-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, L8nSFPDwn57hpZnPiyLcyEOmPb3wu+ro32ESK8THlnnLCj8oS6o2KtwwYe/csk// y6BfkX6FQh+kmJdavCd8Zw== 0000009548-95-000020.txt : 19951119 0000009548-95-000020.hdr.sgml : 19951119 ACCESSION NUMBER: 0000009548-95-000020 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951113 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BANGOR HYDRO ELECTRIC CO CENTRAL INDEX KEY: 0000009548 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 010024370 STATE OF INCORPORATION: ME FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10922 FILM NUMBER: 95589920 BUSINESS ADDRESS: STREET 1: 33 STATE ST CITY: BANGOR STATE: ME ZIP: 04401 BUSINESS PHONE: 2079455621 MAIL ADDRESS: STREET 1: PO BOX 932 CITY: BANGOR STATE: ME ZIP: 04401 10-Q 1 3RD QUARTER 10Q DOCUMENT/BANGOR HYDRO-ELECTRIC CO. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended September 30, 1995 Commission File No. 0-505 ------------------ ----- BANGOR HYDRO-ELECTRIC COMPANY ----------------------------------------------------- (Exact Name of Registrant as specified in its Charter Maine 01-0024370 - ------------------------------- -------------------- (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 33 State Street, Bangor, Maine 04401 - ---------------------------------------- ---------- (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, including Area Code 207-945-5621 ------------ None - ------------------------------------------------------------------------ Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report Outstanding Common Stock, $5 Par Value - 7,284,903 Shares September 30, 1995 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1995 PART I - FINANCIAL INFORMATION PAGE ---- Cover Page 1 Index 2 Consolidated Statements of Income 3 Management's Discussion and Analysis of Financial Statements 4 Consolidated Balance Sheets - September 30, 1995 and December 31, 1994 15 Consolidated Statements of Capitalization 17 Consolidated Statements of Cash Flows 18 Consolidated Statements of Retained Earnings 19 Notes to the Consolidated Financial Statements 20 PART II - OTHER INFORMATION 30 Item 6 - Exhibits and Reports on Form 8-K 31 Signature Page 32 BANGOR HYDRO-ELECTRIC COMPANY CONSOLIDATED STATEMENTS OF INCOME 000's Omitted Except Per Share Amounts (Unaudited) 3 Months Ended 9 Months Ended Sept. 30, Sept. 30 Sept. 30, Sept. 30, 1995 1994 1995 1994 ---------- -------- ---------- ---------- ELECTRIC OPERATING REVENUES $46,025 $42,575 $ 137,982 $ 128,614 ---------- -------- ---------- ---------- OPERATING EXPENSES: Fuel for generation $16,128 $20,076 $ 65,329 $ 65,464 Purchased power 2,495 3,882 12,843 10,448 Other operation and maintenance 11,078 7,341 26,467 25,315 Depreciation and amortization 1,808 1,357 5,164 3,950 Amortization of Seabrook Nuclear Unit 424 424 1,274 1,274 Amortization of costs to terminate purchased power contracts 5,190 972 7,133 2,267 Taxes - Property and payroll 1,167 1,125 3,636 3,493 State income (65) 297 (110) 394 Federal income 262 1,512 1,266 2,834 ---------- -------- ---------- ---------- $38,487 $36,986 $ 123,002 $ 115,439 ---------- -------- ---------- ---------- OPERATING INCOME $ 7,538 $ 5,589 $ 14,980 $ 13,175 ---------- -------- ---------- ---------- OTHER INCOME AND (DEDUCTIONS): Allowance for equity funds used during construction $ 108 $ 248 $ 462 $ 1,013 Other, net of applicable income taxes 302 52 183 35 ---------- -------- ---------- ---------- $ 410 $ 300 $ 645 $ 1,048 ---------- -------- ---------- ---------- INCOME BEFORE INTEREST EXPENSE $ 7,948 $ 5,889 $ 15,625 $ 14,223 ---------- -------- ---------- ---------- INTEREST EXPENSE: Long-term debt $ 6,150 $ 2,675 $ 11,462 $ 8,089 Other 1,149 363 2,259 1,075 Allowance for borrowed funds used during construction (179) (221) (521) (1,116) ---------- -------- ---------- ---------- $ 7,120 $ 2,817 $ 13,200 $ 8,048 ---------- -------- ---------- ---------- NET INCOME $ 828 $ 3,072 $ 2,425 $ 6,175 DIVIDENDS ON PREFERRED STOCK 450 413 1,276 1,239 ---------- -------- ---------- ---------- EARNINGS APPLICABLE TO COMMON STOCK $ 378 $ 2,659 $ 1,149 $ 4,936 ========== ======== ========== ========== WEIGHTED AVERAGE NUMBER OF SHARES 7,281 7,151 7,253 6,870 ========== ======== ========== ========== EARNINGS PER COMMON SHARE, based on the weighted average number of shares outstanding during the period $ .05 $ .37 $ .16 $ .72 ========== ======== ========== ========== DIVIDENDS DECLARED PER COMMON SHARE $ .18 $ .33 $ .69 $ .99 ========== ======== ========== ========== See notes to the consolidated financial statements. BANGOR HYDRO-ELECTRIC COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Management's Discussion and Analysis of the Results of Operations and Financial Condition contained in Bangor Hydro-Electric Company's (the "Company") Annual Report on Form 10-K for the year ended December 31, 1994 ("1994 Form 10-K") should be read in conjunction with the comments below. EARNINGS The quarter ended September 30, 1995 resulted in earnings of $.05 per common share, compared to earnings of $.37 per common share for the quarter ended September 30, 1994. The difference in earnings is principally attributable to recording the cost of an early retirement and involuntary severance program in September 1995, amounting to a onetime, noncash charge to operations of $2.3 million or $.32 per common share(net of income taxes), as well as the impact of incurring higher costs for power to replace the Company's share of Maine Yankee's output (see the discussion of Maine Yankee below). The 1995 earnings per share number is based on a greater number of common shares outstanding than in 1994. IMPORTANT CURRENT ACTIVITIES COST REDUCTIONS - As mentioned above, the Company recorded the costs associated with an early retirement and involuntary severance program in the third quarter of 1995. The program has resulted in approximately another 10% reduction in the Company's workforce. Although this program will result in future cost savings, accounting guidelines require that the Company record the cost of the downsizing program in the period in which it was implemented. MAINE YANKEE - The Company has a 7% equity investment in the Maine Yankee nuclear generating plant, which has been a low cost source of power since it came on line in the early 1970's. As reported in the first two quarters of 1995, when the plant shut down for refueling earlier this year, inspections resulted in discovering that the steam generator tubes were degrading and would require extensive repair. After a thorough evaluation, in May it was determined to resleeve all of the tubes in all three steam generators. The cost of this repair is estimated at $40 million, of which the Company is responsible for 7%. The resleeving costs are offset to some extent by O&M savings at Maine Yankee, due to various cost cutting measures being implemented by the Company while the plant is nonoperational. Repairs are essentially completed, and the plant is anticipated to be operational by the end of 1995. In addition, the Company is incurring replacement power costs of approximately $800,000 per month while the plant is off-line. ACQUISITION OF WHOLESALE CUSTOMER - On October 26, 1995, the Company acquired the assets and service territory of its largest full requirements wholesale customer for a purchase price of approximately $2.4 million. The customer had annual retail revenues of approximately $1 million and served approximately 1,800 customers. REVENUES The $3.45 million increase in total electric operating revenues was attributable to an overall 9.8% increase in total (kilowatt hour) KWH sales in the third quarter of 1995 as compared to 1994. The majority of this increase is related to special contracts which the Company has entered into with three large industrial customers. KWH sales to these customers increased 41.2% in the quarter ended September 30, 1995 versus the comparable 1994 quarter, resulting in associated revenues increasing $1.9 million. KWH sales for other customer classes increased by 1.3% in the third quarter of 1995 as compared to 1994. Increased revenues in the 1995 period were also affected by the elimination of seasonal rates for certain customers in March 1995. EXPENSES The significant decrease in fuel for generation expense is related to the buyback of the high cost non-utility generator purchased power contracts on June 30, 1995, which eliminated fuel expense in the third quarter of 1995 for this non-utility generator (1994 comparable expense was $7.2 million); the amortization of $252,000 in deferred fuel revenue related to overcollections from customers under the fuel cost adjustment (FCA) (the Company is amortizing the overcollected balance of $3.03 million as of January 1, 1995 over a three year period); and certain purchased power costs which are no longer reclassified to fuel for generation, due to the elimination of the FCA (See below). These decreases are offset to some extent by the elimination of the FCA in the first quarter of 1995, when the Company began recording, as expense, the actual cost of fuel for generation. Previously the Company had been permitted to adjust its rates retroactively for changes in these costs. Also in the third quarter of 1995, the incremental cost of Maine Yankee replacement power was $2.2 million. The significant decrease in purchased power expense is a result of lower operating costs at Maine Yankee while the plant is nonoperational, as well as the Company recording no amortization of Maine Yankee refueling costs until the plant is back on-line (anticipated to be at the end of 1995). The Company in a prior rate case was allowed to normalize the cost of the Maine Yankee refueling over a 19 month period, to match the refueling cycle. The refueling cycle will not begin until the plant is operational again. At September 30, 1995, the $2.4 million balance in deferred purchased power costs is related to unamortized Maine Yankee refueling costs. The $3.7 million increase in other O&M expense in the second quarter of 1995 was primarily a result of the previously mentioned early retirement and involuntary severance program, which resulted in a $3.9 million charge to other O&M in the third quarter of 1995. Also in the third quarter of 1995 bad debt expense increased by $428,000, due to higher levels of bad debt write-offs. These increases were offset by a $243,000 decrease in O&M payroll as compared to 1994. The decreased payroll expense was a function of lower employee levels in the 1995 period as compared to 1994 due to the workforce reduction in the third quarter of 1995, as well as higher levels of capital labor in the 1995 quarter. Also reducing O&M expense in the 1995 quarter was a $392,000 reduction in active employee medical expenses. The increase in depreciation and amortization expense was due to an increase in depreciable property, as well as an increase in the composite depreciation rate from 3.0% to 3.2%, resulting from a depreciation study conducted by the Company. The increase in amortization of costs to terminate purchased power contracts was a result of the Company amortizing over a ten year period, starting in July 1995, the costs to terminate the purchased power contract which occurred in June 1995, amounting to monthly amortization of $1.4 million. The increase in property and other taxes in the third quarter of 1995 was due principally to greater property taxes, which was a result of increased property levels and property tax rates. These increases were offset by reduced payroll taxes, as a result of lower employee levels in 1995 as compared to 1994. The decrease in income taxes was primarily a function of lower earnings in the third quarter of 1995. Allowance for funds used during construction (AFDC) decreased in 1995 relative to 1994 primarily due to decreased construction levels in the 1995 period. Other income, net, increased in the 1995 quarter due principally to $345,000 of interest income earned on the debt service reserve fund set aside in connection with the June 30, 1995 purchased power contracts buyback financing with the Finance Authority of Maine (FAME). Long-term debt interest expense increased $3.5 million in the third quarter of 1995 as compared to 1994 due to $186 million of borrowings on June 30, 1995 to finance the purchased power contracts buyback. The increase was offset by the impact of required and optional sinking fund payments on the Company's 12.25% first mortgage bonds. Other interest expense, which is composed primarily of interest expense on short term borrowings, increased due to higher interest rates as well as a $17.9 million increase in weighted average short term borrowings outstanding in the 1995 quarter as compared to 1994. The increased borrowings were a result of the need for additional sources of financing for the purchased power contracts buyback in June. NINE MONTHS OF 1995 VERSUS NINE MONTHS OF 1994 REVENUES The $9.4 million increase in total electric operating revenues was attributable to the 15.9% base rate increase effective March 1, 1994, the previously mentioned elimination of seasonal rates for certain customers, an overall 4.3% increase in KWH sales in the 1995 period as compared to 1994, and an increase in off-system sales of $798,000 in 1995. The majority of the KWH sales increase is related to the previously discussed special contract customers. KWH sales to these customers increased 22.5% in the 1995 period as compared to 1994, resulting in associated revenues increasing $4.3 million. KWH sales for other customer classes decreased by .5% in the 1995 period as compared to 1994. EXPENSES The decrease in fuel for generation expenses in the 1995 period as compared to 1994 is due principally to the same factors as noted for the third quarter of 1995 versus the 1994 quarter. The increase in purchased power expense is attributable to accruing the Company's estimated total share of the Maine Yankee resleeving project costs at June 30, 1995 (see the prior discussion on Maine Yankee). This increase was offset by the same items as noted for the third quarter of 1995 versus the third quarter of 1994. The increase in other O&M in 1995 was primarily a result of the early retirement and involuntary severance program in the third quarter of 1995, as well as a $907,000 increase in bad debt expense in the 1995 period. These increases were offset by the early retirement program implemented in the first quarter of 1994, which resulted in a $2.8 million charge to operations in 1994. Also, as a result of the corresponding reduction in employee levels related to the 1994 and 1995 workforce reductions, O&M payroll expense was $1.2 million lower in the 1995 period as compared to 1994. The reasons for the increases in depreciation and amortization expense, as well as property and payroll taxes for the 1995 period as compared to 1994 are consistent with those previously discussed. Effective March 1, 1994, the Company began amortizing deferred costs associated with the Beaver Wood Joint Venture (Beaver Wood) purchased power contract termination over a nine year period, amounting to $323,863 per month. Effective July 1, 1995, the Company began amortizing deferred costs associated with the most recent purchased power contracts termination over a ten year period, amounting to $1,406,036 on a monthly basis. Consequently amortization expense in 1995 was $4.6 million greater than the same 1994 period. The decrease in income taxes was primarily a function of lower earnings in the 1995 period as compared to 1994. AFDC decreased in 1995 relative to 1994 primarily because the Company ceased accruing carrying costs associated with the Beaver Wood purchased power contract buyout when recovery was authorized by the Maine Public Utilities Commission on March 1, 1994. The decrease was also a function of lower levels of construction in the 1995 period. The increase in long-term debt interest expense in the 1995 period as compared to 1994 was due to the previously mentioned reasons. Other interest expense increased principally due to higher interest rates as well as a $7.6 million increase in weighted average short term borrowings outstanding in the 1995 period as compared to 1994. LIQUIDITY AND CAPITAL RESOURCES The Consolidated Statements of Cash Flows reflect events in the first nine months of 1995 and 1994 as they affect the Company's liquidity. Net cash used in operations was $173.5 million for the period ended September 30, 1995. In June 1995 the Company expended $196.5 million related to the purchased power contracts buyback ($168.7 million) and related financing costs ($27.8 million). These financing costs included debt issuance costs ($2.2 million), funding of the debt service reserve fund ($21.2 million), and collateral pledged on the Company's letter of credit associated with its Pollution Control Revenue Bonds ($4.4 million). Upon establishment of a new letter of credit, the $4.4 million in collateral was released to the Company in the third quarter of 1995. The receipt of these funds is reflected in the statements of cash flows in other, net and was utilized to paydown outstanding short-term debt. Exclusive of the costs to buyback the purchased power contracts, which were entirely debt financed (see below), cash flows provided by operations were $23.1 million for the nine months ended September 30, 1995 as compared to $21.8 million for the comparable 1994 period. With the elimination of the purchased power contracts, the Company incurred no costs related to the contracts in the period from July 1995 through September 1995, while in the comparable 1994 period, the Company incurred approximately $7.2 million in costs under the contracts. Another component of the increase in cash flows from operations is the reduction in payroll costs in 1995 as compared to 1994. Due principally to the reduction in the workforce through the early retirement plans in 1994 and 1995, labor costs were approximately $686,000 lower in the 1995 period as compared to 1994. Also enhancing cash flows from operations in 1995 as compared to 1994 is Company contributions to the defined benefit pension plans. For the nine months ended September 30, 1994 the Company had contributed approximately $1.2 million to the non-bargaining unit plan, while in the 1995 period, with the merging of the bargaining unit and non-bargaining unit plans, no contributions have been required. This is due to the overfunded status of the bargaining unit plan prior to the merger. These enhancements to cash flows from operations have been offset to some extent by the additional costs incurred in 1995 to replace the Company's share of Maine Yankee's output. These additional fuel costs have amounted to $6.6 million for the period from February through September 1995 period. Due to efforts by the Company to control costs and enhance cash flows in 1995, construction expenditures have been reduced by $2.2 million in the 1995 period as compared to 1994. As discussed in the 10-Q for the second quarter of 1995, the Company reduced its quarterly dividend on common stock by $.15 from the prior quarterly level of $.33 per share, effective for the quarter ending June 30, 1995. This reduction has improved cash flows through a $1.1 million decrease in common dividend payments for the 1995 period. The Company in each period made regular and optional sinking fund payments on its 12.25% first mortgage bonds. Under the Company's Dividend Reinvestment and Common Stock Purchase Plan the Company realized a common stock investment of $1.0 million through the issuance of 99,760 new common shares in 1995 as compared to $998,000 in the comparable 1994 period through the issue of 63,764 shares. The purchased power contracts buyback costs in June 1995 were financed through the issuance of $126 million of FAME revenue notes and $60 million of medium term notes. Additional short-term borrowings were also made in the 1995 period under the Company's revolving credit agreement to finance this transaction. In connection with the $60 million of medium term notes, the Company was required to enter into a transaction to cap or fix the rate of interest within 120 days of June 30, 1995. In August 1995, the Company entered into an agreement with three banks to cap the interest rate at 7.25%, with the cost to cap the interest rate amounting to $624,000. These costs are being amortized over the life of the term loan on a straight-line basis. As discussed in the 10-Q for the second quarter of 1995, effective June 30, 1995, the Company entered into a Credit Agreement with a group of seven banks providing a revolving credit facility in the initial amount of $55 million. The revolving credit facility has a term of five years. With the completion of the purchased contract buyback in the second quarter of 1995, the Company expects minimal financing needs for the forseeable future. BANGOR HYDRO-ELECTRIC COMPANY CONSOLIDATED BALANCE SHEETS 000's Omitted (Unaudited) ASSETS Sept. 30, Dec. 31, 1995 1994 ---------- ---------- INVESTMENT IN UTILITY PLANT: Electric plant in service, at original cost $ 293,779 $ 274,830 Less - Accumulated depreciation and amortization 81,006 75,667 ---------- ---------- $ 212,773 $ 199,163 Construction in progress 18,596 23,929 ---------- ---------- $ 231,369 $ 223,092 Investments in corporate joint ventures: Maine Yankee Atomic Power Company $ 4,754 $ 4,754 Maine Electric Power Company, Inc. 125 125 ---------- ----------- $ 236,248 $ 227,971 ---------- ---------- FUNDS HELD BY TRUSTEE, principally at cost $ 21,541 $ - ---------- ---------- OTHER INVESTMENTS, principally at cost $ 4,156 $ 3,482 ---------- ---------- CURRENT ASSETS: Cash and cash equivalents $ 3,605 $ 1,956 Accounts receivable, net of reserve 18,479 19,130 Unbilled revenue receivable 7,302 8,611 Inventories, at average cost: Material and supplies 2,939 2,992 Fuel oil 464 435 Prepaid expenses 1,231 1,681 Deferred purchased power costs 2,419 235 Current deferred income taxes 1,094 ---------- ---------- Total current assets $ 36,439 $ 36,134 ---------- ---------- DEFERRED CHARGES: Investment in Seabrook Nuclear Project, net of accumulated amortization of $24,651 in 1995 and $23,377 in 1994 $ 34,191 $ 35,465 Costs to terminate purchased power contracts 197,330 36,739 Deferred regulatory asset 30,076 33,537 Prepaid pension costs 2,082 Demand-side management costs 2,115 2,684 Other 5,683 3,156 ---------- ---------- Total deferred charges $ 269,395 $ 113,663 ---------- ---------- Total assets $ 567,779 $ 381,250 ========== ========== See notes to the consolidated financial statements. BANGOR HYDRO-ELECTRIC COMPANY CONSOLIDATED BALANCE SHEETS 000's Omitted (Unaudited) Sept. 30, Dec. 31, STOCKHOLDERS' INVESTMENT AND LIABILITIES 1995 1994 --------- --------- CAPITALIZATION: Common stock investment $ 102,812 $ 105,658 Preferred stock 4,734 4,734 Preferred stock subject to mandatory redemption, less current sinking fund requirements 13,832 13,740 Long-term debt, net of current portion 288,075 116,367 ---------- ---------- Total capitalization $ 409,453 $ 240,499 ---------- ---------- CURRENT LIABILITIES: Notes payable - banks $ 38,000 $ 27,000 ---------- ---------- Other current liabilities - Current portion of long-term debt and sinking fund requirements on preferred stock $ 15,146 $ 2,961 Accounts payable 9,658 14,669 Dividends payable 1,706 2,766 Accrued interest 6,158 3,650 Customers' deposits 356 288 Deferred fuel revenue 2,269 3,025 Income taxes payable 966 ---------- ---------- Total other current liabilities $ 35,293 $ 28,325 ---------- ---------- Total current liabilities $ 73,293 $ 55,325 ---------- ---------- DEFERRED CREDITS AND RESERVES: Deferred income taxes - Seabrook $ 17,770 $ 18,434 Other accumulated deferred income taxes 48,871 50,084 Deferred regulatory liability 8,647 9,222 Unamortized investment tax credits 2,282 2,415 Accrued pension cost 672 Other 6,791 5,271 ---------- ---------- Total deferred credits and reserves $ 85,033 $ 85,426 ---------- ---------- Total Stockholders' Investment and Liabilities $ 567,779 $ 381,250 ========== ========== See notes to the consolidated financial statements. BANGOR HYDRO-ELECTRIC COMPANY CONSOLIDATED STATEMENTS OF CAPITALIZATION 000's Omitted (Unaudited) Sept. 30, Dec. 31, 1995 1994 ---------------------- COMMON STOCK INVESTMENT Common stock, par value $5 per share- $ 36,425 $ 35,926 Authorized -- 10,000,000 shares Outstanding -- 7,284,903 shares in 1995 and 7,131,385 in 1994 Amounts paid in excess of par value 56,486 55,974 Retained earnings 9,901 13,758 ---------------------- Total common stock investment $ 102,812 $ 105,658 ---------------------- PREFERRED STOCK-Non participating, cumulative- Par value $100 per share, authorized 600,000 shares Not redeemable or redeemable soley at the option of the issuer- 7%, Noncallable, 25,000 shares, authorized and outstanding $ 2,500 $ 2,500 4.25%, Callable at $100, 4,840 shares, authorized and outstanding 484 484 4%, Series A, Callable at $110, 17,500 shares, authorized and outstanding 1,750 1,750 ---------------------- $ 4,734 $ 4,734 ---------------------- 8.76%, Subject to mandatory redemption requirements- Callable at 105.63% if called on or prior to December 27, 1995, 150,000 shares authorized and outstanding $ 15,332 $ 15,240 Less: Current sinking fund requirements 1,500 1,500 ---------------------- $ 13,832 $ 13,740 ---------------------- LONG-TERM DEBT First Mortgage Bonds- 6.75% Series due 1998 $ 2,500 $ 2,500 10.25% Series due 2019 15,000 15,000 10.25% Series due 2020 30,000 30,000 8.98% Series due 2022 20,000 20,000 7.38% Series due 2002 20,000 20,000 7.30% Series due 2003 15,000 15,000 12.25% Series due 2001 9,021 11,128 ---------------------- $ 111,521 $ 113,628 Less: Current portion 1,646 1,461 ---------------------- Total first mortgage bonds $ 109,875 $ 112,167 ---------------------- Variable rate demand pollution control revenue bonds Series 1983 due 2009 $ 4,200 $ 4,200 ---------------------- Other Long-Term Debt- Finance Authority of Maine - Taxable Electric Rate Stabilization Revenue Notes, 7.03% Series 1995A, due 2005 $ 126,000 $ - ---------------------- Medium Term Notes, Variable interest rate- LIBOR plus 2%, due 2000 $ 60,000 $ - Less: Current portion 12,000 - ---------------------- $ 48,000 $ - ---------------------- Total long-term debt $ 288,075 $ 116,367 ---------------------- Total Capitalization $ 409,453 $ 240,499 ====================== See notes to the consolidated financial statements. BANGOR HYDRO-ELECTRIC COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 000's Omitted (Unaudited) 1995 1994 --------- -------- CASH FLOWS FROM OPERATIONS: NET INCOME $ 2,425 $ 6,175 Adjustments to reconcile net income to net cash (used in) provided by operations: Depreciation and amortization 5,164 3,950 Amortization of Seabrook Nuclear Project 1,274 1,274 Costs to terminate purchased power contract (196,698) -- Amortization of costs to terminate purchased power contracts 7,133 2,267 Payment received related purchased power contract termination 1,000 1,000 Cost of early retirement and involuntary severance plan 3,836 2,801 Base rate case amortizations included in operation and maintenance 864 705 Allowance for equity funds used during construction (462) (1,013) Deferred income tax provision 1,304 3,407 Deferred investment tax credits (133) (134) Changes in assets and liabilities: Deferred fuel revenue and purchased power (2,940) 2,261 Receivables, net and unbilled revenue 1,960 2,043 Prepaid pension costs -- (1,113) Accounts payable (5,011) (3,258) Accrued interest 2,508 (1,268) Current and deferred income taxes (220) -- Accrued pension costs 205 -- Accrued postretirement benefit costs 570 620 Other current assets and liabilities, net 542 823 Other, net 3,192 1,239 ----------- ---------- Net Cash (Used in) Provided By Operations $ (173,487) $ 21,779 ----------- ---------- CASH FLOWS FROM INVESTING: Construction expenditures $ (12,997) $ (15,198) Allowance for borrowed funds used during construction (521) (1,116) ----------- ---------- Net Cash (Used in) Investing $ (13,518) $ (16,314) ----------- ---------- CASH FLOWS FROM FINANCING: Dividends on preferred stock $ (1,185) $ (1,185) Dividends on common stock (6,065) (6,754) Payments on long-term debt (2,107) (2,595) Issuances of common stock: Public offering 867,500 shares in 1994 -- 14,084 Dividend reinvestment plan (99,760 shares in 1995 and 63,764 in 1994) 1,011 998 Issuances of long-term debt 186,000 -- Short-term debt, net 11,000 (11,000) ----------- ---------- Net Cash Provided By (Used in) Financing $ 188,654 $ (6,452) ----------- ---------- NET CHANGE IN CASH AND CASH EQUIVALENTS $ 1,649 $ (987) CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 1,956 2,387 ----------- ---------- CASH AND CASH EQUIVALENTS - END OF NINE MONTHS $ 3,605 $ 1,400 =========== ========== CASH PAID DURING THE NINE MONTHS FOR: INTEREST (Net of Amount Capitalized) $ 10,000 $ 8,089 INCOME TAXES 277 -- =========== ========== See notes to the consolidated financial statements. BANGOR HYDRO-ELECTRIC COMPANY CONSOLIDATED STATEMENTS OF RETAINED EARNINGS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 000's Omitted (Unaudited) 1995 1994 ----------- ----------- BALANCE AT JANUARY 1 $ 13,758 $ 17,386 ADD - NET INCOME 2,425 6,175 ----------- ----------- $ 16,183 $ 23,561 ----------- ----------- DEDUCT: Dividends - Preferred stock $ 1,185 $ 1,185 Common stock 5,005 7,062 Other 92 54 ----------- ----------- $ 6,282 $ 8,301 ----------- ----------- BALANCE AT SEPTEMBER 30 $ 9,901 $ 15,260 ========== ========== See notes to the consolidated financial statements. BANGOR HYDRO-ELECTRIC COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1995 (Unaudited) (1) BASIS OF PRESENTATION AND ACCOUNTING POLICIES: Certain information and footnote disclosures, normally included in financial statements prepared in accordance with generally accepted accounting principles, have been condensed or omitted in this Form 10-Q pursuant to the Rules and Regulations of the Securities and Exchange Commission. However, in the opinion of Bangor Hydro-Electric Company, the disclosures contained in this Form 10-Q are adequate to make the information presented not misleading. The year end condensed balance sheet data was derived from audited financial statements but does not include all disclosures required by generally accepted accounting principles. These statements should be read in conjunction with the consolidated financial statements and the notes thereto and all other information included in the 1994 Form 10-K. In the opinion of the Company, the accompanying unaudited consolidated financial statements reflect all adjustments, including normal recurring accruals, necessary to present fairly the financial position as of September 30, 1995 and the results of operations and cash flows for the periods ended September 30, 1995 and 1994. The Company's significant accounting policies are described in the Notes to the Consolidated Financial Statements included in its 1994 Form 10-K filed with the Securities and Exchange Commission. For interim reporting purposes, the Company follows these same basic accounting policies but considers each interim period as an integral part of an annual period. Accordingly, certain expenses are allocated to interim periods based upon estimates of such expenses for the year. (2) INCOME TAXES: The following table reconciles a provision calculated by multiplying income before federal income taxes by the statutory federal income tax rate to the provisions for federal income taxes: NINE MONTHS ENDED SEPT.30, 1995 1994 AMOUNT % AMOUNT % (Dollars in Thousands) Federal income tax provision at statutory rate $1,268 34% $3,212 34% Plus(less)permanent differences in tax expense resulting from statutory exclusions from taxable income 14 - (323) 4 ------- --- ------- --- Federal income tax provision before effect of temporary differences $1,282 34% $2,889 30% Plus(less) temporary differences that are flowed through for ratemaking and accounting purposes 99 3 (20) - ------- --- ------- --- Federal income tax provision $1,381 37% $2,869 30% ======= === ======= === (3) INVESTMENT IN JOINTLY OWNED FACILITIES: Condensed financial information for Maine Yankee Atomic Power Company ("Maine Yankee"), Maine Electric Power Company, Inc. ("MEPCO"), Bangor- Pacific Hydro Associates ("BPHA") and Chester SVC Partnership ("Chester") is as follows: MAINE YANKEE MEPCO ----------------- ----------------- (Dollars in Thousands) (Unaudited) Operations for Nine Months Ended ------------------------------------- Sept.30, Sept.30, Sept.30, Sept.30, 1995 1994 1995 1994 -------- -------- -------- -------- OPERATIONS: As reported by investee- Operating revenues $156,722 $128,496 $41,650 $17,572 ======== ======== ======= ======= Earnings applicable to common stock $ 5,254 $ 5,283 $ 79 $ 79 ======== ======== ======= ======= Company's reported equity- Equity in net income $ 368 $ 370 $ 11 $ 11 Deduct-Effect of adjusting Company's estimate to actual - (14) - - -------- -------- ------- ------- Amounts reported by Company $ 368 $ 356 $ 11 $ 11 ======== ======== ======= ======= MAINE YANKEE MEPCO --------------- ----------------- (Dollars in Thousands) (Unaudited) Financial Position at Sept.30, Dec. 31, Sept.30, Dec. 31, 1995 1994 1995 1994 -------- -------- -------- -------- FINANCIAL POSITION: As reported by investee- Total assets $563,809 $549,910 $ 6,446 $ 6,563 Less- Preferred stock 18,600 19,200 - - Long-term debt 98,999 118,666 870 1,730 Other liabilities and deferred credits 375,137 344,550 4,698 3,955 -------- -------- -------- ------- Net assets $ 71,073 $ 67,494 $ 878 $ 878 ======== ======== ======== ======= Company's reported equity - Equity in net assets $ 4,975 $ 4,725 $ 125 $ 125 (Deduct)add- Effect of adjusting Company's estimate to actual (221) 29 - - --------- -------- -------- ------- Amounts reported by Company $ 4,754 $ 4,754 $ 125 $ 125 ========= ======== ======== ======= BPHA Chester ----------------- ----------------- (Dollars in Thousands) (Unaudited) Operations for Nine Months Ended ------------------------------------- Sept 30, Sept 30, Sept 30, Sept 30, 1995 1994 1995 1994 -------- -------- -------- -------- OPERATIONS: As reported by investee- Operating revenues $ 5,453 $ 5,222 $ 3,729 $ 3,910 ======= ======== ======= ======= Net Income $ 1,520 $ 820 $ - $ - ======= ======== ======= ======= Company's reported equity in net income $ 760 $ 410 $ - $ - ======= ======== ======= ======= Financial Position at Sept 30, Dec. 31, Sept 30, Dec. 31, 1995 1994 1995 1994 -------- -------- -------- -------- FINANCIAL POSITION: As reported by investee- Total assets $ 40,898 $ 41,789 $ 30,361 $31,325 Less- Long-term debt 33,075 34,950 28,499 29,387 Other liabilities 2,201 2,477 1,862 1,938 -------- -------- -------- ------- Net assets $ 5,622 $ 4,362 $ - $ - ======== ======== ======== ======= Company's reported equity in net assets $ 2,811 $ 2,181 $ - $ - ======== ======== ======== ======= (4) ALTERNATIVE MARKETING PLAN: With the Maine Public Utilities Commission's (MPUC) order on February 14, 1995, approving many aspects of the Company's Alternative Marketing Plan (AMP) proposal, the fuel adjustment clause and deferred fuel accounting were eliminated effective January 1, 1995. Consequently, in the first quarter of 1995, base and fuel cost adjustment (FCA) rates were combined into one overall rate, and the associated revenues have been reflected as Electric Operating Revenues. As of January 1, 1995, the Company's collections under the FCA had exceeded its costs by approximately $3.03 million. The MPUC allowed the Company to retain the overcollection and ordered that the amount be amortized over a period of three years beginning January 1, 1995. (5) MAINE YANKEE OUTAGE: The Company has a 7% equity investment in the Maine Yankee nuclear generating plant, which has been a low cost source of power since it came on line in the early 1970's. As reported in the first quarter of 1995, when the plant shut down for refueling earlier this year, inspections resulted in discovering that the steam generator tubes were degrading and would require extensive repair. After a thorough evaluation, in May it was determined to resleeve all of the tubes in all three steam generators. The cost of this repair is estimated at $40 million, of which the Company is responsible for 7%. The Company accrued for its estimated share of the resleeving project costs as of June 30, 1995. The resleeving costs are offset to some extent by O&M savings at Maine Yankee, due to various cost cutting measures by the Company while the plant is nonoperational. Repairs are essentially completed, and the plant is anticipated to be operational by the end of 1995. In addition, the Company is incurring replacement power costs of approximately $800,000 per month while the plant is off-line. (6) BUYBACK OF PURCHASED POWER CONTRACTS: As discussed in the first quarter, earlier in 1995 the Company negotiated agreements to "buy back" its high-cost commitment to purchase power from two identical non-utility generating plants. The transaction, valued at approximately $170 million, was completed on June 30, 1995. Under AMP the buyback costs have been deferred and recorded as a regulatory asset, to be amortized and collected over a ten year period, beginning July 1, 1995. The buyback was financed entirely with new debt instruments. The Company entered into a loan agreement with the Finance Authority of Maine (FAME), which issued and sold $126 million of revenue notes, bearing interest at a rate of 7.03%, which the Company is obliged to repay. Of that amount, $105 million was made available to the Company to fund a portion of the buyback transaction, and approximately $21 million has been set aside in a debt service reserve fund which, absent the Company's default, will be used to pay the final installments of principal and interest on the notes at maturity in 2005. In order to secure the FAME notes, the Company executed a new General and Refunding Mortgage Indenture and Deed of Trust establishing a second mortgage on the Company's property, and issued bonds to FAME under the new mortgage in the amount of $126 million. The remainder of the buyback was financed by a new credit agreement with a group of seven banks. The credit agreement consists of a revolving credit facility in the initial amount of $55 million and a term loan in the amount of $60 million. The revolving credit facility replaces the Company's short-term credit facilities that existed prior to the closing of this transaction, has a term of five years, and also provides for the issuance of a letter of credit required to support $4.2 million of the Company's Pollution Control Revenue Bonds. To secure the existing letter of credit related to the Pollution Control Revenue Bonds, until the new letter of credit could be issued, the Company deposited approximately $4.4 million of the proceeds from this financing with a third party trustee. These funds were released to the Company upon the issuance of the new letter of credit in August 1995. The term loan, used to finance a portion of the buyback, also has a five year term and requires annual principal payments of $12 million beginning in June 1996. Borrowings under the credit agreement are at variable rates, but the interest rate on the term loan was required to be fixed or capped within 120 days of the closing. In August 1995, the Company entered into agreements with three banks to cap the interest rate at 7.25%, with the cost to cap the interest rate amounting to $624,000. These costs are being amortized over the life of the term loan on a straight-line basis. The Company issued $115 million of non-interest bearing First Mortgage Bonds as security for the credit agreement. The debt instruments executed in connection with this financing contain a number of covenants and restrictions that the Company believes to be usual and customary for such a transaction, including a limitation on the aggregate amount of indebtedness the Company may incur and restrictions on the payment of dividends. (7) EARLY RETIREMENT AND INVOLUNTARY SEVERANCE PROGRAM: In the third quarter of 1995 the Company implemented an early retirement and involuntary severance plan, which resulted in approximately a 10% reduction in the Company's workforce. The cost of the program, amounting to $3.9 million, was charged to other operation and maintenance expense in the third quarter of 1995. (8) RECLASSIFICATIONS: Certain 1994 amounts have been reclassified to conform with the presentation used in Form 10-Q for the quarter ended September 30, 1995. BANGOR HYDRO-ELECTRIC COMPANY FORM 10-Q FOR PERIOD ENDING SEPTEMBER 30, 1995 PART II ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K EXHIBITS - Exhibit 4.1 Loan Agreement by and between Finance Authority of Maine and Bangor Hydro-Electric Company. Exhibit 4.2 Credit Agreement Dated as of June 30, 1995 among Bangor Hydro- Electric Company, the banks named therein, Chemical Bank, as Administrative Agent and Fleet Bank of Maine and the First National Bank of Boston, as Co- Agents. Exhibit 4.3 Purchase Contract dated as of June 28, 1995 among the Finance Authority of Maine and Bangor Hydro-Electric Company and Prudential Securities Incorporated. Exhibit 4.4 General and Refunding Mortgage Indenture and Deed of Trust - Bangor Hydro-Electric Company to Chemical Bank, As Trustee Dated as of June 1, 1995. Exhibit 4.5 Supplemental Indenture Dated as of June 15, 1995 to General and Refunding Mortgage Indenture and Deed of Trust dated as of June 1, 1995 (Bangor Hydro-Electric Company to Chemical Bank). Exhibit 4.6 Supplemental Indenture Dated as of June 29, 1995 to Mortgage and Deed of Trust dated as of July 1, 1936 (Bangor Hydro-Electric Company to Citibank, N.A. As Trustee). Exhibit 10.1 Purchase agreement between Babcock-Ultrapower Jonesboro and Bangor Hydro-Electric Company. Exhibit 10.2 Purchase agreement between Babcock-Ultrapower West Enfield and Bangor Hydro-Electric Company. REPORTS ON FORM 8-K No reports on Form 8-K were filed during the quarter for which this report is submitted. BANGOR HYDRO-ELECTRIC COMPANY FORM 10-Q FOR PERIOD ENDED SEPTEMBER 30, 1995 The information furnished in this report reflects all adjustments which are, in the opinion of management, necessary to a fair statement of the results for the interim period. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BANGOR HYDRO-ELECTRIC COMPANY (Registrant) /s/ Frederick S. Samp Dated: November 10, 1995 ______________________________ Frederick S. Samp Vice President - Finance & Law (Chief Financial Officer) EX-27 2 FINANCIAL DATA SCHEDULE/BANGOR HYDRO ELECTRIC CO.
UT This schedule contains summary financial information extracted from Bangor Hydro-Electric Company's Form 10-Q for the third quarter of 1995 and is qualified in its entirety by reference to such Form 10-Q. 0000009548 BANGOR HYDRO-ELECTRIC COMPANY 1000 9-MOS DEC-31-1995 SEP-30-1995 PER-BOOK 212,773 49,172 36,439 269,395 0 567,779 36,425 56,486 9,901 102,812 13,832 4,734 288,075 0 38,000 0 13,646 1,500 0 0 105,180 567,779 137,982 1,156 121,846 123,002 14,980 645 15,625 13,200 2,425 1,276 1,149 5,005 16,245 (173,487) .16 .16
