Document:

Exhibit 10.22

 

 

INDENTURE OF TRUST

 

 

between

 

 

CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK

 

 

and

 

 

U.S. BANK TRUST NATIONAL ASSOCIATION,

as Trustee

 

 

$4,800,000

California Infrastructure and Economic Development Bank

Variable Rate Demand Industrial

Development Revenue Bonds, Series 1999

(Roller Bearing Company of America, Inc.

- Santa Ana Project)

 

 

Dated as of April 1, 1999

 

 

 

 

	
  Article I

  
	
   

  	
   

  	
   

  
	
  DEFINITIONS;
  CONTENT OF CERTIFICATES AND OPINIONS

  
	
   

  	
   

  	
   

  
	
  Section 1.01.

  	
  Definitions

  	
   

  
	
  Section 1.02.

  	
  Content of
  Certificates and Opinions

  	
   

  
	
  Section 1.03.

  	
  Interpretation

  	
   

  
	
   

  	
   

  	
   

  
	
  Article II

  
	
   

  	
   

  	
   

  
	
  THE BONDS

  
	
   

  	
   

  	
   

  
	
  Section 2.01.

  	
  Authorization
  of Bonds

  	
   

  
	
  Section 2.02.

  	
  Terms of
  the Bonds

  	
   

  
	
  Section 2.03.

  	
  Conversion
  of Bonds

  	
   

  
	
  Section 2.04.

  	
  Execution
  of Bonds

  	
   

  
	
  Section 2.05.

  	
  Transfer
  of Bonds

  	
   

  
	
  Section 2.06.

  	
  Exchange
  of Bonds

  	
   

  
	
  Section 2.07.

  	
  Bond
  Register

  	
   

  
	
  Section 2.08.

  	
  Temporary
  Bonds

  	
   

  
	
  Section 2.09.

  	
  Bonds
  Mutilated, Lost, Destroyed or Stolen

  	
   

  
	
  Section 2.10.

  	
  Special
  Obligations

  	
   

  
	
  Section 2.11.

  	
  Book-Entry-Only
  System

  	
   

  
	
   

  	
   

  	
   

  
	
  Article III

  
	
   

  	
   

  	
   

  
	
  ISSUANCE OF
  BONDS; APPLICATION OF PROCEEDS

  
	
   

  	
   

  	
   

  
	
  Section 3.01.

  	
  Issuance
  of the Bonds

  	
   

  
	
  Section 3.02.

  	
  Application
  of Proceeds of the Bonds

  	
   

  
	
  Section 3.03.

  	
  Establishment
  and Application of Project Fund and Costs of Issuance Fund

  	
   

  
	
  Section 3.04.

  	
  Validity of
  Bonds

  	
   

  
	
   

  	
   

  	
   

  
	
  Article IV

  
	
   

  	
   

  	
   

  
	
  REDEMPTION AND
  PURCHASE OF BONDS

  
	
   

  	
   

  	
   

  
	
  Section 4.01.

  	
  Terms of
  Redemption

  	
   

  
	
  Section 4.02.

  	
  Selection of
  Bonds for Redemption

  	
   

  
	
  Section 4.03.

  	
  Notice of
  Redemption

  	
   

  
	
  Section 4.04.

  	
  Partial
  Redemption of Bonds

  	
   

  
	
  Section 4.05.

  	
  Effect of
  Redemption

  	
   

  
	
  Section 4.06.

  	
  Purchase of
  Bonds by Tender Agent

  	
   

  
	
  Section 4.07.

  	
  Mandatory
  Tender of Bonds

  	
   

  

 

 

	
  Article V

  
	
   

  	
   

  	
   

  
	
  REVENUES; FUNDS AND
  ACCOUNTS; PAYMENT OF PRINCIPAL AND INTEREST

  
	
   

  	
   

  	
   

  
	
  Section 5.01.

  	
  Pledge and
  Assignment; Revenue Fund

  	
   

  
	
  Section 5.02.

  	
  Allocation of
  Revenues

  	
   

  
	
  Section 5.03.

  	
  Priority of
  Moneys in Revenue Fund; Letter of Credit Account

  	
   

  
	
  Section 5.04.

  	
  Letter of
  Credit

  	
   

  
	
  Section 5.05.

  	
  Investment of
  Moneys

  	
   

  
	
  Section 5.06.

  	
  Additional
  Duties of Trustee

  	
   

  
	
  Section 5.07.

  	
  Establishment
  of Rebate Fund

  	
   

  
	
   

  	
   

  	
   

  
	
  Article VI

  
	
   

  	
   

  	
   

  
	
  PARTICULAR COVENANTS

  
	
   

  	
   

  	
   

  
	
  Section 6.01.

  	
  Punctual
  Payment

  	
   

  
	
  Section 6.02.

  	
  Extension of
  Payment of Bonds

  	
   

  
	
  Section 6.03.

  	
  Against
  Encumbrances

  	
   

  
	
  Section 6.04.

  	
  Power to Issue
  Bonds and Make Pledge and Assignment

  	
   

  
	
  Section 6.05.

  	
  Accounting
  Records and Reports

  	
   

  
	
  Section 6.06.

  	
  Arbitrage
  Covenants

  	
   

  
	
  Section 6.07.

  	
  Other Covenants

  	
   

  
	
  Section 6.08.

  	
  Further
  Assurances

  	
   

  
	
  Section 6.09.

  	
  Covenant to
  Enter into Agreement or Contract to Provide Ongoing Disclosure

  	
   

  
	
   

  	
   

  	
   

  
	
  Article VII

  
	
   

  	
   

  	
   

  
	
  EVENTS
  OF DEFAULT AND REMEDIES OF REGISTERED OWNERS

  
	
   

  	
   

  	
   

  
	
  Section 7.01.

  	
  Events of
  Default; Acceleration; Waiver of Default

  	
   

  
	
  Section 7.02.

  	
  Institution of
  Legal Proceedings by Trustee

  	
   

  
	
  Section 7.03.

  	
  Application of
  Revenues and Other Funds After Default

  	
   

  
	
  Section 7.04.

  	
  Trustee to
  Represent Registered Owners

  	
   

  
	
  Section 7.05.

  	
  Registered
  Owners’ Direction of Proceedings

  	
   

  
	
  Section 7.06.

  	
  Limitation
  on Registered Owners’ Right to Sue

  	
   

  
	
  Section 7.07.

  	
  Absolute
  Obligation of Issuer

  	
   

  
	
  Section 7.08.

  	
  Termination
  of Proceedings

  	
   

  
	
  Section 7.09.

  	
  Remedies
  Not Exclusive

  	
   

  
	
  Section 7.10.

  	
  No Waiver
  of Default

  	
   

  
	
  Section 7.11.

  	
  Consent To
  Defaults

  	
   

  

 

ii

 

	
  Article VIII

  
	
   

  	
   

  	
   

  
	
  THE TRUSTEE, THE
  REMARKETING AGENT AND THE TENDER AGENT

  
	
   

  	
   

  	
   

  
	
  Section 8.01.

  	
  Duties,
  Immunities and Liabilities of Trustee

  	
   

  
	
  Section 8.02.

  	
  Merger or
  Consolidation

  	
   

  
	
  Section 8.03.

  	
  Liability
  of Trustee

  	
   

  
	
  Section 8.04.

  	
  Right of
  Trustee to Rely on Documents

  	
   

  
	
  Section 8.05.

  	
  Preservation
  and Inspection of Documents

  	
   

  
	
  Section 8.06.

  	
  Compensation
  and Indemnification

  	
   

  
	
  Section 8.07.

  	
  Notice to
  Rating Agency

  	
   

  
	
  Section 8.08.

  	
  Qualifications
  of Remarketing Agent

  	
   

  
	
  Section 8.09.

  	
  Remarketing
  of Bonds

  	
   

  
	
  Section 8.10.

  	
  Creation
  of Purchase Fund; Purchase of Bonds Delivered to Tender Agent

  	
   

  
	
  Section 8.11.

  	
  Delivery
  of Bonds

  	
   

  
	
  Section 8.12.

  	
  Delivery
  of Proceeds of Remarketing

  	
   

  
	
  Section 8.13.

  	
  No
  Purchases or Sales After Default

  	
   

  
	
  Section 8.14.

  	
  Qualifications
  of Tender Agent

  	
   

  
	
  Section 8.15.

  	
  Paying
  Agent

  	
   

  
	
  Section 8.16.

  	
  Several
  Capacities

  	
   

  
	
   

  	
   

  	
   

  
	
  Article IX

  
	
   

  	
   

  	
   

  
	
  MODIFICATION
  OR AMENDMENT OF THE INDENTURE

  
	
   

  	
   

  	
   

  
	
  Section 9.01.

  	
  Amendments
  Permitted

  	
   

  
	
  Section 9.02.

  	
  Effect of
  Supplemental Indenture

  	
   

  
	
  Section 9.03.

  	
  Endorsement of
  Bonds; Preparation of New Bonds

  	
   

  
	
  Section 9.04.

  	
  Amendment of
  Particular Bonds

  	
   

  
	
   

  	
   

  	
   

  
	
  Article X

  
	
   

  	
   

  	
   

  
	
  DEFEASANCE

  
	
   

  	
   

  	
   

  
	
  Section 10.01.

  	
  Discharge of
  Indenture

  	
   

  
	
  Section 10.02.

  	
  Discharge of
  Liability on Bonds

  	
   

  
	
  Section 10.03.

  	
  Deposit of
  Money or Securities with Trustee

  	
   

  
	
  Section 10.04.

  	
  Payments
  After Discharge of Indenture

  	
   

  
	
   

  	
   

  	
   

  
	
  Article XI

  
	
   

  	
   

  	
   

  
	
  MISCELLANEOUS

  
	
   

  	
   

  	
   

  
	
  Section 11.01.

  	
  Liability of
  Issuer Limited to Revenues

  	
   

  
	
  Section 11.02.

  	
  Successor Is
  Deemed Included in All References to Predecessor

  	
   

  
	
  Section 11.03.

  	
  Limitation of
  Rights to Parties and Registered Owners

  	
   

  
	
  Section 11.04.

  	
  Waiver of
  Notice

  	
   

  

 

iii

 

	
  Section 11.05.

  	
  Destruction
  of Bonds

  	
   

  
	
  Section 11.06.

  	
  Severability
  of Invalid Provisions

  	
   

  
	
  Section 11.07.

  	
  Governing Law

  	
   

  
	
  Section 11.08.

  	
  Notices

  	
   

  
	
  Section 11.09.

  	
  Evidence of
  Rights of Registered Owners

  	
   

  
	
  Section 11.10.

  	
  Disqualified
  Bonds

  	
   

  
	
  Section 11.11.

  	
  Money Held
  for Particular Bonds

  	
   

  
	
  Section 11.12.

  	
  Funds and
  Accounts

  	
   

  
	
  Section 11.13.

  	
  Waiver of
  Personal Liability

  	
   

  
	
  Section 11.14.

  	
  Execution
  in Several Counterparts

  	
   

  
	
  Section 11.15.

  	
  Actions Due
  on Saturdays, Sundays and Holidays

  	
   

  
	
  Section 11.16.

  	
  References to
  Bank

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT A

  	
  FORM OF BOND

  	
   

  

 

iv

 

INDENTURE OF TRUST

 

THIS INDENTURE OF TRUST,
dated as of April 1, 1999, between THE CALIFORNIA INFRASTRUCTURE AND
ECONOMIC DEVELOPMENT BANK (the “Issuer”), an entity within the Trade and
Commerce Agency of the State of California (the “State”), duly organized and
validly existing under the laws of the State, particularly Division 1 of Title
6.7 of the California Government Code (commencing with Section 63000) (the
“Act”), and U.S. BANK TRUST NATIONAL ASSOCIATION, a national banking
association organized and existing under and by virtue of the laws of the
United States of America (the “Trustee”),

 

W I T N E S S E T H:

 

WHEREAS, the Issuer was
established for the purpose of financing projects needed to implement economic
development and job creation and growth management strategies within the State,
and is empowered under the provisions of the Act (capitalized terms used herein
shall have the meanings given such terms in Section 1.01 hereof) to issue
its bonds and to enter into loan agreements for the purpose of financing
private activity economic development projects; and

 

WHEREAS, in furtherance of
the purposes of the Act, the Issuer proposes to finance the Costs of the
Project more particularly described in Exhibit A to the Agreement, to be owned
and operated by the Borrower; and

 

WHEREAS, pursuant to and in
accordance with the Act, the Issuer has authorized and undertaken to issue its
Bonds pursuant to this Indenture in order to provide funds to finance the Costs
of the Project; and

 

WHEREAS, the Issuer has
undertaken to finance the Costs of the Project by loaning the proceeds derived
from the sale of the Bonds to the Borrower pursuant to the Agreement, under
which the Borrower is required to make Loan Repayments sufficient to pay when
due the principal of, premium, if any, and interest on the Bonds and to pay
certain other expenses; and

 

WHEREAS, it has been
determined that the estimated amount necessary to finance a portion of the
Costs of the Project, including a portion of the necessary expenses incidental
to the issuance of the Bonds, will require the issuance, sale and delivery of
the Bonds in the aggregate principal amount of $4,800,000; and

 

WHEREAS, in order to provide
for the authentication and delivery of the Bonds, to establish and declare the
terms and conditions upon which the Bonds are to be issued and secured, and to
secure the payment of the principal and purchase price thereof and interest
thereon, the Issuer has authorized the execution and delivery of this
Indenture; and

 

WHEREAS, in order to further
secure the payments of principal and purchase price of and interest on the
Bonds, the Borrower has obtained an irrevocable direct-pay letter of credit
from the Bank; and

 

 

WHEREAS, all acts and proceedings
required by law or necessary to make the Bonds, when executed by the Issuer and
authenticated and delivered by the Bond Registrar, the valid, binding and legal
special obligations of the Issuer, and to constitute this Indenture a valid and
binding agreement for the uses and purposes herein set forth in accordance with
its terms, have been done and taken, and the execution and delivery of this
Indenture has been in all respects duly authorized;

 

NOW, THEREFORE, THIS
INDENTURE WITNESSETH, that in order to secure the payment of the principal and
purchase price of and premium, if any, and interest on all Bonds at any time
issued and Outstanding under this Indenture, according to their tenor, and, on
a basis subordinate thereto, to secure the Borrower’s obligations to the Bank
under the Credit Agreement, and to secure the performance and observance of all
the covenants and conditions therein and herein set forth, and to declare the
terms and conditions upon and subject to which the Bonds are to be issued and
received, and in consideration of the premises and of the mutual covenants
herein contained and of the purchase and acceptance of the Bonds by the
Registered Owners thereof, and for other valuable consideration, the receipt
whereof is hereby acknowledged, the Issuer does hereby covenant and agree with
the Trustee, for the benefit of the respective Registered Owners from time to
time of the Bonds, as follows:

 

ARTICLE I

 

DEFINITIONS;
CONTENT OF CERTIFICATES AND OPINIONS

 

SECTION 1.01. DEFINITIONS. Unless the context otherwise
requires, the terms defined in this Article shall, for all purposes of
this Indenture and for the purpose of any certificate, opinion or other
document herein mentioned, have the meanings herein specified. Such definitions
are equally applicable to both the singular and plural forms of any of the
terms defined. Unless otherwise defined in this Indenture, all terms defined in
the Act and used herein shall have the meanings assigned to such terms in the
Act.

 

“ACCOUNTANT” means any firm of
independent certified public accountants selected by the Borrower and
reasonably acceptable to the Trustee and the Bank.

 

“ACT” means Division 1 of
Title 6.7 of the California Government Code (commencing with Section 63000),
as amended.

 

“ACT OF BANKRUPTCY” means the
entry of an order or decree, by a court having jurisdiction in the matter, for
relief against the Borrower or the Issuer in an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or other similar official) of the Borrower or the Issuer or of
any substantial part of the property of either the Borrower or the Issuer, or
ordering the winding up or liquidation of the affairs of either the Borrower or
the Issuer; or the institution or commencement by or against the Borrower or
the Issuer of a voluntary or involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, provided, however,
that in the event of an involuntary case such involuntary case or proceeding
shall remain undismissed for a period of sixty (60) days, or the consent by it
to the entry of an order for relief against it in any involuntary case under any
such

 

2

 

law, or to the appointment of
a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Borrower or the Issuer or of any substantial part of
the property of either the Borrower or the Issuer, or the making by either the
Borrower or the Issuer of an assignment for the benefit of creditors, or the
failure of it generally to pay its debts as they become due, or the admission
by it in writing of such failure, or the taking of any action by the Borrower
or the Issuer in furtherance of any such action, or if a receiver of the
business or of the property or assets of the Borrower or the Issuer shall be
appointed by any court, except a receiver appointed at the instance or request
of the Issuer.

 

“ADDITIONAL PAYMENTS” means
the payments required to be made by the Borrower pursuant to Sections 4.02(b),
(c) and (d) of the Agreement.

 

“AGREEMENT” means that
certain loan agreement by and between the Issuer and the Borrower, dated as of April 1,
1999, as originally executed and as it may from time to time be supplemented,
modified or amended in accordance with the terms thereof and of this Indenture.

 

“ALTERNATE CREDIT FACILITY”
means bond insurance or other similar credit enhancement facility meeting the
requirements of Section 5.07 of the Agreement.

 

“ALTERNATE FIXED RATE” shall
have the meaning ascribed to such term in Section 2.03 hereof.

 

“ALTERNATE LETTER OF CREDIT”
means an alternate irrevocable letter of credit or similar credit facility
issued by a commercial bank or savings institution, the terms of which, other
than the expiration date, shall in all material respects be the same as those
of the initial Letter of Credit, delivered to the Trustee pursuant to Section 5.08
of the Agreement.

 

“ALTERNATE WEEKLY RATE” shall
have the meaning ascribed to such term in Section 2.02 hereof.

 

“AUTHORIZED DENOMINATION”
means (a) prior to the Fixed Rate Date, $100,000 or any multiple of $5,000 in
excess of $100,000 and (b) after the Fixed Rate Date, $5,000 or integral
multiples thereof.

 

“AUTHORIZED REPRESENTATIVE”
means with respect to the Borrower, the person or persons at the time
designated to act on behalf of the Borrower by a written certificate signed by
the Borrower, furnished to the Trustee and the Issuer, containing the specimen
signature of each such person.

 

“AVAILABLE MONEYS” means
moneys which are (a) continuously on deposit with the Trustee in trust for a
period of 91 days for the benefit of the Registered Owners in a separate and
segregated account in which only Available Moneys are held and during and prior
to which period no Act of Bankruptcy of the Borrower or the Issuer occurs and
(b) proceeds of (i) the Bonds received contemporaneously with the issuance and
sale of the Bonds, (ii) a drawing under the Letter of Credit, (iii) any other
moneys for which the Trustee has received a written opinion of nationally
recognized counsel experienced in bankruptcy matters and acceptable to the
Trustee to the effect that payment of such moneys to the Registered Owners
would not constitute an avoidable preference under Section 547 of the
United States Bankruptcy Code in the event the

 

3

 

Issuer, the Borrower or any
Related Party were to become a debtor under the United States Bankruptcy Code,
which opinion is acceptable to each rating agency then rating the Bonds, or
(iv) moneys derived from the investment of funds qualifying as Available Moneys
under the foregoing clauses.

 

“BANK” means First Union
National Bank, or any other commercial bank or other financial institution
issuing a Letter of Credit then in effect.

 

“BANK BONDS” means Bonds
tendered pursuant to Section 4.06 hereof or subject to mandatory tender
pursuant to Section 4.07 hereof and purchased from funds described in Section 8.10(b)(ii)
hereof.

 

“BENEFICIAL OWNER” means
generally any person which has or shares the power, directly or indirectly, to
make investment decisions concerning ownership of any Bonds and with respect to
Bonds held by DTC, those individuals, partnerships, corporations or other
entities for whom the Direct Participants have caused DTC to hold Bonds.

 

“BOND” or “BONDS” means any
Bond or all of the Bonds, as the case may be, of the Issuer authorized and
issued by the Issuer, authenticated by the Bond Registrar and delivered
hereunder.

 

“BOND COUNSEL” means any
attorney at law experienced in matters pertaining to the exclusion of interest
from gross income for federal income tax purposes on bonds issued by states and
political subdivisions, and duly admitted to practice law before the highest
court of any state of the United States of America, approved by the Issuer, but
shall not include counsel for the Borrower.

 

“BOND PAYMENT DATE” means any
date on which any principal of, premium, if any, or interest on, any
Outstanding Bond shall be due and payable whether at maturity or on a scheduled
Interest Payment Date or upon redemption, in each case in accordance with the
terms of the Bonds and this Indenture.

 

“BOND REGISTRAR” shall mean
the Bond Registrar specified in Section 2.07 hereof.

 

“BORROWER” means Roller
Bearing Company of America, Inc., a corporation duly organized and validly
existing under the laws of the State of Delaware and authorized to do business
in the State, or any entity which is the surviving, resulting or transferee
entity in any merger, consolidation or transfer of assets permitted under Section 5.02
of the Agreement.

 

“BUSINESS DAY” means a day
which is not a Saturday, Sunday or legal holiday on which banking institutions
in the State or the State of New York or in any state in which the principal
office of the Bank, the Tender Agent or the Trustee or the office of the Bank
designated for presentations under the Letter of Credit is located are closed
or a day on which the New York Stock Exchange is closed.

 

“CERTIFICATE,” “STATEMENT,” “REQUEST,”
“REQUISITION” and “ORDER” of the Issuer or the Borrower means, respectively, a
written certificate, statement, request, requisition or order signed in the
name of the Issuer by the Chair of the Issuer or such other person as may be

 

4

 

designated as authorized to
sign for the Issuer, or in the name of the Borrower by an Authorized
Representative of the Borrower. Any such instrument and supporting opinions or
representations, if any, may, but need not, be combined in a single instrument
with any other instrument, opinion or representation, and the two or more so
combined shall be read and construed as a single instrument. If and to the
extent required by Section 1.02 hereof, each such instrument shall include
the statements provided for in Section 1.02 hereof.

 

“CODE” means the Internal
Revenue Code of 1986, as amended from time to time, and any regulations from
time to time promulgated or deemed in effect thereunder.

 

“COMPONENT
ISSUES” means five or more issues of securities, the interest on which is
Tax-exempt, selected by the Remarketing Agent in accordance with Section 2.03(b)(i)
hereof.

 

“CONSTRUCTION”
means, with respect to the Project, the acquisition, construction,
installation, rehabilitation, expansion, improvement, equipping, furnishing
and/or other activities with respect to the Project described in the Borrower’s
application for financing assistance from the Issuer.

 

“COSTS
OF ISSUANCE” means all items of expense directly or indirectly payable by or
reimbursable to the Issuer or the Borrower and related to the authorization,
issuance, sale and delivery of the Bonds, including but not limited to costs of
preparation and reproduction of documents, printing expenses, application,
filing and recording fees, initial fees and charges of the Trustee and Tender
Agent, legal fees and charges, including the fees and charges of Bond Counsel,
fees and disbursements of consultants and professionals, rating agency fees,
fees and charges for preparation, execution and safekeeping of the Bonds and
any other cost, charge or fee in connection with the original issuance of the
Bonds which constitutes a “cost of issuance” within the meaning of Section 147(g)
of the Code.

 

“COSTS
OF ISSUANCE FUND” means the fund of that name established pursuant to Section 3.03(e)
hereof.

 

“COSTS
OF THE PROJECT” means and shall be deemed to include all of the costs of the
Construction of the Project, to the extent permitted by the Act, whether
incurred prior to or after the date of the Agreement, including, but not
limited to the following (but not including any Costs of Issuance):

 

(a) the cost of construction, improvement, repair and reconstruction;

 

(b) the cost of acquisition, including rights in land and other
property, both real and personal and improved and unimproved, and franchises,
and disposal rights;

 

(c) the cost of demolishing, removing, or relocating any buildings or structures
on lands so acquired, including the cost of acquiring any lands to which such
buildings or structures may be moved or relocated;

 

(d) the cost of machinery, equipment and furnishings, of engineering and
architectural surveys and plans, and specifications and of transportation and
storage until the Project is operational;

 

5

 

(e) the cost of agents or consultants, including, without limitation,
legal, financial, engineering, accounting, and auditing, necessary or incident
to the Project and of the determination as to the feasibility or practicability
of undertaking the Project;

 

(f) the cost of financing interest on the Bonds and fees of the Bank
allocable to the period prior to and during Construction of the Project and
reserves for principal and interest and for extensions, enlargements,
additions, repairs, replacements, renovations, and improvements to the Project;
and

 

(g) the cost of financing the Project, and the reimbursement to any
governmental entity or agency, or any Person, of expenditures made by or on
behalf of such entity agency or Person in connection with the Project;
provided, that the Borrower shall at its own expense insure, repair, and
maintain the Project, pay such taxes with respect to the Borrower’s interest in
the property relating to the Project, and pay such assessments and other public
charges on the Project or shall cause the same to be provided by others to the
satisfaction of the Issuer.

 

“CREDIT AGREEMENT” means the
Credit Agreement, dated as of June 23, 1997 and amended on April 15,
1998 and August 19, 1998, among the Borrower, Credit Suisse First Boston,
and the Lenders identified therein (including, specifically, the Bank), as from
time to time amended or supplemented, or any other similar agreement entered
into by the Borrower and the Bank in connection with the issuance of any
Alternate Letter of Credit or Alternate Credit Facility.

 

“DATE OF DELIVERY” means April 30,
1999.

 

“DETERMINATION
OF TAXABILITY” means the occurrence or existence of any of the conditions or
events more fully described in Section 8.03(a)(ii) or Section 8.03(a)(iii)
of the Agreement.

 

“DIRECT
PARTICIPANT” means those securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations for which DTC,
from time to time, holds the Bonds as securities depository.

 

“DISCLOSURE
REQUIREMENTS” shall have the meaning ascribed to such term in Section 6.09
hereof.

 

“DTC”
means The Depository Trust Company, New York, New York, or any successor
securities depository.

 

“EVENT
OF DEFAULT” means any of the events specified in Section 7.01 hereof.

 

“EXPIRATION
DATE” means the stated date upon which the Letter of Credit or Alternate Letter
of Credit shall expire in accordance with its terms.

 

“FISCAL
YEAR” means the fiscal year of the Borrower ending on the Saturday closest to March 31
of each year, or any other 12-month period selected and designated as the
fiscal year of the Borrower.

 

6

 

“FIXED INTEREST RATE” means
the interest rate borne by the Bonds from and after the Fixed Rate Date and
determined in accordance with Section 2.03 hereof.

 

“FIXED
RATE DATE” means the date on which the Bonds begin to bear interest at the
Fixed Interest Rate, which shall be an Interest Payment Date.

 

“GOVERNMENT
OBLIGATIONS” means and includes any of the following securities, if and to the
extent the same are non-callable and not subject to redemption at the option of
the issuer, at the time legal for investment: direct obligations of, or
obligations the full and timely payment of principal of and interest on which
are unconditionally guaranteed by, the United States of America, including
obligations issued or held in book-entry form on the books of the Department of
the Treasury of the United States of America and including a receipt,
certificate or any other evidence of a direct ownership interest of future
payments in an obligation of, or unconditionally guaranteed by, the United
States of America, or in specified portions thereof held by a custodian in
safekeeping for the holders of such receipt, certificate or any other evidence
of ownership (which may consist of specified portions of interest thereon)
which is rated or assessed in the highest rating category of Moody’s and
S&P to the extent each such rating agency is then rating the Bonds, but
excluding any share or interest in any unitary investment trust or mutual fund
unless such unitary investment trust or mutual fund is rated or assessed in the
highest rating category of Moody’s and S&P to the extent each such rating
agency is then rating the Bonds.

 

“INDENTURE”
means this Indenture, as originally executed or as it may from time to time be
supplemented, modified or amended by any Supplemental Indenture.

 

“INFORMATION
SERVICES” means Financial Information, Inc.’s “Daily Called Bond Service,” 30
Montgomery Street, 10th Floor, Jersey City, New Jersey 07302, Attention:
Editor; Kenny Information Service’s “Called Bond Service,” 65 Broadway, 16th
Floor, New York, New York 10006; Moody’s Investors Service, 5250-77 Center
Drive, Suite 150, Charlotte, North Carolina 28217, Attention: Called Bond
Department; and Standard and Poor’s “Called Bond Record,” 25 Broadway, 3rd
Floor, New York, New York 10004; or, in accordance with then-current guidelines
of the Securities and Exchange Commission, to such other addresses and/or such
other services providing information with respect to called bonds, or no such
services, as the Issuer may designate in a certificate of the Issuer delivered
to the Trustee.

 

“INTEREST
ACCOUNT” means the account of that name in the Revenue Fund established
pursuant to Section 5.02 hereof.

 

“INTEREST
PAYMENT DATE” means (a) on and prior to the Fixed Rate Date: June 1, 1999
and the first Business Day of each calendar month thereafter, and (b) after the
Fixed Rate Date: April 1 and October 1 of each year commencing on the
April 1 or October 1 next succeeding the Fixed Rate Date.

 

“INTEREST PERIOD” means the
period from and including the date of the first authentication and delivery of
the Bonds to and including May 31, 1999, and, thereafter, the period from and
including an Interest Payment Date to and including the day next preceding the
immediately succeeding Interest Payment Date.

 

7

 

“INVESTMENT
SECURITIES” means (a) obligations described in Section 103 of the Code,
the interest on which is Tax-exempt, including certificates or units of or in
any entity that (i) is treated as a “grantor trust” under Subchapter J, Part I,
Subpart E of the Code in which the certificate holders or unit holders are
treated as the owners of all assets owned by such trust and (ii) invests solely
in obligations described in Section 103 of the Code, the interest on which
is Tax-exempt; and (b) stock of a “qualified regulated investment company” as
such term is defined in Section (a)(2) of Notice 87-22 of the Internal
Revenue Service, including qualified temporary investments relating to
Tax-exempt obligations pursuant to paragraph (a)(5) of Notice 87-22 but shall
not include securities issued by the Issuer or the Borrower. At the time of
investment, Investment Securities shall be legal investments under the laws of
the State for the moneys proposed to be invested therein.

 

“ISSUER”
means the California Infrastructure and Economic Development Bank, an entity
within the Trade and Commerce Agency of the State.

 

“LETTER
OF CREDIT” means (a) that certain Letter of Credit issued by the Bank pursuant
to the Credit Agreement, as the same may be amended or modified in accordance
with its terms, naming the Trustee as beneficiary and delivered on the date of
issuance and delivery of the Bonds, (b) in the event of delivery of an
Alternate Letter of Credit, such Alternate Letter of Credit, or (c) in the
event of delivery of an Alternate Credit Facility, such Alternate Credit
Facility.

 

“LETTER
OF CREDIT ACCOUNT” means the account of that name established in the Revenue
Fund pursuant to Section 5.03 hereof.

 

“LETTER
OF CREDIT SUBSTITUTION” means the substitution of an Alternate Letter of Credit
for the then existing Letter of Credit pursuant to Section 5.08 of the
Agreement.

 

“LETTER
OF CREDIT SUBSTITUTION DATE” means the date an Alternate Letter of Credit is
delivered to the Trustee pursuant to Section 5.08 of the Agreement.

 

“LIQUIDITY
ACCOUNT” means the account of that name established in the Purchase Fund
pursuant to Section 8.10 hereof.

 

“LOAN”
means the loan of the proceeds of the Bonds made by the Issuer to the Borrower
pursuant to the Agreement.

 

“LOAN
DEFAULT EVENT” means any one or more of the events specified in Section 7.01
of the Agreement.

 

“LOAN
REPAYMENTS” means the payments required to be made by the Borrower pursuant to Section 4.02(a)
of the Agreement.

 

“MANDATORY
TENDER DATE” shall mean the (a) Fixed Rate Date and (b) any Letter of Credit
Substitution Date, pursuant to which the Bonds are required to be tendered for
purchase in accordance with Section 4.07 hereof.

 

8

 

“MOODY’S” means Moody’s
Investors Service, a corporation organized and existing under the laws of the
State of Delaware, its successors and their assigns, or, if such corporation
shall be dissolved, liquidated or replaced by the Issuer and the Borrower as
the rating agency for the Bonds, or shall no longer perform the functions of a
securities rating agency, any other nationally recognized securities rating
agency designated by the Issuer, with the approval of the Borrower, which is
requested to provide a rating on the Bonds.

 

“NET
PROCEEDS” means the proceeds from insurance or from actual or threatened
condemnation or eminent domain action with respect to the Project, less any
costs reasonably expended by the Borrower to receive such proceeds.

 

“NON-TENDERED
BONDS” shall have the meaning ascribed to such term in Section 4.07
hereof.

 

“OPINION
OF BOND COUNSEL” means a written opinion of Bond Counsel. If and to the extent
required by the provisions of Section 1.02 hereof, each Opinion of Bond
Counsel shall include the statements provided for in Section 1.02 hereof.

 

“ORGANIZATION
DOCUMENTS” mean the Borrower’s articles or certificate of incorporation and
bylaws if the Borrower is a corporation, articles of organization and operating
agreement if the Borrower is a limited liability company, partnership agreement
if the Borrower is a partnership and trust agreement or declaration of trust if
the Borrower is a trust, as such Organization Documents may be amended from
time to time.

 

“OUTSTANDING,”
when used as of any particular time with reference to Bonds, means (subject to
the provisions of Section 11.10 hereof) all Bonds theretofore, or
thereupon being, authenticated and delivered by the Bond Registrar under this
Indenture except (a) Bonds theretofore cancelled by the Bond Registrar or
surrendered to the Bond Registrar for cancellation; (b) Bonds with respect to
which liability of the Issuer shall have been discharged in accordance with Section 10.02
hereof, including Bonds (or portions of Bonds) referred to in Section 11.10
hereof; (c) Bonds for the transfer or exchange of or in lieu of or in
substitution for which other Bonds shall have been authenticated and delivered
by the Bond Registrar pursuant to this Indenture; and (d) Bonds which have been
deemed purchased pursuant to Section 4.07 hereof.

 

“PARTICIPATING
UNDERWRITER” means any broker, dealer or municipal securities dealer acting as
an underwriter in a primary offering of municipal securities subject to
Securities and Exchange Commission Rule 15c2-12 under the Securities Exchange
Act of 1934, as amended.

 

“PAYING
AGENT” means the Trustee and any other paying agent for the Bonds appointed
pursuant to the provisions of this Indenture.

 

“PERMITTED
INVESTMENTS” means Treasury Funds, Government Obligations and Investment
Securities.

 

“PERSON”
means an individual, corporation, firm, association, partnership, trust, or
other legal entity or group of entities, including a governmental entity or any
agency or political subdivision thereof.

 

9

 

“PRINCIPAL
ACCOUNT” means the account of that name in the Revenue Fund established
pursuant to Section 5.02 hereof.

 

“PROJECT”
means (a) all land, buildings, structures, fixtures and improvements, and (b)
all tangible personal property purchased with proceeds of the Bonds by the
Borrower, whether now existing or hereafter acquired, constructed or installed
as more fully described in Exhibit A to the Agreement.

 

“PROJECT
FUND” means the fund of that name established pursuant to Section 3.03
hereof.

 

“PURCHASE
DATE” means (a) the date specified in each notice given by a Registered Owner
pursuant to Section 4.06 hereof on which the Bonds being tendered by such
Registered Owner shall be purchased by the Tender Agent, and (b) the Mandatory
Tender Date.

 

“PURCHASE
FUND” means the fund of that name established pursuant to Section 8.10
hereof.

 

“REBATE
FUND” means the fund of that name created pursuant to Section 5.07 hereof.

 

“RECORD
DATE” means, prior to the Fixed Rate Date, the Business Day preceding each
Interest Payment Date, and after the Fixed Rate Date, the fifteenth (15th) day
of the calendar month preceding each Interest Payment Date.

 

“REDEMPTION
ACCOUNT” means the account of that name established in the Revenue Fund
pursuant to Section 5.02 hereof.

 

“REGISTERED
OWNER,” whenever used herein with respect to a Bond, means the Person in whose
name such Bond is registered.

