42

          Section 22.8. Counterparts. This Project Lease may be executed by the
parties hereto on any number of separate counterparts, each of which, subject to
Section 20, when so executed and delivered shall be an original, but all such
counterparts shall together constitute but one and the same instrument.

          Section 22.9. Headings and Table of Contents. The headings of the
sections of this Project Lease and the Table of Contents are inserted for
purposes of convenience only and shall not be construed to affect the meaning or
construction of any of the provisions hereof.

          Section 22.10. Further Assurances. Each party hereto will promptly and
duly execute and deliver such further documents to make such further assurances
for and take such further action reasonably requested by the other party, all as
may be reasonably necessary to carry out more effectively the intent and purpose
of this Project Lease.

          Section 22.11. Effectiveness. This Project Lease has been dated as of
the date first above written for convenience only. This Project Lease shall be
effective on the Closing Date.

          Section 22.12. Limitation of Liability. It is expressly understood and
agreed by the parties hereto that (a) this Project Lease is executed and
delivered by the Trust Company, not individually or personally but solely as
manager of the Owner Lessor under the LLC Agreement, in the exercise of the
powers and authority conferred and vested in it pursuant thereto, (b) each of
the representations, undertakings and agreements herein made on the part of the
Owner Lessor is made and intended not as personal representations, undertakings
and agreements by the Trust Company but is made and intended for the purpose for
binding only the Owner Lessor, (c) nothing herein contained shall be construed
as creating any liability on the Trust Company, individually or personally, to
perform any covenant either expressed or implied contained herein, all such
liability, if any, being expressly waived by the parties hereto or by any Person
claiming by, through or under the parties hereto and (d) under no circumstances
shall the Trust Company, be personally liable for the payment of any
indebtedness or expenses of the Owner Lessor or be liable for the breach or
failure of any obligation, representation, warranty or covenant made or
undertaken by the Owner Lessor under this Project Lease.

          Section 22.13. Entire Agreement. This Agreement, together with the
other applicable Operative Documents, constitutes the entire agreement of the
parties hereto and thereto with respect to the subject matter hereof and thereof
and supercedes all oral and prior written agreements and understandings with
respect to such subject matter.

                                       43

     IN WITNESS WHEREOF, the Owner Lessor and the Lessee have caused this
Project Lease to be duly executed and delivered by their respective officers
thereunto duly authorized.

                                        SE Puna, L.L.C.

                                        By: Wilmington Trust Company, not in its
                                            individual capacity but solely as
                                            Owner Manager

                                            By: /s/ Janel R. Harvilla
                                                --------------------------------
                                            Name: Janel R. Harvilla
                                            Title: Financial Services Officer

                                        PUNA GEOTHERMAL VENTURE

                                        By: ORNI 8 LLC, its partner
                                        By: Ormat Nevada Inc., its Manager

                                            By: /s/ Connie Stechman
                                                --------------------------------
                                            Name: Connie Stechman
                                            Title: Assistant Secretary

                                        By: OrPuna LLC, its partner
                                        By: Ormat Nevada Inc., its Manager

                                            By: /s/ Connie Stechman
                                                --------------------------------
                                            Name: Connie Stechman
                                            Title: Assistant Secretary

*Receipt of the original counterpart of the foregoing Project Lease is hereby
acknowledged on this 18th day of May 2005.

                                        Union Bank of California, N.A.,
                                        as Indenture Trustee

                                        By: /s/ Sonia N. Flores
                                            ------------------------------------
                                        Name: Sonia N. Flores
                                        Title: Vice President

----------
* This acknowledgment executed in the original counterpart only.

                         PROJECT LEASE SUPPLEMENT NO. 1

     This PROJECT LEASE SUPPLEMENT NO. 1, dated as of May 18, 2005, is between
SE PUNA, L.L.C., a Delaware limited liability company (the "Owner Lessor"), and
PUNA GEOTHERMAL VENTURE, a Hawaii general partnership (the "Lessee").

                                   WITNESSETH:

     WHEREAS, the Owner Lessor and the Lessee have heretofore entered into that
certain Project Lease Agreement, dated as of May 18, 2005 (the "Project Lease").
The terms used herein are used with the meanings specified in the Project Lease;
and

     WHEREAS, the Project Lease provides for the execution and delivery of a
Project Lease Supplement substantially in the form hereof for, among other
things, the purpose of leasing the Project and confirming Periodic Lease Rent,
Allocated Rent and Termination Values with respect thereto.

     NOW, THEREFORE, in consideration of the foregoing premises, the mutual
agreements herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:

          Section 1. Lease. The Owner Lessor hereby leases the Project, upon the
terms and conditions set forth in the Project Lease, to the Lessee for the Basic
Lease Term (and Renewal Lease Term, if any) and the Lessee hereby leases the
Project upon the terms and conditions set forth in the Project Lease, from the
Owner Lessor for such Basic Lease Term (and Renewal Lease Term, if any). The
Head Lease Rent for the Project, designated as such in the Head Lease Supplement
therefor, is $71,000,000.

          Section 2. Payment of Periodic Rent. The Lessee hereby agrees to pay
to the Owner Lessor basic lease rent for the lease of the Project (the "Periodic
Lease Rent"), payable with respect to the Basic Lease Term thereof, as follows:
each payment of Periodic Lease Rent shall be payable on each Rent Payment Date
in the amount equal to, subject to Section 3.4 of the Project Lease, the product
of (x) the Head Lease Rent therefor multiplied by (y) the percentage set forth
opposite such Rent Payment Date on Schedule 1 hereto under the caption "Periodic
Lease Rent Percentage."

          Section 3. Allocation of Rent. The Periodic Lease Rent allocated to
each Rental Period for the use by the Lessee of the Project shall be an amount
equal to the product of (x) the Head Lease Rent therefor multiplied by (y) the
percentage set forth opposite such Rental Period in Schedule 2 hereof under the
caption "Allocation Percentage" (the "Allocated Rent").

                                        1

          Section 4. Termination Values. Termination Values for any Termination
Date in respect of the Project shall be an amount equal to the product of (x)
the Head Lease Rent therefor multiplied by (y) the percentage set forth under
the heading "Termination Value Percentages" on Schedule 3 hereto.

          Section 5. EBO Price; EBO Date Prepaid Rent Balance. The EBO Price in
respect of the Project shall mean an amount equal to $74,137,981.97. The EBO
Date Prepaid Rent Balance shall mean an amount equal to $3,023,892.07.

          Section 6. FPPO Price. The FPPO Price in respect of the Project shall
mean an amount equal to $42,850,709.17.

          Section 7. Miscellaneous. (a) This Project Lease Supplement No. 1
shall be construed in connection with and as part of the Project Lease, and all
terms, conditions and covenants contained in the Project Lease, except as herein
modified, shall be and remain in full force and effect.

     (b) This Project Lease Supplement No. 1 may be executed in any number of
counterparts, each executed counterpart constituting an original but all
together one and the same instrument.

          IN WITNESS WHEREOF, the Owner Lessor and the Lessee have caused this
Project Lease Supplement No. 1 to be duly executed and delivered by their
respective officers thereunto duly authorized as of the day and year first above
written.

                                        SE PUNA, L.L.C.

                                        By: Wilmington Trust Company, not in its
                                            individual capacity but solely as
                                            Owner Manager

                                            By: /s/ Janel R. Harvilla
                                                --------------------------------
                                            Name: Janel R. Harvilla
                                            Title: Financial Services Officer

                                        PUNA GEOTHERMAL VENTURE

                                        By: ORNI 8 LLC, its partner

                                            By: /s/ Connie Stechman
                                                --------------------------------
                                            Name: Connie Stechman
                                            Title: Assistant Secretary

                                        By: OrPuna LLC, its partner

                                            By: /s/ Connie Stechman
                                                --------------------------------
                                            Name: Connie Stechman
                                            Title: Assistant Secretary

*Receipt of the original counterpart of the foregoing Project Lease Supplement
No. 1 is hereby acknowledged on this 18th day of May 2005.

                                        Union Bank of California, N.A.,
                                        as Indenture Trustee

                                        By: /s/ Sonia N. Flores
                                            ------------------------------------
                                        Name: Sonia N. Flores
                                        Title: Vice President

----------
* This acknowledgment executed in the original counterpart only.

--------------------------------------------------------------------------------
                                   SCHEDULE 1
                                     TO THE
                         PROJECT LEASE SUPPLEMENT NO. 1
                               PERIODIC LEASE RENT

          (expressed as a percentage of Head Lease Rent and in dollars)
--------------------------------------------------------------------------------

      RENT                   PERIODIC LEASE           PERIODIC LEASE
  PAYMENT DATE              RENT PERCENTAGE                RENT
  ------------              ---------------           --------------
    June 30, 2005             0.6473227042                459,599.12
December 30, 2005             2.8464218732              2,020,959.53
    June 30, 2006             4.3784005070              3,108,664.36
December 30, 2006             4.3784005070              3,108,664.36
    June 30, 2007             4.2254682113              3,000,082.43
December 30, 2007             4.2254682113              3,000,082.43
    June 30, 2008             4.6768710141              3,320,578.42
December 30, 2008             4.6768710141              3,320,578.42
    June 30, 2009             3.3255457465              2,361,137.48
December 30, 2009             5.0010715634              3,550,760.81
    June 30, 2010             2.7606800000              1,960,082.80
December 30, 2010             4.6806017746              3,323,227.26
    June 30, 2011             4.9906810563              3,543,383.55
December 30, 2011             4.9906810563              3,543,383.55
    June 30, 2012             5.0771234507              3,604,757.65
December 30, 2012             5.0771234507              3,604,757.65
    June 30, 2013             4.9704976620              3,529,053.34
December 30, 2013             4.9704976620              3,529,053.34
    June 30, 2014             5.3714510704              3,813,730.26
December 30, 2014             5.3714510704              3,813,730.26
    June 30, 2015             5.0612968028              3,593,520.73
December 30, 2015             5.0612968028              3,593,520.73
    June 30, 2016             5.1572162113              3,661,623.51
December 30, 2016             5.1572162113              3,661,623.51
    June 30, 2017             5.4082660423              3,839,868.89
December 30, 2017             5.4082660423              3,839,868.89
    June 30, 2018             5.5358332535              3,930,441.61
December 30, 2018             5.5358332535              3,930,441.61
    June 30, 2019             5.6862400704              4,037,230.45
December 30, 2019             5.6862400704              4,037,230.45
    June 30, 2020             2.5095298592              1,781,766.20
December 30, 2020             5.3780137042              3,818,389.73
    June 30, 2021             0.0000000000                      0.00
December 30, 2021             5.8578008310              4,159,038.59
    June 30, 2022             0.0000000000                      0,00
December 30, 2022             2.5535723521              1,813,036.37
    June 30, 2023             0.0000000000                      0.00
December 30, 2023             0.0000000000                      0.00
    June 30, 2024             0.0000000000                      0.00
December 30, 2024             0.0000000000                      0.00
    June 30, 2025             0.0000000000                      0.00
December 30, 2025             0.0000000000                      0.00
    June 30, 2026             0.0000000000                      0.00
December 30, 2026             0.0000000000                      0.00
    June 30, 2027             0.0000000000                      0.00
December 30, 2027             0.0000000000                      0.00

            Total           156.6392511126            111,213,868.29

--------------------------------------------------------------------------------
                                   SCHEDULE 2
                                     TO THE
                         PROJECT LEASE SUPPLEMENT NO. 1

     ALLOCATED RENT, PROPORTIONAL RENT AND SECTION 467 INTEREST PERCENTAGES

                 (expressed as a percentage of Head Lease Rent)
--------------------------------------------------------------------------------
<TABLE>

        RENTAL PERIOD
-------------------------------
                                                        PROPORTIONAL        SECTION 467
 FROM AND                TO AND          ALLOCATION         RENT              INTEREST
INCLUDING              INCLUDING         PERCENTAGE      PERCENTAGE          PERCENTAGE
---------              ---------         ----------     ------------        -----------

  May 19, 2005     December 30,2005      2.5672189155    2.8862298169      0.0000000000

January 1, 2006    December 30,2006      7.0015061268    7.8715358732      0.0318945211

January 1, 2007    December 30,2007      7.0015061268    7.8715358732      0.0800454085

January 1, 2008    December 30,2008      7.0015061268    7.8715358732      0.1146663239

January 1, 2009    December 30,2009      7.0015061268    7.8715358732      0.1985021268

January 1, 2010    December 30,2010      7.0015061268    7.8715358732      0.2328152535

January 1, 2011    December 30,2011      7.0015061268    7.8715358732      0.2224497183

January 1, 2012    December 30,2012      7.0015061268    7.8715358732      0.3448942113

January 1, 2013    December 30,2013      7.0015061268    7.8715358732      0.4828434789

January 1, 2014    December 30,2014      7.0015061268    7.8715358732      0.6168393803

January 1, 2015    December 30,2015      7.0015061268    7.8715358732      0.7999701831

January 1, 2016    December 30,2016      7.0015061268    7.8715358732      0.9601491549

January 1, 2017    December 30,2017      7.0015061268    7.8715358732      1.1388090423

January 1, 2018    December 30,2018      7.0015061268    7.8715358732      1.3532088169

January 1, 2019    December 30,2019      7.0015061268    7.8715358732      1.5922591408

January 1, 2020    December 30,2020      7.0015061268    7.8715358732      1.8596523239

January 1, 2021    December 30,2021      7.0015061268    7.8715358732      1.9581244789

January 1, 2022    December 30,2022      7.0015061268    7.8715358732      1.9552049155

January 1, 2023    December 30,2023      7.0015061268    7.8715358732      1.7786600845

January 1, 2024    December 30,2024      7.0015061268    7.8715358732      1.4587841127

January 1, 2025    December 30,2025      7.0015061268    7.8715358732      1.1221146479

January 1, 2026    December 30,2026      7.0015061268    7.8715358732      0.7677700282

January 1, 2027    December 30,2027      7.0015061268    7.8715358732      0.3948223239

January 1, 2028      January 3,2028      0.0388974075    0.0437309249      0.0000191635

                              Total    156.6392511126  176.1037499522     19.4644988396
</TABLE>

--------------------------------------------------------------------------------
                                   SCHEDULE 3
                                     TO THE
                         PROJECT LEASE SUPPLEMENT NO. 1

                          TERMINATION VALUE PERCENTAGES

                 (expressed as a percentage of Head Lease Rent)
--------------------------------------------------------------------------------

               TERMINATION               TERMINATION VALUE
                   DATE                      PERCENTAGE
               -----------               -----------------
                May 30, 2005               106.3202447183
               June 30, 2005               106.5414426479
               July 30, 2005               107.3672670704
              August 30, 2005              108.1967439014
             September 30, 2005            109.0299003662
              October 30, 2005             109.8490624930
             November 30, 2005             110.6718273803
             December 30, 2005             108.6518000141
              January 30, 2006             109.4490959437
             February 28, 2006             110.2498318451
               March 30, 2006              111.0540333521
               April 30, 2006              111.8573009437
                May 30, 2006               112.6449368592
               June 30, 2006               109.0575402676
               July 30, 2006               109.7770797183
              August 30, 2006              110.4994797887
             September 30, 2006            111.2247618028
              October 30, 2006             111.9274590282
             November 30, 2006             112.6328913803
             December 30, 2006             108.9626787606
              January 30, 2007             109.6151808310
             February 28, 2007             110.2700626901
               March 30, 2007              110.9273420423
               pril 30, 2007               111.5806647183
                May 30, 2007               112.2258624225
               June 30, 2007               108.6479172676
               July 30, 2007               109.2520861549
              August 30, 2007              109.8583120423
             September 30, 2007            110.4666102254
              October 30, 2007             111.0629816901
             November 30, 2007             111.6613520423
             December 30, 2007             108.0362679718
              January 30, 2008             108.5998349577
             February 29, 2008             109.1651949014
               March 30, 2008              109.7323611690
               April 30, 2008              110.2978436056
                May 30, 2008               110.8598466901
               June 30, 2008               106.7467600704
               July 30, 2008               107.2748676197
              August 30, 2008              107.8045544930
             September 30, 2008            108.3358324648
              October 30, 2008             108.8616645775
             November 30, 2008             109.3890590704
             December 30, 2008             105.2411565493
              January 30, 2009             105.7362144930
             February 28, 2009             106.2326508451

--------------------------------------------------------------------------------
                                   SCHEDULE 3
                                     TO THE
                         PROJECT LEASE SUPPLEMENT NO. 1

                          TERMINATION VALUE PERCENTAGES

                 (expressed as a percentage of Head Lease Rent)
--------------------------------------------------------------------------------

                TERMINATION               TERMINATION VALUE
                    DATE                      PERCENTAGE
                -----------               -----------------
               March 30, 2009               106.7304758310
               April 30, 2009               107.2279376479
                May 30, 2009                107.7215289155
                June 30, 2009               104.8909419014
                July 30, 2009               105.3562444366
               August 30, 2009              105.8227036479
             September 30, 2009             106.2903281690
              October 30, 2009              106.7521042394
              November 30, 2009             107.2150107183
              December 30, 2009             102.6779844648
              January 30, 2010              103.0942189155
              February 28, 2010             103.5112444507
               March 30, 2010               103.9290669577
               April 30, 2010               104.3459367746
                May 30, 2010                104.7621812535
                June 30, 2010               102.4185368873
                July 30, 2010               102.8215354225
               August 30, 2010              103.2252264366
             September 30, 2010             103.6296150704
              October 30, 2010              104.0328116479
              November 30, 2010             104.4367021549
              December 30, 2010             100.1606900000
              January 30, 2011              100.5275350704
              February 28, 2011             100.8948032254
               March 30, 2011               101.2624976338
               April 30, 2011               101.6301477465
                May 30, 2011                102.0007365070
                June 30, 2011               97.3810951972
                July 30, 2011               97.7381267183
               August 30, 2011              98.0956088873
             September 30, 2011             98.4535450704
              October 30, 2011              98.8152846901
              November 30, 2011             99.1775100423
              December 30, 2011             94.5495436761
              January 30, 2012              94.8964908873
              February 29, 2012             95.2439189296
               March 30, 2012               95.5918313803
               April 30, 2012               95.9410683662
                May 30, 2012                96.2934571972
                June 30, 2012               91.5692439577
                July 30, 2012               91.9066932817
               August 30, 2012              92.2446603099
             September 30, 2012             92.5831488873
              October 30, 2012              92.9257015352
              November 30, 2012             93.2688099014
              December 30, 2012             88.5353546901

--------------------------------------------------------------------------------
                                   SCHEDULE 3
                                     TO THE
                         PROJECT LEASE SUPPLEMENT NO. 1

                          TERMINATION VALUE PERCENTAGES

                 (expressed as a percentage of Head Lease Rent)
--------------------------------------------------------------------------------

               TERMINATION               TERMINATION VALUE
                   DATE                      PERCENTAGE
               -----------               -----------------
            January 30, 2013               88.8620157183
            February 28, 2013              89.1892283099
             March 30, 2013                89.5169965634
             April 30, 2013                89.8462092958
              May 30, 2013                 90.1787953099
             June 30, 2013                 85.5414793803
              July 30, 2013                85.8592020986
            August 30, 2013                86.1775199859
           September 30, 2013              86.4964374789
            October 30, 2013               86.8196960000
            November 30, 2013              87.1435909437
            December 30, 2013              82.4976293662
            January 30, 2014               82.8050977183
           February 28, 2014               83.1132019155
             March 30, 2014                83.4219467042
             April 30, 2014                83.7322710845
              May 30, 2014                 84.0462218592
             June 30, 2014                 78.9894056901
             July 30, 2014                 79.2854033239
            August 30, 2014                79.5820810141
           September 30, 2014              79,8794438310
            October 30, 2014               80.1814558592
            November 30, 2014              80.4841927465
            December 30, 2014              75.4162088310
            January 30, 2015               75.6992816901
            February 28, 2015              75.9830756761
             March 30, 2015                76.2675961831
             April 30, 2015                76.5538383521
              May 30, 2015                 76.8439588028
             June 30, 2015                 72.0735560845
              July 30, 2015                72.3469298732
            August 30, 2015                72.6210792676
           September 30, 2015              72.8960100704
            October 30, 2015               73.1759061127
            November 30, 2015              73.4566263662
            December 30, 2015              68.6768801690
            January 30, 2016               68.9391129155
            February 29, 2016              69.2021728592
             March 30, 2016                69.4660661972
             April 30, 2016                69.7318436056
              May 30, 2016                 70.0017883944
             June 30, 2016                 65.1154016338
              July 30, 2016                65.3671490000
            August 30, 2016                65.6197815211
           September 30, 2016              65.8733057746
            October 30, 2016               66.1321467324

--------------------------------------------------------------------------------
                                   SCHEDULE 3
                                     TO THE
                         PROJECT LEASE SUPPLEMENT NO. 1

                          TERMINATION VALUE PERCENTAGES

                 (expressed as a percentage of Head Lease Rent)
--------------------------------------------------------------------------------

               TERMINATION               TERMINATION VALUE
                   DATE                      PERCENTAGE
               -----------               -----------------
             November 30, 2016             66.3919256901
             December 30, 2016             61.4954334225
             January 30, 2017              61.7351882958
             February 28, 2017             61.9758834930
              March 30, 2017               62.2175260282
              April 30, 2017               62.4612275493
               May 30, 2017                62.7093997746
               June 30, 2017               57.5503090141
               July 30, 2017               57.7761732817
              August 30, 2017              58.0030171690
            September 30, 2017             58.2308479718
             October 30, 2017              58.4643410000
             November 30, 2017             58.6988704930
             December 30, 2017             53.5261781268
             January 30, 2018              53.7366224930
             February 28, 2018             53.9480842958
              March 30, 2018               54.1605711268
              April 30, 2018               54.3752575915
               May 30, 2018                54.5946757042
               June 30, 2018               49.2793448732
               JULY 30, 2018               49.4745167606
              August 30, 2018              49.6707460563
            September 30, 2018             49.8680406338
             October 30, 2018              50.0713185634
             November 30, 2018             50.2757142958
             December 30, 2018             44.9454029014
             January 30, 2019              45.1238531831
             February 28, 2019             45.3034015352
              March 30, 2019               45.4840561549
              April 30, 2019               45.6670528169
               May 30, 2019                45.8550564085
               June 30, 2019               40.3579891831
               July 30, 2019               40.5200875070
              August 30, 2019              40.6833308028
            September 30, 2019             40.8477275775
             October 30, 2019              41.0184530986
             November 30, 2019             41.1903878451
             December 30, 2019             35.6773007887
             January 30, 2020              35.7983495352
             February 29, 2020             35.9203001831
              March 30, 2020               36.0431594789
              April 30, 2020               36.1682258451
               May 30, 2020                36.2980779296
               June 30, 2020               33.9193676761
               July 30, 2020               34.0280491549
              August 30, 2020              34.1375404085

--------------------------------------------------------------------------------
                                   SCHEDULE 3
                                     TO THE
                         PROJECT LEASE SUPPLEMENT NO. 1

                          TERMINATION VALUE PERCENTAGES

                 (expressed as a percentage of Head Lease Rent)
--------------------------------------------------------------------------------

               TERMINATION               TERMINATION VALUE
                   DATE                      PERCENTAGE
               -----------               -----------------
            September 30, 2020              34.2478474648
             October 30, 2020               34.3641149014
             November 30, 2020              34.4812486338
             December 30, 2020              29.2212414225
             January 30, 2021               29.2777475915
             February 28, 2021              29.3346748028
              March 30, 2021                29.3920261549
              April 30, 2021                29.4510894507
               May 30, 2021                 29.5143805775
               June 30, 2021                29.5781432676
               July 30, 2021                29.6512191127
              August 30, 2021               29.7248394507
            September 30, 2021              29.7990083099
             October 30, 2021               29.8787801127
             November 30, 2021              29.9591462958
             December 30, 2021              24.1823104366
             January 30, 2022               24.1952508169
             February 28, 2022              24.2082876197
              March 30, 2022                24.2214215493
              April 30, 2022                24.2359159296
               May 30, 2022                 24.2543080000
               June 30, 2022                24.2728371268
               July 30, 2022                24.3003469437
              August 30, 2022               24.3280617465
            September 30, 2022              24.3559830423
             October 30, 2022               24.3891653099
             November 30, 2022              24.4225948310
             December 30, 2022              21.9027010563
             January 30, 2023               21.9102780845
             February 28, 2023              21.9179115493
              March 30, 2023                21.9256019014
              April 30, 2023                21.9346127887
               May 30, 2023                 21.9475990986
               June 30, 2023                21.9606821690
               July 30, 2023                21.9829820423
              August 30, 2023               22.0054480704
            September 30, 2023              22.0280814930
             October 30, 2023               22.0560946056
             November 30, 2023              22.0843164225
             December 30, 2023              22.1127485352
             January 30, 2024               22.1479062817
             February 29, 2024              22.1833259859
              March 30, 2024                22.2190096056
              April 30, 2024                22.2562618592
               May 30, 2024                 22.2979147887
               June 30, 2024                22.3398780845