EX-4 3 EXHIBIT 4.1 LOAN AGREEMENT by and between FINANCE AUTHORITY OF MAINE and BANGOR HYDRO-ELECTRIC COMPANY relating to the $126,000,000 FINANCE AUTHORITY OF MAINE TAXABLE ELECTRIC RATE STABILIZATION REVENUE NOTES SERIES 1995A (BANGOR HYDRO-ELECTRIC COMPANY) DATED AS OF JUNE 1, 1995 LOAN AGREEMENT This Loan Agreement, dated as of June 1, 1995, is entered into by and between the FINANCE AUTHORITY OF MAINE, a public body politic and corporate and a duly created and validly existing agency of the State of Maine, and BANGOR HYDRO-ELECTRIC COMPANY, a corporation organized and existing under the laws of the State of Maine. WHEREAS, the Act authorizes the Authority to issue revenue obligation securities to assist in financing eligible projects within the State and to provide credit enhancement by establishing capital reserve funds to secure the payment of principal and interest on such securities; and WHEREAS, the Borrower proposes to undertake an eligible project consisting of the Project, which has been approved by the Authority; and WHEREAS, the Authority has issued its revenue obligation securities referred to as Taxable Electric Rate Stabilization Revenue Notes Series 1995A (Bangor Hydro-Electric Company), which Notes are not a debt or liability of the Authority, the State or any municipality therein or any political subdivision thereof, or a pledge of the faith and credit of the State or any political subdivision thereof, but are limited obligations of the Authority payable solely out of the Trust Estate; and WHEREAS, the Authority has issued a conditional Financing Commitment to the Borrower, pursuant to which the Authority agreed to use a portion of Note proceeds to fund the Loan to the Borrower in the original principal amount of $105,000,000; and WHEREAS, the Authority has issued the Notes in the amount of $126,000,000 in part for the purpose of funding the Loan, the remainder of the Notes to be used to establish a Capital Reserve Fund; and WHEREAS, the Borrower has agreed to accept the Loan of a portion of the proceeds of the Notes, evidenced by the Second Mortgage Bonds, under the terms and conditions set forth herein; and WHEREAS, the Borrower acknowledges that the Authority is providing partial financing for the Project from a portion of the proceeds of the sale of the Notes in accordance with the purposes of the Act, that the accomplishment of these purposes is dependent upon compliance of the Borrower with its covenants contained in this Agreement, and that the Project is in furtherance of a public purpose. W I T N E S S E T H: IN CONSIDERATION of the respective representations and agreements hereinafter contained, the parties hereto agree as follows (provided that in the performance of the agreements of the Authority herein contained, any obligation it may hereby incur for the payment of money shall not create a pecuniary liability or a charge against the general credit of the Authority or the general credit or taxing powers of the State or any municipality therein or political subdivision thereof, but shall be payable solely out of the Trust Estate). ARTICLE I DEFINITIONS AND RULES OF CONSTRUCTION SECTION 1.1 DEFINITIONS. All words and terms defined in the Indenture shall have the same meanings in this Loan Agreement, unless otherwise specifically defined herein. In addition, the following words and terms as used in this Loan Agreement, including the preambles hereto, shall have the following meanings unless some other meaning is plainly intended: "ACT" means the Finance Authority of Maine Act: Title 10, Chapter 110, Maine Revised Statutes, as amended. "ADDITIONAL COVENANTS" shall mean those covenants, warranties, representations and agreements set forth in Exhibit A hereto. "ADDITIONAL PAYMENTS" means the amounts required to be paid by the Borrower pursuant to the provisions of the Second Mortgage Bonds and Section 4.3 hereof. "AGREEMENT" or "LOAN AGREEMENT" means this Loan Agreement between the Authority and the Borrower, as the same may be amended or supplemented from time to time. "AUTHORITY" OR "ISSUER" means the FINANCE AUTHORITY OF MAINE, a body corporate and politic and a public instrumentality of the State, duly organized and existing under the laws of the State, and any body, board, authority, agency or other political subdivision or instrumentality of the State which shall hereafter succeed to the powers, duties and functions thereof. "AUTHORITY DOCUMENTS" means, collectively, those Financing Documents executed by the Authority. "AUTHORIZED BORROWER REPRESENTATIVE" means the person at the time designated to act on behalf of the Borrower by written certificate furnished to the Authority and the Trustee containing the specimen signature of such person and signed on behalf of the Borrower by its President, any of its Vice Presidents, its Secretary, or its Treasurer. Such certificate may designate one or more alternate representatives. "AUTHORIZED ISSUER REPRESENTATIVE" means the Chairperson, Vice- Chairperson, Chief Executive Officer, General Counsel, Deputy General Counsel, Director of Finance or Director of Business Development. "BORROWER" means Bangor Hydro-Electric Company, a corporation organized and existing under the laws of the State of Maine, its permitted successors and assigns, and any surviving, resulting or transferee corporation permitted under this Loan Agreement. "BORROWER DOCUMENTS" means, collectively, all documents and agreements executed and delivered by the Borrower as security for or in connection with the issuance of the Notes, including those Financing Documents executed by the Borrower. "BORROWER INDENTURE" means, together, that certain General and Refunding Mortgage Indenture and Deed of Trust, dated as of June 1, 1995, between the Borrower and Chemical Bank, and the Supplemental Indenture between the Borrower and Chemical Bank, as trustee, supplemental thereto, each as heretofore from time to time or at any time supplemented, modified or amended by supplemental indentures. "BORROWER'S CONTRIBUTION" means the amount of at least $68,000,000, which amount may be part of the proceeds of a loan (other than the Loan) to the Borrower from a Person not affiliated with the Borrower. "CAPITAL RESERVE NOTE PORTION" means the $21,191,940 in aggregate principal amount of the Notes, the proceeds of which are to be deposited in the Capital Reserve Fund, and which Notes shall be the latest maturing $21,191,940 Principal Balance of Outstanding Notes. "CAPITAL RESERVE FEE" means that annual fee, which shall be payable by the Borrower to the Authority, initially established in an amount equal to fifteen basis points (.15%) of the outstanding Loan balance, which amount may be changed from time to time by written agreement between the Authority and the Borrower. The Capital Reserve Fee shall be paid upon funding of the Loan and on each annual anniversary thereof. "CONTRACTS" means, collectively, the power purchase contracts between the Borrower and Babcock-Ultrapower West Enfield in the Town of West Enfield, Maine and between the Borrower and Babcock-Ultrapower Jonesboro in the Town of Jonesboro, Maine. "EVENT OF DEFAULT" means any of the events described as an Event of Default in Section 8.1 hereof. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, including the regulations promulgated thereunder, from time to time. "FINANCING DOCUMENTS" means the Borrower Indenture, the Second Mortgage Bonds and this Loan Agreement. "INDEBTEDNESS" means, as to the Borrower or any Subsidiary, at a particular time, (a) all indebtedness for borrowed money of, or guaranteed by, the Borrower or such Subsidiary, (b) all indebtedness for borrowed money secured by any Lien on any property owned by the Borrower or any Subsidiary, even though the Borrower or such Subsidiary has not assumed or become liable for the payment thereof, (c) obligations of the Borrower or any Subsidiary under leases which the Borrower or such Subsidiary has or should have, in accordance with generally accepted accounting principles, capitalized, (d) all obligations owed by the Borrower or any Subsidiary for all or any portion of the deferred purchase price of property or services which the Borrower or such Subsidiary has or should have, in accordance with generally accepted accounting principles, capitalized, and (e) all obligations of the Borrower or any Subsidiary incurred in connection with any letter of credit or note insurance policy with respect to which the issuer thereof has made any payment or disbursement. "INDENTURE" means the Trust Indenture of even date herewith between the Authority and the Trustee pursuant to which the Notes will be issued and all of the Authority's interest in this Agreement (except Unassigned Issuer's Rights unless otherwise specifically provided herein) will be assigned and pledged as security for the payment of principal of and interest on the Notes. "LOAN" means the loan by the Issuer to the Borrower of the proceeds of sale of the Project Note Portion. "LOAN PAYMENTS" means the amounts required to be paid by the Borrower in repayment of the Loan pursuant to the provisions of the Second Mortgage Bonds and Sections 4.1 and 4.2 hereof. "LOAN PURPOSES" means the Project. "PERSON" or "PERSON" means and includes any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, or government or any agency or political subdivision thereof. "PLEDGED REVENUES" means all payments, revenues, and receipts derived from this Agreement other than (i) payment of fees, taxes, and other governmental charges, indemnification and attorneys' fees, and other expenses pursuant hereto, and (ii) Unassigned Issuer's Rights, and (iii) Shared Rights, except that with respect thereto rights of enforcement may be exercised by the Trustee either jointly or severally with the Issuer and rights to consent to the modification thereof or to waive compliance therewith may be exercised by the Trustee jointly with the Issuer but not severally. "PROJECT" means the Borrower's electric rate stabilization project involving the buy back of the Contracts. "PROJECT COSTS" means all costs, fees, and expenses attributable to the Project, including, but not limited to, all costs of issuance of the Notes, and all other costs, fees and expenses payable or reimbursable to the Authority pursuant to the Inducement Agreement (Taxable Bond) dated as of May 1, 1995, between the Authority and the Borrower. "PROJECT NOTE PORTION" means, subject to adjustment pursuant to Section 3.1 hereof, the $104,808,060 in aggregate principal amount of the Notes the proceeds of which are to be lent to the Borrower for the Project, which Notes shall be the Notes other than the Capital Reserve Note Portion. "REPAYMENT INSTALLMENT" means any amount that the Borrower is required to pay directly to the Trustee pursuant to Section 4.2(c) of this Agreement as a repayment of the Loan, which amount is determined in accordance with Section 4.2(c) hereof. "SECOND MORTGAGE BONDS" means the General and Refunding Mortgage Bonds, Series A, of the Borrower issued in accordance with Section 4.2 of this Agreement and secured under the Borrower Indenture. "SHARED RIGHTS" means all of the rights of the Issuer to enforce and consent to the modification of or waiver of compliance with the Second Mortgage Bonds. "SIGNIFICANT SUBSIDIARY" means, at the time any determination thereof is to be made, any Subsidiary which, as of the end of the next preceding fiscal quarter, had assets, revenues or net worth which comprised not less than 15% of the total assets, revenues or net worth, as the case may be, of the Borrower and its Subsidiaries taken as a whole as of the end of such quarter. "SUBSIDIARY" means a corporation of which the Borrower and/or its or their other Subsidiaries own, directly or indirectly, such number of outstanding shares as have more than 50% of the ordinary voting power for the election of directors. "UNASSIGNED ISSUER'S RIGHTS" means all of the rights of the Issuer (a) to enforce and consent to the modification of or waiver of compliance with, the conditions and covenants of the Borrower referred to in Sections 6.7, 6.11 and 7.1 hereof; (b) to receive Additional Payments under the Second Mortgage Bonds and Section 4.3 hereof; (c) under Section 6.2 hereof; (d) under Section 6.5 hereof; (e) to give or withhold consent to amendments, changes, modifications, alterations and termination of this Agreement under Section 9.6 hereof and in the definition of Capital Reserve Fee contained in Section 1.1 hereof; and (f) to receive notices hereunder, and in each such case any corresponding rights under the Second Mortgage Bonds. Unassigned Issuer's Rights does not include any rights of the Trustee under the foregoing Sections and provisions, including but not limited to its right to receive Additional Payments under the Second Mortgage Bonds and Section 4.3(b) hereof. SECTION 1.2 RULES OF CONSTRUCTION. (a) Words of the masculine gender shall be deemed and construed to include correlative words of the feminine and neuter genders. Unless the context shall otherwise indicate, the words "Note," "owner," "Noteholder," and "person" or "Person" shall include the plural as well as the singular number. (b) The Table of Contents, captions, and headings in this Loan Agreement are for convenience only and in no way limit the scope or intent of any provision or section of this Loan Agreement. (c) All references herein to particular articles or sections are references to articles or sections of this Loan Agreement unless some other reference is indicated. (d) All references herein to the Act or any particular provision or section thereof shall be deemed to refer to any successor, or successor provision or section, thereof, as the case may be. (e) Nothing contained in this Agreement or any of the Financing Documents or otherwise shall be construed to cause the Borrower to become the agent for the Authority or the Trustee for any purpose whatsoever, nor shall the Authority or the Trustee be regarded as an agent for the Borrower unless specifically so provided, or be responsible for any shortage, discrepancy, damage, loss or destruction of any part of the Project wherever located or for whatever cause. (f) All approvals, consents and acceptances required to be given or made by any person or party hereunder shall be at the sole discretion of the party whose approval, consent or acceptance is required. (g) This Agreement shall be governed by and construed in accordance with the applicable laws of the State. (h) If any portion of any provision of the Agreement shall be ruled invalid by any court of competent jurisdiction, the invalidity or such portion shall not affect the remainder of such provision or any of the remaining provisions hereof. (i) Any reference to any person shall be deemed to include the heirs, personal representatives, successors and assigns (of the Borrower, only to the extent permitted hereunder, or otherwise permitted in writing by the Authority) of such person, unless the context clearly indicates otherwise. (j) Any reference to a period of days shall be deemed to mean a period of calendar days, unless Business Days are specified. (k) Any references herein or in the Financing Documents to any of the Financing Documents, the Indenture or the Notes shall be deemed to include any amendments, modifications, supplements, replacements, substitutions, allonges, appendices, attachments, exhibits and schedules thereto or therefor, now existing or hereafter created. ARTICLE II REPRESENTATIONS AND UNDERTAKINGS SECTION 2.1 REPRESENTATIONS BY THE AUTHORITY. The Authority makes the following representations as the basis for the undertakings on its part herein contained: (a) The Authority is a public body politic and corporate and a duly created and validly existing agency of the State and is authorized and empowered by the provisions of the Act to enter into the transactions contemplated by the Authority Documents and the Notes. The Project constitutes and will constitute an "eligible project" within the meaning of the Act. By proper action by the Authority, the Authority has been duly authorized to execute and deliver this Agreement and the Indenture, to issue and deliver the Notes and to use the proceeds thereof to provide funds for the Project; (b) The Authority has taken all action and has complied with all provisions of law, including without limitation the Act, with respect to the execution, delivery and performance of the Authority Documents and the Notes and the due authorization of the consummation of the transactions contemplated hereby and thereby, and the taking of any and all actions as may be required on the part of the Authority to carry out, give effect to and consummate such transaction; and the Authority Documents and the Notes have been duly executed and delivered by, and constitute the legal, valid, and binding agreements or obligations of, the Authority, enforceable in accordance with their respective terms, except as enforcement may be limited by applicable bankruptcy, insolvency, moratorium or other similar laws affecting creditors' rights or the enforcement thereof and by general principles of equity; and (c) The execution and delivery of the Authority Documents and the Notes, the consummation of the transactions contemplated hereby and thereby, and the fulfillment of or compliance with the terms hereof and thereof do not and will not conflict with or constitute on the part of the Authority a violation of, breach of, or default under any constitutional provision or statute or any agreement or instrument to which the Authority is a party or by which the Authority is bound, or any order, rule, regulation or ordinance of any court or governmental agency or body having jurisdiction over the Authority or any of its activities or property; and all consents, approvals, authorizations and orders of governmental or regulatory authorities, if any, which are required for the consummation of the transactions contemplated in the Financing Documents and the Notes have been obtained. SECTION 2.2 REPRESENTATIONS BY THE BORROWER. The Borrower makes the following representations as the basis for the undertakings on its part herein contained: (a) The Borrower is a corporation duly incorporated and validly existing under the laws of the State, is in good standing under the laws of the State and has the power to enter into and perform the transactions contemplated by the Borrower Documents; (b) By proper corporate action, the Borrower has duly authorized the execution and delivery of the Borrower Documents and the consummation of the transactions contemplated hereby and thereby, and the taking of any and all actions as may be required on the part of the Borrower to carry out, give effect to and consummate such transactions; and the Borrower Documents have been duly executed and delivered by, and constitute legal, valid, and binding agreements of, the Borrower, enforceable in accordance with their respective terms, except as enforcement may be limited by applicable bankruptcy, insolvency, moratorium or other similar laws affecting creditors' rights or the enforcement thereof and by general principles of equity; (c) The Borrower certifies that the Project Costs will be not less than $172,000,000; (d) The execution and delivery of the Borrower Documents, the consummation of the transactions contemplated hereby and thereby, and the fulfillment of or compliance with the terms and conditions of the Borrower Documents do not (i) conflict with or result in a breach of any of the terms, conditions, or provisions of its corporate charter, its bylaws or any agreement or instrument to which the Borrower is now a party or by which it is bound, (ii) constitute a default under any of the foregoing, (iii) except as contemplated hereby, result in the creation or imposition of any lien, charge, or encumbrance of any nature whatsoever upon any of the property or assets of the Borrower under the terms of any instrument or agreement to which the Borrower is now a party or by which it is bound, or (iv) violate any provision of law or any regulation applicable to the Borrower or any applicable writ or decree of any court or governmental authority having jurisdiction over the Borrower or any of its activities or property; and (e) The Borrower consents to the references to it in the Preliminary Confidential Private Placement Memorandum dated June 19, 1995 and the Confidential Private Placement Memorandum dated June 28, 1995 relating to the Notes. With respect to the Borrower, the Preliminary Confidential Private Placement Memorandum did not as of its date, and the Confidential Private Placement Memorandum did not as of its date and will not as of the date of delivery of the Notes to the initial purchasers thereof, contain (or incorporate by reference) an untrue statement of a material fact or omit to state (or incorporate by reference) a material fact necessary to make the statements therein (or incorporated by reference), in light of the circumstances under which they were made, not misleading. ARTICLE III THE PROJECT; ISSUANCE OF THE NOTES; PROJECT FUND SECTION 3.1 AGREEMENT TO COMPLETE THE PROJECT. The Borrower agrees that it will exercise due diligence to complete, or cause to be completed, the Project as promptly as practicable after receipt by the Trustee of proceeds from the sale of the Notes. Upon the deposit by the Authority in the Project Fund of the proceeds of the Project Note Portion, the Borrower will pay at least $68,000,000 of Project Costs with the Borrower's Contribution and furnish the Authority with evidence acceptable to the Authority of such payment. In the event that the Project Costs are less than $172,000,000, the Project Note Portion shall be reduced by the amount that the Project Costs are less than $172,000,000. SECTION 3.2 AGREEMENT TO ISSUE THE NOTES; APPLICATION OF NOTE PROCEEDS. In order to provide the Borrower, by way of a loan, with funds for the payment of a portion of the Project Costs, the Authority agrees that it will sell and cause to be delivered to the purchasers thereof the Notes in the aggregate principal amount of $126,000,000 and will thereupon deposit in the Note Fund the premium, if any, received on the sale of the Notes, deposit in the Project Fund $103,913,460 of the proceeds received from said sale (subject to reduction pursuant to Section 3.1), and deposit in the Capital Reserve Fund the balance of the proceeds received from said sale, but in the case of the latter deposit no less than $21,191,940. SECTION 3.3 DISBURSEMENTS FROM THE PROJECT FUND. Moneys in the Project Fund shall be disbursed and used for the payment of the Project Costs in accordance with the provisions of the Indenture. SECTION 3.4 BORROWER REQUIRED TO PAY COSTS IN EVENT PROJECT FUND INSUFFICIENT. In the event the moneys in the Project Fund available for payment of the Project Costs shall not be sufficient to pay such costs in full, the Borrower agrees to complete, or cause to be completed, the Project and to pay, or cause to be paid, all that portion of the Project Costs as may be in excess of the moneys available therefor in the Project Fund; provided that in any event, the Borrower shall pay at least $68,000,000 of the Project Costs by the Borrower's Contribution. The Authority does not make any warranty, either express or implied, that the moneys which will be paid into the Project Fund and which, under the provisions of this Agreement, will be available for payment of the Project Costs, will be sufficient to pay all the costs which have been or will be incurred in that connection. The Borrower agrees that if, notwithstanding the exhaustion of the moneys in the Project Fund, it shall not have been fully reimbursed for the Project Costs, it shall not be entitled to any reimbursement therefor from the Authority or from the Trustee or from the Holders of any of the Notes, nor shall it be entitled to any postponement, abatement, or diminution of the payments required by this Agreement. The obligation of the Borrower to complete, or cause to be completed, the Project shall survive any termination of this Agreement. SECTION 3.5 AUTHORIZED BORROWER REPRESENTATIVE AND SUCCESSORS. The Borrower shall designate, in the manner prescribed in Section 1.1 hereof, the Authorized Borrower Representative. In the event that any person so designated and his alternate or alternates, if any, should become unavailable or unable to take any action or make any certificate provided for or required in this Agreement, a successor shall be appointed in the same manner. ARTICLE IV EFFECTIVE DATE AND DURATION OF THIS AGREEMENT; REPAYMENT PROVISIONS; AND UNCONDITIONAL OBLIGATION OF THE BORROWER SECTION 4.1 EFFECTIVE DATE AND DURATION OF THIS AGREEMENT. This Agreement and the covenants of the Borrower hereunder shall become effective upon its delivery, and shall continue in full force and effect until the principal of and interest on the Notes, together with all sums to which the Authority or the Trustee are entitled hereunder, shall have been fully paid (or provision for such payment has been made in accordance with the provisions of the Indenture); provided, however, that the Borrower's obligations under Sections 4.3 (but only to the extent such obligations have vested prior to termination) and 6.5 hereof shall survive termination of this Agreement. SECTION 4.2 LOAN CLAUSES; SECOND MORTGAGE BONDS. (a) Subject to the conditions and in accordance with the terms and provisions of this Agreement, the Authority agrees to lend to the Borrower the Project Note Portion of the proceeds received from the sale of the Notes, which amount has been set aside from the proceeds of the sale of the Notes in accordance with the Indenture and with this Agreement. (b) To evidence, secure and provide for the repayment of the Loan, and to evidence, secure and provide for the payment of Additional Payments, the Borrower hereby and concurrently herewith delivers to the Authority its Second Mortgage Bonds, of like principal amount, maturity date and interest rate as the Notes and providing for the Additional Payments thereunder. The Second Mortgage Bonds are not subject to redemption prior to maturity unless the Trustee has advised the trustee under the Borrower Indenture that the principal amount of the Notes then Outstanding has been declared due and payable pursuant to Section 7.03 of the Indenture. The Borrower agrees to repay the Loan and pay the Additional Payments in accordance with the terms of the Second Mortgage Bonds, this Agreement and all other Financing Documents. The originally scheduled Loan principal payments are shown on Exhibit C hereto. (c) The Borrower acknowledges receipt of a copy of the Indenture. The Borrower agrees to make the payments required by this subsection (c) (to the extent such payments are not timely provided for by the payment of principal of and interest on the Second Mortgage Bonds) as Repayment Installments on the Loan. The Borrower agrees to pay, or cause to be paid, as a Repayment Installment on the Loan, an amount which, when added to other moneys available therefor in the Note Fund, will be sufficient to pay the principal of and interest on the Notes due and payable on each Interest Payment Date and Principal Payment Date, whether at maturity or upon declaration accelerating the maturity in accordance with the Indenture. With respect to all payments due hereunder, time is of the essence. All payments on the Second Mortgage Bonds and Additional Payments required by the Second Mortgage Bonds and Section 4.3(b) hereof must be paid in immediately available funds as and when due, to the Trustee for the account of the Authority, at the principal corporate trust office of the Trustee or at such other place in the United States as the Trustee may direct in writing, by wire transfer, not later than 11:00 a.m., New York time on the second Business Day next preceding the day on which any payment with respect to the Project Note Portion of the Notes is due and payable. (d) In any event, each payment on the Second Mortgage Bonds, together with any other payments required to be made pursuant to Section 4.2(c), shall be sufficient to pay the amount of principal (whether at maturity or by acceleration, or on any other Principal Payment Date, as provided herein and in the Indenture) and interest payable with respect to the Notes on the due date, and all Additional Payments. If, on any due date for payments with respect to the Notes, the balance in the Note Fund under the Indenture is insufficient to make such payments, the Borrower agrees to immediately pay the amount of the deficiency as a Repayment Installment upon notice (which may be telephonic or as otherwise provided herein) of such deficiency (provided that this provision shall not be deemed a waiver of any default in payment of amounts due as and when due and payable). The sufficiency of amounts in the Note Fund or any other fund established pursuant to the Indenture to pay the next succeeding payment due on the Notes shall not relieve the Borrower of its obligation to make all payments due under this section and on the Second Mortgage Bonds as and when due. (e) Upon the occurrence of any Event of Default under the Indenture because of which the Trustee has declared an acceleration of principal and accrued interest on the Notes under Section 7.03 thereof, written notice of which acceleration has been given by the Trustee to the Authority, the Authority, or the Trustee on the Authority's behalf, may declare the principal amounts payable under this Section for the remainder of the term of the Loan Agreement, and under the Second Mortgage Bonds, and the interest accrued and unpaid thereon, to be immediately due and payable, whereupon the same shall become immediately due and payable. In such event, the Authority and the Trustee shall have access to and may inspect, examine and make copies of the Borrower books and records and any and all of the Borrower's accounts, data, and income and other tax returns, and may take whatever action at law or in equity may appear necessary or desirable to collect such amounts then due and thereafter to become due, or to enforce performance and observance of any obligation, agreement or covenant of the Borrower under this Loan Agreement or the Second Mortgage Bonds. SECTION 4.3 ADDITIONAL AMOUNTS PAYABLE. (a) The Borrower hereby further expressly agrees to pay to the Authority or the Trustee, as applicable, as and when the same shall become due, (i) the fees, including without limitation the Capital Reserve Fee and the Loan Origination Fee, and reasonable expenses of the Authority as provided in the Financing Documents, (ii) the reasonable fees, charges and expenses of the Authority and the Trustee in connection with or arising out of or relating to the issuance and servicing of the Notes, the making, servicing, administration or collection of the Loan or exercise of any rights or responsibilities under the Financing Documents, the Indenture or the Notes, including reasonable charges of counsel, (iii) the reasonable fees and charges of the Trustee, any Authenticating Agent, and any Paying Agent for services, including reasonable charges of counsel, rendered by it directly or indirectly in connection with the Loan or the Notes, including, without limitation, charges for services rendered as Trustee and Paying Agent on the Notes, and (iv) the initial fees and charges of S&P. (b) The Borrower further hereby expressly agrees to pay to the Trustee, as and when the same shall become due, the amounts required by Section 5.04(e) of the Indenture. (c) The Borrower also agrees to pay all amounts payable by it under the Financing Documents, including without limitation Section 6.5 hereof, at the time, in the manner and to the party therein provided, without delay, reduction or offset of any kind or for any reason. (d) In the event the Borrower shall fail to make, or cause to be made, any of the payments required hereby, the unpaid item or installment shall continue as an obligation of the Borrower until such amount shall have been fully paid, and the Borrower agrees to pay, or cause to be paid, the same with interest thereon from the date of failure or, in the case of payments required by Sections 4.3(a)(ii) and (iii) hereof, the date 30 days after the date on which the Borrower is notified thereof, at the interest rate borne by the Notes until fully paid. SECTION 4.4 MANNER OF PAYMENTS. The Loan Payments provided for in this Agreement shall be made as required by Section 4.2 directly to or at the direction of the Trustee. The Additional Payments provided for herein and in the Second Mortgage Bonds shall be made in the same manner directly to the entitled party, which in the case of the Additional Payments specified in Section 4.3(b) hereof shall be the Trustee, and shall be made in the same manner and by the same time of day as provided herein for Loan Payments. In the event a party entitled to payment directs in writing that such payment be made to another party in the United States, the Borrower shall make payments to such designee. SECTION 4.5 OBLIGATIONS OF THE BORROWER HEREUNDER UNCONDITIONAL. (a) The obligations of the Borrower to make, or cause to be made, the payments required herein and under the Second Mortgage Bonds and to perform and observe the other agreements on its part contained herein and in the Financing Documents shall be absolute and unconditional, irrespective of any defense or any rights of set-off, recoupment, or counterclaim it might have against the Authority or the Trustee. The Borrower shall pay, or cause to be paid, all payments required hereunder and under the Second Mortgage Bonds, free of any deductions and without postponement, abatement, set-off or diminution; and until such time as the principal of and interest on the Notes and all other amounts due hereunder shall have been fully paid, or provision for the payment thereof shall have been made in accordance with the Indenture, the Borrower: (i) shall not suspend or discontinue, or cause to be suspended or discontinued, any such payments required hereby or under the Financing Documents: (ii) shall perform and observe all of its other agreements contained in this Agreement and the Financing Documents; and (iii) shall not terminate this Agreement (other than as provided herein) for any cause, including, without limiting the generality of the foregoing, the occurrence of any acts or circumstances that may constitute failure of consideration; commercial frustration of purpose; any change in the tax or other laws of the United States of America or of the State or any political subdivision of either thereof; any failure of the Authority to perform and observe any agreement, whether express or implied, or any duty, liability, or obligation arising out of or connected with this Agreement, the Financing Documents or Indenture; or failure of the Project to comply with any statute, rule, or regulation now or hereafter made applicable thereto. Except to the extent provided in this Subsection (a), nothing contained in this Subsection (a) shall be construed to prevent or restrict the Borrower from asserting any rights it may have against the Authority, the Trustee or any other Person under the Financing Documents or the Indenture or under any provisions of law. (b) Any draw upon the Capital Reserve Fund to make a payment of principal of or interest on any Notes shall not cure or waive any obligation of the Borrower to make any Loan Payment or Additional Payment that otherwise would have been used to satisfy such principal or interest payments. SECTION 4.6 SECURITY CLAUSES. (a) The Authority hereby notifies the Borrower and the Borrower acknowledges that, among other things, Borrower's Loan Payments evidenced hereby and by the Second Mortgage Bonds and all of the Authority's right, title and interest under this Agreement and the Second Mortgage Bonds (except Shared Rights, which with respect to rights of enforcement may be exercised by the Authority and the Trustee jointly or severally, and with respect to rights of consent to the modification of or waiver of compliance may be exercised by the Authority and the Trustee jointly but not severally, and Unassigned Issuer's Rights) are being concurrently with the execution and delivery hereof assigned without recourse to the Trustee as security for the Notes as provided in the Indenture. (b) The Borrower acknowledges that each of the Trustee and the Authority may (except with respect to Shared Rights, except that with respect thereto rights of enforcement may be exercised by the Trustee either jointly or severally with the Authority, and rights to consent to the modification thereof or to waive compliance therewith may be exercised by the Trustee jointly with the Authority but not severally, and Unassigned Issuer's Rights), exercise any and all of their respective rights against the Borrower pursuant to or in connection with this Agreement and the Second Mortgage Bonds, and the Borrower shall not question the authority of any such party to exercise such rights. ARTICLE V [RESERVED] ARTICLE VI SPECIAL COVENANTS SECTION 6.1 NO WARRANTY OF CONDITION OR SUITABILITY BY THE AUTHORITY. The Authority makes no warranty, either express or implied, as to the Project, or that the Project is or will be suitable for the Borrower's or any Subsidiary's purposes or needs. SECTION 6.2 AUTHORITY'S RIGHT OF INSPECTION AND ACCESS. The Authority and the Trustee and their duly authorized agents shall be permitted, at all reasonable times and upon reasonable notice, to examine the books and records of the Borrower with respect to the Project, the Second Mortgage Bonds and Borrower's business generally, and any records maintained by the Authority pertaining to the Borrower or the Project, and the Borrower shall furnish the Authority and the Trustee with such information, statements and certificates as may reasonably be required from time to time. SECTION 6.3 CONDITIONS TO CONSOLIDATION OR MERGER, ETC. (a) The Borrower covenants and agrees that it will not consolidate with or merge into any other corporation, or sell, transfer or lease its properties as an entirety or substantially as an entirety, unless, and the Borrower covenants and agrees that any such consolidation, merger, sale, transfer or lease shall be upon the conditions that, (1) the due and punctual payment of the principal of and interest on all the Second Mortgage Bonds according to their tenor, and the due and punctual performance and observance of all the terms, covenants and conditions of this Agreement to be performed or observed by the Borrower, shall, by an instrument in writing, be expressly assumed by the successor corporation, if other than the Borrower, formed by or surviving any such consolidation or merger or to which such sale, transfer or lease shall have been made, as fully and effectually as if such successor corporation had been an original party to this Agreement, and (2) immediately after giving effect to such transaction, no Event of Default, and no event which, after notice or lapse of time, or both, would become an Event of Default, shall have occurred and be continuing. Every such successor corporation, if other than the Borrower, upon executing such instrument, in form reasonably satisfactory to the Authority and the Trustee, shall succeed to and be substituted for the Borrower with the same effect as if it had been an original party hereto, and shall possess and from time to time may exercise each and every power of the Borrower under this Agreement, and, in the case of any such sale or transfer, the person named as the "Borrower" in the first paragraph of this Agreement or any successor corporation which shall theretofore have become such in the manner prescribed in this Section 6.3 shall be released from its liability as obligor on the Second Mortgage Bonds. Any act or proceeding required by this Loan Agreement to be done or performed by any board or officer of the Borrower may be done or performed with like force and effect by the comparable board or officer of such successor corporation. (b) The Borrower covenants and agrees that if it shall consolidate with or merge into any other corporation, or if it shall sell, transfer or lease its properties as an entirety or substantially as an entirety, the Borrower will promptly furnish to the Authority: (1) A Certificate of an Authorized Borrower Representative stating that the covenants of the Borrower contained in Section 6.3(a) have been complied with; (2) An executed counterpart of any instrument or instruments executed by the Borrower and any successor in the performance of such covenants; and (3) An opinion of counsel reasonably satisfactory to the Authority stating that in the opinion of such counsel any instrument or instruments executed by the Borrower and its successor in the performance of such covenants comply with the requirements of such covenants. SECTION 6.4 GOOD STANDING. Subject to Section 6.3 hereof, the Borrower warrants that it is and will be during the term of this Agreement incorporated and in good standing under the laws of the State. SECTION 6.5 INDEMNIFICATION COVENANTS. (a) The Borrower agrees to protect, defend and hold harmless the Trustee and the Authority and their respective officers, members and employees (each an "Indemnified Party") from any claim, demand, suit or action or other proceeding whatsoever by any person or entity whatsoever, arising or purportedly arising from or in connection with the Financing Documents, the Indenture, the Notes, or the transactions contemplated by or actions taken under any thereof, except for any bad faith, willful misconduct, material misrepresentation or gross negligence on the part of the Indemnified Party. (b) [Reserved.] (c) The Borrower releases each Indemnified Party from, agrees that each Indemnified Party shall not be liable for, and agrees to hold each Indemnified Party harmless against any damages or reasonable expenses, including (subject to subparagraph (e) of this Section 6.5) charges of counsel, incurred because of any investigation, review or lawsuit commenced by any person or entity whatsoever other than the Borrower with respect to the Financing Documents, the Indenture, the Notes or the Project, except for any bad faith, willful misconduct, material misrepresentation or gross negligence on the part of the Indemnified Party. (d) All covenants, stipulations, promises, agreements and obligations of the Authority contained herein shall be deemed to be the covenants, stipulations, promises, agreements and obligations of the Authority and not of any member, officer or employee of the Authority in his or her individual capacity, and no recourse shall be had for the payment of the Loan or the Notes or for any claim based thereon or hereunder against any member, officer or employee of the Authority or the Trustee or any natural person executing the Notes. (e) In case any action shall be brought against one or more of the Indemnified Parties based upon any of the above and in respect of which indemnity may be sought against the Borrower, such Indemnified Party shall notify the Borrower in writing, enclosing a copy of all papers served, but the omission so to notify the Borrower of any such action shall not relieve it of any liability which it may have to any Indemnified Party other than under this Section 6.5. In case any such action shall be brought against any Indemnified Party and it shall notify the Borrower of the commencement thereof, the Borrower shall be entitled to participate in and, to the extent that it shall wish, to assume the defense thereof with counsel reasonably satisfactory to such Indemnified Party, and after notice from the Borrower to such Indemnified Party of the Borrower's election so to assume the defense thereof the Borrower shall not be liable to such Indemnified Party for any legal or other expenses, other