 

“RELATED
PARTY” means any general partner, member, affiliate or guarantor of the
Borrower and any lessee of the Project.

 

“REMARKETING
ACCOUNT” means the account of that name established in the Purchase Fund
pursuant to Section 8.10 hereof.

 

“REMARKETING
AGENT” means the remarketing agent or agents appointed in accordance with Section 8.08
hereof. The Remarketing Agent shall be initially The Chapman Company. “Principal
Office” of the Remarketing Agent shall mean the office thereof designated in
writing to the Issuer, the Trustee, the Tender Agent, the Bank and the
Borrower.

 

“REMARKETING
AGREEMENT” means the Remarketing Agreement, dated as of April 1, 1999,
between the Borrower and the Remarketing Agent, as such agreement may from time
to time be amended and supplemented, to remarket the Bonds delivered or deemed
to be delivered for purchase by the Registered Owners thereof, and any other
similar agreement entered into with any successor Remarketing Agent, subject to
approval by the Issuer. No such amendment or supplement or similar agreement
shall alter the rights or obligations of the Registered Owners of Bonds to
deliver their Bonds for purchase as provided herein.

 

10

 

“REVENUE FUND” means the fund
of that name established pursuant to Section 5.01 hereof.

 

“REVENUES”
means all amounts received by the Issuer or the Trustee for the account of the
Issuer pursuant or with respect to the Agreement or the Letter of Credit,
including, without limiting the generality of the foregoing, Loan Repayments
(including both timely and delinquent payments, and any late charges, paid from
whatever source), prepayments, insurance proceeds, condemnation proceeds, and
all interest, profits or other income derived from the investment of amounts in
any fund or account established pursuant to this Indenture, but not including
any moneys paid for deposit into the Rebate Fund.

 

“S&P”
means Standard & Poor’s Ratings Services, a division of The McGraw-Hill
Companies, Inc., a corporation organized and existing under the laws of the
State of New York, its successors and their assigns, or, if such corporation shall
be dissolved, liquidated or replaced by the Issuer and the Borrower as the
rating agency for the Bonds, or shall no longer perform the functions of a
securities rating agency, any other nationally recognized securities rating
agency designated by the Issuer, with the approval of the Borrower which is
requested to provide a rating on the Bonds.

 

“SECURITIES
DEPOSITORIES” means the following registered securities depositories: (a) The
Depository Trust Company, 711 Stewart Avenue, Garden City, New York 11530,
Fax-(516) 227-4039 or 4190; and (b) Philadelphia Depository Trust Company,
Reorganization Division, 1900 Market Street, Philadelphia, Pennsylvania 19103,
Attention: Bond Department, Fax-(215) 496-5058; or, in accordance with
then-current guidelines of the Securities and Exchange Commission, to such
other addresses and/or such other securities depositories, or no such
depositories, as the Issuer or the Securities and Exchange Commission may
designate in a certificate of the Issuer delivered to the Trustee.

 

“SPECIAL
RECORD DATE” means the date established by the Trustee pursuant to Section 2.02(b)(ii)
hereof as a record date for the payment of defaulted interest on the Bonds.

 

“STATE”
means the State of California.

 

“SUPPLEMENTAL
INDENTURE” means any indenture hereafter duly authorized and entered into
between the Issuer and the Trustee, supplementing, modifying or amending this
Indenture; but only if and to the extent that such Supplemental Indenture is
specifically authorized hereunder.

 

“TAX
REGULATORY AGREEMENT” means the Tax Regulatory Agreement, dated as of April 1,
1999, among the Issuer, the Borrower and the Trustee, as such Tax Regulatory
Agreement shall be amended from time to time.

 

“TAX-EXEMPT”
means, with respect to interest on any obligations of a state or local
government, including the Bonds, that such interest is excluded from gross
income for federal income tax purposes (other than in the case of a Registered
Owner of any Bonds who is a substantial user of the Project or a “related
person” within the meaning of Section 147(a) of the Code) but such
interest may be includable as an item of tax preference or otherwise includable
directly or indirectly for purposes of calculating tax liabilities, including
any alternative minimum tax or environmental tax, under the Code.

 

11

 

“TENDER
AGENT” means U.S. Bank Trust National Association, a national banking
association organized and existing under and by virtue of the laws of the
United States of America having a principal corporate trust office at San
Francisco, California, or any successor appointed pursuant to Section 8.14
hereof.

 

“TREASURY
FUNDS” means (a) any investment portfolio consisting of direct obligations of
the United States Treasury Department and repurchase agreements in respect of
those obligations, including any such investment portfolio maintained by the
Trustee or the Bank, (b) any investment or security permitted pursuant to Section 53601
of the California Government Code, including any investment or security
portfolio consisting of any one or more of such investments or securities and
(c) any other investment or security permitted by law and approved by the Bank.

 

“TRUSTEE”
means U.S. Bank Trust National Association, a national banking association
organized and existing under and by virtue of the laws of the United States of
America having a principal corporate trust office in San Francisco, California,
or its successor as Trustee hereunder as provided in Section 8.01 hereof.

 

“WEEKLY
INTEREST RATE” means the interest rate on the Bonds determined pursuant to Section 2.02(c)
hereof.

 

SECTION 1.02. CONTENT OF CERTIFICATES AND OPINIONS. Every
certificate or opinion provided for in this Indenture with respect to
compliance with any provision hereof shall include (a) a statement that the
Person making or giving such certificate or opinion has read such provision and
the definitions herein relating thereto; (b) a brief statement as to the nature
and scope of the examination or investigation upon which the certificate or
opinion is based; (c) a statement that, in the opinion of such Person, he or
she has made or caused to be made such examination or investigation as is
necessary to enable him or her to express an informed opinion with respect to the
subject matter referred to in the instrument to which his or her signature is
affixed; (d) a statement of the assumptions upon which such certificate or
opinion is based, and that such assumptions are reasonable; and (e) a statement
as to whether, in the opinion of such Person, such provision has been complied
with.

 

Any
such certificate or opinion made or given by an officer of the Issuer or an
officer or an Authorized Representative of the Borrower may be based, insofar
as it relates to legal, accounting or any business matter, upon a certificate
or opinion of or representation by counsel, an Accountant or a management
consultant, unless such officer knows, or in the exercise of reasonable care
should have known, that the certificate, opinion or representation with respect
to the matters upon which such certificate or statement may be based, as
aforesaid, is erroneous. Any such certificate or opinion made or given by
counsel, an Accountant or a management consultant may be based, insofar as it
relates to factual matters (with respect to which information is in the
possession of the Issuer or the Borrower, as the case may be) upon a
certificate or opinion of or representation by an officer of the Issuer or the
Borrower, unless such counsel, Accountant or management consultant knows, or in
the exercise of reasonable care should have known, that the certificate or
opinion or representation with respect to the matters upon which such Person’s
certificate or opinion or representation may be based, as aforesaid, is
erroneous. The same officer of the Issuer or the Borrower, or the same counsel
or Accountant or

 

12

 

management consultant, as the
case may be, need not certify to all of the matters required to be certified
under any provision of this Indenture, but different officers, counsel,
Accountants or management consultants may certify to different matters,
respectively.

 

SECTION 1.03. INTERPRETATION.

 

(a) Unless the context otherwise indicates, defined terms shall include
all variations thereof and words expressed in the singular shall include the
plural and vice versa and the use of the neuter, masculine, or feminine gender
is for convenience only and shall be deemed to mean and include the neuter,
masculine or feminine gender, as appropriate.

 

(b) Headings of articles and sections herein and the table of contents
hereof are solely for convenience of reference, do not constitute a part hereof
and shall not affect the meaning, construction or effect hereof.

 

(c) Unless otherwise indicated, all references herein to “Articles,” “Sections”
and other subdivisions are to the corresponding Articles, Sections or
subdivisions of this Indenture; the words “herein,” “hereof,” “hereby,” “hereunder”
and other words of similar import refer to this Indenture as a whole and not to
any particular Article, Section or subdivision hereof.

 

ARTICLE II

 

THE BONDS

 

SECTION 2.01.
AUTHORIZATION OF
BONDS. There shall be issued under and secured by this Indenture a single
series of Bonds to be designated as “California Infrastructure and Economic
Development Bank Variable Rate Demand Industrial Development Revenue Bonds,
Series 1999 (Roller Bearing Company of America, Inc. - Santa Ana Project)” in
the original principal amount of $4,800,000, to be dated as of the Date of
Delivery, and to mature fully (subject to prior redemption at the prices and
dates and upon the terms and conditions hereinafter set forth) on April 1,
2024.

 

SECTION 2.02. TERMS OF THE BONDS.

 

(a) The Bonds shall be issued as fully registered Bonds  without coupons in the Authorized
Denominations. The Bonds shall be in substantially the form set forth in Exhibit A hereto.

 

(b)
(i) Each Bond shall bear interest at the rates determined  pursuant to Section 2.02(c) and 2.03(b)
hereof from and including the
Interest Payment Date next preceding the date of registration thereof (unless such Bond is registered after a Record Date and on or before the next
succeeding Interest Payment Date
or on an Interest Payment Date, in which event it shall bear interest from and including such
Interest Payment Date, or unless
such Bond is registered on or prior to May 31, 1999, in which event it shall bear interest from and including the Date of Delivery), payable on each
Interest Payment Date. The interest
so 

 

13

 

payable
on any Interest Payment Date will be paid on the  Interest Payment Date to the Persons in whose
name the Bonds are registered at
the close of business of the Bond Registrar on the Record Date for such Interest Payment Date; except as provided below.

 

(ii) Any such interest not so punctually paid or duly  provided for shall forthwith cease to be
payable to the Registered Owner
as of the Record Date for such payment of interest, and shall be paid to the Person in whose name the Bond 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 thereof being given to the Registered Owners not less than ten (10) days
prior to such Special Record
Date.

 

(iii) Interest shall be paid in lawful money of the  United States by check or draft mailed to each
Registered Owner at the address
shown on the registration books maintained
by the Bond Registrar pursuant to Section 2.07 hereof; provided, however, interest may also
be paid by wire transfer to an
address in the continental United States in the case of a Registered Owner of at least $1,000,000 aggregate principal amount of Bonds upon written request
of the Registered Owner thereof
15 days prior to the applicable Record
Date to the Bond Registrar in a form satisfactory to the Bond Registrar.

 

(c)
(i) The Bonds shall bear interest until payment of the  principal thereof and interest thereon shall
have been made or provided for in
accordance with the provisions hereof, whether at maturity, upon redemption or otherwise. Prior to the Fixed Rate Date, interest shall be computed on the
basis of a year of 365 or 366
days, as appropriate, for the actual number of days elapsed.

 

The Bonds shall bear interest for each day from and  including the Date of Delivery until the Fixed
Rate Date or final maturity date,
whichever is earlier, at the Weekly Interest Rate; provided that appropriate adjustments may be made for the initial period following the Date
of Delivery. The Weekly Interest
Rate shall be the rate determined by the Remarketing Agent (on the basis of the examination of Tax-exempt obligations comparable to the Bonds
known by the Remarketing Agent to
have been priced or traded under then prevailing market conditions) to be the minimum interest rate which, if borne by the Bonds, would enable the
Remarketing Agent to sell the
Bonds on the date such rate becomes effective at a price equal to the principal amount thereof, plus accrued interest, if any, but in no event
exceeding twelve percent (12%)
per annum. The Weekly Interest Rate shall be determined by the Remarketing Agent as of the close of business on Tuesday in each calendar week
until the earlier of the Fixed
Rate Date or payment in full of the Bonds; provided that, if Tuesday in any calendar week shall
not be a Business Day, then such
determination shall be made on the next preceding Business Day; and provided further that appropriate adjustments may be made for the initial period
following the Date of Delivery.
The Weekly Interest Rate shall be effective from Wednesday in the week of determination thereof to and including the following Tuesday irrespective
of when the rate was determined
by

 

14

 

the
Remarketing Agent; provided that appropriate adjustments  may be made for the initial period following
the Date of Delivery. The Weekly
Interest Rate shall be communicated by telephonic notice, promptly confirmed in writing, by the Remarketing Agent to the Trustee on the
Business Day next following the
day on which the Weekly Interest Rate is determined. The Remarketing Agent shall also give written notice to the Tender Agent, the Bank and the
Borrower of the Weekly Interest
Rate at the time it gives the aforesaid written confirmation thereof to the Trustee. If for any reason the Remarketing Agent does not determine the
Weekly Interest Rate in any week,
the Weekly Interest Rate for the first such week in which the Remarketing Agent does not determine the Weekly Interest Rate shall remain at the last
Weekly Interest Rate announced by
the Remarketing Agent and the Weekly Interest Rate thereafter shall be the “Alternate Weekly Rate” (as defined below).

 

(ii) If on any date on which the Weekly Interest Rate  is determined, the Weekly Interest Rate
determined in accordance with
paragraph (i) of this paragraph (c) is held by a court to be invalid or unenforceable, then the Weekly Interest Rate shall be the Alternate Weekly
Rate. The “Alternate Weekly Rate”
shall be the Bond Market Association Seven-Day Municipal Swap Index Rate plus 25 basis points (.25%) as determined by the Remarketing Agent.

 

(iii) Each determination of the Weekly Interest Rate  by the Remarketing Agent shall be conclusive
and binding on the Registered
Owners, the Trustee and the Issuer.

 

The Trustee shall calculate the amount of interest  due on each Interest Payment Date with respect
to the then-concluding Interest
Period by the close of business on the
date one (1) Business Day prior to the end of such Interest Period, and shall notify the Borrower
and the Bank of such amount. The
Trustee shall inform any Registered Owner who requests the same of the Weekly Interest Rate in effect from time to time.

 

(iv) Anything herein to the contrary notwithstanding,  in no event shall the interest rate borne by
the Bonds exceed twelve percent
(12%) per annum or, if lower, the maximum rate of interest which may be charged or collected pursuant to applicable provisions of federal or state law.

 

(d) The principal of the Bonds shall be payable in lawful  money of the United States of America on April 1,
2024 at the principal corporate
trust office of the Trustee in San Francisco, California or at such other office as the Trustee may
designate. Except as provided in Section 2.09
hereof, no payment of principal shall be made on any Bond unless and until such Bond is tendered to
the Trustee for cancellation, as
the case may be.

 

(e) The Bonds shall be subject to redemption and purchase as  provided in Article IV hereof.

 

15

 

SECTION 2.03. CONVERSION OF BONDS.

 

(a) On any Interest Payment Date, the interest rate on the  Bonds may be converted to a fixed annual rate
of interest upon receipt by the
Issuer, the Trustee, the Tender Agent, the Bank and the Remarketing Agent not less than 45 days in
advance of the proposed Fixed
Rate Date of (i) notice from the Borrower electing to have the interest rate on the Bonds converted to a
fixed rate of interest and the
effective date of such conversion, (ii) an Opinion of Bond Counsel (which shall be confirmed on the Fixed Rate
Date) to the effect that conversion
to a Fixed Interest Rate is permitted by the Indenture and the Act, that conversion to the Fixed Interest
Rate in accordance with the
provisions of the Indenture will not cause interest on the Bonds to not be Tax-exempt and that, to the extent
required, the Borrower has complied
with the Disclosure Requirements as provided in Section 5.12 of the Agreement, (iii) receipt by the Trustee
of: (A) a commitment from the
Bank evidencing that the Letter of Credit has been increased to provide for the interest, principal and
premium requirements on the Bonds
on and after the Fixed Rate Date, (B) an Alternate Credit Facility pursuant to the terms of Section 5.07
of the Agreement, or (C) an
Alternate Letter of Credit pursuant to the terms of Section 5.08 ofthe Agreement, (iv) the written consent
of the Bank to such conversion and
(v) receipt by the Trustee of written evidence from the rating agency then rating the Bonds of its rating on
the Bonds.

 

(b)
(i) After the Fixed Rate Date, interest on the Bonds shall  be computed on the basis of a year of 360 days
and 12 months of 30 days each.
The interest rate on all Bonds from the Fixed Rate Date until the maturity or prior redemption or acceleration thereof shall be a rate per annum
equal to the Fixed Interest Rate,
which shall be determined on or prior to, but not more than 15 days prior to, the Business Day immediately preceding the Fixed Rate Date. The
Remarketing Agent shall specify
the Fixed Interest Rate to be borne by the Bonds on and after the Fixed Rate Date. The Fixed Interest Rate shall be the rate, but not exceeding the
rate, which at the time of
determination thereof in the judgment of the Remarketing Agent, having due regard for prevailing financial market conditions, would be necessary to
remarket the Bonds at a price
equal to 100% of the principal amount thereof on the Fixed Rate Date. If on the date of
determination by the Remarketing
Agent of the Fixed Interest Rate, the Fixed Interest Rate so determined is held by a court to be invalid or unenforceable, then the Fixed Interest Rate
shall be a rate determined by the
Remarketing Agent, not less than 90% or more than 130% of the “Alternate Fixed Rate,” which in the judgment of the Remarketing Agent, having due regard
for prevailing market conditions,
would be the minimum rate at which Registered
Owners of the Bonds would be able to sell the Bonds at a price equal to the principal amount
thereof on the Fixed Rate Date.
The Alternate Fixed Rate shall be determined by the Remarketing Agent and shall be a rate per
annum based upon yield
evaluations at par of Tax-exempt securities having a remaining term equal, as nearly as practicable,
to the time remaining until the
maturity of the Bonds of Component Issues selected by the Remarketing Agent each of which would be rated by either Moody’s or S&P in a long-term
debt rating category which is the
same as, or is immediately proximate to, the long-term debt rating category which will be assigned to the

 

16

 

Bonds
after the Fixed Rate Date. Anything to the contrary  herein notwithstanding, the Fixed Interest
Rate shall not exceed twelve
percent (12%) per annum. If, after the Fixed Rate Date, the Bonds shall fail to be converted to a Fixed Interest Rate, the Bonds will continue to earn
interest at the Weekly Interest
Rate as provided in this Indenture and the Registered Owners shall be notified thereof by the Trustee.

 

(ii) Following an election of the Borrower to convert  the interest rate on the Bonds to the Fixed
Interest Rate as provided in this
Section, the Registered Owners of all of the Outstanding Bonds shall be required to tender their Bonds for purchase on the Mandatory Tender Date.

 

(iii) At least 30 days prior to the Fixed Rate Date,  the Trustee shall give an irrevocable notice
to the Registered Owners of
conversion of the Weekly Interest Rate borne by the Bonds to the Fixed Interest Rate on the Fixed
Rate Date. If a Registered Owner
delivers a written request to the Trustee at least 45 days prior to the Fixed Rate Date setting forth the appropriate telex or telecopier number and
other necessary information to
enable the Trustee to deliver such notice by telegram, telex, telecopier or other telecommunication device capable of creating a written notice such
notice shall be delivered in the
manner requested. Such notice shall (A) specify the proposed Fixed Rate Date, (B) require the Registered Owners of all of the Outstanding
Bonds to tender their Bonds for
purchase on the Mandatory Tender Date pursuant to Section 4.07 hereof, and (C) state that all Outstanding Bonds not purchased on or before the Mandatory
Tender Date will be deemed to be purchased
on the Mandatory Tender Date at a
price equal to the principal amount thereof, plus unpaid interest, if any, accrued to such date.

 

(iv) Any Bond purchased by the Tender Agent pursuant  to the provisions of Section 4.06 hereof
from the date notice of the
proposed Fixed Rate Date is given to Registered Owners through the Fixed Rate Date shall be
remarketed at the Weekly Interest
Rate for a period of time up to and including the Fixed Rate Date; provided, however, that all
Bonds remarketed from the date
notice of the proposed Fixed Rate Date is given to Registered Owners through the Fixed Rate Date shall be tendered by the Registered Owners thereof for
purchase on the Mandatory Tender
Date.

 

(v) The determination of the Fixed Interest Rate by  the Remarketing Agent shall be conclusive and
binding on the Issuer, the
Trustee, the Borrower and the Registered Owners of the Bonds.

 

SECTION 2.04. EXECUTION OF BONDS. The Bonds shall be
executed in the name and on behalf of the Issuer with the manual or facsimile
signature of the Chair of the Issuer or the Chair’s designee and attested by
the manual or facsimile signature of its Secretary. The Bonds shall then be
delivered to the Bond Registrar for authentication by it. In case any of the
officers who shall have signed or attested any of the Bonds shall cease to be
such officer or officers of the Issuer before the Bonds so signed or attested
shall have been authenticated or delivered by

 

17

 

the Bond Registrar or issued
by the Issuer, such Bonds may nevertheless be authenticated, delivered and
issued and, upon such authentication, delivery and issue, shall be as binding
upon the Issuer as though those who signed and attested the same had continued
to be such officers of the Issuer, and also any Bonds may be signed and
attested on behalf of the Issuer by such persons as at the actual date of
execution of such Bonds shall be the proper officers of the Issuer although at
the nominal date of such Bonds any such person shall not have been such officer
of the Issuer.

 

Only such of the Bonds as
shall bear thereon a certificate of authentication substantially in the form
set forth in Exhibit A hereto, with the manual signature of the Bond Registrar,
shall be valid or obligatory for any purpose or entitled to the benefits of
this Indenture, and such certificate of the Bond Registrar shall be conclusive
evidence that the Bonds so authenticated have been duly executed, authenticated
and delivered hereunder and are entitled to the benefits of this Indenture.

 

SECTION 2.05. TRANSFER OF BONDS. Any Bond may, in
accordance with its terms, be transferred, upon the books required to be kept
pursuant to the provisions of Section 2.07 hereof, by the person in whose
name it is registered, in person or by his duly authorized attorney, upon
surrender of such registered Bond for cancellation, accompanied by delivery of
a written instrument of transfer, duly executed in a form approved by the Bond
Registrar. Transfer of a Bond shall not be permitted by the Bond Registrar: (a)
if the Bond Registrar has received notice from the Registered Owner of such
Bond that such Bond will be delivered to the Tender Agent for purchase on or
before the next succeeding Interest Payment Date or (b) if the Bond Registrar
receives such written instrument of transfer after the Record Date prior to the
next succeeding Interest Payment Date.

 

Whenever any Bond or Bonds
shall be surrendered for transfer, the Issuer shall execute and the Bond
Registrar shall authenticate and deliver a new Bond or Bonds for a like
aggregate principal amount in an Authorized Denomination. The Bond Registrar
shall require the Registered Owner requesting such transfer to pay any tax or
other governmental charge required to be paid with respect to such transfer,
and may in addition require the payment of a reasonable sum to cover expenses
incurred by the Issuer and the Bond Registrar in connection with such transfer.

 

Notwithstanding the
foregoing, prior to the Fixed Rate Date, no Bonds held by or for the account of
the Bank or the Borrower shall be transferred upon the books required to be
kept pursuant to Section 2.07 hereof unless the Trustee has received
positive confirmation by the Bank that the amount that may be drawn under the
Letter of Credit shall have been, or shall concurrently with such transfer be,
reinstated (automatically or otherwise), in the amount of the draw on the
Letter of Credit used to purchase such Bonds proposed to be transferred.

 

SECTION 2.06. EXCHANGE OF BONDS. Bonds may be exchanged at
the principal corporate trust office of the Trustee in San Francisco,
California, or at such other office as the Trustee may designate, for a like
aggregate principal amount of Bonds of other Authorized Denominations. The Bond
Registrar shall require the Registered Owner requesting such exchange to
deliver such Bonds to be exchanged and to pay any tax or other governmental
charge required to be paid with respect to such exchange, and may in addition
require the payment of a reasonable sum to cover

 

18

 

expenses incurred by the
Issuer or the Bond Registrar in connection with such exchange. Thereupon, the
Bonds delivered to the Bond Registrar for exchange shall be cancelled by the
Bond Registrar.

 

SECTION 2.07. BOND REGISTER. The Trustee is hereby
designated and appointed as the bond registrar (the “Bond Registrar”). The Bond
Registrar will keep or cause to be kept at its corporate trust office in San
Francisco, California, or at such other office as the Bond Registrar may
designate, sufficient books for the registration and transfer of the Bonds, and
shall keep or cause to be kept within the State a copy of such books, which
shall at all times be open to inspection during regular business hours by the
Issuer; and, upon presentation for such purpose, the Bond Registrar shall,
under such reasonable regulations as it may prescribe, register or transfer or
cause to be registered or transferred, on such books, Bonds as hereinbefore
provided.

 

SECTION 2.08. TEMPORARY BONDS. The Bonds may be issued in
temporary form exchangeable for definitive Bonds when ready for delivery. Any
temporary Bond may be printed, lithographed or typewritten, shall be in an
Authorized Denomination, shall be in fully registered form without coupons and
may contain such reference to any of the provisions of this Indenture as may be
appropriate and in a form acceptable to the Paying Agent. Every temporary Bond
shall be executed by the Issuer and be authenticated by the Bond Registrar upon
the same conditions and in substantially the same manner as the definitive
Bonds. If the Issuer issues temporary Bonds it will execute and deliver
definitive Bonds as promptly thereafter as practicable, and thereupon the
temporary Bonds may be surrendered, for cancellation, in exchange therefor at
the principal corporate trust office of the Bond Registrar and the Bond
Registrar shall authenticate and deliver in exchange for such temporary Bonds
an equal aggregate principal amount of definitive Bonds in Authorized
Denominations. Until so exchanged, the temporary Bonds shall be entitled to the
same benefits under this Indenture as definitive Bonds authenticated and
delivered hereunder.

 

SECTION 2.09. BONDS MUTILATED, LOST, DESTROYED OR STOLEN.
If any Bond shall become mutilated, the Issuer, at the expense of the
Registered Owner of said Bond, shall execute, and the Bond Registrar shall
thereupon authenticate and deliver, a new Bond of like tenor in exchange and
substitution for the Bond so mutilated, but only upon surrender to the Bond
Registrar of the Bond so mutilated. Every mutilated Bond so surrendered to the
Bond Registrar shall be cancelled by it and delivered to, or upon the order of,
the Issuer. If any Bond shall be lost, destroyed or stolen, evidence of such
loss, destruction or theft may be submitted to the Bond Registrar and, if such
evidence be satisfactory to it and indemnity satisfactory to the Bond Registrar
shall be given, the Issuer, at the expense of the Registered Owner, shall
execute, and the Bond Registrar shall thereupon authenticate and deliver, a new
Bond of like tenor in lieu of and in substitution for the Bond so lost,
destroyed or stolen (or if any such Bond shall have matured or shall be about
to mature, instead of issuing a substitute Bond, the Bond Registrar may pay the
same without surrender thereof upon such maturity date). The Bond Registrar may
require payment by the Registered Owner of a sum not exceeding the actual cost
of preparing each new Bond issued under this Section and of the expenses
which may be incurred by the Issuer and the Bond Registrar in the premises. Any
Bond issued under the provisions of this Section in lieu of any Bond
alleged to be lost, destroyed or stolen shall constitute an original additional
contractual obligation on the part of the Issuer whether or not the Bond so
alleged to

 

19

 

be lost, destroyed or stolen
be at any time enforceable by anyone, and shall be entitled to the benefits of
this Indenture with all other Bonds secured by this Indenture.

 

SECTION 2.10. SPECIAL OBLIGATIONS. The Bonds, together
with the interest and premium (if any) thereon and the purchase price thereof,
shall not be deemed to constitute a debt or liability of the State or any
political subdivision or agency of the State or a pledge of the faith and
credit of the State or any political subdivision or agency of the State, but
shall be payable solely from the funds provided therefor pursuant to this
Indenture. The Bonds are only a special obligation of the Issuer as provided by
the Act and the Issuer shall under no circumstances be obligated to pay the
Bonds or respective Costs of the Project except from Revenues and other funds
pledged therefor.

 

Neither the faith and credit
nor the taxing power of the State or any political subdivision or agency of the
State is pledged to the payment of the principal of, premium, if any, purchase
price of or interest on the Bonds nor is the State or any political subdivision
or agency of the State in any manner obligated to make any appropriation for
such payment. The Issuer has no taxing power.

 

SECTION 2.11. BOOK-ENTRY-ONLY SYSTEM.

 

(a) Except as otherwise provided in subsections (b) and (c) of  this Section, the Bonds initially
authenticated and delivered hereunder shall be registered in the name of Cede & Co., as nominee of DTC orsuch other nominee as DTC shall request.
Payments of interest on, principal
of and any premium on the Bonds shall be made to the account of Cede & Co. on each Bond Payment Date at
the address indicated for Cede
& Co. in the registration books maintained by the Bond Registrar by transfer of immediately available funds.
DTC has represented to the Issuer
that it will maintain a book-entry system in recording ownership interests of its participants (the “Direct
Participants”) and the ownership
interests of a purchaser of a beneficial interest in the Bonds (a “Beneficial Owner”) will be recorded
through book entries on the
records of the Direct Participants.

 

(b) The Bonds shall be initially issued in the form of a  separate single authenticated fully registered
Bond in the amount of each
separate stated maturity. With respect to Bonds so registered in the name of Cede & Co., the Issuer, the
Trustee and the Tender Agent shall
have no responsibility or obligation to any Direct Participant or to any Beneficial Owner of such Bonds. Without
limiting the immediately preceding
sentence, the Issuer, the Trustee and the Tender Agent shall have no responsibility or obligation with
respect to (i) the accuracy of
the records of DTC, Cede & Co. or any Direct Participant with respect to any beneficial ownership interest
in the Bonds, (ii) the delivery
to any Direct Participant, Beneficial Owner or other person, other than DTC, of any notice with respect to
the Bonds, including any notice
of redemption, (iii) the payment to any Direct Participant, Beneficial Owner or other person, other than
DTC, of any amount with respect
to the principal or redemption price of, or interest on, the Bonds or (iv) any consent given or other
action taken by DTC as Registered
Owner of the Bonds. The Issuer, the Trustee and the Tender Agent may treat DTC as, and deem DTC to be,
the absolute Registered Owner of
each Bond for all purposes whatsoever including (but not limited to) (A) payment of the principal or
redemption price of, and interest
on, each such

 

20

 

Bond,
(B) giving notices of conversion or redemption and other matters  with respect to such Bonds and (C) registering
transfers with respect to such
Bonds. The Trustee shall pay the principal or redemption price of, and interest on, all Bonds only to or upon
the order of DTC, and all such
payments shall be valid and effective to fully satisfy and discharge the Issuer’s obligations with
respect to such principal or redemption
price, and interest, to the extent of the sum or sums so paid. No person other than DTC shall receive a
Bond evidencing the obligation of
the Issuer to make payments of principal or redemption price of, and interest on, the Bonds pursuant
to this Indenture. Upon delivery
by DTC to the Trustee of written notice to the effect that DTC has determined to substitute a new nominee in
place of Cede & Co., and subject
to the transfer provisions hereof, the word “Cede & Co.” in this Indenture shall refer to such new nominee
of DTC.

 

(c)
(i) DTC may determine to discontinue providing its  services with respect to the Bonds at any time
by giving reasonable written
notice to the Issuer, the Trustee and the Tender Agent and discharging its responsibilities with respect thereto under applicable law.

 

(ii) The Issuer, in its sole discretion and without  the consent of any other person, may
terminate, upon provision of
notice to the Trustee and Tender Agent, the services of DTC with respect to the Bonds if the Issuer
determines that the continuation
of the system of book-entry only transfers through DTC (or a successor securities depository) is not in the best interests of the Beneficial Owners of
the Bonds or is burdensome to the
Issuer, and shall terminate the services of DTC with respect to the Bonds upon receipt by the Issuer, the Trustee and the Tender Agent of written notice
from DTC to the effect that DTC
has received written notice from Direct Participants having interests, as shown in the records of DTC, in an aggregate principal amount of not less
than fifty percent (50%) of the
aggregate principal amount of the then Outstanding Bonds to the effect, that: (A) DTC is unable to discharge its responsibilities with respect to
such Bonds, or (B) a continuation of the requirement that all of the Outstanding Bonds be registered in the
registration books kept by the
Trustee in the name of Cede & Co., as nominee of DTC, is not in the best interest of the Beneficial
Owners of such Bonds.

 

(d) Upon the termination of the services of DTC with respect  to the Bonds pursuant to subsection (c)(ii)(B)
hereof, or upon the discontinuance
or termination of the services of DTC with respect to the Bonds pursuant to subsection (c)(i)
or subsection (c)(ii)(A) hereof after which no substitute securities depository willing to undertakethe functions of DTC hereunder can be
found or which, in the opinion of the
Issuer, is willing and able to undertake such functions upon reasonable and customary terms, the Bonds
shall no longer be restricted to
being registered in the registration books kept by the Bond Registrar in the name of Cede & Co. as
nominee of DTC. In such event, the
Issuer shall issue and the Trustee shall transfer and exchange Bond certificates as requested by DTC or Direct
Participants of like principal
amount, series and maturity, in Authorized Denominations to the identifiable Beneficial Owners in
replacement of such Beneficial Owners’
beneficial interests in the Bonds.

 

21

 

(e) Notwithstanding any other provision of this Indenture to  the contrary, so long as any Bond is
registered in the name of Cede & Co., as nominee of DTC, all payments with respect to the principal orredemption price of, and interest on,
such Bond and all notices with respect
to such Bond shall be made and given, respectively, to DTC.

 

(f) In connection with any notice or other communication to be  provided to Registered Owners pursuant to this
Indenture by the Issuer, the
Tender Agent or the Trustee with respect to any consent or other action to be taken by Registered Owners, the
Issuer, the Tender Agent or the
Trustee, as the case may be, shall establish a record date for such consent or other action and give DTC
notice of such record date not
less than 15 calendar days in advance of such record date to the extent possible.

 

(g) Notwithstanding any provision herein to the contrary, the  Issuer and the Trustee may agree to allow DTC,
or its nominee, Cede & Co.,
to make a notation on any Bond redeemed in part to reflect, for informational purposes only, the principal
amount and date of any such redemption.

 

(h) Notwithstanding any provision herein to the contrary, so  long as the Bonds are subject to a system of book-entry
only transfers pursuant to this
Section, any requirement for the delivery of Bonds to the Tender Agent in connection with a
mandatory tender pursuant to Section 4.07
hereof shall be deemed satisfied upon the transfer, on the registration books of DTC, of the beneficial
ownership interests in such Bonds
tendered for purchase to the account of the Tender Agent, or a Direct Participant acting on behalf of the
Tender Agent.

 

ARTICLE III

 

ISSUANCE
OF BONDS; APPLICATION OF PROCEEDS

 

SECTION 3.01. ISSUANCE OF THE BONDS. At any time after the
execution of this Indenture, the Issuer may execute and the Bond Registrar
shall authenticate and, upon Request of the Issuer, deliver Bonds in the
aggregate principal amount set forth in Section 2.01 hereof.

 

SECTION 3.02. APPLICATION OF PROCEEDS OF THE BONDS. The
proceeds received from the sale of the Bonds shall be deposited in trust with
the Trustee, who shall forthwith set aside such proceeds as follows:

 

(a) The Trustee shall set aside the sum of $96,000 in the  Costs of Issuance Fund, together with any
additional money supplied by the
Borrower to pay the Costs of Issuance, which Costs of Issuance Fund the Trustee shall establish and maintain as
further provided in Section 3.03(e)
hereof.

 

(b) The Trustee shall set aside the remainder of said  proceeds, $4,704,000, in the Project Fund.

 

22

 

SECTION 3.03.
ESTABLISHMENT AND APPLICATION OF PROJECT FUND AND COSTS OF ISSUANCE FUND.

 

(a)
The Trustee shall establish, maintain and hold in trust a separate fund
designated as the “Project Fund.” The moneys in the Project Fund shall be used
and withdrawn by the Trustee to pay the Costs of the Project.