--------------------------------------------------------------------------------
                                   SCHEDULE 3
                                     TO THE
                         PROJECT LEASE SUPPLEMENT NO. 1

                          TERMINATION VALUE PERCENTAGES

                 (expressed as a percentage of Head Lease Rent)
--------------------------------------------------------------------------------

               TERMINATION               TERMINATION VALUE
                   DATE                      PERCENTAGE
               -----------               -----------------
              July 30, 2024                22.3917746620
             August 30, 2024               22.4440579155
           September 30, 2024              22.4967307324
            October 30, 2024               22.5552934930
            November 30, 2024              22.6142926056
            December 30, 2024              22.6737313239
            January 30, 2025               22.7404847746
            February 28, 2025              22.8077355915
             March 30, 2025                22.8754874930
             April 30, 2025                22.9451185775
              May 30, 2025                 23.0196177324
              June 30, 2025                23.0946719577
              July 30, 2025                23.1804336479
             August 30, 2025               23.2668343521
           September 30, 2025              23.3538788028
            October 30, 2025               23.4473708169
            November 30, 2025              23.5415594225
            December 30, 2025              23.6364498028
            January 30, 2026               24.1928156056
            February 28, 2026              24.2964280563
             March 30, 2026                24.4008125070
             April 30, 2026                24.5074244507
              May 30, 2026                 24.6198905915
              June 30, 2026                24.7331947042
              July 30, 2026                24.8583517042
             August 30, 2026               24.9844412394
           September 30, 2026              25.1114702254
            October 30, 2026               25.2459927606
            November 30, 2026              25.3815175915
            December 30, 2026              25.5180521972
            January 30, 2027               25.0796465211
            February 28, 2027              25.2263174225
             March 30, 2027                25.3740811408
             April 30, 2027                25.5244330423
              May 30, 2027                 25.6819076620
              June 30, 2027                25.8405556056
              July 30, 2027                26.0124255915
             August 30, 2027               26.1855761408
           September 30, 2027              26.3600168169
            October 30, 2027               26.5432690704
            November 30, 2027              26.7278867042
            December 30, 2027              26.9138799014EXECUTION COPY

================================================================================

                          JUNIOR SUBORDINATED INDENTURE

                                     between

                  NORTHSTAR REALTY FINANCE LIMITED PARTNERSHIP

                                       and

                   JPMORGAN CHASE BANK, NATIONAL ASSOCIATION,
                                   as Trustee

                                   ----------

                            Dated as of May 25, 2005

                                   ----------

================================================================================

                                TABLE OF CONTENTS

                                                                            PAGE
                                                                            ----
ARTICLE I      DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION...     1

   Section 1.1.     Definitions..........................................     1

   Section 1.2.     Compliance Certificate and Opinions..................     9

   Section 1.3.     Forms of Documents Delivered to Trustee..............    10

   Section 1.4.     Acts of Holders......................................    10

   Section 1.5.     Notices, Etc. to Trustee and Company.................    12

   Section 1.6.     Notice to Holders; Waiver............................    12

   Section 1.7.     Effect of Headings and Table of Contents.............    13

   Section 1.8.     Successors and Assigns...............................    13

   Section 1.9.     Separability Clause..................................    13

   Section 1.10.    Benefits of Indenture................................    13

   Section 1.11.    Governing Law........................................    13

   Section 1.12.    Submission to Jurisdiction...........................    14

   Section 1.13.    Non-Business Days....................................    14

ARTICLE II     SECURITY FORMS............................................    14

   Section 2.1.     Form of Security.....................................    14

   Section 2.2.     Restricted Legend....................................    20

   Section 2.3.     Form of Trustee's Certificate of Authentication......    22

   Section 2.4.     Temporary Securities.................................    22

   Section 2.5.     Definitive Securities................................    22

ARTICLE III    THE SECURITIES............................................    23

   Section 3.1.     Payment of Principal and Interest....................    23

   Section 3.2.     Denominations........................................    25

   Section 3.3.     Execution, Authentication, Delivery and Dating.......    25

   Section 3.4.     Global Securities....................................    26

   Section 3.5.     Registration, Transfer and Exchange Generally........    28

   Section 3.6.     Mutilated, Destroyed, Lost and Stolen Securities.....    29

   Section 3.7.     Persons Deemed Owners................................    29

   Section 3.8.     Cancellation.........................................    30

   Section 3.9.     Deferrals of Interest Payment Dates..................    30

                                      -i-

                               TABLE OF CONTENTS
                                  (continued)

                                                                            PAGE
                                                                            ----
   Section 3.10.    Agreed Tax Treatment.................................    31

   Section 3.11.    CUSIP Numbers........................................    31

ARTICLE IV     SATISFACTION AND DISCHARGE................................    32

   Section 4.1.     Satisfaction and Discharge of Indenture..............    32

   Section 4.2.     Application of Trust Money...........................    33

ARTICLE V      REMEDIES..................................................    33

   Section 5.1.     Events of Default....................................    33

   Section 5.2.     Acceleration of Maturity; Rescission and Annulment...    34

   Section 5.3.     Collection of Indebtedness and Suits for Enforcement
                       by Trustee........................................    35

   Section 5.4.     Trustee May File Proofs of Claim.....................    36

   Section 5.5.     Trustee May Enforce Claim Without Possession of
                       Securities........................................    36

   Section 5.6.     Application of Money Collected.......................    36

   Section 5.7.     Limitation on Suits..................................    37

   Section 5.8.     Unconditional Right of Holders to Receive Principal,
                       Premium, if any, and Interest; Direct  Action by
                       Holders of Preferred Securities...................    37

   Section 5.9.     Restoration of Rights and Remedies...................    38

   Section 5.10.    Rights and Remedies Cumulative.......................    38

   Section 5.11.    Delay or Omission Not Waiver.........................    38

   Section 5.12.    Control by Holders...................................    38

   Section 5.13.    Waiver of Past Defaults..............................    39

   Section 5.14.    Undertaking for Costs................................    39

   Section 5.15.    Waiver of Usury, Stay or Extension Laws..............    40

ARTICLE VI     THE TRUSTEE...............................................    40

   Section 6.1.     Corporate Trustee Required...........................    40

   Section 6.2.     Certain Duties and Responsibilities..................    40

   Section 6.3.     Notice of Defaults...................................    42

   Section 6.4.     Certain Rights of Trustee............................    42

   Section 6.5.     May Hold Securities..................................    44

   Section 6.6.     Compensation; Reimbursement; Indemnity...............    44

   Section 6.7.     Resignation and Removal; Appointment of Successor....    45

                                      -ii-

                               TABLE OF CONTENTS
                                  (continued)

                                                                            PAGE
                                                                            ----
   Section 6.8.     Acceptance of Appointment by Successor...............    46

   Section 6.9.     Merger, Conversion, Consolidation or Succession to
                       Business..........................................    46

   Section 6.10.    Not Responsible for Recitals or Issuance of
                       Securities........................................    47

   Section 6.11.    Appointment of Authenticating Agent..................    47

ARTICLE VII    HOLDER'S LISTS AND REPORTS BY COMPANY.....................    48

   Section 7.1.     Company to Furnish Trustee Names and Addresses of
                       Holders...........................................    48

   Section 7.2.     Preservation of Information, Communications to
                       Holders...........................................    49

   Section 7.3.     Reports by Company...................................    49

ARTICLE VIII   CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE......    50

   Section 8.1.     Company May Consolidate, Etc., Only on Certain
                       Terms.............................................    50

   Section 8.2.     Successor Company Substituted........................    51

ARTICLE IX     SUPPLEMENTAL INDENTURES...................................    51

   Section 9.1.     Supplemental Indentures without Consent of Holders...    51

   Section 9.2.     Supplemental Indentures with Consent of Holders......    52

   Section 9.3.     Execution of Supplemental Indentures.................    53

   Section 9.4.     Effect of Supplemental Indentures....................    53

   Section 9.5.     Reference in Securities to Supplemental Indentures...    53

ARTICLE X      COVENANTS.................................................    53

   Section 10.1.    Payment of Principal, Premium, if any, and Interest..    53

   Section 10.2.    Money for Security Payments to be Held in Trust......    54

   Section 10.3.    Statement as to Compliance...........................    55

   Section 10.4.    Calculation Agent....................................    55

   Section 10.5.    Additional Tax Sums..................................    56

   Section 10.6.    Additional Covenants.................................    56

   Section 10.7.    Waiver of Covenants..................................    57

   Section 10.8.    Treatment of Securities..............................    57

ARTICLE XI     REDEMPTION OF SECURITIES..................................    58

   Section 11.1.    Optional Redemption..................................    58

   Section 11.2.    Special Event Redemption.............................    58

   Section 11.3.    Election to Redeem; Notice to Trustee................    58

                                     -iii-

                               TABLE OF CONTENTS
                                  (continued)

                                                                            PAGE
                                                                            ----
   Section 11.4.    Selection of Securities to be Redeemed...............    58

   Section 11.5.    Notice of Redemption.................................    59

   Section 11.6.    Deposit of Redemption Price..........................    60

   Section 11.7.    Payment of Securities Called for Redemption..........    60

ARTICLE XII    SUBORDINATION OF SECURITIES...............................    60

   Section 12.1.    Securities Subordinate to Senior Debt................    60

   Section 12.2.    No Payment When Senior Debt in Default; Payment Over
                       of Proceeds Upon Dissolution, Etc. ...............    61

   Section 12.3.    Payment Permitted If No Default......................    62

   Section 12.4.    Subrogation to Rights of Holders of Senior Debt......    62

   Section 12.5.    Provisions Solely to Define Relative Rights..........    63

   Section 12.6.    Trustee to Effectuate Subordination..................    63

   Section 12.7.    No Waiver of Subordination Provisions................    63

   Section 12.8.    Notice to Trustee....................................    64

   Section 12.9.    Reliance on Judicial Order or Certificate of
                       Liquidating Agent.................................    64

   Section 12.10.   Trustee Not Fiduciary for Holders of Senior Debt.....    65

   Section 12.11.   Rights of Trustee as Holder of Senior Debt;
                       Preservation of Trustee's Rights..................    65

   Section 12.12.   Article Applicable to Paying Agents..................    65

SCHEDULES

Schedule A  -   Determination of LIBOR

Exhibit A   -   Form of Officer's Financial Certificate

                                      -iv-

     JUNIOR SUBORDINATED INDENTURE, dated as of May 25, 2005, between NORTHSTAR
REALTY FINANCE LIMITED PARTNERSHIP, a Delaware limited partnership (the
"Company"), and JPMORGAN CHASE BANK, National Association, a national banking
association, as Trustee (in such capacity, the "Trustee").

                             RECITALS OF THE COMPANY

     WHEREAS, the Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance of its unsecured junior subordinated
deferrable interest notes (the "Securities") issued to evidence loans made to
the Company of the proceeds from the issuance by NorthStar Realty Finance Trust
II, a Delaware statutory trust (the "Trust"), of undivided preferred beneficial
interests in the assets of the Trust (the "Preferred Securities") and undivided
common beneficial interests in the assets of the Trust (the "Common Securities"
and, collectively with the Preferred Securities, the "Trust Securities"), and to
provide the terms and conditions upon which the Securities are to be
authenticated, issued and delivered; and

     WHEREAS, all things necessary to make this Indenture a valid agreement of
the Company, in accordance with its terms, have been done.

     NOW, THEREFORE, this Indenture Witnesseth:

     For and in consideration of the premises and the purchase of the Securities
by the Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders of the Securities, as follows:

                                   ARTICLE I

             DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION

     SECTION 1.1. Definitions.

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

          (a) the terms defined in this Article I have the meanings assigned to
     them in this Article I;

          (b) the words "include", "includes" and "including" shall be deemed to
     be followed by the phrase "without limitation";

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

          (d) unless the context otherwise requires, any reference to an
     "Article" or a "Section" refers to an Article or a Section, as the case may
     be, of this Indenture;

          (e) the words "hereby", "herein", "hereof" and "hereunder" and other
     words of similar import refer to this Indenture as a whole and not to any
     particular Article, Section or other subdivision;

                                        1

          (f) a reference to the singular includes the plural and vice versa;
     and

          (g) the masculine, feminine or neuter genders used herein shall
     include the masculine, feminine and neuter genders.

     "Act" when used with respect to any Holder, has the meaning specified in
Section 1.4.

     "Administrative Trustee" means, with respect to the Trust, each Person
identified as an "Administrative Trustee" in the Trust Agreement, solely in its
capacity as Administrative Trustee of the Trust under the Trust Agreement and
not in its individual capacity, or its successor in interest in such capacity,
or any successor Administrative Trustee appointed as therein provided.

     "Additional Interest" means the interest, if any, that shall accrue on any
amounts payable on the Securities, the payment of which has not been made on the
applicable Interest Payment Date and which shall accrue at the rate per annum
specified or determined as specified in such Security, in each case to the
extent legally enforceable.

     "Additional Tax Sums" has the meaning specified in Section 10.5.

     "Additional Taxes" means taxes, duties or other governmental charges
imposed on the Trust as a result of a Tax Event (which, for the sake of clarity,
does not include amounts required to be deducted or withheld by the Trust from
payments made by the Trust to or for the benefit of the Holder of, or any Person
that acquires a beneficial interest in, the Securities).

     "Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control," when used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.

     "Applicable Depositary Procedures" means, with respect to any transfer or
transaction involving a Global Security or beneficial interest therein, the
rules and procedures of the Depositary for such Security, in each case to the
extent applicable to such transaction and as in effect from time to time.

     "Authenticating Agent" means any Person authorized by the Trustee pursuant
to Section 6.11 to act on behalf of the Trustee to authenticate the Securities.

     "Bankruptcy Code" means Title 11 of the United States Code or any successor
statute(s) thereto, or any similar federal or state law for the relief of
debtors, in each case as amended from time to time.

     "Board of Directors" means the board of directors of the Company or any
duly authorized committee of that board.

     "Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company to have been duly adopted by the Board
of Directors and to be in full force and effect on the date of such
certification.

                                       2

     "Business Day" means any day other than (i) a Saturday or Sunday, (ii) a
day on which banking institutions in the City of New York are authorized or
required by law or executive order to remain closed or (iii) a day on which the
Corporate Trust Office of the Trustee is closed for business.

     "Calculation Agent" has the meaning specified in Section 10.4.

     "Common Securities" has the meaning specified in the first recital of this
Indenture.

     "Common Stock" means the common stock, par value $0.01 per share, of the
Company.

     "Company" means the Person named as the "Company" in the first paragraph of
this Indenture until a successor corporation shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor corporation.

     "Company Request" and "Company Order" mean, respectively, the written
request or order signed in the name of the Company by its Chairman of the Board
of Directors, its Vice Chairman of the Board of Directors, its Chief Executive
Officer, President or a Vice President, and by its Chief Financial Officer, its
Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and
delivered to the Trustee.

     "Corporate Trust Office" means the principal office of the Trustee at which
at any particular time its corporate trust business shall be administered, which
office at the date of this Indenture is located at 600 Travis, 50th Floor,
Houston, Texas 77019 Attn: Institutional Trust Services-- NorthStar Realty
Finance Trust II.

     "Debt" means, with respect to any Person, whether recourse is to all or a
portion of the assets of such Person, whether currently existing or hereafter
incurred and whether or not contingent and without duplication, (i) every
obligation of such Person for money borrowed; (ii) every obligation of such
Person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (iii) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such Person; (iv) every obligation of such Person issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or other accrued liabilities arising in the ordinary
course of business); (v) every capital lease obligation of such Person; (vi) all
indebtedness of such Person, whether incurred on or prior to the date of this
Indenture or thereafter incurred, for claims in respect of derivative products,
including interest rate, foreign exchange rate and commodity forward contracts,
options and swaps and similar arrangements; (vii) every obligation of the type
referred to in clauses (i) through (vi) of another Person and all dividends of
another Person the payment of which, in either case, such Person has guaranteed
or is responsible or liable for, directly or indirectly, as obligor or
otherwise; and (viii) any renewals, extensions, refundings, amendments or
modifications of any obligation of the type referred to in clauses (i) through
(vii).

     "Defaulted Interest" has the meaning specified in Section 3.1.

     "Delaware Trustee" means, with respect to the Trust, the Person identified
as the "Delaware Trustee" in the Trust Agreement, solely in its capacity as
Delaware Trustee of the

                                       3

Trust under the Trust Agreement and not in its individual capacity, or its
successor in interest in such capacity, or any successor Delaware Trustee
appointed as therein provided.

     "Depositary" means an organization registered as a clearing agency under
the Exchange Act that is designated as Depositary by the Company or any
successor thereto. DTC will be the initial Depositary.

     "Depositary Participant" means a broker, dealer, bank, other financial
institution or other Person for whom from time to time a Depositary effects
book-entry transfers and pledges of securities deposited with the Depositary.

     "Distributions" means amounts payable in respect of the Trust Securities as
provided in the Trust Agreement and referred to therein as "Distributions."

     "Dollar" or "$" means the currency of the United States of America that, as
at the time of payment, is legal tender for the payment of public and private
debts.

     "DTC" means The Depository Trust Company, a New York corporation, or any
successor thereto.

     "Event of Default" has the meaning specified in Section 5.1.

     "Exchange Act" means the Securities Exchange Act of 1934 or any statute
successor thereto, in each case as amended from time to time.

     "Expiration Date" has the meaning specified in Section 1.4.

     "Extension Period" has the meaning specified in Section 3.9.

     "Extension Right" has the meaning specified in Section 3.9.

     "Fixed Rate Period" shall have the meaning in the form of Security set
forth in Section 2.1.

     "GAAP" means United States generally accepted accounting principles,
consistently applied, from time to time in effect.

     "Global Security" means a Security that evidences all or part of the
Securities, the ownership and transfers of which shall be made through book
entries by a Depositary.

     "Government Obligation" means (a) any security that is (i) a direct
obligation of the United States of America of which the full faith and credit of
the United States of America is pledged or (ii) an obligation of a Person
controlled or supervised by and acting as an agency or instrumentality of the
United States of America or the payment of which is unconditionally guaranteed
as a full faith and credit obligation by the United States of America, which, in
either case (i) or (ii), is not callable or redeemable at the option of the
issuer thereof, and (b) any depositary receipt issued by a bank (as defined in
Section 3(a)(2) of the Securities Act) as custodian with respect to any
Government Obligation that is specified in clause (a) above and held by such
bank for the account of the holder of such depositary receipt, or with respect
to any

                                       4

specific payment of principal of or interest on any Government Obligation that
is so specified and held, provided, that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depositary receipt from any amount received by the custodian in
respect of the Government Obligation or the specific payment of principal or
interest evidenced by such depositary receipt.

     "Holder" means a Person in whose name a Security is registered in the
Securities Register.

     "Indenture" means this instrument as originally executed or as it may from
time to time be amended or supplemented by one or more amendments or indentures
supplemental hereto entered into pursuant to the applicable provisions hereof.

     "Interest Payment Date" means March 30, June 30, September 30 and December
30 of each year, commencing on September 30, 2005, during the term of this
Indenture.

     "Investment Company Act" means the Investment Company Act of 1940 or any
successor statute thereto, in each case as amended from time to time.

     "Investment Company Event" means the receipt by the Company of an Opinion
of Counsel experienced in such matters to the effect that, as a result of the
occurrence of a change in law or regulation (including any announced prospective
change) or a written change in interpretation or application of law or
regulation by any legislative body, court, governmental agency or regulatory
authority, there is more than an insubstantial risk that the Trust is or, within
ninety (90) days of the date of such opinion will be, considered an "investment
company" that is required to be registered under the Investment Company Act,
which change or prospective change becomes effective or would become effective,
as the case may be, on or after the date of the issuance of the Securities.

     "LIBOR" has the meaning specified in Schedule A.

     "LIBOR Business Day" has the meaning specified in Schedule A.

     "LIBOR Determination Date" has the meaning specified in Schedule A.

     "Liquidation Amount" has the meaning specified in the Trust Agreement.

     "Maturity," when used with respect to any Security, means the date on which
the principal of such Security or any installment of principal becomes due and
payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, call for redemption or otherwise.

     "Notice of Default" means a written notice of the kind specified in Section
5.1(c).

     "Officers' Certificate" means a certificate signed by the Chairman of the
Board, a Vice Chairman of the Board, the Chief Executive Officer, the President
or a Vice President, and by the Chief Financial Officer, the Treasurer, an
Assistant Treasurer, the Secretary or an Assistant Secretary, of the Company and
delivered to the Trustee.

                                       5

     "Operative Documents" means the Trust Agreement, the Indenture, the
Purchase Agreement and the Securities.

     "Opinion of Counsel" means a written opinion of counsel, who may be counsel
for or an employee of the Company or any Affiliate of the Company.

     "Optional Redemption Price" has the meaning set forth in Section 11.1.

     "Original Issue Date" means the date of original issuance of each Security.

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

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

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

          (iii) Securities that have been paid or in substitution for or in lieu
     of which other Securities have been authenticated and delivered pursuant to
     the provisions of this Indenture, unless proof satisfactory to the Trustee
     is presented that any such Securities are held by Holders in whose hands
     such Securities are valid, binding and legal obligations of the Company;

provided, that in determining whether the Holders of the requisite principal
amount of Outstanding Securities have given any request, demand, authorization,
direction, notice, consent or waiver hereunder, Securities owned by the Company
or any other obligor upon the Securities or any Affiliate of the Company or such
other obligor shall be disregarded and deemed not to be Outstanding unless the
Company shall hold all Outstanding Securities, except that, in determining
whether the Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Securities that a
Responsible Officer of the Trustee actually knows to be so owned shall be so
disregarded. Securities so owned that have been pledged in good faith may be
regarded as Outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Securities and that
the pledgee is not the Company or any other obligor upon the Securities or any
Affiliate of the Company or such other obligor. Notwithstanding anything herein
to the contrary, Securities initially issued to the Trust that are owned by the
Trust shall be deemed to be Outstanding notwithstanding the ownership by the
Company or an Affiliate of any beneficial interest in the Trust.

     "Paying Agent" means the Trustee or any Person authorized by the Company to
pay the principal of or any premium or interest on, or other amounts in respect
of, any Securities on behalf of the Company.

                                       6

     "Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, company,
limited liability company, trust, unincorporated association, or government, or
any agency or political subdivision thereof, or any other entity of whatever
nature.

     "Place of Payment" means, with respect to the Securities, the Corporate
Trust Office of the Trustee.

     "Preferred Securities" has the meaning specified in the first recital of
this Indenture.

     "Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security. For the purposes of this definition, any security
authenticated and delivered under Section 3.6 in lieu of a mutilated, destroyed,
lost or stolen Security shall be deemed to evidence the same debt as the
mutilated, destroyed, lost or stolen Security.

     "Proceeding" has the meaning specified in Section 12.2.

     "Property Trustee" means the Person identified as the "Property Trustee" in
the Trust Agreement, solely in its capacity as Property Trustee of the Trust
under the Trust Agreement and not in its individual capacity, or its successor
in interest in such capacity, or any successor Property Trustee appointed as
therein provided.

     "Purchase Agreement" means the agreement, dated as of the date hereof,
between the Company, the NorthStar REIT and the Trust, on the one hand, and
Merrill Lynch International, on the other hand.

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

     "Redemption Price" means, when used with respect to any Security to be
redeemed, in whole or in part, the Special Redemption Price or the Optional
Redemption Price, as applicable, at which such Security or portion thereof is to
be redeemed as fixed by or pursuant to this Indenture.

     "Reference Banks" has the meaning specified in Schedule A.

     "Regular Record Date" for the interest payable on any Interest Payment Date
with respect to the Securities means the date that is fifteen (15) days
preceding such Interest Payment Date (whether or not a Business Day).