than reasonable costs of investigation, subsequently incurred by such Indemnified Party in connection with the defense thereof. The Indemnified Party shall have the right to employ its own counsel in any such action, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless (i) the employment of counsel by such Indemnified Party has been authorized by the Borrower, (ii) the Indemnified Party shall have reasonably concluded that there is a conflict of interest between the Borrower and the Indemnified Party in the conduct or the defense of such action (in which case the Borrower shall not have the right to direct the defense of such action on behalf of the Indemnified Party), or (iii) the Borrower shall not in fact have employed counsel reasonably satisfactory to the Indemnified Party to assume the defense of such action. (f) In the event the Borrower fails to pay any amount or perform any act under the Financing Documents, the Trustee or the Authority may, but shall have no obligation to, pay the amount or perform the act, in which event the costs, disbursements, expenses and charges of counsel thereof, together with interest thereon from the date the expense is paid or incurred at the rate of the prime rate then prevailing in the State plus two per centum (2%), shall be an additional obligation hereunder payable on demand. (g) The obligations of the Borrower under this section shall survive the termination of this Agreement. This section is not for the benefit of any person not an Indemnified Party, and no waiver of the Maine Tort Claims Act or other applicable law is intended. SECTION 6.6 FINANCIAL STATEMENTS OF THE BORROWER. The Borrower agrees to furnish to the Trustee a copy of all regular and periodic reports filed with the Securities and Exchange Commission pursuant to Section 13(a) or 15(d) of the Exchange Act. SECTION 6.7 ENVIRONMENTAL COVENANTS. The Borrower covenants that (1) except in compliance with applicable environmental laws, or if known or if it becomes known to the Borrower, as disclosed pursuant to the Exchange Act, it has not discharged, dumped, installed, stored, used, treated, transported, disposed or maintained, and shall neither discharge, dump, install, store, use, treat, transport, dispose or maintain toxic, hazardous, or radioactive substances, materials or wastes, including, without limitation, all of the following: (a) asbestos in any form; (b) urea formaldehyde foam insulation; (c) transformers or other equipment which contain dielectric fluid containing any level of polychlorinated biphenyls or (d) any other chemical, material or substance which is prohibited, limited, or regulated by any federal, state, county, regional, local, or other governmental authority or which, even if not so regulated, to the knowledge of the Borrower poses a substantial hazard to health and safety (all of which are referred to collectively herein as "Hazardous Substances"), except such non-compliance as would not have a material adverse effect on the Borrower or its financial condition, and (2) the Borrower is not the subject of any existing, pending or threatened investigation or inquiry by, or of any remedial order or obligation issued by or at the behest of, any governmental authority under any law, rule or regulation pertaining to health or the environment which would have a material adverse effect on the Borrower or its financial condition except (i) during any period during which the Borrower at its expense and in its name shall be in good faith contesting its obligation to comply therewith or (ii) as described in filings made pursuant to the Exchange Act. SECTION 6.8 [RESERVED]. SECTION 6.9 DEFAULT AND LITIGATION NOTIFICATION. The Borrower shall deliver to the Authority and the Trustee, within ninety (90) days after the close of each fiscal year of Borrower, a certificate signed by an Authorized Borrower Representative to the effect that the Borrower is in compliance with the provisions of the Financing Documents or specifying the nature of the noncompliance and the steps the Borrower is taking to correct any noncompliance. Upon becoming aware of any condition or event which constitutes, or with the giving of notice or the passage of time would constitute, an Event of Default under this Agreement, or an Event of Default (as defined in the Indenture) under the Indenture, the Borrower promptly shall deliver to the Authority and the Trustee a notice stating the existence and nature thereof and specifying the corrective steps the Borrower is taking with respect thereto. The Borrower shall promptly notify the Authority and Trustee of the commencement of any litigation, administrative, enforcement or other proceeding by or against it, or the threat thereof, in which an unfavorable outcome could materially affect the operation of the Borrower's business or compliance with the Financing Documents. SECTION 6.10 INSURANCE. The Borrower shall maintain an insurance policy against liability appropriate for Borrower's business (including environmental insurance to the extent available on reasonable terms) and adequate workers' compensation coverage, in each case with customary deductible and self insurance provisions selected by the Borrower. SECTION 6.11 ADDITIONAL COVENANTS AND AGREEMENTS. The Borrower hereby agrees to those Additional Covenants and other matters set forth in Exhibit A hereto. SECTION 6.12 NO LIABILITY OF THE AUTHORITY. Any obligation of the Authority created by or arising out of this Agreement, including the Notes and the Financing Documents, is not a general obligation of the Authority or payable in any manner from revenues raised by taxation, but shall be payable solely out of Pledged Revenues and the other moneys pledged under the Indenture. In making the agreements, provisions, and covenants set forth in the Indenture and this Agreement, the Authority has not obligated itself except with respect to the Project and the application of the Pledged Revenues and the other moneys pledged under the Indenture. All covenants, stipulations, promises, agreements, and obligations of the Authority contained herein shall be deemed to be covenants, stipulations, promises, agreements, and obligations of the Authority and not of any member, officer, agent, or employee thereof in his or her individual capacity. No recourse shall be had for the payment of the principal of or of the interest on the Notes, for the performance of any obligation hereunder, or for any claim based thereon or hereunder against any such member, officer, agent or employee or against any natural person executing the Notes. No such member, officer, agent, employee, or natural person is or shall become personally liable for any such payment, performance, or other claim, and in no event shall any monetary or deficiency judgment be sought or secured against any such member, officer, agent, employee, or other natural person for any such payment, performance or other claim. SECTION 6.13 COMPLIANCE WITH RULE 144A. If at any time the Borrower is not subject to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 as amended, the Borrower shall make available to any Noteholder upon request (and, upon such Noteholder's request, to the Trustee and the Authority), the information required, at the times required, by Rule 144A to enable resales to be made pursuant to Rule 144A, which on the date hereof is the following information (which shall be reasonably current in relation to the date of any resale in reliance upon Rule 144A): a very brief statement of the nature of the business of the Borrower and the products and services it offers; and the Borrower's most recent balance sheet and profit and loss and retained earnings statements, and similar financial statements for such part of the two preceding fiscal years as the Borrower has been in operation (the financial statements should be audited to the extent reasonably available); the requirements that the information be "reasonably current" will be presumed to be satisfied if (a) the balance sheet is as of a date less than 16 months before the date of resale, the statements of profit and loss and retained earnings are for the 12 months preceding the date of such balance sheet, and if such balance sheet is not as of a date less than 6 months before the date of resale, it shall be accompanied by additional statements of profit and loss and retained earnings for the period from the date of such balance sheet to a date less than 6 months before the date of resale; and (b) the statement of the nature of the Borrower's business and its products and services offered is as of a date within 12 months prior to the date of resale. To enable the Trustee to deliver a notice to investors to those Holders requesting the same under clause (b) of paragraph 2 of Section 14.01 of the Indenture, and the corresponding provision of the legend on the Notes required by Section 14.02 of the Indenture, the Borrower shall use its best efforts to furnish to the Trustee an appropriate form thereof upon any change of law or practice described in Section 8.02(2)(a) of the Indenture or upon the Trustee's request. ARTICLE VII MODIFICATION OF THE PROJECT; PAYMENT OF NOTES SECTION 7.1 MODIFICATION OF THE PROJECT. The Borrower may not without the written consent of the Authority modify the Project in any way. SECTION 7.2 REFERENCE TO NOTES INEFFECTIVE AFTER NOTES PAID. (a) Upon payment in full of the Notes (or provision for payment thereof in accordance with the provisions of the Indenture) and all fees, reimbursement payments and charges of the Trustee and the Authority provided herein, all references in this Agreement to the Notes, the Trustee, and the Authority shall be ineffective, and, subject to the provisions of Section 4.1 hereof, neither the Trustee, the Authority, nor any of the Noteholders, shall thereafter have any rights hereunder, saving and excepting those that shall have theretofore vested. (b) For the purpose of this Agreement, the Notes shall be deemed fully paid if: (i) there are on deposit with the Trustee sufficient moneys to pay all amounts due or to become due to the Authority and the Trustee hereunder; and (ii) all of the Outstanding Notes shall be deemed to have been paid within the meaning of Section 9.01 of the Indenture. ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES SECTION 8.1 EVENTS OF DEFAULT DEFINED. (a) The following shall be "Events of Default" under this Agreement, and the terms "events of default" or "default" shall mean, whenever they are used in this Agreement, any one or more of the following events: (i) failure by the Borrower to pay, or cause to be paid, any Loan Payments under Section 4.2 hereof, or Additional Payments specified in Section 4.3(b) hereof, at the times specified herein; (ii) failure by the Borrower to observe and perform any covenant, condition or agreement on its part to be observed or performed (other than as referred to in Section 8.1(a)(i) hereof) for a period of thirty (30) days after written notice, specifying such failure, requesting that it be remedied, and stating that it is a notice of default, has been given to the Borrower by the Trustee (except in the case of Unassigned Issuer's Rights) or by the Authority, unless the Trustee (except in the case of Unassigned Issuer's Rights) shall agree in writing to an extension of such time prior to its expiration (or, in the case of Unassigned Issuer's Rights, the Authority shall agree in writing to an extension of such time prior to its expiration, or to a modification or waiver of any covenant, condition or agreement in or referred to in this Agreement constituting a part of Unassigned Issuer's Rights); provided, however, if said failure be such that it cannot be corrected within the applicable period, it shall not constitute an Event of Default if corrective action is instituted by the Borrower within the applicable period and diligently pursued until the failure is corrected, but only, with respect to covenants, conditions and agreements not included in Unassigned Issuer's Rights, if such failure is corrected within ninety (90) days after the written notice of default related thereto unless the Trustee shall agree in writing to an extension of such time prior to its expiration; and/or (iii) the Borrower makes an assignment for the benefit of creditors, files a petition in bankruptcy, is adjudicated insolvent or bankrupt, petitions or applies to any tribunal for any receiver of or any trustee for itself or any substantial part of its property under any bankruptcy, insolvency, reorganization, arrangement, or readjustment of debt law or statute or similar law or statute of any jurisdiction, whether now or hereafter in effect; or commences any proceeding relating to the Borrower, under any bankruptcy, insolvency, reorganization, arrangement, or readjustment of debt law or statute or similar law or statute of any jurisdiction, whether now or hereafter in effect; or there is commenced against the Borrower any such proceeding which remains undismissed for a period of sixty (60) days; or the Borrower indicates its consent to, approval of, or acquiescence in any such proceeding or the appointment of any such receiver of or trustee for the Borrower or any substantial part of its property; or the Borrower suffers any such receivership or trusteeship to continue undischarged or unstayed for a period of sixty (60) days; and/or (iv) there shall occur an "Event of Default" specified in Section 7.01(a) or (b) of the Indenture; and/or (v) there shall occur an acceleration of debt as a result of the exercise of remedies under the Borrower Indenture or any Borrower bank credit agreement; and/or (vi) any representation or warranty made by the Borrower in this Agreement, or any material representation or warranty made by the Borrower in any instrument, other agreement, statement or certificate furnished to the Issuer or the Trustee in connection with this Agreement or the purchase of the Notes, proves untrue in any material respect as of the date of the issuance or making thereof; provided, however, if any of the facts upon which the representations and warranties of the Borrower are based are capable of correction or cure to conform to any such representation or warranty, there shall be no Event of Default until passage of a period of thirty (30) days after written notice, specifying such failure and requesting that it be remedied, given to the Borrower by the Trustee or the Holders of twenty-five percent (25%) in aggregate principal amount of the Notes then Outstanding. The declaration of an Event of Default under clause (iii) of subsection (a) above, and the exercise of remedies upon any such declaration, shall be subject to any applicable limitations of federal bankruptcy law affecting or precluding that declaration or exercise during the pendency of or immediately following any bankruptcy, liquidation or reorganization proceedings. (b) Paragraph (ii) of the foregoing Section 8.1(a) is subject to the following limitations: if by reason of force majeure the Borrower is unable in whole or in part to carry out the agreements on its part herein contained, other than the obligations on the part of the Borrower contained in Sections 4.2, 4.3 and 6.5 hereof, the Borrower shall not be deemed in default during the continuance of such inability. The term "force majeure" as used herein shall mean, without limitation, the following: Acts of God; strikes, lockouts, or other industrial disturbances; acts of public enemies; orders of any kind of governmental authority or any of their departments, agencies or officials, or any civil or military authority; insurrections; riots; landslides; earthquakes; fires; storms; droughts; floods; explosions; breakage; malfunction or accident to facilities, machinery, transmission pipes, or canals; or any other cause or event not reasonably within the control of the Borrower. The Borrower agrees, however, to remedy with all reasonable dispatch the cause or causes preventing the Borrower from carrying out this Agreement to the extent that such remedy is reasonably within the ability of the Borrower; provided that the settlement of strikes, lockouts, and other industrial disturbances shall be left entirely within the discretion of the Borrower, and the Borrower shall not be required to make settlement of strikes, lockouts and other industrial disturbances by acceding to the demands of the opposing party or parties. SECTION 8.2 REMEDIES ON DEFAULT. (a) Whenever any Event of Default referred to in Section 8.1 hereof shall have happened and be continuing, the Authority or the Trustee may take any one or more of the following remedial steps (except that the Trustee shall have no right to enforce Unassigned Issuer's Rights): (i) The Authority or the Trustee as provided in the Indenture may declare an amount equal to the unpaid principal amount of the Project Note Portion of the Notes and the interest accrued thereon to the date of such declaration to be immediately due and payable, whereupon the same shall become immediately due and payable, and which amount the Borrower hereby agrees to pay or cause to be paid; and/or (ii) The Authority or the Trustee may declare an amount equal to the unpaid principal amount of the Loan and the interest accrued thereon to the date of such declaration to be immediately due and payable, whereupon the same shall become immediately due and payable, and which amount the Borrower hereby agrees to pay or cause to be paid; and/or (iii) The Authority or the Trustee may take whatever action at law or in equity may appear necessary or desirable to collect the payments and other amounts then due and thereafter to become due or to enforce performance and observance of any obligation, agreement, or covenant of the Borrower under this Agreement. (b) Any amounts collected pursuant to action taken under this Section shall be paid into the Note Fund or the Capital Reserve Fund, as required by the Indenture, and applied in accordance with the provisions of the Indenture or, if all of the Notes and other amounts due hereunder have been fully paid (or provision for payment thereof has been made in accordance with the provisions of the Indenture), to the Borrower (except, with respect to the last $21,191,940 of principal of and interest on the Notes Outstanding, to the Authority). (c) Except to the extent of any such collection, no action taken pursuant to this Section shall relieve the Borrower from such of the Borrower's obligations pursuant to Sections 4.2, 4.3 and 6.5 hereof which shall survive any such action, and the Authority or the Trustee may take whatever action at law or in equity as may appear necessary and desirable to collect all amounts then due and thereafter to become due and/or to enforce the performance and observance of any obligation, agreement or covenant of the Borrower hereunder (except that the Trustee shall have no right to enforce Unassigned Issuer's Rights). SECTION 8.3 NO REMEDY EXCLUSIVE; TRUSTEE AND NOTEHOLDERS DEEMED THIRD PARTY BENEFICIARIES. No remedy herein conferred upon or reserved to the Authority is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Agreement or now or hereafter existing at law or in equity or by statute. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be expedient. In order to entitle the Issuer or the Trustee to exercise any remedy reserved to it in this Article, it shall not be necessary to give any notice, other than such notice as may be herein expressly required. Subject to any applicable restriction on enforcement contained in the Indenture, such rights and remedies as are given the Authority hereunder shall also extend to the Trustee, and the Trustee and the Noteholders shall be deemed third party beneficiaries of all covenants and agreements herein contained, whether described as rights of the Trustee or Holders or as rights of the Authority, except in the case of the Noteholders as to the rights of the Trustee or any Authenticating Agent or Paying Agent for its own account, and except in each and every such case Unassigned Issuer's Rights. SECTION 8.4 NO ADDITIONAL WAIVER IMPLIED BY ONE WAIVER. In the event any agreement contained in this Agreement should be breached by either party and thereafter waived by the other party or the Trustee, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach hereunder. ARTICLE IX MISCELLANEOUS SECTION 9.1 NOTICES. (a) All notices, certificates, or other communications hereunder shall be sufficiently given and shall be deemed given when (i) mailed by first class mail or by overnight courier, (ii) faxed and immediately confirmed by first class mail, or (iii) delivered, postage prepaid, or by overnight courier addressed as follows: (i) IF TO THE AUTHORITY: If by registered or certified mail, to: Finance Authority of Maine Post Office Box 949 Augusta, ME 04332-0949 (Attention: Chief Executive Officer) Telephone Number: (207) 623-3263 Fax Number: (207) 623-0095 and If by overnight courier, to: Finance Authority of Maine 83 Western Avenue Augusta, ME 04330-7226 (Attention: Chief Executive Officer) Telephone Number: (207) 623-3263 Fax Number: (207) 623-0095 (ii) IF TO THE BORROWER, TO: Bangor Hydro-Electric Company 33 State Street P.O. Box 932 Bangor, ME 04402-0932 (Attention: Treasurer) Telephone Number: (207) 945-5621 Fax Number: (207) 990-6954 (iii) IF TO THE TRUSTEE, TO: First Fidelity Bank 10 State House Square Corporate Trust - CB 5845 Hartford, CT 06103-3698 Telephone Number: (203) 247-1353 Fax Number: (203) 247-1356 Wire Transfer Instructions: ABA #031201467 FIRST FIDELITY A/C #0666249910 For Further Credit to: FAME BANGOR HYDRO NOTE FD (b) Duplicate copies of each notice, certificate, or other communication given hereunder by the Authority, the Trustee or the Borrower to any of the others, shall also be given to all of the others, except that in the case of notices relating solely to Unassigned Issuer's Rights, no notice need be sent to the Trustee. (c) The Authority, the Borrower and the Trustee may, by notice given to all parties hereto or to the Indenture, designate any further or different addresses to which subsequent notices, certificates, or other communications shall be sent. SECTION 9.2 FILING. (a) Financing statements shall be filed with respect to the pledge of the Trust Estate effected by the Indenture. (b) The parties agree that all necessary continuation statements shall be filed by the Trustee, at the expense of the Borrower, within the time prescribed by the Uniform Commercial Code - Secured Transactions of the State. SECTION 9.3 BINDING EFFECT. This Agreement shall inure to the benefit of and shall be binding upon the Authority, its successors and assigns, the Borrower, and the permitted successors and assigns of the Borrower. SECTION 9.4 SEVERABILITY. In the event any provision of this Agreement shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision hereof. SECTION 9.5 AMOUNTS REMAINING IN THE NOTE FUND. It is agreed by the parties hereto that any amounts remaining in the Note Fund after payment in full of the Notes (or provision for payment thereof having been made in accordance with the provisions of the Indenture), all other amounts due hereunder and the fees, charges, and expenses of the Trustee and the Paying Agents in accordance with the Indenture, shall belong to and be paid to the Authority by the Trustee as overpayments. SECTION 9.6 AMENDMENTS, CHANGES AND MODIFICATIONS. (a) This Agreement may not be amended, changed, modified, altered, or terminated without in each instance the prior written consent of both parties hereto and (except in the case of Unassigned Issuer's Rights) the Trustee. (b) No obligation is imposed on the Authority by this Section 9.6 to enter into any amendment, and no amendment is permitted hereunder which would result in the breach of the Authority's agreements in the Indenture. SECTION 9.7 EXECUTION OF COUNTERPARTS. This agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. SECTION 9.8 LAW GOVERNING CONSTRUCTION OF AGREEMENT. This Agreement shall be deemed to be a contract made under the laws of the State and for all purposes shall be governed by and construed in accordance with the laws of the State applicable to contracts made and to be performed entirely within the State. SECTION 9.9 ASSIGNMENT OF AGREEMENT OR SECOND MORTGAGE BONDS. Except as specifically permitted herein, the Borrower may not assign its rights, interests or obligations hereunder or under the Second Mortgage Bonds or other Financing Documents without the express prior written approval of the Authority and the Trustee. SECTION 9.10 FURTHER ASSURANCES AND CORRECTIVE INSTRUMENTS. The Authority and the Borrower agree that they will, from time to time, execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such supplements hereto and such further instruments as may reasonably be required for correcting any inadequate or incorrect description of the Project or for carrying out the intention of or facilitating the performance of this Agreement and the Financing Documents. SECTION 9.11 PAYMENTS DUE ON NON-BUSINESS DAYS. If any payment of moneys hereunder is due on a date other than a Business Day (the "due date"), that payment need not be made on the due date, but may be made on the next succeeding Business Day with the same force and effect as if that payment were made on the due date, and in such case no interest shall accrue for the period from such due date. IN WITNESS WHEREOF, the FINANCE AUTHORITY OF MAINE has executed this Agreement by causing these presents to be signed in its name and behalf by its Chief Executive Officer and BANGOR HYDRO-ELECTRIC COMPANY has executed this Agreement by causing these presents to be signed in its name and behalf by its duly authorized officer, and the same to be attested by its Secretary, all being done as of the day and year first hereinabove written. FINANCE AUTHORITY OF MAINE [SEAL] By /s/ Timothy P. Agnew ------------------------ Timothy P. Agnew Chief Executive Officer BANGOR HYDRO-ELECTRIC COMPANY [SEAL] By /s/ Robert S. Briggs -------------------------- Robert S. Briggs President Attest: /s/ Frederick S. Samp ----------------------- Frederick S. Samp Clerk EXHIBIT A ADDITIONAL COVENANTS OF BORROWER 1. Commencing with Fiscal Year 1996, the Borrower is prohibited from making common stock dividends and/or distributions in any fiscal year in excess of 70% of earnings applicable to common stock. The Borrower may, at its discretion, place additional restrictions on dividends and distributions. Any waiver of the prohibition must be approved in writing by the Chief Executive Officer of the Authority. 2. The Borrower must furnish a signed copy of a Commitment Letter from the Chemical Bank Group ("Chemical") in form and substance satisfactory to the Authority. The loan(s) from Chemical must close prior to or contemporaneously with the Loan. 3. The Borrower shall not redeem any stock except pursuant to existing mandatory redemption provisions. The foregoing will not prevent the Borrower from purchasing stock on the open market pursuant to any existing dividend reinvestment plan. 4. The Borrower must promptly notify the Authority of the occurrence of any of the following: (a) the institution of, or any development or determination in, any litigation, arbitration proceeding or governmental proceeding which is adverse to the Borrower or any Subsidiary and which is material to the Borrower and its Subsidiaries as a whole, (b) the occurrence of a Reportable Event a 30-day notice of which must be filed with the Pension Benefit Guaranty Corporation ("PBGC") pursuant to PBGC Regulation Section 2615.3 under, or the institution of steps by the Borrower or any Significant Subsidiary to withdraw from, or the institution of any steps to terminate, any employee benefit plan maintained by the Borrower or any Significant Subsidiary, or (c) any Subsidiary becoming, or ceasing to be, a Significant Subsidiary. For purposes of subsection (a) above, "material" includes, but is not limited to any claim or action with a demand of $5,000,000 or greater. Such notice must be in writing and must describe the matter and the steps being taken by the Borrower or the Subsidiary affected with respect thereto. 5. The Borrower must provide the Authority with copies of each filing and report made by the Borrower or any Subsidiary with or to the Securities and Exchange Commission (other than registration statements that have not become effective under the Securities Act of 1933, filings and reports with respect to dividend reinvestment, employee benefits, or other similar plans, and filings and reports pertaining to sales of or other transactions in securities of the Borrower or any Subsidiary by persons other than the Borrower or such Subsidiary), and of each communication from the Borrower or any Subsidiary to public shareholders generally, promptly upon the filing or making thereof. The Borrower must meet periodically with the Authority at the Authority's request to provide information on financial conditions (whether or not included in such filings) and any other issue raised by the Authority. 6. The Borrower must furnish the Authority with such information and statements pertaining to the business or the financial condition of the Borrower as may be reasonably required from time to time. 7. The Borrower must furnish the Authority, prior to the original issuance of the Notes, signed copies of agreements it has negotiated with Babcock - Ultrapower West Enfield and Babcock - Ultrapower Jonesboro. 8. The Borrower must furnish, prior to the original issuance of the Notes, the final signed order of the Maine Public Utilities Commission. 9. The Borrower will observe and comply in all material respects with all laws, regulations, ordinances, rules, and orders (including without limitation those relating to zoning, land use, environmental protection, air, water and land pollution, wetlands, health, equal opportunity, minimum wages, worker's compensation and employment practices) of any federal, state, municipal or other governmental authority except during any period during which the Borrower at its expense and in its name shall be in good faith contesting its obligations to comply therewith. 10. The Borrower acknowledges that its Certificate of Organization ("Certificate") and By-laws are its only corporate governance documents. The Borrower must comply with all conditions of its Certificate. The Borrower shall make no changes to its Certificate without providing prior notification to the Authority. 11. The Borrower must provide to the Authority its Regulatory Update when each is distributed or any successor internal publication and such other information regarding pending or anticipated filings as the Authority may reasonably request. 12. The Borrower may not create, incur, assume or permit to exist any mortgage, lien, charge, security interest or other encumbrance on any property or asset of the Borrower, except the Borrower Indenture, Permitted Liens and Prior Liens, each as defined in the Borrower Indenture. 13. The Borrower must apply Loan proceeds only in accordance with the "Use of Proceeds" on page 1 of the Commitment dated June 22, 1995 from the Authority to the Borrower. 14. The Borrower is to promptly notify the Authority of any material adverse change in its business operations or financial condition occurring either before or after the closing of the Loan. 15. Enforcement actions of the Authority may include but shall not be limited to any action the Authority may deem necessary or desirable before the Maine Public Utilities Commission, or any other administrative body, to reasonably assure payment of the Loan and compliance with the Financing Documents. 16. The Borrower must pay all costs and expenses incurred by the Authority in connection with the issuance of the Notes and servicing of the Loan and Notes. This will include costs and expenses of employees of the Authority including in-house counsel in processing servicing requests during the term of the Loan. 17. The Borrower agrees, unless it is legally precluded, that it will file for appropriate rate relief from the Maine Public Utilities Commission in the event it is unable to make any payments or perform any financial obligation under the Loan Agreement. 18. The Borrower agrees that it will give to the Authority prompt notice of any material default under its 1936 Indenture (as defined in the Borrower Indenture) or any other credit agreement with any financing institution while any portion of the Loan remains outstanding. 19. The Borrower hereby waives any objection to the Authority's standing in any matter in which the Borrower or any subsidiary may be a party before the Maine Public Utilities Commission. 20. The Borrower must not incur any additional debt in excess of $15,000,000. Current and future borrowings on the revolving credit facility with Chemical closing concurrently with this Loan do not constitute new debt. 21. The Borrower may not incur additional debt in excess of $15,000,000 unless (a) such debt is refunding debt, which does not increase the Borrower's aggregate level of debt or (b) the issuance of such debt does not reduce the Debt Service Coverage (as defined below) below the lesser of (i) the debt service coverage prior to the issuance of new debt or (ii) 1.3x or (c) the Chief Executive Officer of the Authority provides written consent. For the purpose of this covenant, Debt Service Coverage means: earnings before income taxes + interest for the previous 12 months + depreciation for the previous 12 months + amortization for the previous 12 months (less or plus extraordinary [see footnote at end of Exhibit A] income or losses) divided by: interest for the previous 12 months + principal payments for the previous 12 months + the projected 12 months of principal and interest for the proposed new debt. 22. All first mortgage bonds of the Borrower pledged to secure the loans made by Chemical which are released from the security interest of Chemical will be assigned by Chemical to the Trustee of the Borrower Indenture for the benefit of the holders of the bonds issued thereunder. 23. If there shall be a conflict between the terms of the Loan Agreement and the Borrower Indenture, the terms of the Loan Agreement shall control. Footnote: Extraordinary is defined as a nonrecurring occurrence that must be explained by note on the financial statements or in a filing. Earnings are adjusted by adding or subtracting the extraordinary occurrence. EXHIBIT C LOAN PRINCIPAL LIQUIDATION TOTAL NOTE NOTE PRINCIPAL LOAN OF CAPITAL PRINCIPAL PAYMENT DATE PRINCIPAL RESERVE FUND REPAYMENTS 7/1/98 $ 12,300,000 $ 0 $ 12,300,000 7/1/99 13,100,000 0 13,100,000 7/1/00 14,000,000 0 14,000,000 7/1/01 15,100,000 0 15,100,000 7/1/02 16,100,000 0 16,100,000 7/1/03 17,200,000 0 17,200,000 7/1/04 17,008,060 1,391,940 18,400,000 7/1/05 0 19,800,000 19,800,000 Total $104,808,060 $126,000,000 EX-4 4 EXHIBIT 4.2 EXECUTION COPY CREDIT AGREEMENT Dated as of June 30, 1995 among Bangor Hydro-Electric Company, The Banks Named Herein, Chemical Bank, as Administrative Agent, and Fleet Bank of Maine and The First National Bank of Boston, as Co-Agents TABLE OF CONTENTS Page ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . 1 SECTION 1.1 DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . 1 SECTION 1.2 OTHER DEFINITIONAL PROVISIONS. . . . . . . . . . . . . . 14 ARTICLE II THE COMMITMENTS . . . . . . . . . . . . . . 14 SECTION 2.1 REVOLVING CREDIT LOANS . . . . . . . . . . . . . . . . . 14 SECTION 2.2 PROCEDURE FOR REVOLVING CREDIT BORROWING . . . . . . . . 15 SECTION 2.3 REVOLVING CREDIT NOTES . . . . . . . . . . . . . . . . . 15 SECTION 2.4 SWING LINE COMMITMENT. . . . . . . . . . . . . . . . . . 16 SECTION 2.5 COMMITMENT FEE . . . . . . . . . . . . . . . . . . . . . 18 SECTION 2.6 OPTIONAL TERMINATION OR REDUCTION OF REVOLVING CREDIT COMMITMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 18 SECTION 2.7 TERM LOANS.. . . . . . . . . . . . . . . . . . . . . . . 18 SECTION 2.8 TERM NOTES . . . . . . . . . . . . . . . . . . . . . . . 19 SECTION 2.9 PROCEDURE FOR TERM LOAN BORROWING. . . . . . . . . . . . 19 SECTION 2.10 OPTIONAL PREPAYMENTS. . . . . . . . . . . . . . . . . . 19 SECTION 2.11 MANDATORY REPAYMENTS AND COMMITMENT REDUCTIONS . . . . 20 SECTION 2.12 COMPUTATION OF INTEREST AND FEES. . . . . . . . . . . . 21 SECTION 2.13 INTEREST RATE AND PAYMENT DATES . . . . . . . . . . . . 21 SECTION 2.14 CONVERSION OPTIONS. . . . . . . . . . . . . . . . . . . 21 SECTION 2.15 INABILITY TO DETERMINE INTEREST RATE. . . . . . . . . . 22 SECTION 2.16 PRO RATA TREATMENT AND PAYMENTS.. . . . . . . . . . . . 23 SECTION 2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . 24 SECTION 2.18 REQUIREMENTS OF LAW.. . . . . . . . . . . . . . . . . . 24 SECTION 2.19 INDEMNITY . . . . . . . . . . . . . . . . . . . . . . . 25 ARTICLE III LETTERS OF CREDIT. . . . . . . . . . . . . . 26 SECTION 3.1 L/C COMMITMENT.. . . . . . . . . . . . . . . . . . . . . 26 SECTION 3.2 PROCEDURE FOR ISSUANCE OF LETTERS OF CREDIT. . . . . . . 26 SECTION 3.3 COMMISSIONS AND OTHER CHARGES. . . . . . . . . . . . . . 27 SECTION 3.4 L/C PARTICIPATIONS.. . . . . . . . . . . . . . . . . . . 27 SECTION 3.5 REIMBURSEMENT OBLIGATION OF THE COMPANY. . . . . . . . . 28 SECTION 3.6 OBLIGATIONS ABSOLUTE.. . . . . . . . . . . . . . . . . . 29 SECTION 3.7 LETTER OF CREDIT PAYMENTS. . . . . . . . . . . . . . . . 29 SECTION 3.8 APPLICATION. . . . . . . . . . . . . . . . . . . . . . . 30 ARTICLE IV CONDITIONS TO EXTENSIONS OF CREDIT. . . . . . . . . . 30 SECTION 4.1 EACH EXTENSION OF CREDIT . . . . . . . . . . . . . . . . 30 SECTION 4.2 FIRST LOAN . . . . . . . . . . . . . . . . . . . . . . . 30 SECTION 4.3 SPECIFIED LETTER OF CREDIT . . . . . . . . . . . . . . . 32 ARTICLE V REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . 32 SECTION 5.1 CORPORATE EXISTENCE AND POWER. . . . . . . . . . . . . . 32 SECTION 5.2 CORPORATE AUTHORIZATION; NON-CONTRAVENTION. . . . . . . 33 SECTION 5.3 BINDING EFFECT . . . . . . . . . . . . . . . . . . . . . 33 SECTION 5.4 FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . 33 SECTION 5.5 LEGAL AND REGULATORY PROCEEDINGS . . . . . . . . . . . . 33 SECTION 5.6 GOVERNMENTAL AUTHORIZATION . . . . . . . . . . . . . . . 33 SECTION 5.7 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . 34 SECTION 5.8 SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . 34 SECTION 5.9 COMPLIANCE WITH ERISA. . . . . . . . . . . . . . . . . . 34 SECTION 5.10 USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . 34 SECTION 5.11 PROPERTIES. . . . . . . . . . . . . . . . . . . . . . . 34 SECTION 5.12 NO DEFAULTS, VIOLATIONS, ETC. . . . . . . . . . . . . . 35 SECTION 5.13 RESTRICTIONS ON COMPANY . . . . . . . . . . . . . . . . 35 SECTION 5.14 PUBLIC UTILITY HOLDING COMPANY ACT. . . . . . . . . . . 35 ARTICLE VI COVENANTS. . . . . . . . . . . . . . . . 35 SECTION 6.1 INFORMATION. . . . . . . . . . . . . . . . . . . . . . . 35 SECTION 6.2 PAYMENT OF TAXES; PRESERVATION OF CORPORATE EXISTENCE AND FRANCHISES; MAINTENANCE OF PROPERTIES; COMPLIANCE WITH LAWS; MAINTENANCE OF INSURANCE . . . . . . . . . . . . . . . . . 37 SECTION 6.3 LIMITATION ON DEBT . . . . . . . . . . . . . . . . . . . 38 SECTION 6.4 INVESTMENTS. . . . . . . . . . . . . . . . . . . . . . . 39 SECTION 6.5 NEGATIVE PLEDGE. . . . . . . . . . . . . . . . . . . . . 39 SECTION 6.6 CONSOLIDATIONS, MERGERS AND SALES OF ASSETS. . . . . . . 41 SECTION 6.7 CONSOLIDATED TOTAL DEBT RATIO. . . . . . . . . . . . . . 41 SECTION 6.8 CONSOLIDATED FIXED CHARGE RATIO. . . . . . . . . . . . . 41 SECTION 6.9 MAINTENANCE OF NET WORTH . . . . . . . . . . . . . . . . 42 SECTION 6.10 LIMITATION ON DIVIDENDS, ETC. . . . . . . . . . . . . . 42 SECTION 6.11 STATUS. . . . . . . . . . . . . . . . . . . . . . . . . 42 SECTION 6.12 AMENDMENTS TO SECOND MORTGAGE BONDS, ETC. . . . . . . . 42 SECTION 6.13 INTEREST RATE PROTECTION. . . . . . . . . . . . . . . . 43 SECTION 6.14 LIMITATION ON OPTIONAL PREPAYMENTS OF CERTAIN DEBT. . . 43 SECTION 6.15 RIGHTS OF INSPECTION. . . . . . . . . . . . . . . . . . 43 SECTION 6.16 MATTERS OF ENVIRONMENTAL CONCERN. . . . . . . . . . . . 43 ARTICLE VII DEFAULTS . . . . . . . . . . . . . . . . 44 SECTION 7.1 EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . 44 SECTION 7.2 NOTICE OF EVENT OF DEFAULT . . . . . . . . . . . . . . . 46 ARTICLE VIII THE ADMINISTRATIVE AGENT . . . . . . . . . . . . 46 SECTION 8.1 APPOINTMENT. . . . . . . . . . . . . . . . . . . . . . . 47 SECTION 8.2 DELEGATION OF DUTIES . . . . . . . . . . . . . . . . . . 47 SECTION 8.3 EXCULPATORY PROVISIONS . . . . . . . . . . . . . . . . . 47 SECTION 8.4 RELIANCE BY ADMINISTRATIVE AGENT . . . . . . . . . . . . 47 SECTION 8.5 NOTICE OF EVENT OF DEFAULT . . . . . . . . . . . . . . . 48 SECTION 8.6 NON-RELIANCE ON ADMINISTRATIVE AGENT AND OTHER BANKS . . 48 SECTION 8.7 INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . 48 SECTION 8.8 ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY. . . . . 49 SECTION 8.9 SUCCESSOR ADMINISTRATIVE AGENT . . . . . . . . . . . . . 49 SECTION 8.10 CO-AGENTS . . . . . . . . . . . . . . . . . . . . . . . 49 ARTICLE IX MISCELLANEOUS. . . . . . . . . . . . . . . 50 SECTION 9.1 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . 50 SECTION 9.2 NO WAIVERS; CUMULATIVE REMEDIES. . . . . . . . . . . . . 50 SECTION 9.3 EXPENSES; DOCUMENTARY TAXES. . . . . . . . . . . . . . . 50 SECTION 9.4 ADJUSTMENTS. . . . . . . . . . . . . . . . . . . . . . . 51 SECTION 9.5 AMENDMENTS AND WAIVERS . . . . . . . . . . . . . . . . . 51 SECTION 9.6 SUCCESSORS AND ASSIGNS; PARTICIPATIONS; PURCHASING BANKS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 ARTICLE X. . . . . . . . . . . . . . . . 54 SECTION 10.1 COUNTERPARTS; EFFECTIVENESS . . . . . . . . . . . . . . 55 ARTICLE XI. . . . . . . . . . . . . . . . 55 SECTION 11.1 SECTION HEADINGS. . . . . . . . . . . . . . . . . . . . 55 ARTICLE XII . . . . . . . . . . . . . . . 55 SECTION 12.1 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . 55 ARTICLE XIII . . . . . . . . . . . . . . . 55 SECTION 13.1 SUBMISSION TO JURISDICTION; WAIVERS . . . . . . . . . . 