 

(b)
Subject to paragraph (c) of this Section, before any  payment from the Project Fund shall be made to
pay any Costs of the Project, the
Borrower shall file or cause to be filed with the Trustee a Requisition of the Borrower stating (i) the
item number of such payment; (ii)
the name of the Person to whom each such payment is due, which may be the Borrower in the case of
reimbursement for any Costs of the
Project theretofore paid by the Borrower; (iii) the respective amounts to be paid; (iv) the purpose by
general classification for which
each obligation to be paid was incurred; (v) that obligations in the stated amounts are presently due and
payable and that each item thereof
is a proper charge against the Project Fund and has not been previously paid from said fund or from the
proceeds of the Bonds; and (vi)
that there has not been filed with or served upon the Borrower notice of any lien, or attachment upon, or
claim affecting the right to receive
payment of, any of the amounts payable to any of the persons named in such Requisition, which has not been
released or will not be released
simultaneously with the payment of such obligation, other than materialmen’s or mechanics’ liens accruing by
mere operation of law.

 

Upon
receipt of each Requisition and written approval of the  Bank, the Trustee shall pay the amount set
forth in such Requisition as directed
by the terms thereof out of the Project Fund. The Trustee shall not make any such payment if it has
theretofore received notice of
any lien, right to lien or attachment upon, or claim affecting the right to receive payment of, any of the moneys
to be so paid, which has not been
released or will not be released simultaneously with such payment, other than materialmen’s or
mechanics’ liens accruing by mere operation
of law.

 

(c)
In the event the Borrower elects to invest any moneys on  deposit in the Project Fund in Permitted
Investments other than Investment
Securities pursuant to Section 5.05 hereof, and the Borrower has not otherwise satisfied any of the
exceptions to the calculation of rebate
as provided in Section 4.02(a) of the Tax Regulatory Agreement, the Trustee shall, prior to the payment of any
Requisition which would result in
the amount remaining on deposit in the Project Fund being less than 2% of the principal amount of the
Bonds set forth in Section 2.01
hereof, notify the Borrower that a rebate calculation is required to determine the Rebate Requirement (as
defined in the Tax Regulatory Agreement)
in accordance with Section 5.07 hereof. In addition, the payment of such Requisition by the Trustee
shall be subject to prior compliance
with the provisions of Section 5.07 hereof and the Tax Regulatory Agreement.

 

(d)
Subject to paragraph (c) of this Section, upon the receipt  of the Certificate of the Borrower required by
Section 3.03 of the Agreement,
accompanied by the written approval of the Bank, or at such time that there are no Outstanding Bonds, the
Trustee shall transfer any
remaining balance in the Project Fund, less the amount of any such

 

23

 

retention, to a separate
account within the Redemption Account, which  the Trustee shall establish and hold in trust,
and which shall be entitled the
“Surplus Account.” The moneys in the Surplus Account shall be used and applied (unless some other
application of such moneys would not,
in the Opinion of Bond Counsel, adversely affect the Tax-exempt status of interest on the Bonds) to pay
principal only in connection with
the call and redemption of Bonds to the maximum degree permissible in accordance with Section 4.01 hereof, at the
earliest possible dates at which
Bonds can be redeemed without payment of premium pursuant to this Indenture or to reimburse the Bank for
any draws theretofore made by the
Trustee under the Letter of Credit, but not yet reimbursed, the proceeds of which were used to accomplish such
redemption; provided, however,
that the principal of Bank Bonds shall be paid from moneys in the Surplus Account prior to the payment of
principal of any other outstanding
Bonds. Any moneys in the Surplus Account not used to call and redeem Bonds or to reimburse the Bank as
herein provided shall be used and
applied to pay the principal of the Bonds as such principal becomes due and payable, in annual amounts
which bear the same ratio to the
annual principal due on the Bonds that the amount deposited in the Surplus Account bears to the original face
amount of the Bonds (unless in
the Opinion of Bond Counsel another use would not adversely affect the Tax-exempt status of interest on the
Bonds). Notwithstanding Section
5.05 hereof, the moneys in the Surplus Account shall be invested at a yield no higher than the yield
on the Outstanding Bonds (unless
in the Opinion of Bond Counsel investment at a higher yield would not adversely affect the Tax-exempt
status of interest on the Bonds),
and all such investment income shall be deposited in the Surplus Account and expended or reinvested as
provided above.

 

(e)
The Trustee shall establish, maintain and hold in trust a  separate fund designated as the “Costs of
Issuance Fund.” The moneys in the
Costs of Issuance Fund shall be held by the Trustee in trust and applied to the payment of Costs of Issuance,
upon a requisition or letter
filed with the Trustee by an Authorized Representative of the Borrower or a designee of an Authorized
Representative of the Borrower. Any
money remaining in the Costs of Issuance Fund on April 29, 2000 shall be either transferred to the Project
Fund or returned to the Borrower,
at the direction of the Borrower.

 

SECTION 3.04.
VALIDITY OF BONDS. The validity of the authorization and issuance of the Bonds
is not dependent on and shall not be affected in any way by any proceedings
taken by the Issuer or the Trustee with respect to or in connection with the
Agreement. The recital contained in the Bonds that the same are issued pursuant
to the Act and the Constitution and laws of the State shall be conclusive
evidence of their validity and of compliance with the provisions of law in
their issuance.

 

ARTICLE IV

 

REDEMPTION AND PURCHASE OF
BONDS

 

SECTION 4.01.
TERMS OF REDEMPTION. The Bonds are subject to redemption by the Issuer if and
to the extent the Borrower is entitled to make and makes, or is required to
make, a payment or prepayment pursuant to Articles IV or VIII of the Agreement.
All such prepayments by the Borrower shall be deposited in the Redemption
Account. The Issuer shall not call the

 

24

 

Bonds for optional
redemption, and the Trustee shall not give notice of any such redemption,
unless the Borrower has so directed in accordance with the Agreement and has
made or caused to be made all required installments of the Borrower’s
obligations under the Agreement; provided that the Issuer may require such
payment under Section 8.03 of the Agreement without the Borrower’s direction.

 

The Bonds shall be subject to
redemption by the Issuer upon the following terms in increments of $5,000,
provided that in the event of redemption of less than all of the Bonds, the
amount which remains Outstanding shall be in Authorized Denominations:

 

(a)
SINKING FUND REDEMPTION. The Bonds are not subject to  mandatory sinking fund redemption.

 

(b)
PRIOR TO THE FIXED RATE DATE. On or prior to the Fixed  Rate Date, the Bonds are subject to optional
redemption on any Business Day,
in whole or in part, to the extent of prepayments of amounts due under the Agreement made at the option of the
Borrower pursuant to Section
8.02(b) of the Agreement with the written approval of the Bank, at a redemption price of 100% of the principal
amount of the Bonds to be
redeemed, plus interest accrued thereon to the redemption date.

 

(c)
TAXABILITY. In the event of a prepayment pursuant to  Section 8.03(a)(ii) or Section 8.03(a)(iii) of
the Agreement as a result of a
Determination of Taxability, Bonds Outstanding on the date of the occurrence of such Determination of
Taxability shall be redeemed in
whole at any time within 60 days after such occurrence, at a redemption price of 100% of the principal
amount thereof plus interest accrued
thereon to the redemption date. No redemption of Bonds shall be made pursuant to any of the other provisions
of this Section following a
Determination of Taxability. IF THE LIEN OF THIS INDENTURE IS DISCHARGED PRIOR TO THE OCCURRENCE OF A
DETERMINATION OF TAXABILITY, THEN
THE BONDS SHALL NOT BE REDEEMED AS DESCRIBED IN THIS SUBSECTION 4.01(c).

 

(d)
LETTER OF CREDIT. The Bonds shall be redeemed in whole, at  a redemption price equal to 100% of the
principal amount thereof, plus interest
accrued thereon to the redemption date, on a redemption date selected by the Trustee not less than fifteen
(15) days preceding the Expiration
Date of the Letter of Credit if no Alternate Letter of Credit has been delivered to the Trustee in
accordance with Section 5.08 of
the Agreement.

 

(e)
EXTRAORDINARY EVENTS. To the extent of a prepayment or a  required prepayment by the Borrower pursuant
to Sections 8.02(a), 8.03(a)(i)
or 8.03(b) of the Agreement, the Bonds are subject to redemption prior to their stated maturity as a
whole or in part, on any date, at
a redemption price equal to 100% of the principal amount thereof, plus interest accrued thereon to the
redemption date.

 

(f)
OPTIONAL REDEMPTION AFTER THE FIXED RATE DATE. After the  Fixed Rate Date, the Bonds are subject to
redemption to the extent of prepayments
of amounts due under the Agreement made at the option of the Borrower pursuant to Section 8.02(b) of
the Agreement, with the consent
of the Bank, in whole or in part, on any Interest Payment

 

25

 

Date during the applicable
periods specified below, at the applicable redemption price stated below, plus
interest accrued thereon to the  redemption date:

 

	
  NUMBER OF YEARS

  FROM FIXED RATE DATE

  TO FINAL MATURITY

  	
   

  	
  FIRST OPTIONAL

  REDEMPTION DATE

  	
   

  	
  REDEMPTION

  PRICE

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  greater than 9 years

  	
   

  	
  7
  years from conversion

  	
   

  	
  101%, declining .5%

  annually to 100%

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6-9 years

  	
   

  	
  6
  years from conversion

  	
   

  	
  100.5%, declining .5%

  annually to 100%

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  less than 6 years

  	
   

  	
  no
  optional redemption

  	
   

  	
   

  

 

Notwithstanding the optional
redemption schedule set forth above, on or prior to the Fixed Rate Date, the
Remarketing Agent may provide an alternate optional redemption schedule if it
obtains an Opinion of Bond Counsel that such alternate schedule will not cause
interest on the Bonds not to be Tax-exempt.

 

(g)
MANDATORY REDEMPTION FOR FAILURE TO REINSTATE THE LETTER OF CREDIT OR CREDIT
AGREEMENT DEFAULT. The Bonds shall be redeemed in whole, at a redemption price
equal to 100% of the principal amount  thereof, plus interest accrued thereon to the redemption date, withinfive calendar days (and before the
following Saturday if the fifth calendar
day is a Saturday) from the date the Trustee receives written notice from the Bank that the Bank will not
reinstate the interest portion of
the Letter of Credit or that an event of default has taken place under the Credit Agreement and directing
the Trustee to redeem the Bonds.

 

(h)
MANDATORY REDEMPTION FROM EXCESS FUNDS. The Bonds are  subject to redemption in part on any Interest
Payment Date at a redemption
price equal to 100% of the principal amount thereof, plus accrued interest to the redemption date, on
the next succeeding Interest
Payment Date to the extent of amounts remaining in the Project Fund upon completion of the Project which are
deposited in the Surplus Account
and directed to be used to redeem Bonds as provided in Section 3.03(d) hereof.

 

SECTION 4.02.
SELECTION OF BONDS FOR REDEMPTION. Whenever provision is made in this Indenture
for the redemption of less than all of the Bonds, the Trustee shall select the
Bonds to be redeemed from all Bonds or such given portion thereof not
previously called for redemption by lot in any manner which the Trustee in its
sole discretion shall deem appropriate and fair, to be credited against the
principal of the Bonds to be redeemed; provided, however, that in connection
with an optional redemption of the Bonds, Bank Bonds shall be the first Bonds
selected for redemption; and provided further, that the Bonds Outstanding after
giving effect to any redemption shall be in Authorized Denominations. Upon
selection of Bonds for redemption on or prior to the Fixed Rate Date, the
Trustee will immediately notify the Tender Agent of the Bonds selected for
redemption.

 

26

 

SECTION 4.03.
NOTICE OF REDEMPTION.

 

(a)
The Trustee shall mail notice of redemption (i) prior to  the Fixed Rate Date, not less than 15 days
before such redemption date, (except
in the case of redemptions pursuant to Section 4.01(d) hereof in which case not less than five days, or in
the case of redemptions pursuant
to Section 4.01(g) hereof, in which case notice shall be given as soon as practicable), and (ii) after the
Fixed Rate Date, not less than
thirty days before such redemption date (except in the case of redemptions pursuant to Section 4.01(d)
hereof, in which case not less than
five days, or in the case of redemptions pursuant to Section 4.01(g) hereof, in which case notice shall be
given as soon as practicable) to
the respective Registered Owners of any Bonds designated for redemption at their addresses on the registration booksmaintained by the Bond Registrar and to
the Issuer. Each notice of redemption
shall state the redemption date, the place or places of redemption, if less than all of the Bonds are
to be redeemed, the distinctive
numbers of the Bonds to be redeemed, and in the case of Bonds to be redeemed in part only, the
respective portions of the principal
amount thereof to be redeemed. Each such notice shall also state that on said date there will become due
and payable on each of said Bonds
the principal thereof or of said specified portion of the principal thereof in the case of a Bond to be
redeemed in part only, and that
from and after such redemption date interest thereon shall cease to accrue, and shall require that such
Bonds be then surrendered

 

(b)
Notice of redemption of Bonds shall be given by the  Trustee, at the expense of the Issuer, for and
on behalf of the Issuer.

 

(c)
In the case of redemption pursuant to Section 4.01 hereof  in connection with refunding obligations to be
issued for such purpose, notice
of such redemption may be cancelled if such refunding obligations are not issued on or prior to the
date fixed for such redemption.

 

(d)
Receipt of such notice shall not be a condition precedent to such redemption
and failure so to mail any such notice to a Registered Owner shall not affect
the validity of the proceedings for the redemption of Bonds of any Registered
Owner.

 

(e)
The Trustee shall, at the same time the notice in subsection (a) above is
mailed, also send a copy of the notice by certified mail or by overnight
delivery to each Securities Depository and to an Information Service. Failure
to provide notice to the Tender Agent, the Remarketing Agent, a Securities
Depository or to an Information Service shall not affect the validity of
proceedings for  the
redemption of Bonds.

 

SECTION 4.04.
PARTIAL REDEMPTION OF BONDS. Upon surrender of any Bond redeemed in part only,
the Issuer shall execute and the Bond Registrar shall authenticate and deliver
to the registered owner thereof, at the expense of the Issuer, a new Bond or
Bonds of Authorized Denominations equal in aggregate principal amount to the
unredeemed portion of the Bond surrendered.

 

27

 

SECTION 4.05. EFFECT
OF REDEMPTION. Notice of redemption having been duly given as aforesaid, and
Available Moneys for payment of the redemption price of the Bonds, together
with interest accrued to the date fixed for redemption, being held by the Trustee,
the Bonds (or portions thereof) so called for redemption shall become due and
payable on the redemption date designated in such notice, interest on the Bonds
(or portions thereof) so called for redemption shall cease to accrue, said
Bonds (or portions thereof) shall cease to be entitled to any benefit or
security under this Indenture, and the Registered Owners of said Bonds shall
have no rights in respect thereof except to receive payment of said principal,
premium, if any, and interest accrued to the date fixed for redemption.

 

All Bonds redeemed pursuant
to the provisions of this Article shall be cancelled upon surrender thereof by
the Trustee and delivered to or upon the order of the Issuer.

 

SECTION 4.06.
PURCHASE OF BONDS BY TENDER AGENT. Prior to the Fixed Rate Date, the Bonds may
be delivered by the Registered Owners thereof to the Tender Agent at its
principal corporate trust office in San Francisco, California, or such other
place as the Tender Agent may designate in writing to Registered Owners, the
Issuer, the Trustee, the Bank, the Borrower and the Remarketing Agent. Any Bond
so delivered shall be purchased by the Tender Agent on demand of the Registered
Owner thereof on the close of any Business Day at a purchase price equal to the
principal amount thereof plus accrued interest to but not including the date of
purchase (unless such date is an Interest Payment Date, in which case the
purchase price will be the principal amount of such Bond); provided that the
Tender Agent will be under no obligation to use its own funds to purchase such
Bonds and provided further that sufficient funds in the Purchase Fund are
immediately available for purchase of the Bonds and upon:

 

(a)
delivery to the Tender Agent of an irrevocable written  notice by 4:00 p.m., California time, (if not
received by 4:00 p.m., California time, on a Business Day it shall be deemed
received on the next succeeding Business Day) which states (i) the name and
address of the Registered Owner, (ii) the number or numbers of the Bond or
Bonds to be purchased, (iii) the aggregate principal amount of the Bond or
Bonds to be purchased, and (iv) the date on which the Bond is or Bonds are to be purchased, which date shall be a
Business Day not prior to the seventh (7th) calendar day next succeeding the
date of delivery of such notice;
and

 

(b)
delivery to the Tender Agent at or prior to 10:00 a.m.,  California time, on the Purchase Date
specified in the aforesaid notice,
of the Bond or Bonds to be tendered; provided, however, that any Bond for which a notice of the exercise of
the purchase option has been
given as provided in subsection (a) above and which is not so delivered shall be deemed delivered on the
date of purchase and shall be
purchased in accordance with this Indenture.

 

All Bonds, or portions
thereof, purchased pursuant to this Section shall be purchased in an amount
equal to an Authorized Denomination. The Trustee shall upon request of the
Tender Agent calculate the purchase price of any Bonds purchased pursuant to
this Section and shall notify the Tender Agent of such amount prior to the
Purchase Date.

 

28

 

SECTION 4.07.
MANDATORY TENDER OF BONDS. On each Mandatory Tender Date, the Bonds shall be
subject to mandatory tender for purchase on such Mandatory Tender Date at a
purchase price equal to the principal amount thereof, plus accrued interest, if
any. The Registered Owners of all of the Outstanding Bonds shall be required to
tender their Bonds for purchase by the Tender Agent on the Mandatory Tender
Date. All Bonds which on the Mandatory Tender Date have not been tendered for
purchase (“Non-Tendered Bonds”), shall be deemed purchased by the Tender Agent
on the Mandatory Tender Date at a price of the principal amount thereof plus unpaid
interest accrued, if any, to such date. Replacement Bonds for the Non-Tendered
Bonds may be remarketed and delivered to new Registered Owners as instructed by
the Borrower or the Remarketing Agent. The Tender Agent shall hold in trust for
the Registered Owners of the Non-Tendered Bonds the purchase price thereof, and
after the Mandatory Tender Date such Registered Owners will no longer be
entitled to any of the benefits of this Indenture except for the payment of
such purchase price.

 

ARTICLE V

 

REVENUES; FUNDS AND ACCOUNTS;

PAYMENT
OF PRINCIPAL AND INTEREST

 

SECTION 5.01.
PLEDGE AND ASSIGNMENT; REVENUE FUND.

 

(a)
Subject only to the provisions of this Indenture  permitting the application thereof for the
purposes and on the terms and
conditions set forth herein, all of the Revenues and any other amounts (including proceeds of the sale of
Bonds) held in any fund or account
established pursuant to this Indenture (except to the extent provided in Sections 5.05, 7.03 and 8.06
hereof and excepting the Rebate
Fund created by Section 5.07 hereof) are hereby pledged by the Issuer to secure the payment of the principal
and purchase price of and interest
on the Bonds in accordance with their terms and the provisions of this Indenture and thereafter, on a basis
subordinate thereto, to secure
the Borrower’s obligations to the Bank under the Credit Agreement. Said pledge shall constitute a lien
on and security interest in such
assets and shall attach, be perfected and be valid and binding from and after delivery by the Trustee of the
Bonds, without any physical
delivery thereof or further act.

 

(b)
The Issuer hereby transfers in trust, and assigns to the  Trustee, for the benefit of the Registered
Owners of the Bonds, and the Bank,
to the extent of its interest therein, all of the Revenues and other assets pledged in subsection (a) of this
Section and all of the right,
title and interest of the Issuer in the Agreement (except for the right to receive any Additional Payments
to the extent payable to the
Issuer, any rights of the Issuer to indemnification and rights of inspection and consent). The Trustee shall be
entitled to and shall collect and
receive all of the Revenues, and any Revenues collected or received by the Issuer shall be deemed to be
held, and to have been collected
or received, by the Issuer as the agent of the Trustee and shall forthwith be paid by the Issuer to the
Trustee. The Trustee also shall be entitled to and shall take all steps,
actions and proceedings reasonably necessary in its judgment to enforce, either
jointly with the Issuer or separately, all of the rights of the Issuer and all
of the obligations of the Borrower under the Agreement.

 

29

 

The
Trustee agrees that, so long as the Trustee holds any  Revenues or any other amounts (including
proceeds of the sale of the Bonds)
in any fund or account established pursuant to this Indenture which are pledged by the Issuer or the
Borrower to secure the payment of
the principal of and interest on the Bonds and the Borrower’s reimbursement obligations under the Credit
Agreement, the Trustee shall hold
the same as the collateral agent and bailee of the Bank but only to the extent of amounts paid by the Bank
under the Letter of Credit for
which the Bank has not received reimbursement from the Borrower for purposes of perfecting the lien and security
interest of the Bank therein.
Upon receipt of written notice from the Bank that the Borrower has failed to reimburse the Bank for a draw
under the Letter of Credit as required
by the Credit Agreement, the Trustee shall either cause all accounts and investments which are the subject
of the preceding sentence to be
titled in such a manner to reflect that the Bank has an interest therein as described in the preceding
sentence or ensure that each
Person with whom the Trustee places or through whom the Trustee invests any moneys which are the subject of
the preceding sentence is advised
of the Bank’s interest therein as described in the preceding sentence and instructed to mark its records to
reflect such interest. The
Trustee shall not pledge, hypothecate, transfer or release all or any portion of the Revenues to any persons
(including, without limitation,
the Borrower) other than Registered Owners of the Bonds in payment thereof or in any manner not in
accordance with this Indenture or
the Credit Agreement without the written consent of the Issuer and the Bank, except as otherwise required by a
court of law.

 

(c)
All Revenues shall be promptly deposited by the Trustee  upon receipt thereof in a special fund
designated as the Revenue Fund which
the Trustee shall establish, maintain and hold in trust; except as otherwise provided in Section 5.02 hereof,
all moneys received by the
Trustee and required to be deposited in the Project Fund shall be promptly deposited in the Project Fund and all
moneys received by the Trustee
and required to be deposited in the Redemption Account shall be promptly deposited in the Redemption Account,
which the Trustee shall establish,
maintain and hold in trust. All Revenues deposited with the Trustee shall be held, disbursed, allocated
and applied by the Trustee only
as provided in this Indenture. All moneys held by the Tender Agent for the payment of the principal or purchase
price of, premium, if any, and
interest on the Bonds, shall be held by the Tender Agent in trust for the
payment of such Bonds.

 

SECTION 5.02.
ALLOCATION OF REVENUES. Loan Repayments received by the Trustee from the
Borrower pursuant to Section 4.02(a) of the Agreement shall be deposited by the
Trustee into the following respective accounts (each of which the Trustee shall
establish and maintain within the Revenue Fund), in the following amounts, in
the following order of priority, and the requirements of each such account
(including the making up of any deficiencies in any such account resulting from
lack of Revenues sufficient to make any earlier required deposit) at the time
of deposit shall be satisfied before any transfer is made to any account
subsequent in priority, and provided, that no moneys representing drawings
under the Letter of Credit shall be transferred into the Interest Account, the
Principal Account or the Redemption Account of the Revenue Fund:

 

FIRST,
to the Interest Account, the amount paid by the  Borrower and designated as or attributable to
interest on the Bonds in the most
recent Loan Repayment, so that the

 

30

 

aggregate of such amounts
will, on the next Interest Payment Date, equal the amount of interest due on the
Bonds on such Interest Payment  Date.

 

SECOND,
to the Principal Account, the amount paid by the  Borrower and designated as or attributable to
principal of the Bonds in the
most recent Loan Repayment, so that the aggregate of such amounts will, on the next succeeding principal payment
date, equal the amount of
principal due (whether at maturity or by acceleration) on such principal payment date.

 

THIRD,
to the Redemption Account, the aggregate amount of principal and premium, if
any, next coming due by redemption permitted (as directed in writing by the
Borrower) or required under Article IV hereof, or any portion thereof paid by
the Borrower.

 

SECTION
5.03. PRIORITY OF
MONEYS IN REVENUE FUND; LETTER OF CREDIT ACCOUNT.

 

(a)
Funds for the payment of the principal or redemption price  of and interest on the Bonds shall be derived
from the following sources in the
order of priority indicated in each of the accounts in the Revenue Fund; provided however, that
amounts in the respective accounts
within the Revenue Fund shall be used to pay the principal or redemption price of and interest on the Bonds
held by Registered Owners other
than the Bank or the Borrower prior to the payment of the principal and interest on the Bonds held by
the Bank or the Borrower, and
provided further, that if principal or redemption price (or any portion thereof) of and interest on the Bonds
is paid with moneys described in
subparagraph (i) of this Section 5.03(a), any other moneys on deposit in the respective accounts in the
Revenue Fund shall be applied to
immediately reimburse the Bank by wire transfer in the amount of any such drawings:

 

(i)
moneys paid into the Letter of Credit Account of the Revenue Fund representing
the proceeds of drawings by the  Trustee under the Letter of Credit;

 

(ii)
moneys paid into the Interest Account, if any, representing accrued interest
received at the initial sale of the Bonds and proceeds from the investment
thereof which shall be applied to the payment of interest on the Bonds; 

 

(iii)
moneys paid into the Revenue Fund pursuant to Section 10.01(b) hereof and
proceeds from the investment thereof, which constitute Available Moneys;

 

(iv)
moneys deposited into the Redemption Account pursuant to Section 3.03(d) hereof
and proceeds from the investment thereof;

 

(v)
any other moneys (not derived from drawings under the Letter of Credit) paid
into the Revenue Fund and proceeds from the investment thereof, which
constitute Available Moneys; and

 

31

 

(vi)
any other moneys paid into the Revenue Fund and proceeds from the investment
thereof, which are not Available  Moneys.

 

The
Trustee shall create within the Revenue Fund a separate  account called the “Letter of Credit Account,”
and all moneys drawn under the
Letter of Credit shall be deposited and disbursed either in the Letter of Credit Account or the Liquidity
Account established pursuant to
Section 8.10 hereof. None of the Borrower, any Related Party, the Trustee or the Issuer shall have
any legal, equitable or beneficial
right, title or interest in the Letter of Credit Account or the Liquidity Account. The Letter of Credit
Account and the Liquidity Account
shall be established and maintained by the Trustee and the Tender Agent, respectively, and held in trust
apart from all other moneys and
securities held under this Indenture or otherwise, and over which the Trustee and the Tender Agent,
respectively, shall have the exclusive
and sole right of withdrawal for the exclusive benefit of the Registered Owners of the Bonds with respect to
which each drawing is made.

 

(b)
The Trustee shall draw moneys under the Letter of Credit  in accordance with the terms thereof in
amounts necessary to make full and
timely payments of principal of, premium, if any, and interest on the Bonds, other than Bonds owned by or for
the account of the Borrower or
the Bank when due, whether at maturity, redemption, acceleration, an Interest Payment Date or otherwise. In
addition, the Trustee shall draw moneys
under the Letter of Credit in accordance with the terms thereof to the extent necessary to make full and
timely payments required to be made
pursuant to, and in accordance with, Article VIII hereof to pay the purchase price of tendered Bonds. The
Trustee shall notify the Borrower
of any proposed drawing on the Letter of Credit (other than with respect to scheduled payments of
principal and interest), as and when
it notifies the Bank.

 

(c)
If on the Fixed Rate Date there shall have been delivered  to the Trustee an Alternate Credit Facility
pursuant to Section 5.07 of the
Agreement or if at any time there shall have been delivered to the Trustee an Alternate Letter of Credit pursuant
to Section 5.08 of the Agreement,
then the Trustee shall accept such Alternate Credit Facility or Alternate Letter of Credit, as applicable,
and promptly surrender the
previously held Letter of Credit to the issuing Bank for cancellation, and shall promptly take all
actions requested by the issuing
Bank to convey to such Bank or otherwise relinquish all of its right, title and interest in any security held
jointly by the issuing Bank and
the Trustee. If at any time there shall cease to be any Bonds Outstanding hereunder, the Trustee shall
promptly surrender the Letter of
Credit to the Bank for cancellation. The Trustee shall comply with the procedures set forth in the Letter of
Credit relating to the surrender
thereof.

 

SECTION 5.04.
LETTER OF CREDIT. Subject to the provisions of Section 5.03(c) hereof, the
Trustee shall hold and maintain the Letter of Credit for the benefit of the
Registered Owners until the Letter of Credit expires in accordance with its
terms. The Trustee shall diligently observe all terms, covenants and conditions
of the Letter of Credit, including payment when due of any draws on the Letter
of Credit, and the provisions relating to the payment of draws on, and
reinstatement of amounts that may be drawn under, the Letter of Credit, and
will not consent to,

 

32

 

agree to or permit any
amendment or modification of the Letter of Credit which would adversely affect
the rights or security of the Registered Owners of the Bonds. If at any time
during the term of the Letter of Credit, any successor Trustee shall be
appointed and qualified under this Indenture, the resigning or removed Trustee
shall request that the Bank transfer the Letter of Credit to the successor
Trustee in accordance with the procedures for transfer specified in the Letter
of Credit. If the resigning or removed Trustee fails to make this request, the
successor Trustee shall do so before accepting appointment. The Trustee shall
send notice to the Issuer, the Bank and the Borrower of the expiration of the
Letter of Credit at least two months prior to the date of such expiration.

 

At least 30 days prior to the
Letter of Credit Substitution Date, the Trustee shall send a written notice to
the Registered Owners relating to the Borrower’s election pursuant to Section
5.08 of the Agreement to deliver an Alternate Letter of Credit to the Trustee.
Such notice shall (a) specify the proposed Letter of Credit Substitution Date,
(b) require the Registered Owners of all of the Outstanding Bonds to tender
their Bonds for purchase on the Mandatory Tender Date pursuant to Section 4.07
hereof, and (c) state that all Outstanding Bonds not purchased on or before the
Mandatory Tender Date will be deemed to be purchased on the Mandatory Tender
Date at a price equal to the principal amount thereof, plus unpaid interest, if
any, accrued to such date.

 

SECTION 5.05.
INVESTMENT OF MONEYS. Subject to the following sentence, all moneys in any of
the funds or accounts established pursuant to this Indenture shall be invested
by the Trustee as directed in writing by an Authorized Representative of the
Borrower, in Permitted Investments maturing not later than the date on which it
is estimated that such moneys will be required for the purposes specified in
this Indenture; provided, however, that: (a) moneys on deposit in the Letter of
Credit Account and the Purchase Fund and any moneys held pursuant to Section
4.07 hereof shall be held uninvested; (b) any moneys held in trust for the
payment or redemption of Bonds pursuant to Article X hereof shall be invested
as provided in Section 10.03 hereof; (c) moneys held in the Rebate Fund shall
be invested in direct obligations of the United States or bonds or other
obligations guaranteed by the United States government or for which the full
faith and credit of the United States is pledged for the payment of principal
and interest thereof, or in money market funds the investment of which is
limited to such obligations, in each case rated in the highest rating category
applicable to such investments which mature not later than the date on which it
is estimated that such moneys will be required; and (d) moneys described in
clause (ii), (iii), or (iv) of Section 5.03(a) hereof shall be invested in
Permitted Investments rated A-1 or Prime 1 or higher by S&P and Moody’s
which mature not later than the date on which such moneys will be required to
pay the Bonds or the interest thereon. Immediately upon the giving by the
Trustee of the notice provided for in paragraph (c) of Section 3.03 hereof, all
moneys in any of the funds or accounts established pursuant to this Indenture,
subject to the limitations set forth in (a) through (d) of the first sentence
above, shall be invested by the Trustee in Permitted Investments maturing not
later than the date on which it is estimated that such moneys will be required
for the purposes specified in this Indenture.

 

Permitted Investments may be
purchased at such prices as the Trustee may in its discretion determine or as
may be directed by the Borrower or its agent. All Permitted Investments shall
be acquired as directed by the Borrower subject to the limitations set forth in
Section 6.06 hereof, the limitations as to maturities in this Section set
forth, and such additional

 

33

 

limitations or requirements
consistent with the foregoing as may be established by Request of the Borrower.
Notwithstanding any other provision herein, in the absence of written
investment instructions from the Borrower directing the Trustee by noon of the
Business Day preceding the day when investments are to be made, the Trustee is
directed to invest available funds not described in clauses (a), (b) or (c) of
the first paragraph of this Section in Investment Securities. The Trustee shall
not be liable for any consequences resulting from any investments made pursuant
to the preceding sentence except for its own negligence or willful misconduct.

 

All interest, profits and
other income received from the investment of moneys in any fund established
pursuant to this Indenture, (i) prior to delivery to the Trustee of the
Certificate of the Borrower with respect to completion of the Project (as
provided in Section 3.03(d) hereof) shall be deposited when received in the
Project Fund, and (ii) after the delivery of such Certificate shall be
deposited in the Revenue Fund; except that any such interest, profits and other
income received from the investment of: (A) any moneys held in trust for the
payment or redemption of Bonds pursuant to Article X shall be applied as
provided in Article X hereof; and (B) any moneys held in the Rebate Fund shall
be deposited in such fund. Notwithstanding anything to the contrary contained
in this paragraph, an amount of interest received with respect to any Permitted
Investment equal to the amount of accrued interest, if any, paid as part of the
purchase price of such Permitted Investment shall be credited to the fund from
which such accrued interest was paid.

 

For the purpose of
determining the amount in any fund, all Permitted Investments credited to such
fund shall be valued at the market value of such Permitted Investments.

 

The Trustee may act as
principal or agent in the making or disposing of any investment. The Trustee
may sell at the best price obtainable in the Trustee’s sole discretion, or
present for redemption, any Permitted Investment so purchased whenever it shall
be necessary to provide moneys to meet any required payment, transfer,
withdrawal or disbursement from the fund to which such Permitted Investment is
credited, and the Trustee shall not be liable or responsible for any loss
resulting from such investment except for its own negligence or willful
misconduct. For investment purposes only, the Trustee may commingle moneys held
in the Interest Account and Principal Account of the Revenue Fund.

 

SECTION 5.06.
ADDITIONAL DUTIES OF TRUSTEE. While the Bonds bear interest at the Weekly
Interest Rate, on or prior to the Business Day preceding each Interest Payment
Date, the Trustee shall send to the Borrower an invoice for the interest
accrued on the Bonds for the current Interest Period which is to be paid
pursuant to Section 4.02 of the Agreement. While the Bonds bear interest at the
Fixed Interest Rate, 30 days prior to each Interest Payment Date, the Trustee
shall send to the Borrower an invoice for the interest due on the Bonds on the
next succeeding Interest Payment Date which is to be paid pursuant to Section
4.02 of the Agreement. The Trustee shall send a copy of any such invoice sent
to the Borrower to the Bank. If full payment of any such invoice is not
received by the date the Borrower is required to make such payment pursuant to
Section 4.02 of the Agreement, the Trustee shall immediately notify in writing
the Bank, the Borrower and the Issuer of such nonpayment or underpayment by the
Borrower. The Trustee shall immediately give the Bank written notice upon the failure
of the Borrower to make any principal payment pursuant to Section 4.02 of the
Agreement.

 

34

 

SECTION 5.07.
ESTABLISHMENT OF REBATE FUND.

 

(a)
The Trustee shall establish and maintain a fund separate  from any other fund established and maintained
hereunder designated as the
“Rebate Fund.” There shall be deposited in the Rebate Fund such amounts as are required to be deposited
therein pursuant to the written instructions
of the Borrower. All money at any time deposited in the Rebate Fund shall be held by the Trustee in
trust, to the extent required to
satisfy the Rebate Requirement (as defined in the Tax Regulatory Agreement), for payment to the
federal government of the United
States of America and none of the Issuer, the Registered Owners, the Trustee, the Tender Agent, or the Bank
shall have any rights in or claim
to such moneys. All amounts deposited into or on deposit in the Rebate Fund shall be governed by this Section
and Sections 3.04 and 5.11 of the
Agreement and by the Tax Regulatory Agreement (which is incorporated herein by reference). The Trustee
shall be deemed conclusively to
have complied with said Sections if it follows the written direction of the Borrower, and shall
have no liability or responsibility
to enforce compliance by the Borrower with the terms of the Tax Regulatory Agreement or said Sections.