     "Responsible Officer" means, when used with respect to the Trustee, the
officer in the Institutional Trust Services department of the Trustee having
direct responsibility for the administration of this Indenture.

     "Rights Plan" means a plan of the Company providing for the issuance by the
Company to all holders of its Common Stock of rights entitling the holders
thereof to subscribe for or purchase shares of any class or series of capital
stock of the Company which rights (i) are deemed to be transferred with such
shares of such Common Stock and (ii) are also issued in

                                       7

respect of future issuances of such Common Stock, in each case until the
occurrence of a specified event or events.

     "Securities" or "Security" has the meaning set forth in the first recital
to this Indenture and more particularly means the Securities authenticated and
delivered under this Indenture.

     "Securities Act" means the Securities Act of 1933 or any successor statute
thereto, in each case as amended from time to time.

     "Securities Register" and "Securities Registrar" have the respective
meanings specified in Section 3.5.

     "Senior Debt" means the principal of and any premium and interest on
(including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company, whether or not such
claim for post-petition interest is allowed in such proceeding) all Debt of the
Company, whether incurred on or prior to the date of this Indenture or
thereafter incurred, unless it is provided in the instrument creating or
evidencing the same or pursuant to which the same is outstanding, that such
obligations are not superior in right of payment to the Securities issued under
this Indenture.

     "Special Event" means the occurrence of an Investment Company Event or a
Tax Event.

     "Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 3.1.

     "Special Redemption Price" has the meaning set forth in Section 11.2.

     "Stated Maturity" means June 30, 2035.

     "Subsidiary" means a Person more than fifty percent (50%) of the
outstanding voting stock or other voting interests of which is owned, directly
or indirectly, by the Company or by one or more other Subsidiaries, or by the
Company and one or more other Subsidiaries. For purposes of this definition,
"voting stock" means stock that ordinarily has voting power for the election of
directors, whether at all times or only so long as no senior class of stock has
such voting power by reason of any contingency.

     "Tax Event" means the receipt by the Company of an Opinion of Counsel
experienced in such matters to the effect that, as a result of (a) any amendment
to or change (including any announced prospective change) in the laws or any
regulations thereunder of the United States or any political subdivision or
taxing authority thereof or therein or (b) any judicial decision or any official
administrative pronouncement (including any private letter ruling, technical
advice memorandum or field service advice) or regulatory procedure, including
any notice or announcement of intent to adopt any such pronouncement or
procedure (an "Administrative Action"), regardless of whether such judicial
decision or Administrative Action is issued to or in connection with a
proceeding involving the Company or the Trust and whether or not subject to
review or appeal, which amendment, change, judicial decision or Administrative
Action is enacted, promulgated or announced, in each case, on or after the date
of issuance of the Securities, there is more than an insubstantial risk that (i)
the Trust is, or will be within ninety (90) days of the date of such opinion,
subject to United States federal income tax with respect to

                                       8

income received or accrued on the Securities, (ii) interest payable by the
Company on the Securities is not, or within ninety (90) days of the date of such
opinion, will not be, deductible by the Company, in whole or in part, for United
States federal income tax purposes, or (iii) the Trust is, or will be within
ninety (90) days of the date of such opinion, subject to more than a de minimis
amount of other taxes, duties or other governmental charges.

     "Trust" has the meaning specified in the first recital of this Indenture.

     "Trust Agreement" means the Amended and Restated Trust Agreement executed
and delivered by the Company, the Property Trustee, Chase Bank USA, National
Association, as Delaware Trustee and the Administrative Trustees named therein,
contemporaneously with the execution and delivery of this Indenture, for the
benefit of the holders of the Trust Securities, as amended or supplemented from
time to time.

     "Trustee" means the Person named as the "Trustee" in the first paragraph of
this instrument, solely in its capacity as such and not in its individual
capacity, until a successor Trustee shall have become such pursuant to the
applicable provisions of this Indenture, and, thereafter, "Trustee" shall mean
or include each Person who is then a Trustee hereunder.

     "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended and
as in effect on the date as of this Indenture.

     "Trust Securities" has the meaning specified in the first recital of this
Indenture.

     SECTION 1.2. Compliance Certificate and Opinions.

     (a) Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall, if
requested by the Trustee, furnish to the Trustee an Officers' Certificate
stating that all conditions precedent (including covenants compliance with which
constitutes a condition precedent), if any, provided for in this Indenture
relating to the proposed action have been complied with and an Opinion of
Counsel stating that in the opinion of such counsel all such conditions
precedent (including covenants compliance with which constitutes a condition
precedent), if any, have been complied with.

     (b) Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than the certificate
provided pursuant to Section 10.3) shall include:

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

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

          (iii) a statement that, in the opinion of such individual, he or she
     has made such examination or investigation as is necessary to enable him or
     her to express an informed opinion as to whether or not such covenant or
     condition has been complied with; and

                                       9

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

     SECTION 1.3. Forms of Documents Delivered to Trustee.

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

     (b) Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or after reasonable
inquiry should know, that the certificate or opinion or representations with
respect to matters upon which his or her certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or after reasonable inquiry should know,
that the certificate or opinion or representations with respect to such matters
are erroneous.

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

     (d) Whenever, subsequent to the receipt by the Trustee of any Board
Resolution, Officers' Certificate, Opinion of Counsel or other document or
instrument, a clerical, typographical or other inadvertent or unintentional
error or omission shall be discovered therein, a new document or instrument may
be substituted therefor in corrected form with the same force and effect as if
originally received in the corrected form and, irrespective of the date or dates
of the actual execution and/or delivery thereof, such substitute document or
instrument shall be deemed to have been executed and/or delivered as of the date
or dates required with respect to the document or instrument for which it is
substituted. Without limiting the generality of the foregoing, any Securities
issued under the authority of such defective document or instrument shall
nevertheless be the valid obligations of the Company entitled to the benefits of
this Indenture equally and ratably with all other Outstanding Securities.

     SECTION 1.4. Acts of Holders.

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

                                       10

signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Indenture and conclusive in favor of the Trustee and the
Company, if made in the manner provided in this Section 1.4.

     (b) The fact and date of the execution by any Person of any such instrument
or writing may be proved by the affidavit of a witness of such execution or by
the certificate of any notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to him or her the execution thereof. Where such
execution is by a Person acting in other than his or her individual capacity,
such certificate or affidavit shall also constitute sufficient proof of his or
her authority. The fact and date of the execution by any Person of any such
instrument or writing, or the authority of the Person executing the same, may
also be proved in any other manner that the Trustee deems sufficient and in
accordance with such reasonable rules as the Trustee may determine.

     (c) The ownership of Securities shall be proved by the Securities Register.

     (d) Any request, demand, authorization, direction, notice, consent, waiver
or other action by the Holder of any Security shall bind every future Holder of
the same Security and the Holder of every Security issued upon the registration
of transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done or suffered to be done by the Trustee or the Company in reliance
thereon, whether or not notation of such action is made upon such Security.

     (e) Without limiting the foregoing, a Holder entitled to take any action
hereunder with regard to any particular Security may do so with regard to all or
any part of the principal amount of such Security or by one or more duly
appointed agents each of which may do so pursuant to such appointment with
regard to all or any part of such principal amount.

     (f) Except as set forth in paragraph (g) of this Section 1.4, the Company
may set any day as a record date for the purpose of determining the Holders of
Outstanding Securities entitled to give, make or take any request, demand,
authorization, direction, notice, consent, waiver or other action provided or
permitted by this Indenture to be given, made or taken by Holders of Securities.
If any record date is set pursuant to this paragraph, the Holders of Outstanding
Securities on such record date, and no other Holders, shall be entitled to take
the relevant action, whether or not such Holders remain Holders after such
record date; provided, that no such action shall be effective hereunder unless
taken on or prior to the applicable Expiration Date (as defined in Section
1.4(h)) by Holders of the requisite principal amount of Outstanding Securities
on such record date. Nothing in this paragraph shall be construed to prevent the
Company from setting a new record date for any action for which a record date
has previously been set pursuant to this paragraph (whereupon the record date
previously set shall automatically and with no action by any Person be canceled
and of no effect). Promptly after any record date is set pursuant to this
paragraph, the Company, at its own expense, shall cause notice of such record
date, the proposed action by Holders and the applicable Expiration Date to be
given to the Trustee in writing and to each Holder of Securities in the manner
set forth in Section 1.6.

     (g) The Trustee may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities entitled to join in the giving
or making of (i) any Notice of Default, (ii) any declaration of acceleration or
rescission or annulment thereof referred to in

                                       11

Section 5.2, (iii) any request to institute proceedings referred to in Section
5.7(b) or (iv) any direction referred to in Section 5.12. If any record date is
set pursuant to this paragraph, the Holders of Outstanding Securities on such
record date, and no other Holders, shall be entitled to join in such notice,
declaration, request or direction, whether or not such Holders remain Holders
after such record date; provided, that no such action shall be effective
hereunder unless taken on or prior to the applicable Expiration Date by Holders
of the requisite principal amount of Outstanding Securities on such record date.
Nothing in this paragraph shall be construed to prevent the Trustee from setting
a new record date for any action for which a record date has previously been set
pursuant to this paragraph (whereupon the record date previously set shall
automatically and with no action by any Person be canceled and of no effect).
Promptly after any record date is set pursuant to this paragraph, the Trustee,
at the Company's expense, shall cause notice of such record date, the proposed
action by Holders and the applicable Expiration Date to be given to the Company
in writing and to each Holder of Securities in the manner set forth in Section
1.6.

     (h) With respect to any record date set pursuant to paragraph (f) or (g) of
this Section 1.4, the party hereto that sets such record date may designate any
day as the "Expiration Date" and from time to time may change the Expiration
Date to any earlier or later day; provided, that no such change shall be
effective unless notice of the proposed new Expiration Date is given to the
other party hereto in writing, and to each Holder of Securities in the manner
set forth in Section 1.6, on or prior to the existing Expiration Date. If an
Expiration Date is not designated with respect to any record date set pursuant
to this Section 1.4, the party hereto that set such record date shall be deemed
to have initially designated the ninetieth (90th) day after such record date as
the Expiration Date with respect thereto, subject to its right to change the
Expiration Date as provided in this paragraph. Notwithstanding the foregoing, no
Expiration Date shall be later than the one hundred eightieth (180th) day after
the applicable record date.

     SECTION 1.5. Notices, Etc. to Trustee and Company.

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

     (a) the Trustee by any Holder, any holder of Preferred Securities or the
Company shall be sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with and received by the Trustee at its
Corporate Trust Office, or

     (b) the Company by the Trustee, any Holder or any holder of Preferred
Securities shall be sufficient for every purpose hereunder if in writing and
mailed, first class, postage prepaid, to the Company addressed to it at 527
Madison Avenue, New York, NY 10022, or at any other address previously furnished
in writing to the Trustee by the Company.

     SECTION 1.6. Notice to Holders; Waiver.

     Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first class, postage prepaid, to each Holder affected
by such event to the address of such Holder as it appears in the Securities
Register, not later than the latest date (if any), and not earlier than the

                                       12

earliest date (if any), prescribed for the giving of such notice. If, by reason
of the suspension of or irregularities in regular mail service or for any other
reason, it shall be impossible or impracticable to mail notice of any event to
Holders when said notice is required to be given pursuant to any provision of
this Indenture, then any manner of giving such notice as shall be satisfactory
to the Trustee shall be deemed to be a sufficient giving of such notice. In any
case where notice to Holders is given by mail, neither the failure to mail such
notice, nor any defect in any notice so mailed, to any particular Holder shall
affect the sufficiency of such notice with respect to other Holders. Where this
Indenture provides for notice in any manner, such notice may be waived in
writing by the Person entitled to receive such notice, either before or after
the event, and such waiver shall be the equivalent of such notice. Waivers of
notice by Holders shall be filed with the Trustee, but such filing shall not be
a condition precedent to the validity of any action taken in reliance upon such
waiver.

     SECTION 1.7. Effect of Headings and Table of Contents.

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

     SECTION 1.8. Successors and Assigns.

     This Indenture shall be binding upon and shall inure to the benefit of any
successor to the Company and the Trustee, including any successor by operation
of law. Except in connection with a transaction involving the Company that is
permitted under Article VIII and pursuant to which the assignee agrees in
writing to perform the Company's obligations hereunder, the Company shall not
assign its obligations hereunder.

     SECTION 1.9. Separability Clause.

     If any provision in this Indenture or in the Securities shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby, and
there shall be deemed substituted for the provision at issue a valid, legal and
enforceable provision as similar as possible to the provision at issue.

     SECTION 1.10. Benefits of Indenture.

     Nothing in this Indenture or in the Securities, express or implied, shall
give to any Person, other than the parties hereto and their successors and
assigns, the holders of Senior Debt, the Holders of the Securities and, to the
extent expressly provided in Sections 5.2, 5.8, 5.9, 5.11, 5.13, 9.2 and 10.7,
the holders of Preferred Securities, any benefit or any legal or equitable
right, remedy or claim under this Indenture.

     SECTION 1.11. Governing Law.

     THIS INDENTURE AND THE RIGHTS AND OBLIGATIONS OF EACH OF THE HOLDERS, THE
COMPANY AND THE TRUSTEE SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ITS CONFLICT
OF LAWS PROVISIONS (OTHER THAN SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW).

                                       13

     SECTION 1.12. Submission to Jurisdiction.

     ANY LEGAL ACTION OR PROCEEDING BY OR AGAINST ANY PARTY HERETO OR WITH
RESPECT TO OR ARISING OUT OF THIS INDENTURE MAY BE BROUGHT IN OR REMOVED TO THE
COURTS OF THE STATE OF NEW YORK, IN AND FOR THE COUNTY OF NEW YORK, OR OF THE
UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK (IN EACH CASE
SITTING IN THE BOROUGH OF MANHATTAN). BY EXECUTION AND DELIVERY OF THIS
INDENTURE, EACH PARTY ACCEPTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY,
GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS (AND
COURTS OF APPEALS THEREFROM) FOR LEGAL PROCEEDINGS ARISING OUT OF OR IN
CONNECTION WITH THIS INDENTURE.

     SECTION 1.13. Non-Business Days.

     If any Interest Payment Date, Redemption Date or Stated Maturity of any
Security shall not be a Business Day, then (notwithstanding any other provision
of this Indenture or the Securities) payment of interest, premium, if any, or
principal or other amounts in respect of such Security shall not be made on such
date, but shall be made on the next succeeding Business Day (and no interest
shall accrue in respect of the amounts whose payment is so delayed for the
period from and after such Interest Payment Date, Redemption Date or Stated
Maturity, as the case may be, until such next succeeding Business Day) except
that, if such Business Day falls in the next succeeding calendar year, such
payment shall be made on the immediately preceding Business Day, in each case
with the same force and effect as if made on the Interest Payment Date or
Redemption Date or at the Stated Maturity.

                                   ARTICLE II

                                 SECURITY FORMS

     SECTION 2.1. Form of Security.

     Any Security issued hereunder shall be in substantially the following form:

                  NORTHSTAR REALTY FINANCE LIMITED PARTNERSHIP

                 FLOATING RATE JUNIOR SUBORDINATED NOTE DUE 2035

No. _____________                                                    $25,780,000

     NorthStar Realty Finance Limited Partnership, a limited partnership
organized and existing under the laws of Delaware (hereinafter called the
"Company," which term includes any successor Person under the Indenture
hereinafter referred to), for value received, hereby promises to pay to
[_______________], or registered assigns, the principal sum of Twenty Five
Million Seven Hundred Eighty Thousand Dollars ($25,780,000) [IF THE SECURITY IS
A GLOBAL SECURITY, THEN INSERT-- OR SUCH OTHER PRINCIPAL AMOUNT REPRESENTED
HEREBY AS MAY BE SET FORTH IN THE RECORDS OF THE SECURITIES REGISTRAR
HEREINAFTER REFERRED TO IN ACCORDANCE WITH THE INDENTURE] on June 30, 2035. The
Company further promises to pay interest on said principal sum from May 25,
2005, or from the most recent Interest Payment Date to which

                                       14

interest has been paid or duly provided for, quarterly (subject to deferral as
set forth herein) in arrears on March 30, June 30, September 30 and December 30
of each year, commencing September 30, 2005, or if any such day is not a
Business Day, on the next succeeding Business Day (and no interest shall accrue
in respect of the amounts whose payment is so delayed for the period from and
after such Interest Payment Date until such next succeeding Business Day),
except that, if such Business Day falls in the next succeeding calendar year,
such payment shall be made on the immediately preceding Business Day, in each
case, with the same force and effect as if made on the Interest Payment Date, at
a fixed rate equal to 7.74% per annum through the interest payment date in June
2015 ("Fixed Rate Period") and thereafter at a variable rate equal to LIBOR plus
3.25% per annum, together with Additional Tax Sums, if any, as provided in
Section 10.5 of the Indenture, until the principal hereof is paid or duly
provided for or made available for payment; provided, further, that any overdue
principal, premium, if any, or Additional Tax Sums and any overdue installment
of interest shall bear Additional Interest at a fixed rate equal to 7.74%
through the interest payment date in June 2015 and thereafter at a variable rate
equal to LIBOR plus 3.25% per annum (to the extent that the payment of such
interest shall be legally enforceable), compounded quarterly, from the dates
such amounts are due until they are paid or made available for payment, and such
interest shall be payable on demand.

     During the Fixed Rate Period, the amount of interest payable shall be
computed on the basis of a 360-day year of twelve 30-day months and the amount
payable for any partial period shall be computed on the basis of the number of
days elapsed in a 360-day year of twelve 30-day months. Upon expiration of the
Fixed Rate Period, the amount of interest payable for any Interest Payment
Period will be computed on the basis of a 360-day year and the actual number of
days elapsed in the relevant interest period. The interest so payable, and
punctually paid or duly provided for, on any Interest Payment Date shall, as
provided in the Indenture, be paid to the Person in whose name this Security (or
one or more Predecessor Securities) is registered at the close of business on
the Regular Record Date for such interest installment. Any such interest not so
punctually paid or duly provided for shall 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 Security (or one or more Predecessor Securities) is registered at the
close of business on a Special Record Date for the payment of such Defaulted
Interest to be fixed by the Trustee, notice whereof shall be given to Holders of
Securities not less than ten (10) days prior to such Special Record Date, or be
paid at any time in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Securities may be listed,
and upon such notice as may be required by such exchange, all as more fully
provided in the Indenture.

     So long as no Event of Default has occurred and is continuing, after
October 12, 2006, the Company shall have the right, at any time and from time to
time during the term of this Security, to defer the payment of interest on this
Security for a period of up to six (6) consecutive quarterly interest payment
periods (such right to defer, the "Extension Right" and each such period,
including any extensions thereof prior to the expiration of such period, an
"Extension Period"), during which Extension Period(s), no interest shall be due
and payable (except any Additional Tax Sums that may be due and payable);
provided, that the Company shall not be entitled to exercise its Extension Right
so that it would be able to defer the payment of interest on this Security for
more than six (6) quarterly interest payment periods during the term of this
Security; provided, further, that, after the expiration of any Extension Period,
the Company may not exercise its Extension Right to begin any subsequent
Extension Period until it pays all

                                       15

interest then accrued and unpaid on this Security, together with such Additional
Interest, prior to beginning such subsequent Extension Period. No Extension
Period shall end on a date other than an Interest Payment Date, and no Extension
Period shall extend beyond the Stated Maturity of the principal of this
Security. No interest shall be due and payable during an Extension Period
(except any Additional Tax Sums that may be due and payable), except at the end
thereof, but each installment of interest that would otherwise have been due and
payable during such Extension Period shall bear Additional Interest (to the
extent payment of such interest would be legally enforceable) at a fixed rate
equal to 7.74% per annum through the interest payment date in June 2015 and
thereafter at a variable rate equal to LIBOR plus 3.25% per annum, compounded
quarterly, from the dates on which amounts would have otherwise been due and
payable until paid or made available for payment. At the end of any such
Extension Period (which shall include any extensions thereof prior to the
expiration of such Extension Period), the Company shall pay all interest then
accrued and unpaid on this Security, together with such Additional Interest.
Prior to the termination of any such Extension Period, the Company may further
defer the payment of interest; provided, that (i) all such previous and further
extensions comprising such Extension Period do not exceed six (6) quarterly
interest payment periods, (ii) no Extension Period shall end on a date other
than an Interest Payment Date and (iii) no Extension Period shall extend beyond
the Stated Maturity of the principal of this Security. Upon (i) the termination
of any such Extension Period (which shall include any extensions thereof prior
to the expiration of such Extension Period) and (ii) the payment of all accrued
and unpaid interest and any Additional Interest then due on any Interest Payment
Date, the Company may exercise its Extension Right to begin a new Extension
Period with respect to future payments of interest on this Security; provided,
that (i) such Extension Period does not exceed six (6) quarterly interest
payment periods, (ii) no Extension Period shall end on a date other than an
Interest Payment Date and (iii) no Extension Period shall extend beyond the
Stated Maturity of the principal of this Security. The Company shall give the
Holder of this Security and the Trustee written notice of its election to begin
any such Extension Period at least one Business Day prior to the next succeeding
Interest Payment Date on which interest on this Security would be payable but
for such deferral or, so long as this Security is held by NorthStar Realty
Finance Trust II, at least one Business Day prior to the earlier of (i) the next
succeeding date on which Distributions on the Preferred Securities of NorthStar
Realty Finance Trust II would be payable but for such deferral and (ii) the date
on which the Property Trustee of such Trust is required to give notice to any
securities exchange or other applicable self-regulatory organization or to
holders of such Preferred Securities of the record date for the payment of such
Distributions.

     During any such Extension Period, the Company shall not (i) declare or pay
any dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of the Company's capital stock or (ii)
make any payment of principal of or any interest or premium, if any, on or
repay, repurchase or redeem any debt securities of the Company that rank pari
passu in all respects with or junior in interest to this Security (other than
(a) repurchases, redemptions or other acquisitions of shares of capital stock of
the Company in connection with (1) any employment contract, benefit plan or
other similar arrangement with or for the benefit of any one or more employees,
officers, directors or consultants, (2) a dividend reinvestment or stockholder
stock purchase plan and (3) the issuance of capital stock of the Company (or
securities convertible into or exercisable for such capital stock) as
consideration in an acquisition transaction entered into prior to the applicable
Extension Period, (b) as a result of an exchange or conversion of any class or
series of the Company's capital stock (or any capital stock of a Subsidiary of
the Company) for any class or series of the Company's capital stock or

                                       16

of any class or series of the Company's indebtedness for any class or series of
the Company's capital stock, (c) the purchase of fractional interests in shares
of the Company's capital stock pursuant to the conversion or exchange provisions
of such capital stock or the security being converted or exchanged, (d) any
declaration of a dividend in connection with any Rights Plan, the issuance of
rights, stock or other property under any Rights Plan, or the redemption or
repurchase of rights pursuant thereto or (e) any dividend in the form of stock,
warrants, options or other rights where the dividend stock or the stock issuable
upon exercise of such warrants, options or other rights is the same stock as
that on which the dividend is being paid or ranks pari passu with or junior to
such stock).

     Payment of principal of, premium, if any, and interest on this Security
shall be made in such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private debts.
Payments of principal, premium, if any, and interest due at the Maturity of this
Security shall be made at the Place of Payment upon surrender of such Securities
to the Paying Agent, and payments of interest shall be made, subject to such
surrender where applicable, by wire transfer at such place and to such account
at a banking institution in the United States as may be designated in writing to
the Paying Agent at least ten (10) Business Days prior to the date for payment
by the Person entitled thereto unless proper written transfer instructions have
not been received by the relevant record date, in which case such payments shall
be made by check mailed to the address of such Person as such address shall
appear in the Security Register. Notwithstanding the foregoing, so long as the
Holder of this Security is the Property Trustee, the payment of the principal of
(and premium, if any) and interest (including any overdue installment of
interest and Additional Tax Sums, if any) on this Security will be made at such
place and to such account as may be designated by the Property Trustee.

     The indebtedness evidenced by this Security is, to the extent provided in
the Indenture, subordinate and junior in right of payment to the prior payment
in full of all Senior Debt, and this Security is issued subject to the
provisions of the Indenture with respect thereto. Each Holder of this Security,
by accepting the same, (a) agrees to and shall be bound by such provisions, (b)
authorizes and directs the Trustee on his or her behalf to take such actions as
may be necessary or appropriate to effectuate the subordination so provided and
(c) appoints the Trustee his or her attorney-in-fact for any and all such
purposes. Each Holder hereof, by his or her acceptance hereof, waives all notice
of the acceptance of the subordination provisions contained herein and in the
Indenture by each holder of Senior Debt, whether now outstanding or hereafter
incurred, and waives reliance by each such holder upon said provisions.