55 SCHEDULE I Commitment Schedule SCHEDULE II Address Schedule EXHIBIT A-1 Form of Revolving Credit Note EXHIBIT A-2 Form of Swing Line Note EXHIBIT B Form of Term Note EXHIBIT C Closing Certificate EXHIBIT D Form of Assignment and Acceptance EXHIBIT E-1 Opinion to be Delivered by General Counsel of Company EXHIBIT E-2 Opinion of Winthrop, Stimson EXHIBIT E-3 Opinion of Eaton, Peabody EXHIBIT F Form of Pledge Agreement EXHIBIT G List of Subsidiaries of Company EXHIBIT H List of Guarantees EXHIBIT I 1994 Audited Financial Statement of the Company (from the Company's 1994 Annual Report on Form 10-K) CREDIT AGREEMENT dated as of June 30, 1995 among Bangor Hydro-Electric Company, a Maine corporation (the "COMPANY"), the several banks from time to time parties to this Agreement (individually, a "BANK" and collectively, the "BANKS"), Chemical Bank, as administrative agent for the Banks, and Fleet Bank of Maine and The First National Bank of Boston, as co- agents (in such capacity, the "CO-AGENTS"). The parties hereto hereby agree as follows: ARTICLE I DEFINITIONS SECTION 1.1 (A) DEFINITIONS. The following terms, as used herein, have the following meanings: "ADMINISTRATIVE AGENT": Chemical Bank, together with its affiliates, as the arranger of the Commitments and as the agent for the Banks under this Agreement and the other Loan Documents. "AGGREGATE OUTSTANDING REVOLVING EXTENSIONS OF CREDIT": as to any Revolving Credit Bank at any time, an amount equal to the sum of (a) the aggregate principal amount of all Revolving Credit Loans made by such Bank then outstanding, (b) such Bank's Revolving Credit Commitment Percentage of the L/C Obligations then outstanding, and (c) such Bank's Revolving Credit Commitment Percentage of the aggregate principal amount of all Swing Line Loans then outstanding. "AGREEMENT": this Credit Agreement, as amended, supplemented or modified from time to time. "APPLICABLE BASE RATE MARGIN": with respect to each Base Rate Loan at any date, the applicable percentage per annum set forth below based upon the Status on such date: Level I Level II Level III Level IV Level V Status Status Status Status Status ------- -------- --------- -------- ------- 0.00% 0.25% 0.75% 1.00% 1.50% "APPLICABLE EURODOLLAR MARGIN": with respect to each Eurodollar Loan at any date, the applicable percentage per annum set forth below based upon the Status on such date: Level I Level II Level III Level IV Level V Status Status Status Status Status ------- -------- --------- -------- ------- 0.75% 1.25% 1.75% 2.00% 2.50% "APPLICATION": an application, in such form as the Issuing Bank may specify from time to time, requesting the Issuing Bank to open a Letter of Credit. "ASSIGNMENT AND ACCEPTANCE AGREEMENT": an Assignment and Acceptance Agreement, substantially in the form of Exhibit D. "AVAILABLE REVOLVING CREDIT COMMITMENT": as to any Revolving Credit Bank, at a particular time, an amount equal to the excess, if any, of (a) the amount of such Bank's Revolving Credit Commitment at such time over (b) such Bank's Aggregate Outstanding Revolving Extensions of Credit at such time; PROVIDED, that in calculating any Bank's Aggregate Outstanding Revolving Extensions of Credit for the purpose of determining such Bank's Available Revolving Credit Commitment pursuant to Section 2.5, the aggregate unpaid principal amount of Swing Line Loans then outstanding shall be deemed to be zero. "BASE RATE": for any day, a rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate in effect on such day plus 1% and (c) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. For purposes hereof: "PRIME RATE" shall mean the rate of interest per annum publicly announced from time to time by Chemical Bank as its prime rate in effect at its principal office in New York City (the Prime Rate not being intended to be the lowest rate of interest charged by Chemical Bank in connection with extensions of credit to debtors); "BASE CD RATE" shall mean the sum of (a) the product of (i) the Three-Month Secondary CD Rate and (ii) a fraction, the numerator of which is one and the denominator of which is one minus the CD Reserve Percentage and (b) the CD Assessment Rate; "THREE-MONTH SECONDARY CD RATE" shall mean, for any day, the secondary market rate for three-month certificates of deposit reported as being in effect on such day (or, if such day shall not be a Business Day, the next preceding Business Day) by the Board through the public information telephone line of the Federal Reserve Bank of New York (which rate will, under the current practices of the Board, be published in Federal Reserve Statistical Release H.15(519) during the week following such day), or, if such rate shall not be so reported on such day or such next preceding Business Day, the average of the secondary market quotations for three-month certificates of deposit of major money center banks in New York City received at approximately 10:00 A.M., New York City time, on such day (or, if such day shall not be a Business Day, on the next preceding Business Day) by the Administrative Agent from three New York City negotiable certificate of deposit dealers of recognized standing selected by it; "CD ASSESSMENT RATE" shall mean, for any day, the annual assessment rate in effect on such day which is payable by a member of the Bank Insurance Fund maintained by the FDIC classified as well-capitalized and within supervisory subgroup "A" (or a comparable successor assessment risk classification) within the meaning of 12 C.F.R. Section 327.3(d) (or any successor provision) to the FDIC for the FDIC's insuring time deposits at offices of such institution in the United States; "CD RESERVE PERCENTAGE" shall mean, for any day, that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board, for determining the maximum reserve requirement for a Depositary Institution (as defined in Regulation D of the Board) in respect of new non-personal time deposits in Dollars having a maturity of 30 days or more; and "FEDERAL FUNDS EFFECTIVE RATE" shall mean, for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for the day of such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by it. If for any reason the Administrative Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Base CD Rate or the Federal Funds Effective Rate, or both, for any reason, including the inability or failure of the Administrative Agent to obtain sufficient quotations in accordance with the terms thereof, the Base Rate shall be determined without regard to clause (b) or (c), or both, of the first sentence of this definition, as appropriate, until the circumstances giving rise to such inability no longer exist. Any change in the Base Rate due to a change in the Prime Rate, the Three-Month Secondary CD Rate, the CD Reserve Percentage, the CD Assessment Rate or the Federal Funds Effective Rate shall be effective as of the opening of business on the effective day of such change in the Prime Rate, the Three-Month Secondary CD Rate, the CD Reserve Percentage, the CD Assessment Rate or the Federal Funds Effective Rate, respectively. "BASE RATE LOANS": loans hereunder at such time as they are being made and/or being maintained at a rate of interest based upon the Base Rate (including Swing Line Loans). "BOARD": the Board of Governors of the Federal Reserve System (or any successor). "BORROWING DATE": any Business Day specified in a notice pursuant to Section 2.2, 2.4 or 2.9 as a date on which the Company requests the relevant Banks to make Revolving Credit Loans, Swing Line Loans or Term Loans, as the case may be, hereunder. "BUSINESS DAY": a day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to close. "CAPITAL STOCK": any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation), and any and all warrants or options to purchase any of the foregoing. "CASH": with respect to the Company, the sum of (i) cash on hand and all money in demand deposit or similar accounts; and (ii) Temporary Cash Investments. "CODE": the Internal Revenue Code of 1986, as amended from time to time. "COLLATERAL BONDS": as defined in Section 4.2(b). "COMMISSION": the Public Utilities Commission of the State of Maine. "Commitment": as to each Bank, the sum of the Term Loan Commitment and the Revolving Credit Commitment of such Bank. "COMMITMENT FEE RATE": for any day, the rate per annum set forth below opposite the Status in effect on such day: Commitment Fee Status Rate ---------------- -------------- Level I Status 0.250% Level II Status 0.375% Level III Status 0.500% Level IV Status 0.500% Level V Status 0.625% "COMMONLY CONTROLLED ENTITY": an entity, whether or not incorporated, which is under common control with the Company within the meaning of Section 414(b) or (c) of the Code. "COMPANY'S 1994 FORM 10-K": the Company's annual report on Form 10-K for 1994, as filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended. "COMPANY'S FORM 10-Q": the Company's quarterly reports on Form 10-Q, as filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended. "CONSOLIDATED ADJUSTED EBIT": for any period, Consolidated Net Income for such period (a) PLUS, without duplication and to the extent reflected as a charge in the statement of such Consolidated Net Income for such period, the sum of (i) total income tax expense and (ii) interest expense, amortization or writeoff of debt discount and debt issuance costs and commissions, discounts and other fees and charges associated with Debt (including the Loans) and (b) MINUS, to the extent included in Consolidated Net Income for such period, the amount which would appear in accordance with GAAP on a statement of income of the Company and its consolidated Subsidiaries opposite the heading "Allowance for equity funds used during construction" (or any similar item). "CONSOLIDATED FIXED CHARGES": for any period, (a) total cash interest expense (including that attributable to capital lease obligations) of the Company and its Subsidiaries for such period with respect to all outstanding Debt of the Company and its Subsidiaries, including, without limitation, all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing, determined on a consolidated basis in accordance with GAAP PLUS (b) to the extent subtracted in arriving at the amount described in clause (a) above, the amount which would appear in accordance with GAAP on a statement of income of the Company and its consolidated Subsidiaries for such period opposite the heading "Allowance for borrowed funds used during construction" (or any similar item). "CONSOLIDATED FIXED CHARGE RATIO": for any period, the ratio of (a) Consolidated Adjusted EBIT for such period to (b) Consolidated Fixed Charges for such period. "CONSOLIDATED NET INCOME": for any period, the net income (or loss) of the Company and its Subsidiaries, determined on a consolidated basis in accordance with GAAP; PROVIDED that there shall be excluded (a) the income (or deficit) of any Person accrued prior to the date it becomes a Subsidiary or is merged into or consolidated with the Company or any of its Subsidiaries, (b) the income (or deficit) of any Person (other than a Subsidiary) in which the Company or any of its Subsidiaries has an ownership interest, except to the extent that any such income is actually received by the Company or such Subsidiary in the form of dividends or similar distributions and (c) the undistributed earnings of any Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary is not at the time permitted by the terms of any contractual obligation or any law, rule, regulation or order applicable to such Subsidiary. "CONSOLIDATED NET WORTH": at any date of determination, with respect to any Person, (a) the stated capital of the common stock of such Person PLUS (b) additional paid-in capital in respect of such common stock PLUS (c) retained earnings (or minus accumulated deficit) of such Person, determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED TOTAL CAPITALIZATION": at any date of determination, the sum of (a) Consolidated Total Debt at such date and (b) the aggregate of all amounts which would appear in accordance with GAAP on a balance sheet of the Company and its consolidated Subsidiaries at such date opposite the headings "Common stock investment," "Preferred stock" and "Preferred stock subject to mandatory redemption" (or any similar items). "CONSOLIDATED TOTAL DEBT": at any date of determination, the aggregate principal amount of all Debt which would appear in accordance with GAAP on a balance sheet of the Company and its consolidated Subsidiaries at such date. "CONSOLIDATED TOTAL DEBT RATIO": at any date of determination, the ratio of (a) Consolidated Total Debt at such date to (b) Consolidated Total Capitalization at such date. "DEBT": at any date, as to any Person, (a) all indebtedness or other obligations of such Person for borrowed money, for letters of credit opened for the account of such Person, or for the deferred purchase price of property or services, or with respect to obligations pursuant to capitalized leases, (b) all indebtedness or other obligations of any other Person for borrowed money or for the deferred purchase price of property or services, the payment or collection of which such Person has guaranteed (except by reason of endorsement for collection and endorsements in the ordinary course of business) or in respect of which such Person is liable, contingently or otherwise, including, without limitation, liability by way of agreement to purchase, to provide funds for payment, to supply funds to or otherwise to invest in such other Person, or otherwise to assure a creditor against loss, and (c) all indebtedness or other obligations of any other Person for borrowed money or for the deferred purchase price of property or services secured by (or for which the holder of such indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage, deed of trust, pledge, lien, security interest or other charge or encumbrance upon or in property (including, without limitation, accounts and contract rights) owned by such Person, whether or not such Person has assumed or become liable for the payment of such indebtedness or obligations. It is understood that Interest Rate Protection Agreements and commodities hedge agreements shall not constitute Debt for the purposes of this Agreement. "DEFAULT": any of the events specified in Section 7.1, whether or not any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied. "DISCLOSURE DOCUMENTS": as defined in Section 5.4(a). "DOLLARS" and "$": dollars in lawful currency of the United States of America. "DOMESTIC LENDING OFFICE": initially, the office of each Bank designated as such in Schedule II hereto; thereafter, such other office of such Bank, if any, located within the United States which shall be making or maintaining Base Rate Loans. "EFFECTIVE DATE": June 30, 1995. "ERISA": the Employee Retirement Income Security Act of 1974, as amended. "EURODOLLAR LENDING OFFICE": initially, the office of each Bank designated as such in Schedule II hereto; thereafter, such other office of such Bank, if any, which shall be making or maintaining Eurodollar Loans. "EURODOLLAR LOANS": loans hereunder at such time as they are made and/or being maintained at a rate of interest based on the LIBO Rate. "EURODOLLAR TRANCHE": the collective reference to Eurodollar Loans made by the Revolving Credit Banks or the Term Loan Banks, as the case may be, the then current Interest Periods with respect to all of which begin on the same date and end on the same later date (whether or not such Loans shall originally have been made on the same day). "EVENT OF DEFAULT": as defined in Section 7.1. "EXCHANGE ACT": the Securities Exchange Act of 1934, as amended, including the regulations promulgated thereunder, from time to time. "EXISTING CREDIT AGREEMENT": as defined in Section 4.2(d). "FAME LOAN AGREEMENT": the Loan Agreement dated as of June 1, 1995 between the Company and the Finance Authority of Maine. "GAAP": generally accepted accounting principles in the United States of America in effect from time to time; provided, that all computations determining compliance with Section 6, including definitions used therein, shall utilize generally accepted accounting principles in effect at the time of the preparation of, and in conformity with those used to prepare, the financial statements of the Company in respect of the fiscal year ended December 31, 1994 delivered pursuant to Section 5.4(a). "GENERAL AND REFUNDING MORTGAGE INDENTURE": The General and Refunding Mortgage Indenture and Deed of Trust dated as of June 1, 1995 between the Company and Chemical Bank, as trustee. "GUARANTEE": as to any Person, any obligations, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt or lease payments of any other Person or otherwise in any manner assuring the holder of any Debt or lease of any other Person against loss (whether by agreement to keep-well, to purchase assets, goods or services, or to take-or-pay or otherwise). The term "guarantee" used as a verb has a correlative meaning. "INTEREST PAYMENT DATE": (a) as to any Base Rate Loan, the last day of each March, June, September and December, commencing on the first of such days to occur after a Base Rate Loan is made or Eurodollar Loans are converted to Base Rate Loans, (b) as to any Eurodollar Loan, in respect of which the Company has selected an Interest Period of one, two or three months, the last day of such Interest Period and (c) as to any Eurodollar Loan in respect of which the Company has selected a longer Interest Period than the periods described in clause (b), each day which is three months, or a whole multiple thereof, after the first day of such Interest Period and the last day of such Interest Period. "INTEREST PERIOD": (a) initially, the period commencing on the Borrowing Date or the conversion date, as the case may be, with respect to each Eurodollar Loan and ending one, two, three or six months thereafter, as selected by the Company in its notice of borrowing as provided in Section 2.2 or 2.9 or its notice of conversion as provided in Section 2.14; and (b) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to each Eurodollar Loan and ending one, two, three or six months thereafter, as selected by the Company by irrevocable notice to the Administrative Agent not less than three Working Days prior to the last day of the then current Interest Period with respect to such Eurodollar Loan; PROVIDED THAT, the foregoing provisions relating to Interest Periods are subject to the following: (A) if any Interest Period pertaining to a Eurodollar Loan would otherwise end on a day which is not a Working Day, that Interest Period shall be extended to the next succeeding Working Day unless the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Working Day; (B) any Interest Period that would otherwise extend beyond the Termination Date shall end on the Termination Date; (C) if the Company shall fail to give notice as provided above, the Company shall be deemed to have selected a Base Rate Loan to replace the affected Eurodollar Loan; (D) any Interest Period pertaining to a Eurodollar Loan that begins on the last Working Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Working Day of a calendar month; and (E) the Company shall select Interest Periods so as not to require a payment or prepayment of any Eurodollar Loan during an Interest Period for such Loan. "INTEREST RATE PROTECTION AGREEMENT": any interest rate protection agreement, interest rate swap, interest rate cap or other interest rate hedge arrangement. "INVESTMENT": any investment in any Person, whether by means of share purchase, loan, capital contribution or otherwise. "ISSUING BANK": Chemical Bank, in its capacity as issuer of any Letter of Credit. "L/C COMMITMENT": $5,000,000. "L/C FEE PAYMENT DATE": the last day of each March, June, September and December. "L/C OBLIGATIONS": at any time, an amount equal to the sum of (a) the aggregate then undrawn and unexpired amount of the then outstanding Letters of Credit and (b) the aggregate amount of drawings under Letters of Credit which have not then been reimbursed pursuant to Section 3.5(a). "L/C PARTICIPANTS": the collective reference to all Revolving Credit Banks other than the Issuing Bank. "LETTERS OF CREDIT": as defined in Section 3.1(a). "LEVEL I STATUS": exists at any date if, at such date, the Company has a long-term senior secured debt rating (whether or not published) of BBB or better by S&P AND, unless the Company is then unrated by Moody's, Baa2 or better by Moody's. "LEVEL II STATUS": exists at any date if, at such date, Level I Status does not exist and the Company has a long-term senior secured debt rating (whether or not published) of BBB- or better by S&P AND, unless the Company is then unrated by Moody's, Baa1 or better by Moody's. "LEVEL III STATUS": exists at any date if, at such date, neither Level I Status nor Level II Status exists and the Company has a long- term senior secured debt rating (whether or not published) of BB+ or better by S&P AND, unless the Company is then unrated by Moody's, Ba1 or better by Moody's. "LEVEL IV STATUS": exists at any date if, at such date, neither Level I Status, Level II Status nor Level III Status exists and the Company has a long-term senior secured debt rating (whether or not published) of BB or better by S&P AND, unless the Company is then unrated by Moody's, Ba2 or better by Moody's. "LEVEL V STATUS": exists at any date if, at such date, none of Level I Status, Level II Status, Level III Status or Level IV Status exists. "LIBO RATE": with respect to each Interest Period pertaining to Eurodollar Loans, the rate per annum at which the Administrative Agent's Eurodollar Lending Office is offered Dollar deposits two Working Days prior to the beginning of such Interest Period in the interbank eurodollar market where the foreign currency and exchange operations of such Eurodollar Lending Office are customarily conducted at 10:00 a.m., New York time, for delivery on the first day of such Interest Period for the number of days comprised therein and in an amount equal to the amount of the Eurodollar Loan of the Administrative Agent to be outstanding during such Interest Period, divided by (b) a number equal to 1.00 minus the aggregate of the rates (expressed as a decimal fraction) of reserve requirements current on the date two Working Days prior to the beginning of such Interest Period (including, without limitation, basic, supplemental, marginal and emergency reserves under any regulations of the Board or other governmental authority having jurisdiction with respect thereto), as now and from time to time hereafter in effect, dealing with reserve requirements prescribed for eurocurrency funding (currently referred to as "Eurocurrency liabilities" in Regulation D of the Board) maintained by a member bank of such System (the "EUROCURRENCY RESERVE REQUIREMENTS") (such LIBO Rate to be adjusted to the nearest or next higher 1/100 of one percent). "LIEN": with respect to any asset, (i) any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset or (ii) the interest of a vendor or lessor under any conditional sale agreement, financing lease or other title retention agreement relating to such asset. "LOANS": any loan made by any Bank hereunder. "LOAN AGREEMENT": the Loan Agreement dated as of December 1, 1983 between the Company and the Industrial Development Authority of the State of New Hampshire, as such agreement may be amended from time to time. "LOAN DOCUMENTS": the collective reference to this Agreement, the Notes, the Letters of Credit, the Applications, the Pledge Agreement, the Mortgage, the Supplemental Indenture and the Collateral Bonds. "MAINE YANKEE/MEPCO GUARANTEES": the obligations of the Company with respect to its status as a stockholder and sponsor of Maine Yankee Atomic Power Company ("MAINE YANKEE") and Maine Electric Power Company, Inc. ("MEPCO"), as more particularly set forth in Exhibit H. "MAJORITY BANKS": at a particular time, the holders of at least 51% of the sum of (a) the aggregate unpaid principal amount of the Term Loans and (b) the aggregate Revolving Credit Commitments (or if the Revolving Credit Commitments have been terminated, the Aggregate Outstanding Revolving Extensions of Credit). "MATERIAL ADVERSE EFFECT": a material adverse effect on (a) the business, operations, property, condition (financial or otherwise) or prospects of the Company and its Subsidiaries, taken as a whole, or (b) the validity or enforceability of (i) this Agreement or any of the other Loan Documents or (ii) the rights or remedies of the Administrative Agent or the Banks hereunder or thereunder. "MOODY'S": Moody's Investors Service, Inc. and its successors. "MORTGAGE": the Mortgage and Deed of Trust of the Company to City Bank Farmers Trust Company (of which Citibank, N.A., a national banking association, is the successor), as trustee, dated as of July 1, 1936, as heretofore and hereafter supplemented and amended. "NOTES": the collective reference to the Revolving Credit Notes, the Swing Line Note and the Term Notes. "PBGC": the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA. "PERSON": an individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority or other entity of whatever nature. "PLAN": at any time, any employee benefit plan which is covered by ERISA and in respect of which the Company or a Commonly Controlled Entity is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "PLEDGE AGREEMENT": the Pledge Agreement to be executed and delivered by the Company, substantially in the form of Exhibit F, as the same may be amended, supplemented or otherwise modified from time to time. "PREFERRED STOCK": as defined in Section 6.10(b). "PURCHASING BANKS": as defined in Section 9.6(c). "REGISTER": as defined in Section 9.6(d). "REIMBURSEMENT OBLIGATIONS": the obligation of the Company to reimburse the Issuing Bank pursuant to Section 3.5(a) for amounts drawn under Letters of Credit. "REPORTABLE EVENT": any of the events set forth in Section 4043(b) of ERISA or the regulations thereunder. "REQUIRED BANKS": at a particular time, the holders of at least 60% of the sum of (a) the aggregate unpaid principal amount of the Term Loans and (b) the aggregate Revolving Credit Commitments (or, if the Revolving Credit Commitments have been terminated, the Aggregate Outstanding Revolving Extensions of Credit). "REVOLVING CREDIT BANKS": each Bank which has a Revolving Credit Commitment or which has made a Revolving Credit Loan. "REVOLVING CREDIT COMMITMENT": as to any Bank, its obligation, if any to make Revolving Credit Loans to, and/or issue or participate in Letters of Credit issued on behalf of, the Company in an aggregate amount not to exceed at any one time outstanding the amount set forth opposite such Revolving Credit Bank's name in Schedule I under the heading "Revolving Credit Commitment" or, in the case of any Bank that is a Purchasing Bank, the amount of the assigning Bank's Revolving Credit Commitment assigned to such Purchasing Bank pursuant to Section 9.6(c) (in each case as such amount may be adjusted from time to time as provided herein). "REVOLVING CREDIT COMMITMENT PERCENTAGE": as to any Revolving Credit Bank, the percentage of the aggregate Revolving Credit Commitments constituted by its Revolving Credit Commitment (or, if the Revolving Credit Commitments have terminated, the percentage of the aggregate amount of the Aggregate Outstanding Revolving Extensions of Credit of all Revolving Credit Banks then constituted by such Bank's Aggregate Outstanding Revolving Extensions of Credit (in each case determined, in the case of clauses (b) and (c) of the definition thereof, on the basis of the Revolving Credit Commitment Percentages in effect immediately prior to such termination)). "REVOLVING CREDIT COMMITMENT PERIOD": the period from and including the date hereof to but not including the Termination Date or such earlier date as the Revolving Credit Commitments shall terminate as provided herein. "REVOLVING CREDIT NOTE": a note of the Company substantially in the form of Exhibit A-1 hereto. "SECOND MORTGAGE BONDS": the bonds issued pursuant to the General and Refunding Mortgage Indenture. "S&P": Standard & Poor's Ratings Group and its successors. "SPECIFIED LETTER OF CREDIT" : any Letter of Credit issued for the benefit of the trustee under the Loan Agreement. "STATUS": the existence of Level I Status, Level II Status, Level III Status, Level IV Status or Level V Status, as the case may be. "SUBSIDIARY": as to any Person, a corporation, partnership or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of the Company. "SUBSTANTIAL PART": with respect to any Person, refers to assets sold, leased or otherwise transferred pursuant to any one or more transactions (whether or not related) which, in the aggregate, represent more than 10% of the total assets of such Person as of December 31, 1994. "SUPPLEMENTAL INDENTURE": as defined in Section 4.2(b). "SWING LINE COMMITMENT": the Swing Line Bank's obligation to make Swing Line Loans pursuant to Section 2.4. "SWING LINE BANK": as defined in Section 2.4(a). "SWING LINE LOANS": as defined in Section 2.4(a). "SWING LINE NOTE": as defined in Section 2.4(h). "TEMPORARY CASH INVESTMENT": any Investment in (i) direct obligations of the United States or any agency thereof, or obligations guaranteed by the United States or any agency thereof, (ii) commercial paper rated in the highest grade by a nationally recognized credit rating agency or (iii) time deposits with, including certificates of deposit issued by, any bank or trust company organized under the laws of the United States or any state thereof and having capital, surplus and undivided profits aggregating at least $500,000,000, PROVIDED in each case that such Investment matures within one year from the date of acquisition thereof by the Company or a Subsidiary. "TERMINATION DATE": June 30, 2000. "TERM LOAN BANK": each Bank which has a Term Loan Commitment or which has made a Term Loan. "TERM LOAN COMMITMENT": as to any Bank, the obligation of such Bank, if any, to make Term Loans to the Company hereunder in an aggregate principal amount not to exceed the amount set forth under the heading "Term Loan Commitment" opposite such Bank's name on Schedule I, or in the case of any Bank that is a Purchasing Bank, the amount of the assigning Bank's Term Loan Commitment assigned to such Purchasing Bank pursuant to Section 9.6(c) (in each case as such amount may be adjusted from time to time as provided herein). The Term Loan Commitment of each Term Loan Bank will automatically be terminated on the Effective Date immediately after the making of any Term Loan by such Bank on such date. "TERM LOAN PERCENTAGE": as to any Term Loan Bank at any time, the percentage which (a) such Bank's Term Loan Commitment the outstanding constitutes of (b) the aggregate Term Loan Commitments then outstanding. "TERM NOTE": a note of the Company substantially in the form of Exhibit B. "TRANSFER EFFECTIVE DATE": as defined in each Assignment and Acceptance Agreement. "TRANSFEREE": as defined in Section 9.6(f). "UNFUNDED VESTED LIABILITIES": with respect to any Plan at any time, the amount (if any) by which (i) the present value of all vested nonforfeitable benefits under such Plan exceeds (ii) the fair market value of all Plan assets allocable to such benefits, all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of the Company or any Subsidiary to the PBGC or the Plan under Title IV of ERISA. "UNIFORM CUSTOMS": the Uniform Customs and Practice for Documentary Credits (1993 Revisions), International Chamber of Commerce Publication No. 500, as the same may be amended from time to time. "WORKING DAY": any day on which dealings in foreign currencies and exchange between banks may be carried on in London, England, and in New York, New York. SECTION 0.2 OTHER DEFINITIONAL PROVISIONS. (a) Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with GAAP. (b) Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in the other Loan Documents or any certificate or other document made or delivered pursuant hereto or thereto. ARTICLE II THE COMMITMENTS SECTION 2.1 REVOLVING CREDIT LOANS. (a) Subject to the terms and conditions hereof, each Revolving Credit Bank severally agrees to make revolving credit loans ("REVOLVING CREDIT LOANS") to the Company from time to time during the Revolving Credit Commitment Period, so long as the Aggregate Outstanding Revolving Extensions of Credit of such Bank shall at no time exceed such Bank's Revolving Credit Commitment. During the Revolving Credit Commitment Period, the Company may use the Revolving Credit Commitments by borrowing, prepaying the Revolving Credit Loans in whole or in part, and reborrowing, all in accordance with the terms and conditions hereof. (b) The Revolving Credit Loans may be (i) Eurodollar Loans, (ii) Base Rate Loans or (iii) a combination thereof, as determined by the Company and notified to the Administrative Agent in accordance with Sections 2.2 and 2.14; PROVIDED that no revolving credit Eurodollar Loan shall be made after the day that is one month prior to the Termination Date. SECTION 2.2 PROCEDURE FOR REVOLVING CREDIT BORROWING. The Company may borrow under the Revolving Credit Commitments during the Revolving Credit Commitment Period on any Working Day if the borrowing is a Eurodollar Loan or on any Business Day if the borrowing is a Base Rate Loan; PROVIDED that the Company shall give the Administrative Agent irrevocable notice (which notice must be received by the Administrative Agent prior to (a) 12:00 Noon (New York City time) three Working Days prior to the requested Borrowing Date, in the case of Eurodollar Loans and (b) 10:00 a.m. (New York City time) on the requested Borrowing Date, in the case of Base Rate Loans, specifying (i) the amount to be borrowed, (ii) the requested Borrowing Date, (iii) whether the borrowing is to be a Eurodollar Loan or a Base Rate Loan or a combination thereof, and (iv) if the borrowing is to be entirely or partly a Eurodollar Loan, the length of the Interest Period for such Eurodollar Loan. Each borrowing pursuant to the Revolving Credit Commitments shall be in an aggregate principal amount of the lesser of (a) $3,000,000 or any larger multiple of $1,000,000 and (b) the sum of the Available Revolving Credit Commitments. Upon receipt of such notice from the Company the Administrative Agent shall, on the Business Day on which such notice is received, notify each Bank thereof. Each Revolving Credit Bank will make the amount of its PRO RATA share of each borrowing available to the Administrative Agent for the account of the Company at the office of the Administrative Agent set forth in Schedule II hereto at 12:00 noon (in the case of the Eurodollar Loans) or 2:00 p.m. (in the case of Base Rate Loans), New York City time, on the Borrowing Date requested by the Company in funds immediately available to the Administrative Agent as the Administrative Agent may direct. The proceeds of all such Loans will then be made available to the Company by the Administrative Agent by crediting the account of the Company specified by the Company to the Administrative Agent. SECTION 2.3 REVOLVING CREDIT NOTES. The Revolving Credit Loans made by each Revolving Credit Bank pursuant hereto shall be evidenced by a promissory note of the Company, substantially in the form of Exhibit A-1 with appropriate insertions (a "REVOLVING CREDIT NOTE"), payable to the order of such Bank, representing the obligation of the Company to pay the lesser of (a) the amount of the Revolving Credit Commitment of such Bank and (b) the aggregate unpaid principal amount of all Revolving Credit Loans made by such Bank, with interest thereon as prescribed in Section 2.13. Each Revolving Credit Bank is hereby authorized to record the date and amount of each Revolving Credit Loan (or conversion) made by such Bank, and the date and amount of each payment or prepayment of principal thereof, and, in the case of Eurodollar Loans, the Interest Period and interest rate with respect thereto, on the schedule annexed to and constituting a part of such Bank's Revolving Credit Note, which recordation shall constitute PRIMA FACIE evidence of the accuracy of the information so recorded, PROVIDED, HOWEVER, that the failure of the holder of such Note to make any recordation, or any error in such recordations, shall not affect the obligations of the Company under such Note. Each Revolving Credit Note shall (a) be dated the Effective Date, (b) be stated to mature on the Termination Date and (c) bear interest for the period from the date thereof to the Termination Date on the unpaid principal amount thereof from time to time outstanding at the applicable interest rate per annum determined as provided in Section 2.13. SECTION 2.4 SWING LINE COMMITMENT. (a) Subject to the terms and conditions hereof, Chemical Bank (in such capacity, the "SWING LINE BANK") agrees to make available to the Company a portion of the credit otherwise available under the Revolving Credit Commitments from time to time during the Revolving Credit Commitment Period by making swing line loans ("SWING LINE LOANS") to the Company in an aggregate principal amount not to exceed $5,000,000 (notwithstanding that the Swing Line Loans outstanding at any time, when aggregated with the Swing Line Bank's other outstanding revolving extensions of credit hereunder, may exceed such Bank's Revolving Credit Commitment then in effect). During the Commitment Period, the Company may use the Swing Line Commitment by borrowing, repaying and reborrowing, all in accordance with the terms and conditions hereof. All Swing Line Loans shall at all times be Base Rate Loans. (b) Whenever the Company desires that the Swing Line Bank make Swing Line Loans under Section 2.4(a), it shall give the Swing Line Bank irrevocable telephonic notice confirmed promptly in writing (which telephonic notice must be received by the Swing Line Bank not later than 2:00 P.M., New York City time, on the proposed Borrowing Date), specifying (a) the amount to be borrowed and (b) the requested Borrowing Date. Each borrowing under the Swing Line Commitment shall be in an amount equal to $100,000 or a whole multiple of $100,000 in excess thereof. Not later than 4:00 P.M., New York City time, on the Borrowing Date specified in a notice in respect of Swing Line Loans, the Swing Line Bank shall make available to the Administrative Agent for the account of the Company at the office of the Administrative Agent specified in Schedule II hereto an amount in immediately available funds equal to the amount of the Swing Line Loan to be made by the Swing Line Bank. The proceeds of such Swing Line Loan will then be made available to the Company on such Borrowing Date by the Administrative Agent crediting the account of the Company on the books of such office with the aggregate of the amounts made available to the Administrative Agent by the Swing Line Bank and in like funds as received by the Administrative Agent. (c) The Swing Line Bank, at any time and from time to time in its sole and absolute discretion may, and, at any time at which there shall be a Swing Line Loan outstanding for more than five Business Days, the Swing Line Bank shall, on behalf of the Company (which hereby irrevocably directs the Swing Line Bank to act on its behalf), upon notice given by the Swing Line Bank no later than 10:00 A.M., New York City time, on the relevant refunding date, request each Revolving Credit Bank to make, and each Revolving Credit Bank hereby agrees to make, a Revolving Credit Loan (which shall be a Base Rate Loan), in an amount equal to such Revolving Credit Bank's Revolving Credit Commitment Percentage of the aggregate amount of the Swing Line Loans (the "REFUNDED SWING LINE LOANS") outstanding on the date of such notice, to refund such Swing Line Loans. Each Revolving Credit Bank shall make the amount of such Revolving Credit Loan available to the Administrative Agent at its office set forth in Schedule II hereto in immediately available funds, no later than 1:00 P.M., New York City time, on the date of such notice. The proceeds of such Revolving Credit Loans shall be distributed by the Administrative Agent to the Swing Line Bank and immediately applied by the Swing Line Bank to repay the Refunded Swing Line Loans. Effective on the day such Revolving Credit Loans are made, the portion of the Swing Line Loans so paid shall no longer be outstanding as Swing Line Loans. (d) The making of any Swing Line Loan hereunder shall be subject to the agreement of the Swing Line Bank in its discretion to make such Swing Line Loan, and, in any event, the satisfaction of the applicable conditions precedent thereto set forth in Section 4. The Swing Line Bank shall notify the Company of its election not to make Swing Line Loans hereunder. (e) If, for any reason, Revolving Credit Loans may not be (as determined by the Administrative Agent in its sole discretion), or are not, made pursuant to Section 2.4(c) to repay Swing Line Loans as required by said Section, then, effective on the date such Revolving Credit Loans would otherwise have been made, each Revolving Credit Bank severally, unconditionally and irrevocably agrees that it shall purchase a participating interest in such Swing Line Loans ("UNREFUNDED SWING LINE LOANS") in an amount equal to the amount of Revolving Credit Loans which would otherwise have been made by such Bank pursuant to Section 2.4(c). Each Revolving Credit Bank will immediately transfer to the Administrative Agent, in immediately available funds, the amount of its participation (the "SWING LINE PARTICIPATION AMOUNT"), and the proceeds of such participation shall be distributed by the Administrative Agent to the Swing Line Bank in such amount as will reduce the amount of the participating interest retained by the Swing Line Bank in its Swing Line Loans to the amount of the Revolving Credit Loans which were to have been made by it pursuant to Section 2.4(c). (f) Whenever, at any time after the Swing Line Bank has received from any Revolving Credit Bank such Bank's Swing Line Participation Amount, the Swing Line Bank receives any payment on account of the Swing Line Loans, the Swing Line Bank will distribute to such Bank its Swing Line Participation Amount (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Bank's participating interest was outstanding and funded and, in the case of principal and interest payments, to reflect such Bank's PRO RATA portion of such payment if such payment is not sufficient to pay the principal of and interest on all Swing Line Loans then due); PROVIDED, HOWEVER, that in the event that such payment received by the Swing Line Bank is required to be returned, such Bank will return to the Swing Line Bank any portion thereof previously distributed to it by the Swing Line Bank. (g) Each Revolving Credit Bank's obligation to make the Loans referred to in Section 2.4(c) and to purchase participating interests pursuant to Section 2.4(e) shall be absolute and unconditional and shall not be affected by any circumstance, including, without limitation, (i) any setoff, counterclaim, recoupment, defense or other right which such Bank or the Company may have against the Swing Line Bank, the Company or any other Person for any reason whatsoever; (ii) the occurrence or continuance of a Default or an Event of Default or the failure to satisfy any of the other conditions specified in Section 4; (iii) any adverse change in the condition (financial or otherwise) of the Company; (iv) any breach of this Agreement or any other Loan Document by the Company or any Bank; or (v) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. (h) The Swing Line Loans made by the Swing Line Bank pursuant hereto shall be evidenced by a promissory note of the Company, substantially in the form of Exhibit A-2 with appropriate insertions (the "SWING LINE NOTE"), payable to the order of the Swing Line Bank, representing the obligation of the Company to pay the amount of the Swing Line Commitment or, if less, the unpaid principal amount of the Swing Line Loans. The Swing Line Bank is authorized to record the date and amount of each Swing Line Loan made by such Bank, and the date and amount of each payment or prepayment of principal thereof, on the schedule annexed to and constituting a part of the Swing Line Note, which recordation shall constitute PRIMA FACIE evidence of the accuracy of the information so recorded, PROVIDED, HOWEVER, that the failure of the holder of such Note to make any recordation, or any error in such recordations, shall not affect the obligations of the Company under such Note. The Swing Line Note shall (a) be dated the Effective Date, (b) be stated to mature on the Termination Date, and (c) bear interest for the period from the date thereof to the Termination Date on the unpaid principal amount thereof from time to time outstanding at the applicable interest