 

(b)
Upon receipt of the instructions required to be delivered  to the Trustee pursuant to the Tax Regulatory
Agreement, the Trustee shall remit
part or all of the balance in the Rebate Fund to the United States government, as so directed. In
addition, if the instructions delivered
to the Trustee pursuant to the Tax Regulatory Agreement so direct, the Trustee shall deposit moneys into
or transfer moneys out of the
Rebate Fund from or into such accounts or funds excluding the Purchase Fund and the Letter of Credit
Account, Available Moneys and moneys
being aged to become Available Moneys, as the instructions direct.

 

(c)
Notwithstanding any provision of this Section, if the  Issuer or the Borrower shall provide to the
Trustee an Opinion of Bond Counsel
that any specified action required under this Section is no longer required or that some further or
different action is required to maintain
the exclusion from gross income for federal income tax purposes of interest with respect to the
Bonds, the Trustee and the Issuer
may conclusively rely on such opinion in complying with the requirements of this Section, and the
covenants hereunder shall be deemed
to be modified to that extent.

 

ARTICLE VI

 

PARTICULAR COVENANTS

 

SECTION 6.01.
PUNCTUAL PAYMENT. The Issuer shall punctually pay or cause to be paid the
principal, premium, if any, and interest to become due in respect of all the
Bonds, in strict conformity with the terms of the Bonds and of this Indenture,
according to the true intent and meaning thereof, but only out of Revenues and
other assets pledged for such payment as provided in this Indenture.

 

SECTION 6.02.
EXTENSION OF PAYMENT OF BONDS. The Issuer shall not directly or indirectly
extend or assent to the extension of the maturity of any of the Bonds or the
time of

 

35

 

payment of any claims for
interest by the purchase or funding of such Bonds or claims for interest or by
any other arrangement and in case the maturity of any of the Bonds or the time
of payment of any such claims for interest shall be extended, such Bonds or
claims for interest shall not be entitled, in case of any default hereunder, to
the benefits of this Indenture, except subject to the prior payment in full of
the principal of all of the Bonds then outstanding and of all claims for
interest thereon which shall not have been so extended. Nothing in this Section
shall be deemed to limit the right of the Issuer to issue bonds for the purpose
of refunding any Outstanding Bonds, and such issuance shall not be deemed to
constitute an extension of maturity of Bonds.

 

SECTION 6.03.
AGAINST ENCUMBRANCES. The Issuer shall not create, or permit the creation of,
any pledge, lien, charge or other encumbrance upon the Revenues and other
assets pledged or assigned under this Indenture while any of the Bonds are
Outstanding, except the pledge and assignment created by this Indenture.
Subject to this limitation, the Issuer expressly reserves the right to enter
into one or more other indentures for any of its corporate purposes, including
other programs under the Act, and reserves the right to issue other obligations
for such purposes.

 

SECTION 6.04.
POWER TO ISSUE BONDS AND MAKE PLEDGE AND ASSIGNMENT. The Issuer is duly
authorized pursuant to law to issue the Bonds and to enter into this Indenture
and to pledge and assign the Revenues and other assets purported to be pledged
and assigned, respectively, under this Indenture in the manner and to the
extent provided in this Indenture. The Bonds and the provisions of this
Indenture are and will be the legal, valid and binding limited obligations of
the Issuer enforceable in accordance with their terms, and the Issuer shall at
all times, to the extent permitted by law, defend, preserve and protect said
pledge and assignment of Revenues and other assets and all the rights of the
Registered Owners under this Indenture against all claims and demands of all persons
whomsoever.

 

SECTION 6.05.
ACCOUNTING RECORDS AND REPORTS. The Trustee shall keep or cause to be kept
proper books of record and account in which complete and correct entries shall
be made of all transactions relating to the receipt, investment, disbursement,
allocation and application of the Revenues and the proceeds of the Bonds
received by the Trustee with respect to all funds and accounts held hereunder.
Such records shall specify the account or fund to which each investment (or
portion thereof) held by the Trustee is to be allocated and shall set forth, in
the case of each Investment Security, (a) its purchase price, (b) identifying
information, including par amount, coupon rate, and payment dates, (c) the
amount received at maturity or its sale price, as the case may be, (d) the
amounts and dates of any payments made with respect thereto, and (e) the dates
of acquisition and disposition or maturity.

 

Such records shall be open to
inspection by any Registered Owner, the Borrower and the Bank at any reasonable
time during regular business hours on reasonable notice.

 

SECTION 6.06.
ARBITRAGE COVENANTS. The Issuer has in the Agreement caused the Borrower to
covenant that the Borrower shall not make any use of the proceeds of the Bonds
or of any moneys on deposit to the credit of the Project Fund, the Revenue Fund
or the Rebate Fund which may be deemed to be proceeds of the Bonds pursuant to
Section 148 of the Code and the applicable Treasury Regulations thereunder
which would cause any Bond to be an “arbitrage

 

36

 

bond” within the meaning of
said Section and said regulations and that the Borrower will comply with the
requirements of said Section and said regulations, as the same may be amended
from time to time, so long as any Bonds remain Outstanding.

 

SECTION 6.07.
OTHER COVENANTS.

 

(a)
The Trustee shall promptly collect all amounts due from  the Borrower pursuant to the Agreement, shall
perform all duties imposed upon
it pursuant to the Agreement and shall diligently enforce, and take all steps, actions and proceedings
reasonably necessary for the
enforcement of all of the rights of the Issuer and all of the obligations of the Borrower.

 

(b)
The Issuer shall not amend, modify or terminate any of the  terms of the Agreement, or consent to any such
amendment, modification or
termination, without the written consent of the Trustee and the Bank. The Trustee shall give such written
consent only if (i) in the opinion
of the Trustee, in reliance upon the advice of counsel, such amendment, modification or termination will
not materially adversely affect
the interests of the Registered Owners or result in any material impairment of the security hereby given for
the payment of the Bonds, or (ii)
the Issuer first obtains the written consent of the Registered Owners of a majority in principal amount of
the Bonds then Outstanding to
such amendment, modification or termination, provided that no such amendment, modification or termination shall
reduce the amount of Loan Repayments
to be made to the Issuer or the Trustee by the Borrower pursuant to the Agreement, or extend the time
for making such payments, without
the written consent of all of the Registered Owners of the Bonds then Outstanding. The Trustee shall be
entitled to rely upon an Opinion
of Bond Counsel with respect to the effect of any amendments hereto or to the
Agreement.

 

SECTION 6.08.
FURTHER ASSURANCES. The Issuer shall make, execute and deliver any and all such
further indentures, instruments and assurances as may be reasonably necessary
or proper to carry out the intention or to facilitate the performance of this
Indenture and for the better assuring and confirming unto the Registered Owners
of the Bonds of the rights and benefits provided in this Indenture.

 

SECTION 6.09.
COVENANT TO ENTER INTO AGREEMENT OR CONTRACT TO PROVIDE ONGOING DISCLOSURE. The
Borrower has covenanted and agreed with the Issuer in Section 5.12 of the
Agreement to enter into an agreement or contract, constituting an undertaking
(the “Undertaking”), to provide ongoing disclosure for the benefit of the
Registered Owners as required by Paragraph (b)(5)(i) of the Securities and
Exchange Commission Rule 15c2-12 under the Securities Exchange Act of 1934, as
amended (17 CFR Part 240 Section 240.15c2-12) (the “Disclosure Requirements”),
to the extent the Bonds or the remarketing thereof are at any time not exempt
from the Disclosure Requirements. The Undertaking is hereby assigned by the
Issuer to the Trustee for the benefit of the Registered Owners, any
Participating Underwriter and any Beneficial Owner. Such assignment is a
present absolute assignment and not an assignment of a security interest.
Section 5.12 of the Agreement shall be enforceable by any Registered Owner,
Participating Underwriter or Beneficial Owner. However, neither the Issuer nor
the Trustee shall have any duty to enforce Section 5.12 of the Agreement. The
Issuer shall have no liability to the Registered Owners, Participating
Underwriters, Beneficial Owners or any other person with

 

37

 

respect to the actions by the
Borrower relating to the Disclosure Requirements. Notwithstanding any other
provision of this Indenture, failure of the Borrower to comply with Section
5.12 of the Agreement shall not be considered an Event of Default; provided,
however, the Trustee may (and, at the request of any Participating Underwriter
or the Registered Owners of at least 25% aggregate principal amount in
Outstanding Bonds, shall) or any Beneficial Owner may take such action as may
be necessary and appropriate, including seeking mandate or specific performance
by court order, to cause the Borrower to comply with its obligations under
Section 5.12 of the Agreement.

 

ARTICLE VII

 

EVENTS
OF DEFAULT AND REMEDIES OF REGISTERED OWNERS

 

SECTION
7.01. EVENTS OF
DEFAULT; ACCELERATION; WAIVER OF DEFAULT. Each of the following events shall
constitute an “Event of Default” hereunder:

 

(a)
default in the due and punctual payment of the principal  of, or premium (if any) on, any Bond when and
as the same shall become due and
payable, whether at maturity as therein expressed, by proceedings for redemption, by declaration or
otherwise;

 

(b)
default in the due and punctual payment of any installment  of interest on any Bond, when and as such
interest installment shall become
due and payable and the continuation of such failure for a period of five days after the due date for
such payment;

 

(c)
failure to pay the purchase price of any Bond tendered in  accordance with the provisions of Section 4.06
hereof, and the continuation of
such failure for a period of five days after such purchase price has become due and payable;

 

(d)
failure by the Issuer to perform or observe any of the  other covenants, agreements or conditions on
its part in this Indenture or in
the Bonds contained, and the continuation of such failure for a period of sixty (60) days after written notice
thereof, specifying such default
and requiring the same to be remedied, shall have been given to the Issuer, the Bank and the Borrower by the
Trustee, or to the Issuer, the
Bank, the Borrower and the Trustee by the Registered Owners of not less than twenty-five percent (25%) in
aggregate principal amount of the
Bonds at the time Outstanding;

 

(e)
the occurrence and continuance of an Event of Default  described in Section 8.01 of the Tax
Regulatory Agreement; or

 

(f)
the occurrence and continuance of a Loan Default Event  described in Section 7.01(a), (b) or (c) of
the Agreement.

 

No default specified in (d)
above shall constitute an Event of Default unless the Issuer and the Borrower
shall have failed to correct such default within the applicable period;
provided, however, that if the default shall be such that it cannot be
corrected within such period, it shall not constitute an Event of Default if
corrective action is instituted by the Issuer or the Borrower within the
applicable period and diligently pursued. With regard to any alleged default

 

38

 

concerning which notice is
given to the Borrower under the provisions of this Section, the Issuer hereby
grants the Borrower full authority for account of the Issuer to perform any
covenant or obligation the non-performance of which is alleged in said notice
to constitute a default in the name and stead of the Issuer with full power to
do any and all things and acts to the same extent that the Issuer could do and
perform any such things and acts and with power of substitution.

 

During the continuance of an
Event of Default, unless the principal of all the Bonds shall have already
become due and payable, the Trustee may, and upon the written request of the
Registered Owners of not less than twenty-five percent (25%) in aggregate
principal amount of the Bonds at the time Outstanding, or upon the occurrence
of an Event of Default described in (a), (b) or (c) above, the Trustee shall,
by notice in writing to the Issuer, the Tender Agent, the Remarketing Agent,
the Borrower and the Bank, declare the principal of all the Bonds then Outstanding,
and the interest accrued thereon, to be due and payable immediately, and upon
any such declaration the same shall become and shall be immediately due and
payable, anything in this Indenture or in the Bonds contained to the contrary
notwithstanding. Upon any such declaration the Trustee shall immediately draw
upon any then existing Letter of Credit in accordance with the terms thereof
and apply the amount so drawn to pay the principal of and interest on the Bonds
so declared to be due and payable. Interest on the Bonds shall cease to accrue
upon the declaration of acceleration. The Trustee shall notify the Registered
Owners of the date of acceleration and the cessation of accrual of interest on
the Bonds in the same manner as for a notice of redemption.

 

The preceding paragraph,
however, is subject to the condition that if, at any time after the principal
of the Bonds shall have been so declared due and payable, and before any
judgment or decree for the payment of the moneys due shall have been obtained or
entered as hereinafter provided, and before the Letter of Credit has been drawn
upon in accordance with its terms and honored, there shall have been deposited
with the Trustee a sum sufficient to pay all the principal of the Bonds matured
prior to such declaration and all matured installments of interest (if any)
upon all the Bonds, with interest on such overdue installments of principal as
provided in the Agreement, and the reasonable expenses of the Trustee, and any
and all other defaults known to the Trustee (other than in the payment of
principal of and interest on the Bonds due and payable solely by reason of such
declaration) shall have been made good or cured to the satisfaction of the
Trustee or provision deemed by the Trustee to be adequate shall have been made
therefor, then, and in every such case, the Registered Owners of at least a
majority in aggregate principal amount of the Bonds then Outstanding, by
written notice to the Issuer and to the Trustee, may, on behalf of the
Registered Owners of all the Bonds, rescind and annul such declaration and its
consequences and waive such default; but no such rescission and annulment shall
extend to or shall affect any subsequent default, or shall impair or exhaust
any right or power as a consequence thereof.

 

SECTION
7.02. INSTITUTION OF
LEGAL PROCEEDINGS BY TRUSTEE. If one or more Events of Default shall happen and
be continuing, subject to the satisfaction of the conditions of Section 7.11
hereof, the Trustee in its discretion may, and upon the written request of the
Registered Owners of a majority in principal amount of the Bonds then
Outstanding and upon being indemnified to its satisfaction therefor shall,
proceed to protect or enforce its rights or the rights of the Registered Owners
of Bonds under the Act or under this Indenture or the Agreement by a suit in
equity or action at law, either for the specific performance of any covenant or
agreement

 

39

 

contained herein or therein,
or in aid of the execution of any power herein or therein granted, or by
mandamus or other appropriate proceeding for the enforcement of any other legal
or equitable remedy as the Trustee shall deem most effectual in support of any
of its rights or duties hereunder.

 

SECTION
7.03. APPLICATION OF
REVENUES AND OTHER FUNDS AFTER DEFAULT. If an Event of Default shall occur and
be continuing, all Revenues and any other funds then held or thereafter
received by the Trustee under any of the provisions of this Indenture (subject
to Sections 5.05, 5.07 and 11.11 hereof) shall be applied by the Trustee as
follows and in the following order:

 

(a)
to the payment of any expenses necessary in the opinion of  the Trustee to protect the interests of the
Registered Owners of the Bonds
and payment of reasonable fees and expenses of the Trustee (including reasonable fees and disbursements
of its counsel) incurred in and
about the performance of its powers and duties under this Indenture; provided, however, that moneys in
the Letter of Credit Account of
the Revenue Fund and the Purchase Fund shall not be used for the payment of any such expenses;

 

(b)
to the payment of the principal of and interest then due  on the Bonds (upon presentation of the Bonds
to be paid, and stamping thereon
of the payment if only partially paid, or surrender thereof if fully paid) subject to the provisions of this
Indenture (including Section 6.02
hereof), as follows:

 

(i)
Unless the principal of all of the Bonds shall  have become or have been declared due and
payable,

 

FIRST,
to the payment to the persons  entitled thereto of all installments of interest then due in the order of the maturity of suchinstallments, and, if the amount
available shall not be sufficient
to pay in full any installment or installments
maturing on the same date, then to the payment thereof ratably, according to the amounts due thereon, to the persons entitled thereto,
without any discrimination or
preference; and

 

SECOND,
to the payment to the persons  entitled thereto of the unpaid principal of any Bonds which shall have become due, whether at
maturity or by call for
redemption, with interest on the overdue principal at the rate borne by the respective Bonds, and, if the amount available shall not be
sufficient to pay in full all the
Bonds, together with such interest,
then to the payment thereof ratably, according to the amounts of principal due on such date to the persons entitled thereto, without
any discrimination or preference.

 

(ii)
If the principal of all of the Bonds shall have  become or have been declared due and payable,
to the payment of the principal
and interest then due and unpaid upon the Bonds, with interest on the overdue principal at the rate borne by the Bonds, and, if the amount
available shall not be sufficient
to pay in

 

40

 

full
the whole amount so due and unpaid, then to the payment  thereof ratably, without preference or
priority of principal over
interest, or of interest over principal, or of any installment of interest over any other installment
of interest, or of any Bond over
any other Bond, according to the amounts
due respectively for principal and interest, to the persons entitled thereto without any
discrimination or preference;
provided, however, that neither moneys derived from drawings under the Letter of Credit, Available Moneys, moneys being aged to become Available Moneys,
nor the proceeds from remarketing
of the Bonds shall be used to pay any of the items listed in clause (a) of this Section, provided, further,that moneys held in the Purchase Fund
shall only be used to pay the
purchase price of the Bonds.

 

SECTION 7.04. TRUSTEE TO REPRESENT REGISTERED OWNERS. The
Trustee is hereby irrevocably appointed (and the successive respective
Registered Owners of the Bonds, by taking and holding the same, shall be
conclusively deemed to have so appointed the Trustee) as trustee and true and
lawful attorney-in-fact of the Registered Owners of the Bonds for the purpose
of exercising and prosecuting on their behalf such rights and remedies as may
be available to such Registered Owners under the provisions of the Bonds, this
Indenture, the Agreement, the Act and applicable provisions of any other law.
Upon the occurrence and continuance of an Event of Default or other occasion
giving rise to a right in the Trustee to represent the Registered Owners, the
Trustee in its discretion may, and upon the written request of the Registered
Owners of not less than twenty-five percent (25%) in aggregate principal amount
of the Bonds then Outstanding, and upon being indemnified to its satisfaction
therefor (except any actions required to be taken by Section 7.03 hereof,
in which event no indemnification shall be required), shall, proceed to protect
or enforce its rights or the rights of such Registered Owners by such
appropriate action, suit, mandamus or other proceedings as it shall deem most
effectual to protect and enforce any such right, at law or in equity, either
for the specific performance of any covenant or agreement contained herein, or
in aid of the execution of any power herein granted, or for the enforcement of
any other appropriate legal or equitable right or remedy vested in the Trustee
or in such Registered Owners under this Indenture, the Agreement, the Act or
any other law; and upon instituting such proceeding, the Trustee shall be
entitled, as a matter of right, to the appointment of a receiver of the
Revenues and other assets pledged under this Indenture, pending such
proceedings. All rights of action under this Indenture or the Bonds or otherwise
may be prosecuted and enforced by the Trustee without the possession of any of
the Bonds or the production thereof in any proceeding relating thereto, and any
such suit, action or proceeding instituted by the Trustee shall be brought in
the name of the Trustee for the benefit and protection of all the Registered
Owners of such Bonds, subject to the provisions of this Indenture (including
Section 6.02 hereof).

 

SECTION 7.05. REGISTERED OWNERS’ DIRECTION OF PROCEEDINGS.
Anything in this Indenture to the contrary notwithstanding, the Registered
Owners of a majority in aggregate principal amount of the Bonds then
Outstanding shall have the right, by an instrument or concurrent instruments in
writing executed and delivered to the Trustee, to direct the method of
conducting all remedial proceedings taken by the Trustee hereunder, provided
that such direction shall not be otherwise than in accordance with law and the
provisions of this Indenture, and that the Trustee shall have the right to
decline to follow any such direction which in the opinion of the Trustee would
be unjustly prejudicial to Registered Owners not parties to such direction or
for which it has not been provided adequate indemnity to its satisfaction.

 

41

 

SECTION 7.06. LIMITATION ON REGISTERED OWNERS’ RIGHT TO
SUE. No Registered Owner of any Bond shall have the right to institute any
suit, action or proceeding at law or in equity, for the protection or
enforcement of any right or remedy under this Indenture, the Agreement, the Act
or any other applicable law with respect to such Bond, unless (a) such
Registered Owner shall have given to the Trustee written notice of the
occurrence of an Event of Default; (b) the Registered Owners of not less
than 25% in aggregate principal amount of the Bonds then Outstanding shall have
made written request upon the Trustee to exercise the powers hereinbefore
granted or to institute such suit, action or proceeding in its own name;
(c) such Registered Owner or said Registered Owners shall have tendered to
the Trustee reasonable indemnity against the costs, expenses and liabilities to
be incurred in compliance with such request; and (d) the Trustee shall
have refused or omitted to comply with such request for a period of 60 days
after such written request shall have been received by, and said tender of
indemnity shall have been made to, the Trustee.

 

Such
notification, request, tender of indemnity and refusal or omission are hereby
declared, in every case, to be conditions precedent to the exercise by any
Registered Owner of Bonds of any remedy hereunder or under law; it being
understood and intended that no one or more Registered Owners of Bonds shall
have any right in any manner whatever by his or their action to affect, disturb
or prejudice the security of this Indenture or the rights of any other
Registered Owners of Bonds, or to enforce any right under this Indenture, the
Agreement, the Act or other applicable law with respect to the Bonds, except in
the manner herein provided, and that all proceedings at law or in equity to
enforce any such right shall be instituted, had and maintained in the manner
herein provided and for the benefit and protection of all Registered Owners of
the Outstanding Bonds, subject to the provisions of this Indenture (including
Section 6.02 hereof).

 

SECTION 7.07. ABSOLUTE OBLIGATION OF ISSUER. Nothing in
Section 7.06 hereof or in any other provision of this Indenture, or in the
Bonds, contained shall affect or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on the Bonds
to the respective Registered Owners of the Bonds at their respective dates of
maturity, or upon acceleration or call for redemption, as herein provided, but only
out of the Revenues and other assets herein pledged therefor, or affect or
impair the right of such Registered Owners, which is also absolute and
unconditional, to enforce such payment by virtue of the contract embodied in
the Bonds.

 

SECTION 7.08. TERMINATION OF PROCEEDINGS. In case any
proceedings taken by the Trustee or any one or more Registered Owners on
account of any Event of Default shall have been discontinued or abandoned for
any reason or shall have been determined adversely to the Trustee or the
Registered Owners, then in every such case the Issuer, the Bank, the Trustee
and the Registered Owners, subject to any determination in such proceedings,
shall be restored to their former positions and rights hereunder, severally and
respectively, and all rights, remedies, powers and duties of the Issuer, the
Bank, the Trustee and the Registered Owners shall continue as though no such
proceedings had been taken. The Trustee shall deliver copies of all proceedings
taken by the Trustee under this Indenture to the Tender Agent.

 

SECTION 7.09. REMEDIES NOT EXCLUSIVE. No remedy herein
conferred upon or reserved to the Trustee, the Bank or to the Registered Owners
of the Bonds is intended to be exclusive of

 

42

 

any other remedy or remedies,
and each and every such remedy, to the extent permitted by law, shall be
cumulative and in addition to any other remedy given hereunder or now or
hereafter existing at law or in equity or otherwise.

 

SECTION 7.10. NO WAIVER OF DEFAULT. In the event any
agreement or covenant contained in this Indenture should be breached by the
Issuer and/or the Borrower and thereafter waived by the Trustee or the
Registered Owners of the Bonds, such waiver shall be limited to the particular
breach so waived and shall not be deemed to waive any other breach hereunder.
No delay or omission of the Trustee or of any Registered Owner of the Bonds to
exercise any right or power arising upon the occurrence of any default shall
impair any such right or power or shall be construed to be a waiver of any such
default or an acquiescence therein; and every power and remedy given by this
Indenture to the Trustee or to the Registered Owners of the Bonds may be
exercised from time to time and as often as may be deemed expedient.

 

SECTION 7.11. CONSENT TO DEFAULTS. Notwithstanding any
other provisions of this Article, so long as the Letter of Credit is in full
force and effect and the Bank has not wrongfully dishonored and is not
continuing wrongfully to dishonor drawings under the Letter of Credit and all
payments of principal or purchase price and interest on the Bonds have been
timely made, no Event of Default shall be declared (except in a case resulting
from the failure of the Borrower to pay the Trustee’s fees), nor any remedies
exercised with respect to any such Events of Default by the Trustee or by the
Registered Owners and no Event of Default under Section 7.01 hereof shall
be waived by the Trustee or the Registered Owners to the extent they may otherwise
be permitted hereunder, without, in any case, the prior written consent of the
Bank. Unless an Alternate Credit Facility has been provided pursuant to
Section 5.07 of the Agreement, no Event of Default can be waived, in any
circumstance, unless the Letter of Credit has been fully reinstated and is in
full force and effect as evidenced in writing by the Bank to the Trustee.

 

ARTICLE VIII

 

THE
TRUSTEE, THE REMARKETING

AGENT AND THE TENDER AGENT

 

SECTION 8.01. DUTIES, IMMUNITIES AND LIABILITIES OF
TRUSTEE.

 

(a) The Trustee shall, prior to an Event of Default, and after
the curing of all Events of
Default which may have occurred, perform such duties and only such duties as are specifically set forth in thisIndenture. The Trustee shall, during the
existence of any Event of Default
(which has not been cured), exercise such of the 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 his
own affairs.

 

(b) The Trustee may at any time and for any reason be removed
by an instrument or concurrent
instruments in writing appointing a successor Trustee filed with the Trustee so removed and executed by theRegistered Owners of a majority in
aggregate principal amount of the Bonds
Outstanding. The Trustee may also be removed by an instrument in writing executed by the Issuer, consented to
by the Bank, appointing

 

43

 

a
successor Trustee filed with the Trustee so removed; provided that  the Issuer may not remove the Trustee during
the occurrence and continuance of
an Event of Default. Notwithstanding the foregoing, the Trustee may not be removed until a successor
Trustee has been appointed and has
assumed the duties and responsibilities of successor Trustee under this Indenture.

 

(c) The Trustee may at any time resign by giving written  notice of such resignation to the Issuer, the
Borrower and the Bank and by
giving the Registered Owners notice of such resignation by mail at the addresses shown on the registration books
maintained by the Bond Registrar.
Upon receiving such notice of resignation, the Issuer shall promptly appoint, with the consent of the
Bank, a successor Trustee by an
instrument in writing. The Trustee shall not be relieved of its duties until such successor Trustee has
accepted its appointment. 

 

(d) Any removal or resignation of the Trustee and appointment
of a successor Trustee shall
become effective only upon acceptance of appointment by the successor Trustee. If no successor Trustee shallhave been appointed and have accepted
appointment within 45 days of giving
notice of removal or notice of resignation as aforesaid, the resigning Trustee or any Registered Owner (on
behalf of himself and all other
Registered Owners) may petition any court of competent jurisdiction for the appointment of a
successor Trustee, and such court may
thereupon, after such notice (if any) as it may deem proper, appoint such successor Trustee. Any successor
Trustee appointed under this
Indenture, shall signify its acceptance of such appointment by executing and delivering to the Issuer and to
its predecessor Trustee a written
acceptance thereof and a written instrument by the successor Trustee indemnifying the predecessor Trustee
for all costs or claims arising
after the acceptance of appointment hereunder relating to such successor Trustee’s performance of its duties
under this Indenture, and thereupon
and after the payment by the Issuer of all unpaid fees and expenses (including legal fees and expenses)
of the predecessor Trustee such
successor Trustee, without any further act, deed or conveyance, shall become vested with all the moneys,
estates, properties, rights, powers,
trusts, duties and obligations of such predecessor Trustee, with like effect as if originally named
Trustee herein; but, nevertheless
at the Request of the Issuer or the request of the successor Trustee, such predecessor Trustee
shall execute and deliver any and
all instruments of conveyance or further assurance and do such other things as may reasonably be required for
more fully and certainly vesting
in and confirming to such successor Trustee all the right, title and interest of such predecessor Trustee
in and to any property held by it
under this Indenture and shall pay over, transfer, assign and deliver to the successor Trustee any money
or other property subject to the
trusts and conditions herein set forth. Upon request of the successor Trustee, the Issuer shall
execute and deliver any and all instruments
as may be reasonably required for more fully and certainly vesting in and confirming to such successor
Trustee all such moneys, estates,
properties, rights, powers, trusts, duties and obligations. Upon acceptance of appointment by a successor
Trustee as provided in this
subsection, the Issuer shall mail a notice of the succession of such Trustee to the trusts hereunder to each
rating agency which is then
rating the Bonds, to the Registered Owners at the addresses shown on the registration books maintained by the
Bond Registrar, and to the Bank.
If the Issuer fails to mail such notice within 15 days after acceptance of appointment by the successor

 

44

 

Trustee,
the successor Trustee shall cause such notice to be mailed at  the expense of the Issuer.

 

(e) Any Trustee appointed under the provisions of this
Section in succession to the Trustee shall be a trust company or bank
having  the powers of a
trust company, having a combined capital and surplus of at least fifty million dollars ($50,000,000),
and subject to supervision or
examination by federal or state authority. If such bank or trust company publishes a report of
condition at least annually, pursuant
to law or to the requirements of any supervising or examining authority above referred to, then for the
purpose of this subsection the combined capital and surplus of such bank
or trust company shall be deemed
to be its combined capital and surplus as set forth in its most recent report of condition so published. In
case at any time the Trustee
shall cease to be eligible in accordance with the provisions of this subsection (e), the Trustee shall
resign immediately in the manner and
with the effect specified in this Section.

 

SECTION 8.02. MERGER OR CONSOLIDATION. Any company into
which the Trustee may be merged or converted or with which it may be
consolidated or any company resulting from any merger, conversion or
consolidation to which it shall be a party or any company to which the Trustee
may sell or transfer all or substantially all of its corporate trust business,
provided such company shall be eligible under subsection (e) of
Section 8.01 hereof shall be the successor to such Trustee without the
execution or filing of any paper or any further act, anything herein to the
contrary notwithstanding.

 

SECTION 8.03. LIABILITY OF TRUSTEE.

 

(a) The recitals of facts herein and in the Bonds contained  shall be taken as statements of the Issuer,
and the Trustee shall assume no
responsibility for the correctness of the same, or make any representations as to the validity or
sufficiency of this Indenture or of
the Bonds. In addition, the Trustee shall assume no responsibility with respect to this Indenture or Bonds other
than in connection with the duties
or obligations assigned to or imposed upon the Trustee herein or in the Bonds. The Trustee shall,
however, be responsible for its
representations contained in its certificate of authentication on the Bonds. The Trustee shall not be liable in
connection with the performance
of its duties hereunder, except for its own negligence or willful misconduct. The Trustee may become the
Registered Owner of Bonds with
the same rights it would have if it were not Trustee and, to the extent permitted by law, may act as
depositary for and permit any of
its officers or directors to act as a member of, or in any other capacity with respect to, any committee formed
to protect the rights of Registered
Owners, whether or not such committee shall represent the Registered Owners of a majority in principal
amount of the Bonds then Outstanding.

 

The Trustee may execute any of the trusts or powers set forth  herein and perform the duties required of it
hereunder by or through attorneys,
agents, or receivers, and shall be entitled to the advice of counsel concerning all matters of trusts and
its duties herein, and the Trustee
shall not be answerable for the default or misconduct of any such attorney, agent or receiver selected by
it with reasonable care.

 

45

 

(b) The Trustee shall not be liable for any error of judgment
made in good faith by a
responsible officer, unless it shall be proved that the actions taken or omitted by the Trustee constitute willfulmisconduct or that the Trustee was
negligent in ascertaining the pertinent
facts.

 

(c) 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 Registered Owners of not less than a majority inaggregate principal amount of the Bonds
at the time Outstanding relating
to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred
upon the Trustee under this Indenture.

 

(d) The Trustee shall be under no obligation to exercise any
of the rights or powers vested in
it by this Indenture at the request, order or direction of any of the Registered Owners pursuant to theprovisions of this Indenture unless such
Registered Owners shall have offered
to the Trustee satisfactory security or indemnity against the costs, expenses and liabilities which may be
incurred therein or thereby;
provided, however, that the Trustee shall not be entitled to any security or indemnity with respect to its
obligation to draw under the
Letter of Credit to pay the principal or purchase price of or interest on the Bonds.

 

(e) The Trustee shall not be liable for any action taken by it
in good faith and believed by it
to be authorized or within the discretion
or rights or powers conferred upon it by this Indenture except for its own negligence or willful
misconduct.

 

(f) The Trustee shall not be deemed to have knowledge of any
default or Event of Default
hereunder unless and until it shall have actual knowledge thereof, or shall have received written notice thereof, at its principal corporate trust
office. Except as otherwise expressly
provided herein, the Trustee shall not be bound to ascertain or inquire as to the performance or observance
of any of the terms, conditions,
covenants or agreements herein or of any of the documents executed in connection with the Bonds, or as
to the existence of a default or
Event of Default thereunder. The Trustee shall not be responsible for the validity or effectiveness
of any collateral given to or
held by it.

 

(g) 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 its rights or powers. The Trustee
shall, however, in any case make
drawings under the Letter of Credit, pay principal or purchase price of or interest on the Bonds as
it becomes due, and accelerate
the Bonds as required by this Indenture, notwithstanding anything to the contrary herein.

 

SECTION 8.04. RIGHT OF TRUSTEE TO RELY ON DOCUMENTS. The
Trustee shall be protected in acting upon any notice, resolution, request,
consent, order, certificate, report, opinion, bond or other paper or document
believed by it to be genuine and to have been signed or presented by the proper
party or parties. The Trustee may consult with counsel, who may be counsel of
or to the Issuer, with regard to legal questions, and the opinion of such
counsel shall be full and complete

 

46

 

authorization and protection
in respect of any action taken or suffered by it hereunder in good faith and in
accordance therewith.

 

The
Trustee shall not be bound to recognize any person as the Registered Owner of a
Bond unless and until such Bond is submitted for inspection, if required, and
his title thereto is satisfactorily established, if disputed.

 

Whenever
in the administration of the trusts imposed upon it by this Indenture the
Trustee shall deem it necessary or desirable that a matter be proved or
established prior to taking or suffering any action hereunder, such matter
(unless other evidence in respect thereof be herein specifically prescribed)
may be deemed to be conclusively proved and established by a Certificate of the
Issuer, and such Certificate shall be full warrant to the Trustee for any
action taken or suffered in good faith under the provisions of this Indenture
in reliance upon such Certificate, but in its discretion the Trustee may, in
lieu thereof, accept other evidence of such matter or may require such
additional evidence as it may deem reasonable.

 

SECTION 8.05. PRESERVATION AND INSPECTION OF DOCUMENTS.
All documents received by the Trustee under the provisions of this Indenture
shall be retained in its possession and shall be subject at all reasonable
times to the inspection of the Issuer and any Registered Owner, and their
agents and representatives duly authorized in writing, at reasonable hours and
under reasonable conditions.

 

SECTION 8.06. COMPENSATION AND INDEMNIFICATION. The Issuer
shall pay (solely from Additional Payments) to the Trustee and the Tender Agent
from time to time reasonable compensation for all services rendered under this
Indenture, and also all reasonable expenses, charges, legal and consulting fees
and other disbursements and those of its attorneys, agents and employees,
incurred in and about the performance of its powers and duties under this
Indenture, and the Trustee and the Tender Agent each shall have a lien therefor
on any and all funds (except moneys on deposit in the Purchase Fund, the Rebate
Fund and the Letter of Credit Account, Available Moneys, moneys being aged to
become Available Moneys and funds held for the payment of Bonds or the interest
thereon which is past due or for which notice of redemption has been mailed) at
any time held by it under this Indenture which lien shall be prior and superior
to the lien of the Registered Owners of the Bonds.

 

SECTION 8.07. NOTICE TO RATING AGENCY. The Issuer and the
Trustee shall give written notice to each rating agency then rating the Bonds
of each of the following: (a) a successor Trustee is appointed hereunder;
(b) this Indenture, the Agreement, the Remarketing Agreement, the Letter
of Credit or the Credit Agreement is amended or supplemented in any manner;
(c) the Bonds are converted to a Fixed Interest Rate pursuant to
Section 2.03 hereof or defeased pursuant to Section 10.01 hereof or
accelerated pursuant to Section 7.01 hereof or redeemed in whole pursuant
to Section 4.01 hereof; or (d) the expiration, substitution,
termination or extension of the Letter of Credit.