     Unless the certificate of authentication hereon has been executed by the
Trustee by manual signature, this Security shall not be entitled to any benefit
under the Indenture or be valid or obligatory for any purpose.

                          [FORM OF REVERSE OF SECURITY]

     This Security is one of a duly authorized issue of securities of the
Company (the "Securities") issued under the Junior Subordinated Indenture, dated
as of May 25, 2005 (the "Indenture"), between the Company and JPMorgan Chase
Bank, National Association, as Trustee (in such capacity, the "Trustee," which
term includes any successor trustee under the Indenture), to which Indenture and
all indentures supplemental thereto reference is hereby made for a statement of
the respective rights, limitations of rights, duties and immunities thereunder
of the Company, the Trustee, the holders of Senior Debt, the Holders of the
Securities and the

                                       17

holders of the Preferred Securities, and of the terms upon which the Securities
are, and are to be, authenticated and delivered.

     All terms used in this Security that are defined in the Indenture or in the
Amended and Restated Trust Agreement, dated as of May 25, 2005 (as modified,
amended or supplemented from time to time, the "Trust Agreement"), relating to
the NorthStar Realty Finance Trust II (the "Trust") among the Company, as
Depositor, the Trustees named therein and the Holders from time to time of the
Trust Securities issued pursuant thereto, shall have the meanings assigned to
them in the Indenture or the Trust Agreement, as the case may be.

     The Company may, on any Interest Payment Date, at its option, upon not less
than thirty (30) days' nor more than sixty (60) days' written notice to the
Holders of the Securities (unless a shorter notice period shall be satisfactory
to the Trustee) on or after June 30, 2010 and subject to the terms and
conditions of Article XI of the Indenture, redeem this Security in whole at any
time or in part from time to time at a Redemption Price equal to one hundred
percent (100%) of the principal amount hereof, together, in the case of any such
redemption, with accrued interest, including any Additional Interest, through
but excluding the date fixed as the Redemption Date.

     In addition, upon the occurrence and during the continuation of a Special
Event, the Company may, at its option, upon not less than thirty (30) days' nor
more than sixty (60) days' written notice to the Holders of the Securities
(unless a shorter notice period shall be satisfactory to the Trustee), redeem
this Security, in whole but not in part, subject to the terms and conditions of
Article XI of the Indenture at a Redemption Price equal to one hundred seven and
one half percent (107.5%) of the principal amount hereof, together, in the case
of any such redemption, with accrued interest, including any Additional
Interest, through but excluding the date fixed as the Redemption Date.

     In the event of redemption of this Security in part only, a new Security or
Securities for the unredeemed portion hereof will be issued in the name of the
Holder hereof upon the cancellation hereof. If less than all the Securities are
to be redeemed, the particular Securities to be redeemed shall be selected not
more than sixty (60) days prior to the Redemption Date by the Trustee from the
Outstanding Securities not previously called for redemption, by such method as
the Trustee shall deem fair and appropriate and which may provide for the
selection for redemption of a portion of the principal amount of any Security.

     The Indenture permits, with certain exceptions as therein provided, the
Company and the Trustee at any time to enter into a supplemental indenture or
indentures for the purpose of modifying in any manner the rights and obligations
of the Company and of the Holders of the Securities, with the consent of the
Holders of not less than a majority in principal amount of the Outstanding
Securities. The Indenture also contains provisions permitting Holders of
specified percentages in principal amount of the Securities, on behalf of the
Holders of all Securities, 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 Security
shall be conclusive and binding upon such Holder and upon all future Holders of
this Security and of any Security issued upon the registration of transfer
hereof or in exchange herefor or in lieu hereof, whether or not notation of such
consent or waiver is made upon this Security.

                                       18

     No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and any premium, if any, and
interest, including any Additional Interest (to the extent legally enforceable),
on this Security at the times, place and rate, and in the coin or currency,
herein prescribed.

     As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Security is restricted to transfers to "Qualified
Purchasers" (as such term is defined in the Investment Company Act of 1940, as
amended,) and is registrable in the Securities Register, upon surrender of this
Security for registration of transfer at the office or agency of the Company
maintained for such purpose, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Securities
Registrar and duly executed by, the Holder hereof or such Holder's attorney duly
authorized in writing, and thereupon one or more new Securities, of like tenor,
of authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.

     The Securities are issuable only in registered form without coupons in
minimum denominations of $100,000 and any integral multiple of $1,000 in excess
thereof. As provided in the Indenture and subject to certain limitations therein
set forth, Securities are exchangeable for a like aggregate principal amount of
Securities and of like tenor 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.

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

     The Company and, by its acceptance of this Security or a beneficial
interest herein, the Holder of, and any Person that acquires a beneficial
interest in, this Security agree that, for United States federal, state and
local tax purposes, it is intended that this Security constitute indebtedness.

     THIS SECURITY SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT
OF LAWS PROVISIONS (OTHER THAN SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW).

                                       19

     IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed on this ____ day of __________, 20__.

                                        NORTHSTAR REALTY FINANCE LIMITED
                                        PARTNERSHIP

                                        BY: NORTHSTAR REALTY FINANCE CORP., AS
                                        GENERAL PARTNER

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

     SECTION 2.2. Restricted Legend.

     (a) Any Security issued hereunder shall bear a legend in substantially the
following form:

     "[IF THIS SECURITY IS A GLOBAL SECURITY INSERT: THIS SECURITY IS A GLOBAL
     SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS
     REGISTERED IN THE NAME OF THE DEPOSITORY TRUST COMPANY ("DTC") OR A NOMINEE
     OF DTC. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME
     OF A PERSON OTHER THAN DTC OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES
     DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A
     TRANSFER OF THIS SECURITY AS A WHOLE BY DTC TO A NOMINEE OF DTC OR BY A
     NOMINEE OF DTC TO DTC OR ANOTHER NOMINEE OF DTC) MAY BE REGISTERED EXCEPT
     IN LIMITED CIRCUMSTANCES.

     UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC TO
     THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
     AND ANY SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
     OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
     PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
     REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE 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.]

     THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED IN A
     TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
     AMENDED (THE "SECURITIES ACT"), AND SUCH SECURITIES, AND ANY INTEREST
     THEREIN, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE
     OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH

                                       20

     PURCHASER OF ANY SECURITIES IS HEREBY NOTIFIED THAT THE SELLER OF THE
     SECURITIES MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5
     OF THE SECURITIES ACT PROVIDED BY RULE 144A UNDER THE SECURITIES ACT.

     THE HOLDER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE AGREES FOR THE
     BENEFIT OF THE COMPANY THAT (A) SUCH SECURITIES MAY BE OFFERED, RESOLD OR
     OTHERWISE TRANSFERRED ONLY (I) TO THE COMPANY OR (II) TO A PERSON WHOM THE
     SELLER REASONABLY BELIEVES IS A "QUALIFIED PURCHASER" (AS DEFINED IN
     SECTION 2(a)(51) OF THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED), AND
     (B) THE HOLDER WILL NOTIFY ANY PURCHASER OF ANY SECURITIES FROM IT OF THE
     RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE.

     THE SECURITIES WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING
     AN AGGREGATE PRINCIPAL AMOUNT OF NOT LESS THAN $100,000. TO THE FULLEST
     EXTENT PERMITTED BY LAW, ANY ATTEMPTED TRANSFER OF SECURITIES, OR ANY
     INTEREST THEREIN, IN A BLOCK HAVING AN AGGREGATE PRINCIPAL AMOUNT OF LESS
     THAN $100,000 AND MULTIPLES OF $1,000 IN EXCESS THEREOF SHALL BE DEEMED TO
     BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. TO THE FULLEST EXTENT PERMITTED
     BY LAW, ANY SUCH PURPORTED TRANSFEREE SHALL BE DEEMED NOT TO BE THE HOLDER
     OF SUCH SECURITIES FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE
     RECEIPT OF PRINCIPAL OF OR INTEREST ON SUCH SECURITIES, OR ANY INTEREST
     THEREIN, AND SUCH PURPORTED TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST
     WHATSOEVER IN SUCH SECURITIES.

     THE HOLDER OF THIS SECURITY, OR ANY INTEREST THEREIN, BY ITS ACCEPTANCE
     HEREOF OR THEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN
     EMPLOYEE BENEFIT, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR
     ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY
     ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE
     CODE OF 1986, AS AMENDED (THE "CODE") (EACH A "PLAN"), OR AN ENTITY WHOSE
     UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON OF ANY PLAN'S INVESTMENT
     IN THE ENTITY, AND NO PERSON INVESTING "PLAN ASSETS" OF ANY PLAN MAY
     ACQUIRE OR HOLD THIS SECURITY OR ANY INTEREST THEREIN. ANY PURCHASER OR
     HOLDER OF THE SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE
     REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT IT IS NOT AN EMPLOYEE
     BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO
     WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON
     ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON
     OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE
     SUCH PURCHASE."

                                       21

     (b) The above legends shall not be removed from any Security unless there
is delivered to the Company satisfactory evidence, which may include an Opinion
of Counsel, as may be reasonably required to ensure that any future transfers
thereof may be made without restriction under or violation of the provisions of
the Securities Act and other applicable law. Upon provision of such satisfactory
evidence, the Company shall execute and deliver to the Trustee, and the Trustee
shall deliver, upon receipt of a Company Order directing it to do so, a Security
that does not bear the legend.

     SECTION 2.3. Form of Trustee's Certificate of Authentication.

     The Trustee's certificate of authentication shall be in substantially the
following form:

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

Dated:

                                        JPMORGAN CHASE BANK, National
                                        Association, not in its individual
                                        capacity, but solely as Trustee

                                        By:
                                            ------------------------------------
                                                    Authorized signatory

     SECTION 2.4. Temporary Securities.

     (a) Pending the preparation of definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities that are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any denomination, substantially of the tenor of the
definitive Securities in lieu of which they are issued and with such appropriate
insertions, omissions, substitutions and other variations as the officers
executing such Securities may determine, as evidenced by their execution of such
Securities.

     (b) If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at the office
or agency of the Company designated for that purpose without charge to the
Holder. Upon surrender for cancellation of any one or more temporary Securities,
the Company shall execute and the Trustee shall authenticate and deliver in
exchange therefor one or more definitive Securities of any authorized
denominations having the same Original Issue Date and Stated Maturity and having
the same terms as such temporary Securities. Until so exchanged, the temporary
Securities shall in all respects be entitled to the same benefits under this
Indenture as definitive Securities.

     SECTION 2.5. Definitive Securities.

     The Securities issued on the Original Issue Date shall be in definitive
form. The definitive Securities shall be printed, lithographed or engraved, or
produced by any combination

                                       22

of these methods, if required by any securities exchange on which the Securities
may be listed, on a steel engraved border or steel engraved borders or may be
produced in any other manner permitted by the rules of any securities exchange
on which the Securities may be listed, all as determined by the officers
executing such Securities, as evidenced by their execution of such Securities.

                                   ARTICLE III

                                 THE SECURITIES

     SECTION 3.1. Payment of Principal and Interest.

     (a) The unpaid principal amount of the Securities shall bear interest at a
fixed rate equal to 7.74% per annum through the interest payment date in June
2015 and thereafter at a variable rate of LIBOR plus 3.25% per annum until paid
or duly provided for, such interest to accrue from the Original Issue Date or
from the most recent Interest Payment Date to which interest has been paid or
duly provided for, and any overdue principal, premium, if any, or Additional Tax
Sums and any overdue installment of interest shall bear Additional Interest at
the rate equal to a fixed rate equal to 7.74% per annum through the interest
payment date in June 2015 and thereafter at a variable rate of LIBOR plus 3.25%
per annum, compounded quarterly from the dates such amounts are due until they
are paid or funds for the payment thereof are made available for payment.

     (b) Interest and Additional Interest on any Security that is payable, and
is punctually paid or duly provided for, on any Interest Payment Date shall be
paid to the Person in whose name that Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest, except that interest and any Additional Interest payable on
the Stated Maturity (or any date of principal repayment upon early maturity) of
the principal of a Security or on a Redemption Date shall be paid to the Person
to whom principal is paid. The initial payment of interest on any Security that
is issued between a Regular Record Date and the related Interest Payment Date
shall be payable as provided in such Security.

     (c) Any interest on any Security that is due and payable, but is not timely
paid or duly provided for, on any Interest Payment Date for Securities (herein
called "Defaulted Interest") shall forthwith cease to be payable to the
registered Holder on the relevant Regular Record Date by virtue of having been
such Holder, and such Defaulted Interest may be paid by the Company, at its
election in each case, as provided in paragraph (i) or (ii) below:

          (i) The Company may elect to make payment of any Defaulted Interest to
     the Persons in whose names the Securities (or their respective Predecessor
     Securities) are registered at the close of business on a Special Record
     Date for the payment of such Defaulted Interest (a "Special Record Date"),
     which shall be fixed in the following manner. At least thirty (30) days
     prior to the date of the proposed payment, the Company shall notify the
     Trustee in writing of the amount of Defaulted Interest proposed to be paid
     on each Security and the date of the proposed payment, and at the same time
     the Company shall deposit with the Trustee an amount of money equal to the
     aggregate amount proposed to be paid in respect of such Defaulted Interest
     or shall make arrangements satisfactory to the Trustee for such deposit
     prior to the date of the proposed

                                       23

     payment, such money when deposited to be held in trust for the benefit of
     the Persons entitled to such Defaulted Interest. Thereupon the Trustee
     shall fix a Special Record Date for the payment of such Defaulted Interest,
     which shall be not more than fifteen (15) days and not less than ten (10)
     days prior to the date of the proposed payment and not less than ten (10)
     days after the receipt by the Trustee of the notice of the proposed
     payment. The Trustee shall promptly notify the Company of such Special
     Record Date and, in the name and at the expense of the Company, shall cause
     notice of the proposed payment of such Defaulted Interest and the Special
     Record Date therefor to be mailed, first class, postage prepaid, to each
     Holder of a Security at the address of such Holder as it appears in the
     Securities Register not less than ten (10) days prior to such Special
     Record Date. Notice of the proposed payment of such Defaulted Interest and
     the Special Record Date therefor having been so mailed, such Defaulted
     Interest shall be paid to the Persons in whose names the Securities (or
     their respective Predecessor Securities) are registered on such Special
     Record Date; or

          (ii) The Company may make payment of any Defaulted Interest in any
     other lawful manner not inconsistent with the requirements of any
     securities exchange or automated quotation system on which the Securities
     may be listed, traded or quoted and, upon such notice as may be required by
     such exchange or automated quotation system (or by the Trustee if the
     Securities are not listed), if, after notice given by the Company to the
     Trustee of the proposed payment pursuant to this clause, such payment shall
     be deemed practicable by the Trustee.

     (d) Payments of interest on the Securities shall include interest accrued
to but excluding the respective Interest Payment Dates. During the period when
the interest rate is a fixed interest rate, interest payments for the Securities
shall be computed and paid on the basis of a 360-day year of twelve (12) thirty
(30)-day months and, thereafter, interest payments for the Securities shall be
computed and paid on the basis of shall be computed on the basis of a 360-day
year and the actual number of days elapsed in the relevant period.

     (e) Payment of principal of, premium, if any, and interest on the
Securities shall be made in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts. Payments of principal, premium, if any, and interest due at the
Maturity of such Securities shall be made at the Place of Payment upon surrender
of such Securities to the Paying Agent and payments of interest shall be made
subject to such surrender where applicable, by wire transfer at such place and
to such account at a banking institution in the United States as may be
designated in writing to the Paying Agent at least ten (10) Business Days prior
to the date for payment by the Person entitled thereto unless proper written
transfer instructions have not been received by the relevant record date, in
which case such payments shall be made by check mailed to the address of such
Person as such address shall appear in the Security Register. Notwithstanding
the foregoing, so long as the holder of this Security is the Property Trustee,
the payment of the principal of (and premium, if any) and interest (including
any overdue installment of interest and Additional Tax Sums, if any) on this
Security will be made at such place and to such account as may be designated by
the Property Trustee.

     (f) Subject to the foregoing provisions of this Section 3.1, each Security
delivered under this Indenture upon transfer of or in exchange for or in lieu of
any other Security shall

                                       24

carry the rights to interest accrued and unpaid, and to accrue, that were
carried by such other Security.

     SECTION 3.2. Denominations.

     The Securities shall be in registered form without coupons and shall be
issuable in minimum denominations of $100,000 and any integral multiple of
$1,000 in excess thereof.

     SECTION 3.3. Execution, Authentication, Delivery and Dating.

     (a) At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities in an aggregate principal
amount (including all then Outstanding Securities) not in excess of Twenty Five
Million Seven Hundred Eighty Thousand Dollars ($25,780,000) executed by the
Company to the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities, and the Trustee in accordance
with the Company Order shall authenticate and deliver such Securities. In
authenticating such Securities, and accepting the additional responsibilities
under this Indenture in relation to such Securities, the Trustee shall be
entitled to receive, and shall be fully protected in relying upon:

          (i) a copy of any Board Resolution relating thereto; and

          (ii) an Opinion of Counsel stating that: (1) such Securities, when
     authenticated and delivered by the Trustee and issued by the Company in the
     manner and subject to any conditions specified in such Opinion of Counsel,
     will constitute, and the Indenture constitutes, valid and legally binding
     obligations of the Company, each enforceable in accordance with its terms,
     subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
     moratorium and similar laws of general applicability relating to or
     affecting creditors' rights and to general equity principles; (2) the
     Securities have been duly authorized and executed by the Company and have
     been delivered to the Trustee for authentication in accordance with this
     Indenture; (3) the Securities are not required to be registered under the
     Securities Act; and (4) the Indenture is not required to be qualified under
     the Trust Indenture Act.

     (b) The Securities shall be executed on behalf of the Company by its
Chairman of the Board, its Vice Chairman of the Board, its Chief Executive
Officer, its President or one of its Vice Presidents. The signature of any of
these officers on the Securities may be manual or facsimile. Securities bearing
the manual or facsimile signatures of individuals who were at any time the
proper officers of the Company shall bind the Company, notwithstanding that such
individuals or any of them have ceased to hold such offices prior to the
authentication and delivery of such Securities or did not hold such offices at
the date of such Securities.

     (c) No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by the manual signature of one of its authorized
signatories, and such certificate upon any Security shall be conclusive
evidence, and the only evidence, that such Security has been duly authenticated
and delivered hereunder. Notwithstanding the foregoing, if any Security shall
have been authenticated and delivered hereunder but never issued and sold by the
Company, and the Company shall deliver

                                       25

such Security to the Trustee for cancellation as provided in Section 3.8, for
all purposes of this Indenture such Security shall be deemed never to have been
authenticated and delivered hereunder and shall never be entitled to the
benefits of this Indenture.

     (d) Each Security shall be dated the date of its authentication.

     SECTION 3.4. Global Securities.

     (a) Upon the election of the Holder after the Original Issue Date, which
election need not be in writing, the Securities owned by such Holder shall be
issued in the form of one or more Global Securities registered in the name of
the Depositary or its nominee. Each Global Security issued under this Indenture
shall be registered in the name of the Depositary designated by the Company for
such Global Security or a nominee thereof and delivered to such Depositary or a
nominee thereof or custodian therefor, and each such Global Security shall
constitute a single Security for all purposes of this Indenture.

     (b) Notwithstanding any other provision in this Indenture, no Global
Security may be exchanged in whole or in part for registered Securities, and no
transfer of a Global Security in whole or in part may be registered, in the name
of any Person other than the Depositary for such Global Security or a nominee
thereof unless (i) such Depositary advises the Trustee and the Company in
writing that such Depositary is no longer willing or able to properly discharge
its responsibilities as Depositary with respect to such Global Security, and no
qualified successor is appointed by the Company within ninety (90) days of
receipt by the Company of such notice, (ii) such Depositary ceases to be a
clearing agency registered under the Exchange Act and no successor is appointed
by the Company within ninety (90) days after obtaining knowledge of such event,
(iii) the Company executes and delivers to the Trustee a Company Order stating
that the Company elects to terminate the book-entry system through the
Depositary or (iv) an Event of Default shall have occurred and be continuing.
Upon the occurrence of any event specified in clause (i), (ii), (iii) or (iv)
above, the Trustee shall notify the Depositary and instruct the Depositary to
notify all owners of beneficial interests in such Global Security of the
occurrence of such event and of the availability of Securities to such owners of
beneficial interests requesting the same. The Trustee may conclusively rely, and
be protected in relying, upon the written identification of the owners of
beneficial interests furnished by the Depositary, and shall not be liable for
any delay resulting from a delay by the Depositary. Upon the issuance of such
Securities and the registration in the Securities Register of such Securities in
the names of the Holders of the beneficial interests therein, the Trustees shall
recognize such holders of beneficial interests as Holders.

     (c) If any Global Security is to be exchanged for other Securities or
canceled in part, or if another Security is to be exchanged in whole or in part
for a beneficial interest in any Global Security, then either (i) such Global
Security shall be so surrendered for exchange or cancellation as provided in
this Article III or (ii) the principal amount thereof shall be reduced or
increased by an amount equal to (x) the portion thereof to be so exchanged or
canceled, or (y) the principal amount of such other Security to be so exchanged
for a beneficial interest therein, as the case may be, by means of an
appropriate adjustment made on the records of the Securities Registrar,
whereupon the Trustee, in accordance with the Applicable Depositary Procedures,
shall instruct the Depositary or its authorized representative to make a
corresponding adjustment to its records. Upon any such surrender or adjustment
of a Global Security by the Depositary,

                                       26

accompanied by registration instructions, the Company shall execute and the
Trustee shall authenticate and deliver any Securities issuable in exchange for
such Global Security (or any portion thereof) in accordance with the
instructions of the Depositary. The Trustee shall not be liable for any delay in
delivery of such instructions and may conclusively rely on, and shall be fully
protected in relying on, such instructions.

     (d) Every Security authenticated and delivered upon registration of
transfer of, or in exchange for or in lieu of, a Global Security or any portion
thereof shall be authenticated and delivered in the form of, and shall be, a
Global Security, unless such Security is registered in the name of a Person
other than the Depositary for such Global Security or a nominee thereof.

     (e) Securities distributed to holders of Book-Entry Preferred Securities
(as defined in the applicable Trust Agreement) upon the dissolution of the Trust
shall be distributed in the form of one or more Global Securities registered in
the name of a Depositary or its nominee, and deposited with the Securities
Registrar, as custodian for such Depositary, or with such Depositary, for credit
by the Depositary to the respective accounts of the beneficial owners of the
Securities represented thereby (or such other accounts as they may direct).
Securities distributed to holders of Preferred Securities other than Book-Entry
Preferred Securities upon the dissolution of the Trust shall not be issued in
the form of a Global Security or any other form intended to facilitate
book-entry trading in beneficial interests in such Securities.

     (f) The Depositary or its nominee, as the registered owner of a Global
Security, shall be the Holder of such Global Security for all purposes under
this Indenture and the Securities, and owners of beneficial interests in a
Global Security shall hold such interests pursuant to the Applicable Depositary
Procedures. Accordingly, any such owner's beneficial interest in a Global
Security shall be shown only on, and the transfer of such interest shall be
effected only through, records maintained by the Depositary or its nominee or
its Depositary Participants. The Securities Registrar and the Trustee shall be
entitled to deal with the Depositary for all purposes of this Indenture relating
to a Global Security (including the payment of principal and interest thereon
and the giving of instructions or directions by owners of beneficial interests
therein and the giving of notices) as the sole Holder of the Security and shall
have no obligations to the owners of beneficial interests therein. Neither the
Trustee nor the Securities Registrar shall have any liability in respect of any
transfers effected by the Depositary.

     (g) The rights of owners of beneficial interests in a Global Security shall
be exercised only through the Depositary and shall be limited to those
established by law and agreements between such owners and the Depositary and/or
its Depositary Participants.