rate per annum determined as provided in Section 2.13. SECTION 2.5 COMMITMENT FEE. The Company will pay to the Administrative Agent for the account of the Revolving Credit Banks a commitment fee from and including the date hereof to the Termination Date, computed at a per annum rate equal to the Commitment Fee Rate on the average daily amount of the Available Revolving Credit Commitments during the period for which payment is made. Such commitment fee shall be payable quarterly on the last day of each March, June, September and December and on the Termination Date or such earlier date as the Revolving Credit Commitments shall terminate as provided herein, commencing on the first of such dates to occur after the date hereof. SECTION 2.6 OPTIONAL TERMINATION OR REDUCTION OF REVOLVING CREDIT COMMITMENTS. The Company shall have the right, upon not less than five Business Days' irrevocable notice to the Administrative Agent, to terminate the Revolving Credit Commitments or, from time to time, reduce the amount of the Revolving Credit Commitments, PROVIDED that (i) after giving effect to any such reduction (together with any prepayment of Revolving Credit Loans and Swing Line Loans made on the date of such reduction), the sum of the Aggregate Outstanding Revolving Extensions of Credit of all Revolving Credit Banks then outstanding shall not exceed the aggregate amount of the Revolving Credit Commitments as then reduced and (ii) any such termination of the Revolving Credit Commitments shall be accompanied by prepayment in full of the Revolving Credit Loans and Swing Line Loans then outstanding hereunder, together with accrued interest thereon to the date of such prepayment, the termination of any Letter of Credit then outstanding, and the payment of any unpaid commitment fee then accrued hereunder. Any such reduction shall be in an amount of $5,000,000 or any larger multiple of $1,000,000 and shall reduce permanently the amount of the Revolving Credit Commitments then in effect. SECTION 2.7 TERM LOANS. Subject to the terms and conditions hereof, each Term Loan Bank severally agrees to make a Term Loan to the Company on the Effective Date in an amount not to exceed the amount of the Term Loan Commitment of such Bank. The Term Loans may be (a) Eurodollar Loans, (b) Base Rate Loans, (c) or a combination thereof, as determined by the Company and notified to the Administrative Agent in accordance with Sections 2.9 and 2.14; PROVIDED, that no term Eurodollar Loan shall be made after the day that is one month prior to the Termination Date. SECTION 2.8 TERM NOTES. The Term Loan made by each Term Loan Bank pursuant hereto shall be evidenced by a promissory note of the Company, substantially in the form of Exhibit B, with appropriate insertions therein as to date and principal amount, payable to the order of such Bank and representing the obligation of the Company to pay the lesser of (a) the initial amount of the Term Loan of such Bank and (b) the unpaid principal amount from time to time of such Bank's Term Loan, with interest thereon as prescribed in Section 2.13. Each Term Loan Bank is hereby authorized to record the date and amount of each Term Loan (or conversion) made by such Bank, and the date and amount of each payment or prepayment of principal of such Bank's Term Loan, and, in the case of Eurodollar Loans, the Interest Period and interest rate with respect thereto, on the schedule annexed to and constituting a part of its Term Note, and any such recordation shall constitute PRIMA FACIE evidence of the accuracy of the information so recorded; provided, however, that the failure of the holder of such Note to make any recordation or any error in such recordations shall not effect the obligations of the Company under such Note. Each Term Note shall (a) be dated the Effective Date, (b) be stated to mature as provided in Section 2.11, and (c) bear interest for the period from the date thereof on the unpaid principal amount thereof at the applicable interest rate per annum specified in Section 2.13. SECTION 2.9 PROCEDURE FOR TERM LOAN BORROWING. The Company shall give the Administrative Agent irrevocable notice (which notice must be received by the Administrative Agent prior to (a) 12:00 Noon (New York City time) three Working Days prior to the Effective Date if the Term Loans are to be initially Eurodollar Loans, or (b) 10:00 a.m. (New York City time) one Business Day prior to the Effective Date if the Term Loans are to be initially Base Rate Loans, requesting that the Term Loan Banks make the Term Loans on the Effective Date and specifying (i) the amount of the borrowing, not to exceed the aggregate amount of the Term Loan Commitments, and (ii) whether the Term Loans are to be initially Eurodollar Loans or Base Rate Loans or a combination thereof. Not later than 12:00 noon, New York City time, on the Effective Date, each Term Loan Bank shall make available to the Administrative Agent at its office specified in Schedule II hereto the amount of such Bank's PRO RATA share of the borrowing in immediately available funds. The proceeds of all such Term Loans will be made available to the Company by the Administrative Agent at the office of the Administrative Agent specified in Schedule II hereto by crediting the account of the Company on the books of such office of the Administrative Agent with the aggregate of the amount made available to the Administrative Agent by the Term Loan Banks and in like funds as received by the Administrative Agent. SECTION 2.10 OPTIONAL PREPAYMENTS. The Company may on the last day of the relevant Interest Period if the Loans to be prepaid are in whole or in part Eurodollar Loans, or at any time and from time to time if the Loans to be prepaid are Base Rate Loans prepay such Loans, in whole or in part, without premium or penalty, upon at least three Business Days' irrevocable notice to the Administrative Agent, specifying (i) the date and amount of prepayment; (ii) whether the prepayment is of Eurodollar Loans or Base Rate Loans or a combination thereof; and (iii) if of a combination thereof the amount of prepayment allocable to each. Upon receipt of such notice the Administrative Agent shall, within one Business Day of the date such notice is received, notify each Bank thereof. If such notice is given, the Company shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein, together with accrued interest to such date on the amount prepaid. Partial prepayments of the Term Loans shall be applied to the installments of principal thereof in the inverse order of maturity. Amounts prepaid on account of the Term Loans may not be reborrowed. Partial prepayments shall be in an aggregate principal amount of $1,000,000, or any multiple thereof (or, in the case of Swing Line Loans, any whole multiple of $100,000); PROVIDED, that at no time may any Eurodollar Tranche be outstanding after such prepayment in an amount less than $3,000,000. SECTION 2.11 MANDATORY REPAYMENTS AND COMMITMENT REDUCTIONS . (a) The Term Loans shall be repaid by the Company in annual installments on the dates listed below and in the aggregate amount for each such installment listed opposite such dates below: INSTALLMENT DATE AGGREGATE INSTALLMENT AMOUNT ---------------- ---------------------------- June 30, 1996 $12,000,000 June 30, 1997 $12,000,000 June 30, 1998 $12,000,000 June 30, 1999 $12,000,000 June 30, 2000 $12,000,000 (b) The Revolving Credit Commitments shall be automatically and permanently reduced on the dates listed below and in the aggregate amount for each such reduction listed opposite such dates below: DATE AGGREGATE COMMITMENT REDUCTION ---------------- ------------------------------ December 31, 1995 $1,000,000 June 30, 1996 $2,000,000 December 31, 1996 $3,000,000 If, after giving effect to any reduction of the Revolving Credit Commitments pursuant to this paragraph, the sum of the Aggregate Outstanding Revolving Extensions of Credit of all Revolving Credit Banks exceeds the aggregate Revolving Credit Commitments after giving effect to such reduction, the Company shall, without notice or demand, immediately repay the Revolving Credit Loans and the Swing Line Loans in an aggregate principal amount equal to such excess, together with interest accrued to the date of such prepayment and any amounts payable under Section 2.19. To the extent that, after giving effect to any prepayment of the Loans required by the preceding sentence, the sum of the Aggregate Outstanding Revolving Extensions of Credit of all Revolving Credit Banks exceeds the aggregate Revolving Credit Commitments then in effect, the Company shall, without notice or demand, immediately cash collateralize the then outstanding L/C Obligations in an amount equal to such excess upon terms reasonably satisfactory to the Administrative Agent. SECTION 2.12 COMPUTATION OF INTEREST AND FEES. (a) Interest (other than interest based on the Prime Rate) and commitment fees shall be calculated on the basis of a 360-day year for the actual days elapsed; and interest based on the Prime Rate shall be calculated on the basis of a 365- (or 366-, as the case may be) day year for the actual days elapsed. The Administrative Agent shall as soon as practicable notify the Company and the Banks of each determination of a LIBO Rate. Any change in the interest rate on a Loan resulting from a change in the Base Rate or the Eurocurrency Reserve Requirements shall become effective as of the opening of business on the day on which such change in the Base Rate or the Eurocurrency Reserve Requirements shall become effective. The Administrative Agent shall as soon as practicable notify the Company and the Banks of the effective date and the amount of each such change. (b) Each determination of an interest rate by the Administrative Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Company and the Banks in the absence of manifest error. SECTION 2.13 INTEREST RATE AND PAYMENT DATES. (a) The Eurodollar Loans shall bear interest for each Interest Period with respect thereto on the unpaid principal amount thereof at a rate per annum equal to the LIBO Rate determined for each such Interest Period in accordance with the terms hereof plus the Applicable Eurodollar Margin. (b) The Base Rate Loans shall bear interest on the unpaid principal amount thereof at a rate per annum equal to the Base Rate plus the Applicable Base Rate Margin. (c) If all or a portion of the principal amount of any Eurodollar Loan shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such Loan shall be converted to a Base Rate Loan on the last day of the Interest Period then in effect with respect thereto. Any overdue principal amount of any Eurodollar Loan or Base Rate Loan or overdue commitment fee pursuant to Section 2.5 shall bear interest at a rate per annum which is 2% above the rate which would otherwise be applicable pursuant to Section 2.13(a) or (b) (or, in the case of overdue commitment fees, 2% above the rate specified in Section 2.13(b)) from the date of such non-payment until paid in full (as well after as before judgment). (d) Interest shall be payable in arrears on each Interest Payment Date. SECTION 2.14 CONVERSION OPTIONS. (a) The Company may elect from time to time to convert Eurodollar Loans to Base Rate Loans by giving the Administrative Agent at least two Business Days' prior irrevocable notice of such election, PROVIDED that any such conversion of Eurodollar Loans shall be made only on the last day of an Interest Period with respect thereto. The Company may elect from time to time to convert Base Rate Loans to Eurodollar Loans by giving the Administrative Agent at least three Working Days' prior irrevocable notice of such election. Upon receipt of such notice, the Administrative Agent shall within one Business Day of the date such notice is received, notify each Bank thereof. All or any part of outstanding Eurodollar Loans or Base Rate Loans may be converted as provided herein, PROVIDED that (i) partial conversions shall be in an aggregate principal amount of $1,000,000 or a whole multiple thereof, and (ii) no Loan may be converted into a Eurodollar Loan when any Default or Event of Default has occurred and is continuing; PROVIDED, FURTHER, that at no time may any Eurodollar Tranche be outstanding after such conversion in an amount less than $3,000,000. (b) Any Eurodollar Loans may be continued as such upon the expiration of an Interest Period with respect thereto by compliance by the Company with the applicable notice provisions contained in Section 2.14(a); PROVIDED, that no Eurodollar Loan may be continued as such when any Default or Event of Default has occurred and is continuing, but such Loans shall be automatically converted to a Base Rate Loan on the last day of the Interest Period then in effect with respect thereto; the Administrative Agent shall notify the Banks promptly that such automatic conversion will occur. (c) Each continuation of or conversion into a Eurodollar Loan shall constitute a representation and warranty by the Company as of the date of such continuation or conversion, as the case may be, that no Default or Event of Default has occurred and is continuing. SECTION 2.15 INABILITY TO DETERMINE INTEREST RATE. In the event that: (i) the Administrative Agent shall have determined (which determination shall be conclusive and binding upon the Company) that by reason of circumstances affecting the interbank eurodollar market, adequate and reasonable means do not exist for ascertaining the LIBO Rate applicable pursuant to Section 2.13(a) for any Interest Period; or (ii) the Administrative Agent shall have received notice prior to the first day of such Interest Period from Banks constituting the Majority Banks that the interest rate determined pursuant to Section 2.13(a) for such Interest Period does not accurately reflect the cost to such Banks (as conclusively certified by such Banks) of making or maintaining their affected Loans during such Interest Period, with respect to (a) a proposed Loan that the Company has requested be made as a Eurodollar Loan, (b) a Eurodollar Loan that will result from the requested conversion of a Base Rate Loan into a Eurodollar Loan or (c) the continuation of Eurodollar Loans beyond the expiration of the then current Interest Period with respect thereto, the Administrative Agent shall forthwith give notice of such determination, confirmed in writing, to the Company and the Banks at least one day prior to, as the case may be, the requested Borrowing Date for such Eurodollar Loan, the conversion date of such Base Rate Loan or the last day of such Interest Period. If such notice is given (x) any requested Eurodollar Loan shall be made as a Base Rate Loan, (y) any Base Rate Loan that was to have been converted to a Eurodollar Loan shall be continued as a Base Rate Loan, and (z) any outstanding Eurodollar Loan shall be converted, on the last day of the then current Interest Period with respect thereto, to a Base Rate Loan. Until such notice has been withdrawn by the Administrative Agent, no further Eurodollar Loan shall be made nor shall the Company have the right to convert a Base Rate Loan to a Eurodollar Loan. SECTION 2.16 PRO RATA TREATMENT AND PAYMENTS. (a) Each borrowing of Loans (other than Swing Line Loans) by the Company hereunder shall be made, each payment by the Company on account of any commitment fee hereunder shall be allocated by the Administrative Agent, and any reduction of the Commitments shall be allocated by the Administrative Agent, PRO RATA according to the respective Term Loan Percentages or Revolving Credit Commitment Percentages, as the case may be, of the relevant Banks. Each payment (including each prepayment) by the Company on account of principal of and interest on the Term Loans shall be allocated by the Administrative Agent PRO RATA according to the respective outstanding principal amounts of such Term Loans then held by the Term Loan Banks. Each payment (including each prepayment) by the Company on account of principal of and interest on any Revolving Credit Loans shall be allocated by the Administrative Agent PRO RATA according to the respective outstanding principal amounts of such Revolving Credit Loans then held by the Revolving Credit Banks. (b) All payments (including prepayments) to be made by the Company on account of principal, interest and fees shall be made without set off or counterclaim and shall be made to the Administrative Agent on behalf of the Banks at the Administrative Agent's office located at 270 Park Avenue, New York, New York 10017, in lawful money of the United States of America and in immediately available funds. The Administrative Agent shall distribute such payments to the Banks promptly upon receipt in like funds as received. If any payment hereunder (other than payments on the Eurodollar Loans) becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. If any payment on a Eurodollar Loan becomes due and payable on a day other than a Working Day, the maturity thereof shall be extended to the next succeeding Working Day (and interest thereon shall be payable at the then applicable rate during such extension) unless the result of such extension would be to extend such payment into another calendar month in which event such payment shall be made on the immediately preceding Working Day. (c) Unless the Administrative Agent shall have been notified in writing by any Bank prior to a Borrowing Date that such Bank will not make the amount which would constitute its PRO RATA share of the borrowing on such date available to the Administrative Agent, the Administrative Agent may assume that such Bank has made such amount available on such Borrowing Date and the Administrative Agent may, in reliance upon such assumption, make available to the Company a corresponding amount. If such amount is made available to the Administrative Agent on a date after such Borrowing Date, such Bank shall pay to the Administrative Agent upon the demand of the Administrative Agent, an amount equal to the product of (i) the Federal Funds Effective Rate, TIMES (ii) the amount of such Bank's PRO RATA share of such borrowing, TIMES (iii) a fraction the numerator of which is the number of days that elapse from and including such Borrowing Date to the date on which such Bank's PRO RATA share of such borrowing shall have become immediately available to the Administrative Agent and the denominator of which is 365. A certificate of the Administrative Agent submitted to any Bank with respect to any amounts owing under this Section 2.16(c) shall be conclusive, absent manifest error. If such Bank's PRO RATA share is not in fact made available to the Administrative Agent by such Bank within three Business Days of such Borrowing Date, the Administrative Agent shall be entitled to recover such amount with interest thereon at the rate per annum applicable to Base Rate Loans hereunder, on demand, from the Company. SECTION 2.17 TAXES. All payments made by the Company under this Agreement shall be made free and clear of, and without reduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any governmental authority, agency or instrumentality excluding, in the case of the Administrative Agent and each Bank, net income and franchise taxes imposed on the Administrative Agent or such Bank by the jurisdiction under the laws of which such agent or such Bank is organized or any political subdivision or taxing authority thereof or therein, or by any jurisdiction in which such Bank's Domestic Lending Office or Eurodollar Lending Office, as the case may be, is located or any political subdivision or taxing authority thereof or therein (all such non-excluded taxes, levies, imposts, deductions, charges or withholdings being hereinafter called "TAXES"). If any Taxes are required to be withheld from any amounts payable to the Administrative Agent or any Bank hereunder or under the Notes, the amounts so payable to the Administrative Agent or such Bank shall be increased to the extent necessary to yield to the Administrative Agent or such Bank (after payment of all Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement and the Notes. If the Company fails to pay any Taxes when due to the appropriate taxing authority or fails to remit to the Administrative Agent the required receipts or other required documentary evidence, the Company shall indemnify the Administrative Agent and the Banks for any incremental taxes, interest or penalties that may become payable by any of them as a result of any such failure. The agreements in this Section shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. SECTION 2.18 REQUIREMENTS OF LAW. (a) In the event that any law, regulation, treaty or directive or any change therein or in the interpretation or application thereof or compliance by any Bank with any request or directive (whether or not having the force of law) from any central bank or other governmental authority, agency or instrumentality: (i) does or shall subject any Bank to any tax of any kind whatsoever with respect to this Agreement, any Note, and Letter of Credit, any Application or any Loans made hereunder, or change the basis of taxation of payments to such Bank of principal, commitment fee, interest or any other amount payable hereunder (except for changes in the rate of tax on the overall net income of such Bank); (ii) does or shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, or deposits or other liabilities in or for the account of, advances or loans by, or other credit extended by, or any other acquisition of funds by, any office of such Bank which are not otherwise included in the determination of the LIBO Rate hereunder; (iii) does or shall impose on such Bank any other condition; and the result of any of the foregoing is to increase the cost to such Bank of making, renewing or maintaining advances or extensions of credit or issuing or participating in Letters of Credit or to reduce any amount receivable hereunder then, in any such case, the Company shall promptly pay such Bank, upon its demand, any additional amounts necessary to compensate such Bank for such additional cost or reduced amount receivable which such Bank deems to be material as determined by such Bank with respect to this Agreement, the Note or the Loans made hereunder. If a Bank becomes entitled to claim any additional amounts pursuant to this Section, it shall promptly notify the Company, through the Administrative Agent, of the event by reason of which it has become so entitled. A certificate as to any additional amounts payable pursuant to the foregoing sentence submitted by a Bank, through the Administrative Agent, to the Company shall be conclusive in the absence of manifest error. This covenant shall survive the termination of this Agreement and payment of the Loans. (b) In the event that any Bank shall have determined that the adoption of any law, rule or regulation regarding capital adequacy, or any change therein, or in the interpretation or application thereof or compliance by any Bank with any request or directive regarding capital adequacy (whether or not having the force of law) from any central bank or other governmental authority, agency or instrumentality, in any case, made subsequent to the date hereof, does or shall have the effect of reducing the rate of return on such Bank's capital as a consequence of its obligation hereunder or under any Letter of Credit to a level below that which such Bank could have achieved but for such adoption, change or compliance (taking into consideration such Bank's policies with respect to capital adequacy) by an amount deemed by such Bank to be material, then from time to time, after submission by such Bank to the Company (with a copy to the Administrative Agent) of a written request therefor, the Company shall pay to such Bank such additional amount or amounts as will compensate such Bank for such reduction. SECTION 2.19 INDEMNITY. The Company agrees to indemnify each Bank and to hold such Bank harmless from any loss or expense which such Bank may sustain or incur as a consequence of (a) default by the Company in payment of the principal amount of or interest on the Eurodollar Loans of such Bank, including, but not limited to, any such loss or expense arising from interest or fees payable by such Bank to lenders of funds obtained by it in order to maintain its Eurodollar Loans hereunder, (b) default by the Company in making a borrowing, conversion or continuation after the Company has given a notice in accordance with Section 2.2, 2.9 or 2.14 hereof, (c) default by the Company in making any prepayment after the Company has given a notice in accordance with Section 2.10 hereof or (d) the making of a prepayment of a Eurodollar Loan on a day which is not the last day of an Interest Period with respect thereto, including, but not limited to, any such loss or expense arising from interest or fees payable by such Bank to lenders of funds obtained by it in order to maintain its Eurodollar Loans hereunder. This covenant shall survive termination of this Agreement and payment of the Loans. ARTICLE III LETTERS OF CREDIT SECTION 3.1 L/C COMMITMENT. (a) Subject to the terms and conditions hereof, the Issuing Bank, in reliance on the agreements of the other Banks set forth in Section 3.4(a), agrees to issue letters of credit ("LETTERS OF CREDIT") for the account of the Company on any Business Day during the Revolving Credit Commitment Period in such form as may be approved from time to time by the Issuing Bank; PROVIDED that the Issuing Bank shall not issue any Letter of Credit if, after giving effect to such issuance, (1) the L/C Obligations would exceed the L/C Commitment or (2) the Available Revolving Credit Commitment of any Revolving Credit Bank would be less than zero. (b) Each Letter of Credit shall: (i) be denominated in Dollars and shall be a standby letter of credit issued to support obligations of the Company, contingent or otherwise, acceptable to the Issuing Bank and (ii) expire no later than the earlier of (x) one year after the date of issuance thereof and (y) the Termination Date. (c) Each Letter of Credit shall be subject to the Uniform Customs and, to the extent not inconsistent therewith, the laws of the State of New York. (d) The Issuing Bank shall not at any time be obligated to issue any Letter of Credit hereunder if such issuance would conflict with, or cause the Issuing Bank or any L/C Participant to exceed any limits imposed by, any applicable Requirement of Law. SECTION 3.2 PROCEDURE FOR ISSUANCE OF LETTERS OF CREDIT. The Company may from time to time request that the Issuing Bank issue a Letter of Credit by delivering to the Issuing Bank at its address for notices specified herein an Application therefor, completed to the satisfaction of the Issuing Bank, and such other certificates, documents and other papers and information as the Issuing Bank may request. Upon receipt of any Application, the Issuing Bank will process such Application and the certificates, documents and other papers and information delivered to it in connection therewith in accordance with its customary procedures and shall promptly issue the Letter of Credit requested thereby (but in no event shall the Issuing Bank be required to issue any Letter of Credit earlier than three Business Days after its receipt of the Application therefor and all such other certificates, documents and other papers and information relating thereto) by issuing the original of such Letter of Credit to the beneficiary thereof or as otherwise may be agreed by the Issuing Bank and the Company. The Issuing Bank shall furnish a copy of such Letter of Credit to the Company promptly following the issuance thereof. SECTION 3.3 COMMISSIONS AND OTHER CHARGES. (a) The Company shall pay to the Administrative Agent, for the account of the Revolving Credit Banks, a letter of credit commission with respect to each Letter of Credit, computed for the period from the date of issuance of such Letter of Credit to the expiration date of such Letter of Credit at a rate per annum, calculated on the basis of a 360-day year, equal to the Applicable Eurodollar Margin from time to time in effect on the average daily aggregate amount available to be drawn under such Letter of Credit during the period for which payment is made, and payable to the Revolving Credit Banks (including the Issuing Bank in its capacity as a Revolving Credit Bank) to be shared ratably among them in accordance with their respective Revolving Credit Commitment Percentages. In addition to the foregoing, the Company shall pay to the Issuing Bank, for its own account, a fronting commission with respect to each Letter of Credit, computed for the period from the date of issuance of such Letter of Credit to the expiration date of such Letter of Credit at a rate per annum, calculated on the basis of a 360-day year, equal to one-half of 1% on the average daily aggregate amount available to be drawn under such Letter of Credit during the period for which payment is made. Such commissions shall be payable in arrears on each L/C Fee Payment Date to occur after the date of issuance of each Letter of Credit and shall be nonrefundable. (b) In addition to the foregoing commissions, the Company shall pay or reimburse the Issuing Bank for such normal and customary costs and expenses as are incurred or charged by the Issuing Bank in issuing, effecting payment under, amending or otherwise administering any Letter of Credit. (c) The Administrative Agent shall, promptly following its receipt thereof, distribute to the Issuing Bank and the L/C Participants all commissions received by the Administrative Agent for their respective accounts pursuant to this Section. SECTION 3.4 L/C PARTICIPATIONS. (a) The Issuing Bank irrevocably agrees to grant and hereby grants to each L/C Participant, and, to induce the Issuing Bank to issue Letters of Credit hereunder, each L/C Participant irrevocably agrees to accept and purchase and hereby accepts and purchases from the Issuing Bank, on the terms and conditions hereinafter stated, for such L/C Participant's own account and risk an undivided interest equal to such L/C Participant's Revolving Credit Commitment Percentage in the Issuing Bank's obligations and rights under each Letter of Credit issued hereunder and the amount of each draft paid by the Issuing Bank thereunder. Each L/C Participant unconditionally and irrevocably agrees with the Issuing Bank that, if a draft is paid under any Letter of Credit for which the Issuing Bank is not reimbursed in full by the Company in accordance with the terms of this Agreement, such L/C Participant shall pay to the Issuing Bank upon demand at the Issuing Bank's address for notices specified herein an amount equal to such L/C Participant's Revolving Credit Commitment Percentage of the amount of such draft, or any part thereof, which is not so reimbursed. (b) If any amount required to be paid by any L/C Participant to the Issuing Bank pursuant to Section 3.4(a) in respect of any unreimbursed portion of any payment made by the Issuing Bank under any Letter of Credit is paid to the Issuing Bank within three Business Days after the date such payment is due, such L/C Participant shall pay to the Issuing Bank on demand an amount equal to the product of (1) such amount, times (2) the daily average Federal Funds Effective Rate, as quoted by the Issuing Bank, during the period from and including the date such payment is required to the date on which such payment is immediately available to the Issuing Bank, times (3) a fraction the numerator of which is the number of days that elapse during such period and the denominator of which is 360. If any such amount required to be paid by any L/C Participant pursuant to Section 3.4(a) is not in fact made available to the Issuing Bank by such L/C Participant within three Business Days after the date such payment is due, the Issuing Bank shall be entitled to recover from such L/C Participant, on demand, such amount with interest thereon calculated from such due date at the rate per annum applicable to Base Rate Loans hereunder. A certificate of the Issuing Bank submitted to any L/C Participant with respect to any amounts owing under this Section shall be conclusive in the absence of manifest error. (c) Whenever, at any time after the Issuing Bank has made payment under any Letter of Credit and has received from any L/C Participant its pro rata share of such payment in accordance with Section 3.4(a), the Issuing Bank receives any payment related to such Letter of Credit (whether directly from the Company or otherwise, including proceeds of collateral applied thereto by the Issuing Bank), or any payment of interest on account thereof, the Issuing Bank will distribute to such L/C Participant its pro rata share thereof; PROVIDED, HOWEVER, that in the event that any such payment received by the Issuing Bank shall be required to be returned by the Issuing Bank, such L/C Participant shall return to the Issuing Bank the portion thereof previously distributed by the Issuing Bank to it. SECTION 3.5 REIMBURSEMENT OBLIGATION OF THE COMPANY. (a) The Company agrees to reimburse the Issuing Bank on each date on which the Issuing Bank notifies the Company of the date and amount of a draft presented under any Letter of Credit and paid by the Issuing Bank for the amount of (1) such draft so paid and (2) any taxes, fees, charges or other costs or expenses incurred by the Issuing Bank in connection with such payment. Each such payment shall be made to the Issuing Bank at its address for notices specified herein in lawful money of the United States of America and in immediately available funds. (b) Interest shall be payable on any and all amounts remaining unpaid by the Company under this Section (i) from the date the draft presented under the affected Letter of Credit is paid to the date on which the Company is required to pay such amounts pursuant to paragraph (a) above at the rate which would then be payable on any outstanding Base Rate Loans and (ii) thereafter until payment in full at the rate which would be payable on any outstanding Base Rate Loans which were then overdue. (c) Each drawing under any Letter of Credit shall constitute a request by the Company to the Administrative Agent for a borrowing pursuant to Section 2.2 of Base Rate Loans in the amount of such drawing. The Borrowing Date with respect to such borrowing shall be the date of such drawing. SECTION 3.6 OBLIGATIONS ABSOLUTE. (a) The Company's obligations under this Section 3 shall be absolute and unconditional under any and all circumstances and irrespective of any set-off, counterclaim or defense to payment which the Company may have or have had against the Issuing Bank or any beneficiary of a Letter of Credit. (b) The Company also agrees with the Issuing Bank that the Issuing Bank shall not be responsible for, and the Company's Reimbursement Obligations under Section 3.5(a) shall not be affected by, among other things, (1) the validity or genuineness of documents or of any endorsements thereon, even though such documents shall in fact prove to be invalid, fraudulent or forged, or (2) any dispute between or among the Company and any beneficiary of any Letter of Credit or any other party to which such Letter of Credit may be transferred or (3) any claims whatsoever of the Company against any beneficiary of such Letter of Credit or any such transferee. (c) The Issuing Bank shall not be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit, except for errors or omissions caused by the Issuing Bank's gross negligence or willful misconduct. (d) The Company agrees that any action taken or omitted by the Issuing Bank under or in connection with any Letter of Credit or the related drafts or documents, if done in the absence of gross negligence of willful misconduct and in accordance with the standards of care specified in the Uniform Commercial Code of the State of New York, shall be binding on the Company and shall not result in any liability of the Issuing Bank to the Company. SECTION 3.7 LETTER OF CREDIT PAYMENTS. If any draft shall be presented for payment under any Letter of Credit, the Issuing Bank shall promptly notify the Company of the date and amount thereof. The responsibility of the Issuing Bank to the Company in connection with any draft presented for payment under any Letter of Credit shall, in addition to any payment obligation expressly provided for in such Letter of Credit, be limited to determining that the documents (including each draft) delivered under such Letter of Credit in connection with such presentment are in conformity with such Letter of Credit. If an Event of Default shall have occurred and be continuing, the Issuing Bank shall be entitled to give notice to the trustee under the Loan Agreement that it has terminated its obligations to honor "C Drawings" and "D Drawings" under the Specified Letter of Credit. SECTION 3.8 APPLICATION. To the extent that any provision of any Application related to any Letter of Credit is inconsistent with the provisions of this Section 3, the provisions of this Section 3 shall apply. ARTICLE IV CONDITIONS TO EXTENSIONS OF CREDIT The obligations of each Bank to make each extension of credit hereunder are subject to the satisfaction of the following conditions precedent: SECTION 4.1 EACH EXTENSION OF CREDIT. In the case of the making of each Loan and the issuance of each Letter of Credit (including the initial extensions of credit hereunder): (a) the Administrative Agent (or in the case of any Letter of Credit, the Issuing Bank) shall have received notice of such extension of credit as required by Section 2.2, 2.4, 2.9 or 3.2; (b) immediately prior to and after such extension of credit no Default or Event of Default shall have occurred and be continuing; and (c) each of the representations and warranties contained in this Agreement shall be true and correct on and as of the date of such extension of credit with the same effect as if made on and as of such date. Each borrowing by and issuance of a Letter of Credit on behalf of the Company hereunder shall constitute a representation and warranty by the Company as of the date of such extension of credit that (i) the conditions set forth in this Section 4.1 have been satisfied and (ii) in the case of each Loan, no more than $8,000,000 in Cash (excluding (x) Temporary Cash Investments in an aggregate amount not to exceed $22,000,000 maintained pursuant to the documentation governing the FAME Loan Agreement and (y) Cash securing the letter of credit issued by Shawmut Bank referred to in Section 4.3) will be retained by the Company after three Business Days from the relevant Borrowing Date. SECTION 4.2 FIRST LOAN. In the case of the first Loan hereunder (in addition to the conditions set forth in Section 4.1 hereof): (a) the Administrative Agent shall have received (i) this Agreement, executed and delivered by a duly authorized officer of the Company and each Bank, (ii) the Pledge Agreement, executed and delivered by the Company, and (iii) for the account of each relevant Bank, a duly executed Revolving Credit Note, Swing Line Note or Term Note complying with the provisions of Section 2.3, 2.4(h) or 2.8; (b) (i) the Administrative Agent and each of the Banks shall have received a Supplemental Indenture (the "Supplemental Indenture") to the Mortgage in form and substance satisfactory to it providing for the issuance of First Mortgage Bonds (the "COLLATERAL BONDS") having an aggregate principal amount of at least $115,000,000 and (ii) the Administrative Agent shall have received a certificate evidencing each Collateral Bond registered in the name of the Administrative Agent; (c) the Administrative Agent shall have received, with a photocopy for each Bank, an opinion each of (i) Frederick Samp, General Counsel of the Company, dated the Effective Date, substantially in the form of Exhibit E-1 hereto, (ii) Winthrop, Stimson, Putnam & Roberts, New York counsel to the Company, dated the Effective Date, substantially in the form of Exhibit E-2 hereto and (iii) Eaton, Peabody, Bradford & Veague, special Maine counsel to the Administrative Agent, dated the Effective Date, substantially in the form of Exhibit E-3 hereto, and covering such additional matters relating to the transactions contemplated hereby as any Bank may reasonably request; (d) the Administrative Agent shall have received evidence in form and substance satisfactory to it (i) of the termination and cancellation of the commitment to lend thereunder of the banks that are parties to the Credit Agreement, dated as of May 26, 1992, as amended from time to time, among the Company, the banks named therein and Chemical Bank, as administrative agent (the "EXISTING CREDIT AGREEMENT"), and (ii) that all amounts of principal, interest and fees due and payable to such banks thereunder shall have been paid in full (it being understood that, without affecting any terms of the Existing Credit Agreement which expressly survive the termination thereof, each Bank party to the Existing Credit Agreement hereby waives any requirement of advance notice of such termination contained therein and hereby agrees that the Existing Credit Agreement and the commitments thereunder shall terminate simultaneously with the satisfaction of the conditions set forth in this Section 4.2); (e) the Administrative Agent shall have received, with a photocopy for each Bank, true and complete copies of the certificate of incorporation and by-laws of the Company, certified as of the date of the first borrowing, as complete and correct copies thereof by the Secretary or an Assistant Secretary of the Company; (f) the Administrative Agent shall have received, with a photocopy for each Bank, a copy of the resolutions, in form and substance satisfactory to the Banks, of the Board of Directors of the Company authorizing (i) the execution, delivery and performance of the Loan Documents and (ii) the extensions of credit contemplated hereunder, certified by the Secretary or an Assistant Secretary of the Company, which certificate shall state that the resolutions thereby certified have not been amended, modified, revoked or rescinded and are in full force and effect; (g) the Administrative Agent shall have received, with a photocopy for each Bank, a certificate of the Secretary or an Assistant Secretary of the Company, substantially in the form of Exhibit C, as to the incumbency and signature of the officers signing any Loan Document, any of the certificates required hereunder and any other document or certificate delivered pursuant to the provisions of this Agreement, together with evidence of the incumbency of such Secretary or Assistant Secretary; (h) the Administrative Agent shall have received, with a photocopy for each Bank, a certified copy of the order from the Commission referred to in Section 5.6; (i) the Administrative Agent shall have received evidence satisfactory to it that the Company has received gross proceeds of at least $105,000,000 from the issuance of Debt secured by Second Mortgage Bonds, on terms and conditions satisfactory to the Administrative Agent and the Banks; and (j) (i) concurrently with the making of the initial Loans, the Company shall have paid in full all of its obligations under the Purchase Agreements between the Company and each of Babcock-Ultrapower Jonesboro ("Jonesboro") and Babcock-Ultrapower West Enfield ("West Enfield"), each dated March 31, 1995 (the "Purchase Agreements") and the aggregate amount so paid, together with transaction costs relating to such Purchase Agreements, shall not exceed $180,000,000 and (ii) the Administrative Agent shall have received satisfactory evidence of the termination of the power purchase contracts between the Company and each of Jonesboro and West Enfield and the Loan Agreement referred to in the Purchase Agreements. SECTION 4.3 SPECIFIED LETTER OF CREDIT. In the case of the issuance of any Specified Letter of Credit, the Administrative Agent shall have received evidence satisfactory to it of the termination of the Letter of Credit issued by Shawmut Bank for the benefit of the trustee under the Loan Agreement. ARTICLE V REPRESENTATIONS AND WARRANTIES In order to induce the Administrative Agent and the Banks to enter into this Agreement and make the extensions of credit provided for herein, the Company represents and warrants to the Administrative Agent and each Bank that: SECTION 5.1 CORPORATE EXISTENCE AND POWER. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Maine and has all corporate power and all material governmental licenses, permits, authorizations, consents, approvals and franchises required to own and operate its properties and to carry on its business as now conducted. SECTION 5.2 CORPORATE AUTHORIZATION; NON-CONTRAVENTION. The execution, delivery and performance by the Company of each Loan Document are within the Company's corporate powers, have been duly authorized by all necessary corporate action and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of organization, as amended, or by-laws of the Company or of any agreement, judgment, injunction, order, decree or other instrument binding upon the Company or result in the creation or imposition of any Lien on any asset of the Company or any of its Subsidiaries (except as contemplated by the Mortgage and the Pledge Agreement). SECTION 5.3 BINDING EFFECT. Each Loan Document constitutes a valid and binding obligation of the Company, enforceable in accordance with its terms. SECTION 5.4 FINANCIAL INFORMATION. (a) The balance sheet of the Company as of December 31, 1994 and the related statements of income, retained earnings and statement of cash flows for plant additions for the fiscal year then ended (reported on by Coopers & Lybrand), copies of which have been delivered to each of the Banks and are attached hereto as Exhibit I, fairly present, in conformity with GAAP applied on a consistent basis, the financial position of the Company as of such date and its results of operations and statement of cash flows, for plant additions for such fiscal year. The Company does not have any material liability, contingent or other, not provided for or described in (i) the financial statements referred to in this Section 5.4(a), (ii) the Company's 1994 Form 10-K or (iii) the Company's report to stockholders for the first quarter of 1995 (collectively, the "DISCLOSURE DOCUMENTS"). Copies of each of the Disclosure Documents have been provided to each of the Banks. (b) Except as set forth in the Disclosure Documents, since December 31, 1994, there has been no development or event nor any prospective development or event, which has had or could have a Material Adverse Effect. SECTION 5.5 LEGAL AND REGULATORY PROCEEDINGS. Except as set forth in the Disclosure Documents, there is no action, suit, proceeding or investigation pending, or to the knowledge of the Company threatened, against or affecting the Company or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official, an adverse decision which might materially and adversely affect the business, financial position or results of operations of the Company or which in any manner questions the validity of any Loan Document. Except as set forth in the Disclosure Documents, since December 31, 1994, there has been no materially adverse development or determination (interim or final) in any such action, suit, proceeding or investigation. SECTION 5.6 GOVERNMENTAL AUTHORIZATION. Except for the order of the Commission authorizing the entering into, execution, delivery and performance of the Loan Documents, no approval, consent or authorization of or filing with any governmental or public regulatory body or authority is required in connection with the execution, delivery and performance of any Loan Document. On or prior to the first borrowing hereunder, the order of the Commission authorizing the entering into, execution, delivery and performance of the Loan Documents as aforesaid will have been obtained and a true copy thereof will have been furnished to each of the Banks. On the date of each subsequent extension of credit hereunder, such order will be in full force and effect. SECTION 5.7 TAXES. United States federal income tax returns of the Company have been examined and closed through the fiscal year ended December 31, 1988. The Company has filed all United States federal income tax returns and all other material tax returns which are required to be filed by it and has paid all taxes due pursuant to such returns or pursuant to any assessment received by the Company. The charges, accruals and reserves on the books of the Company in respect of taxes or other governmental charges are adequate in the opinion of the Company. SECTION 5.8 SUBSIDIARIES. Annexed hereto as Exhibit G is a statement showing the names of all the Subsidiaries of the Company as of the date of this Agreement, the amount of the capital stock of each and the amount thereof owned by the Company, and the business of each. Each such Subsidiary is a corporation duly organized and validly existing under the laws of the State of Maine, and each has all requisite corporate power and all material governmental licenses, permits, authorizations, consents, approvals and franchises to conduct the business in which it is engaged and to own and operate the properties used by it in such business. All shares of each such Subsidiary owned by the Company have been duly and validly issued and are fully paid and nonassessable, are free and clear of all Liens and there are no outstanding options, warrants or other rights to purchase or securities convertible into or exchangeable for shares of capital stock of any such Subsidiary. SECTION 5.9 COMPLIANCE WITH ERISA. The Company has satisfied the minimum funding standards under ERISA with respect to its Plans and is in compliance in all material respects with the presently applicable provisions of ERISA. SECTION 5.10 USE OF PROCEEDS. The proceeds of the Loans made under this Agreement will be used by the Company for general corporate purposes. None of such proceeds will be used, directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of purchasing or carrying any "margin stock" within the meaning of Regulation U of the Board of Governors of the Federal Reserve System. The Company is not engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any such margin stock within the meaning of such Regulation U. SECTION 5.11 PROPERTIES. The Company and its Subsidiaries each has good and sufficient title to all real property and all machinery and equipment owned by it and owns or possesses adequate rights to use all real property and all machinery and equipment necessary to the conduct of its business, all free and clear of Liens other than Liens permitted by Section 6.5. The Company enjoys peaceful and undisturbed possession under all of its leases with respect to materially important properties held under lease, and all of such leases are in full force and effect. SECTION 5.12 NO DEFAULTS, VIOLATIONS, ETC. The Company is not in violation of its certificate of organization, as amended, or by-laws or in violation of any law, ordinance, rule or regulation to which it is subject which violations, individually or in the aggregate, would materially and adversely affect the business, properties, operations, prospects or condition (financial or other) of the Company, or in default in any material respect in the performance of any obligation, agreement or condition contained in any bond, debenture, note or any other evidence of indebtedness or in any indenture or loan agreement of the Company. SECTION 5.13 RESTRICTIONS ON COMPANY. Except as set forth in the Disclosure Documents, the Company is not a party or subject to any contract or agreement, or any charter, by-law or other corporate restriction, or any law, ordinance, rule or regulation or order, decree, judgment or license which, individually or when aggregated, materially and adversely affects or in the future may (so far as the Company can now reasonably foresee) materially and adversely affect the business of the Company. SECTION 5.14 PUBLIC UTILITY HOLDING COMPANY ACT. The Company is exempt from the provisions of the Public Utility Holding Company Act of 1935 and the rules promulgated thereunder other than Section 9(a)(2) thereof, and is not a "subsidiary" or an "affiliate" of any "holding company" as such terms are defined in said act. The Company is not subject to any other law, rule or regulation which in any way restricts its ability to incur Debt pursuant to this Agreement. ARTICLE VI COVENANTS The Company agrees that, so long as any Bank has any Commitment hereunder, any Letter of Credit is outstanding, or any Loan or other amount owing hereunder remains unpaid: SECTION 6.1 INFORMATION. The Company will deliver to each of the Banks: (a) as soon as available and in any event within 100 days after the end of each fiscal year, a balance sheet of the Company as of the end of such fiscal year and the related statements of income, retained earnings and statement of cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on in a manner acceptable to the Securities and Exchange Commission by Coopers & Lybrand or other independent public accountants of nationally recognized standing; PROVIDED that if the Company has any consolidated Subsidiaries, such financial statements shall be prepared on a consolidated basis; and PROVIDED, FURTHER, that such financial statements shall in any event include all figures necessary to enable the Banks to determine whether the Company shall have been in compliance with the requirements of Sections 6.7, 6.8, 6.9 and 6.10 as at the end of the fiscal period covered thereby; (b) as soon as available and in any event within 50 days after the end of each of the first three quarters of each fiscal year, a balance sheet of the Company as of the end of such quarter and the related statements of income, retained earnings and statement of cash flows for such quarter and for the portion of the Company's fiscal year ended at the end of such quarter, setting forth in each case in comparative form the figures for the corresponding quarter and the corresponding portion of the Company's previous fiscal year, all certified as to fairness of presentation, generally accepted accounting principles and consistency by the chief financial officer or the chief accounting officer of the Company; PROVIDED that if the Company has any consolidated Subsidiaries, such financial statements shall be prepared on a consolidated basis; and PROVIDED, FURTHER, that such financial statements shall in any event include all figures necessary to enable the Banks to determine whether the Company shall have been in compliance with the requirements of Sections 6.7, 6.8 and 6.9 as at the end of the fiscal period covered thereby; (c) simultaneously with the delivery of each set of financial statements referred to in clauses (a) and (b) above, a certificate of the chief financial officer or the chief accounting officer of the Company (i) setting forth calculations in reasonable detail demonstrating whether the Company was in compliance with the requirements of Sections 6.3, 6.4, 6.5, 6.7, 6.8, 6.9, and 6.10 on the date of such financial statements and (ii) stating whether there exists on the date of such certificate any Default or Event of Default and, if any Default or Event of Default then exists, setting forth the details thereof and the action which the Company is taking with respect thereto; (d) simultaneously with the delivery of each set of financial statements referred to in clause (a) above, a statement of the firm of independent public accountants which reported on such statements to the effect that nothing has come to their attention to cause them to believe that there existed on the date of such statements any Default or Event of Default; (e) forthwith upon the occurrence of any Default or Event of Default, a certificate of the chief financial officer or the chief accounting officer of the Company setting forth the details thereof and the action which the Company is taking with respect thereto; (f) promptly upon the mailing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and annual, quarterly or monthly reports which the Company shall have filed with the Securities and Exchange Commission; (g) promptly upon the mailing thereof to the shareholders of the Company generally, copies of all financial statements, reports and proxy statements so mailed; (h) if and when the Company or any Subsidiary gives or is required to give notice to the PBGC of any "reportable event" (as defined in Section 4043 of ERISA) with respect to any Plan which might constitute grounds for a termination of such Plan under Title IV of ERISA or knows that the plan administrator of any Plan-has given or is required to give notice of any such reportable event, a copy of the notice of such reportable event given or required to be given to the PBGC; (i) promptly on every December 31, a projected balance sheet as of the end of the next fiscal year and a projected statement of income, retained earnings and cash flows for such fiscal year; (j) forthwith upon the entering into of any commitment for additional capacity for the generation or transmission of electric energy in connection with a transaction requiring the approval of the Commission (or which would require such approval but for specific exception therefrom with respect to transactions with any "co-generator" or "small power producer", as such terms are defined in Chapter 172 of Title 35 of the Maine Revised Statutes), notice of such commitment, together with a brief description of the nature thereof, the amount thereof and the approximate dates on which expenditures under such commitment are to be made and any changes in any of the foregoing upon the effectiveness thereof; (k) promptly upon the Company's knowledge thereof, notice of (1) any material amendment of the terms of any joint ownership agreement, joint venture, partnership, plant construction or similar agreement or arrangement for the ownership, construction or operation of electric generating facilities to which the Company is a party, and (2) any material default by any party to such agreement or arrangement; (l) (i) on or about June 30 and December 31 of each year, a letter from S&P setting forth the Company's long-term senior secured debt rating then in effect and (ii) within two Business Days after the occurrence thereof, written notice of any change in Status; PROVIDED that the failure to provide such notice shall not delay or otherwise affect any change in the Applicable Base Rate Margin, the Applicable Eurodollar Margin or the Commitment Fee Rate which is to occur upon a change in Status pursuant to the terms of this Agreement; and (m) from time to time such additional information regarding the financial position or business of the Company as the Administrative Agent, at the request of any Bank, may reasonably request. SECTION 6.2 PAYMENT OF TAXES; PRESERVATION OF CORPORATE EXISTENCE AND FRANCHISES; MAINTENANCE OF PROPERTIES; COMPLIANCE WITH LAWS; MAINTENANCE OF INSURANCE. The Company will, and cause each Subsidiary to: (a) pay and discharge promptly or cause to be paid and discharged promptly all taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or upon any of its properties, as well as all lawful claims for labor, materials and supplies which, if unpaid, might by law become a Lien upon any of its properties; PROVIDED, that the payment of any such tax, assessment, charge, levy or claim shall not be required so long as the amount, applicability or validity thereof shall be contested in good faith by appropriate proceedings (or, in the case of any tax, assessment, charge or levy, payment may be made without penalty) and the Company or such Subsidiary, as the case may be, shall have set aside on its books such reserves, if any, in respect thereof (segregated to the extent required by generally accepted accounting principles) as shall be deemed to be necessary and adequate in the judgment of (i) the Company or such Subsidiary, as the case may be, and (ii) its independent public accountants; (b) subject to Section 6.6, do or cause to be done all things necessary on its part to preserve and keep in full force and effect its corporate existence and rights and its corporate and public utility franchises, rights, licenses and permits necessary for the conduct of its business; PROVIDED that the Company may terminate the corporate existence of any Subsidiary or may terminate or abandon, or permit the termination or abandonment of, any right, franchise, license or permit if the termination or abandonment thereof is in the best interests of the Company or the affected Subsidiary, in the opinion of the Company's Board of Directors, and such termination or abandonment does not result in a Default or Event of Default under this Agreement; (c) maintain and keep, or cause to be maintained and kept, its properties in good repair, working order and condition, and from time to time make or cause to be made all necessary and proper repairs, renewals, replacements and improvements so that the business carried on in connection therewith may be properly and advantageously conducted at all times; (d) comply in all material respects with all applicable laws, rules and regulations and orders of any governmental authority, noncompliance with which would have a Material Adverse Effect, except laws, rules, regulations or orders being contested in good faith; and (e) maintain insurance with responsible and reputable insurers covering all such properties and risks, and in such amounts as is usually carried by companies engaged in similar businesses, similarly situated and owning similar properties (including without limitation, the ownership or operation of nuclear generating facilities). SECTION 6.3 LIMITATION ON DEBT. The Company will not, nor will it permit any Subsidiary to, incur, assume, guarantee or otherwise become or remain liable for any Debt other than: (a) Debt outstanding on the date hereof and described in the Disclosure Documents and any refinancing thereof, having covenants and maturities no less favorable to the Company than the Debt being refinanced, which does not increase the principal amount of the Debt being refinanced; (b) Debt described in Section 4.2(i) in an aggregate principal amount not to exceed $126,000,000; (c) Debt outstanding on the Effective Date incurred pursuant to the Loan Agreement; (d) Guarantees of the Company of the indebtedness of others, as set forth in Exhibit H, but only to the extent and upon the terms indicated; (e) (i) Debt outstanding under this Agreement, the Notes or the Collateral Bonds and (ii) L/C Obligations; or (f) Any unsecured Debt not otherwise permitted by this Section 6.3 in an aggregate principal amount not to exceed at any one time the sum of (i) $5,000,000 plus (ii) an amount equal to 50% of the aggregate amount of any reductions in the Revolving Credit Commitments made pursuant to Section 2.6 or 2.11. SECTION 6.4 INVESTMENTS. Neither the Company nor any Subsidiary will make or acquire any Investment in any Person other than: (a) Temporary Cash Investments; (b) Investments in Persons who are principally engaged, or who propose principally to engage, in the generation or transmission of electricity or in water storage development, PROVIDED that the aggregate amount expended pursuant to this paragraph (b) shall not exceed $20,000,000 during the term of this Agreement; (c) Investments in Persons for the purpose of promoting the sale, installation and maintenance of products that consume electricity, PROVIDED that the aggregate amount expended pursuant to this paragraph (c) shall not exceed $5,000,000 during the term of this Agreement; and (d) Investments in Persons participating in the implementation of demand side measures pursuant to the rules and regulations now or hereafter promulgated by the Commission, provided that any such Investments shall not in the aggregate exceed $2,000,000 principal amount at any time outstanding to all such Persons or in the aggregate exceed $1,000,000 principal amount at any time outstanding to any Person. SECTION 6.5 NEGATIVE PLEDGE. Neither the Company nor any Subsidiary will create, assume or suffer to exist any Lien on any asset now owned or hereafter acquired by it, except: (a) Liens existing on the date of this Agreement and reflected in the Disclosure Documents and not otherwise permitted by this Section 6.5, PROVIDED that the aggregate of all Debt or other obligations secured by all such Liens does not at any time exceed $500,000; (b) Liens existing on any property at the time of acquisition thereof by the Company or any Subsidiary or Liens on property of a corporation existing at the time such corporation becomes a Subsidiary and in each case not created in connection with or in contemplation of such acquisition or event, as the case may be, whether or not assumed; PROVIDED that in each case such Lien shall apply and attach only to the property originally subject thereto and improvements constructed thereon; (c) any Lien on any asset securing Debt incurred or assumed for the purpose of financing all or any part of the purchase price of such asset, PROVIDED that such Lien attaches to such asset concurrently with or within 90 days after the acquisition thereof, PROVIDED FURTHER that the aggregate amount of all Debt or other obligations secured by all such Liens permitted by this clause (c) shall not at any time exceed $2,000,000; (d) Liens for the sole purpose of extending, renewing or replacing (or successively extending, renewing or replacing) in whole or in part the Debt secured by any Lien permitted by clauses (a), (b) and (c) of this Section 6.5; PROVIDED that the principal amount of Debt secured thereby shall not exceed the principal amount of Debt so secured at the time of such extension, renewal or replacement, and that such extension, renewal or replacement Lien shall be limited to all or a part of the property which secured the Debt so extended, renewed or replaced (plus improvements on such property); (e) Liens for taxes, fees, assessments or governmental charges not yet due and delinquent or being contested in good faith by appropriate proceedings and Liens resulting from or incurred with respect to legal proceedings being contested in good faith by appropriate proceedings; (f) Liens securing the claims of mechanics, laborers, workmen, repairmen, materialmen, suppliers, carriers, warehousemen, landlords or vendors not yet due and delinquent, or being contested in good faith by appropriate proceedings; (g) deposits to secure the performance of obligations (other than obligations for the payment of borrowed money) incurred in the ordinary course of business; (h) banker's Liens arising by operation of law and other banker's possessory Liens arising in the ordinary course of business otherwise than for the purpose of securing obligations for the payment of borrowed money (including, without limitation, obligations arising from drafts accepted representing extensions of credit to or for the benefit of the Company); (i) Liens created by the Mortgage securing bonds issued under and in accordance with the requirements of the Mortgage as such Mortgage may be amended from time to time, PROVIDED, HOWEVER, no such amendment or supplement thereof shall without the consent of all of the Banks amend or supplement the Mortgage (1) to include categories of property or property interests of the Company not already included pursuant to the terms of such Mortgage as in effect on the date hereof, or (2) to permit the Company to withdraw "Deposited Cash" or execute "Bonds" in excess of 75% of the amount by which the actual cost or fair value (whichever is lower) of "property additions" shall exceed "property retirements", as set forth in Section 27 of the Mortgage as in effect on the date hereof. For purposes of this Section 6.5(i) only, "Deposited Cash", "Bonds", "property additions" and "property retirements" shall have the respective definition of such terms as defined in the Mortgage on the date hereof; (j) Liens incurred in connection with equipment or vehicle financing leases having an aggregate purchase cost to the lessors not to exceed $5,000,000; (k) minor defects and irregularities in the title (including easements, rights of way, restrictions or other similar nonmonetary charges) to any real property of the Company or any Subsidiary which have no material adverse effect on the use or disposition thereof by the Company or such Subsidiary; (l) Liens created pursuant to the General and Refunding Mortgage Indenture; (m) Liens created by the Pledge Agreement; and (n) Liens in respect of the Cash collateral referred to in Section 4.1. SECTION 6.6 CONSOLIDATIONS, MERGERS AND SALES OF ASSETS. The Company will not, other than as described below, (i) consolidate with or merge with or into any other Person or (ii) sell, lease or otherwise transfer all or a Substantial Part of its assets during the term of this Agreement. The Company will not permit any Subsidiary to consolidate with, merge with or into or transfer all or a Substantial Part of its assets to any Person other than the Company or a wholly owned Subsidiary, PROVIDED that assets having an aggregate book value of up to $500,000 may be so transferred during the term of this Agreement. SECTION 6.7 CONSOLIDATED TOTAL DEBT RATIO. The Company shall not permit the Consolidated Total Debt Ratio at any time during any period set forth below to be higher than the ratio set forth opposite such period below: PERIOD RATIO ---------------------------------- ----------- Effective Date to and including - 12/31/95 0.77 to 1.0 1/1/96 to and including - 12/31/96 0.75 to 1.0 1/1/97 to and including - 12/31/97 0.72 to 1.0 1/1/98 to and including - 12/31/98 0.68 to 1.0 1/1/99 and thereafter 0.65 to 1.0 SECTION 6.8 CONSOLIDATED FIXED CHARGE RATIO. The Company shall not permit the Consolidated Fixed Charge Ratio for any period of four consecutive fiscal quarters of the Company ending during any period set forth below to be less than the ratio set forth opposite such period below: PERIOD RATIO ------------------------ ----------- Effective Date to and 1.25 to 1.0 including 9/30/96 Thereafter 1.5 to 1.0 SECTION 6.9 MAINTENANCE OF NET WORTH. The Company shall not permit Consolidated Net Worth of the Company at any time during any period set forth below to be less than the amount set forth opposite such period below: PERIOD AMOUNT ---------------------------------------- ------------ Effective Date to and including 6/30/96 $ 95,000,000 7/1/96 to and including 6/30/97 $100,000,000 7/1/97 to and including 6/30/98 $105,000,000 7/1/98 and thereafter $110,000,000 SECTION 6.10 LIMITATION ON DIVIDENDS, ETC. (a) During any fiscal year of the Company commencing after December 31, 1995, the Company shall not declare or pay any dividend (other than dividends payable solely in common stock of the Company) on, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other acquisition of, any shares of any class of common stock of the Company or any warrants or options to purchase any such common stock, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of the Company or any Subsidiary. Notwithstanding the foregoing, the Company may pay dividends in respect of its common stock in any fiscal year in an aggregate amount not to exceed 70% of earnings applicable to common stock for such fiscal year. (b) The Company shall not issue any Capital Stock (other than common stock) ("PREFERRED STOCK") after the Effective Date except for Preferred Stock the proceeds of which are used to refinance other Preferred Stock or Debt having covenants and maturities no less favorable to the Company than the Preferred Stock or Debt being refinanced. SECTION 6.11 STATUS. Promptly upon request by the Administrative Agent or any Bank, the Company shall obtain from S&P in writing the Company's long-term senior secured debt rating and disclose such rating to the Administrative Agent or such Bank, as the case may be. SECTION 6.12 AMENDMENTS TO SECOND MORTGAGE BONDS, ETC. The Company shall not amend, supplement or otherwise modify, or consent to any amendment, supplement or other modification to, (a) the General and Refunding Mortgage Indenture, the Second Mortgage Bonds, the FAME Loan Agreement or any agreement entered into by the Company in connection therewith (provided that the foregoing shall not prohibit (i) the issuance of any supplemental indenture in respect of the General and Refunding Mortgage Indenture for the sole purpose of providing for the issuance of refinancing Debt expressly permitted by Section 6.3 or (ii) modifications to the General and Refunding Mortgage Indenture made for the sole purpose of perfecting under applicable law the Liens contemplated thereby) or (b) the terms of any Preferred Stock. SECTION 6.13 INTEREST RATE PROTECTION. Within 120 days after the Effective Date, the Company shall enter into an Interest Rate Protection Agreement in respect of the entire principal amount of the Term Loans effective through June 30, 2000 which Interest Rate Protection Agreement shall have terms and conditions reasonably satisfactory to the Administrative Agent (and in any event, in the case of a cap, shall protect the Company against any increase in the eurodollar rate by more than 1-1/2% above the eurodollar rate in effect on the Effective Date). SECTION 6.14 LIMITATION ON OPTIONAL PREPAYMENTS OF CERTAIN DEBT. The Company shall not make any optional payment or prepayment on or redemption, purchase or defeasance of (a) any Second Mortgage Bond, (b) any Debt under the FAME Loan Agreement or (c) any Preferred Stock. SECTION 6.15 RIGHTS OF INSPECTION. The Company shall permit the Administrative Agent at all reasonable times and upon reasonable notice, to examine the books and records of the Company with respect the Company's business generally, and the Company shall furnish the Administrative Agent with such information, statements and certificates as may reasonably be required from time to time. SECTION 6.16 MATTERS OF ENVIRONMENTAL CONCERN. The Company covenants that (a) except in compliance with applicable environmental laws, or, if known or if it becomes known to the Company, as disclosed pursuant to the Exchange Act, it has not discharged, dumped, installed, stored, used, treated, transported, disposed or maintained, and shall neither discharge, dump, install, store, use, treat, transport, dispose or maintain toxic, hazardous, or radioactive substances, materials or wastes, including, without limitation, all of the following; (i) asbestos in any form; (ii) urea formaldehyde foam insulation, (iii) transformers or other equipment which contain dielectric fluid containing any level or polychlorinated biphenyls or (iv) any other chemical, material or substance which is prohibited, limited or regulated by any federal, state, county, regional, local or other governmental authority or which, even if not so regulated, to the knowledge of the Company poses substantial hazard to health and safety (all of which are referred to collectively herein as ("HAZARDOUS SUBSTANCES"), except such non-compliance as would not have a material adverse effect on the Company or its financial condition, and (b) the Company is not the subject of any existing, pending or threatened investigation or inquiry by, or any remedial order or obligation issued by or at the behest of, any governmental authority under any law, rule or regulation pertaining to health or the environment which would have a material adverse effect on the Company or its financial condition except (i) during any period during which the Company at its own expense and in its name shall be in good faith contesting its obligation to company therewith or (ii) as described in filings made pursuant to the Exchange Act. ARTICLE VII DEFAULTS SECTION 7.1 EVENTS OF DEFAULT. If one or more of the following events ("EVENTS OF DEFAULT") shall have occurred and be continuing: (a) the Company shall fail to pay when due any principal of or interest on any Loan, any commitment fee or any Reimbursement Obligation; (b) the Company shall fail to observe or perform any covenant contained in Section 6.1(e), any of Sections 6.3 through 6.12, inclusive, Section 6.14 or Section 3 or 4 of the Pledge Agreement; (c) the Company shall fail to observe or perform any covenant or agreement contained in this Agreement or any other Loan Document (other than those covered by clauses (a) or (b) above) for 10 days after written notice thereof has been given to the Company by the Administrative Agent or the Majority Banks; (d) any representation, warranty, certification or statement made by the Company in this Agreement or in the Pledge Agreement or in any certificate, financial statement or other document delivered pursuant to this Agreement shall prove to have been materially incorrect when made; (e) the Company or any Subsidiary shall fail to make any payment in respect of any Debt (other than the Loans) when due or within any applicable grace period; (f) the Company or any Subsidiary shall fail to observe or perform any covenant or agreement contained in any agreement or instrument relating to any of its Debt within any applicable grace period if the effect of such failure is to accelerate, or to permit the holder of such Debt or any other Person to accelerate, the maturity of such Debt; (g) an involuntary case or other proceeding shall be commenced against the Company or any Subsidiary seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; or an order for relief shall be entered against the Company or any Subsidiary under the federal bankruptcy laws as now or hereafter in effect; (h) the Company or any Subsidiary shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing; (i) there shall be commenced against the Company or any of its Subsidiaries any case or other proceeding seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal for a period of 60 days; (j) the Company or any Subsidiary or a Commonly Controlled Entity shall fail to pay when due an amount or amounts aggregating in excess of $100,000 which it shall have become liable to pay to the PBGC or to a Plan under Title IV of ERISA; or notice of intent to terminate a Plan or Plans having aggregate Unfunded Vested Liabilities in excess of $500,000 shall be filed under Title IV of ERISA by the Company, any Subsidiary, a Commonly Controlled Entity, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate or to cause a trustee to be appointed to administer any such Plan or Plans or a proceeding shall be instituted by a fiduciary of any such Plan or Plans to enforce Section 515 of ERISA and such proceeding shall not have been dismissed within 30 days thereafter; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any such Plan or Plans must be terminated; or (k) a final judgment or order (from which all appeals have been taken and determined or as to which all time for the taking of appeals has lapsed) for the payment of money in excess of $500,000 shall be rendered against the Company or any Subsidiary and such judgment or order shall continue unsatisfied and in effect for a period of 60 days; or (l) (i) a judgment creditor shall obtain possession of any material portion of the mortgaged property (the "Mortgaged Property") referred to in the Mortgage by any means, including, without limitation, levy, distraint, replevin or self-help, (ii) any foreclosure or other remedial action in respect of or affecting the Mortgaged Property shall be commenced by or on behalf of the holders of the Second Mortgage Bonds or the trustee under the General and Refunding Mortgage Indenture, (iii) any material portion of the Mortgaged Property shall be taken by eminent domain or condemnation, (iv) the Mortgage shall cease to be in full force and effect or the Company shall disavow its obligations thereunder or shall contest the validity or enforceability thereof, (v) the trustee under the Mortgage (the "First Mortgage Trustee") shall cease, in respect of any material portion of the Mortgaged Property, to have a valid and perfected first priority security interest therein, (vi) the security interest of the First Mortgage Trustee in any material portion of the Mortgaged Property shall otherwise become impaired or unenforceable, or (vii) any provision of the Mortgage, the Supplemental Indenture or the Collateral Bonds shall be amended, supplemented, waived or otherwise modified in any respect except to the extent expressly permitted by the Pledge Agreement; then, and in every such event and at any time thereafter during the continuance of any such event, the Administrative Agent shall, if requested by the Majority Banks, by notice to the Company terminate the Commitments and they shall thereupon be terminated, and the Administrative Agent shall, if requested by the Majority Banks, by notice to the Company declare the Loans (together with accrued interest thereon) and all other amounts outstanding under this Agreement (including, without limitation, all amounts of L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented the documents required thereunder), and the Loans and such amounts shall thereupon become, due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company; PROVIDED that in the case of the occurrence of any event described in the foregoing clauses (g) and (h) with respect to the Company, the Loans and all amounts outstanding hereunder (including, without limitation, all amounts of L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented the documents required thereunder) shall become due and payable forthwith without the requirement of any such notice, and without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company. With respect to all Letters of Credit with respect to which presentment for honor shall not have occurred at the time of an acceleration pursuant to this paragraph, the Company shall at such time deposit in a cash collateral account opened by the Administrative Agent an amount equal to the aggregate then undrawn and unexpired amount of such Letters of Credit. Amounts held in such cash collateral account shall be applied by the Administrative Agent to the payment of drafts drawn under such Letters of Credit, and the unused portion thereof after all such Letters of Credit shall have expired or been fully drawn upon, if any, shall be applied to repay other obligations of the Company owing to the Administrative Agent and the Banks hereunder and under the other Loan Documents. After all such Letters of Credit shall have expired or been fully drawn upon, all Reimbursement Obligations shall have been satisfied and all other obligations of the Company owing to the Administrative Agent and the Banks hereunder and under the other Loan Documents shall have been paid in full, the balance, if any, in such cash collateral account shall be returned to the Company (or such other Person as may be lawfully entitled thereto). SECTION 7.2 NOTICE OF EVENT OF DEFAULT. The Administrative Agent shall give notice to the Company under Section 7.1(c) promptly upon being requested to do so by the Majority Banks and shall thereupon notify all holders of Notes thereof. ARTICLE VIII THE ADMINISTRATIVE AGENT SECTION 8.1 APPOINTMENT. Each Bank who may, from time to time, be party to this Agreement, hereby irrevocably designates and appoints the Administrative Agent as agent of such Bank under this Agreement and the other Loan Documents, and each such Bank hereby irrevocably authorizes the Administrative Agent, in such capacity, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement or any other Loan Document, the Administrative Agent shall have not any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Bank, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Administrative Agent. SECTION 8.2 DELEGATION OF DUTIES. The Administrative Agent may execute any of its duties under this Agreement and the other Loan Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. SECTION 8.3 EXCULPATORY PROVISIONS. Neither the Administrative Agent, nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates, shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or any other Loan Document (except for its or such Person's own gross negligence or willful misconduct), or (ii) responsible in any manner to any of the Banks for any recitals, statements, representations or warranties made by the Company or any officer thereof contained in this Agreement or any other Loan Document or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent under or in connection with, this Agreement or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Documents or for any failure of the Company to perform its obligations hereunder or thereunder. Neither the Administrative Agent nor any Co-Agent shall be under any obligation to any Bank to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of the Company. SECTION 8.4 RELIANCE BY ADMINISTRATIVE AGENT. The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any Note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including without limitation, counsel to the Company), independent accountants and other experts selected by them. The Administrative Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with them. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Majority Banks as it deems appropriate or it shall first be indemnified to its satisfaction by the Banks against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under the Loan Documents in accordance with a request of the Majority Banks, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Banks and all future holders of the Notes. SECTION 8.5 NOTICE OF EVENT OF DEFAULT. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Event of Default hereunder unless it receives notice from a Bank or the Company referring to this Agreement, describing such Event of Default and stating that such notice is a "notice of default". In the event that the Administrative Agent receives such a notice, it shall give notice thereof to the Banks. The Administrative Agent shall take such action with respect to such Event of Default as shall be reasonably directed by the Majority Banks. SECTION 8.6 NON-RELIANCE ON ADMINISTRATIVE AGENT AND OTHER BANKS. Each Bank expressly acknowledges that neither the Administrative Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates has made any representations or warranties to it and that no act by the Administrative Agent hereinafter taken, including any review of the affairs of the Company, shall be deemed to constitute any representation or warranty by the Administrative Agent to any Bank. Each Bank represents to the Administrative Agent that it has, independently and without reliance upon the Administrative Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Company and made its own decision to make its loans hereunder and enter into this Agreement. Each Bank also represents that it will, independently and without reliance upon the Administrative Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Company. Except for notices, reports and other documents expressly required to be furnished to the Banks by the Administrative Agent hereunder, the Administrative Agent shall not have any duty or responsibility to provide any Bank with any credit or other information concerning the business, operations, property, financial and other condition or creditworthiness of the Company which may come into the possession of such Administrative Agent or any of its respective officers, directors, employees, agents, attorneys-in-fact or affiliates. SECTION 8.7 INDEMNIFICATION. The Banks agree to indemnify the Administrative Agent, in its capacity as administrative agent (to the extent not reimbursed by the Company and without limiting the obligation of the Company to do so), ratably according to the respective amounts of their Revolving Credit Commitments (or, if the Revolving Credit Commitments have been terminated, their Aggregate Outstanding Revolving Extensions of Credit) and Term Loans outstanding on the date on which indemnification is sought (or, if indemnification is sought after the date on which the Loans shall have been paid in full, ratably in accordance with the foregoing amounts immediately prior to such date), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Loans) be imposed on, incurred by or asserted against the Administrative Agent in any way relating to or arising out of this Agreement, or any documents contemplated by or referred to herein or the transactions contemplated hereby or any action taken or omitted by the Administrative Agent under or in connection with any of the foregoing; PROVIDED that no Bank shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from the Administrative Agent's gross negligence or willful misconduct. The agreements in this Section shall survive the payment of the Loans and all other amounts payable hereunder. SECTION 8.8 ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY. The Administrative Agent and its affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Company as though such Administrative Agent were not the Administrative Agent hereunder. With respect to its loans made or renewed by it and any Note issued to it and with respect to any Letter of Credit issued or participated in by it, the Administrative Agent shall have the same rights and powers under this Agreement as any Bank and may exercise the same as though it were not the Administrative Agent, and the terms "Bank" and "Banks" shall include the Administrative Agent in its individual capacity. SECTION 8.9 SUCCESSOR ADMINISTRATIVE AGENT. The Administrative Agent may resign upon 10 days' notice to the Banks. If the Administrative Agent shall resign, then the Majority Banks shall appoint from among the Banks a successor administrative agent for the Banks which successor agent or administrative agent shall be approved by the Company (which approval shall not be unreasonably withheld), whereupon such successor administrative agent shall succeed to the rights, powers and duties of the Administrative Agent and the term "Administrative Agent" shall mean such successor administrative agent effective upon the appointment and approval of such successor administrative agent, whereupon the former Administrative Agent's rights, powers and duties hereunder shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Agreement, or any holders of the Notes. After any retiring Administrative Agent's resignation hereunder as Administrative Agent, as the case may be, the provisions of this Article VIII shall inure to the successor administrative agent's benefit as to any actions taken or omitted to be taken by it while under this Agreement. SECTION 8.10 CO-AGENTS. No Co-Agent in its capacity as such shall have any rights, duties or responsibilities hereunder, or any fiduciary relationship with any Bank, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or otherwise exist against any Co-Agent in its capacity as such. ARTICLE IX MISCELLANEOUS SECTION 9.1 NOTICES. All notices, requests and other communications provided for herein shall be in writing (including bank wire, telex, telegram, telecopy or similar writing) and shall be given: (a) if to any party hereto, to it at its address or telex or telecopy number set forth on Schedule II hereof; and (b) if to any holder of a Note, other than a Bank, to it at the address or telex or telecopy number of the original payee thereof or at the address or telex or telecopy number or any subsequent holder if notice of the transfer of such Note and the name and the address or telex or telecopy number of such subsequent holder shall have been given to the Administrative Agent and the Company; or in any of the foregoing cases at such other address or telex or telecopy number as such party or subsequent holder may hereafter specify for the purpose by notice to the Administrative Agent and the Company. Each such notice, request or other communication shall be effective (i) if given by telex, when such telex is transmitted to the telex number specified in this Section and the appropriate answerback is received, (ii) if given by mail, 72 hours after such letter, is deposited in the mails with first class postage prepaid, addressed as aforesaid, (iii) if given by telecopy, when such telecopy is received or (iv) if given by any other means, when delivered at the address specified in this Section; PROVIDED that notices to the Administrative Agent or any Bank under Article II or III shall not be effective until received. SECTION 9.2 NO WAIVERS; CUMULATIVE REMEDIES. No failure to exercise and no delay in exercising, on the part of the Administrative Agent or any Bank, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. SECTION 9.3 EXPENSES; DOCUMENTARY TAXES. The Company agrees (a) to pay or reimburse the Administrative Agent for all of its out-of-pocket costs and expenses incurred in connection with the development, preparation and execution of, and any amendment, supplement or modification to, this Agreement and the other Loan Documents and any other documents prepared in connection herewith, and the consummation of the transactions contemplated hereby and thereby, including, without limitation, the fees and disbursements of counsel to the Administrative Agent, (b) to pay or reimburse each Bank and the Administrative Agent for all their costs and expenses incurred in connection with the enforcement or preservation of any rights under this Agreement, the other Loan Documents and any such other documents, including, without limitation, fees and disbursements of counsel to the Administrative Agent and to the several Banks, (c) to pay, indemnify, and to hold each Bank and the Administrative Agent harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of, or consummation of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, the other Loan Documents and any such other documents, and (d) to pay, indemnify, and hold each Bank and the Administrative Agent harmless from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement, the other Loan Documents and any such other documents (all the foregoing in this clause (d), collectively, the "indemnified liabilities"), PROVIDED, that the Company shall have no obligation hereunder to the Administrative Agent or any Bank with respect to indemnified liabilities arising from the gross negligence or willful misconduct of the Administrative Agent or such Bank, as the case may be. The agreements in this Section shall survive the payment of the Loans and all other amounts payable hereunder. SECTION 9.4 ADJUSTMENTS. Except to the extent that this Agreement specifies that optional or mandatory prepayments or repayments are to be allocated to the Revolving Credit Loans, Swing Line Loans or Term Loans, as the case may be, if any Bank (a "BENEFITTED BANK") shall at any time receive any payment of all or part of its Loans, or interest thereon, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set- off, pursuant to events or proceedings of the nature referred to in clause (g) or (h) of Section 7.1, or otherwise) in a greater proportion than any such payment to and collateral received by any other Bank, if any, in respect of such other Bank's Loans, or interest thereon, such benefitted Bank shall purchase for cash from the other Banks such portion of each such other Bank's Loan, or shall provide such other Banks with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such benefitted Bank to share the excess payment or benefits of such collateral or proceeds ratably with each of the Banks; PROVIDED, HOWEVER, that if all or any portion of such excess payment or benefits is thereafter recovered from such benefitted Bank, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest. The Company agrees that each Bank so purchasing a portion of another Bank's Loan may exercise all rights of payment (including, without limitation, rights of set-off) with respect to such portion as fully as if such Bank were the direct holder of such portion. SECTION 9.5 AMENDMENTS AND WAIVERS. Any provision of this Agreement, the Pledge Agreement or the Notes may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Company and the Majority Banks (and, if the rights or duties of the Administrative Agent are affected thereby, by the Administrative Agent); PROVIDED that no such amendment or waiver shall, unless signed by all the Banks, (a)(i) increase or extend the Commitment of any Bank, (ii) reduce the principal of or rate of interest on the Loans or reduce any commitment fees or Letter of Credit commissions hereunder or (iii) postpone the date fixed for any payment of principal of or interest on the Loans or any commitment fees or Letter of Credit commissions hereunder (it being understood that amendments or waivers of the provisions of Section 2.11(b) shall not be subject to the requirements of this proviso), (b) change the percentage of the Commitments and the extensions of credit which shall be required for the Banks to take any action hereunder, (c) amend or modify the provisions of this Section or (d) release any substantial portion of the Collateral (as defined in the Pledge Agreement) except (i) to the extent expressly contemplated by the Supplemental Indenture and the Pledge Agreement and (ii) any release of Collateral Bonds to the extent the aggregate principal amount thereof exceeds the sum of the aggregate Revolving Credit Commitments and the outstanding principal amount of the Term Loans. SECTION 9.6 SUCCESSORS AND ASSIGNS; PARTICIPATIONS; PURCHASING BANKS. (a) This Agreement shall be binding upon and inure to the benefit of the Company, the Banks, the Administrative Agent, all future holders of the Notes, and their respective successors and assigns, except that the Company may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of each Bank. (b) Any Bank may, in the ordinary course of its business and in accordance with applicable law, at any time sell to one or more banks or other entities ("PARTICIPANTS") participating interests in any loan made hereunder owing to such Bank, any Note held by such Bank, any Commitment of such Bank or any other interest of such Bank hereunder. In the event of any such sale by a Bank of participating interests to a Participant, such Bank's obligations under this Agreement to the other parties to this Agreement shall remain unchanged, such Bank shall remain solely responsible for the performance thereof, such Bank shall remain the holder of any such Note for all purposes under this Agreement and the Company and the Administrative Agent shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement. The Company agrees that if amount outstanding under this Agreement and the Notes are due and unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall be deemed to have the right of setoff in respect of its participating interest in amounts owing under this Agreement and any Note to the same extent as if the amount of its participating interest were owing directly to it as a Bank under this Agreement or any Note; PROVIDED, that such right of setoff shall be subject to the obligation of such Participant to share with the Banks, and the Banks agree to share with such Participant, as provided in Section 9.4. The Company also agrees that each Participant shall be entitled to the benefits of Sections 2.17, 2.18, 2.19 and 9.3 with respect to its participation in the Commitments and the Loans outstanding hereunder from time to time; PROVIDED that no Participant shall be entitled to receive any greater amount pursuant to such Sections than the transferor Bank would have been entitled to receive in respect of the amount of the participation transferred by such transferor Bank to such Participant had no such transfer occurred. (c) Any Bank may, in the ordinary course of its business and in accordance with applicable law, at any time sell to any Bank or any affiliate thereof, and, with the consent of the Company and the Administrative Agent (which in each case shall not be unreasonably withheld) to one or more additional banks or financial institutions ("PURCHASING BANKS") all or any part of its rights and obligations under this Agreement and the Notes, pursuant to an Assignment and Acceptance Agreement, executed by such Purchasing Bank, such transferor Bank (and, in the case of a Purchasing Bank that is not then a Bank or an affiliate thereof, by the Company and the Administrative Agent), and delivered to the Administrative Agent for its acceptance and recording in the Register; PROVIDED that, except in the case of an assignment of all of a Bank's interest under this Agreement and the Notes, after giving effect to any such assignment, each of the assigning Bank and the Purchasing Bank (together with any Bank which is an affiliate of such assigning Bank or such Purchasing Bank, as the case may be) shall have Loans and/or Commitments aggregating not less than $5,000,000. Any such assignment need not be ratable as between the Revolving Credit Commitments and/or Revolving Credit Loans and the Term Loan Commitments and/or Term Loans of the assigning Bank. Upon such execution, delivery, acceptance and recording, from and after the Transfer Effective Date determined pursuant to such Assignment and Acceptance Agreement, (x) the Purchasing Bank thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance Agreement, have the rights and obligations of a Bank hereunder with a Commitment and/or Loans as set forth therein, and (y) the transferor Bank thereunder shall, to the extent provided in such Assignment and Acceptance Agreement, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance Agreement covering all or the remaining portion of a transferor Bank's rights and obligations under this Agreement, such transferor Bank shall cease to be a party hereto). Such an Assignment and Acceptance Agreement shall be deemed to amend this Agreement to the extent, and only to the extent, necessary to reflect the addition of such Purchasing Bank and the resulting adjustments arising from the purchase by such Purchasing Bank of all or a portion of the rights and obligations of such transferor Bank under this Agreement and the Notes. On or prior to the Transfer Effective Date determined pursuant to such Assignment and Acceptance Agreement, the Company, at its own expense, shall execute and deliver to the Administrative Agent in exchange for the surrendered Revolving Credit Note and/or Term Note a new Revolving Credit Note and/or Term Note, as the case may be, to the order of such Purchasing Bank in an amount equal to the Revolving Credit Commitment and/or Term Loans assumed by it pursuant to such an Assignment and Acceptance Agreement and, if the transferor Bank has retained a Revolving Credit Commitment and/or Term Loans hereunder, a new Note or Notes to the order of the Purchasing Bank in an amount equal to the Revolving Credit Commitment and/or Term Loans retained by it hereunder. Such new Notes shall be in the form of the Notes replaced thereby. The Notes surrendered by the transferor Bank shall be returned by the Administrative Agent to the Company marked "cancelled." (d) The Administrative Agent shall maintain at its address referred to in Schedule II hereto a copy of each Assignment and Acceptance Agreement delivered to it and a register (the "REGISTER") for the recordation of the names and addresses of the Banks and the Commitment of, and principal amount of the Loans owing to, each Bank from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Company, the Administrative Agent and the Banks may treat each Person whose name is recorded in the Register as the owner of the Loan recorded therein for all purposes of this Agreement. The Register shall be available for inspection by the Company or any Bank at any reasonable time and from time to time upon reasonable prior notice. (e) Upon its receipt of an Assignment Acceptance Agreement executed by a transferor Bank and a Purchasing Bank (and, in the case of a Purchasing Bank that is not then a Bank or an affiliate thereof, by the Company and the Administrative Agent) together with payment by or on behalf of the transferor Bank or the Purchasing Bank (as agreed between them) to the Administrative Agent of a registration and processing fee of $2,500, the Administrative Agent shall (i) promptly accept such an Assignment and Acceptance Agreement (ii) on the Transfer Effective Date determined pursuant thereto record the information contained therein in the Register and give notice of such acceptance and recordation to the Banks and the Company. (f) The Company authorizes each Bank to disclose to any Participant or Purchasing Bank (each, a "TRANSFEREE") and any prospective Transferee any and all financial information in such Bank's possession concerning the Company and its affiliates which has been delivered to such Bank by or on behalf of the Company pursuant to this Agreement or which has been delivered to such Bank by or on behalf of the Company in connection with such Bank's credit evaluation of the Company and its affiliates prior to becoming a party to this Agreement. (g) If, pursuant to this Section, any interest in this Agreement or any Note is transferred to any Transferee which is organized under the laws of any jurisdiction other than the United States or any State thereof, the transferor Bank shall cause such Transferee, concurrently with the effectiveness of such transfer, (i) to represent to the transferor Bank (for the benefit of the transferor Bank, the Administrative Agent and the Company) that under applicable law and treaties no taxes will be required to be withheld by the Administrative Agent, the Company or the transferor Bank with respect to any payments to be made to such Transferee in respect of the Loans, (ii) to furnish to the transferor Bank (and, in the case of any Purchasing Bank registered in the Register, the Administrative Agent and the Company) either U.S. Internal Revenue Service Form 4224 or U.S. Internal Revenue Service Form 1001 (wherein such Transferee claims entitlement to complete exemption from U.S. federal withholding tax on all interest payments hereunder) and (iii) to agree (for the benefit of the transferor Bank, the Administrative Agent and the Company) to provide the transferor Bank (and, in the case of any Purchasing Bank registered in the Register, the Administrative Agent and the Company) a new Form 4224 or Form 1001 upon the expiration or obsolescence of any previously delivered form and comparable statements in accordance with applicable U.S. laws and regulations and amendments duly executed and completed by such Transferee, and to comply from time to time with all applicable U.S. laws and regulations with regard to such withholding tax exemption. (h) For avoidance of doubt, the parties to this Agreement acknowledge that the provisions of this Section concerning assignments of Loans and Notes relate only to absolute assignments and that such provisions do not prohibit assignments creating security interests, including, without limitation, any pledge or assignment by a Bank of any Loan or Note to any Federal Reserve Bank in accordance with applicable law. ARTICLE X SECTION 10.1 COUNTERPARTS; EFFECTIVENESS. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall be effective when signed by the Administrative Agent and the Company and the Administrative Agent has received telecopy or telephonic confirmation of the signing of this Agreement from each of the Banks. A set of the copies of this Agreement signed by all the parties hereto shall be lodged with the Company and the Administrative Agent. ARTICLE XI SECTION 11.1 SECTION HEADINGS. The Section headings in this Agreement are inserted for convenience only and shall not be part of this instrument. ARTICLE XII SECTION 12.1 GOVERNING LAW. This Agreement and the rights and obligations of the parties under this Agreement shall be governed by, and construed and interpreted in accordance with, the law of the State of New York. ARTICLE XIII SECTION 13.1 SUBMISSION TO JURISDICTION; WAIVERS. (a) The Company hereby irrevocably and unconditionally: (i) submits for itself and its property in any legal action or proceeding relating to this Agreement or any other Loan Document, or for recognition and enforcement of any judgment in respect thereof, to the nonexclusive general jurisdiction of the Courts of the State of New York, the courts of the United States of America for the Southern District of New York, and appellate courts from any thereof; (ii) consents that any such action or proceeding may be brought in such courts, and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (iii) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to the Company at its address set forth in Schedule II or at such other address of which the Administrative Agent shall have been notified pursuant thereto; and (iv) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction. (b) The Company, the Administrative Agent and each Bank hereby irrevocably and unconditionally waive trial by jury in any legal action or proceeding relating to this Agreement or any other Loan Document and for any counterclaim therein. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective proper and duly authorized officers as of the day and year first above written. BANGOR HYDRO-ELECTRIC COMPANY By:________________________________ Title: CHEMICAL BANK, as Administrative Agent and as a Bank By:________________________________ Title: THE FIRST NATIONAL BANK OF BOSTON By:________________________________ Title: THE BANK OF NEW YORK By:________________________________ Title: FLEET BANK OF MAINE By:________________________________ Title: KEY BANK By:________________________________ Title: SHAWMUT BANK, N.A. By:________________________________ Title: TORONTO-DOMINION BANK By:________________________________ Title: Total Banks Allocation Revolver 47.83% Term Loan 52.17% - ---------------- ------------ ------------- ------------- Chemical Bank $21,000,000 10,043,478.27 10,956,521.73 Bank of Boston 18,000,000 8,608,695.65 9,391,304.35 Fleet Bank 18,000,000 8,608,695.65 9,391,304.35 Toronto-Dominion 18,000,000 8,608,695.65 9,391,304.35 Shawmut Bank 15,000,000 7,173,913.04 7,826,086.96 Bank of New York 15,000,000 7,173,913.04 7,826,086.96 Key Bank 10,000,000 4,782,608.70 5,217,391.30 ------------ ------------ ------------ $115,000,000 55,000,000 $60,000,000 SCHEDULE II ADDRESS SCHEDULE Bangor Hydro-Electric Company 33 State Street Bangor, Maine 04401 Attention: Robert Weiser Telecopy: (207) 990-6990 Chemical Bank, as Administrative Agent and as a Bank Domestic and Eurodollar Lending Office: 270 Park Avenue, 8th Floor New York, New York 10017 Attention: Utilities Group Telecopy: (212) 270-2555 The Bank of New York Domestic and Eurodollar Lending Office: One Wall Street, 19th Floor New York, New York 10286 Attention: John Hall Telecopy: (212) 635-7923 The First National Bank of Boston Domestic and Eurodollar Lending Office: Energy & Utilities Division 100 Federal Street - 15th Floor Boston, MA 02110 Attention: Michael Kane Telecopy: (617) 434-3652 Fleet Bank of Maine Domestic and Eurodollar Lending Office: 80 Exchange Street Bangor, Maine 04401 Attention: Chuck Osgood Telecopy: (207) 941-6023 Key Bank Domestic and Eurodollar Lending Office: One Monument Square, 4th Floor Portland, Maine 04104 Attention: Richard McNaughton Telecopy: (207) 776-7624 Shawmut Bank, N.A. Domestic and Eurodollar Lending Office: One Federal Street Boston, Massachusetts 02211 Attention: John Rafferty Telecopy: (617) 292-2619 The Toronto-Dominion Bank Domestic and Eurodollar Lending Office: 909 Fannin Street, Suite 1700 Houston, Texas 77010 Attention: Neva Nesbitt Telecopy: (713) 951-9921 ` Exhibit A-1 to the Credit Agreement ------------------ FORM OF REVOLVING CREDIT NOTE $______________ New York, New York June ___, 1995 FOR VALUE RECEIVED, the undersigned, Bangor Hydro-Electric Company, a Maine corporation (the "COMPANY"), hereby unconditionally promises to pay to the order of _______________ (the "BANK") at the office of Chemical Bank, located at 270 Park Avenue, New York, New York 10017, in lawful money of the United States of America and in immediately available funds, on the Termination Date the principal amount of (a) ____________ DOLLARS ($_______), or, if less, (b) the aggregate unpaid principal amount of all Revolving Credit Loans made by the Bank to the Company pursuant to Section 2.1 of the Credit Agreement, as hereinafter defined. The Company further agrees to pay interest in like money at such office on the unpaid principal amount hereof from time to time outstanding at the rates and on the dates specified in Section 2.13 of such Credit Agreement. The holder of this Note is authorized to endorse on the schedules annexed hereto and made a part hereof or on a continuation thereof which shall be attached hereto and made a part hereof the date and amount of each Revolving Credit Loan made pursuant to the Credit Agreement and the date and amount of each payment or prepayment of principal thereof, each conversion of all or a portion thereof and, in the case of Eurodollar Loans, the length of each Interest Period with respect thereto. Each such endorsement shall constitute PRIMA FACIE evidence of the accuracy of the information endorsed. The failure to make any such endorsement or any error in any such endorsement shall not affect the obligations of the Company in respect of the Revolving Credit Loans. This Note (a) is one of the Revolving Credit Notes referred to in the Credit Agreement dated as of June ___, 1995 (as amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"), among the Company, the Bank, the other banks and financial institutions from time to time parties thereto and Chemical Bank, as administrative agent, (b) is subject to the provisions of the Credit Agreement and (c) is subject to prepayment in whole or in part as provided in the Credit Agreement. This Note is secured as provided in the Loan Documents. Reference is hereby made to the Loan Documents for a description of the properties and assets in which a security interest has been granted, the nature and extent of the security, the terms and conditions upon which the security interests were granted and the rights of the holder of this Note in respect thereof. Upon the occurrence of any one or more of the Events of Default, all amounts then remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable, all as provided in the Credit Agreement. All parties now and hereafter liable with respect to this Note, whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive presentment, demand, protest and all other notices of any kind. Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. BANGOR HYDRO-ELECTRIC COMPANY By:_______________________________ Name: Title: Schedule A To Revolving Credit Note ------------------------ LOANS, CONVERSIONS AND REPAYMENTS OF BASE RATE LOANS |---------------------------------------------------------------------------| | |AMOUNT OF| AMOUNT | AMOUNT OF | AMOUNT OF | UNPAID | | |DATE|BASE RATE| CONVERTED | PRINCIPAL | BASE RATE | PRINCIPAL | NOTATION| | | LOANS | TO BASE |OF BASE RATE| LOANS CON- | BALANCE OF| MADE BY | | | | RATE LOANS |LOANS REPAID| VERTED TO | BASE RATE | | | | | | | EURODOLLAR | LOANS | | | | | | | LOANS | | | |----|---------|------------|------------|------------|-----------|---------| | | | | | | | | |____|_________|____________|____________|____________|___________|_________| | | | | | | | | | | | | | | | | |____|_________|____________|____________|____________|___________|_________| | | | | | | | | | | | | | | | | |____|_________|____________|____________|____________|___________|_________| Schedule B To Revolving Credit Note ------------------------ LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR LOANS |---------------------------------------------------------------------------| | |AMOUNT OF |AMOUNT |INTEREST |AMOUNT OF|AMOUNT OF |UNPAID |NOTATION| |DATE|EURODOLLAR|CONVERTED| PERIOD |PRINCIPAL|EURODOLLAR|PRINCIPAL|MADE BY | | | LOANS |TO EURO- |AND LIBO |OF EURO- |LOANS CON-|BALANCE | | | | | DOLLAR |RATE WITH| DOLLAR |VERTED TO |OF EURO- | | | | | LOANS |RESPECT | LOANS |BASE RATE |DOLLAR | | | | | | THERETO | REPAID | LOANS | LOANS | | |----|----------|---------|---------|---------|----------|---------|--------| | | | | | | | | | |____|__________|_________|_________|_________|__________|_________|________| | | | | | | | | | | | | | | | | | | |____|__________|_________|_________|_________|__________|_________|________| | | | | | | | | | | | | | | | | | | |____|__________|_________|_________|_________|__________|_________|________| Exhibit A-2 to the CREDIT AGREEMENT ------------------ FORM OF SWING LINE NOTE $_____________ New York, New York June ___, 1995 FOR VALUE RECEIVED, the undersigned, Bangor Hydro-Electric Company, a Maine corporation (the "COMPANY"), hereby unconditionally promises to pay to the order of _____________ (the "BANK") at the office of Chemical Bank, located at 270 Park Avenue, New York, New York 10017, in lawful money of the United States of America and in immediately available funds, on the Termination Date the principal amount of (a) ____________ DOLLARS ($________), or, if less, (b) the aggregate unpaid principal amount of all Swing Line Loans made by the Bank to the Company pursuant to Section 2.4 of the Credit Agreement, as hereinafter defined. The Company further agrees to pay interest in like money at such office on the unpaid principal amount hereof from time to time outstanding at the rates and on the dates specified in Section 2.13 of such Credit Agreement. The holder of this Note is authorized to endorse on the schedules annexed hereto and made a part hereof or on a continuation thereof which shall be attached hereto and made a part hereof the date and amount of each Swing Line Loan made pursuant to the Credit Agreement and the date and amount of each payment or prepayment of principal thereof. Each such endorsement shall constitute PRIMA FACIE evidence of the accuracy of the information endorsed. The failure to make any such endorsement or any error in any such endorsement shall not affect the obligations of the Company in respect of the Swing Line Loans. This Note (a) is the Swing Line Note referred to in the Credit Agreement dated as of June ___, 1995 (as amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"), among the Company, the Bank, the other banks and financial institutions from time to time parties thereto and Chemical Bank, as administrative agent, (b) is subject to the provisions of the Credit Agreement and (c) is subject to prepayment in whole or in part as provided in the Credit Agreement. This Note is secured as provided in the Loan Documents. Reference is hereby made to the Loan Documents for a description of the properties and assets in which a security interest has been granted, the nature and extent of the security, the terms and conditions upon which the security interests were granted and the rights of the holder of this Note in respect thereof. Upon the occurrence of any one or more of the Events of Default, all amounts then remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable, all as provided in the Credit Agreement. All parties now and hereafter liable with respect to this Note, whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive presentment, demand, protest and all other notices of any kind. Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. BANGOR HYDRO-ELECTRIC COMPANY By: _________________________________ Name: Title: Schedule A To Swing Line Note ------------------ LOANS, CONVERSIONS AND REPAYMENTS OF BASE RATE LOANS |---------------------------------------------------------------------------| | |AMOUNT OF BASE| AMOUNT OF | UNPAID PRINCIPAL | NOTATION MADE BY | | DATE | RATE LOANS | PRINCIPAL | BALANCE OF BASE | | | | | OF BASE RATE | RATE LOANS | | | | | LOANS REPAID | | | |-------|--------------|--------------|------------------|------------------| | | | | | | |_______|______________|______________|__________________|__________________| | | | | | | | | | | | | |_______|______________|______________|__________________|__________________| | | | | | | | | | | | | |_______|______________|______________|__________________|__________________| Exhibit B to the Credit Agreement ---------------- FORM OF TERM NOTE $_________ New York, New York June ___, 1995 FOR VALUE RECEIVED, the undersigned, Bangor Hydro-Electric Company, a Maine corporation (the "COMPANY"), hereby unconditionally promises to pay to the order of _____________ (the "BANK") at the office of Chemical Bank, located at 270 Park Avenue, New York, New York 10017, in lawful money of the United States of America and in immediately available funds, the principal amount of _______________ DOLLARS ($_________), or, if less, the unpaid principal amount of the Term Loan made by the Bank pursuant to Section 2.7 of the Credit Agreement, as hereinafter defined. The principal amount hereof shall be paid in the amounts and on the dates specified in Section 2.11 of such Credit Agreement. The Company further agrees to pay interest in like money at such office on the unpaid principal amount hereof from time to time outstanding at the rates and on the dates specified in Section 2.13 of such Credit Agreement. The holder of this Note is authorized to endorse on the schedules annexed hereto and made a part hereof or on a continuation thereof which shall be attached hereto and made a part hereof the date and amount of the Term Loan and the date and amount of each payment or prepayment of principal with respect thereto, each conversion of all or a portion thereof, and in the case of Eurodollar Loans, the length of each Interest Period with respect thereto. Each such endorsement shall constitute PRIMA FACIE evidence of the accuracy of the information endorsed. The failure to make any such endorsement or any error in any such endorsement shall not affect the obligations of the Company in respect of such Term Loan. This Note (a) is one of the Term Notes referred to in the Credit Agreement dated as of June ___, 1995 (as amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"), among the Company, the Bank, the other banks and financial institutions from time to time parties thereto and Chemical Bank, as administrative agent, (b) is subject to the provisions of the Credit Agreement and (c) is subject to prepayment in whole or in part as provided in the Credit Agreement. This Note is secured as provided in the Loan Documents. Reference is hereby made to the Loan Documents for a description of the properties and assets in which a security interest has been granted, the nature and extent of the security the terms and conditions upon which the security interests were granted and the rights of the holder of this Note in respect thereof. Upon the occurrence of any one or more of the Events of Default, all amounts then remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable, all as provided in the Credit Agreement. All parties now and hereafter liable with respect to this Note, whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive presentment, demand, protest and all other notices of any kind. Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. BANGOR HYDRO-ELECTRIC COMPANY By: __________________________________ Name: Title: Schedule A To Term Loan Note ------------------ LOANS, CONVERSIONS AND REPAYMENTS OF BASE RATE LOANS |---------------------------------------------------------------------------| | |AMOUNT OF| AMOUNT | AMOUNT OF | AMOUNT OF | UNPAID | | |DATE|BASE RATE| CONVERTED | PRINCIPAL | BASE RATE | PRINCIPAL | NOTATION| | | LOANS | TO BASE |OF BASE RATE| LOANS CON- | BALANCE OF| MADE BY | | | | RATE LOANS |LOANS REPAID| VERTED TO | BASE RATE | | | | | | | EURODOLLAR | LOANS | | | | | | | LOANS | | | |----|---------|------------|------------|------------|-----------|---------| | | | | | | | | |____|_________|____________|____________|____________|___________|_________| | | | | | | | | | | | | | | | | |____|_________|____________|____________|____________|___________|_________| | | | | | | | | | | | | | | | | |____|_________|____________|____________|____________|___________|_________| Schedule B To Term Loan Note ------------------------ LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR LOANS |---------------------------------------------------------------------------| | |AMOUNT OF |AMOUNT |INTEREST |AMOUNT OF|AMOUNT OF |UNPAID |NOTATION| |DATE|EURODOLLAR|CONVERTED| PERIOD |PRINCIPAL|EURODOLLAR|PRINCIPAL|MADE BY | | | LOANS |TO EURO- |AND LIBO |OF EURO- |LOANS CON-|BALANCE | | | | | DOLLAR |RATE WITH| DOLLAR |VERTED TO |OF EURO- | | | | | LOANS |RESPECT | LOANS |BASE RATE |DOLLAR | | | | | | THERETO | REPAID | LOANS | LOANS | | |----|----------|---------|---------|---------|----------|---------|--------| | | | | | | | | | |____|__________|_________|_________|_________|__________|_________|________| | | | | | | | | | | | | | | | | | | |____|__________|_________|_________|_________|__________|_________|________| | | | | | | | | | | | | | | | | | | |____|__________|_________|_________|_________|__________|_________|________| Exhibit C to the Credit Agreement ---------------- FORM OF CLOSING CERTIFICATE Pursuant to Sections 4.2(e), (f), (g) and (h) of the Credit Agreement, dated as of June 30, 1995 (the "CREDIT AGREEMENT") (unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement), among Bangor-Hydro-Electric Company, a Maine corporation (the "COMPANY"), the several Banks from time to time parties thereto, Chemical Bank, as Administrative Agent, and Fleet Bank of Maine and The First National Bank of Boston, as Co-Agents, the undersigned ____________ of the Company hereby certifies as follows: 1. The representations and warranties of the Company contained in any Loan Document or in any certificate, document or financial or other statement furnished by or on behalf of the Company pursuant to or in connection with any Loan Document are true and correct on and as of the date hereof with the same effect as if made on the date hereof; 2. No Default or Event of Default has occurred and is continuing as of the date hereof or after giving effect to any extensions of credit to occur on the date hereof; 3. No more than $8,000,000 in Cash (excluding (i) Temporary Cash Investments in an aggregate amount not to exceed $22,000,000 maintained pursuant to the documentation governing the FAME Loan Agreement and (ii) cash securing the letter of credit issued by Shawmut Bank, N.A. referred to in Section 4.3 of the Credit Agreement) will be retained by the Company after three Business Days from the Borrowing Date; 4. Frederick Samp is and at all times since _____________________ 19__, has been the duly elected and qualified Clerk of the Company and the signature set forth on the signature line for such officer below is such officer's true and genuine signature; and the undersigned Clerk of the Company hereby certifies as follows: 5. There are no liquidation or dissolution proceedings pending or to my knowledge threatened against the Company, nor to my knowledge has any other event occurred affecting or threatening the corporate existence of the Company; 6. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Maine; 7. Attached hereto as Exhibit A is a complete and correct copy of resolutions duly adopted by the Board of Directors (or a duly authorized committee thereof) of the Company on _________, 19__; such resolutions have not in any way been amended, modified, revoked or rescinded and have been in full force and effect since their adoption to and including the date hereof and are now in full force and effect; such resolutions are the only corporate proceedings of the Company now in force relating to or affecting the matters referred to therein; 8. Attached hereto as Exhibit B is a complete and correct copy of the by-laws of the Company as in effect at all times since _________________, 19__ to and including the date hereof; and attached hereto as Exhibit C is a true and complete copy of the certificate of incorporation of the Company as in effect at all times since ___________________, 19__ to and including the date hereof; 8. Attached hereto as Exhibit D is a complete and correct copy of the order of the Commission described in Section 5.6 of the Credit Agreement; and 9. The following persons are now duly elected and qualified officers of the Company holding the offices indicated next to their respective names below, and such officers have held such offices with the Company at all times since ________________, 19__ to and including the date hereof, and the signatures appearing opposite their respective names below are the true and genuine signatures of such officers, and each of such officers is duly authorized to execute and deliver on behalf of the Company each Loan Document to which it is a party and any certificate or other document to be delivered by the Company pursuant to such Loan Documents: Name Office Signature ________________ ______________ _____________________ ________________ ______________ _____________________ IN WITNESS WHEREOF, the undersigned have hereto set our names. ----------------------- -------------------------- Title: _____________ Title: Clerk Date: June , 1995 Exhibit D to the Credit Agreement ---------------- ASSIGNMENT AND ACCEPTANCE Reference is made to the Credit Agreement, dated as of June ___, 1995 (as amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"), among Bangor Hydro-Electric Company (the "COMPANY"), the Banks named therein and Chemical Bank, as administrative agent for the Banks (in such capacity, the "ADMINISTRATIVE AGENT"). Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement. (the "ASSIGNOR") and (the "ASSIGNEE") agree as follows: 1. The Assignor hereby irrevocably sells and assigns to the Assignee without recourse to the Assignor, and the Assignee hereby irrevocably purchases and assumes from the Assignor without recourse to the Assignor, as of the Transfer Effective Date (as defined below), an interest (the "ASSIGNED INTEREST") specified on Schedule 1 in and to the Assignor's rights and obligations under the Credit Agreement with respect to those credit facilities contained in the Credit Agreement as are set forth on Schedule 1 (individually, an "ASSIGNED FACILITY"; collectively, the "ASSIGNED FACILITIES"), in a principal amount for each Assigned Facility as set forth on Schedule 1. 