 

SECTION 8.08. QUALIFICATIONS OF REMARKETING AGENT. The
Remarketing Agent shall be a member of the National Association of Securities
Dealers, Inc. or be a banking corporation or trust company and shall be
authorized by law to perform all the duties imposed upon it by this Indenture.
The Remarketing Agent may at any time resign and be discharged of the duties
and

 

47

 

obligations created by this
Indenture by giving at least 45 days’ notice to the Issuer, the Borrower, the
Bank, the Tender Agent, the Trustee, S&P and Moody’s, to the extent each
rating agency is then rating the Bonds. The Remarketing Agent may be removed at
any time, by the Borrower, by an instrument, signed by the Borrower and filed
with the Remarketing Agent, the Bank, the Tender Agent and the Trustee. The
Borrower, with the consent of the Bank, shall appoint a successor Remarketing
Agent.

 

The
Remarketing Agent shall designate to the Trustee its principal office and
signify its acceptance of the duties and obligations imposed on it hereunder by
a written instrument of acceptance delivered to the Issuer and the Trustee and
the Tender Agent under which the Remarketing Agent will agree to perform the
obligations of the Remarketing Agent set forth in Section 8.09 hereof.

 

If
the Letter of Credit is terminated for any reason, or an Event of Default under
this Indenture occurs, the Remarketing Agent shall have the right to resign
immediately. The initial Remarketing Agent appointed hereunder is The Chapman
Company.

 

SECTION 8.09. REMARKETING OF BONDS.

 

(a) The Tender Agent shall immediately provide the Remarketing
Agent, the Bank and the Trustee with
telephonic notice, promptly confirmed
by written notice by 12:00 noon, California time, on the next succeeding Business Day, of the receipt by the
Tender Agent of a tender notice
from any Registered Owner pursuant to Section 4.06 hereof or the receipt by the Tender Agent of a notice from
the Borrower of its election to
substitute an Alternate Letter of Credit for the then existing Letter of Credit pursuant to
Section 5.08 of the Agreement and providing the Remarketing Agent, the Bank and the Trustee with theinformation contained in such notices.
Upon receipt of such telephonic notice,
the Remarketing Agent shall use its best efforts to remarket the Bonds described in such notice, any such
remarketing to be made at a price
equal to the principal amount thereof plus accrued interest. (b) The Remarketing Agent shall
(i) by 4:00 p.m., California time, on the Business Day prior to the Purchase Date, give telegraphicor telephonic notice, promptly confirmed
by a written notice, to the Trustee,
the Tender Agent, the Borrower and the Bank (A) directing the Tender Agent to make available for pick up by
11:00 a.m., California time,
on the Purchase Date, at the principal corporate trust office of the Tender Agent (or at such other office as
the Tender Agent shall designate)
any Bonds for which the Remarketing Agent has arranged sales pursuant to this Section and
(B) stating the principal amount of Bonds sold pursuant to subsection (a) of this Section, and
(ii) deliver or cause to be
delivered to the Tender Agent at or prior to 8:00 a.m., California time, on the Purchase Date the
principal of and interest accrued
to such Purchase Date on the Bond or Bonds to be so purchased that have been remarketed by the Remarketing
Agent, in immediately available
funds. Upon receipt of amounts for the purchase of Bonds from the Remarketing Agent, the Tender Agent shall
immediately give telephonic
notice to the Trustee, the Borrower and the Bank, promptly confirmed in writing of (A) the proceeds
received from the Remarketing Agent
to be applied to the purchase of the Bonds tendered for purchase, and (B) the amount that must be drawn
under the Letter of Credit for Bonds

 

48

 

which
have been tendered as to which the Tender Agent has not received  the principal of and interest accrued thereon
to the Purchase Date from the
Remarketing Agent. None of the moneys so provided to the Tender Agent for purchase of Bonds may be derived
directly or indirectly from the
Borrower, any Related Party or the Issuer and therefore the Bonds may not be remarketed to any such entity or
person. The notice by the Remarketing
Agent shall specify the names, addresses, and taxpayer identification numbers of the purchasers of,
and the principal amount and
denominations of, such Bonds, if any, for which it has found purchasers as of such date and the principal
amount of such Bonds, if any, for
which it has not found purchasers as of such date. The Tender Agent shall make available for pick up new
Bonds properly executed, registered
in the name(s) and issued in Authorized Denominations as may be specified in the notice by the Remarketing
Agent to the Tender Agent by
11:00 a.m., California time, on the Purchase Date. The Remarketing Agent and the Tender Agent shall hold all moneys
available for the purchase of
Bonds in trust solely for the benefit of the person or entity which shall have so delivered such
moneys until Bonds purchased with
such moneys shall have been delivered to or for the account of such person or entity, and such moneys shall
not be commingled with any other
moneys. Under no circumstances shall the Tender Agent be obligated to expend any of its own funds in
connection with this Indenture.

 

(c) On the date Bonds are to be purchased pursuant to
Section 8.10 hereof, the Trustee shall, prior to 8:30 a.m.,
California time,  draw on
the Letter of Credit in accordance with the provisions thereof to the extent of the purchase price of the
Bonds for which the Tender Agent
has not received proceeds from the remarketing of such Bonds as evidenced by the notice from the Tender Agent
to the Trustee and shall immediately
transfer or direct the proceeds of such draw to the Tender Agent to pay the purchase price of such Bonds
on the Purchase Date; provided
however, that no drawings shall be made under the Letter of Credit to purchase Bonds held by or for the
account of the Borrower or the
Bank.

 

SECTION 8.10. CREATION OF PURCHASE FUND; PURCHASE OF BONDS
DELIVERED TO TENDER AGENT.

 

(a) There is hereby created and established with the Tender  Agent, in a trust capacity, a separate fund to
be designated as the “Purchase
Fund” and there shall be created within the Purchase Fund (i) a separate
account called the “Remarketing Account” into which all moneys representing the proceeds of remarketing
pursuant to Section 8.09 hereof (which moneys shall be in a form
immediately available on the
Purchase Date) shall be deposited and (ii) a separate account called the “Liquidity Account” into which the
proceeds of drawings by the
Trustee under the Letter of Credit shall be deposited. None of the Borrower, any Related Party, the Trustee nor
the Issuer shall have any legal,
equitable or beneficial right, title or interest in the moneys held by the Remarketing Agent or by the Tender
Agent in the Purchase Fund, or
the Remarketing Account or Liquidity Account therein. The Purchase Fund and each such Account shall be
established and maintained by the
Tender Agent and held in trust apart from all other moneys and securities held under this Indenture or otherwise,
and over which the Tender Agent
shall have the exclusive and sole right of withdrawal for the exclusive benefit of

 

49

 

the
persons tendering or purchasing Bonds with respect to which amounts  were deposited into the Purchase Fund and the
Accounts created therein.

 

On each day on which Bonds have been tendered for purchase or  are deemed to have been tendered for purchase
pursuant to this Indenture, after
paying or making provision for the payment of the purchase price of such Bonds as in this
Indenture provided, the Tender Agent
shall promptly remit to the Bank any moneys, but not exceeding the amount drawn on the Letter of Credit for
such purchase, on deposit in the
Liquidity Account not used to purchase Bonds.

 

(b) Funds for the purchase of Bonds at the principal amount  thereof plus unpaid interest accrued to the
Purchase Date, if any, shall be
paid out of the Purchase Fund in the order of priority indicated:

 

(i) from the Remarketing Account, proceeds from the  remarketing of Bonds pursuant to
Section 8.09 hereof; and

 

(ii) from the Liquidity Account, moneys representing  proceeds of a drawing by the Trustee under the
Letter of Credit.

 

(c) In the event that Bonds are not purchased pursuant to this
Section, the Trustee shall pay
the principal amount of Bonds tendered pursuant to Section 4.06 hereof or Bonds subject to mandatory
tender pursuant to
Section 4.07 hereof with moneys on deposit in the Revenue Fund pursuant to Section 5.02 hereof and
cancel such Bonds.

 

(d) The Tender Agent shall:

 

(i) hold all Bonds delivered to it pursuant to  Sections 4.06, 4.07 or 8.11 hereof in trust
solely for the benefit of the
respective Registered Owners which shall have so delivered such Bonds until moneys representing the purchase price for such Bonds shall have been delivered
to or for the account of or to
the order of such Registered Owners;

 

(ii) hold all moneys delivered to it under this  Section for the purchase of Bonds in
trust solely for the benefit of
the person or entity which shall have so delivered such moneys until the Bonds purchased with
such moneys shall have been
delivered to or for the account of such person or entity;

 

(iii) only make such payments called for under this  Indenture from immediately available funds
transferred to the Tender Agent
for payment pursuant to this Indenture which funds are on deposit in an appropriate account maintained by the Tender Agent;

 

(iv) under no circumstances be obligated to expend  any of its own funds in connection with this
Indenture;

 

(v) in acting with regard to the purchase of Bonds  under this Indenture be acting as a conduit
and shall not be purchasing Bonds
for its own account, and

 

50

 

in
the absence of written notice from the Issuer or the  Trustee, shall be entitled to assume that any
Bond tendered to it, or deemed
tendered to it for purchase, is entitled under this Indenture to be so purchased; and

 

(vi) notify the Remarketing Agent by telephone,  telegram or other form of electronic
communication of the contents of,
and promptly deliver to the Borrower, the Trustee, the Remarketing Agent and the Bank a copy of, each notice delivered to it in accordance with
Section 4.06 hereof and,
immediately upon the delivery to it of Bonds in accordance with Section 4.06 hereof, give telegraphic or telephonic notice to the Borrower, the Trustee
and the Bank specifying the
principal amount of the Bonds so delivered.

 

SECTION 8.11. DELIVERY OF BONDS.

 

(a) Bonds purchased by the Tender Agent with the moneys  described in subsection (b)(i) of
Section 8.10 hereof shall be made available by the Tender Agent to the new purchasers.

 

(b) (i) Bonds paid with the moneys described in
subsection (c) of Section 8.10 hereof shall be cancelled.

 

(ii) Bonds paid by the Tender Agent with moneys  described in subsection (b)(ii) of
Section 8.10 hereof shall be
held by the Tender Agent as Bank Bonds in which Bank shall have a security interest or registered in the
name of the Bank on the
registration books of DTC, with respect to book-entry Bonds.

 

(c) Bonds which have been delivered to the Tender Agent and  which thereafter have been sold shall be
delivered to such new owners as
the Remarketing Agent or the Bank may designate to the Tender Agent, but only upon (i) written confirmation to
the Trustee by the Bank that the
stated amount of the Letter of Credit has been reinstated with respect to the principal of the Bonds being so
re-registered and delivered,
together with the portion of the Letter of Credit used to pay accrued interest for the purchase of such
Bonds and (ii) written confirmation
to the Tender Agent by the Trustee that the stated amount of the Letter of Credit has been reinstated
with respect to the principal of
the Bonds being so re-registered and delivered, together with the portion of the Letter of Credit used
to pay accrued interest for the
purchase of such Bonds; provided, however, that if the Letter of Credit provides for automatic
reinstatement, no such confirmation shall be required.

 

The
Issuer shall cooperate with the Trustee, the Tender Agent, and the Borrower to
cause the necessary arrangements to be made and to be thereafter continued
whereby funds from the sources specified herein will be made available for the
purchase of Bonds presented at the principal office of the Tender Agent and
whereby Bonds executed by the Issuer and authenticated by the Tender Agent,
shall be made available to the extent necessary for delivery pursuant to this
Section.

 

SECTION 8.12. DELIVERY OF PROCEEDS OF REMARKETING. The
proceeds of the remarketing by the Remarketing Agent of any Bonds delivered to
the Tender Agent, or delivered to the

 

51

 

Remarketing Agent by the Bank
or any other Registered Owner, shall be turned over to the Bank or such other
Registered Owner, as the case may be.

 

SECTION 8.13. NO PURCHASES OR SALES AFTER DEFAULT.
Anything in this Indenture to the contrary notwithstanding, there shall be no
purchases or sales of Bonds pursuant to this Article if there shall have
occurred and be continuing an Event of Default described in clauses
(a) through (c) of Section 7.01 hereof. Anything in this
Indenture to the contrary notwithstanding, there shall be no remarketing of
Bonds pursuant to this Article if there shall have occurred and be
continuing any Event of Default described in Section 7.01 hereof or if any
event shall have occurred which with notice or the lapse of time would
constitute such an Event of Default.

 

SECTION 8.14. QUALIFICATIONS OF TENDER AGENT. The Tender
Agent shall be a bank or trust company or another institution which has a
rating on its long-term debt from Moody’s of at least “Baa3” and a short term
rating of at least “P-3” authorized to perform all duties imposed upon it
by this Indenture and the Remarketing Agreement. The Tender Agent may at any
time resign and be discharged of the duties and obligations created by this
Indenture by giving at least 60 days’ notice to the Issuer, the Borrower, the
Remarketing Agent and the Trustee. With the consent of the Bank, the Tender
Agent may be removed at any time by the Issuer, by an instrument, signed by the
Issuer, filed with the Tender Agent, the Remarketing Agent and the Trustee.

 

The
initial Tender Agent appointed under this Indenture is U.S. Bank Trust National
Association. The Issuer, with the consent of the Bank, shall appoint a
successor Tender Agent and such successor Tender Agent shall evidence its
acceptance of such appointment by executing and delivering to the Issuer, the
Bank and the Borrower a written acceptance thereof. In the event the Issuer
fails to appoint a successor Tender Agent prior to the effective date of the
removal or resignation of the current Tender Agent, the existing Tender Agent
shall remain in place until a successor Tender Agent is appointed. If a
successor Tender Agent is not appointed within 30 days as provided herein the
Trustee shall be appointed as the successor Tender Agent.

 

SECTION 8.15. PAYING AGENT. The Issuer, with the written
approval of the Bank, may appoint and at all times have a Paying Agent in such
cities as the Issuer deems desirable, for the payment of the principal of, and
the interest (and premium, if any) on, the Bonds. The Issuer hereby appoints
the Trustee as paying agent in San Francisco, California. The Trustee shall not
be responsible for the failure of the Bank or any other party to make funds
available to the Trustee.

 

SECTION 8.16. SEVERAL CAPACITIES. Anything in this
Indenture to the contrary notwithstanding, the same entity may serve hereunder
as the Trustee, Tender Agent and Paying Agent and in any other combination of
such capacities, to the extent permitted by law.

 

52

 

ARTICLE IX

 

MODIFICATION
OR AMENDMENT OF THE INDENTURE

 

SECTION
9.01. AMENDMENTS
PERMITTED.

 

(a) This Indenture and the
rights and obligations of the  Issuer and of the Registered Owners of the Bonds and of the Trustee maybe modified or amended from time to time
and at any time by an indenture
or indentures supplemental thereto, which the Issuer and the Trustee may enter into when the written
consent of the Registered Owners
of a majority in aggregate principal amount of all Bonds then Outstanding, the Borrower and the Bank shall
have been filed with the Trustee.
No such modification or amendment shall (i) extend the fixed maturity of any Bond, or reduce the amount of
principal thereof, or extend the
time of payment, or change the method of computing the rate of interest thereon, or extend the time of
payment of interest thereon, without
the consent of the Registered Owner of each Bond so affected, or (ii) reduce the aforesaid percentage of
Bonds the consent of the Registered
Owners of which is required to effect any such modification or amendment, or permit the creation of any
lien on the Revenues and other
assets pledged under this Indenture prior to or on a parity with the lien created by this Indenture, or deprive
the Registered Owners of the
Bonds of the lien created by this Indenture on such Revenues and other assets (except as expressly provided in
this Indenture), without the
consent of the Registered Owners of all of the Bonds then Outstanding, or (iii) adversely affect the
interests of the Tender Agent
without its prior written consent. It shall not be necessary for the consent of the Registered Owners to
approve the particular form of any
Supplemental Indenture, but it shall be sufficient if such consent shall approve the substance thereof. Promptly
after the execution by the Issuer
and the Trustee of any Supplemental Indenture pursuant to this subsection (a), the Trustee shall mail a
copy of the Supplemental Indenture
to the Tender Agent and mail a notice, setting forth in general terms the substance of such
Supplemental Indenture, to each rating
agency then rating the Bonds and the Registered Owners of the Bonds at the address shown on the registration
books of the Trustee. Any failure
to give such notice, or any defect therein, shall not, however, in any way impair or affect the
validity of any such Supplemental
Indenture.

 

(b) This Indenture and the
rights and obligations of the  Issuer, of the Trustee and of the Registered Owners of the Bonds mayalso be modified or amended from time to
time and at any time by an indenture
or indentures supplemental hereto, which the Issuer and the Trustee may enter into without the consent of
any Registered Owners but with
the written consent of the Borrower and the Bank, but only to the extent permitted by law including, without
limitation, for any one or more
of the following purposes:

 

(i)
to add to the covenants and agreements of the  Issuer contained in this Indenture other
covenants and agreements
thereafter to be observed, to pledge or assign additional security for the Bonds, or to surrender any right or power herein reserved to or conferred upon
the Issuer;

 

53

 

(ii)
to make such provisions for the purpose of  curing any ambiguity, inconsistency or
omission, or of curing or
correcting any defective provision, contained in this Indenture, or in regard to matters or
questions arising under this
Indenture, as the Issuer may deem necessary or desirable which do not adversely affect the rights of
the Registered Owners hereunder;

 

(iii)
to modify, amend or supplement this Indenture  in such manner as to permit the qualification
hereof under the Trust Indenture
Act of 1939, as amended, or any similar federal statute hereafter in effect, and to add such other terms, conditions and provisions as may be
permitted by said act or similar
federal statute;

 

(iv)
to make such provisions for the purpose of  conforming to the terms and provisions of any
Alternate Letter of Credit or
Alternate Credit Facility or to obtain a rating on the Bonds which do not adversely affect the rights of the Registered Owners hereunder; and

 

(v)
to modify, amend or supplement this Indenture in  any other respect which does not adversely
affect the rights of the
Registered Owners hereunder. The Trustee shall give notice of any such modification or amendment
to each rating agency then rating
the Bonds.

 

(c)
The Trustee may in its discretion, but shall not be  obligated to, enter into any such Supplemental
Indenture authorized by subsections
(a) or (b) of this Section which materially adversely affects the Trustee’s own rights, duties or
immunities under this Indenture
or otherwise.

 

SECTION 9.02.
EFFECT OF SUPPLEMENTAL INDENTURE. Upon the execution of any Supplemental
Indenture pursuant to this Article, this Indenture shall be deemed to be
modified and amended in accordance therewith, and the respective rights, duties
and obligations under this Indenture of the Issuer, the Trustee and all
Registered Owners of Bonds Outstanding shall thereafter be determined,
exercised and enforced hereunder subject in all respects to such modification
and amendment, and all the terms and conditions of any such Supplemental
Indenture shall be deemed to be part of the terms and conditions of this
Indenture for any and all purposes.

 

SECTION 9.03.
ENDORSEMENT OF BONDS; PREPARATION OF NEW BONDS. Bonds delivered after the
execution of any Supplemental Indenture pursuant to this Article may, and if
the Issuer so determines shall, bear a notation by endorsement or otherwise in
form approved by the Issuer as to any modification or amendment provided for in
such Supplemental Indenture, and, in that case, upon demand of the Registered
Owner of any Bond Outstanding at the time of such execution and presentation of
his Bond for the purpose at the office of the Bond Registrar or at such
additional offices as the Bond Registrar may select and designate for that
purpose, a suitable notation shall be made on such Bond. If the Supplemental
Indenture shall so provide, new Bonds so modified as to conform, in the opinion
of the Issuer, to any modification or amendment contained in such Supplemental
Indenture, shall be prepared and executed by the Issuer and authenticated by
the Bond Registrar, and upon demand of the Registered Owners of

 

54

 

any Bonds then Outstanding
shall be exchanged at the principal office of the Bond Registrar, without cost
to any Registered Owner, for Bonds then Outstanding, upon surrender for
cancellation of such Bonds, in equal aggregate principal amounts of the same
series and maturity.

 

SECTION 9.04.
AMENDMENT OF PARTICULAR BONDS. The provisions of this Article shall not prevent
any Registered Owner from accepting any amendment as to the particular Bonds
held by such Registered Owner, provided that due notation thereof is made on
such Bonds.

 

ARTICLE X

 

DEFEASANCE

 

SECTION 10.01.
DISCHARGE OF INDENTURE. The Bonds may be paid by the Issuer in any of the
following ways, provided that the Issuer also pays or causes to be paid any
other sums payable hereunder by the Issuer:

 

(a)
by paying or causing to be paid with Available Moneys the  principal of, interest and premium, if any, on
the Bonds, as and when the same
become due and payable;

 

(b)
by depositing with the Trustee, in trust, at or before  maturity, money or securities in the necessary
amount (as provided in Section
10.03 hereof) to pay or redeem with Available Moneys all Bonds then Outstanding; or

 

(c)
by delivering to the Trustee, for cancellation by it, the  Bonds then Outstanding.

 

If the Bonds are paid by the
Issuer pursuant to this Section 10.01(b) prior to the Fixed Rate Date, the
Issuer and the Borrower shall provide to the Trustee written evidence from
Moody’s, if the Bonds are then rated by Moody’s, and S&P, if the Bonds are
then rated by S&P, to the effect that such payment will not result in a
withdrawal of its rating on the Bonds or a reduction from the rating which then
exists as to the Bonds. If the Issuer shall also pay or cause to be paid all
other sums payable hereunder by the Issuer, then and in that case, at the
election of the Issuer (evidenced by a Certificate of the Issuer, filed with
the Trustee, signifying the intention of the Issuer to discharge all such
indebtedness and this Indenture), and notwithstanding that any Bonds shall not
have been surrendered for payment, this Indenture and the pledge of Revenues
and other assets made under this Indenture and all covenants, agreements and
other obligations of the Issuer under this Indenture shall cease, terminate,
become void and be completely discharged and satisfied except only as provided
in Section 10.02 hereof. In such event, upon Request of the Issuer, the Trustee
shall cause an accounting for such period or periods as may be requested by the
Issuer to be prepared and filed with the Issuer and shall execute and deliver to
the Issuer all such instruments as may be necessary or desirable to evidence
such discharge and satisfaction, and the Trustee shall pay over, transfer,
assign or deliver all moneys or securities or other property held by it
pursuant to this Indenture which are not required for the payment of
obligations to be paid from Additional Payments or for the payment or
redemption of Bonds not theretofore surrendered for such payment or redemption
in

 

55

 

the following order (i)
first, to the Bank to the extent of any amounts due to the Bank pursuant to the
Credit Agreement, and (ii) otherwise, to the Borrower, provided that moneys in
the Letter of Credit Account, the Liquidity Account and the Remarketing Account
shall be returned to the Bank.

 

SECTION 10.02.
DISCHARGE OF LIABILITY ON BONDS. Upon the deposit with the Trustee, in trust,
at or before maturity, of money or securities in the necessary amount (as
provided in Section 10.03 hereof) to pay or redeem all Outstanding Bonds
(whether upon or prior to the maturity or the redemption date of such Bonds),
provided that, if any of such Bonds are to be redeemed prior to maturity,
notice of such redemption shall have been given as provided in Article IV or
provision satisfactory to the Trustee shall have been made for the giving of
such notice, then all liability of the Issuer in respect of such Bonds shall
cease, terminate and be completely discharged, except only that the Registered
Owners thereof shall thereafter be entitled to payment of the principal or
redemption price, as applicable, of and interest on such Bonds by the Issuer,
and the Issuer shall remain liable for such payment, but only out of such money
or securities deposited with the Trustee as aforesaid for their payment,
provided further, however, that the provisions of Section 10.04 hereof shall
apply in all events. In the event any of said Bonds are not to be redeemed
within the next succeeding 60 days, the Issuer shall have given the Trustee in
form satisfactory to it irrevocable instructions for it to mail, as soon as
practicable in the same manner as a notice of redemption is mailed pursuant to
Article IV hereof, a notice to the Registered Owners of such Bonds and to the
Securities Depositories and an Information Service that the deposit required
above has been made with the Trustee and that said Bonds are deemed to have
been paid in accordance with this Section and stating such maturity or
redemption dates upon which moneys are to be available for the payment of the
principal or redemption price, as applicable, of said Bonds.

 

SECTION 10.03.
DEPOSIT OF MONEY OR SECURITIES WITH TRUSTEE. Whenever in this Indenture it is
provided or permitted that there be deposited with or held in trust by the
Trustee money or securities in the necessary amount to pay or redeem any Bonds,
the money or securities so to be deposited or held may include money or
securities held by the Trustee in the funds and accounts established pursuant
to this Indenture (exclusive of the Project Fund, the Purchase Fund, the Letter
of Credit Account and the Rebate Fund) and shall be:

 

(a)
Available Moneys in an amount equal to the principal  amount of such Bonds, all unpaid interest
thereon to maturity, and the purchase
price of such Bonds except that, in the case of Bonds which are to be redeemed prior to maturity and in
respect of which notice of such
redemption shall have been given as in Article IV hereof provided or provision satisfactory to the Trustee shall
have been made for the giving of
such notice, the amount to be deposited or held shall be the redemption price of such Bonds and all unpaid
interest thereon to the redemption
date; or

 

(b)
Government Obligations purchased with Available Moneys  which when due will provide money sufficient
to pay the principal or redemption
price, as applicable, of, all unpaid interest to maturity, or to the redemption date, as the case may be,
on the Bonds to be paid or
redeemed, as such principal and interest become due, and the purchase price of such Bonds; provided that,
in the case of Bonds which are to
be redeemed prior to the maturity thereof, notice of such redemption shall have been given 

 

56

 

as provided in Article IV
hereof or provision satisfactory to the  Trustee shall have been made for the giving of such notice; and provided further that investment securities
purchased pursuant to this paragraph
shall not be subject to redemption prior to their maturity other than at the option of the holder thereof
unless the moneys to be available
from the redemption of such securities on the earliest date on which such securities are subject to
redemption, other than at the option
of the holder thereof, shall be at least equal to the amount of money expected to be derived in connection
with such securities in determining
that the provisions of this paragraph have been satisfied; provided, in each case, that the Trustee shall
have been irrevocably instructed
(by the terms of this Indenture or by Request of the Issuer) to apply such money to the payment of such
principal or redemption price, as
applicable, and interest with respect to such Bonds.

 

SECTION 10.04.
PAYMENTS AFTER DISCHARGE OF INDENTURE. When there are no longer any Bonds
Outstanding, and all fees, charges and expenses of the Trustee, the Tender
Agent and any Paying Agents have been paid or provided for, and all expenses of
the Issuer relating to this Indenture have been paid or provided for, and all
other amounts payable hereunder and under the Agreement have been paid, and
this Indenture has been discharged and satisfied, and subject to the escheat
laws of the State, the Trustee shall pay any moneys remaining in any fund
established and held hereunder (other than moneys held in the Rebate Fund which
shall continue to be applied as provided in Section 5.07 hereof) in the
following order (a) first, to the Bank to the extent of any amounts due to the
Bank pursuant to the Credit Agreement with respect to the Letter of Credit, and
(b) otherwise to the Borrower, provided that moneys in the Letter of Credit
Account, the Liquidity Account and the Remarketing Account shall be returned to
the Bank.

 

ARTICLE XI

 

MISCELLANEOUS

 

SECTION 11.01.
LIABILITY OF ISSUER LIMITED TO REVENUES. Notwithstanding anything in this Indenture
or in the Bonds contained, the Issuer shall not be required to advance any
moneys derived from any source other than the Revenues and other assets pledged
under this Indenture for any of the purposes in this Indenture mentioned,
whether for the payment of the principal of or interest on the Bonds or for any
other purpose of this Indenture.

 

SECTION 11.02.
SUCCESSOR IS DEEMED INCLUDED IN ALL REFERENCES TO PREDECESSOR. Whenever in this
Indenture either the Issuer or the Trustee is named or referred to, such
reference shall be deemed to include the successors or assigns thereof, and all
the covenants and agreements in this Indenture contained by or on behalf of the
Issuer or the Trustee shall bind and inure to the benefit of the respective
successors and assigns thereof whether so expressed or not.

 

SECTION 11.03.
LIMITATION OF RIGHTS TO PARTIES AND REGISTERED OWNERS. Nothing in this
Indenture or in the Bonds expressed or implied is intended or shall be
construed to give to any Person other than the Issuer, the Trustee, the Bank,
the Borrower and the Registered Owners of the Bonds, any legal or equitable
right, remedy or claim under or in respect of this Indenture or any covenant,
condition or provision therein or herein contained; and all such covenants,

 

57

 

conditions and provisions are
and shall be held to be for the sole and exclusive benefit of the Issuer, the
Trustee, the Bank, the Borrower and the Registered Owners of the Bonds.

 

SECTION 11.04.
WAIVER OF NOTICE. Whenever in this Indenture the giving of notice by mail or
otherwise is required, the giving of such notice may be waived in writing by
the person entitled to receive such notice and in any such case the giving or
receipt of such notice shall not be a condition precedent to the validity of
any action taken in reliance upon such waiver.

 

SECTION 11.05.
DESTRUCTION OF BONDS. Whenever in this Indenture provision is made for the
cancellation by the Trustee and the delivery to the Issuer of any Bonds, the
Trustee may, upon Request of the Issuer, in lieu of such cancellation and
delivery, destroy such Bonds (in the presence of an officer of the Issuer, if
the Issuer shall so require), and deliver a certificate of such destruction to
the Issuer.

 

SECTION 11.06.
SEVERABILITY OF INVALID PROVISIONS. If any one or more of the provisions
contained in this Indenture or in the Bonds shall for any reason be held to be
invalid, illegal or unenforceable in any respect, then such provision or
provisions shall be deemed severable from the remaining provisions contained in
this Indenture and such invalidity, illegality or unenforceability shall not
affect any other provision of this Indenture, and this Indenture shall be
construed as if such invalid or illegal or unenforceable provision had never
been contained herein. The Issuer hereby declares that it would have entered
into this Indenture and each and every other Section, paragraph, sentence,
clause or phrase hereof and authorized the issuance of the Bonds pursuant thereto
irrespective of the fact that any one or more Sections, paragraphs, sentences,
clauses or phrases of this Indenture may be held illegal, invalid or
unenforceable.

 

SECTION 11.07.
GOVERNING LAW. This Indenture shall be governed exclusively by and construed in
accordance with the applicable laws of the State for contracts executed and
delivered, and to be completely performed, in the State without giving effect
to conflicts of law provisions.

 

SECTION 11.08.
NOTICES. If a Registered Owner delivers a written request to the Trustee
setting forth the appropriate telex or telecopier number and other necessary
information to enable the Trustee to deliver notices by telex, telegram,
telecopier or other telecommunication device notices shall be delivered to such
Registered Owner in the manner requested unless otherwise provided herein and
confirmed in writing as soon as practicable. In all other events, notices shall
be delivered to each Registered Owner by first-class mail, postage prepaid, at
the address set forth for such Registered Owner on the registration books
required to be maintained by the Bond Registrar pursuant to Section 2.07
hereof. Any notice to or demand upon the Trustee may be served or presented,
and such demand may be made, at the principal corporate trust office of the
Trustee in San Francisco, California, which at the date of adoption of this
Indenture is located at the address set forth below or at such other address as
may have been filed in writing by the Trustee with the Issuer. Any notice to or
demand upon the Issuer, the Borrower, the Remarketing Agent, the Tender Agent
or the Bank shall be deemed to have been sufficiently given or served for all
purposes by being delivered or sent by telex or by being deposited, postage
prepaid, in a post office letter box, addressed, as the case may be, as set
forth below or at such other addresses as may have been filed in writing with
the Trustee.

 

58

 

If to the Economic
Development California Infrastructure and Economic

 

	
  Bank:

  	
  Development Bank

  
	
   

  	
  801 K Street, Suite 1700

  
	
   

  	
  Sacramento, California
  95814

  
	
   

  	
  Attention: Bond Manager

  
	
   

  	
  (916) 322-8520 Fax: (916)
  322-7214

  
	
   

  	
   

  
	
  If to the Borrower:

  	
  Roller Bearing Company of
  America, Inc.

  
	
   

  	
  60 Round Hill Road

  
	
   

  	
  Fairfield, Connecticut
  06430

  
	
   

  	
  Attention: Michael S.
  Gostomski

  
	
   

  	
  (203) 255-1511 Fax: (203)
  255-3862

  
	
   

  	
   

  
	
  If to the Trustee:

  	
  U.S. Bank Trust National
  Association

  
	
   

  	
  One California Street, 4th
  Floor

  
	
   

  	
  San Francisco, California
  94111

  
	
   

  	
  Attention: Corporate Trust
  Department

  
	
   

  	
  (415) 273-4500 Fax: (415)
  273-4590

  
	
   

  	
   

  
	
  If to the Tender Agent:

  	
  U.S. Bank Trust National
  Association

  
	
   

  	
  One California Street, 4th
  Floor

  
	
   

  	
  San Francisco, California
  94111

  
	
   

  	
  Attention: Municipal Trusts
  and Agency

  
	
   

  	
  (415) 273-4500 Fax: (415)
  273-4590

  
	
   

  	
   

  
	
  If to the Bank:

  	
  First Union National Bank

  
	
   

  	
  1345 Chestnut Street

  
	
   

  	
  Philadelphia, Pennsylvania
  19107

  
	
   

  	
  Attention: Robert A. Brown

  
	
   

  	
  (215) 973-1259 Fax: (215)
  786-2877

  
	
   

  	
  Credit Suisse First Boston

  
	
   

  	
  11 Madison Avenue, 13th
  Floor

  
	
   

  	
  New York, New York 10010

  
	
   

  	
  Attention: Mark Callahan

  
	
   

  	
  (212) 325-9940 Fax: (212)
  325-8304

  
	
   

  	
   

  
	
  If to the Remarketing
  Agent:

  	
  The Chapman Company

  
	
   

  	
  115 Sansome Street, Suite
  250

  
	
   

  	
  San Francisco, California
  94104

  
	
   

  	
  Attention: Director of
  Public Finance

  
	
   

  	
  (415) 392-5505 Fax: (415)
  392-5276

  
	
   

  	
   

  
	
  If to DTC:

  	
  Notices required to be
  given under this

  
	
   

  	
  Indenture to DTC by
  facsimile

  
	
   

  	
  transmission shall be sent
  to DTC’s

  
	
   

  	
  Call Notification
  Department at

  
	
   

  	
  (516) 227-4039

  

 

59

 

	
   

  	
  or (516) 227-4190. Notices

  
	
   

  	
  to DTC by mail or any other
  means

  
	
   

  	
  shall be sent to:

  
	
   

  	
   

  
	
   

  	
  The Depository Trust
  Company

  
	
   

  	
  711 Stewart Avenue

  
	
   

  	
  Garden City, New York 11530

  
	
   

  	
  Attention: Call
  Notification Department

  
	
   

  	
  Muni Reorganization Manager

  

 

SECTION 11.09.
EVIDENCE OF RIGHTS OF REGISTERED OWNERS. Any request, consent or other
instrument required or permitted by this Indenture to be signed and executed by
Registered Owners may be in any number of concurrent instruments of
substantially similar tenor and shall be signed or executed by such Registered
Owners in person or by an agent or agents duly appointed in writing. Proof of
the execution of any such request, consent or other instrument or of a writing
appointing any such agent, or of the holding by any person of Bonds transferable
by delivery, shall be sufficient for any purpose of this Indenture and shall be
conclusive in favor of the Trustee and of the Issuer if made in the manner
provided in this Section.

 

The fact and date of the
execution by any person of any such request, consent or other instrument or
writing may be proved by the certificate of any notary public or other officer
of any jurisdiction, authorized by the laws thereof to take acknowledgments of
deeds, certifying that the person signing such request, consent or other
instrument acknowledged to such notary public or other officer the execution
thereof, or by an affidavit of a witness of such execution duly sworn to before
such notary public or other officer.

 

The ownership of registered
Bonds shall be proved by the bond registration books held by the Bond
Registrar.

 

Any request, consent, or
other instrument or writing of the Registered Owner of any Bond shall bind
every future Registered Owner of the same Bond and the Registered Owner of
every Bond issued in exchange therefor or in lieu thereof, in respect of
anything done or suffered to be done by the Trustee or the Issuer in accordance
therewith or reliance thereon.