     (h) No holder of any beneficial interest in any Global Security held on its
behalf by a Depositary shall have any rights under this Indenture with respect
to such Global Security, and such Depositary may be treated by the Company, the
Trustee and any agent of the Company or the Trustee as the owner of such Global
Security for all purposes whatsoever. None of the Company, the Trustee nor any
agent of the Company or the Trustee will have any responsibility or liability
for any aspect of the records relating to or payments made on account of
beneficial ownership interests of a Global Security or maintaining, supervising
or reviewing any records relating to such beneficial ownership interests.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by a Depositary or

                                       27

impair, as between a Depositary and such holders of beneficial interests, the
operation of customary practices governing the exercise of the rights of the
Depositary (or its nominee) as Holder of any Security.

     SECTION 3.5. Registration, Transfer and Exchange Generally.

     (a) The Trustee shall cause to be kept at the Corporate Trust Office a
register (the "Securities Register") in which the registrar and transfer agent
with respect to the Securities (the "Securities Registrar"), subject to such
reasonable regulations as it may prescribe, shall provide for the registration
of Securities and of transfers and exchanges of Securities. The Trustee shall at
all times also be the Securities Registrar. The provisions of Article VI shall
apply to the Trustee in its role as Securities Registrar.

     (b) Subject to compliance with Section 2.2(b), upon surrender for
registration of transfer of any Security at the offices or agencies of the
Company designated for that purpose the Company shall execute, and the Trustee
shall authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Securities of any authorized denominations of like
tenor and aggregate principal amount.

     (c) At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denominations, of like tenor and aggregate
principal amount, upon surrender of the Securities to be exchanged at such
office or agency. Whenever any Securities are so surrendered for exchange, the
Company shall execute, and the Trustee shall authenticate and deliver, the
Securities that the Holder making the exchange is entitled to receive.

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

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

     (f) No service charge shall be made to a Holder for any transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any transfer or exchange of Securities.

     (g) Neither the Company nor the Trustee shall be required pursuant to the
provisions of this Section 3.5 (g): (i) to issue, register the transfer of or
exchange any Security during a period beginning at the opening of business
fifteen (15) days before the day of selection for redemption of Securities
pursuant to Article XI and ending at the close of business on the day of mailing
of the notice of redemption or (ii) to register the transfer of or exchange any
Security so selected for redemption in whole or in part, except, in the case of
any such Security to be redeemed in part, any portion thereof not to be
redeemed.

     (h) The Company shall designate an office or offices or agency or agencies
where Securities may be surrendered for registration or transfer or exchange.
The Company initially

                                       28

designates the Corporate Trust Office as its office and agency for such
purposes. The Company shall give prompt written notice to the Trustee and to the
Holders of any change in the location of any such office or agency.

     (i) The Securities may only be transferred to a "Qualified Purchaser" as
such term is defined in Section 2(a)(51) of the Investment Company Act.

     SECTION 3.6. Mutilated, Destroyed, Lost and Stolen Securities.

     (a) If any mutilated Security is surrendered to the Trustee together with
such security or indemnity as may be required by the Trustee to save the Company
and the Trustee harmless, the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a new Security of like tenor and
aggregate principal amount and bearing a number not contemporaneously
outstanding.

     (b) If there shall be delivered to the Trustee (i) evidence to its
satisfaction of the destruction, loss or theft of any Security and (ii) such
security or indemnity as may be required by it to save each of the Company and
the Trustee harmless, then, in the absence of notice to the Company or the
Trustee that such Security has been acquired by a bona fide purchaser, the
Company shall execute and upon its written request the Trustee shall
authenticate and deliver, in lieu of any such destroyed, lost or stolen
Security, a new Security of like tenor and aggregate principal amount as such
destroyed, lost or stolen Security, and bearing a number not contemporaneously
outstanding.

     (c) If any such mutilated, destroyed, lost or stolen Security has become or
is about to become due and payable, the Company in its discretion may, instead
of issuing a new Security, pay such Security.

     (d) Upon the issuance of any new Security under this Section 3.6, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.

     (e) Every new Security issued pursuant to this Section 3.6 in lieu of any
mutilated, destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the mutilated,
destroyed, lost or stolen Security shall be at any time enforceable by anyone,
and shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Securities duly issued hereunder.

     (f) The provisions of this Section 3.6 are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.

     SECTION 3.7. Persons Deemed Owners.

     The Company, the Trustee and any agent of the Company or the Trustee shall
treat the Person in whose name any Security is registered as the owner of such
Security for the purpose of receiving payment of principal of and any interest
on such Security and for all other purposes

                                       29

whatsoever, and neither the Company, the Trustee nor any agent of the Company or
the Trustee shall be affected by notice to the contrary.

     SECTION 3.8. Cancellation.

     All Securities surrendered for payment, redemption, transfer or exchange
shall, if surrendered to any Person other than the Trustee, be delivered to the
Trustee, and any such Securities and Securities surrendered directly to the
Trustee for any such purpose shall be promptly canceled by it. The Company may
at any time deliver to the Trustee for cancellation any Securities previously
authenticated and delivered hereunder that the Company may have acquired in any
manner whatsoever, and all Securities so delivered shall be promptly canceled by
the Trustee. No Securities shall be authenticated in lieu of or in exchange for
any Securities canceled as provided in this Section 3.8, except as expressly
permitted by this Indenture. All canceled Securities shall be retained or
disposed of by the Trustee in accordance with its customary practices and the
Trustee shall deliver to the Company a certificate of such disposition.

     SECTION 3.9. Deferrals of Interest Payment Dates.

     (a) So long as no Event of Default has occurred and is continuing, after
October 12, 2006, the Company shall have the right, at any time and from time to
time during the term of this Security, to defer the payment of interest on this
Security for a period of up to six (6) consecutive quarterly interest payment
periods (such right to defer, the "Extension Right" and each such period,
including any extensions thereof prior to the expiration of such period, an
"Extension Period"), during which Extension Period(s), no interest shall be due
and payable (except any Additional Tax Sums that may be due and payable);
provided, that the Company shall not be entitled to exercise its Extension Right
so that it would be able to defer the payment of interest on this Security for
more than six (6) quarterly interest payment periods during the term of this
Security; provided, further, that, after the expiration of any Extension Period,
the Company may not exercise its Extension Right to begin any subsequent
Extension Period until it pays all interest then accrued and unpaid on this
Security, together with such Additional Interest, prior to beginning such
subsequent Extension Period. No Extension Period shall end on a date other than
an Interest Payment Date and no Extension Period shall extend beyond the Stated
Maturity of the principal of the Securities. No interest shall be due and
payable during an Extension Period, except at the end thereof, but each
installment of interest that would otherwise have been due and payable during
such Extension Period shall bear Additional Interest (to the extent payment of
such interest would be legally enforceable) at the rate equal to a fixed rate
equal to 7.74% per annum through the interest payment date in June 2015 and
thereafter at a variable rate equal to LIBOR plus 3.25% per annum compounded
quarterly, from the dates on which amounts would have otherwise been due and
payable until paid or until funds for the payment thereof have been made
available for payment. At the end of any such Extension Period (which shall
include any extensions thereof prior to the expiration of such Extension
Period), the Company shall pay all interest then accrued and unpaid on the
Securities together with such Additional Interest. Prior to the termination of
any such Extension Period, the Company may extend such Extension Period and
further defer the payment of interest; provided, that (i) all such previous and
further extensions comprising such Extension Period do not exceed six (6)
quarterly interest payment periods, (ii) no Extension Period shall end on a date
other than an Interest Payment Date and (iii) no Extension Period shall extend
beyond the Stated Maturity

                                       30

of the principal of the Securities. Upon (i) the termination of any such
Extension Period (which shall include any extensions thereof prior to the
expiration of such Extension Period) and (ii) the payment of all accrued and
unpaid interest and any Additional Interest then due on any Interest Payment
Date, the Company may exercise its Extension Right to begin a new Extension
Period with respect to future payments of interest on this Security; provided,
that (i) such Extension Period does not exceed six (6) quarterly interest
payment periods, (ii) no Extension Period shall end on a date other than an
Interest Payment Date and (iii) no Extension Period shall extend beyond the
Stated Maturity of the principal of the Securities. The Company shall give the
Holders of the Securities and the Trustee written notice of its election to
begin any such Extension Period at least one Business Day prior to the next
succeeding Interest Payment Date on which interest on the Securities would be
payable but for such deferral or, so long as any Securities are held by the
Trust, at least one Business Day prior to the earlier of (i) the next succeeding
date on which Distributions on the Preferred Securities of such Trust would be
payable but for such deferral and (ii) the date on which the Property Trustee of
such Trust is required to give notice to any securities exchange or other
applicable self-regulatory organization or to holders of such Preferred
Securities of the record date for the payment of such Distributions.

     (b) In connection with any such Extension Period, the Company shall be
subject to the restrictions set forth in Section 10.6(a).

     SECTION 3.10. Agreed Tax Treatment.

     Each Security issued hereunder shall provide that the Company and, by its
acceptance or acquisition of a Security or a beneficial interest therein, the
Holder of, and any Person that acquires a direct or indirect beneficial interest
in, such Security, intend and agree to treat such Security as indebtedness of
the Company for United States Federal, state and local tax purposes and to treat
the Preferred Securities (including but not limited to all payments and proceeds
with respect to the Preferred Securities) as an undivided beneficial ownership
interest in the Securities (and any other Trust property) (and payments and
proceeds therefrom, respectively) for United States Federal, state and local tax
purposes. The provisions of this Indenture shall be interpreted to further this
intention and agreement of the parties.

     SECTION 3.11. CUSIP Numbers.

     The Company in issuing the Securities may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices
of redemption and other similar or related materials as a convenience to
Holders; provided, that any such notice or other materials may state that no
representation is made as to the correctness of such numbers either as printed
on the Securities or as contained in any notice of redemption or other materials
and that reliance may be placed only on the other identification numbers printed
on the Securities, and any such redemption shall not be affected by any defect
in or omission of such numbers.

                                       31

                                   ARTICLE IV

                           SATISFACTION AND DISCHARGE

     SECTION 4.1. Satisfaction and Discharge of Indenture.

     This Indenture shall, upon Company Request, cease to be of further effect
(except as to any surviving rights of registration of transfer or exchange of
Securities herein expressly provided for and as otherwise provided in this
Section 4.1) and the Trustee, on demand of and at the expense of the Company,
shall execute proper instruments acknowledging satisfaction and discharge of
this Indenture, when

     (a) either

          (i) all Securities theretofore authenticated and delivered (other than
     (A) Securities that have been mutilated, destroyed, lost or stolen and that
     have been replaced or paid as provided in Section 3.6 and (B) Securities
     for whose payment money has theretofore been deposited in trust or
     segregated and held in trust by the Company and thereafter repaid to the
     Company or discharged from such trust as provided in Section 10.2) have
     been delivered to the Trustee for cancellation; or

          (ii) all such Securities not theretofore delivered to the Trustee for
     cancellation

               (A) have become due and payable, or

               (B) will become due and payable at their Stated Maturity within
          one year of the date of deposit, or

               (C) are to be called for redemption within one year under
          arrangements satisfactory to the Trustee for the giving of notice of
          redemption by the Trustee in the name, and at the expense, of the
          Company,

     and the Company, in the case of subclause (ii)(A), (B) or (C) above, has
     deposited or caused to be deposited with the Trustee as trust funds in
     trust for such purpose (x) an amount in the currency or currencies in which
     the Securities are payable, (y) Government Obligations which through the
     scheduled payment of principal and interest in respect thereof in
     accordance with their terms will provide, not later than the due date of
     any payment, money in an amount or (z) a combination thereof, in each case
     sufficient, in the opinion of a nationally recognized firm of independent
     public accountants expressed in a written certification thereof delivered
     to the Trustee, to pay and discharge the entire indebtedness on such
     Securities not theretofore delivered to the Trustee for cancellation, for
     principal and any premium and interest (including any Additional Interest)
     to the date of such deposit (in the case of Securities that have become due
     and payable) or to the Stated Maturity (or any date of principal repayment
     upon early maturity) or Redemption Date, as the case may be;

     (b) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and

                                       32

     (c) the Company has delivered to the Trustee an Officers' Certificate and
an Opinion of Counsel each stating that all conditions precedent herein provided
for relating to the satisfaction and discharge of this Indenture have been
complied with.

Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 6.6, the obligations of
the Company to any Authenticating Agent under Section 6.11 and, if money shall
have been deposited with the Trustee pursuant to subclause (a)(ii) of this
Section 4.1, the obligations of the Trustee under Section 4.2 and Section
10.2(e) shall survive.

     SECTION 4.2. Application of Trust Money.

     Subject to the provisions of Section 10.2(e), all money deposited with the
Trustee pursuant to Section 4.1 shall be held in trust and applied by the
Trustee, in accordance with the provisions of the Securities and this Indenture,
to the payment in accordance with Section 3.1, either directly or through any
Paying Agent (including the Company acting as its own Paying Agent) as the
Trustee may determine, to the Persons entitled thereto, of the principal and any
premium and interest (including any Additional Interest) for the payment of
which such money or obligations have been deposited with or received by the
Trustee. Moneys held by the Trustee under this Section 4.2 shall not be subject
to the claims of holders of Senior Debt under Article XII.

                                   ARTICLE V

                                    REMEDIES

     SECTION 5.1. Events of Default.

     "Event of Default" means, wherever used herein with respect to the
Securities, any one of the following events (whatever the reason for such Event
of Default and whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):

     (a) default in the payment of any interest upon any Security, including any
Additional Interest in respect thereof, when it becomes due and payable, and
continuance of such default for a period of thirty (30) days (subject to the
deferral of any due date in the case of an Extension Period); or

     (b) default in the payment of the principal of or any premium on any
Security at its Maturity; or

     (c) default in the performance, or breach, of any covenant or warranty of
the Company in this Indenture and continuance of such default or breach for a
period of thirty (30) days after there has been given, by registered or
certified mail, to the Company by the Trustee or to the Company and the Trustee
by the Holders of at least twenty five percent (25%) in aggregate principal
amount of the Outstanding Securities a written notice specifying such default or
breach and requiring it to be remedied and stating that such notice is a "Notice
of Default" hereunder;

                                       33

     (d) the entry by a court having jurisdiction in the premises of a decree or
order adjudging the Company a bankrupt or insolvent, or approving as properly
filed a petition seeking reorganization, arrangement, adjustment or composition
of or in respect of the Company under any applicable Federal or state
bankruptcy, insolvency, reorganization or other similar law, or appointing a
custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and the continuance of
any such decree or order for relief or any such other decree or order unstayed
and in effect for a period of sixty (60) consecutive days;

     (e) the institution by the Company of proceedings to be adjudicated a
bankrupt or insolvent, or the consent by the Company to the institution of
bankruptcy or insolvency proceedings against it, or the filing by the Company of
a petition or answer or consent seeking reorganization or relief under any
applicable Federal or state bankruptcy, insolvency, reorganization or other
similar law, or the consent by it to the filing of such petition or to the
appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee, sequestrator or other similar official of the Company or of
any substantial part of its property, or the making by it of an assignment for
the benefit of creditors, or the admission by it in writing of its inability to
pay its debts generally as they become due and its willingness to be adjudicated
a bankrupt or insolvent, or the taking of corporate action by the Company in
furtherance of any such action; or

     (f) the Trust shall have voluntarily or involuntarily liquidated,
dissolved, wound-up its business or otherwise terminated its existence, except
in connection with (1) the distribution of the Securities to holders of the
Preferred Securities in liquidation of their interests in the Trust, (2) the
redemption of all of the outstanding Preferred Securities or (3) certain
mergers, consolidations or amalgamations, each as and to the extent permitted by
the Trust Agreement.

     SECTION 5.2. Acceleration of Maturity; Rescission and Annulment.

     (a) If an Event of Default occurs and is continuing, then and in every such
case the Trustee or the Holders of not less than twenty five percent (25%) in
aggregate principal amount of the Outstanding Securities may declare the
principal amount of all the Securities to be due and payable immediately, by a
notice in writing to the Company (and to the Trustee if given by Holders),
provided, that if, upon an Event of Default, the Trustee or the Holders of not
less than twenty five percent (25%) in principal amount of the Outstanding
Securities fail to declare the principal of all the Outstanding Securities to be
immediately due and payable, the holders of at least twenty five percent (25%)
in aggregate Liquidation Amount of the Preferred Securities then outstanding
shall have the right to make such declaration by a notice in writing to the
Property Trustee, the Company and the Trustee; and upon any such declaration the
principal amount of and the accrued interest (including any Additional Interest)
on all the Securities shall become immediately due and payable.

     (b) At any time after such a declaration of acceleration with respect to
Securities has been made and before a judgment or decree for payment of the
money due has been obtained by the Trustee as hereinafter provided in this
Article V, the Holders of a majority in aggregate principal amount of the
Outstanding Securities, by written notice to the Indenture Trustee, or the
holders of a majority in aggregate Liquidation Amount of the Preferred
Securities, by written

                                       34

notice to the Property Trustee, the Company and the Trustee, may rescind and
annul such declaration and its consequences if:

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

               (A) all overdue installments of interest on all Securities,

               (B) any accrued Additional Interest on all Securities,

               (C) the principal of and any premium on any Securities that have
          become due otherwise than by such declaration of acceleration and
          interest (including any Additional Interest) thereon at the rate borne
          by the Securities, and

               (D) all sums paid or advanced by the Trustee hereunder and the
          reasonable compensation, expenses, disbursements and advances of the
          Trustee, the Property Trustee and their agents and counsel; and

          (ii) all Events of Default with respect to Securities, other than the
     non-payment of the principal of Securities that has become due solely by
     such acceleration, have been cured or waived as provided in Section 5.13;

provided, that if the Holders of such Securities fail to annul such declaration
and waive such default, the holders of not less than a majority in aggregate
Liquidation Amount of the Preferred Securities then outstanding shall also have
the right to rescind and annul such declaration and its consequences by written
notice to the Property Trustee, the Company and the Trustee, subject to the
satisfaction of the conditions set forth in paragraph (b) of this Section 5.2.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.

     SECTION 5.3. Collection of Indebtedness and Suits for Enforcement by
Trustee.

     (a) The Company covenants that if:

          (i) default is made in the payment of any installment of interest
     (including any Additional Interest) on any Security when such interest
     becomes due and payable and such default continues for a period of thirty
     (30) days, or

          (ii) default is made in the payment of the principal of and any
     premium on any Security at the Maturity thereof,

the Company will, upon demand of the Trustee, pay to the Trustee, for the
benefit of the Holders of such Securities, the whole amount then due and payable
on such Securities for principal and any premium and interest (including any
Additional Interest) and, in addition thereto, all amounts owing the Trustee
under Section 6.6.

     (b) If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, and may
prosecute such proceeding to judgment or final decree, and may enforce the same
against the Company or any other obligor upon such Securities and collect the
moneys adjudged or decreed to be payable in the manner provided by

                                       35

law out of the property of the Company or any other obligor upon the Securities,
wherever situated.

     (c) If an Event of Default with respect to Securities occurs and is
continuing, the Trustee may in its discretion proceed to protect and enforce its
rights and the rights of the Holders of Securities by such appropriate judicial
proceedings as the Trustee shall deem most effectual to protect and enforce any
such rights, whether for the specific enforcement of any covenant or agreement
in this Indenture or in aid of the exercise of any power granted herein, or to
enforce any other proper remedy.

     SECTION 5.4. Trustee May File Proofs of Claim.

     In case of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or similar judicial
proceeding relative to the Company (or any other obligor upon the Securities),
its property or its creditors, the Trustee shall be entitled and empowered, by
intervention in such proceeding or otherwise, to take any and all actions
authorized hereunder in order to have claims of the Holders and the Trustee
allowed in any such proceeding. In particular, the Trustee shall be authorized
to collect and receive any moneys or other property payable or deliverable on
any such claims and to distribute the same; and any custodian, receiver,
assignee, trustee, liquidator, sequestrator or other similar official in any
such judicial proceeding is hereby authorized by each Holder to make such
payments to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to first pay to the Trustee any
amount due it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts owing the
Trustee, any predecessor Trustee and other Persons under Section 6.6.

     SECTION 5.5. Trustee May Enforce Claim Without Possession of Securities.

     All rights of action and claims under this Indenture or the Securities may
be prosecuted and enforced by the Trustee without the possession of any of the
Securities or the production thereof in any proceeding relating thereto, and any
such proceeding instituted by the Trustee shall be brought in its own name as
trustee of an express trust, and any recovery of judgment shall, subject to
Article XII and after provision for the payment of all the amounts owing the
Trustee, any predecessor Trustee and other Persons under Section 6.6, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.

     SECTION 5.6. Application of Money Collected.

     Any money or property collected or to be applied by the Trustee with
respect to the Securities pursuant to this Article V shall be applied in the
following order, at the date or dates fixed by the Trustee and, in case of the
distribution of such money or property on account of principal or any premium or
interest (including any Additional Interest), upon presentation of the
Securities and the notation thereon of the payment if only partially paid and
upon surrender thereof if fully paid:

     FIRST: To the payment of all amounts due the Trustee, any predecessor
Trustee and other Persons under Section 6.6;

                                       36

     SECOND: To the payment of all Senior Debt of the Company if and to the
extent required by Article XII;

     THIRD: Subject to Article XII, to the payment of the amounts then due and
unpaid upon the Securities for principal and any premium and interest (including
any Additional Interest) in respect of which or for the benefit of which such
money has been collected, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Securities for principal and any
premium and interest (including any Additional Interest), respectively; and

     FOURTH: The balance, if any, to the Person or Persons entitled thereto.

     SECTION 5.7. Limitation on Suits.

     Subject to Section 5.8, no Holder of any Securities shall have any right to
institute any proceeding, judicial or otherwise, with respect to this Indenture
or for the appointment of a custodian, receiver, assignee, trustee, liquidator,
sequestrator (or other similar official) or for any other remedy hereunder,
unless:

     (a) such Holder has previously given written notice to the Trustee of a
continuing Event of Default with respect to the Securities;

     (b) the Holders of not less than a majority in aggregate principal amount
of the Outstanding Securities shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name as
Trustee hereunder;

     (c) such Holder or Holders have offered to the Trustee reasonable indemnity
against the costs, expenses and liabilities to be incurred in compliance with
such request;

     (d) the Trustee after its receipt of such notice, request and offer of
indemnity has failed to institute any such proceeding for sixty (60) days; and

     (e) no direction inconsistent with such written request has been given to
the Trustee during such sixty (60)-day period by the Holders of a majority in
aggregate principal amount of the Outstanding Securities;

it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing itself of, any
provision of this Indenture to affect, disturb or prejudice the rights of any
other Holders of Securities, or to obtain or to seek to obtain priority or
preference over any other of such Holders or to enforce any right under this
Indenture, except in the manner herein provided and for the equal and ratable
benefit of all such Holders.

     SECTION 5.8. Unconditional Right of Holders to Receive Principal, Premium,
if any, and Interest; Direct Action by Holders of Preferred Securities.

     Notwithstanding any other provision in this Indenture, the Holder of any
Security shall have the right, which is absolute and unconditional, to receive
payment of the principal of and any premium on such Security at its Maturity and
payment of interest (including any Additional Interest) on such Security when
due and payable and to institute suit for the enforcement of any such payment,
and such right shall not be impaired without the consent of such Holder. Any

                                       37

registered holder of the Preferred Securities shall have the right, upon the
occurrence of an Event of Default described in Section 5.1(a) or Section 5.1(b),
to institute a suit directly against the Company for enforcement of payment to
such holder of principal of and any premium and interest (including any
Additional Interest) on the Securities having a principal amount equal to the
aggregate Liquidation Amount of the Preferred Securities held by such holder.

     SECTION 5.9. Restoration of Rights and Remedies.

     If the Trustee, any Holder or any holder of Preferred Securities has
instituted any proceeding to enforce any right or remedy under this Indenture
and such proceeding has been discontinued or abandoned for any reason, or has
been determined adversely to the Trustee, such Holder or such holder of
Preferred Securities, then and in every such case the Company, the Trustee, such
Holders and such holder of Preferred Securities shall, subject to any
determination in such proceeding, be restored severally and respectively to
their former positions hereunder, and thereafter all rights and remedies of the
Trustee, such Holder and such holder of Preferred Securities shall continue as
though no such proceeding had been instituted.

     SECTION 5.10. Rights and Remedies Cumulative.

     Except as otherwise provided in Section 3.6(f), no right or remedy herein
conferred upon or reserved to the Trustee or the Holders is intended to be
exclusive of any other right or remedy, and every right and remedy shall, to the
extent permitted by law, be cumulative and in addition to every other right and
remedy given hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.

     SECTION 5.11. Delay or Omission Not Waiver.

     No delay or omission of the Trustee, any Holder of any Securities or any
holder of any Preferred Security to exercise any right or remedy accruing upon
any Event of Default shall impair any such right or remedy or constitute a
waiver of any such Event of Default or an acquiescence therein. Every right and
remedy given by this Article V or by law to the Trustee or to the Holders and
the right and remedy given to the holders of Preferred Securities by Section 5.8
may be exercised from time to time, and as often as may be deemed expedient, by
the Trustee, the Holders or the holders of Preferred Securities, as the case may
be.

     SECTION 5.12. Control by Holders.

     The Holders of not less than a majority in aggregate principal amount of
the Outstanding Securities (or, as the case may be, the holders of a majority in
aggregate Liquidation Amount of Preferred Securities) shall have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee; provided, that:

     (a) such direction shall not be in conflict with any rule of law or with
this Indenture,

     (b) the Trustee may take any other action deemed proper by the Trustee that
is not inconsistent with such direction, and

                                       38

     (c) subject to the provisions of Section 6.2, the Trustee shall have the
right to decline to follow such direction if a Responsible Officer or Officers
of the Trustee shall, in good faith, reasonably determine that the proceeding so
directed would be unjustly prejudicial to the Holders not joining in any such
direction or would involve the Trustee in personal liability.

     SECTION 5.13. Waiver of Past Defaults.

     (a) The Holders of not less than a majority in aggregate principal amount
of the Outstanding Securities or the holders of not less than a majority in
aggregate Liquidation Amount of the Preferred Securities may waive any past
Event of Default hereunder and its consequences except an Event of Default:

          (i) in the payment of the principal of or any premium or interest
     (including any Additional Interest) on any Outstanding Security (unless
     such Event of Default has been cured and the Company has paid to or
     deposited with the Trustee a sum sufficient to pay all installments of
     interest (including any Additional Interest) due and past due and all
     principal of and any premium on all Securities due otherwise than by
     acceleration), or

          (ii) in respect of a covenant or provision hereof that under Article
     IX cannot be modified or amended without the consent of each Holder of any
     Outstanding Security.

     (b) Any such waiver shall be deemed to be on behalf of the Holders of all
the Outstanding Securities or, in the case of a waiver by holders of Preferred
Securities issued by such Trust, by all holders of Preferred Securities.

     (c) Upon any such waiver, such Event of Default shall cease to exist and
any Event of Default arising therefrom shall be deemed to have been cured for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other Event of Default or impair any right consequent thereon.

     SECTION 5.14. Undertaking for Costs.

     All parties to this Indenture agree, and each Holder of any Security by his
or her acceptance thereof shall be deemed to have agreed, that any court may in
its discretion require, in any suit for the enforcement of any right or remedy
under this Indenture, or in any suit against the Trustee for any action taken or
omitted by it as Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees and
expenses, against any party litigant in such suit, having due regard to the
merits and good faith of the claims or defenses made by such party litigant; but
the provisions of this Section 5.14 shall not apply to any suit instituted by
the Trustee, to any suit instituted by any Holder, or group of Holders, holding
in the aggregate more than ten percent (10%) in aggregate principal amount of
the Outstanding Securities, or to any suit instituted by any Holder for the
enforcement of the payment of the principal of or any premium on the Security
after the Stated Maturity or any interest (including any Additional Interest) on
any Security after it is due and payable.

                                       39

     SECTION 5.15. Waiver of Usury, Stay or Extension Laws.

     The Company covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage of, any usury, stay or extension law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.

                                   ARTICLE VI

                                   THE TRUSTEE

     SECTION 6.1. Corporate Trustee Required.

     There shall at all times be a Trustee hereunder with respect to the
Securities. The Trustee shall be a corporation organized and doing business
under the laws of the United States or of any state thereof, authorized to
exercise corporate trust powers, having a combined capital and surplus of at
least $50,000,000, subject to supervision or examination by Federal or state
authority and having an office within the United States. If such corporation
publishes reports of condition at least annually, pursuant to law or to the
requirements of such supervising or examining authority, then, for the purposes
of this Section 6.1, the combined capital and surplus of such corporation shall
be deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. If at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section 6.1, it shall resign
immediately in the manner and with the effect hereinafter specified in this
Article VI.

     SECTION 6.2. Certain Duties and Responsibilities.

     Except during the continuance of an Event of Default:

          (i) the Trustee undertakes to perform such duties and only such duties
     as are specifically set forth in this Indenture, and no implied covenants
     or obligations shall be read into this Indenture against the Trustee; and

          (ii) in the absence of bad faith on its part, the Trustee may
     conclusively rely, as to the truth of the statements and the correctness of
     the opinions expressed therein, upon certificates or opinions furnished to
     the Trustee and conforming to the requirements of this Indenture; provided,
     that in the case of any such certificates or opinions that by any provision
     hereof are specifically required to be furnished to the Trustee, the
     Trustee shall be under a duty to examine the same to determine whether or
     not they substantially conform on their face to the requirements of this
     Indenture.

     (b) If an Event of Default known to the Trustee has occurred and is
continuing, the Trustee shall, prior to the receipt of directions, if any, from
the Holders of at least a majority in aggregate principal amount of the
Outstanding Securities (or, if applicable, from the holders of at least a
majority in aggregate Liquidation Amount of Preferred Securities), exercise such
of the

                                       40

rights and powers vested in it by this Indenture, and use the same degree
of care and skill in its exercise, as a prudent person would exercise or use
under the circumstances in the conduct of such person's own affairs.

     (c) Notwithstanding the foregoing, no provision of this Indenture shall
require the Trustee to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties hereunder, or in the
exercise of any of its rights or powers, if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against such risk
or liability is not reasonably assured to it. Whether or not therein expressly
so provided, every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section 6.2. To the extent that, at law or in
equity, the Trustee has duties and liabilities relating to the Holders, the
Trustee shall not be liable to any Holder or any holder of Preferred Securities
for the Trustee's good faith reliance on the provisions of this Indenture. The
provisions of this Indenture, to the extent that they restrict the duties and
liabilities of the Trustee otherwise existing at law or in equity, are agreed by
the Company and the Holders and the holders of Preferred Securities to replace
such other duties and liabilities of the Trustee.

     (d) No provisions of this Indenture shall be construed to relieve the
Trustee from liability with respect to matters that are within the authority of
the Trustee under this Indenture for its own negligent action, negligent failure
to act or willful misconduct, except that:

          (i) the Trustee shall not be liable for any error or judgment made in
     good faith by an authorized officer of the Trustee, unless it shall be
     proved that the Trustee was negligent in ascertaining the pertinent facts;

          (ii) the Trustee shall not be liable with respect to any action taken
     or omitted to be taken by it in good faith in accordance with the direction
     of the Holders of at least a majority in aggregate principal amount of the
     Outstanding Securities (or, as the case may be, the holders of a majority
     in aggregate Liquidation Amount of Preferred Securities) relating to the
     time, method and place of conducting any proceeding for any remedy
     available to the Trustee under this Indenture; and

          (iii) the Trustee shall be under no liability for interest on any
     money received by it hereunder except as otherwise agreed in writing with
     the Company and money held by the Trustee in trust hereunder need not be
     segregated from other funds except to the extent required by law.

     (e) If at any time the Trustee hereunder is not the same Person as the
Property Trustee under the Trust Agreement:

          (i) whenever a reference is made herein to the dissolution,
     termination or liquidation of the Trust, the Trustee shall be entitled to
     assume that no such dissolution, termination, or liquidation has occurred
     so long as the Securities are or continue to be registered in the name of
     such Property Trustee, and the Trustee shall be charged with notice or
     knowledge of such dissolution, termination or liquidation only upon written
     notice thereof given to the Trustee by the Depositor under the Trust
     Agreement; and

                                       41

          (ii) the Trustee shall not be charged with notice or knowledge that
     any Person is a holder of Preferred Securities or Common Securities issued
     by the Trust or whether any group of holders of Preferred Securities
     constitutes any specified percentage of all outstanding Preferred
     Securities for any purpose under this Indenture, unless and until the
     Trustee is furnished with a list of holders by such Property Trustee and
     the aggregate Liquidation Amount of the Preferred Securities then
     outstanding. The Trustee may conclusively rely and shall be protected in
     relying on such list.

     (f) Notwithstanding Section 1.10, the Trustee shall not, and shall not be
deemed to, owe any fiduciary duty to the holders of any of the Trust Securities
issued by the Trust and shall not be liable to any such holder (other than for
the willful misconduct or negligence of the Trustee) if the Trustee in good
faith (i) pays over or distributes to a registered Holder of the Securities or
to the Company or to any other Person, cash, property or securities to which
such holders of such Trust Securities shall be entitled or (ii) takes any action
or omits to take any action at the request of the Holder of such Securities.
Nothing in this paragraph shall affect the obligation of any other such Person
to hold such payment for the benefit of, and to pay such amount over to, such
holders of Preferred Securities or Common Securities or their representatives.

     SECTION 6.3. Notice of Defaults.

     Within ninety (90) days after the occurrence of any default actually known
to the Trustee, the Trustee shall give the Holders notice of such default unless
such default shall have been cured or waived; provided, that except in the case
of a default in the payment of the principal of or any premium or interest on
any Securities, the Trustee shall be fully protected in withholding the notice
if and so long as the board of directors, the executive committee or a trust
committee of directors and/or Responsible Officers of the Trustee in good faith
determines that withholding the notice is in the interest of holders of
Securities; and provided, further, that in the case of any default of the
character specified in Section 5.1(c), no such notice to Holders shall be given
until at least thirty (30) days after the occurrence thereof. For the purpose of
this Section 6.3, the term "default" means any event which is, or after notice
or lapse of time or both would become, an Event of Default.

     SECTION 6.4. Certain Rights of Trustee.

     Subject to the provisions of Section 6.2:

     (a) the Trustee may conclusively rely and shall be fully protected in
acting or refraining from acting in good faith and in accordance with the terms
hereof upon any resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note or other paper
or document believed by it to be genuine and to have been signed or presented by
the proper party or parties;

     (b) if (i) in performing its duties under this Indenture the Trustee is
required to decide between alternative courses of action, (ii) in construing any
of the provisions of this Indenture the Trustee finds ambiguous or inconsistent
with any other provisions contained herein or (iii) the Trustee is unsure of the
application of any provision of this Indenture, then, except as to any matter as
to which the Holders are entitled to decide under the terms of this Indenture,
the

                                       42

Trustee shall deliver a notice to the Company requesting the Company's written
instruction as to the course of action to be taken and the Trustee shall take
such action, or refrain from taking such action, as the Trustee shall be
instructed in writing to take, or to refrain from taking, by the Company;
provided, that if the Trustee does not receive such instructions from the
Company within ten Business Days after it has delivered such notice or such
reasonably shorter period of time set forth in such notice the Trustee may, but
shall be under no duty to, take such action, or refrain from taking such action,
as the Trustee shall deem advisable and in the best interests of the Holders, in
which event the Trustee shall have no liability except for its own negligence,
bad faith or willful misconduct;

     (c) any request or direction of the Company shall be sufficiently evidenced
by a Company Request or Company Order and any resolution of the Board of
Directors may be sufficiently evidenced by a Board Resolution;

     (d) the Trustee may consult with counsel (which counsel may be counsel to
the Trustee, the Company or any of its Affiliates, and may include any of its
employees) and the advice of such counsel or any Opinion of Counsel shall be
full and complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance thereon;

     (e) the Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
the Holders or any holder of Preferred Securities pursuant to this Indenture,
unless such Holders (or such holders of Preferred Securities) shall have offered
to the Trustee security or indemnity reasonably satisfactory to it against the
costs, expenses (including reasonable attorneys' fees and expenses) and
liabilities that might be incurred by it in compliance with such request or
direction, including reasonable advances as may be requested by the Trustee;

     (f) the Trustee shall not be bound to make any investigation into the facts
or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, indenture,
note or other paper or document, but the Trustee in its discretion may make such
inquiry or investigation into such facts or matters as it may see fit, and, if
the Trustee shall determine to make such inquiry or investigation, it shall be
entitled to examine the books, records and premises of the Company, personally
or by agent or attorney;

     (g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents, attorneys,
custodians or nominees and the Trustee shall not be responsible for any
misconduct or negligence on the part of any such agent, attorney, custodian or
nominee appointed with due care by it hereunder;

     (h) whenever in the administration of this Indenture the Trustee shall deem
it desirable to receive instructions with respect to enforcing any remedy or
right or taking any other action with respect to enforcing any remedy or right
hereunder, the Trustees (i) may request instructions from the Holders (which
instructions may only be given by the Holders of the same aggregate principal
amount of Outstanding Securities as would be entitled to direct the Trustee
under this Indenture in respect of such remedy, right or action), (ii) may
refrain from enforcing such remedy or right or taking such action until such
instructions are received and (iii) shall be protected in acting in accordance
with such instructions;

                                       43

     (i) except as otherwise expressly provided by this Indenture, the Trustee
shall not be under any obligation to take any action that is discretionary under
the provisions of this Indenture;

     (j) without prejudice to any other rights available to the Trustee under
applicable law, when the Trustee incurs expenses or renders services in
connection with any bankruptcy, insolvency or other proceeding referred to in
clauses (d) or (e) of the definition of Event of Default, such expenses
(including legal fees and expenses of its agents and counsel) and the
compensation for such services are intended to constitute expenses of
administration under any bankruptcy laws or law relating to creditors rights
generally;

     (k) whenever in the administration of this Indenture the Trustee shall deem
it desirable that a matter be proved or established prior to taking, suffering
or omitting any action hereunder, the Trustee (unless other evidence be herein
specifically prescribed) may, in the absence of bad faith on its part,
conclusively rely upon an Officers' Certificate addressing such matter, which,
upon receipt of such request, shall be promptly delivered by the Company;

     (l) the Trustee shall not be charged with knowledge of any Event of Default
unless either (i) a Responsible Officer of the Trustee shall have actual
knowledge or (ii) the Trustee shall have received written notice thereof from
the Company or a Holder; and

     (m) in the event that the Trustee is also acting as Paying Agent,
Authenticating Agent or Securities Registrar hereunder, the rights and
protections afforded to the Trustee pursuant to this Article VI shall also be
afforded such Paying Agent, Authenticating Agent, or Securities Registrar.

     SECTION 6.5. May Hold Securities.

     The Trustee, any Authenticating Agent, any Paying Agent, any Securities
Registrar or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Securities and may otherwise deal
with the Company with the same rights it would have if it were not Trustee,
Authenticating Agent, Paying Agent, Securities Registrar or such other agent.

     SECTION 6.6. Compensation; Reimbursement; Indemnity.

     (a) The Company agrees:

          (i) to pay to the Trustee from time to time reasonable compensation
     for all services rendered by it hereunder in such amounts as the Company
     and the Trustee shall agree from time to time (which compensation shall not
     be limited by any provision of law in regard to the compensation of a
     trustee of an express trust);

          (ii) to reimburse the Trustee upon its request for all reasonable
     expenses, disbursements and advances incurred or made by the Trustee in
     accordance with any provision of this Indenture (including the reasonable
     compensation and the expenses and disbursements of its agents and counsel),
     except any such expense, disbursement or advance as may be attributable to
     its negligence, bad faith or willful misconduct; and

                                       44

          (iii) to the fullest extent permitted by applicable law, to indemnify
     the Trustee and its Affiliates, and their officers, directors,
     shareholders, agents, representatives and employees for, and to hold them
     harmless against, any loss, damage, liability, tax (other than income,
     franchise or other taxes imposed on amounts paid pursuant to (i) or (ii)
     hereof), penalty, expense or claim of any kind or nature whatsoever
     incurred without negligence, bad faith or willful misconduct on its part
     arising out of or in connection with the acceptance or administration of
     this trust or the performance of the Trustee's duties hereunder, including
     the costs and expenses of defending itself against any claim or liability
     in connection with the exercise or performance of any of its powers or
     duties hereunder.

     (b) To secure the Company's payment obligations in this Section 6.6, the
Company hereby grants and pledges to the Trustee and the Trustee shall have a
lien prior to the Securities on all money or property held or collected by the
Trustee, other than money or property held in trust to pay principal and
interest on particular Securities. Such lien shall survive the satisfaction and
discharge of this Indenture or the resignation or removal of the Trustee.

     (c) The obligations of the Company under this Section 6.6 shall survive the
satisfaction and discharge of this Indenture and the earlier resignation or
removal of the Trustee.

     (d) In no event shall the Trustee be liable for any indirect, special,
punitive or consequential loss or damage of any kind whatsoever, including, but
not limited to, lost profits, even if the Trustee has been advised of the
likelihood of such loss or damage and regardless of the form of action.

     (e) In no event shall the Trustee be liable for any failure or delay in the
performance of its obligations hereunder because of circumstances beyond its
control, including, but not limited to, acts of God, flood, war (whether
declared or undeclared), terrorism, fire, riot, embargo, government action,
including any laws, ordinances, regulations, governmental action or the like
which delay, restrict or prohibit the providing of the services contemplated by
this Indenture.

     SECTION 6.7. Resignation and Removal; Appointment of Successor.

     (a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article VI shall become effective until the
acceptance of appointment by the successor Trustee under Section 6.8.

     (b) The Trustee may resign at any time by giving written notice thereof to
the Company.

     (c) Unless an Event of Default shall have occurred and be continuing, the
Trustee may be removed at any time by the Company by a Board Resolution. If an
Event of Default shall have occurred and be continuing, the Trustee may be
removed by Act of the Holders of a majority in aggregate principal amount of the
Outstanding Securities, delivered to the Trustee and to the Company.

     (d) If the Trustee shall resign, be removed or become incapable of acting,
or if a vacancy shall occur in the office of Trustee for any reason, at a time
when no Event of Default

                                       45

shall have occurred and be continuing, the Company, by a Board Resolution, shall
promptly appoint a successor Trustee, and such successor Trustee and the
retiring Trustee shall comply with the applicable requirements of Section 6.8.
If the Trustee shall resign, be removed or become incapable of acting, or if a
vacancy shall occur in the office of Trustee for any reason, at a time when an
Event of Default shall have occurred and be continuing, the Holders, by Act of
the Holders of a majority in aggregate principal amount of the Outstanding
Securities, shall promptly appoint a successor Trustee, and such successor
Trustee and the retiring Trustee shall comply with the applicable requirements
of Section 6.8. If no successor Trustee shall have been so appointed by the
Company or the Holders and accepted appointment within sixty (60) days after the
giving of a notice of resignation by the Trustee or the removal of the Trustee
in the manner required by Section 6.8, any Holder who has been a bona fide
Holder of a Security for at least six months may, on behalf of such Holder and
all others similarly situated, and any resigning Trustee may, at the expense of
the Company, petition any court of competent jurisdiction for the appointment of
a successor Trustee.

     (e) The Company shall give notice to all Holders in the manner provided in
Section 1.6 of each resignation and each removal of the Trustee and each
appointment of a successor Trustee. Each notice shall include the name of the
successor Trustee and the address of its Corporate Trust Office.

     SECTION 6.8. Acceptance of Appointment by Successor.

     (a) In case of the appointment hereunder of a successor Trustee, each
successor Trustee so appointed shall execute, acknowledge and deliver to the
Company and to the retiring Trustee an instrument accepting such appointment,
and thereupon the resignation or removal of the retiring Trustee shall become
effective and such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and duties
of the retiring Trustee; but, on the request of the Company or the successor
Trustee, such retiring Trustee shall, upon payment of its charges, execute and
deliver an instrument transferring to such successor Trustee all the rights,
powers and trusts of the retiring Trustee and shall duly assign, transfer and
deliver to such successor Trustee all property and money held by such retiring
Trustee hereunder.

     (b) Upon request of any such successor Trustee, the Company shall execute
any and all instruments for more fully and certainly vesting in and confirming
to such successor Trustee all rights, powers and trusts referred to in paragraph
(a) of this Section 6.8.

     (c) No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified and eligible under
this Article VI.

     SECTION 6.9. Merger, Conversion, Consolidation or Succession to Business.

     Any Person into which the Trustee may be merged or converted or with which
it may be consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any Person succeeding to
all or substantially all of the corporate trust business of the Trustee, shall
be the successor of the Trustee hereunder, without the execution or filing of
any paper or any further act on the part of any of the parties hereto, provided,
that such Person shall be otherwise qualified and eligible under this Article
VI. In case any Securities shall

                                       46

have been authenticated, but not delivered, by the Trustee then in office, any
successor by merger, conversion or consolidation or as otherwise provided above
in this Section 6.9 to such authenticating Trustee may adopt such authentication
and deliver the Securities so authenticated, and in case any Securities shall
not have been authenticated, any successor to the Trustee may authenticate such
Securities either in the name of any predecessor Trustee or in the name of such
successor Trustee, and in all cases the certificate of authentication shall have
the full force which it is provided anywhere in the Securities or in this
Indenture that the certificate of the Trustee shall have.

     SECTION 6.10. Not Responsible for Recitals or Issuance of Securities.

     The recitals contained herein and in the Securities, except the Trustee's
certificates of authentication, shall be taken as the statements of the Company,
and neither the Trustee nor any Authenticating Agent assumes any responsibility
for their correctness. The Trustee makes no representations as to the validity
or sufficiency of this Indenture or of the Securities. Neither the Trustee nor
any Authenticating Agent shall be accountable for the use or application by the
Company of the Securities or the proceeds thereof.

     SECTION 6.11. Appointment of Authenticating Agent.

     (a) The Trustee may appoint an Authenticating Agent or Agents with respect
to the Securities, which shall be authorized to act on behalf of the Trustee to
authenticate Securities issued upon original issue and upon exchange,
registration of transfer or partial redemption thereof or pursuant to Section
3.6, and Securities so authenticated shall be entitled to the benefits of this
Indenture and shall be valid and obligatory for all purposes as if authenticated
by the Trustee hereunder. Wherever reference is made in this Indenture to the
authentication and delivery of Securities by the Trustee or the Trustee's
certificate of authentication, such reference shall be deemed to include
authentication and delivery on behalf of the Trustee by an Authenticating Agent.
Each Authenticating Agent shall be acceptable to the Company and shall at all
times be a corporation organized and doing business under the laws of the United
States of America, or of any State or Territory thereof or the District of
Columbia, authorized under such laws to act as Authenticating Agent, having a
combined capital and surplus of not less than $50,000,000 and subject to
supervision or examination by Federal or state authority. If such Authenticating
Agent publishes reports of condition at least annually pursuant to law or to the
requirements of said supervising or examining authority, then for the purposes
of this Section 6.11 the combined capital and surplus of such Authenticating
Agent shall be deemed to be its combined capital and surplus as set forth in its
most recent report of condition so published. If at any time an Authenticating
Agent shall cease to be eligible in accordance with the provisions of this
Section 6.11, such Authenticating Agent shall resign immediately in the manner
and with the effect specified in this Section 6.11.

     (b) Any Person into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any Person resulting from any
merger, conversion or consolidation to which such Authenticating Agent shall be
a party, or any Person succeeding to all or substantially all of the corporate
trust business of an Authenticating Agent shall be the successor Authenticating
Agent hereunder, provided such Person shall be otherwise eligible under this
Section 6.11, without the execution or filing of any paper or any further act on
the part of the Trustee or the Authenticating Agent.

                                       47

     (c) An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Company. The Trustee may at any time terminate
the agency of an Authenticating Agent by giving written notice thereof to such
Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section 6.11, the Trustee may appoint a successor
Authenticating Agent eligible under the provisions of this Section 6.11, which
shall be acceptable to the Company, and shall give notice of such appointment to
all Holders. Any successor Authenticating Agent upon acceptance of its
appointment hereunder shall become vested with all the rights, powers and duties
of its predecessor hereunder, with like effect as if originally named as an
Authenticating Agent.

     (d) The Company agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section 6.11 in such
amounts as the Company and the Authenticating Agent shall agree from time to
time.

     (e) If an appointment of an Authenticating Agent is made pursuant to this
Section 6.11, the Securities may have endorsed thereon, in addition to the
Trustee's certificate of authentication, an alternative certificate of
authentication in the following form:

This is one of the Securities referred to in the within mentioned Indenture.