 

SECTION 11.10.
DISQUALIFIED BONDS. In determining whether the Registered Owners of the
requisite aggregate principal amount of Bonds have concurred in any demand,
request, direction, consent or waiver under this Indenture, Bonds which are
owned or held by or for the account of the Issuer or the Borrower, or by any
other obligor on the Bonds, or by any person directly or indirectly controlling
or controlled by, or under direct or indirect common control with, the Issuer
or the Borrower or any other obligor on the Bonds, shall be disregarded and
deemed not to be Outstanding for the purpose of any such determination. Bonds
so owned which have been pledged in good faith may be regarded as Outstanding
for the purposes of this Section if the pledgee shall establish to the
satisfaction of the Trustee the pledgee’s right to vote such Bonds and that the
pledgee is not a person directly or indirectly controlling or controlled by, or
under direct or indirect common control with, the Issuer or the Borrower or any
other obligor on the Bonds. In case of a dispute as to such right, any decision
by the Trustee taken upon the advice of counsel shall be full protection to the
Trustee.

 

60

 

SECTION 11.11.
MONEY HELD FOR PARTICULAR BONDS.

 

(a)
The money held by the Trustee for the payment of the  interest, principal, or premium due on any
date with respect to particular
Bonds (or portions of Bonds in the case of Bonds redeemed in part only) shall, on and after such date and
pending such payment, be set
aside on its books and held in trust by it for the Registered Owners of the Bonds entitled thereto,
(subject, however, to the provisions
of Section 10.04 hereof) for a period of two years but without any liability for interest thereon.

 

(b)
Upon the expiration of the period specified in subsection  (a) above, except as provided in subsection
(c) below, funds held by the
Trustee pursuant to this Indenture shall be paid, subject to any prior payments pursuant to the provisions of
Section 10.04 hereof, to the
Borrower, and funds held by the Tender Agent shall be paid to the Trustee and thereafter paid, subject to the
provisions of Section 10.04 hereof,
to the Borrower, upon direction of an Authorized Representative of the Borrower, and thereafter Registered
Owners shall be entitled to look
only to the Borrower for payment, and then only to the extent of the amount so deposited with the Borrower, and
all liability of the Issuer or
the Trustee with respect to such money shall thereupon cease, and the Borrower shall not be liable for any
interest thereon and shall not be
regarded as a trustee of such money.

 

(c)
Any moneys held by the Trustee or the Tender Agent, as the  case may be, in the Letter of Credit Account
or the Liquidity Account for the
payment of the principal, premium, or purchase price of any Bonds not so applied to the payment of the
Bonds within two years after the
date on which the same shall have become due shall be transferred to the Bank. Upon the expiration of the period
specified in subsection (a)
above, any moneys held by the Tender Agent representing the proceeds of the remarketing of the Bonds but
which were not so applied to the
payment of Bonds shall be transferred to the Bank. All such moneys shall be subject to escheat to the
State in accordance with the laws
thereof. Registered Owners shall be entitled to look only to the Bank for payment from such moneys, and all
liability of the Issuer, the Trustee
or the Tender Agent with respect to such money shall thereupon cease, and the Trustee, the Tender Agent, the
Issuer, the Bank, or the Borrower
shall not be liable for any interest thereon and such parties shall not be regarded as a trustee of such
money.

 

SECTION 11.12.
FUNDS AND ACCOUNTS. Any fund or account required by this Indenture to be
established and maintained by the Trustee may be established and maintained in
the accounting records of the Trustee, either as a fund or an account, and may,
for the purposes of such records, any audits thereof and any reports or
statements with respect thereto, be treated either as a fund or as an account;
but all such records with respect to all such funds and accounts shall at all
times be maintained in accordance with generally accepted corporate trust
industry standards, to the extent practicable, and with due regard for the
requirements of Section 6.05 hereof and for the protection of the security of
the Bonds and the rights of every Registered Owner thereof and the Bank’s
interest created herein.

 

SECTION 11.13.
WAIVER OF PERSONAL LIABILITY. No member, officer, agent or employee of the
Issuer shall be individually or personally liable for the payment of the
principal of or

 

61

 

premium or interest on the
Bonds or be subject to any personal liability or accountability by reason of
the issuance thereof; but nothing herein contained shall relieve any such
member, officer, agent or employee from the performance of any official duty
provided by law or by this Indenture.

 

SECTION 11.14.
EXECUTION IN SEVERAL COUNTERPARTS. This Indenture may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original; and all such counterparts, or as many of them as the Issuer
and the Trustee shall preserve undestroyed, shall together constitute but one
and the same instrument.

 

SECTION 11.15.
ACTIONS DUE ON SATURDAYS, SUNDAYS AND HOLIDAYS. Except as otherwise provided in
this Indenture, if any date on which a payment, notice or other action required
by this Indenture falls on other than a Business Day, then that action or
payment need not be taken or made on such date, but may be taken or made on the
next succeeding Business Day with the same force and effect as if made on such
date.

 

SECTION 11.16.
REFERENCES TO BANK. Notwithstanding any provisions contained herein to the
contrary, the Bank shall be entitled to take all actions and exercise its
rights hereunder in accordance with the Credit Agreement so long as the Bank
has not wrongfully dishonored any drawings under the Letter of Credit and the
Bank is not in liquidation, bankruptcy or receivership proceedings. After the
expiration or termination of the Letter of Credit and after all obligations
owed to the Bank pursuant to the Credit Agreement with respect to the Letter of
Credit have been paid in full or discharged, all references to the Bank contained
herein (other than in Section 10.04 hereof) shall be null and void and of no
further force and effect.

 

62

 

IN WITNESS WHEREOF, the
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK has caused this
Indenture to be signed in its name by the Chair of the Issuer and attested by
its Secretary and U.S. BANK TRUST NATIONAL ASSOCIATION, in token of its
acceptance of the trusts created hereunder, has caused this Indenture to be
signed in its corporate name by its officers thereunto duly authorized, all as
of the day and year first above written.

 

	
   

  	
  CALIFORNIA INFRASTRUCTURE
  AND

  
	
   

  	
  ECONOMIC DEVELOPMENT BANK

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  Lon S. Hatamiya, Chair

  
	
   

  	
   

  
	
  Attest:

  	
   

  
	
   

  	
   

  
	
  By

  	
   

  	
   

  
	
   

  	
  Blake Fowler, Secretary

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  U.S. BANK TRUST NATIONAL
  ASSOCIATION,

  
	
   

  	
  as Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  Authorized Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  
	
   

  	
   

  
	
  By

  	
   

  	
   

  
	
   

  	
  Assistant Secretary

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  [Signature
  Page to Indenture of Trust]

  

 

63

 

EXHIBIT A

 

FORM OF BOND

 

NEITHER THE STATE OF
CALIFORNIA NOR ANY POLITICAL SUBDIVISION OR AGENCY OF THE STATE OF CALIFORNIA
SHALL BE OBLIGATED TO PAY THIS BOND OR THE INTEREST HEREON. NEITHER THE FAITH
AND CREDIT NOR THE TAXING POWER OF THE STATE OF CALIFORNIA OR ANY POLITICAL
SUBDIVISION OR AGENCY THEREOF IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF,
PREMIUM, IF ANY,PURCHASE PRICE OF, OR INTEREST ON, THIS BOND. NEITHER THE STATE
OF CALIFORNIA NOR ANY POLITICAL SUBDIVISION OR AGENCY OF THE STATE OF CALIFORNIA
IS IN ANY MANNER OBLIGATED TO MAKE ANY APPROPRIATION FOR SUCH PAYMENTS. THE
ISSUER HAS NO TAXING POWER. THIS BOND, TOGETHER WITH THE INTEREST AND PREMIUM
(IF ANY) HEREON AND THE PURCHASE PRICE HEREOF,SHALL NOT BE DEEMED TO CONSTITUTE
A DEBT OR LIABILITY OF THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION OR
AGENCY OF THE STATE OF CALIFORNIA.

 

	
  No. R-1

  	
  $4,800,000

  

 

CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK

VARIABLE RATE DEMAND

INDUSTRIAL DEVELOPMENT REVENUE BOND, SERIES 1999

(ROLLER BEARING COMPANY OF AMERICA, INC.

- SANTA ANA PROJECT)

 

	
  MATURITY
  DATE

  	
   

  	
  ORIGINAL
  ISSUE DATE

  	
   

  	
  CUSIP

  
	
  April
  1, 2024

  	
   

  	
  April
  30, 1999

  	
   

  	
   

  

 

Registered Owner: CEDE &
CO.

 

Principal
Sum:    FOUR MILLION EIGHT HUNDRED THOUSAND DOLLARS

 

The CALIFORNIA INFRASTRUCTURE
AND ECONOMIC DEVELOPMENT BANK (the “Issuer”), an entity with the Trade and
Commerce Agency of the State of California (the “State”), duly organized and
existing under the laws of the State, particularly Division 1 of Title 6.7 of
the California Government Code (commencing with Section 63000 of the California
Government Code), as amended (the “Act”), for value received, hereby promises
to pay to the Registered Owner specified above, or registered assigns, on the
maturity date set forth above (subject to any right of prior redemption
hereinafter mentioned), the principal sum set forth above, in lawful money of
the United States of America, and to pay interest thereon in like lawful money
from and including the Interest Payment Date (as defined herein) next preceding

 

 

the date of registration of
this bond (unless this bond is registered after a Record Date (as hereinafter
defined) and on or before the next succeeding Interest Payment Date or on an
Interest Payment Date, in which event it shall bear interest from and including
such Interest Payment Date, or unless this bond is registered on or prior to
May 31, 1999, in which event it shall bear interest from and including the date
of initial issuance and delivery (the “Date of Delivery”)), until payment of
such principal sum shall be discharged as provided in the Indenture (as
hereinafter defined), at the rates per annum determined as set forth below. The
interest on this bond will be payable on June 1, 1999, and thereafter on the
first Business Day of each month on or prior to the date on which this bond is
converted to bear a fixed rate of interest as provided in the Indenture (the
“Fixed Rate Date”), and thereafter on April 1 and October 1 in each year (each
such date being referred to herein as an “Interest Payment Date”). The
principal (or redemption price) hereof is payable upon presentation hereof at
the principal corporate trust office of U.S. Bank Trust National Association
(together with any successor as trustee under the Indenture, the “Trustee”), in
San Francisco, California, or at such other office as the Trustee may
designate. Interest hereon is payable by check or draft mailed, except as
provided in the Indenture, to the person whose name appears on the bond
registration books of the Trustee as the Registered Owner hereof as of the close
of business on the Record Date, in each case, at such person’s address as it
appears on such registration books. The term “Record Date” means, prior to the
Fixed Rate Date, the Business Day preceding any Interest Payment Date, and
after the Fixed Rate Date, the fifteenth (15th) day of the calendar month
preceding any Interest Payment Date.

 

The Issuer, U.S. Bank Trust
National Association, as tender agent (the “Tender Agent”), the Trustee, any
paying agent, and any agent of the Issuer, the Tender Agent or the Trustee may
treat the person in whose name this bond is registered as the absolute owner
hereof for the purpose of receiving payment as herein provided and for all
other purposes, and the Issuer, the Tender Agent, the Trustee, any paying agent
or any such agent shall not be affected by notice to the contrary.

 

This bond, together with the
interest and premium (if any) hereon shall not be deemed to constitute a debt
or liability of the State or any political subdivision or agency of the State
or a pledge of the faith and credit of the State or any political subdivision
or agency of the State, but shall be payable solely from the funds provided
therefor pursuant to the Indenture. This bond is only a special, limited
obligation of the Issuer as provided by the Act and the Issuer shall under no
circumstances be obligated to pay the principal of, premium, if any, purchase
price of, or interest on this bond, or other costs incident hereto except from
the revenues and funds pledged therefor pursuant to the Indenture. Neither the
State nor any political subdivision or agency of the State is in any manner
obligated to make any appropriation for such payments. The Issuer has no taxing
power.

 

No member or officer of the
Issuer, nor any person executing this bond shall in any event be subject to any
personal liability or accountability by reason of the issuance of this bond.

 

This bond is one of a duly
authorized issue of bonds of the Issuer designated as captioned above (the
“Bonds”) pursuant to the provisions of the Act, and pursuant to an Indenture of
Trust, dated as of April 1, 1999, between the Issuer and the Trustee (the
“Indenture”). The Bonds are issued for the purpose of making a loan to Roller
Bearing Company of America, Inc., a corporation duly organized and existing
under the laws of the State of Delaware and qualified to

 

A-2

 

do business in the State of
California (the “Borrower”), to assist in the financing of a Project (as such
term is defined in the Indenture) owned by the Borrower, pursuant to a loan
agreement, dated as of April 1, 1999, between the Issuer and the Borrower (the
“Agreement”), for the purposes and on the terms and conditions set forth
therein. The payment of principal of and interest on the Bonds is secured by an
irrevocable Letter of Credit issued by First Union National Bank (the “Letter
of Credit” and the “Bank,” respectively). Such Letter of Credit may be renewed
or substituted by a letter of credit of another financial institution or an
alternate credit facility as provided in the Agreement and the Indenture.

 

Reference is hereby made to
the Indenture (a copy of which is on file at said office of the Trustee) and
all indentures supplemental thereto and to the Act for a description of the
rights thereunder of the registered owners of the Bonds, of the nature and
extent of the security, of the rights, duties and immunities of the Trustee and
the Tender Agent and of the rights and obligations of the Issuer thereunder, to
all the provisions of which Indenture the Registered Owner of this bond, by
acceptance hereof, assents and agrees.

 

The Bonds and the interest
thereon are payable solely from Revenues (as defined in the Indenture) and are
secured by a pledge of said Revenues and of amounts held in the funds (except
as provided in the Indenture) and accounts established pursuant to the
Indenture (including proceeds of the sale of the Bonds), subject only to the
provisions of the Indenture permitting the application thereof for the purposes
and on the terms and conditions set forth in the Indenture. The Bonds are
further secured by an assignment of the right, title and interest of the Issuer
in the Agreement (to the extent and as more particularly described in the
Indenture) and by the Letter of Credit.

 

The Bonds shall bear interest
from and including the Date of Delivery of the Bonds to and including a date
specified in the Indenture at the rate specified in the Indenture. Thereafter,
prior to the Fixed Rate Date or final maturity date, whichever is earlier, the
Bonds shall bear interest, calculated on the basis of a year of 365 or 366
days, as appropriate, at a rate per annum equal to the Weekly Interest Rate (as
hereinafter defined). Each period from and including the Date of Delivery to and
including May 31, 1999 and, thereafter, the period from and including an
Interest Payment Date to and including the day next preceding the immediately
succeeding Interest Payment Date is herein called an “Interest Period.”

 

The Weekly Interest Rate
shall be the rate determined The Chapman Company (together with any successor
as Remarketing Agent under the Indenture, the “Remarketing Agent”), on the
basis of the examination of Tax-exempt (as defined in the Indenture)
obligations comparable to the Bonds known by the Remarketing Agent to have been
priced or traded under then prevailing market conditions, to be the minimum
interest rate which, if borne by the Bonds, would enable the Remarketing Agent
to sell the Bonds on the date such interest rate becomes effective at a price
equal to the principal amount thereof plus accrued interest, if any, but in no
event exceeding twelve percent (12%); provided, however, that if for any reason
a Weekly Interest Rate so determined shall be held to be invalid or unenforceable
by a court of law, the Weekly Interest Rate shall be the rate established in
accordance with the Indenture.

 

The Remarketing Agent shall
determine the Weekly Interest Rate as of the close of business on Tuesday in
each calendar week until the earlier of the Fixed Rate Date, or payment

 

A-3

 

in full of the Bonds;
provided that if Tuesday in any calendar week shall not be a Business Day then
such determination shall be made on the next preceding Business Day, and
communicate by telephonic notice such rate to the Trustee (with prompt
confirmation in writing). The Weekly Interest Rate so determined shall become
effective Wednesday in the week of determination thereof, to and including the
following Tuesday irrespective of when the rate was determined by the
Remarketing Agent. If the Remarketing Agent shall fail to determine a new
Weekly Interest Rate in any week, the previously effective Weekly Interest Rate
shall remain in effect for the next succeeding week and shall thereafter be
determined in accordance with the Indenture.

 

Each determination of the
Weekly Interest Rate by the Remarketing Agent shall be conclusive and binding
on the registered owners of the Bonds.

 

Anything herein to the
contrary notwithstanding, in no event may the interest rate borne by the Bonds
exceed twelve percent (12%) per annum or, if lower, the maximum rate of
interest which may be charged or collected pursuant to applicable provisions of
federal or state law.

 

On any Interest Payment Date,
the interest rate on the Bonds may be converted to a fixed annual rate of
interest (the “Fixed Interest Rate”) upon receipt by the Issuer, the Trustee,
the Tender Agent, the Bank and the Remarketing Agent not less than 45 days in
advance of the date on which the Bonds begin to bear interest at the Fixed
Interest Rate (the “Fixed Rate Date”) of (a) notice from the Borrower electing
to have the interest rate on the Bonds converted to a Fixed Interest Rate, (b)
an Opinion of Bond Counsel to the effect that conversion to a Fixed Interest
Rate is permitted by the Indenture and the Act and that conversion to the Fixed
Interest Rate in accordance with the provisions of the Indenture will not cause
interest on the Bonds to not be Tax-exempt and (c) satisfaction of certain
other conditions set forth in the Indenture.

 

After the Fixed Rate Date,
interest on the Bonds shall be computed on the basis of a year of 360 days and
12 months of 30 days each. The interest rate on all Bonds from the Fixed Rate
Date until the maturity or prior redemption or acceleration thereof shall be a
rate per annum equal to the Fixed Interest Rate, which shall be determined as
follows on or prior to, but not more than 15 days prior to, the Business Day
immediately preceding the Fixed Rate Date. The Remarketing Agent shall specify
the Fixed Interest Rate to be borne by the Bonds on and after the Fixed Rate
Date.

 

The Fixed Interest Rate shall
be the rate, but not exceeding the rate, which at the time of determination
thereof in the judgment of the Remarketing Agent, having due regard for
prevailing financial market conditions, would be necessary to remarket the
Bonds at a price equal to 100% of the principal amount thereof on the Fixed
Rate Date. If on the date of determination by the Remarketing Agent of the
Fixed Interest Rate, the Fixed Interest Rate so determined is held by a court
to be invalid or unenforceable, then the Fixed Interest Rate shall be a rate
determined by the Remarketing Agent, not less than 90% or more than 130% of the
“Alternate Fixed Rate,” which in the judgment of the Remarketing Agent, having
due regard for prevailing market conditions, would be the minimum rate at which
registered owners of the Bonds would be able to sell the Bonds at a price equal
to the principal amount thereof on the Fixed Rate Date. The Alternate Fixed
Rate shall be determined by the Remarketing Agent and shall be a rate per annum
based upon yield evaluations at par of Tax-exempt securities having a remaining
term equal, as nearly as practicable, to the time remaining until the maturity
of the

 

A-4

 

Bonds of not less than five
Component Issues (as defined in the Indenture) selected by the Remarketing
Agent each of which would be rated by either Moody’s Investors Service, Inc. or
Standard & Poor’s Ratings Group in a long-term debt rating category which
is the same as, or is immediately proximate to, the long-term debt rating
category which will be assigned to the Bonds after the Fixed Rate Date. Anything
to the contrary herein notwithstanding, the Fixed Interest Rate shall not
exceed 12% per annum. If, after the Fixed Rate Date the Bonds shall fail to be
converted to a Fixed Interest Rate, the Bonds will continue to earn interest at
the Weekly Interest Rate as provided in the Indenture and the registered owners
of the Bonds shall be notified thereof.

 

At least 30 days prior to the
Fixed Rate Date, the Trustee shall give an irrevocable notice to the registered
owners of the Bonds of conversion of the Weekly Interest Rate borne by the
Bonds to the Fixed Interest Rate. Such notice shall (a) specify the proposed
Fixed Rate Date, (b) require registered owners of all of the Outstanding Bonds
to tender their Bonds for purchase on the Fixed Rate Date and (c) state that
all Outstanding Bonds not purchased on or before the Fixed Rate Date pursuant
to the Indenture will be deemed to be purchased on the Fixed Rate Date at a
price equal to the principal amount thereof, plus unpaid interest, if any,
accrued to such date.

 

Any Bond purchased by the
Tender Agent from the date notice of the proposed Fixed Rate Date is given to
registered owners of the Bonds through the Fixed Rate Date shall be remarketed
at the Weekly Interest Rate for a period up to and including the Fixed Rate
Date; provided, however, that all Bonds remarketed from the date notice of the
proposed Fixed Rate Date is given to a registered owner of the Bonds through
the Fixed Rate Date shall be tendered by the registered owner thereof on the
Fixed Rate Date pursuant to the provisions of the Indenture.

 

The Bonds are also subject to
mandatory tender for purchase on the date an alternate letter of credit is
substituted for the Letter of Credit (the “Letter of Credit Substitution
Date”). The Fixed Rate Date and the Letter of Credit Substitution Date are also
referred to as the “Mandatory Tender Date.”

 

All Bonds which on the
Mandatory Tender Date have not been tendered for purchase (“Non-Tendered
Bonds”), shall be deemed purchased by the Tender Agent on the Mandatory Tender
Date at a price of the principal amount thereof plus unpaid interest, if any,
accrued to such date. Replacement bonds for the Non-Tendered Bonds may be
remarketed and delivered to new owners as instructed by the Borrower or the
Remarketing Agent. The Tender Agent shall hold in escrow for the owners of the
Non-Tendered Bonds the purchase price thereof, and after the Mandatory Tender
Date such owners will no longer be entitled to any of the benefits of the
Indenture except for the payment of such purchase price.

 

The Indenture provides that
prior to the Fixed Rate Date, the Bonds may be delivered by the registered
owners thereof to the Tender Agent at its principal corporate trust office in
San Francisco, California or at such other place as the Tender Agent may
designate in writing to the registered owners of the Bonds. Any Bond so
delivered or notice with respect to which is received shall be purchased by the
Tender Agent on demand of the registered owner thereof on the close of any
Business Day at a purchase price equal to the principal amount thereof plus

 

A-5

 

accrued interest to but not
including the date of purchase (unless such date is an Interest Payment Date,
in which case the purchase price will be the principal amount of such Bond)
upon:

 

(a)
delivery to the Tender Agent of an irrevocable written  notice by 4:00 p.m., California time, which
states (i) the name and address
of the registered owner of the Bond, (ii) the number or numbers of the Bond or Bonds to be purchased, (iii)
the aggregate principal amount of
the Bond or Bonds to be purchased, and (iv) the date on which the Bond is or Bonds are to be purchased,
which date shall be a Business
Day not prior to the seventh (7th) calendar day next succeeding the date of delivery of such
notice; and

 

(b)
delivery to the Tender Agent at or prior to 10:00 a.m.,  California time, on the Purchase Date
specified in the aforesaid notice,
of the Bond or Bonds to be tendered; provided, however, that any Bond for which a notice of the exercise of
the purchase option has been
given as provided in subsection (a) above and which is not so delivered shall be deemed delivered on the
date of purchase and shall be
purchased in accordance with the Indenture.

 

The
Bonds are subject to redemption by the Issuer upon the  following terms in increments of $5,000,
provided that in the event of redemption
of less than all of the Bonds, the amount which remains Outstanding shall be in Authorized
Denominations (as defined in the Indenture):

 

(i)
The Bonds are not subject to sinking fund  redemption.

 

(ii)
On or prior to the Fixed Rate Date, the Bonds  are subject to redemption on any Business Day,
in whole or in part, to the
extent of prepayments of amounts due under the Agreement made at the option of the Borrower, with the written approval of the Bank, at a redemption price of
100% of the principal amount of
the Bonds redeemed, plus interest accrued thereon to the redemption date.

 

(iii)
The Bonds Outstanding on the date of the  occurrence of a Determination of Taxability (as defined in the Indenture) shall be redeemed in whole, at a
price of 100% of the principal
amount thereof plus interest accrued thereon to the redemption date, at any time within 60 days after such occurrence. IF THE LIEN OF THE INDENTURE IS
DISCHARGED PRIOR TO THE
OCCURRENCE OF A DETERMINATION OF TAXABILITY THE BONDS SHALL NOT BE REDEEMED AS DESCRIBED HEREIN.

 

(iv)
The Bonds shall be redeemed in whole, at a  redemption price equal to 100% of the
principal amount thereof plus
interest accrued thereon to the redemption date, on a redemption date not less than fifteen (15)
days preceding the expiration
date of the Letter of Credit selected by the Trustee if no Alternate Letter of Credit has been delivered to the Trustee in accordance with the Agreement.

 

A-6

 

(v)
The Bonds are subject to redemption in whole or  in part, on any date, at a redemption price
equal to 100% of the principal
amount of Bonds redeemed, plus interest accrued thereon to the redemption date, to the extent of prepayments or required prepayments of amounts due under
the Agreement made at the option
of the Borrower following the occurrence of damage to, or the destruction of, the Project, the taking thereof under the power of eminent domain or
the Agreement is void
unenforceable, impossible of performance or unlawful.

 

(vi)
After the Fixed Rate Date, the Bonds are subject  to redemption to the extent of prepayments of
amounts due under the Agreement
made at the option of the Borrower, with the consent of the Bank, in whole or in part, on any Interest Payment Date during the applicable periods
specified below, at the
applicable redemption price stated below, plus interest accrued thereon to the redemption date:

 

	
  NUMBER OF YEARS

  FROM FIXED RATE DATE

  TO FINAL MATURITY

  	
   

  	
  FIRST OPTIONAL

  REDEMPTION DATE

  	
   

  	
  REDEMPTION

  PRICE

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  greater than 9 years

  	
   

  	
  7 years from conversion

  	
   

  	
  101%, declining .5%

  annually to 100%

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6-9 years

  	
   

  	
  6 years from conversion

  	
   

  	
  100.5%, declining .5%

  annually to 100%

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  less than 6 years

  	
   

  	
  no optional redemption

  	
   

  	
   

  

 

Notwithstanding the optional
redemption schedule set forth  above, on or prior to the Fixed Rate Date, the Remarketing Agent may provide an alternate optional
redemption schedule if it obtains
an Opinion of Bond Counsel that such alternate schedule will not cause interest on the Bonds not to be Tax-exempt.

 

(vii)
The Bonds shall be redeemed in whole, at a  redemption price equal to 100% of the
principal amount thereof, plus
interest accrued thereon to the redemption date, within five calendar days (and before the following Saturday if the fifth calendar day is a Saturday) from
the date the Trustee receives
written notice from the Bank that the Bank will not reinstate the interest portion of the Letter of Credit or that an event of default has taken
place under the Credit Agreement
and directing the Trustee to redeem the Bonds.

 

(viii)
The Bonds are subject to redemption, in part  on any Interest Payment Date, at a redemption
price equal to 100% of the
principal amount thereof, plus accrued interest to the redemption date, to the extent of amounts
remaining in the Project Fund
upon completion of the Project which are deposited in the Surplus Account (as such terms are defined in the Indenture) as provided in the Indenture.

 

A-7

 

If an Event of Default (as
defined in the Indenture) shall occur, the principal of all Bonds may be
declared due and payable upon the conditions, in the manner and with the effect
provided in the Indenture. The Indenture provides that in certain events such
declaration and its consequences may be rescinded.

 

The Bonds are issuable as
fully registered bonds without coupons in denominations of $100,000 or any
multiple of $5,000 in excess of $100,000, provided that after the Fixed Rate
Date the Bonds will be issued in denominations of $5,000 or any integral
multiple thereof. This bond is transferable by the Registered Owner hereof, in
person or by his attorney duly authorized in writing, but only in the manner,
subject to the limitations and upon payment of the charges, if any, provided in
the Indenture, and upon surrender and cancellation of this bond. Upon such
transfer a new registered Bond or Bonds, of authorized denomination or
denominations, for the same aggregate principal amount, will be issued to the
transferee in exchange therefor.

 

The Indenture and the rights
and obligations of the Issuer and of the registered owners of the Bonds and of
the Trustee or Tender Agent may be modified or amended from time to time and at
any time (and in certain cases without the consent of the registered owners of
the Bonds) in the manner, to the extent, and upon the terms provided in the
Indenture; provided that no such modification or amendment shall (a) extend the
fixed maturity of this bond, or reduce the amount of principal hereof, or
extend the time of payment or change the method of computing the rate of
interest hereon, or extend the time of payment of interest hereon, without the
consent of the Registered Owner hereof, (b) reduce the percentage of Bonds the
consent of the registered owners of which is required to effect any such
modification or amendment, or permit the creation of any lien on the Revenues
and other assets pledged as security for the Bonds prior to or on a parity with
the lien created by the Indenture, or deprive the registered owners of the
Bonds of the lien created by the Indenture on such Revenues and other assets
(except as expressly provided in the Indenture), without the consent of the
registered owners of all Bonds then outstanding, or (c) adversely affect the
interests of the Tender Agent without its prior written consent. The Trustee
shall not be required to consent to any such amendment which materially adversely
affects its rights, duties and immunities under the Indenture or otherwise, all
as more fully set forth in the Indenture.

 

If moneys or securities shall
have been set aside and held for the payment or redemption of Bonds and the
interest installments therefor to the maturity or redemption date thereof in
accordance with the Indenture, such Bonds shall be deemed to be paid within the
meaning provided in the Indenture and the pledge of Revenues and other assets
made under the Indenture and all covenants, agreements and other obligations of
the Issuer under the Indenture shall cease, terminate, become void and be
completely discharged and satisfied.

 

It is hereby certified and
recited that any and all conditions, things and acts required to exist, to have
happened and to have been performed precedent to and in the issuance of this
bond do exist, have happened and have been performed in due time, form and
manner as required by the Act, and by the Constitution and laws of the State,
and that the amount of this bond, together with all other indebtedness of the
Issuer, does not exceed any limit prescribed by the Act, or by the Constitution
and laws of the State, and is not in excess of the amount of Bonds permitted to
be issued under the Indenture.

 

A-8

 

This bond shall not be
entitled to any benefit under the Indenture, or become valid or obligatory for
any purpose, until the certificate of authentication and registration hereon
endorsed shall have been signed by the Trustee.

 

A-9

 

IN WITNESS WHEREOF, the
California Infrastructure and Economic Development Bank has caused this bond to
be executed in its name and on its behalf by the manual or facsimile signature
of the Chair of the Issuer and attested by the manual or facsimile signature of
its Secretary, all as of the date set forth above.

 

	
   

  	
  CALIFORNIA INFRASTRUCTURE
  AND

  
	
   

  	
  ECONOMIC DEVELOPMENT BANK

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  Chair

  
	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  
	
   

  	
   

  
	
  By

  	
   

  	
   

  	
   

  
	
   

  	
  Secretary

  	
   

  
						

 

A-10

 

CERTIFICATE OF AUTHENTICATION AND REGISTRATION

 

This is one of the Bonds
described in the within-mentioned Indenture, which has been registered on April
30, 1999.

 

	
   

  	
  U.S. BANK TRUST NATIONAL
  ASSOCIATION,

  
	
   

  	
  as Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  Authorized Signatory

  

 

A-11

 

ASSIGNMENT

 

For value received the
undersigned do(es) hereby sell, assign and transfer unto
                                                                       
(Insert name, address, zip code and Social Security, taxpayer or other
identification numbers of Assignee) the within-mentioned registered Bond and
hereby irrevocably constitute(s) and appoint(s)                                                   
attorney, to transfer the same on the books of the Bond Registrar with full
power of substitution in the premises.

 

	
  Dated:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Notice: The
  signature on this Assignment must correspond with the name of the Registered Owner as it appears upon the face
  of the within Bond in every particular without alteration or enlargement or any change whatsoever.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature guaranteed:

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (NOTE: Signature must be
  guaranteed by an Eligible Guarantor Institution

  

 

A-12Exhibit
10.23

 

 

TAX
REGULATORY AGREEMENT

 

 

by
and among

 

 

CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK

 

U.S.
BANK TRUST NATIONAL ASSOCIATION,

as
Trustee,

 

and

 

ROLLER
BEARING COMPANY OF AMERICA, INC.

 

DATED
AS OF APRIL 1, 1999

 

 

EXECUTED
AS PART OF THE PROCEEDINGS FOR THE

AUTHORIZATION
AND ISSUANCE OF:

 

$4,800,000

CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK

VARIABLE
RATE DEMAND

INDUSTRIAL
DEVELOPMENT REVENUE BONDS, SERIES 1999

(ROLLER
BEARING COMPANY OF AMERICA, INC. - SANTA ANA PROJECT)

 

 

 

TABLE OF CONTENTS

 

(This Table of Contents is
for convenience of reference only and is not part of the Tax Regulatory
Agreement.)

 

	
  Article I

  
	
  DEFINITIONS

  
	
   

  	
   

  	
   

  
	
  Section 1.01.

  	
  Definitions

  	
   

  
	
  Section 1.02.

  	
  Reliance on
  Borrower’s Information

  	
   

  
	
   

  	
   

  	
   

  
	
  Article II

  
	
   

  	
   

  	
   

  
	
  CERTAIN
  REPRESENTATIONS BY THE BORROWER

  
	
   

  	
   

  	
   

  
	
  Section 2.01.

  	
  Description of
  the Project and Description of the Facilities

  	
   

  
	
  Section 2.02.

  	
  Capital
  Expenditures

  	
   

  
	
  Section 2.03.

  	
  Prior Issues
  and $40 Million Limit

  	
   

  
	
  Section 2.04.

  	
  Federal Tax
  Return Information

  	
   

  
	
  Section 2.05.

  	
  Composite
  Issues

  	
   

  
	
  Section 2.06.

  	
  Prohibited Uses

  	
   

  
	
  Section 2.07.

  	
  No Composite
  Project

  	
   

  
	
  Section 2.08.

  	
  Acquisition
  of Existing Property

  	
   

  
	
  Section 2.09.

  	
  Land
  Acquisition Limit and No Acquisition of Farmland

  	
   

  
	
  Section 2.10.

  	
  Representations
  by the Borrower for Purposes of IRS Form 8038

  	
   

  
	
   

  	
   

  	
   

  
	
  Article III

  
	
   

  	
   

  	
   

  
	
  USE
  OF BOND PROCEEDS

  
	
   

  	
   

  	
   

  
	
  Section 3.01.

  	
  Anticipated Use
  of Proceeds

  	
   

  
	
  Section 3.02.

  	
  Certification
  as to Costs of the Project

  	
   

  
	
   

  	
   

  	
   

  
	
  Article IV

  
	
   

  	
   

  	
   

  
	
  ARBITRAGE

  
	
   

  	
   

  	
   

  
	
  Section 4.01.

  	
  Arbitrage
  Representations and Elections

  	
   

  
	
  Section 4.02.

  	
  Arbitrage
  Compliance

  	
   

  
	
  Section 4.03.

  	
  Calculation of
  Rebate Amount

  	
   

  

 

 

	
  Section 4.04.

  	
  Payment to
  United States

  	
   

  
	
  Section 4.05.

  	
  Recordkeeping

  	
   

  
	
  Section 4.06.

  	
  Rebate Analyst

  	
   

  
	
   

  	
   

  	
   

  
	
  Article V

  
	
   

  	
   

  	
   

  
	
  COMPLIANCE
  WITH CODE

  	
   

  
	
   

  	
   

  	
   

  
	
  Article VI

  
	
   

  	
   

  	
   

  
	
  TERM OF TAX REGULATORY
  AGREEMENT

  	
   

  
	
   

  	
   

  	
   

  
	
  Article VII

  
	
   

  	
   

  	
   

  
	
  AMENDMENTS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Article VIII

  
	
   

  	
   

  	
   

  
	
  EVENTS OF DEFAULT, REMEDIES

  
	
   

  	
   

  	
   

  
	
  Section 8.01.

  	
  Events of
  Default

  	
   

  
	
  Section 8.02.