Dated:

                                        JPMORGAN CHASE BANK, NATIONAL
                                        ASSOCIATION, not in its individual
                                        capacity, but solely as Trustee

                                        By:
                                            ------------------------------------
                                            Authenticating Agent

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

                                  ARTICLE VII

                      HOLDER'S LISTS AND REPORTS BY COMPANY

     SECTION 7.1. Company to Furnish Trustee Names and Addresses of Holders.

     The Company will furnish or cause to be furnished to the Trustee:

     (a) semiannually, on or before June 30 and December 31 of each year, a
list, in such form as the Trustee may reasonably require, of the names and
addresses of the Holders as of a date not more than fifteen (15) days prior to
the delivery thereof, and

                                       48

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

in each case to the extent such information is in the possession or control of
the Company and has not otherwise been received by the Trustee in its capacity
as Securities Registrar.

     SECTION 7.2. Preservation of Information, Communications to Holders.

     (a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 7.1 and the names and
addresses of Holders received by the Trustee in its capacity as Securities
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 7.1 upon receipt of a new list so furnished.

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

     (c) Every Holder of Securities, by receiving and holding the same, agrees
with the Company and the Trustee that neither the Company nor the Trustee nor
any agent of either of them shall be held accountable by reason of the
disclosure of information as to the names and addresses of the Holders made
pursuant to the Trust Indenture Act.

     SECTION 7.3. Reports by Company.

     (a) The Company shall furnish to the Holders and to prospective purchasers
of Securities, upon their request, the information required to be furnished
pursuant to Rule 144A(d)(4) under the Securities Act. The delivery requirement
set forth in the preceding sentence may be satisfied by compliance with Section
7.3(b) hereof.

     (b) The Company shall cause NorthStar Realty Finance Corp., the general
partner of the Company, to furnish to each of (i) the Trustee, (ii) the Holders
and to subsequent holders of Securities, (iii) Cohen Bros. & Company, 450 Park,
23rd Floor, New York, NY 10022, Attn: Mitchell Kahn or such other address as
designated by Cohen Bros. & Company) and (iv) any beneficial owner of the
Securities reasonably identified to the Company (which identification may be
made either by such beneficial owner or by Cohen Bros. & Company), a duly
completed and executed certificate substantially and substantively in the form
attached hereto as Exhibit A, including the financial statements referenced in
such Exhibit, which certificate and financial statements shall be so furnished
by the Company not later than fifty (50) days after the end of each of the first
three fiscal quarters of each fiscal year of the Company and not later than
ninety-five (95) days after the end of each fiscal year of the Company. The
delivery requirements under this Section 7.3(b) may be satisfied by compliance
with Section 8.16(b) of the Trust Agreement.

     (c) If the Company intends to file its annual and quarterly information
with the Securities and Exchange Commission (the "Commission") in electronic
form pursuant to Regulation S-T of the Commission using the Commission's
Electronic Data Gathering, Analysis and Retrieval ("EDGAR") system, the Company
shall notify the Trustee in the manner prescribed herein of each such annual and
quarterly filing. The Trustee is hereby authorized and directed to

                                       49

access the EDGAR system for purposes of retrieving the financial information so
filed. Compliance with the foregoing shall constitute delivery by the Company of
its financial statements to the Trustee in compliance with the provisions of
Section 314(a) of the Trust Indenture Act, if applicable. The Trustee shall have
no duty to search for or obtain any electronic or other filings that the Company
makes with the Commission, regardless of whether such filings are periodic,
supplemental or otherwise. Delivery of reports, information and documents to the
Trustee pursuant to this Section 7.3(c) shall be solely for purposes of
compliance with this Section 7.3 and, if applicable, with Section 314(a) of the
Trust Indenture Act. The Trustee's receipt of such reports, information and
documents shall not constitute notice to it of the content thereof or any matter
determinable from the content thereof, including the Company's compliance with
any of its covenants hereunder, as to which the Trustee is entitled to rely upon
Officers' Certificates.

                                  ARTICLE VIII

              CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE

     SECTION 8.1. Company May Consolidate, Etc., Only on Certain Terms.

     The Company shall not consolidate with or merge into any other Person or
convey, transfer or lease its properties and assets substantially as an entirety
to any Person, and no Person shall consolidate with or merge into the Company or
convey, transfer or lease its properties and assets substantially as an entirety
to the Company, unless:

     (a) if the Company shall consolidate with or merge into another Person or
convey, transfer or lease its properties and assets substantially as an entirety
to any Person, the entity formed by such consolidation or into which the Company
is merged or the Person that acquires by conveyance or transfer, or that leases,
the properties and assets of the Company substantially as an entirety shall be
an entity organized and existing under the laws of the United States of America
or any State or Territory thereof or the District of Columbia and shall
expressly assume, by an indenture supplemental hereto, executed and delivered to
the Trustee, in form reasonably satisfactory to the Trustee, the due and
punctual payment of the principal of and any premium and interest (including any
Additional Interest) on all the Securities and the performance of every covenant
of this Indenture on the part of the Company to be performed or observed;

     (b) immediately after giving effect to such transaction, no Event of
Default, and no event that, after notice or lapse of time, or both, would
constitute an Event of Default, shall have happened and be continuing; and

     (c) the Company has delivered to the Trustee an Officers' Certificate and
an Opinion of Counsel, each stating that such consolidation, merger, conveyance,
transfer or lease and, if a supplemental indenture is required in connection
with such transaction, any such supplemental indenture comply with this Article
VIII and that all conditions precedent herein provided for relating to such
transaction have been complied with; and the Trustee may rely upon such
Officers' Certificate and Opinion of Counsel as conclusive evidence that such
transaction complies with this Section 8.1.

                                       50

     SECTION 8.2. Successor Company Substituted.

     (a) Upon any consolidation or merger by the Company with or into any other
Person, or any conveyance, transfer or lease by the Company of its properties
and assets substantially as an entirety to any Person in accordance with Section
8.1 and the execution and delivery to the Trustee of the supplemental indenture
described in Section 8.1(a), the successor entity formed by such consolidation
or into which the Company is merged or to which such conveyance, transfer or
lease is made shall succeed to, and be substituted for, and may exercise every
right and power of, the Company under this Indenture with the same effect as if
such successor Person had been named as the Company herein; and in the event of
any such conveyance or transfer, following the execution and delivery of such
supplemental indenture, the Company shall be discharged from all obligations and
covenants under the Indenture and the Securities.

     (b) Such successor Person may cause to be executed, and may issue either in
its own name or in the name of the Company, any or all of the Securities
issuable hereunder that theretofore shall not have been signed by the Company
and delivered to the Trustee; and, upon the order of such successor Person
instead of the Company and subject to all the terms, conditions and limitations
in this Indenture prescribed, the Trustee shall authenticate and shall deliver
any Securities that previously shall have been signed and delivered by the
officers of the Company to the Trustee for authentication, and any Securities
that such successor Person thereafter shall cause to be executed and delivered
to the Trustee on its behalf. All the Securities so issued shall in all respects
have the same legal rank and benefit under this Indenture as the Securities
theretofore or thereafter issued in accordance with the terms of this Indenture.

     (c) In case of any such consolidation, merger, sale, conveyance or lease,
such changes in phraseology and form may be made in the Securities thereafter to
be issued as may be appropriate to reflect such occurrence.

                                   ARTICLE IX

                             SUPPLEMENTAL INDENTURES

     SECTION 9.1. Supplemental Indentures without Consent of Holders.

     Without the consent of any Holders, the Company, when authorized by a Board
Resolution, and the Trustee, at any time and from time to time, may enter into
one or more indentures supplemental hereto, in form reasonably satisfactory to
the Trustee, for any of the following purposes:

     (a) to evidence the succession of another Person to the Company, and the
assumption by any such successor of the covenants of the Company herein and in
the Securities; or

     (b) to evidence and provide for the acceptance of appointment hereunder by
a successor trustee; or

     (c) to cure any ambiguity, to correct or supplement any provision herein
that may be defective or inconsistent with any other provision herein, or to
make or amend any other provisions with respect to matters or questions arising
under this Indenture, which shall not be inconsistent with the other provisions
of this Indenture, provided, that such action pursuant to

                                       51

this clause (b) shall not adversely affect in any material respect the interests
of any Holders or the holders of the Preferred Securities; or

     (d) to comply with the rules and regulations of any securities exchange or
automated quotation system on which any of the Securities may be listed, traded
or quoted; or

     (e) to add to the covenants, restrictions or obligations of the Company or
to add to the Events of Default, provided, that such action pursuant to this
clause (c) shall not adversely affect in any material respect the interests of
any Holders or the holders of the Preferred Securities; or

     (f) to modify, eliminate or add to any provisions of the Indenture or the
Securities to such extent as shall be necessary to ensure that the Securities
are treated as indebtedness of the Company for United States Federal income tax
purposes, provided, that such action pursuant to this clause (d) shall not
adversely affect in any material respect the interests of any Holders or the
holders of the Preferred Securities.

     SECTION 9.2. Supplemental Indentures with Consent of Holders.

     (a) Subject to Section 9.1, with the consent of the Holders of not less
than a majority in aggregate principal amount of the Outstanding Securities, by
Act of said Holders delivered to the Company and the Trustee, the Company, when
authorized by a Board Resolution, and the Trustee may enter into an indenture or
indentures supplemental hereto for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Indenture or
of modifying in any manner the rights of the Holders of Securities under this
Indenture; provided, that no such supplemental indenture shall, without the
consent of the Holder of each Outstanding Security,

          (i) change the Stated Maturity of the principal or any premium of any
     Security or change the date of payment of any installment of interest
     (including any Additional Interest) on any Security, or reduce the
     principal amount thereof or the rate of interest thereon or any premium
     payable upon the redemption thereof or change the place of payment where,
     or the coin or currency in which, any Security or interest thereon is
     payable, or restrict or impair the right to institute suit for the
     enforcement of any such payment on or after such date, or

          (ii) reduce the percentage in aggregate principal amount of the
     Outstanding Securities, the consent of whose Holders is required for any
     such supplemental indenture, or the consent of whose Holders is required
     for any waiver of compliance with any provision of this Indenture or of
     defaults hereunder and their consequences provided for in this Indenture,
     or

          (iii) modify any of the provisions of this Section 9.2, Section 5.13
     or Section 10.7, except to increase any percentage in aggregate principal
     amount of the Outstanding Securities, the consent of whose Holders is
     required for any reason, or to provide that certain other provisions of
     this Indenture cannot be modified or waived without the consent of the
     Holder of each Security;

provided, further, that, so long as any Preferred Securities remain outstanding,
no amendment under this Section 9.2 shall be effective until the holders of a
majority in Liquidation Amount of

                                       52

the Preferred Securities shall have consented to such amendment; provided,
further, that if the consent of the Holder of each Outstanding Security is
required for any amendment under this Indenture, such amendment shall not be
effective until the holder of each Outstanding Preferred Security shall have
consented to such amendment.

     (b) It shall not be necessary for any Act of Holders under this Section 9.2
to approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.

     SECTION 9.3. Execution of Supplemental Indentures.

     In executing or accepting the additional trusts created by any supplemental
indenture permitted by this Article IX or the modifications thereby of the
trusts created by this Indenture, the Trustee shall be entitled to receive, and
shall be fully protected in conclusively relying upon, an Officers' Certificate
and an Opinion of Counsel stating that the execution of such supplemental
indenture is authorized or permitted by this Indenture, and that all conditions
precedent herein provided for relating to such action have been complied with.
The Trustee may, but shall not be obligated to, enter into any such supplemental
indenture that affects the Trustee's own rights, duties, indemnities or
immunities under this Indenture or otherwise. Copies of the final form of each
supplemental indenture shall be delivered by the Trustee at the expense of the
Company to each Holder, and, if the Trustee is the Property Trustee, to each
holder of Preferred Securities, promptly after the execution thereof.

     SECTION 9.4. Effect of Supplemental Indentures.

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

     SECTION 9.5. Reference in Securities to Supplemental Indentures.

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

                                    ARTICLE X

                                    COVENANTS

     SECTION 10.1. Payment of Principal, Premium, if any, and Interest.

     The Company covenants and agrees for the benefit of the Holders of the
Securities that it will duly and punctually pay the principal of and any premium
and interest (including any Additional Interest) on the Securities in accordance
with the terms of the Securities and this

                                       53

Indenture. As of the date hereof, the Company represents that it has no present
intention to exercise its right under Section 3.9 to defer payments of interest
on the Securities.

     SECTION 10.2. Money for Security Payments to be Held in Trust.

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

     (b) Whenever the Company shall have one or more Paying Agents, it will,
prior to 10:00 a.m., New York City time, on each due date of the principal of or
any premium or interest (including any Additional Interest) on any Securities,
deposit with a Paying Agent a sum sufficient to pay such amount, such sum to be
held as provided in the Trust Indenture Act and (unless such Paying Agent is the
Trustee) the Company will promptly notify the Trustee of its failure so to act.

     (c) The Company will cause each Paying Agent for the Securities other than
the Trustee to execute and deliver to the Trustee an instrument in which such
Paying Agent shall agree with the Trustee, subject to the provisions of this
Section 10.2, that such Paying Agent will (i) comply with the provisions of this
Indenture and the Trust Indenture Act applicable to it as a Paying Agent and
(ii) during the continuance of any default by the Company (or any other obligor
upon the Securities) in the making of any payment in respect of the Securities,
upon the written request of the Trustee, forthwith pay to the Trustee all sums
held in trust by such Paying Agent for payment in respect of the Securities.

     (d) The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.

     (e) Any money deposited with the Trustee or any Paying Agent, or then held
by the Company in trust for the payment of the principal of and any premium or
interest (including any Additional Interest) on any Security and remaining
unclaimed for two years after such principal and any premium or interest has
become due and payable shall (unless otherwise required by mandatory provision
of applicable escheat or abandoned or unclaimed property law) be paid on Company
Request to the Company, or (if then held by the Company) shall (unless otherwise
required by mandatory provision of applicable escheat or abandoned or unclaimed
property law) be discharged from such trust; and the Holder of such Security
shall thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; provided, that the Trustee or such Paying Agent,
before being

                                       54

required to make any such repayment, may at the expense of the Company cause to
be published once, in a newspaper published in the English language, customarily
published on each Business Day and of general circulation in the Borough of
Manhattan, The City of New York, notice that such money remains unclaimed and
that, after a date specified therein, which shall not be less than thirty (30)
days from the date of such publication, any unclaimed balance of such money then
remaining will be repaid to the Company.

     SECTION 10.3. Statement as to Compliance.

     The Company shall deliver to the Trustee, within one hundred and twenty
(120) days after the end of each fiscal year of the Company ending after the
date hereof, an Officers' Certificate covering the preceding calendar year,
stating whether or not to the knowledge of the signers thereof the Company is in
default in the performance or observance of any of the terms, provisions and
conditions of this Indenture (without regard to any period of grace or
requirement of notice provided hereunder), and if the Company shall be in
default, specifying all such defaults and the nature and status thereof of which
they may have knowledge. The delivery requirements of this Section 10.3 may be
satisfied by compliance with Section 8.16(a) of the Trust Agreement.

     SECTION 10.4. Calculation Agent.

     (a) The Company hereby agrees that for so long as any of the Securities
remain Outstanding, there will at all times be an agent appointed to calculate
LIBOR in respect of each Interest Payment Date in accordance with the terms of
Schedule A (the "Calculation Agent"). The Company has initially appointed the
Property Trustee as Calculation Agent for purposes of determining LIBOR for each
Interest Payment Date. The Calculation Agent may be removed by the Company at
any time. So long as the Property Trustee holds any of the Securities, the
Calculation Agent shall be the Property Trustee, except as described in the
immediately preceding sentence. If the Calculation Agent is unable or unwilling
to act as such or is removed by the Company, the Company will promptly appoint
as a replacement Calculation Agent the London office of a leading bank which is
engaged in transactions in Eurodollar deposits in the international Eurodollar
market and which does not control or is not controlled by or under common
control with the Company or its Affiliates. The Calculation Agent may not resign
its duties without a successor having been duly appointed.

     (b) The Calculation Agent shall be required to agree that, as soon as
possible after 11:00 a.m. (London time) on each LIBOR Determination Date (as
defined in Schedule A), but in no event later than 11:00 a.m. (London time) on
the Business Day immediately following each LIBOR Determination Date, the
Calculation Agent will calculate the interest rate (the Interest Payment shall
be rounded to the nearest cent, with half a cent being rounded upwards) for the
related Interest Payment Date, and will communicate such rate and amount to the
Company, the Trustee, each Paying Agent and the Depositary. The Calculation
Agent will also specify to the Company the quotations upon which the foregoing
rates and amounts are based and, in any event, the Calculation Agent shall
notify the Company before 5:00 p.m. (London time) on each LIBOR Determination
Date that either: (i) it has determined or is in the process of determining the
foregoing rates and amounts or (ii) it has not determined and is not in the
process of determining the foregoing rates and amounts, together with its
reasons therefor. The Calculation Agent's determination of the foregoing rates
and amounts for any Interest Payment Date will (in

                                       55

the absence of manifest error) be final and binding upon all parties. For the
sole purpose of calculating the interest rate for the Securities, "Business Day"
shall be defined as any day on which dealings in deposits in Dollars are
transacted in the London interbank market.

     SECTION 10.5. Additional Tax Sums.

     So long as no Event of Default has occurred and is continuing, if (a) the
Trust is the Holder of all of the Outstanding Securities and (b) a Tax Event
described in clause (i) or (iii) in the definition of Tax Event in Section 1.1
hereof has occurred and is continuing, the Company shall pay to the Trust (and
its permitted successors or assigns under the related Trust Agreement) for so
long as the Trust (or its permitted successor or assignee) is the registered
holder of the Outstanding Securities, such amounts as may be necessary in order
that the amount of Distributions (including any Additional Interest Amount (as
defined in the Trust Agreement)) then due and payable by the Trust on the
Preferred Securities and Common Securities that at any time remain outstanding
in accordance with the terms thereof shall not be reduced as a result of any
Additional Taxes arising from such Tax Event (additional such amounts payable by
the Company to the Trust, the "Additional Tax Sums"). Whenever in this Indenture
or the Securities there is a reference in any context to the payment of
principal of or interest on the Securities, such mention shall be deemed to
include mention of the payments of the Additional Tax Sums provided for in this
Section 10.5 to the extent that, in such context, Additional Tax Sums are, were
or would be payable in respect thereof pursuant to the provisions of this
Section 10.5 and express mention of the payment of Additional Tax Sums (if
applicable) in any provisions hereof shall not be construed as excluding
Additional Tax Sums in those provisions hereof where such express mention is not
made; provided, that the deferral of the payment of interest pursuant to Section
3.9 on the Securities shall not defer the payment of any Additional Tax Sums
that may be due and payable.

     SECTION 10.6. Additional Covenants.

     (a) The Company covenants and agrees with each Holder of Securities that if
an Event of Default shall have occurred and be continuing or the Company shall
have given notice of its election to begin an Extension Period with respect to
the Securities or such Extension Period, or any extension thereof, shall be
continuing, it shall not (i) declare or pay any dividends or distributions on,
or redeem, purchase, acquire or make a liquidation payment with respect to, any
shares of the Company's capital stock (for the avoidance of doubt, the term
"capital stock" includes both common stock and preferred stock of the Company),
(ii) vote in favor of or permit or otherwise allow any of its subsidiaries to
declare or pay any dividends or distributions on, or redeem, purchase, acquire
or make a liquidation payment with respect to or otherwise retire, any shares of
such subsidiaries preferred stock (for the avoidance of doubt, whether such
preferred stock is perpetual or otherwise), or (iii) make any payment of
principal of or any interest or premium, if any, on or repay, repurchase or
redeem any debt securities of the Company that rank pari passu in all respects
with or junior in interest to the Securities (other than (A) repurchases,
redemptions or other acquisitions of shares of capital stock of the Company in
connection with any employment contract, benefit plan or other similar
arrangement with or for the benefit of any one or more employees, officers,
directors or consultants, in connection with a dividend reinvestment or
stockholder stock purchase plan or in connection with the issuance of capital
stock of the Company (or securities convertible into or exercisable for such
capital stock) as consideration in an acquisition transaction entered into prior
to the Event of Default or applicable

                                       56

Extension Period, (B) as a result of an exchange or conversion of any class or
series of the Company's capital stock (or any capital stock of a Subsidiary of
the Company) for any class or series of the Company's capital stock or of any
class or series of the Company's indebtedness for any class or series of the
Company's capital stock, (C) the purchase of fractional interests in shares of
the Company's capital stock pursuant to the conversion or exchange provisions of
such capital stock or the security being converted or exchanged, (D) any
declaration of a dividend in connection with any Rights Plan, the issuance of
rights, stock or other property under any Rights Plan or the redemption or
repurchase of rights pursuant thereto or (E) any dividend in the form of stock,
warrants, options or other rights where the dividend stock or the stock issuable
upon exercise of such warrants, options or other rights is the same stock as
that on which the dividend is being paid or ranks pari passu with or junior to
such stock).

     (b) The Company also covenants with each Holder of Securities (i) to hold,
directly or indirectly, one hundred percent (100%) of the Common Securities of
the Trust, provided, that any permitted successor of the Company hereunder may
succeed to the Company's ownership of such Common Securities, (ii) as holder of
such Common Securities, not to voluntarily dissolve, wind-up or liquidate the
Trust other than (A) in connection with a distribution of the Securities to the
holders of the Preferred Securities in liquidation of the Trust or (B) in
connection with certain mergers, consolidations or amalgamations permitted by
the Trust Agreement and (iii) to use its reasonable commercial efforts,
consistent with the terms and provisions of the Trust Agreement, to cause the
Trust to continue to be taxable as a grantor trust and not as a corporation for
United States Federal income tax purposes.

     (c) The Company also agrees to use its reasonable best efforts to meet the
requirements to qualify, effective for the fiscal year ending December 31, 2004
and all future fiscal years, as a real estate investment trust under the
Internal Revenue Code of 1986, as amended.

     SECTION 10.7. Waiver of Covenants.

     The Company may omit in any particular instance to comply with any covenant
or condition contained in Section 10.6 if, before or after the time for such
compliance, the Holders of at least a majority in aggregate principal amount of
the Outstanding Securities shall, by Act of such Holders, and at least a
majority of the aggregate Liquidation Amount of the Preferred Securities then
outstanding, by consent of such holders, either waive such compliance in such
instance or generally waive compliance with such covenant or condition, but no
such waiver shall extend to or affect such covenant or condition except to the
extent so expressly waived, and, until such waiver shall become effective, the
obligations of the Company in respect of any such covenant or condition shall
remain in full force and effect.

     SECTION 10.8. Treatment of Securities.

     The Company will treat the Securities as indebtedness, and the amounts,
other than payments of principal, payable in respect of the principal amount of
such Securities as interest, for all U.S. federal income tax purposes. All
payments in respect of the Securities will be made free and clear of U.S.
withholding tax to any beneficial owner thereof that has provided an Internal
Revenue Service Form W-9 or W-8BEN (or any substitute or successor form)

                                       57

establishing its U.S. or non-U.S. status for U.S. federal income tax purposes,
or any other applicable form establishing a complete exemption from U.S.
withholding tax.

                                   ARTICLE XI

                            REDEMPTION OF SECURITIES

     SECTION 11.1. Optional Redemption.

     The Company may, at its option, on any Interest Payment Date, on or after
June 30, 2010, redeem the Securities in whole at any time or in part from time
to time, at a Redemption Price equal to one hundred percent (100%) of the
principal amount thereof (or of the redeemed portion thereof, as applicable),
together, in the case of any such redemption, with accrued and unpaid interest,
including any Additional Interest, through but excluding the date fixed as the
Redemption Date (the "Optional Redemption Price").

     SECTION 11.2. Special Event Redemption.

     Prior to June 30, 2010, upon the occurrence and during the continuation of
a Special Event, the Company may, at its option, redeem the Securities, in whole
but not in part, at a Redemption Price equal to one hundred seven and one half
percent (107.5%) of the principal amount thereof, together, in the case of any
such redemption, with accrued interest, including any Additional Interest,
through but excluding the date fixed as the Redemption Date (the "Special
Redemption Price").

     SECTION 11.3. Election to Redeem; Notice to Trustee.

     The election of the Company to redeem any Securities, in whole or in part,
shall be evidenced by or pursuant to a Board Resolution. In case of any
redemption at the election of the Company, the Company shall, not less than
forty-five (45) days and not more than seventy-five (75) days prior to the
Redemption Date (unless a shorter notice shall be satisfactory to the Trustee),
notify the Trustee and the Property Trustee under the Trust Agreement in writing
of such date and of the principal amount of the Securities to be redeemed and
provide the additional information required to be included in the notice or
notices contemplated by Section 11.5. In the case of any redemption of
Securities, in whole or in part, (a) prior to the expiration of any restriction
on such redemption provided in this Indenture or the Securities or (b) pursuant
to an election of the Company which is subject to a condition specified in this
Indenture or the Securities, the Company shall furnish the Trustee with an
Officers' Certificate and an Opinion of Counsel evidencing compliance with such
restriction or condition.

     SECTION 11.4. Selection of Securities to be Redeemed.

     (a) If less than all the Securities are to be redeemed, the particular
Securities to be redeemed shall be selected and redeemed on a pro rata basis not
more than sixty (60) days prior to the Redemption Date by the Trustee from the
Outstanding Securities not previously called for redemption, provided, that the
unredeemed portion of the principal amount of any Security shall be in an
authorized denomination (which shall not be less than the minimum authorized
denomination) for such Security.

                                       58

     (b) The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption and, in the case of any Securities selected
for partial redemption, the principal amount thereof to be redeemed. For all
purposes of this Indenture, unless the context otherwise requires, all
provisions relating to the redemption of Securities shall relate, in the case of
any Security redeemed or to be redeemed only in part, to the portion of the
principal amount of such Security that has been or is to be redeemed.

     (c) The provisions of paragraphs (a) and (b) of this Section 11.4 shall not
apply with respect to any redemption affecting only a single Security, whether
such Security is to be redeemed in whole or in part. In the case of any such
redemption in part, the unredeemed portion of the principal amount of the
Security shall be in an authorized denomination (which shall not be less than
the minimum authorized denomination) for such Security.

     SECTION 11.5. Notice of Redemption.

     (a) Notice of redemption shall be given not later than the thirtieth (30th)
day, and not earlier than the sixtieth (60th) day, prior to the Redemption Date
to each Holder of Securities to be redeemed, in whole or in part (unless a
shorter notice shall be satisfactory to the Property Trustee under the related
Trust Agreement).

     (b) With respect to Securities to be redeemed, in whole or in part, each
notice of redemption shall state:

          (i) the Redemption Date;

          (ii) the Redemption Price or, if the Redemption Price cannot be
     calculated prior to the time the notice is required to be sent, the
     estimate of the Redemption Price, as calculated by the Company, together
     with a statement that it is an estimate and that the actual Redemption
     Price will be calculated on the fifth Business Day prior to the Redemption
     Date (and if an estimate is provided, a further notice shall be sent of the
     actual Redemption Price on the date that such Redemption Price is
     calculated);

          (iii) if less than all Outstanding Securities are to be redeemed, the
     identification (and, in the case of partial redemption, the respective
     principal amounts) of the amount of and particular Securities to be
     redeemed;

          (iv) that on the Redemption Date, the Redemption Price will become due
     and payable upon each such Security or portion thereof, and that any
     interest (including any Additional Interest) on such Security or such
     portion, as the case may be, shall cease to accrue on and after said date;

          (v) the place or places where such Securities are to be surrendered
     for payment of the Redemption Price; and

          (vi) such other provisions as the Company deems relevant.

     (c) Notice of redemption of Securities to be redeemed, in whole or in part,
at the election of the Company shall be given by the Company or, at the
Company's request, by the Trustee in the name and at the expense of the Company
and shall be irrevocable. The notice if

                                       59

mailed in the manner provided above shall be conclusively presumed to have been
duly given, whether or not the Holder receives such notice. In any case, a
failure to give such notice by mail or any defect in the notice to the Holder of
any Security designated for redemption as a whole or in part shall not affect
the validity of the proceedings for the redemption of any other Security.

     SECTION 11.6. Deposit of Redemption Price.

     Prior to 10:00 a.m., New York City time, on the Redemption Date specified
in the notice of redemption given as provided in Section 11.5, the Company will
deposit with the Trustee or with one or more Paying Agents (or if the Company is
acting as its own Paying Agent, the Company will segregate and hold in trust as
provided in Section 10.2) an amount of money sufficient to pay the Redemption
Price of, and any accrued interest (including any Additional Interest) on, all
the Securities (or portions thereof) that are to be redeemed on that date.

     SECTION 11.7. Payment of Securities Called for Redemption.

     (a) If any notice of redemption has been given as provided in Section 11.5,
the Securities or portion of Securities with respect to which such notice has
been given shall become due and payable on the date and at the place or places
stated in such notice at the applicable Redemption Price, together with accrued
interest (including any Additional Interest) to the Redemption Date. On
presentation and surrender of such Securities at a Place of Payment specified in
such notice, the Securities or the specified portions thereof shall be paid and
redeemed by the Company at the applicable Redemption Price, together with
accrued interest (including any Additional Interest) to the Redemption Date.

     (b) Upon presentation of any Security redeemed in part only, the Company
shall execute and the Trustee shall authenticate and deliver to the Holder
thereof, at the expense of the Company, a new Security or Securities, of
authorized denominations, in aggregate principal amount equal to the unredeemed
portion of the Security so presented and having the same Original Issue Date,
Stated Maturity and terms.

     (c) If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal of and any premium on such
Security shall, until paid, bear interest from the Redemption Date at the rate
prescribed therefor in the Security.

                                  ARTICLE XII

                           SUBORDINATION OF SECURITIES

     SECTION 12.1. Securities Subordinate to Senior Debt.

     The Company covenants and agrees, and each Holder of a Security, by its
acceptance thereof, likewise covenants and agrees, that, to the extent and in
the manner hereinafter set forth in this Article XII, the payment of the
principal of and any premium and interest (including any Additional Interest) on
each and all of the Securities are hereby expressly made subordinate and subject
in right of payment to the prior payment in full of all Senior Debt, except as
otherwise provided in Section 4.2.

                                       60

     SECTION 12.2. No Payment When Senior Debt in Default; Payment Over of
Proceeds Upon Dissolution, Etc.

     (a) In the event and during the continuation of any default by the Company
in the payment of any principal of or any premium or interest on any Senior Debt
(following any grace period, if applicable) when the same becomes due and
payable, whether at maturity or at a date fixed for prepayment or by declaration
of acceleration or otherwise, then, upon written notice of such default to the
Company by the holders of such Senior Debt or any trustee therefor, unless and
until such default shall have been cured or waived or shall have ceased to
exist, no direct or indirect payment (in cash, property, securities, by set-off
or otherwise) shall be made or agreed to be made on account of the principal of
or any premium or interest (including any Additional Interest) on any of the
Securities, or in respect of any redemption, repayment, retirement, purchase or
other acquisition of any of the Securities.

     (b) In the event of a bankruptcy, insolvency or other proceeding described
in clause (d) or (e) of the definition of Event of Default (each such event, if
any, herein sometimes referred to as a "Proceeding"), all Senior Debt (including
any interest thereon accruing after the commencement of any such proceedings)
shall first be paid in full before any payment or distribution, whether in cash,
securities or other property, shall be made to any Holder of any of the
Securities on account thereof. Any payment or distribution, whether in cash,
securities or other property (other than securities of the Company or any other
entity provided for by a plan of reorganization or readjustment the payment of
which is subordinate, at least to the extent provided in these subordination
provisions with respect to the indebtedness evidenced by the Securities, to the
payment of all Senior Debt at the time outstanding and to any securities issued
in respect thereof under any such plan of reorganization or readjustment), which
would otherwise (but for these subordination provisions) be payable or
deliverable in respect of the Securities shall be paid or delivered directly to
the holders of Senior Debt in accordance with the priorities then existing among
such holders until all Senior Debt (including any interest thereon accruing
after the commencement of any Proceeding) shall have been paid in full.

     (c) In the event of any Proceeding, after payment in full of all sums owing
with respect to Senior Debt, the Holders of the Securities, together with the
holders of any obligations of the Company ranking on a parity with the
Securities, shall be entitled to be paid from the remaining assets of the
Company the amounts at the time due and owing on account of unpaid principal of
and any premium and interest (including any Additional Interest) on the
Securities and such other obligations before any payment or other distribution,
whether in cash, property or otherwise, shall be made on account of any capital
stock or any obligations of the Company ranking junior to the Securities and
such other obligations. If, notwithstanding the foregoing, any payment or
distribution of any character or any security, whether in cash, securities or
other property (other than securities of the Company or any other entity
provided for by a plan of reorganization or readjustment the payment of which is
subordinate, at least to the extent provided in these subordination provisions
with respect to the indebtedness evidenced by the Securities, to the payment of
all Senior Debt at the time outstanding and to any securities issued in respect
thereof under any such plan of reorganization or readjustment) shall be received
by the Trustee or any Holder in contravention of any of the terms hereof and
before all Senior Debt shall have been paid in full, such payment or
distribution or security shall be received in trust for the benefit of, and
shall be paid over or delivered and transferred to, the holders of the Senior
Debt at the time outstanding in accordance with the priorities then existing
among such holders

                                       61

for application to the payment of all Senior Debt remaining unpaid, to the
extent necessary to pay all such Senior Debt (including any interest thereon
accruing after the commencement of any Proceeding) in full. In the event of the
failure of the Trustee or any Holder to endorse or assign any such payment,
distribution or security, each holder of Senior Debt is hereby irrevocably
authorized to endorse or assign the same.

     (d) The Trustee and the Holders, at the expense of the Company, shall take
such reasonable action (including the delivery of this Indenture to an agent for
any holders of Senior Debt or consent to the filing of a financing statement
with respect hereto) as may, in the opinion of counsel designated by the holders
of a majority in principal amount of the Senior Debt at the time outstanding, be
necessary or appropriate to assure the effectiveness of the subordination
effected by these provisions.

     (e) The provisions of this Section 12.2 shall not impair any rights,
interests, remedies or powers of any secured creditor of the Company in respect
of any security interest the creation of which is not prohibited by the
provisions of this Indenture.

     (f) The securing of any obligations of the Company, otherwise ranking on a
parity with the Securities or ranking junior to the Securities, shall not be
deemed to prevent such obligations from constituting, respectively, obligations
ranking on a parity with the Securities or ranking junior to the Securities.

     SECTION 12.3. Payment Permitted If No Default.

     Nothing contained in this Article XII or elsewhere in this Indenture or in
any of the Securities shall prevent (a) the Company, at any time, except during
the pendency of the conditions described in paragraph (a) of Section 12.2 or of
any Proceeding referred to in Section 12.2, from making payments at any time of
principal of and any premium or interest (including any Additional Interest) on
the Securities or (b) the application by the Trustee of any moneys deposited
with it hereunder to the payment of or on account of the principal of and any
premium or interest (including any Additional Interest) on the Securities or the
retention of such payment by the Holders, if, at the time of such application by
the Trustee, it did not have knowledge (in accordance with Section 12.8) that
such payment would have been prohibited by the provisions of this Article XII,
except as provided in Section 12.8.

     SECTION 12.4. Subrogation to Rights of Holders of Senior Debt.

     Subject to the payment in full of all amounts due or to become due on all
Senior Debt, or the provision for such payment in cash or cash equivalents or
otherwise in a manner satisfactory to the holders of Senior Debt, the Holders of
the Securities shall be subrogated to the extent of the payments or
distributions made to the holders of such Senior Debt pursuant to the provisions
of this Article XII (equally and ratably with the holders of all indebtedness of
the Company that by its express terms is subordinated to Senior Debt of the
Company to substantially the same extent as the Securities are subordinated to
the Senior Debt and is entitled to like rights of subrogation by reason of any
payments or distributions made to holders of such Senior Debt) to the rights of
the holders of such Senior Debt to receive payments and distributions of cash,
property and securities applicable to the Senior Debt until the principal of and
any premium and interest (including any Additional Interest) on the Securities
shall be paid in full. For purposes of

                                       62

such subrogation, no payments or distributions to the holders of the Senior Debt
of any cash, property or securities to which the Holders of the Securities or
the Trustee would be entitled except for the provisions of this Article XII, and
no payments made pursuant to the provisions of this Article XII to the holders
of Senior Debt by Holders of the Securities or the Trustee, shall, as among the
Company, its creditors other than holders of Senior Debt, and the Holders of the
Securities, be deemed to be a payment or distribution by the Company to or on
account of the Senior Debt.

     SECTION 12.5. Provisions Solely to Define Relative Rights.

     The provisions of this Article XII are and are intended solely for the
purpose of defining the relative rights of the Holders of the Securities on the
one hand and the holders of Senior Debt on the other hand. Nothing contained in
this Article XII or elsewhere in this Indenture or in the Securities is intended
to or shall (a) impair, as between the Company and the Holders of the
Securities, the obligations of the Company, which are absolute and
unconditional, to pay to the Holders of the Securities the principal of and any
premium and interest (including any Additional Interest) on the Securities as
and when the same shall become due and payable in accordance with their terms,
(b) affect the relative rights against the Company of the Holders of the
Securities and creditors of the Company other than their rights in relation to
the holders of Senior Debt or (c) prevent the Trustee or the Holder of any
Security (or to the extent expressly provided herein, the holder of any
Preferred Security) from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, including filing and voting
claims in any Proceeding, subject to the rights, if any, under this Article XII
of the holders of Senior Debt to receive cash, property and securities otherwise
payable or deliverable to the Trustee or such Holder.

     SECTION 12.6. Trustee to Effectuate Subordination.

     Each Holder of a Security by his or her acceptance thereof authorizes and
directs the Trustee on his or her behalf to take such action as may be necessary
or appropriate to acknowledge or effectuate the subordination provided in this
Article XII and appoints the Trustee his or her attorney-in-fact for any and all
such purposes.

     SECTION 12.7. No Waiver of Subordination Provisions.

     (a) No right of any present or future holder of any Senior Debt to enforce
subordination as herein provided shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the Company or by any act
or failure to act, in good faith, by any such holder, or by any noncompliance by
the Company with the terms, provisions and covenants of this Indenture,
regardless of any knowledge thereof that any such holder may have or be
otherwise charged with.

     (b) Without in any way limiting the generality of paragraph (a) of this
Section 12.7, the holders of Senior Debt may, at any time and from to time,
without the consent of or notice to the Trustee or the Holders of the
Securities, without incurring responsibility to such Holders of the Securities
and without impairing or releasing the subordination provided in this Article
XII or the obligations hereunder of such Holders of the Securities to the
holders of Senior Debt, do any one or more of the following: (i) change the
manner, place or terms of payment or extend the

                                       63

time of payment of, or renew or alter, Senior Debt, or otherwise amend or
supplement in any manner Senior Debt or any instrument evidencing the same or
any agreement under which Senior Debt is outstanding, (ii) sell, exchange,
release or otherwise deal with any property pledged, mortgaged or otherwise
securing Senior Debt, (iii) release any Person liable in any manner for the
payment of Senior Debt and (iv) exercise or refrain from exercising any rights
against the Company and any other Person.

     SECTION 12.8. Notice to Trustee.

     (a) The Company shall give prompt written notice to a Responsible Officer
of the Trustee of any fact known to the Company that would prohibit the making
of any payment to or by the Trustee in respect of the Securities.
Notwithstanding the provisions of this Article XII or any other provision of
this Indenture, the Trustee shall not be charged with knowledge of the existence
of any facts that would prohibit the making of any payment to or by the Trustee
in respect of the Securities, unless and until a Responsible Officer of the
Trustee shall have received written notice thereof from the Company or a holder
of Senior Debt or from any trustee, agent or representative therefor; provided,
that if the Trustee shall not have received the notice provided for in this
Section 12.8 at least two Business Days prior to the date upon which by the
terms hereof any monies may become payable for any purpose (including, the
payment of the principal of and any premium on or interest (including any
Additional Interest) on any Security), then, anything herein contained to the
contrary notwithstanding, the Trustee shall have full power and authority to
receive such monies and to apply the same to the purpose for which they were
received and shall not be affected by any notice to the contrary that may be
received by it within two Business Days prior to such date.

     (b) The Trustee shall be entitled to rely on the delivery to it of a
written notice by a Person representing himself or herself to be a holder of
Senior Debt (or a trustee, agent, representative or attorney-in-fact therefor)
to establish that such notice has been given by a holder of Senior Debt (or a
trustee, agent, representative or attorney-in-fact therefor). In the event that
the Trustee determines in good faith that further evidence is required with
respect to the right of any Person as a holder of Senior Debt to participate in
any payment or distribution pursuant to this Article XII, the Trustee may
request such Person to furnish evidence to the reasonable satisfaction of the
Trustee as to the amount of Senior Debt held by such Person, the extent to which
such Person is entitled to participate in such payment or distribution and any
other facts pertinent to the rights of such Person under this Article XII, and
if such evidence is not furnished, the Trustee may defer any payment to such
Person pending judicial determination as to the right of such Person to receive
such payment.

     SECTION 12.9. Reliance on Judicial Order or Certificate of Liquidating
Agent.

     Upon any payment or distribution of assets of the Company referred to in
this Article XII, the Trustee and the Holders of the Securities shall be
entitled to conclusively rely upon any order or decree entered by any court of
competent jurisdiction in which such Proceeding is pending, or a certificate of
the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee
for the benefit of creditors, agent or other Person making such payment or
distribution, delivered to the Trustee or to the Holders of Securities, for the
purpose of ascertaining the Persons entitled to participate in such payment or
distribution, the holders of the Senior Debt and other indebtedness

                                       64

of the Company, the amount thereof or payable thereon, the amount or amounts
paid or distributed thereon and all other facts pertinent thereto or to this
Article XII.

     SECTION 12.10. Trustee Not Fiduciary for Holders of Senior Debt.

     The Trustee, in its capacity as trustee under this Indenture, shall not be
deemed to owe any fiduciary duty to the holders of Senior Debt and shall not be
liable to any such holders if it shall in good faith mistakenly pay over or
distribute to Holders of Securities or to the Company or to any other Person
cash, property or securities to which any holders of Senior Debt shall be
entitled by virtue of this Article XII or otherwise.

     SECTION 12.11. Rights of Trustee as Holder of Senior Debt; Preservation of
Trustee's Rights.

     The Trustee in its individual capacity shall be entitled to all the rights
set forth in this Article XII with respect to any Senior Debt that may at any
time be held by it, to the same extent as any other holder of Senior Debt, and
nothing in this Indenture shall deprive the Trustee of any of its rights as such
holder.

     SECTION 12.12. Article Applicable to Paying Agents.

     If at any time any Paying Agent other than the Trustee shall have been
appointed by the Company and be then acting hereunder, the term "Trustee" as
used in this Article XII shall in such case (unless the context otherwise
requires) be construed as extending to and including such Paying Agent within
its meaning as fully for all intents and purposes as if such Paying Agent were
named in this Article XII in addition to or in place of the Trustee; provided,
that Sections 12.8 and 12.11 shall not apply to the Company or any Affiliate of
the Company if the Company or such Affiliate acts as Paying Agent.

                                     * * * *

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

                                     * * * *

                                       65

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

                                      NORTHSTAR REALTY FINANCE LIMITED
                                      PARTNERSHIP

                                      By : NorthStar Realty Finance Corp., as
                                           General Partner

                                      By: /s/ Mark E. Chertok
                                          --------------------------------------
                                          Name: Mark E. Chertok
                                          Title: Chief Financial Officer and
                                                 Treasurer.

                                      JPMORGAN CHASE BANK, NATIONAL ASSOCIATION,
                                      as Trustee

                                      By: /s/ Marie D. Calzado
                                          --------------------------------------
                                          Name:   Marie D. Calzado
                                          Title:  Vice President

                                       66

                                                                      SCHEDULE A

                             DETERMINATION OF LIBOR

     With respect to the Securities, the London interbank offered rate ("LIBOR")
shall be determined by the Calculation Agent in accordance with the following
provisions (in each case rounded to the nearest .000001%):

(1) On the second LIBOR Business Day (as defined below) prior to an Interest
Payment Date (except with respect to the first interest payment period, such
date shall be May 23, 2005) (each such day, a "LIBOR Determination Date"), LIBOR
for any given security shall for the following interest payment period equal the
rate, as obtained by the Calculation Agent from Bloomberg Financial Markets
Commodities News, for three-month Eurodollar deposits that appears on Dow Jones
Telerate Page 3750 (as defined in the International Swaps and Derivatives
Association, Inc. 2000 Interest Rate and Currency Exchange Definitions), or such
other page as may replace such Page 3750, as of 11:00 a.m. (London time) on such
LIBOR Determination Date.

(2) If, on any LIBOR Determination Date, such rate does not appear on Dow Jones
Telerate Page 3750 or such other page as may replace such Page 3750, the
Calculation Agent shall determine the arithmetic mean of the offered quotations
of the Reference Banks (as defined below) to leading banks in the London
interbank market for three-month Eurodollar deposits in an amount determined by
the Calculation Agent by reference to requests for quotations as of
approximately 11:00 a.m. (London time) on the LIBOR Determination Date made by
the Calculation Agent to the Reference Banks. If, on any LIBOR Determination
Date, at least two of the Reference Banks provide such quotations, LIBOR shall
equal such arithmetic mean of such quotations. If, on any LIBOR Determination
Date, only one or none of the Reference Banks provide such quotations, LIBOR
shall be deemed to be the arithmetic mean of the offered quotations that leading
banks in the City of New York selected by the Calculation Agent are quoting on
the relevant LIBOR Determination Date for three-month Eurodollar deposits in an
amount determined by the Calculation Agent by reference to the principal London
offices of leading banks in the London interbank market; provided that, if the
Calculation Agent is required but is unable to determine a rate in accordance
with at least one of the procedures provided above, LIBOR shall be LIBOR as
determined on the previous LIBOR Determination Date.

(3) As used herein: "Reference Banks" means four major banks in the London
interbank market selected by the Calculation Agent; and "LIBOR Business Day"
means a day on which commercial banks are open for business (including dealings
in foreign exchange and foreign currency deposits) in London.

                                  Schedule A-1

                                                                       EXHIBIT A

                     FORM OF OFFICER'S FINANCIAL CERTIFICATE

     The undersigned, the [Chief Financial Officer/Treasurer/Assistant
Treasurer/ Secretary/ Assistant Secretary, Chairman/ViceChairman/Chief Executive
Officer/President/Vice President] of NorthStar Realty Finance Corp. (the
"Company") hereby certifies, pursuant to Section 7.3(b) of the Junior
Subordinated Indenture, dated as of May 25, 2005 (the "Indenture"), among
NorthStar Realty Finance Limited Partnership and JPMorgan Chase Bank, National
Association, as trustee, that, as of [date], [20__], the Company had the
following consolidated ratios and balances and, if applicable, its
unconsolidated subsidiaries had the following rations and balances:

As of [Quarterly/Annual Financial Date], 20__

<TABLE>
                                                                                     The Company and
                                                                                      Consolidated
                                                                   The Company and   Subsidiaries &
                                                                    Consolidated     Unconsolidated
                                                                    Subsidiaries      Subsidiaries
                                                                   ---------------   ---------------

Senior secured indebtedness for borrowed money ("Debt")                 $____              $____
Senior unsecured Debt                                                   $____              $____
Subordinated Debt                                                       $____              $____
Total Debt                                                              $____              $____
Ratio of (x) senior secured and unsecured Debt to (y) total Debt         ____%              ____%
</TABLE>

[FOR FISCAL YEAR END: Attached hereto are the audited consolidated financial
statements (including the balance sheet, income statement and statement of cash
flows, and notes thereto, together with the report of the independent
accountants thereon) of the Company and its consolidated subsidiaries for the
three years ended [date], 20__.]

[FOR FISCAL QUARTER END: Attached hereto are the unaudited consolidated
financial statements (including the balance sheet and income statement) of the
Company and its consolidated subsidiaries for the fiscal quarter ended [date],
20__.]

     The financial statements fairly present in all material respects, in
accordance with U.S. generally accepted accounting principles ("GAAP"), the
financial position of the Company and its consolidated subsidiaries, and the
results of operations and changes in financial condition as of the date, and for
the [quarter] [annual] period ended [date], 20__, and such financial statements
have been prepared in accordance with GAAP consistently applied throughout the
period involved (expect as otherwise noted therein).

                                                                       EXHIBIT A

     IN WITNESS WHEREOF, the undersigned has executed this Officer's Financial
Certificate as of this _____ day of _____________, 20__

                                              NORTHSTAR REALTY FINANCE CORP.

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

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