  	
  Remedies for
  an Event of Default

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT A-1

  	
  SOURCES AND USES OF FUNDS

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT A-2

  	
  PROPERTY FINANCED OR REFINANCED BY THE
  BONDS

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT B-1

  	
  FORM OF PROVIDER CERTIFICATION FOR A
  CERTIFICATE OF DEPOSIT

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT B-2

  	
  FORM OF PROVIDER CERTIFICATION FOR AN
  INVESTMENT CONTRACT

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT B-3

  	
  FORM OF BORROWER’S CERTIFICATION FOR A
  CERTIFICATE OF DEPOSIT INVOLVING THREE BIDS

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT C

  	
  USEFUL LIFE CALCULATION

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT D

  	
  DECLARATION OF OFFICIAL INTENT

  	
   

  

 

ii

 

TAX REGULATORY AGREEMENT

 

THIS TAX REGULATORY AGREEMENT
(this “Tax Regulatory Agreement”) is made and dated as of April 1, 1999, by and
among CALIFORNIA INFRASTRUCTURE AND DEVELOPMENT BANK and its successors or
assigns (the “Issuer”), ROLLER BEARING COMPANY OF AMERICA, INC., a corporation
duly organized and existing under the laws of the State of Delaware and its
successors or assigns (the “Borrower”), and U.S. BANK TRUST NATIONAL
ASSOCIATION, solely in its capacity as trustee under the Indenture, as defined
below (the “Trustee”);

 

W I T N E S S E T H:

 

WHEREAS, the Issuer has
authorized the issuance of $4,800,000 aggregate principal amount of its
Variable Rate Demand Industrial Development Revenue Bonds, Series 1999 (Roller
Bearing Company of America, Inc. (Santa Ana Facility) Project) (the “Bonds”),
the proceeds of which are being loaned to the Borrower pursuant to a Loan
Agreement, dated as of April 1, 1999, between the Issuer and the Borrower (the “Agreement”),
to finance the acquisition and rehabilitation of a manufacturing facility and
the acquisition and installation of certain manufacturing equipment, as more
fully set forth in the Agreement (the “Project”) and to pay a portion of the
costs of issuance of the Bonds;

 

WHEREAS, the Borrower will
use the Project in the manufacture of roller bearings and precision components
or for the manufacture of other tangible personal property; and

 

WHEREAS, the Issuer has
determined that the issuance, sale and delivery of the Bonds is needed to
finance the Project; and

 

WHEREAS, this Tax Regulatory
Agreement has been entered into by the Issuer, the Borrower and the Trustee to
ensure compliance with the provisions of the Code (as hereinafter defined; and

 

WHEREAS, to ensure that
interest on the Bonds will be and remain excludable from gross income under the
Code, the restrictions listed in this Tax Regulatory Agreement must be
satisfied.

 

NOW THEREFORE, the Issuer,
the Borrower and the Trustee hereby agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

SECTION 1.01.
DEFINITIONS. The following words and phrases shall have the following meanings.
Any capitalized word or term used herein but not defined herein shall have the
same meaning given in the hereinafter defined Indenture.

 

“ABUSIVE ARBITRAGE DEVICE”
means any action which has the effect of (a) enabling the Issuer or the
Borrower to exploit the difference between taxable and tax-exempt interest
rates to

 

 

obtain a material financial
advantage; and (b) overburdening the tax-exempt bond market as defined in ss.
1.148-10 of the Regulations.

 

“ACCOUNTING METHOD” means
both the overall method used to account for the Gross Proceeds of the Bonds
(e.g., the cash method or a modified accrual method) and the method used to
account for or allocate any particular item within that overall accounting
method (e.g., accounting for Investments, Expenditures, allocations to and from
different sources and particular items of the foregoing).

 

“AGREEMENT” means the Loan
Agreement, dated as of April 1, 1999, between the Issuer and the Borrower, and
any amendments and supplements thereto.

 

“AVERAGE ECONOMIC LIFE” means
the average reasonably expected economic life of the Facilities as defined in
ss. 147(b) of the Code.

 

“AVERAGE MATURITY” means the
average maturity of the Bonds as defined in ss. 147(b) of the Code.

 

“BOND COUNSEL” means a law
firm of nationally recognized bond counsel who is requested to deliver its
approving opinion with respect to the issuance of and the exclusion from
federal income taxation of interest on the Bonds.

 

“BOND YEAR” means the period
commencing April 1 of each calendar year and terminating on March 31 of the
immediately succeeding calendar year during the term of the Bonds, except that
the first Bond Year shall commence on the Date of Issuance and end on March 31,
2000 (unless a different period is required by the Regulations or selected by
the Borrower pursuant to the Regulations).

 

“BOND YIELD” means the Yield
of the Bonds calculated in accordance with Section 1.148-4 of the Regulations.

 

“BORROWER” means Roller
Bearing Company of America, Inc., a corporation duly organized and existing
under the laws of the State of Delaware or any entity which is the surviving,
resulting or transferee entity in any merger, consolidation or transfer
permitted under the Agreement.

 

“CAPITAL EXPENDITURE” means
any cost of a type that is for the acquisition, construction, reconstruction or
improvement of land or property of a character subject to the allowance for
depreciation. For example, costs incurred to acquire, construct, reconstruct or
improve land, buildings and equipment generally are Capital Expenditures.
Whether an expenditure is a capital expenditure is determined at the time the
expenditure is paid with respect to the property. Future changes in law do not
affect whether an expenditure is a capital expenditure.

 

“CAPITAL PROJECT” means all
Capital Expenditures that carry out the governmental purpose of the Bonds. For
example, a Capital Project may include Capital Expenditures for one or more
building improvements or equipment, plus related capitalized interest paid or
accrued prior to the in-service date for the Capital Project.

 

2

 

“CLASS OF INVESTMENTS” means
one of the following, each of which represents a different Class of Investments:

 

(a)
Each category of yield restricted Purpose Investment and Program Investment, as
defined in ss. 1.148-1(b), that is subject to a different definition of
materially higher Yield under ss. 1.148-2(d)(2);

 

(b)
Yield restricted Nonpurpose Investments; and

 

(c)
All other Nonpurpose Investments.

 

“CODE” means the Internal
Revenue Code of 1986, as amended.

 

“COMPUTATION DATE” means the
Initial Computation Date, an Installment Computation Date or the Final
Computation Date.

 

“COMPUTATION DATE CREDIT” means
on the last day of each Bond Year during which there are Gross Proceeds subject
to the rebate requirement of Article IV hereof, and on the Final Computation
Date, the amount of $1,000.

 

“CONSISTENTLY APPLIED” means
applied uniformly within a fiscal period and between fiscal periods to account
for Gross Proceeds of an issue and any amounts that are in a commingled fund.

 

“COSTS OF ISSUANCE” means all
costs incurred in connection with the issuance of the Bonds, other than fees
paid to or on behalf of credit enhancers as fees for “qualified guarantees” as
defined in ss. 1.148-4(f) of the Regulations or to the Issuer as a portion of
its higher Yield permitted on the Agreement under ss. 1.148-2(d)(2) of the
Regulations. Examples of Costs of Issuance include (but are not limited to):

 

(a)
underwriter’s spread (whether realized directly or derived through purchase of
the Bonds at a discount below the price at which a substantial number of the
Bonds are sold to the public) or placement agent’s fee;

 

(b)
counsel fees (including bond counsel, underwriter’s counsel, placement agent’s
counsel, issuer’s counsel, borrower’s counsel, trustee’s counsel, and any other
specialized counsel fees incurred in connection with the issuance of the
Bonds);

 

(c)
financial advisor fees incurred in connection with the issuance of the Bonds;

 

(d)
rating agency fees (except for any such fee that is paid in connection with or
as a part of the fee for credit enhancement of the Bonds);

 

(e)
trustee fees incurred in connection with the issuance of the Bonds;

 

(f)
accountant fees incurred in connection with the issuance of the Bonds;

 

3

 

(g)
printing costs (for the Bonds and of the preliminary and final offering
circulars or official statements);

 

(h)
costs incurred in connection with the required public approval process (e.g.,
publication costs for public notices generally and costs of the public
hearing); and

 

(i)
Issuer fees to cover administrative costs and expenses incurred in connection
with the issuance of the Bonds.

 

“COSTS OF ISSUANCE FUND”
means the Costs of Issuance Fund established pursuant to the Indenture.

 

“CURRENT OUTLAY OF CASH”
means an outlay reasonably expected to occur not later than 5 banking days
after the date as of which the allocation of Gross Proceeds to the Expenditure
is made.

 

“DATE OF ISSUANCE” means
April 30, 1999.

 

“DISCHARGED” means, with
respect to any Bond, the date on which all amounts due with respect to such
Bond are actually and unconditionally due, if cash is available at the place of
payment, and no interest accrues with respect to such Bond after such date.

 

“ECONOMIC ACCRUAL METHOD”
(also known as the CONSTANT INTEREST METHOD or ACTUARIAL METHOD) means the
method of computing Yield that is based on the compounding of interest at the
end of each compounding period.

 

“EXPENDITURE” means a book or
record entry which allocates Proceeds of the Bonds in connection with a Current
Outlay of Cash.

 

“FACILITIES” means the
Manufacturing Facility financed or refinanced with the Proceeds of the Bonds
and described in Exhibit A-2 hereto.

 

“FAIR MARKET VALUE” means the
price at which a willing buyer would purchase an Investment from a willing
seller in a bona fide, arm’s-length transaction. Fair Market Value generally is
determined on the date on which a contract to purchase or sell the Nonpurpose
Investment becomes binding (i.e., the trade date rather than the settlement
date). Except as otherwise provided in this definition, an Investment that is
not of a type traded on an established securities market (within the meaning of
ss. 1273 of the Code), is rebuttably presumed to be acquired or disposed of for
a price that is not equal to its Fair Market Value. The Fair Market Value of a
United States Treasury obligation that is purchased directly from the United
States Treasury is its purchase price. The following guidelines shall apply for
purposes of determining the Fair Market Value of the obligations described
below:

 

(a)
CERTIFICATES OF DEPOSIT. The purchase of certificates of deposit with fixed
interest rates, fixed payment schedules and substantial penalties for early
withdrawal will be deemed to be an Investment purchased at its Fair Market
Value on the purchase date if the Yield on the certificate of deposit is not
less than:

 

4

 

(i)
the Yield on reasonably comparable direct obligations of the United States; and

 

(ii)
the highest Yield that is published or posted by the provider to be currently
available from the provider on reasonably comparable certificates of deposit
offered to the public.

 

(b)
GUARANTEED INVESTMENT CONTRACTS. A Guaranteed Investment Contract is a
Nonpurpose Investment that has specifically negotiated withdrawal or
reinvestment provisions and a specifically negotiated interest rate, and also
includes any agreement to supply Investments on two or more future dates (e.g.,
a forward supply contract). The purchase price of a Guaranteed Investment
Contract is treated as its Fair Market Value on the purchase date if:

 

(i)
The Borrower makes a bona fide solicitation for a specified Guaranteed
Investment Contract and receives at least three bona fide bids from providers
that have no material financial interest in the issue (e.g., as underwriters or
brokers);

 

(ii)
The Borrower purchases the highest-Yielding Guaranteed Investment Contract for
which a qualifying bid is made (determined net of broker’s fees);

 

(iii)
The Yield on the Guaranteed Investment Contract (determined net of broker’s
fees) is not less than the Yield then available from the provider on reasonably
comparable Guaranteed Investment Contracts, if any, offered to other persons
from a source of funds other than gross proceeds of tax-exempt bonds;

 

(iv)
The determination of the terms of the Guaranteed Investment Contract takes into
account as a significant factor the Borrower’s reasonably expected drawdown
schedule for the amounts to be invested, exclusive of amounts deposited in debt
service funds and reasonably required reserve or replacement funds;

 

(v)
The terms of the Guaranteed Investment Contract, including collateral security
requirements, are reasonable; and

 

(vi)
The obligor on the Guaranteed Investment Contract certifies the administrative
costs that it is paying (or expects to pay) to third parties in connection with
the Guaranteed Investment Contract.

 

“FINAL COMPUTATION DATE”
means the date the last Bond is Discharged.

 

“FUTURE VALUE” means the
Value of a Receipt or Payment at the end of any interval as determined by using
the Economic Accrual Method and equals the Value of that Payment or Receipt
when it is paid or received (or treated as paid or received), plus interest
assumed to be

 

5

 

earned and compounded over
the period at a rate equal to the Yield on the Bonds, using the same
compounding interval and financial conventions used to compute the Yield on the
Bonds.

 

“GROSS PROCEEDS” means any
Proceeds or Replacement Proceeds of the Bonds.

 

“INDENTURE” means, the
Indenture of Trust, dated as of April 1, 1999, between the Issuer and the
Trustee, and any amendments and supplements thereto.

 

“Initial Computation Date”
means the date a rebate calculation is required, if any, pursuant to Section
3.03(c) of the Indenture.

 

“INSTALLMENT COMPUTATION DATE”
means the last day of the fifth Bond Year and each succeeding fifth Bond Year
as stated in Section 4.01 hereof or the last day of any Bond Year prior to the
fifth Bond Year selected by the Borrower.

 

“INVESTMENT” means any
Purpose Investment or Nonpurpose Investment, including any other tax-exempt
bond.

 

“INVESTMENT INSTRUCTIONS”
means the letter of instructions set forth as an exhibit to the No Arbitrage
Certificate of the Issuer dated the Date of Issuance.

 

“INVESTMENT PROCEEDS” means
any amounts actually or constructively received from investing Proceeds of the
Bonds.

 

“INVESTMENT-TYPE PROPERTY”
means any property, other than property described in ss. 148(b)(2)(A), (B), (C)
or (E) of the Code that is held principally as a passive vehicle for the
production of income. Except as otherwise provided, a prepayment for property
or services is Investment-Type Property if a principal purpose for prepaying is
to receive an Investment return from the time the prepayment is made until the
time payment otherwise would be made. A prepayment is not Investment-Type
Property if--

 

(a)
the prepayment is made for a substantial business purpose other than Investment
return and the issuer has no commercially reasonable alternative to the
prepayment, or

 

(b)
prepayments on substantially the same terms are made by a substantial
percentage of persons who are similarly situated to the issuer but who are not
beneficiaries of tax-exempt financing.

 

“ISSUE PRICE” means, except
as otherwise provided, issue price as defined in ss.ss. 1273 and 1274 of the
Code. Generally, the Issue Price of bonds that are publicly offered is the
first price at which a substantial amount of the bonds is sold to the public.
Ten percent is a substantial amount. The public does not include bond houses,
brokers or similar persons or organizations acting in the capacity of
underwriters or wholesalers. The Issue Price does not change if part of the
issue is later sold at a different price. The Issue Price of bonds that are not
substantially identical is determined separately. The Issue Price of bonds for
which a bona fide public offering is made is determined as of the sale date
based upon reasonable expectations regarding the initial

 

6

 

public offering price. If a
bond is issued for property, the applicable Federal tax-exempt rate is used in
lieu of the Federal rate in determining the Issue Price under ss. 1274 of the
Code. The issue price of bonds may not exceed their Fair Market Value as of the
sale date. With respect to the Bonds, the Issue Price is $4,800,000.

 

“MANUFACTURING FACILITY”
means a Capital Project that is used in the manufacturing or production of
tangible personal property (including the processing resulting in a change in
the condition of such property) including facilities that are directly related
and ancillary to a Manufacturing Facility if such directly related and
ancillary facilities are located on the same site as the Manufacturing Facility
and not more than 25% of the net proceeds of an issue that finances the
Manufacturing Facility (after deducting costs of issuance) are used to provide
such directly related and ancillary facilities.

 

“NET SALE PROCEEDS” means
Sale Proceeds, less the portion of those Sale Proceeds invested in a reasonably
required reserve or replacement fund under ss. 148(d) of the Code and as part
of a minor portion under ss. 148(e) of the Code.

 

“NONPURPOSE INVESTMENT” means
any security, obligation, annuity contract or Investment type property as
defined in ss. 148(b) of the Code, but excluding all obligations the interest
on which is excludable from federal gross income. The term “Nonpurpose
Investment” does not include the Borrower’s obligations to make payments to the
Issuer pursuant to the provisions of the Agreement.

 

“PAYMENTS” means, for
purposes of computing the Rebate Amount, (a) amounts actually or constructively
paid to acquire a Nonpurpose Investment (or treated as paid to a commingled
fund); (b) for a Nonpurpose Investment that is allocated to an issue on a date
after it is actually acquired (e.g., an Investment that becomes allocable to
Transferred Proceeds or to Replacement Proceeds) or that becomes subject to the
rebate requirement of the Code on a date after it is actually acquired (e.g.,
an Investment allocated to a reasonably required reserve or replacement fund
for a construction issue at the end of the two-year spending period), the Value
of that Investment on that date; (c) for a Nonpurpose Investment that was
allocated to an issue at the end of the preceding computation period, the Value
of that Investment at the beginning of the computation period; (d) on the last
day of each Bond Year during which there are amounts allocated to Gross
Proceeds of an issue that are subject to the rebate requirement of the Code,
and on the final maturity date, a Computation Date Credit; and (e) Yield
Reduction Payments on Nonpurpose Investments made pursuant to ss. 1.148-5(c) of
the Regulations. For purposes of computing the Yield on an Investment
(including the Value of the Investment), Payment means amounts to be actually
or constructively paid to acquire the Investment; provided, however, that
payments made by a conduit borrower, such as the Borrower, are not treated as
paid until the conduit borrower ceases to receive the benefit of earnings on
those amounts. Payments on Investments, including Guaranteed Investment
Contracts, are adjusted for Qualified Administrative Costs of acquiring a
Nonpurpose Investment.

 

“PRE-ISSUANCE ACCRUED
INTEREST” means amounts representing interest that accrued on an obligation for
a period not greater than one year before the Date of Issuance but only if
those amounts are paid within one year after the Date of Issuance.

 

7

 

“PRINCIPAL USER” means a
person who is a principal owner, principal lessee, a principal output purchaser
or “other” principal user and any Related Person to a Principal User. A
principal owner is a person who at any time holds more than a 10% ownership
interest (by value) in a facility or, if no person holds more than a 10%
ownership interest, then the person (or persons in the case of multiple equal
owners) who holds the largest ownership interest in the facility. A person is
treated as holding an ownership interest if such person is an owner for federal
income tax purposes generally. A principal lessee is a person who at any time
leases more than 10% of the facility (disregarding portions used by the lessee
under a short-term lease). The portion of a facility leased to a lessee is
generally determined by reference to its fair rental value. A short-term lease
is one which has a term of one year or less, taking into account all options to
renew and reasonably anticipated renewals. A principal output purchaser is any
person who purchases output of a facility, unless the total output purchased by
such person during each one-year period beginning with the date such facility
is placed in service is 10% or less of such facility’s output during each such
period. An “other” principal user is a person who enjoys a use of a facility
(other than a short-term use) in a degree comparable to the enjoyment of a
principal owner or a principal lessee, taking into account all the relevant
facts and circumstances, such as the person’s participation in control over use
of such facility or its remote or proximate geographic location.

 

“PRIOR ISSUES” means any
issue of tax-exempt obligations (whether or not the issuer of each issue is the
same) to which Section 103(b)(6) of the 1954 Code or Section 144(a) of the Code
applies.

 

“PROCEEDS” means any Sale
Proceeds, Investment Proceeds and Transferred Proceeds of an issue. Proceeds do
not include, however, amounts actually or constructively received with respect
to a Purpose Investment that are properly allocable to the immaterially higher
Yield under ss. 1.148-2(d) of the Regulations or section 143(g) of the Code or
to Qualified Administrative Costs recoverable under ss. 1.148-5(e) of the
Regulations.

 

“PROJECT” has the meaning
given to such term in the preambles hereto.

 

“PROJECT FUND” means the
Project Fund established pursuant to the Indenture.

 

“PURCHASE FUND” means the
Purchase Fund established pursuant to the Indenture.

 

“PURPOSE INVESTMENT” means an
Investment that is acquired to carry out the governmental purpose of an issue.
The Agreement constitutes a Purpose Investment.

 

“QUALIFIED ADMINISTRATIVE
COSTS” means reasonable, direct administrative costs, other than carrying
costs, such as separately stated brokerage or selling commissions, but not
legal and accounting fees, recordkeeping, custody and similar costs. General
overhead costs and similar indirect costs of the issuer such as employee
salaries and office expenses and costs associated with computing the Rebate
Amount are not Qualified Administrative Costs. In general, administrative costs
are not reasonable unless they are comparable to administrative costs that
would be charged for the same Investment or a reasonably comparable Investment
if acquired with a source of funds other than Gross Proceeds of tax-exempt
bonds.

 

8

 

“QUALIFIED HEDGING
TRANSACTION” means a contract which meets the requirements of ss. 1.148-4(h)(2)
of the Regulations.

 

“REBATE AMOUNT” means the
excess of the Future Value of all Receipts on Nonpurpose Investments over the
Future Value of all the Payments on Nonpurpose Investments. Future Value is
computed as of the Computation Date. Rebate Amount additionally includes any
penalties and interest on underpayments reduced for recoveries of overpayments.

 

“REBATE ANALYST” shall mean
the entity chosen by the Borrower and the Issuer in accordance with Section
4.06 hereof to determine the amount of required deposits to the Rebate Fund, if
any.

 

“REBATE FUND” means the
Rebate Fund established pursuant to the Indenture.

 

“RECEIPTS” means, for
purposes of computing the Rebate Amount, (a) amounts actually or constructively
received from a Nonpurpose Investment (including amounts treated as received
from a commingled fund), such as earnings and return of principal; (b) for a
Nonpurpose Investment that ceases to be allocated to an issue before its
disposition or redemption date (e.g., an Investment that becomes allocable to
Transferred Proceeds of another issue or that ceases to be allocable to the issue
pursuant to the universal cap under ss. 1.148-6 of the Regulations) or that
ceases to be subject to the rebate requirement of the Code on a date earlier
than its disposition or redemption date (e.g., an Investment allocated to a
fund initially subject to the rebate requirement of the Code but that
subsequently qualifies as a bona fide debt service fund), the Value of that
Nonpurpose Investment on that date; and (c) for a Nonpurpose Investment that is
held at the end of a computation period, the Value of that Investment at the
end of that period. For purposes of computing Yield on an Investment, Receipts
means amounts to be actually or constructively received from the Investment,
such as earnings and return of principal (including the Value of an Investment).
Receipts on Investments, including Guaranteed Investment Contracts, are
adjusted (reduced) for Qualified Administrative Costs.

 

“RECOMPUTATION EVENT” means a
transfer, waiver, modification or similar transaction of any right that is part
of the terms of the Bonds or a Qualified Hedging Transaction is entered into,
or terminated, in connection with the Bonds.

 

“REGULATION” or “REGULATIONS”
means the temporary, proposed or final Income Tax Regulations promulgated by
the Department of the Treasury and applicable to the Bonds.

 

“RELATED PERSON” means any
person if (a) the relationship to such person would result in a disallowance of
loss under Sections 267 or 707(b) of the Code or (b) such person is a member of
the same controlled group of corporations (as defined in Section 1563(a) of the
Code, except that “more than 50 percent” shall be substituted for “at least 80
percent” each place it appears therein).

 

“REPLACEMENT PROCEEDS” means
amounts which have a sufficiently direct nexus to the Bonds or to the governmental
purpose of the Bonds to conclude that the amounts would have been used for that
governmental purpose if the Proceeds of the Bonds were not used or to be used
for that governmental purpose, as more fully defined in ss. 1.148-1(c) of the
Regulations.

 

9

 

“REVENUE FUND” means the
Revenue Fund established pursuant to the Indenture.

 

“SALE PROCEEDS” means any
amounts actually or constructively received from the sale of the Bonds,
including amounts used to pay underwriters’ discount or compensation or
placement agent’s fee and accrued interest other than Pre-Issuance Accrued
Interest.

 

“SLGS” means United States
Treasury Certificates of Indebtedness, Notes and Bonds State and Local
Government Series.

 

“TAX REGULATORY AGREEMENT”
means this Tax Regulatory Agreement.

 

“TEST-PERIOD BENEFICIARY”
means any person who is an owner or a Principal User of facilities financed by
an issue or issues of tax-exempt obligations issued under the 1954 Code or the
Code during the three-year period beginning on the later of the date such
facilities were placed in service or the date of issuance for such issue or
issues of tax-exempt obligations. For purposes of determining whether a person
is a Test-Period Beneficiary, all persons who are Related Persons shall be
treated as one person.

 

“TRANSFERRED PROCEEDS” means
Proceeds of a refunding issue which become transferred proceeds of a refunding
issue and cease to be Proceeds of a prior issue when Proceeds of the refunding
issue discharge any of the outstanding principal amount of the prior issue. The
amount of Proceeds of the prior issue that become transferred proceeds of the
refunding issue is an amount equal to the Proceeds of the prior issue on the
date of that discharge multiplied by a fraction:

 

(a)
the numerator of which is the principal amount of the prior issue discharged
with Proceeds of the refunding issue on the date of that discharge; and

 

(b)
the denominator of which is the total outstanding principal amount of the prior
issue on the date immediately before the date of that discharge.

 

“UNIVERSAL CAP” means the
Value of all outstanding Bonds.

 

“VALUE” means Value as
determined under ss. 1.148-4(e) of the Regulations for a Bond and Value
determined under ss. 1.148-5(d) of the Regulations for an Investment.

 

“YIELD” means, for purposes
of determining the Yield on the Bonds, the Yield computed under the Economic
Accrual Method using consistently applied compounding intervals of not more
than one year. A short first compounding interval and a short last compounding
interval may be used. Yield is expressed as an annual percentage rate that is
calculated to at least four decimal places (e.g., 5.2525%). Other reasonable,
standard financial conventions, such as the 30 days per month/360 days per year
convention, may be used in computing Yield but must be consistently applied.
The Yield on an issue that would be a Purpose Investment (absent ss.
148(b)(3)(A) of the Code) is equal to the Yield on the conduit financing issue
that financed that Purpose Investment. The Yield on a fixed yield issue is the
discount rate that, when used in computing the present Value as of the issue
date of all unconditionally payable payments of principal, interest and fees
for qualified guarantees on the issue and amounts reasonably expected

 

10

 

to be paid as fees for
qualified guarantees on the issue, produces an amount equal to the present
Value, using the same discount rate, of the aggregate issue price of bonds of
the issue as of the issue date. In the case of obligations purchased or sold at
a substantial discount or premium, the Regulations prescribe certain special
Yield calculation rules. For purposes of determining the Yield on an
Investment, the Yield computed under the Economic Accrual Method, using the
same compounding interval and financial conventions, shall be used to compute
the Yield on the Bonds.

 

The Yield on an Investment
allocated to the Bonds is the discount rate that, when used in computing the
present Value as of the date the Investment is first allocated to the issue of
all unconditionally payable receipts from the Investment, produces an amount
equal to the present Value of all unconditionally payable payments for the
Investment. The Yield on an Investment shall not be adjusted by any hedging
transaction entered into in connection with such Investment unless the Issuer,
the Trustee and the Borrower have received an opinion of Bond Counsel that such
an adjustment is permitted by the Regulations. Yield shall be calculated
separately for each Class of Investments.

 

“YIELD REDUCTION PAYMENT”
means a payment to the United States with respect to an Investment which is
treated as a Payment for that Investment that reduces the Yield on that Investment
in accordance with ss. 1.148-5(c) of the Regulations. Yield Reduction Payments
include Rebate Amounts paid to the United States.

 

“1954 CODE” means the
Internal Revenue Code of 1954, as amended, as in effect on the effective date
of the Code.

 

SECTION 1.02.
RELIANCE ON BORROWER’S INFORMATION. Bond Counsel and the Issuer shall be
permitted to rely upon the contents of any certification, document or
instructions provided pursuant to this Tax Regulatory Agreement and shall not
be responsible or liable in any way for the accuracy of their contents or the
failure of the Borrower to deliver any required information.

 

ARTICLE II

 

CERTAIN REPRESENTATIONS BY THE BORROWER

 

SECTION 2.01.
DESCRIPTION OF THE PROJECT AND DESCRIPTION OF THE FACILITIES. The Borrower
hereby represents and warrants for the benefit of the Issuer, the Trustee and
the registered owners of the Bonds that:

 

(a)
The description of the Project set forth in the preambles hereto and the
description of the Facilities set forth in Exhibit A-2 hereto are true and
accurate.

 

(b)
The Facilities constitute a Manufacturing Facility of roller bearings and
precision components or facilities directly related and ancillary to such
Manufacturing Facility.

 

(c)
The portion of the Facilities which constitutes directly related and ancillary
facilities serves solely the manufacturing portion of the Facilities, is on the
same

 

11

 

site as the manufacturing
portion of the Facilities and is financed with not more than 25% of the net
Proceeds of the Bonds. In addition, with respect to the portion of the
Facilities to be used for offices, not more than a DE MINIMIS amount of the
functions to be performed at such offices is not directly related to day-to-day
operations of the Facilities (e.g., a salesman’s office is not related to
day-to-day operations of the Facilities).

 

(d)
The Facilities were placed in service no earlier than March, 1998.

 

SECTION 2.02.
CAPITAL EXPENDITURES. The Borrower hereby represents and warrants for the
benefit of the Issuer, the Trustee and the registered owners of the Bonds that:

 

(a)
During the period beginning three years before the Date of Issuance and ending
on the Date of Issuance, the aggregate amount of Capital Expenditures
(including any expenditure that was or could have been treated as a Capital
Expenditure under any rule or election under the Code) paid or incurred,
excluding those to be paid or reimbursed with Proceeds of the Bonds, with
respect to (i) facilities located in the incorporated municipality (or
unincorporated county) in which the Facilities are located and (ii) the
Principal User of which was or is the Borrower, any other Principal User of the
Facilities or any Related Person thereto, was $756,407.

 

(b)
During the period beginning on the Date of Issuance and ending on the date
three years after the Date of Issuance, the aggregate amount of Capital
Expenditures (including any expenditure that was or could have been treated as
a Capital Expenditure under any rule or election under the Code) expected to be
incurred, excluding those to be paid or reimbursed with Proceeds of the Bonds,
with respect to (i) facilities located in the incorporated municipality (or unincorporated
county) in which the Facilities are located and (ii) the Principal User of
which was or is the Borrower, any other Principal User of the Facilities or any
Related Person thereto, is anticipated to be $1,500,000.

 

(c)
The amount of capitalized interest to be paid on all financings for the
Facilities excluding that paid from Proceeds of the Bonds is $0. The amount of
capitalized interest to be paid in connection with the Facilities paid from
Proceeds of the Bonds is $0.

 

(d)
The sum of (i) the Capital Expenditures described in paragraph (a) above plus
(ii) the actual Capital Expenditures to be incurred as described in paragraphs
(b) and (c) plus (iii) the aggregate outstanding amount of all $1 million or
$10 million exempt small issues set forth in Section 2.03(a) below plus (iv)
the greater of the Issue Price or the par amount of the Bonds shall not exceed
$10 million.

 

(e)
The information contained in subsections (a), (b), (c) and (d) above, which has
been provided to the Issuer to enable the Issuer to elect to qualify the Bonds
for the $10,000,000 exemption afforded by Section 144(a)(4) of the Code, is
true, accurate and complete. The Issuer hereby elects to issue the Bonds
pursuant to the exemption afforded by Section 144(a)(4) of the Code.

 

12

 

(f)
The Facilities will not be sold, leased or the use otherwise transferred to a
person other than the Borrower, any other Principal User of the Facilities or
any Related Person thereto identified as of the Date of Issuance during the
three-year period ending three years after the Date of Issuance, unless the
Borrower has received an approving opinion of Bond Counsel to the effect that
such sale, lease or transfer will not adversely affect the tax-exempt status of
the Bonds.

 

SECTION 2.03.
PRIOR ISSUES AND $40 MILLION LIMIT. The Borrower hereby represents and warrants
for the benefit of the Issuer, the Trustee and the registered owners of the
Bonds that:

 

(a)
The aggregate face amount of all Prior Issues outstanding as of the Date of
Issuance, the proceeds of which were or will be used to any extent with respect
to facilities located in the incorporated municipality (or unincorporated
county) in which the Facilities are located and the Principal Users of such
facilities are the Borrower, any other Principal User of the Facilities or any
Related Person thereto, is $-0-.

 

(b)
The aggregate face amount of all Prior Issues and all exempt facility bonds,
qualified redevelopment bonds and industrial development bonds as defined in
the 1954 Code or the Code outstanding as of the Date of Issuance, the proceeds
of which were used by or were allocated to the Borrower, any other Principal
User of the Facilities or any Related Person thereto as a Test-Period
Beneficiary is $10,700,000.

 

SECTION 2.04.
FEDERAL TAX RETURN INFORMATION. The Facilities have a SIC Code Number of 2013.
The Borrower files its federal income tax return at the Internal Revenue
Service Center in Andover, Maryland. The federal employer identification number
of the Borrower is 13-3426227.

 

SECTION 2.05.
COMPOSITE ISSUES. The Borrower hereby represents and warrants for the benefit
of the Issuer, the Trustee and the registered owners of the Bonds that:

 

(a)
During the period beginning 15 days prior to the sale date of the Bonds and
ending 15 days thereafter none of the Borrower, any other Principal User of the
Facilities or any Related Person thereto sold, guaranteed, arranged,
participated in, assisted with, borrowed the proceeds of, or leased facilities
financed by obligations issued under Section 103 of the 1954 Code or Section
103 of the Code by any state or local governmental unit or any constituted
authority empowered to issue obligations by or on behalf of any state or local
governmental unit.

 

(b)
During the period commencing on the Date of Issuance and ending 15 days
thereafter, there will be no obligations sold or issued under Section 103 of
the 1954 Code or the Code that are guaranteed by the Borrower, any other
Principal User of the Facilities or any Related Person or which are issued with
the assistance or participation of, or by arrangement with, the Borrower, any
other Principal User of the Facilities or any Related Person without the
written opinion of Bond Counsel to the effect that the issuance of such
obligations will not adversely affect their opinion as to the exclusion from
gross income for federal income tax purposes of interest with respect to the
Bonds.

 

13

 

(c)
Other than the Borrower, any other Principal User of the Facilities or any
Related Person, no person (or Related Person to such other person) has (i)
guaranteed, arranged, participated in, assisted with the issuance of, or paid
any portion of the Costs of Issuance of the Bonds or (ii) provided any property
or any franchise, trademark or trade name (within the meaning of Section 1253
of the Code) which is to be used in connection with the Facilities.

 

SECTION 2.06.
PROHIBITED USES. The Borrower hereby represents and warrants for the benefit of
the Issuer, the Trustee and the registered owners of the Bonds that no portion
of the Proceeds of the Bonds is being used to provide a facility, a purpose of
which is retail food and beverage services, automobile sales or service, or the
provision of recreation or entertainment. No portion of the proceeds of the Bonds
is being used to provide any private or commercial golf course, country club,
health club, massage parlor, tennis club, skating facility (including roller
skating, skateboarding and ice skating), racquet sports facility (including any
handball, squash or racquetball court), hot tub facility, suntan facility,
racetrack, skybox or other luxury box, airplane, store the principal business
of which is the sale of alcoholic beverages for consumption off premises, or
facility used primarily for gambling. No portion of the Proceeds of the Bonds
is being used directly or indirectly to provide residential real property for
single- or multi-family units.

 

SECTION 2.07.
NO COMPOSITE PROJECT. The Borrower hereby represents and warrants for the
benefit of the Issuer, the Trustee and the registered owners of the Bonds that
the Facilities are a stand-alone Manufacturing Facility unconnected to any
other facility and do not share any portion of substantial common facilities
with any other building (other than the Facilities), (b) an enclosed shopping
mall or (c) a strip of offices, stores or warehouses.

 

SECTION 2.08.
ACQUISITION OF EXISTING PROPERTY. The Borrower hereby represents and warrants
for the benefit of the Issuer, the Trustee and the registered owners of the Bonds
that a portion of the Proceeds of the Bonds in the amount of $1,986,000 will be
used to pay the cost of acquisition of real property (other than land or any
interest therein) the first use of which will not be pursuant to the
acquisition with the Proceeds of the Bonds. The Owner will meet the
rehabilitation requirements of Section 147(d)(3) through the rehabilitation and
improvement of the Facilities within the two-year period following the later of
the Date of Issuance or the date the existing property is acquired. An amount
equal to $1,307,137 will be used to accomplish such rehabilitation and
improvement, which amount is greater than the 15% of the amount of Bond
proceeds used to acquire such existing property.

 

SECTION 2.09.
LAND ACQUISITION LIMIT AND NO ACQUISITION OF FARMLAND. The Borrower hereby
represents and warrants for the benefit of the Issuer, the Trustee and the
registered owners of the Bonds that:

 

(a)
The amount of Proceeds of the Bonds expended for land will not exceed $364,000,
which is not greater than 25% of the Proceeds of the Bonds.

 

(b)
No portion of the Proceeds of the Bonds will be used directly or indirectly for
the acquisition of land or any interest therein to be used for the purpose of
farming.

 

14

 

SECTION 2.10.
REPRESENTATIONS BY THE BORROWER FOR PURPOSES OF IRS FORM 8038. Section 149(e)
of the Code requires as a condition to qualification for tax-exemption that the
Issuer provide to the Secretary of the Treasury certain information with
respect to the Bonds and the application of the proceeds derived therefrom. The
following representations of the Borrower will be relied upon by the Issuer and
Bond Counsel in satisfying this information reporting requirement. Accordingly,
the Borrower hereby represents, covenants and warrants to the best of its
knowledge, for the benefit of the Issuer, Bond Counsel and the registered
owners of the Bonds, the truth and accuracy of (c) through (t) below:

 

	
  (a)

  	
   

  	
  Issuer’s employer
  identification number

  	
   

  	
  68-0304653

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (b)

  	
   

  	
  Number of 8038 reports
  previously filed by the Issuer this calendar year

  	
   

  	
  1

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (c)

  	
   

  	
  Issue price of the Bonds

  	
   

  	
  $

  	
  4,800,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (d)

  	
   

  	
  Proceeds used for Accrued
  Interest

  	
   

  	
  $

  	
  0

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (e)

  	
   

  	
  Costs of Issuance
  (including Underwriter’s Discount)

  	
   

  	
  $

  	
  96,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (f)

  	
   

  	
  Reasonably required Reserve
  Fund Deposits

  	
   

  	
  $

  	
  0

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (g)

  	
   

  	
  Proceeds used for Credit
  Enhancement

  	
   

  	
  $

  	
  0

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (h)

  	
   

  	
  Proceeds used to refund
  prior issue

  	
   

  	
  $

  	
  0

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (i)

  	
   

  	
  Nonrefunding Proceeds

  	
   

  	
  $

  	
  4,704,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (j)

  	
   

  	
  Date of final maturity of
  the Bonds

  	
   

  	
  April
  1, 2024

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (k)

  	
   

  	
  Interest Rate on the final
  maturity of the Bonds

  	
   

  	
  VR

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (l)

  	
   

  	
  Issue price of the final
  maturity of the Bonds

  	
   

  	
  $

  	
  4,800,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (m)

  	
   

  	
  Issue price on the entire
  issue of the Bonds

  	
   

  	
  $

  	
  4,800,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (n)

  	
   

  	
  Stated redemption price at
  maturity of the final maturity of the Bonds

  	
   

  	
  $

  	
  4,800,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (o)

  	
   

  	
  Stated redemption price at
  maturity of the entire issue of the Bonds

  	
   

  	
  $

  	
  4,800,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (p)

  	
   

  	
  Weighted average maturity
  of the entire issue of the Bonds

  	
   

  	
  24.92
  years

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (q)

  	
   

  	
  Yield on the entire issue
  of the Bonds

  	
   

  	
  VR

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (r)

  	
   

  	
  Net interest cost for the
  entire issue of the Bonds

  	
   

  	
  VR

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (s)

  	
   

  	
  The Standard Industrial
  Classification Code(s) for the Facilities is

  	
   

  	
  3562

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (t)

  	
   

  	
  Type of Property financed
  by Nonrefunding Proceeds of the Bonds:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  $

  	
  364,000

  	
   

  
	
   

  	
   

  	
  Land

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Buildings

  	
   

  	
  $

  	
  1,986,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Equipment with recovery
  period of more than 5 years

  	
   

  	
  $

  	
  1,046,863

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Equipment with recovery period
  of 5 years or less

  	
   

  	
  $

  	
  0

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Other

  	
   

  	
  $

  	
  1,307,137

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Total

  	
   

  	
  $

  	
  4,704,000

  	
   

  

 

15

 

ARTICLE III

 

USE OF BOND
PROCEEDS

 

SECTION
3.01. ANTICIPATED USE
OF PROCEEDS. The Borrower covenants, represents and warrants for the benefit of
the Issuer, the Trustee and the registered owners of the Bonds that the
Proceeds of the Bonds will be used in the manner set forth in Exhibit A-2
hereto and that the Proceeds of the Bonds will be invested in accordance with
the Investment Instructions.

 

SECTION
3.02. CERTIFICATION AS
TO COSTS OF THE PROJECT. The Borrower hereby certifies, with respect to the
amounts shown in Exhibit A-1, that such amounts consist only of costs which are
directly related to and necessary for the financing of the Project.

 

ARTICLE IV

 

ARBITRAGE

 

SECTION
4.01. ARBITRAGE
REPRESENTATIONS AND ELECTIONS. In connection with the issuance of the Bonds,
the Borrower hereby represents, certifies and warrants as follows:

 

(a)
The Borrower has entered into contracts with third parties for the acquisition,
construction and equipping of the Facilities obligating an expenditure in
excess of 5% of the Net Sale Proceeds of the Bonds and the Borrower will
proceed with due diligence in completing the Facilities and in allocating the
Net Sale Proceeds of the Bonds to such Expenditures.

 

(b)
The Borrower will use a reasonable, Consistently Applied Accounting Method to
account for Gross Proceeds, Investments and Expenditures for the Bonds. The
Borrower shall additionally use a Consistently Applied Accounting Method for
allocating Proceeds of the Bonds to Expenditures, subject to the Current Outlay
of Cash rule.

 

(c)
The Borrower shall not commingle Proceeds of the Bonds with any other funds.

 

16

 

(d)
In connection with the Bonds, there has not been created or established and the
Borrower does not expect that there will be created or established, any sinking
fund, pledged fund or similar fund (other than as specifically identified in
the Indenture), including without limitation any arrangement under which money,
securities or obligations are pledged directly or indirectly to secure the
Bonds or any contract securing the Bonds or any arrangement providing for compensating
or minimum balances to be maintained by the Borrower with any registered owner
or credit enhancer of the Bonds.

 

(e)
The allocation of Net Proceeds of the Bonds to the reimbursement portion of the
costs of the Facilities will be made as of and completed on the Date of
Issuance. The declaration of official intent required by ss. 1.150-2 of the
Regulations with respect to Net Proceeds of the Bonds used to reimburse the
Borrower for certain Capital Expenditures made in connection with the
Facilities is attached hereto as Exhibit D.

 

(f)
The Borrower reasonably expects that 85% of the Net Sale Proceeds of the Bonds
will be used to complete the Facilities within three years of the Date of
Issuance and not more than 50% of the Proceeds of the Bonds will be invested in
Nonpurpose Investments having a substantially guaranteed Yield for four years
or more. The Borrower reasonably expects that the Net Sale Proceeds of the
Bonds deposited to the Project Fund will be expended in accordance with the
schedule contained in the No Arbitrage Certificate executed and delivered by
the Issuer in connection with the issuance and delivery of the Bonds.

 

(g)
All funds and accounts established pursuant to the Indenture will be invested
pursuant to the No Arbitrage Certificate executed by the Issuer on the Date of
Issuance and the Investment Instructions delivered to the Issuer and the
Borrower on the Date of Issuance.

 

(h)
The Borrower will not enter into and will not direct the Trustee to engage in
any Abusive Arbitrage Devises. If the Borrower directs the Trustee to invest
any of the Gross Proceeds in certificates of deposit or pursuant to an
investment contract or a certificate of deposit, the Borrower will obtain and
provide to the Trustee certifications in the form attached hereto as Exhibit B.

 

(i)
The Borrower hereby makes, and the Issuer hereby accepts, the following
elections and other choices pursuant to the Regulations with respect to the
Bonds:

 

(i)
The Borrower elects the bond year stated in the definition of the Bond Year.

 

(ii)
The Borrower elects to avail itself of all unrestricted yield investments
granted in the Regulations for temporary period, reasonably required reserve
fund and minor portion investments.

 

(iii)
The Borrower elects to treat the last day of the fifth Bond Year (March 31,
2004) as the initial Installment Computation Date and the initial rebate
payment date. The Borrower elects to treat the last day of each subsequent
fifth

 

17

 

Bond Year as subsequent
Installment Computation Dates and subsequent rebate payment dates. The Borrower
may change or adjust such dates as permitted by the Regulations.

 

(iv)
With respect to the Universal Cap, the Borrower as of the Date of Issuance does
not expect that the operation of the Universal Cap will result in a reduction
or reallocation of Gross Proceeds of the Bonds and that the Borrower (A) does
not expect to pledge funds (other than those described in the Indenture) to the
payment of the Bonds; (B) expects to expend Sale Proceeds of the Bonds within
the expected temporary periods; and (C) does not expect to retire any of the
Bonds earlier than shown in the Yield computations for the Bonds pursuant to
this Article IV.

 

SECTION
4.02. ARBITRAGE
COMPLIANCE.

 

(a)
The Borrower and the Issuer acknowledge that the continued exclusion of
interest on the Bonds from gross income of the recipients thereof for purposes
of federal income taxation depends, in part, upon compliance with the arbitrage
limitations imposed byss. 148 of the Code, including the rebate requirement
described in Section 4.03 below. The Borrower and the Issuer hereby agree and
covenant that they shall not permit at any time or times any of the Proceeds of
the Bonds or other funds of the Borrower to be used, directly or indirectly, to
acquire any asset or obligation, the acquisition of which would cause the Bonds
to be “arbitrage bonds” for purposes ofss. 148 of the Code. The Borrower
further agrees and covenants that it shall, to the extent that any Proceeds of
the Bonds are invested in any Investment which is not Investment Securities, do
and perform all acts and things necessary in order to ensure that the
requirements ofss. 148 of the Code and the Regulations are met. To the extent
that Proceeds of the Bonds are invested in any Investment which is not an
Investment Security, the Borrower shall retain, at its own expense, a Rebate
Analyst to make such determinations and calculations as may be necessary in
order to ensure that the Borrower takes the actions described in Sections 4.02 through
4.06 hereof with respect to the Investment of Gross Proceeds on deposit in the
funds and accounts established under the Indenture. If the Borrower fails to
retain such a Rebate Analyst, the Issuer shall, upon being notified in writing
of such failure, at the Borrower’s expense, retain such a Rebate Analyst. The
Borrower shall direct the Trustee to make the required transfers and
dispositions described in Sections 4.02, 4.03 and 4.04 hereof, and the Trustee
may rely upon information provided by the Borrower.

 

(b)
The Revenue Fund and the Purchase Fund will be used primarily to achieve a
proper matching of revenues and debt service on the Bonds within each Bond
Year. With respect to the Revenue Fund and the Purchase Fund: (i) to the extent
amounts are deposited therein, the Revenue Fund and the Purchase Fund will be
depleted at least once a year except for a carryover amount not to exceed in
the aggregate the greater of one-twelfth of the principal and interest payments
on the Bonds for the immediately preceding Bond Year or the earnings on the Revenue
Fund and the Purchase Fund for the immediately preceding Bond Year; (ii) any
amounts contributed to the Revenue Fund and the Purchase Fund will be spent
within thirteen (13) months of the

 

18

 

date of such contribution to
pay debt service on the Bonds; and (iii) any amount received from the
investment or reinvestment of moneys held in the Revenue Fund and the Purchase
Fund will be spent within one year of receipt thereof, all in accordance with
the Indenture. To the extent the provisions of this Section 4.2(b) are
satisfied, amounts in the Revenue Fund and the Purchase Fund will be invested
without regard to yield and no rebate calculations will need to be made with
respect to any moneys in the Revenue Fund or the Purchase Fund during any Bond Year.

 

(c)
In general, no rebate calculations will be required with respect to Sale
Proceeds or Investment Proceeds if (i) 100% of expected Gross Proceeds actually
are spent within six (6) months after the Date of Issuance or (ii) at least 15%
of expected Gross Proceeds actually are spent within six (6) months after the
Date of Issuance, at least 60% of expected Gross Proceeds actually are spent
within twelve (12) months after the Date of Issuance, and 100% of actual Gross
Proceeds actually are spent within eighteen (18) months after the Date of Issuance.
The requirement that 100% of actual Gross Proceeds be spent within eighteen
(18) months after the Date of Issuance will be met if at least 95% of Gross
Proceeds is spent within eighteen (18) months and the remainder is held as a
reasonable retainage and such remainder is spent within thirty months after the
Date of Issuance.

 

SECTION 4.03.
CALCULATION OF REBATE AMOUNT.

 

(a)
ss. 148(f) of the Code requires the payment to the United States of the Rebate
Amount. Except as provided below, the Revenue Fund, the Project Fund, the Costs
of Issuance Fund, the Rebate Fund and all other funds or accounts treated as
containing Gross Proceeds, are subject to this rebate requirement.

 

(b)
In accordance with the requirements set out in the Code and pursuant to the
Indenture, the Issuer has created the Rebate Fund, to be held by the Trustee,
in its capacity as Trustee under the Indenture, and used as provided in this
Section.

 

(i)
On or before 25 days following each Computation Date, upon the Borrower’s
written direction, an amount shall be deposited to the Rebate Fund by the
Trustee from source or sources stated in such direction so that the balance of
the Rebate Fund shall equal the aggregate Rebate Amount as of such determination
date.

 

(ii)
Amounts deposited in the Rebate Fund shall be invested in accordance with the
Investment Instructions by the Trustee at the written direction of the
Borrower.

 

(iii)
All money at any time deposited in the Rebate Fund shall be held by the
Trustee, to the extent required by this Tax Regulatory Agreement and the
Indenture, for payment to the United States of America of the Rebate Amount.
All amounts deposited into or on deposit in the Rebate Fund shall be governed
by this Tax Regulatory Agreement.

 

19

 

(iv)
For purposes of crediting amounts to the Rebate Fund or withdrawing amounts
from the Rebate Fund, Nonpurpose Investments shall be valued in the manner
provided in this Article.

 

(c)
In order to meet the rebate requirement of ss. 148(f) of the Code, the Borrower
agrees and covenants to take, or cause to be taken by the Trustee or the Rebate
Analyst described in Section 4.06 hereof, as appropriate, the following
actions:

 

(i)
For each Investment of amounts held with respect to the Bonds in (A) the
Revenue Fund, (B) the Purchase Fund, (C) the Project Fund, (D) the Costs of
Issuance Fund and (E) the Rebate Fund, the Trustee shall record the purchase
date of such Investment, its purchase price, accrued interest due on its
purchase date, its face amount, its coupon rate, its Yield, the frequency of
its interest payment, its disposition price, accrued interest due on its
disposition date and its disposition date. The Rebate Analyst retained by the
Borrower shall determine the Fair Market Value for such Investments and the
Yield thereon as may be required by the Regulations. The Yield for an
Investment shall be calculated by using the method set forth in the
Regulations.

 

(ii)
For each Computation Date specified in paragraph (iii) below, the Rebate
Analyst shall compute the Yield on the Bonds as required by the Regulations
based on the definition of issue price contained in Section 148(h) of the Code
and the Regulations. The Bonds are a variable rate issue and accordingly the
yield on the Bonds cannot be determined at this time. The Yield on the Bonds
shall be calculated by the Rebate Analyst at such time in order to comply with
this Tax Regulatory Agreement and the Regulations based on the definitions of
issue price contained in Section 148(h) of the Code using payments or
prepayments of the principal of, premium, if any, and interest on the Bonds
required by the Regulations. For purposes of this Tax Regulatory Agreement the initial
offering price to the public (not including bond houses and brokers, or similar
persons or organizations acting in the capacity of underwriters or wholesalers)
at which a substantial amount of the Bonds were sold is the Issue Price. Any
reasonable amounts paid for credit enhancement have been and may generally be
treated as interest on the Bonds for purposes of Yield computation to the
extent permitted by the Regulations.

 

(iii)
Subject to the special rules set forth in paragraphs (iv) and (v) below, the
Rebate Analyst shall determine the amount of earnings received on all
Nonpurpose Investments described in paragraph (i) above, for each Computation
Date. In addition, where Nonpurpose Investments are retained by the Trustee
after retirement of the Bonds, any unrealized gains or losses as of the date of
retirement of the Bonds must be taken into account in calculating the earnings on
such Nonpurpose Investments to the extent required by the Regulations.

 

(iv)
In determining the Rebate Amount computed pursuant to this Section, (A) all
earnings on any bona fide debt service fund (including the Revenue Fund and the
Purchase Fund) shall not be taken into account for any

 

20

 

Bond Year during which the
gross earnings of such funds total less than $100,000, (B) the Universal Cap
applicable to the Bonds pursuant to ss. 1.148-6(b)(2) of the Regulations shall be
taken into account, (C) all of the Borrower’s elections and other choices set
forth in Section 4.01 hereof shall be taken into account and (D) all spending
exceptions to rebate met by the Borrower shall be taken into account.

 

(v)
For each Computation Date specified in paragraph (iii) above, the Rebate
Analyst shall calculate for each Investment described in paragraphs (i) and
(iii) above, an amount equal to the earnings which would have been received on such
Investment at an interest rate equal to the Yield on the Bonds as described in
paragraph (ii) above. The method of calculation shall follow that set forth in
the Regulations.

 

(vi)
For each Computation Date, the Rebate Analyst shall determine the amount of
earnings received on all Investments held in the Rebate Fund for the
Computation Date. The method of calculation shall follow that set forth in the
Regulations.

 

(vii)
For each Computation Date, the Rebate Analyst shall calculate the Rebate
Amount, by any appropriate method to be described in the Code and Regulations
applicable or which becomes applicable to the Bonds. The determination of the
Rebate Amount shall account for the amount (to be rounded down to the nearest
multiple of $100) equal to the sum of all amounts determined in paragraph
(iii), all amounts determined in paragraphs (v) and (vi), and less any amount
which has previously been paid to the United States pursuant to Section 4.04
below. The Rebate Analyst shall notify the Trustee of the Rebate Amount.

 

(viii)
If the Rebate Amount exceeds the amount on deposit in the Rebate Fund, the
Borrower shall immediately pay such amount to the Trustee for deposit into the
Rebate Fund.

 

SECTION 4.04.
PAYMENT TO UNITED STATES.

 

(a)
Not later than sixty (60) days after each Installment Computation Date (or such
longer period as may be permitted by the Regulations), the Trustee shall pay to
the United States an amount that, when added to the Future Value as of such
Computation Date of previous rebate payments made for the Bonds, equals at
least ninety percent (90%) of the Rebate Amount required to be on deposit in
the Rebate Fund as of such payment date. No later than sixty (60) days after
the Final Computation Date the Trustee shall pay to the United States an amount
that, when added to the Future Value as of such Computation Date of previous
rebate payments made for the Bonds, equals at least one hundred percent (100%)
of the balance remaining in the Rebate Fund.

 

(b)
The Trustee shall mail each payment of an installment to the Internal Revenue
Service Center, Philadelphia, Pennsylvania 19255. Each payment shall be

 

21

 

accompanied by Internal
Revenue Form 8038-T, and, if necessary, a statement summarizing the
determination of the Rebate Amount.

 

(c)
If on any Computation Date, the aggregate amount earned on Nonpurpose
Investments in which the Gross Proceeds of the Bonds are invested is less than
the amount that would have been earned if the obligations had been invested at
a rate equal to the Yield on the Bonds as determined in Section 4.03 hereof,
such deficit may at the written request of the Borrower be withdrawn from the
Rebate Fund and paid to the Borrower or as the Borrower shall direct. The
Borrower may direct that any overpayment of rebate may be recovered from any
Rebate Amount previously paid to the United States pursuant to ss. 1.148-3(i)
of the Regulations.

 

(d)
The Borrower shall also pay any penalty or interest on underpayments of Rebate
Amount not paid in a timely manner pursuant to this Tax Regulatory Agreement,
the Code and the Regulations.

 

SECTION 4.05.
RECORDKEEPING. In connection with the rebate requirement, the Borrower and the
Trustee shall maintain the following records:

 

(a)
The Borrower and the Trustee shall record all amounts paid to the United States
pursuant to Section 4.04 hereof. The Trustee shall furnish to the Issuer and
the Borrower copies of any materials filed with the Internal Revenue Service
pertaining thereto and shall provide the Issuer and the Borrower with all
records in its possession that the Issuer, the Borrower or the Rebate Analyst
may request relating to the calculation of any Rebate Amount.

 

(b)
The Borrower and the Trustee shall retain records of the rebate calculations
until six years after the retirement of the last obligation of the Bonds.

 

SECTION 4.06.
REBATE ANALYST

 

(a)
To the extent required to comply with the provisions of Section 4.02 hereof,
the Borrower shall appoint a Rebate Analyst and any successor Rebate Analyst
for the Bonds reasonably acceptable to the Issuer, subject to the conditions
set forth in this Section. The Rebate Analyst and each successor Rebate Analyst
shall signify its acceptance of the duties imposed upon it hereunder by a
written instrument of acceptance delivered to the Trustee, the Issuer and the
Borrower under which such Rebate Analyst will agree to discharge its duties
pursuant to this Tax Regulatory Agreement in a manner consistent with prudent industry
practice.

 

(b)
The Rebate Analyst may at any time resign and be discharged of the duties and
obligations created by this Tax Regulatory Agreement by giving notice to the
Trustee, the Issuer and the Borrower. The Rebate Analyst may be removed at any
time by an instrument signed by the Issuer and the Borrower and filed with the
Issuer, the Borrower and the Trustee. The Borrower and the Issuer shall, upon
the resignation or removal of the Rebate Analyst, appoint a successor Rebate
Analyst.

 

22

 

(c)
Each successor Rebate Analyst appointed pursuant to this Section shall be either
a firm of independent accountants or Bond Counsel or another entity experienced
in calculating rebate payments required by ss. 148(f) of the Code.

 

(d)
In order to provide for the administration of the matters pertaining to
arbitrage rebate calculations set forth herein, and in the Investment
Instructions and No Arbitrage Certificate, the Trustee, the Borrower and the
Issuer may provide for the employment of the Rebate Analyst on or prior to
March 31, 2004. The Trustee and the Issuer may rely conclusively upon and shall
be fully protected from all liability in relying upon the opinions,
calculations, determinations, directions and advice of the Rebate Analyst. The
charges and fees for such Rebate Analyst shall be paid by the Borrower upon
presentation of an invoice for services rendered in connection therewith.

 

ARTICLE V

 

COMPLIANCE
WITH CODE

 

In order to ensure that
interest on the Bonds is excludable from the gross income of the recipients
thereof for purposes of federal income taxation, the Borrower hereby represents
and covenants as follows:

 

(a)
The Average Maturity of the Bonds does not exceed 120% of the Average Economic
Life of the Facilities within the meaning of ss. 147(b) of the Code as set
forth in Exhibit C hereto.

 

(b)
The Bonds are not and shall not become directly or indirectly “federally
guaranteed.” Unless otherwise excepted underss. 149(b) of the Code, the Bonds
will be considered “federally guaranteed” if (i) the payment of principal and
interest with respect to the Bonds is guaranteed (in whole or in part) by the
United States (or any agency or instrumentality thereof), (ii) 5% or more of
the Proceeds of the Bonds is (A) to be used in making loans, the payment of
principal or interest with respect to which are to be guaranteed (in whole or
in part) by the United States (or any agency or instrumentality thereof) or (B)
to be invested (directly or indirectly) in federally insured deposits or
accounts or (iii) the payment of principal or interest on the Bonds is
otherwise indirectly guaranteed (in whole or in part) by the United States (or
any agency or instrumentality thereof).

 

(c)
The Borrower will provide to the Issuer all information necessary to enable the
Issuer to complete and file Internal Revenue Forms 8038 and 8038-T pursuant to
ss. 149(e) of the Code.

 

(d)
As required by ss. 147(f) of the Code, the Bonds and the Project were the
subject of a public hearing held on January 28, 1999, which was preceded by
reasonable public notice.

 

(e)
The Borrower will comply with, and make all filings required by, all effective
rules, rulings or regulations promulgated by the Department of the Treasury or

 

23

 

IRS with respect to
obligations described in ss.ss. 103 and 144 of the Code, such as the Bonds.

 

(f)
The Borrower agrees to rebate all amounts required to be rebated to the United
States of America pursuant to ss. 148(f) of the Code. The Borrower agrees to
provide any instructions to the Trustee that are necessary to satisfy the
requirements of ss. 148(f) of the Code. The Borrower will not deposit or
instruct the Trustee to deposit amounts in the Rebate Fund in excess of the
amounts reasonably expected to be needed to make the payments to the United
States as required by ss. 148(f) of the Code.

 

(g)
The Sale Proceeds of the Bonds and any Investment Proceeds will be expended for
the purposes set forth in the Agreement and in the Indenture and no amount of
such Proceeds of the Bonds in excess of 2% of the Sale Proceeds of the Bonds
will be expended to pay the costs of issuing the Bonds within the meaning of
ss. 147(g) of the Code.

 

(h)
The Issuer shall not sell any other tax-exempt obligations within 15 days of
the sale date of the Bonds pursuant to the same plan of financing with the
Bonds and payable from substantially the same source of funds, determined
without regard to qualified guaranties from unrelated parties and used to pay
the Bonds.

 

(i)
The Bonds were approved by the Treasurer of the State of California following
the public hearing referred to in (d) above.

 

ARTICLE VI

 

TERM OF TAX REGULATORY AGREEMENT

 

This Tax Regulatory Agreement
shall be effective from the Date of Issuance through the date that the last
Bond is redeemed, paid or deemed paid pursuant to the terms of the Indenture,
except that the requirements of Section 4.05 hereof shall survive until six
years after the retirement of the last obligations of the Bonds.

 

ARTICLE VII

 

AMENDMENTS

 

Notwithstanding any other
provision hereof, any provision of this Tax Regulatory Agreement may be deleted
or modified at any time at the option of the Borrower, with the consent of the
Issuer, if the Borrower has provided to the Trustee and the Issuer an opinion,
in form and substance satisfactory to the Trustee and the Issuer, of Bond
Counsel that such deletion or modification will not adversely affect the
exclusion of interest on the Bonds from the gross income of the recipients
thereof for purposes of federal income taxation.

 

24

 

ARTICLE VIII

 

EVENTS OF
DEFAULT, REMEDIES

 

SECTION 8.01.
EVENTS OF DEFAULT. The failure of any party to this Tax Regulatory Agreement to
perform any of its required duties under any provision hereof shall constitute
an Event of Default under this Tax Regulatory Agreement and under the
Indenture.

 

SECTION 8.02.
REMEDIES FOR AN EVENT OF DEFAULT. Upon an occurrence of an Event of Default
under Section 8.01 hereof, the Issuer or the Trustee may in their discretion,
proceed to protect and enforce their rights and the rights of the registered
owners of the Bonds by pursuing any available remedy under the Indenture or by
pursuing any other available remedy, including, but not limited to, a suit at
law or in equity.

 

25

 

IN WITNESS WHEREOF, the
Issuer, the Borrower and the Trustee have caused this Tax Regulatory Agreement
to be executed in their respective names and by their proper officers thereunto
duly authorized, all as of the day and year first written above.

 

	
   

  	
  CALIFORNIA INFRASTRUCTURE
  AND

  
	
   

  	
  DEVELOPMENT BANK

  
	
  Attest:

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  Lon S. Hatamiya, Chair

  
	
   

  	
   

  
	
  By

  	
   

  	
   

  	
   

  
	
   

  	
  Blake Fowler, Secretary

  	
   

  
	
   

  	
   

  
	
   

  	
  ROLLER BEARING COMPANY OF
  AMERICA, INC.

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  Authorized Signatory

  
	
   

  	
   

  
	
   

  	
  U.S. BANK TRUST NATIONAL
  ASSOCIATION,

  
	
   

  	
  as Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  Authorized Signatory

  
	
   

  	
   

  
	
   

  	
   

  
	
  [Signature
  Page to Tax Regulatory Agreement]

  
						

 

 

EXHIBIT A-1

 

SOURCES AND USES OF FUNDS

 

1. Amount received from the
sale of the Bonds (exclusive of accrued interest) is as follows:

 

	
  Face amount of the Bonds

  	
   

  	
  $

  	
  4,800,000

  	
   

  
	
  Less: Underwriters’
  discount

  	
   

  	
  $

  	
  0

  	
   

  
	
  Total amount received from
  the sale of the Bonds

  	
   

  	
  $

  	
  4,800,000

  	
   

  

 

2. Proceeds of the Bonds
totaling $4,704,000, representing 100% of the Net Sale Proceeds of the Bonds
after deduction of the amounts described in 3 below will be deposited to the
Project Fund

 

3. $96,000 of the Bond
proceeds will be deposited in the Costs of Issuance Fund to pay a portion of
the Costs of Issuance of the Bonds.

Estimated Use of Substantially all

of the Proceeds of the

Bonds

 

	
  (1)

  	
   

  	
  Issue price
  of Bonds

  	
   

  	
  $

  	
  4,800,000

  	
   

  
	
  (2)

  	
   

  	
  Substantially
  All Factor

  	
   

  	
  .95

  	
  %

  
	
  (3)

  	
   

  	
  Total

  	
   

  	
  $

  	
  4,560,000

  	
   

  
	
  (4)

  	
   

  	
  Amount paid
  for qualified Project Costs* (including interest during construction, if any)

  	
   

  	
  $

  	
  4,704,000

  	
   

  

 

Note:      All investment earnings, if any, on the
Bond proceeds will be used for qualified Project Costs (including interest
during construction, if any).

 

*Qualified Project Costs:

 

	
  Land

  	
   

  	
  $

  	
  364,000

  	
   

  
	
  Building

  	
   

  	
  $

  	
  1,986,000

  	
   

  
	
  Equipment

  	
   

  	
  $

  	
  1,046,863

  	
   

  
	
  Improvements

  	
   

  	
  $

  	
  1,307,137

  	
   

  

 

A-1

 

EXHIBIT A-2

 

PROPERTY FINANCED OR REFINANCED BY THE BONDS

 

1.             Acquisition of the real property located at 3131 West
Segerstrom Avenue, Santa Ana, California 92702 $2,350,000.

 

2.             Rehabilitation of manufacturing facility $1,307,137.

 

3.             Acquisition and installation of manufacturing equipment
$1,046,863.

 

A-2

 

EXHIBIT B-1

 

FORM OF PROVIDER CERTIFICATION

FOR A CERTIFICATE OF DEPOSIT

 

I, [Name], [Position], of
[Entity Providing the Certificate of Deposit] (the “Provider”) HEREBY CERTIFY
that the yield on the Certificate of Deposit entered into on [DATE] is not less
than the highest yield that the Provider publishes or posts for comparable
certificates of deposit offered to the public and that the yield on the
Certificate of Deposit is not less than the yield available on reasonably
comparable direct obligations offered by the United States Treasury.

 

IN WITNESS WHEREOF, I have
hereunto set my hand this    day of                      
19    .

 

	
   

  	
  By

  	
   

  	
   

  
	
   

  	
  Name

  	
   

  	
   

  
	
   

  	
  Title

  	
   

  	
   

  
						

 

B-1

 

EXHIBIT B-2

 

FORM OF PROVIDER CERTIFICATION

FOR AN INVESTMENT CONTRACT

 

I, [Name], [Position], of
[Entity Providing Investment Contract] (the “Provider”) HEREBY CERTIFY in
connection with the Investment Contract between [NAME] and the Provider dated
as of [DATE] (the “Investment Contract”) that the yield on the Investment
Contract is at least equal to the yield offered on reasonably comparable
Investment contracts offered to other persons, if any, from a source of funds
other than gross proceeds of an issue of tax-exempt bonds and that the amount
of administrative costs that are reasonably expected to be paid by the Provider
to third parties in connection with the Investment Contract is
$               .
For purposes of this certification, administrative costs include all brokerage
or selling commissions paid by the Provider to third parties in connection with
the Investment Contract, legal or accounting fees, investment advisory fees,
recordkeeping, safekeeping, custody and other similar costs or expenses.

 

IN WITNESS WHEREOF, I have
hereunto set my hand this      day of                      
19    .

 

	
   

  	
  By

  	
   

  	
   

  
	
   

  	
  Name

  	
   

  	
   

  
	
   

  	
  Title

  	
   

  	
   

  
						

 

B-2

 

EXHIBIT B-3

 

FORM OF BORROWER’S CERTIFICATION FOR AN

 

INVESTMENT CONTRACT INVOLVING THREE BIDS

 

I, [[Name], [Position], of
Roller Bearing Company of America, Inc., a Delaware corporation (the “Borrower”),
HEREBY CERTIFY in connection with the Investment contract between the Borrower
and [Entity Providing Investment Contract] (the “Provider”) dated as of               
         ,             
the “Investment Contract”) that (i) at least three bids on the Investment
Contract were received from persons other than those with a material financial
advantage in the California Infrastructure and Economic Development Bank
Variable Rate Demand Industrial Development Revenue Bonds, Series 1999 (Roller
Bearing Company of America, Inc. - Santa Ana Project), (ii) the yield on the
Investment Contract purchased is at least equal to the yield offered under the
highest bid received from an uninterested party, (iii) the price of the
Investment Contract takes into account as a significant factor the Borrower’s
expected drawdown for the funds to be invested (other than float funds or
reasonably required reserve or replacement funds) and (iv) any collateral
security requirements for the Investment Contract are reasonable.

 

IN WITNESS WHEREOF, I have
hereunto set my hand this        day of                     
19       .

 

	
   

  	
  ROLLER BEARING COMPANY OF

  
	
   

  	
  AMERICA, INC.

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
  Name

  	
   

  	
   

  
	
   

  	
  Title

  	
   

  	
   

  
						

 

B-3

 

EXHIBIT C

 

USEFUL LIFE OF THE PROPERTY FINANCED

OR REFINANCED BY THE BONDS

 

	
   

  	
   

  	
  COST

  	
   

  	
   

  	
   

  	
  USEFUL LIFE*

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Land

  	
   

  	
  $

  	
  364,000

  	
   

  	
  X

  	
   

  	
  n/a

  	
   

  	
   

  	
   

  
	
  Building

  	
   

  	
  1,986,000

  	
   

  	
  X

  	
   

  	
  35

  	
   

  	
  $

  	
  69,510,000

  	
   

  
	
  Equipment

  	
   

  	
  1,046,863

  	
   

  	
  X

  	
   

  	
  10

  	
   

  	
  $

  	
  10,468,630

  	
   

  
	
  Improvements

  	
   

  	
  $

  	
  1,307,137

  	
   

  	
   

  	
   

  	
  20

  	
   

  	
  $

  	
  26,142,740

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  4,704,000

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  106,121,370

  	
   

  
	
  Less:    cost of land

  	
   

  	
  364,000

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  $

  	
  4,340,000

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Average life of Project = $106,121,370 /
  $4,340,000 = 24.45 years.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Useful life of Project for purposes of
  Section 147(b) of the Code = 24.45 years x 1.20 = 29.34 years

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Average life of Bonds =

  	
   

  	
  24.92 years

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

The information contained in
this schedule, attached as an exhibit hereto, setting forth the respective
cost, economic life, ADR midpoint life, if any, under Revenue Procedure 87-56,
1987-42 I.R.B. 4, and Revenue Procedure 83-35, 1983-2 C.B. 745, as supplemented
and amended from time to time, and guideline life, if any, under Revenue
Procedure 62-21, 1962-2 C.B. 118, as supplemented and amended from time to time,
of each asset of the Facilities financed with the Proceeds of the Bonds, is
true, accurate and complete.

 

*Includes time from date of
issuance until property is placed in service.

 

C-1

 

EXHIBIT D

 

DECLARATION OF OFFICIAL INTENT

 

[See Attached]

 

D-1

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