2. The Assignor (a) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or any other Loan Document or with respect to the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement, any other Loan Document or any other instrument or document furnished pursuant thereto, other than that the Assignor has not created any adverse claim upon the interest being assigned by it hereunder and that such interest is free and clear of any such adverse claim; (b) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Company, any of its Subsidiaries or any other obligor or the performance or observance by the Company, any of its Subsidiaries or any other obligor of any of their respective obligations under the Credit Agreement or any other Loan Document or any other instrument or document furnished pursuant hereto or thereto; and (c) attaches any Note or Notes held by it evidencing the Assigned Facilities and (i) requests that the Administrative Agent, upon request by the Assignee, exchange the attached Note or Notes for a new Note or Notes payable to the Assignee and (ii) if the Assignor has retained any interest in the Assigned Facility, requests that the Administrative Agent exchange the attached Note or Notes for a new Note or Notes payable to the Assignor, in each case in amounts which reflect the assignment being made hereby (and after giving effect to any other assignments which have become effective on the Transfer Effective Date). 3. The Assignee (a) represents and warrants that it is legally authorized to enter into this Assignment and Acceptance; (b) confirms that it has received a copy of the Credit Agreement, together with copies of the financial statements delivered pursuant to subsection 5.4(a) thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (c) agrees that it will, independently and without reliance upon the Assignor, the Administrative Agent or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement, the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto; (d) appoints and authorizes the Administrative Agent to take such action as Administrative Agent on its behalf and to exercise such powers and discretion under the Credit Agreement, the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto as are delegated to the Administrative Agent by the terms thereof, together with such powers as are incidental thereto; and (e) agrees that it will be bound by the provisions of the Credit Agreement and will perform in accordance with its terms all the obligations which by the terms of the Credit Agreement are required to be performed by it as a Bank including, if it is organized under the laws of a jurisdiction outside the United States, its obligation pursuant to Section 2.17 of the Credit Agreement. 4. The effective date of this Assignment and Acceptance shall be , 19 (the "TRANSFER EFFECTIVE DATE"). Following the execution of this Assignment and Acceptance, it will be delivered to the Administrative Agent for acceptance by it and recording by the Administrative Agent pursuant to the Credit Agreement, effective as of the Transfer Effective Date (which shall not, unless otherwise agreed to by the Administrative Agent, be earlier than five Business Days after the date of such acceptance and recording by the Administrative Agent). 5. Upon such acceptance and recording, from and after the Transfer Effective Date, the Administrative Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignee whether such amounts have accrued prior to the Transfer Effective Date or accrue subsequent to the Transfer Effective Date. The Assignor and the Assignee shall make all appropriate adjustments in payments by the Administrative Agent for periods prior to the Transfer Effective Date or with respect to the making of this assignment directly between themselves. 6. From and after the Transfer Effective Date, (a) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Bank thereunder and under the other Loan Documents and shall be bound by the provisions thereof and (b) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement. 7. This Assignment and Acceptance shall be governed by and construed in accordance with the laws of the State of New York. IN WITNESS WHEREOF, the parties hereto have caused this Assignment and Acceptance to be executed as of the date first above written by their respective duly authorized officers on Schedule 1 hereto. SCHEDULE 1 TO ASSIGNMENT AND ACCEPTANCE RELATING TO THE CREDIT AGREEMENT, DATED AS OF JUNE __, 1995, AMONG BANGOR HYDRO-ELECTRIC COMPANY, THE BANKS NAMED THEREIN AND CHEMICAL BANK, AS ADMINISTRATIVE AGENT FOR THE BANKS (IN SUCH CAPACITY, THE "ADMINISTRATIVE AGENT") - ----------------------------------------------------------------------------- Name of Assignor: Name of Assignee: Transfer Effective Date of Assignment: Credit Facility Assigned - ----------------- Principal Amount Assigned - --------------- Commitment Percentage Assigned* - ---------------------------- $______________ ___._______________% [Name of Assignee] By____________________________ Name: Title: [Name of Assignor] By____________________________ Name: Title: Accepted for Recordation in the Register: Chemical Bank, as Administrative Agent By _____________________________ Name: Title: Consented To: Bangor Hydro-Electric Company By ______________________________ Name: Title: Chemical Bank, as Administrative Agent By____________________________ Name: Title: [Consents required only to the extent specified in Section 9.6(c) of the Credit Agreement] * Footnote: Calculate the Commitment Percentage that is assigned to at least 15 decimal places and show as a percentage of the aggregate commitments of all Lenders. Exhibit E-1 to the Credit Agreement ------------------ BANGOR HYDRO-ELECTRIC COMPANY LETTERHEAD June 30, 1995 Chemical Bank, as Administrative Agent 270 Park Avenue New York New York 10017 And each of the Banks parties to the Credit Agreement referred to below Ladies and Gentlemen: I am General Counsel and Clerk of Bangor Hydro-Electric Company, a Maine corporation (the "COMPANY"), and I have acted as counsel for the Company in connection with (a) the Credit Agreement, dated as of June 30, 1995 (the "CREDIT AGREEMENT"), among the Company, the banks parties thereto (the "BANKS") and Chemical Bank, as administrative agent for the Banks (in such capacity, the "ADMINISTRATIVE AGENT"), and (b) the other Loan Documents referred to in the Credit Agreement which have been executed by the Company on or prior to the date hereof. This opinion is furnished to you pursuant to Section 4.2(c) of the Credit Agreement. Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement. In arriving at this opinion, (a) I have examined and relied on the originals, or copies certified or otherwise identified to my satisfaction, of each of (1) the Credit Agreement, (2) the Pledge Agreement, (3) the Supplemental Indenture dated as of June 29, 1995 (the "SUPPLEMENTAL INDENTURE") to the Mortgage and Deed of Trust dated as of July 1, 1936, from the Company to City Bank Farmers Trust Company (Citibank, N.A., successor), as trustee, as amended and supplemented (the "1936 MORTGAGE"), (4) the Bonds of the Collateral Series due 2000 (the "COLLATERAL BONDS") issued pursuant to the Supplemental Indenture and the 1936 Mortgage, and (5) the Notes executed and delivered by the Company on the date hereof (the "NOTES", and together with the Credit Agreement, the Pledge Agreement, the Supplemental Indenture, and the Collateral Bonds being hereinafter referred to collectively as the "TRANSACTION DOCUMENTS"); and (b) I have examined such corporate documents and records of the Company and such other instruments and certificates of public officials, officers and representatives of the Company and other Persons as I have deemed necessary or appropriate for the purposes of this opinion. In rendering this opinion, I have assumed, with your permission, without independent investigation or inquiry, (a) the authenticity of all documents submitted to me as originals, (b) the genuineness of all signatures on all documents that I have examined (other than those of officers of the Company), (c) the due execution and delivery of the Supplemental Indenture, and the due authentication of the Collateral Bonds, by the trustee under the 1936 Mortgage and (d) the conformity to authentic originals of documents submitted to me as certified, conformed or photostatic copies. When my opinion with respect to the existence or absence of facts is stated "to the best of my knowledge," I have made reasonable and diligent investigation of the subject matters of such opinion and have no reason to believe that there exist any facts or other information that would render such opinion incomplete or incorrect. Based upon and subject to the foregoing, I am of the opinion that: 1. The Company (a) is duly organized, validly existing and in good standing under the laws of the State of Maine, (b) has the corporate power and authority and the legal right to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged and (c) is duly qualified as a foreign corporation and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, except to the extent that the failure to be so qualified could not reasonably be expected to have a Material Adverse Effect. 2. The Company has the corporate power and authority, and the legal right, to make, deliver and perform its obligations under the Credit Agreement and each of the other Transaction Documents, to borrow under the Credit Agreement and to issue, deliver and pledge to the Administrative Agent the Collateral Bonds. The Company has taken all necessary corporate action to authorize the borrowings on the terms and conditions of the Credit Agreement, to grant the security interests contemplated by the Pledge Agreement, to authorize the issuance, delivery and pledge to the Administrative Agent of the Collateral Bonds pursuant to the Supplemental Indenture and the Pledge Agreement and to authorize the execution, delivery and performance of the Credit Agreement and the other Transaction Documents. Except for consents, authorizations, approvals, notices and filings as have been obtained or made, as the case may be, and are now in full force and effect, no consent or authorization of, approval by, notice to, filing with or other act by or in respect of, any governmental authority or any other Person is required in connection with the borrowings under the Credit Agreement or with the execution, delivery, performance, validity or enforceability of the Credit Agreement and the other Transaction Documents or the perfection of the security interests created by the Pledge Agreement or the issuance, delivery and pledge of the Collateral Bonds pursuant to the Supplemental Indenture and the Pledge Agreement. 3. Each of the Credit Agreement and the other Transaction Documents has been duly executed and delivered on behalf of the Company and constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws affecting creditors' rights generally and by general equitable principles. 4. The Collateral Bonds (a) are outstanding for all purposes of the 1936 Mortgage, (b) do not constitute Company-owned Bonds for any purposes of the 1936 Mortgage and (c) are entitled, subject to the terms of the Pledge Agreement, to the benefits of the security afforded by the 1936 Mortgage. 5. The execution and delivery of the Credit Agreement and the other Transaction Documents, the performance by the Company of its obligations thereunder, the consummation of the transactions contemplated thereby, the compliance by the Company with any of the provisions thereof, the borrowings under the Credit Agreement and the use of proceeds thereof, all as provided therein, (a) will not violate, or constitute a default under, (i) any law, rule or regulation, (ii) the Certificate of Organization or By-laws of the Company or (iii) to the best of my knowledge, any contractual obligation of the Company or of any of its Subsidiaries and (b) will not result in, or require, the creation or imposition of any Lien on any of its or their respective properties or revenues, except the security interests created pursuant to the Pledge Agreement and the 1936 Mortgage. 6. To the best of my knowledge, no litigation, investigation or proceeding of or before any arbitrator or governmental authority is pending or threatened by or against the Company or any of its Subsidiaries or against any of its or their respective properties or revenues (a) with respect to the Credit Agreement or any of the other Transaction Documents, or (b) which could reasonably be expected to have a Material Adverse Effect. 7. The Company is exempt from the provisions of the Public Utility Holding Company Act of 1935 and the rules promulgated thereunder except for Section 9 (a)(2) thereof. The Company is not subject to any other law, rule or regulation under any federal or state statute or regulation which limits its ability to incur Debt under the Credit Agreement. I am a member of the bar of the State of Maine and I express no opinion as to the laws of any jurisdiction other than the laws of the State of Maine and the federal laws of the United States of America. Insofar as my opinion expressed in paragraphs (2) and (3) above involve the laws of the State of New York, I have relied on the opinion, dated the date hereof, of Winthrop, Stimson, Putnam & Roberts, a copy of which you have been furnished concurrently herewith, and with your permission I have not made any independent investigation of such laws. I have no responsibility to advise you of changes in any of the foregoing which may hereafter come to my attention. I express no opinion with respect to the effect on the Transaction Documents of Section 552 of the United States Bankruptcy Code (relating to property acquired by the Company or any of its subsidiaries after the commencement of a case under the United States Bankruptcy Code with respect to such party) and Section 547 of the United States Bankruptcy Code (relating to a security interest in such after-acquired property which serves to secure antecedent debt). This opinion is being furnished only to the addressees and is solely for their benefit and the benefit of their participants and assigns in connection with the above transaction. This opinion may not be relied upon for any other purpose, or relied upon by any other person, firm or corporation for any purpose, without my prior written consent. Very truly yours, Exhibit E-2 to the Credit Agreement ------------------ WINTRHOP, STIMSON, PUTNAM & ROBERTS LETTERHEAD June 30, 1995 Chemical Bank, as Administrative Agent 270 Park Avenue New York, New York 10017 And each of the Banks parties to the Credit Agreement referred to below Ladies and Gentlemen: We have acted as special New York counsel to Bangor Hydro- Electric Company, a Maine corporation (the "COMPANY"), in connection with (a) the Credit Agreement, dated as of June 30, 1995 (the "CREDIT AGREEMENT"), among the Company, the banks parties thereto (the "BANKS") and Chemical Bank, as administrative agent for the Banks (in such capacity, the "ADMINISTRATIVE AGENT"), and (b) the other Loan Documents referred to in the Credit Agreement which have been executed by the Company on or prior to the date hereof. This opinion is furnished to you pursuant to Section 4.2(c) of the Credit Agreement. Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement. In arriving at this opinion, (a) we have examined and relied on the originals, or copies certified or otherwise identified to our satisfaction, of each of (1) the Credit Agreement, (2) the Pledge Agreement, (3) the Supplemental Indenture dated as of June 29, 1995 (the "SUPPLEMENTAL INDENTURE") to the Mortgage and Deed of Trust, dated as of July 1, 1936, from the Company to City Bank Farmers Trust Company (Citibank, N.A., successor), as trustee, as amended and supplemented (the "1936 MORTGAGE") (4) the Bonds of the Collateral Series due 2000 (the "COLLATERAL BONDS") issued pursuant to the Supplemental Indenture and the 1936 Mortgage, and (5) the Notes executed and delivered by the Company on the date hereof (the "NOTES", and together with the Credit Agreement, the Pledge Agreement, the Supplemental Indenture and the Collateral Bonds, being hereinafter referred to collectively as the "TRANSACTION DOCUMENTS"); and (b) we have examined such corporate documents and records of the Company and such other instruments and certificates of public officials, officers and representatives of the Company and other Persons as we have deemed necessary or appropriate for the purposes of this opinion. In rendering this opinion, we have assumed, with your permission, without independent investigation or inquiry, (a) the authenticity of all documents submitted to us as originals, (b) the genuineness of all signatures on all documents that we have examined and (c) the conformity to authentic originals of documents submitted to us as certified, conformed or photostatic copies. We have also assumed for purposes of this opinion, that the Transaction Documents are within the capacity and power of and have been validly authorized, executed and delivered by each party to them (other than the Company) and constitute legal, valid, binding and enforceable obligations of all parties (other than the Company) under all applicable laws. Based upon and subject to the foregoing, and to the exceptions and qualifications hereinafter expressed, we are of the opinion that: 1. No consent or authorization of, approval by, notice to, filing with or other act by or in respect of, any New York or Federal governmental authority is required to be obtained by the Company in connection with the borrowings under the Credit Agreement or with the execution, delivery, performance, validity or enforceability of the Credit Agreement and the other Transaction Documents or the issuance, delivery and pledge of the Collateral Bonds pursuant to the Supplemental Indenture and the Pledge Agreement. The execution and delivery of the Credit Agreement and the other Transaction Documents, the performance by the Company of its obligations thereunder, the consummation of the transactions contemplated thereby, the compliance by the Company with any of the provisions thereof, the borrowings under the Credit Agreement and the use of proceeds thereof, all as provided therein, will not violate any New York or Federal statute or regulation. 2. Assuming due authorization, execution and delivery thereof by the Company and the Banks, each of the Credit Agreement, the Pledge Agreement and the Notes constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws affecting creditors' rights generally and by general equitable principles. 3. The Company is not an "investment company," or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended. The Company is exempt from the provisions of the Public Utility Holding Company Act of 1935 and the rules promulgated thereunder except for Section 9(a)(2) thereof. The Company is not subject to any other law, rule or regulation under any Federal or New York statute or regulation which limits its ability to incur Debt under the Credit Agreement. 4. After giving effect to the delivery to the Administrative Agent of the certificates for the Collateral Bonds, and assuming the continuous possession by the Administrative Agent of the Collateral Bonds in the State of New York, the security interest created in favor of the Administrative Agent under the Pledge Agreement to secure the obligations of the Company under the Credit Agreement constitutes a valid, enforceable and perfected first priority security interest in such Collateral Bonds and the proceeds thereof subject to no other security interest. The opinion contained in this paragraph (4) is subject to the following qualifications: (i) our opinion as to priority assumes that the Administrative Agent and the Banks have taken the Collateral Bonds in good faith prior to the date of delivery to the Collateral Agent of notice of any adverse claim relating to such Collateral Bonds (all within the meaning of the Uniform Commercial Code as in effect in the State of New York (the "NYUCC")); (ii) the priority of a security interest may be subject to claims or liens in favor of the United States or any state or any agency or instrumentality of any thereof which are given priority by operation of law, including, without limitation, to the extent they would be given priority by operation of law, liens for the payment of federal, state and/or local taxes, liens incurred in connection with unemployment insurance, social security and similar insurance schemes and claims under the federal priority statute (31 U.S.C. Section 3713); (iii) the priority of a security interest may be subject to a prior lien created under Section 364 of the Federal Bankruptcy Code; and (iv) our opinion as to the priority of the security interests in the Collateral Bonds as against any person who is a lien creditor (as such term is defined in Article 9 of the NYUCC) is limited (a) to the extent that Section 9-301(4) of the NYUCC is applicable, or (b) to the extent that such person became a lien creditor before the security interest of the Administrative Agent in the Collateral Bonds is perfected. This opinion is subject to the following further qualifications: (a) We are members of the Bar of the State of New York and we do not hold ourselves out as being conversant with, and express no opinion as to, the laws of the State of Maine or any other jurisdiction other than the United States of America and the State of New York. This opinion is limited to the laws, regulations, documents and other agreements, contracts and instruments within the scope of this opinion in effect on the date of this opinion, and we express no opinion as to the possible application of laws of other jurisdictions, unless they are specifically referred to herein, and we have no responsibility to advise you of changes in any of the foregoing which may hereafter come to our attention. (b) We express no opinion with respect to the rights of the Company in or title to or legal or beneficial ownership of any of the mortgaged property that is subject to the lien of the 1936 Mortgage. (c) We express no opinion with respect to the effect on the Transaction Documents of Section 552 of the United States Bankruptcy Code (relating to property acquired by the Company or any of its subsidiaries after the commencement of a case under the United States Bankruptcy Code with respect to such party) and Section 547 of the United States Bankruptcy Code (relating to a security interest in such after-acquired property which serves to secure antecedent debt). (d) The continuation of a security interest in proceeds is limited to the degree set forth in Sections 9- 306(2) and 9-306(4) of the NYUCC and the perfection of a security interest in proceeds continues only upon compliance with the provisions of Section 8-313 or 9-306(3) of the NYUCC, as applicable. This opinion is being furnished only to the addressees and is solely for their benefit and the benefit of their participants and assigns in connection with the above transaction. This opinion may not be relied upon for any other purpose, or relied upon by any other person, firm or corporation for any purpose, without our prior written consent. Very truly yours, EATON, PEABODY, BRADFORD & VEAGUE, P.A. LETTERHEAD June 30, 1995 Chemical Bank, as Administrative Agent 270 Park Avenue New York, New York 10017 Each of the Banks Party to the Credit Agreement Referred to Below Ladies and Gentlemen: We have been asked to render this limited opinion to Chemical Bank, as Administrative Agent, in connection with the Credit Agreement dated as of June 30, 1995 (the "Credit Agreement") among Bangor Hydro-Electric Company (the "Company"), the banks which are parties thereto (the "Banks") and Chemical Bank, as administrative agent for the Banks (in such capacity, the "Administrative Agent"). The opinions expressed below are furnished to you pursuant to Section 4.2(c)(iii) of the Credit Agreement. Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings ascribed to them in the Credit Agreement. In arriving at the opinions expressed below, we have examined (a) unexecuted copies in the form furnished to us of each of (1) the Credit Agreement, (2) the Pledge Agreement, (3) the Supplemental Indenture dated as of June 29, 1995 (the "Supplemental Indenture") with respect to the Mortgage, (4) the Bonds of the Collateral Series due 2000 (the "Collateral Bonds") referred to in the Supplemental Indenture, and (5) the Notes executed and delivered by the Company on the date hereof (the Credit Agreement and such other documents being hereinafter referred to collectively as the "Transaction Documents"); and (b) such corporate documents and records of the Company and such other instruments and certificates of public officials, officers and representatives of the Company and other Persons as we have deemed necessary or appropriate for the purposes of this opinion. In rendering the opinions expressed below, we have assumed, with your permission without independent investigation or inquiry, (a) the authenticity of all documents submitted to us as originals, (b) the genuineness of all signatures on all documents that we have examined, (c) the conformity to authentic originals of documents submitted to us in the form of unexecuted photostatic copies or telecopies, (d) that all Transaction Documents have been duly executed, delivered and authenticated in substantively the form furnished to us for review, and (e) that the liens created by the Mortgage and the Pledge Agreement have been and remain duly perfected and that there is no contractual arrangement altering their priority. Based upon and subject to the foregoing, we are of the opinion that: 1. Except for (i) such consents, authorizations, approvals, notices and filings as may be required in connection with orders or proceedings of the Maine Public Utilities Commission and related statutes and regulations, with respect to which we express no opinion, and (ii) such filings as may be required to duly perfect the security interest created by the Pledge Agreement in Collateral other than the Pledged Bonds, no consent or authorization of, approval by, notice to, filing with or other act by or in respect of, any governmental authority of the State of Maine is required in connection with the borrowings under the Credit Agreement or with the execution, delivery, performance, validity or enforceability of the Credit Agreement and the other Transaction Documents or the perfection of the security interests created by the Pledge Agreement or the issuance, delivery and pledge of the Collateral Bonds pursuant to the Supplemental Indenture and the Pledge Agreement. 2. Each of the Transaction Documents which is governed by the laws of the State of Maine constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting the enforcement of creditors' rights generally and to general principles of equity, whether considered in a proceeding in equity or at law. Notwithstanding the foregoing, we express no opinion as to the enforceability of provisions of the Transaction Documents pursuant to which (i) any party purports to waive the benefit of statutory and common law rights, (ii) any party is purportedly granted the right to exercise remedies without notice to the party with respect to whom the rights are to be exercised or without benefit of legal process, or (iii) a party is purportedly indemnified with respect to its own negligence or willful misconduct. The enforceability of any provision purporting to entitle a party to be reimbursed for attorneys fees and other costs may be subject to judicial discretion. 3. The courts of the State of Maine will enforce those provisions in the Transaction Documents which provide that the validity, construction and enforceability of such documents will be governed by the laws of the State of New York. 4. The Collateral Bonds (a) are outstanding for all purposes of the Mortgage, (b) do not constitute Company-owned Bonds for any purposes of the Mortgage, and (c) are entitled, subject to the terms of the Pledge Agreement, to the substantive benefits of the security afforded by the Mortgage. 5. The execution and delivery of the Credit Agreement and the other Transaction Documents, the performance by the Company of its obligations thereunder, the consummation of the transactions contemplated thereby, the compliance by the Company with any of the provisions thereof, the borrowings under the Credit Agreement and the use of proceeds thereof, all as provided therein, will not violate any law, rule or regulation of the State of Maine or of any Maine governmental authority. 6. Under the laws of the State of Maine (a) the mortgage interest in real estate and the security interest in personalty of the First Mortgage Trustee in the Collateral created by the Mortgage has priority over the mortgage interest in real estate and the security interest in personalty of the Second Mortgage Trustee in the Collateral created by the General and Refunding Mortgage Indenture; and (b) the exercise by the Second Mortgage Trustee or holders of the Second Mortgage Bonds of rights in respect of the Collateral pursuant to the General and Refunding Mortgage Indenture will not extinguish or affect the priority of the mortgage interest and security interest created by the Mortgage. As used in this paragraph, (i) "First Mortgage Trustee" means the Trustee referred to in the Mortgage, (ii) "Second Mortgage Trustee" means the Trustee referred to in the General and Refunding Mortgage Indenture, and (iii) "Collateral" means the Mortgaged Property referred to in the General and Refunding Mortgage Indenture (except to the extent that such Mortgaged Property does not constitute mortgaged and pledged property for the purposes of the Mortgage). The opinions expressed in paragraphs 1 and 5 above are based solely upon a review by us of those Maine statutes and regulations that a lawyer exercising customary professional diligence would reasonably recognize as being directly applicable to the transactions contemplated by the Transaction Documents. Without limiting the generality of the foregoing, we express no opinion with respect to orders or proceedings of the Maine Public Utilities Commission or other statutes and regulations relating specifically to the regulation of electric utilities. To the extent that we have opined as to future conduct, such opinion is subject to future changes in applicable law and regulation. We have addressed only the laws of the State of Maine, and our opinion is limited accordingly. We express no opinion as to the enforceability of documents to the extent governed by the laws of jurisdictions other than the State of Maine. We do not undertake to advise you of any changes to the opinions expressed herein resulting from matters which may hereafter be brought to our attention. We advise you that we have been separately engaged by Fleet Bank to review on its behalf certain of the Transaction Documents. We also advise that we perform legal services unrelated to the transactions contemplated by the Transaction Documents on behalf of Fleet Bank, Key Bank and the Company. This opinion is being furnished to the Banks party to the Credit Agreement solely in connection with the transactions contemplated by the Transaction Documents. It may not be relied upon by any other person or for any other purpose without our expressed written consent. Very truly yours, EXHIBIT F --------- BOND PLEDGE AND SECURITY AGREEMENT BOND PLEDGE AND SECURITY AGREEMENT, dated as of June 30, 1995, made by BANGOR HYDRO-ELECTRIC COMPANY, a Maine corporation (the "PLEDGOR"), to CHEMICAL BANK, as Administrative Agent (in such capacity, the "ADMINISTRATIVE AGENT") for the banks (the "BANKS") parties to the Credit Agreement dated as of June 30, 1995 (as amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT") among the Pledgor, the Banks and the Administrative Agent. W I T N E S S E T H : WHEREAS, the Pledgor has on the date hereof issued $115,000,000 principal amount of its First Mortgage Bonds (the "PLEDGED BONDS") pursuant to a Supplemental Indenture, dated as of the date hereof, to the Mortgage and Deed of Trust, dated as of July 1, 1936 (as amended, supplemented or otherwise modified from time to time, the "MORTGAGE"), between the Pledgor and Citibank, N.A. (as successor to City Bank Farmers Trust Company), as trustee thereunder (the "FIRST MORTGAGE TRUSTEE"); and WHEREAS, it is a condition precedent to the obligations of the Banks to make the extensions of credit under the Credit Agreement that the Pledgor shall have executed and delivered this Agreement, and delivered in pledge the Pledged Bonds, to the Administrative Agent, on behalf of and for the ratable benefit of the Banks; NOW, THEREFORE, in consideration of the premises and in order to induce the Banks to enter into and make the extensions of credit provided for under the Credit Agreement and for other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, the Pledgor hereby agrees with the Administrative Agent on behalf of and for the ratable benefit of the Banks as follows: Section 1. DEFINED TERMS. Unless otherwise defined herein, terms defined in the Credit Agreement shall have such defined meanings when used herein. As used herein: "COLLATERAL" shall mean the Pledged Bonds and all other property at any time pledged to the Administrative Agent hereunder (whether described herein or not) and all income therefrom and proceeds thereof. "FIRST MORTGAGE BONDS" shall mean any Bonds (including the Pledged Bonds) issued pursuant to the Mortgage. "OBLIGATIONS" shall mean the collective reference to the unpaid principal of and interest on the Loans and all other obligations and liabilities of the Pledgor to the Administrative Agent and the Banks (including, without limitation, interest accruing at the then applicable rate provided in the Credit Agreement after the maturity of the Loans and interest accruing at the then applicable rate provided in the Credit Agreement after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Pledgor, whether or not a claim for post-filing or post- petition interest is allowed in such proceeding), whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, the Credit Agreement, this Agreement, the Letters of Credit, the other Loan Documents or any other document made, delivered or given in connection therewith, in each case whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including, without limitation, all fees and disbursements of counsel to the Administrative Agent or to the Banks that are required to be paid by the Pledgor pursuant to the terms of the Credit Agreement or this Agreement or any other Loan Document). "SECOND MORTGAGE TRUSTEE" shall mean the Trustee referred to in the General and Refunding Mortgage Indenture. "SPECIFIED MORTGAGE COLLATERAL" shall mean the Mortgaged Property referred to in the General and Refunding Mortgage Indenture (except to the extent that such Mortgaged Property does not constitute mortgaged and pledged property for the purposes of the Mortgage). Section 2. PLEDGE. The Pledgor hereby pledges, assigns, hypothecates, transfers, and delivers to the Administrative Agent on behalf of and for the ratable benefit of the Banks, and grants a security interest to the Administrative Agent on behalf of and for the ratable benefit of the Banks in, all the Pledged Bonds, fully registered in the name of the Administrative Agent, together with all income and profits thereof, all distributions thereon, all collateral security therefor, all other proceeds thereof and all other rights and privileges pertaining thereto, all as collateral security for the prompt and complete payment when due (whether at the stated maturity, by acceleration or otherwise) of the Obligations. Section 3. NO RIGHT TO MODIFY, ETC. The Pledgor shall not amend, supplement or otherwise modify, or consent to any amendment, supplement or other modification to, the terms of the Pledged Bonds or the other First Mortgage Bonds (or any supplemental indenture issued in connection therewith) or the Mortgage (provided that the foregoing shall not prohibit the issuance of any supplemental indenture in respect of the Mortgage solely to the extent necessary to provide for the issuance of refinancing Debt expressly permitted by Section 6.3 of the Credit Agreement). The Pledgor shall not have the right to optionally redeem the Pledged Bonds without the consent of the Administrative Agent. Section 4. NO DISPOSITION. Without the prior written consent of the Administrative Agent, the Pledgor agrees that it will not sell, assign, transfer, exchange, or otherwise dispose of, or grant any option with respect to, the Collateral, nor will it create, incur or permit to exist any pledge, lien, mortgage, hypothecation, security interest, charge, option or any other encumbrance with respect to any of the Collateral, or any interest therein, or any proceeds thereof, except for the lien and security interest provided for by this Agreement. Section 5. AMENDMENTS, MODIFICATIONS AND WAIVERS WITH RESPECT TO OBLIGATIONS. The Pledgor hereby consents that, without the necessity of any reservation of rights against the Pledgor, and without notice to or further assent by the Pledgor, any demand for payment of any of the Obligations made by the Administrative Agent or the Banks may be rescinded by the Administrative Agent or the Banks and any of the Obligations continued, and the Obligations, or the liability of the Pledgor or any other party upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, refunded, extended, amended, modified, accelerated, compromised, waived, surrendered, or released by the Administrative Agent or any Bank and the Credit Agreement and any Loan Document or any other documents delivered in connection therewith may be amended, modified, supplemented or terminated in whole or in part, as the Banks may deem advisable from time to time, and any collateral security at any time held by the Banks for the payment of the Obligations may be sold, exchanged, waived, surrendered or released, all without the necessity of any reservation of rights against the Pledgor and without notice to or further assent by the Pledgor, which will remain bound hereunder, notwithstanding any such renewal, extension, modification, acceleration, compromise, amendment, supplement, termination, sale, exchange, waiver, surrender or release. Neither the Administrative Agent nor the Banks shall have any obligation to protect, secure, perfect or insure any other collateral security document or property subject thereto at any time held as security for the Obligations. The Pledgor waives any and all notice of the creation, renewal, extension or accrual of any of the Obligations and notice of or proof of reliance by the Administrative Agent or any Bank upon this Agreement, and the Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred in reliance upon this Agreement, and all dealings between the Pledgor and the Administrative Agent and the Banks shall likewise be conclusively presumed to have been had or consummated in reliance upon this Agreement. The Pledgor waives diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon the Pledgor with respect to the Obligations. Section 6. RIGHTS OF THE BANKS AND THE ADMINISTRATIVE AGENT. (a) ADMINISTRATIVE AGENT TO EXERCISE RIGHTS OF BONDHOLDER. The Administrative Agent may, at all times, exercise all of the rights of a holder of First Mortgage Bonds including, without limitation, (i) the right to demand and receive payments of principal of and interest on the Pledged Bonds in accordance with the terms thereof and of the Mortgage, (ii) the right to attend or be represented by proxy at any meeting of bondholders under the Mortgage, (iii) the right to vote the Pledged Bonds in accordance with the terms of the Mortgage, (iv) the right to issue consents and waivers with respect to the Pledged Bonds, as a holder of First Mortgage Bonds, under or in connection with the Mortgage, (v) the right to issue any and all instructions and requests for action to the First Mortgage Trustee under the Mortgage which are permitted to a bondholder under the Mortgage and (vi) the right to exercise all of the remedies provided in the Mortgage for holders of bonds issued thereunder. (b) OTHER REMEDIES. If an Event of Default shall have occurred and be continuing, in addition to the rights granted to the Administrative Agent under Section 6(a) hereof, the Administrative Agent, without demand of performance or other demand, advertisement or notice of any kind (except the notice specified below of time and place of public or private sale) to or upon the Pledgor or any other Person (all and each of which demands, advertisements and/or notices are hereby expressly waived), may forthwith collect, receive, appropriate and realize upon the Collateral, or any part thereof, and/or may forthwith sell, assign, give option or options to purchase, contract to sell or otherwise dispose of and deliver said Collateral, or any part thereof, in one or more parcels at public or private sale or sales, at any exchange, broker's board or at any of the Administrative Agent's offices or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk, with the right to the Administrative Agent or any Bank upon any such sale or sales, public or private, to purchase the whole or any part of said Collateral so sold, free of any right or equity of redemption in the Pledgor, which right or equity is hereby expressly waived or released. The Administrative Agent shall pay over the net proceeds received on the Pledged Bonds, after deducting all reasonable costs and expenses of every kind incurred therein or incidental to the care, safekeeping or otherwise of any and all of the Collateral or in any way relating to the rights of the Administrative Agent hereunder, including reasonable attorneys' fees and legal expenses, ratably to the Banks for application by them to the payment in whole or in part of the Obligations in such order as each of the Banks may elect, the Pledgor remaining liable for any deficiency remaining unpaid after such application, and only after so paying over such net proceeds and after the payment by the Administrative Agent of any other amount required by any provision of law, including, without limitation, Section 9-504(l)(c) of the Uniform Commercial Code, need the Administrative Agent account for the surplus, if any, to the Pledgor. In addition to the rights and remedies granted to it in this Agreement and in any other instrument or agreement securing, evidencing or relating to any of the Obligations, the Administrative Agent shall have all the rights and remedies of a secured party under the Uniform Commercial Code of the State of New York. The Pledgor further agrees to waive and agrees not to assert any rights or privileges which it may acquire under Section 9-112 of the Uniform Commercial Code and the Pledgor shall be liable for the deficiency if the proceeds of any sale or other disposition of the Collateral are insufficient to pay all amounts to which the Banks are entitled, and the fees of any attorneys employed by the Administrative Agent to collect such deficiency. (c) LIMITED LIABILITY. Neither the Administrative Agent nor any Bank shall be liable for failure to collect or realize upon the Obligations or any collateral security or guarantee therefor, or any part thereof, or for any delay in so doing nor shall any of them be under any obligation to take any action whatsoever with regard thereto. Although the Administrative Agent or its nominee may without notice exercise any and all rights, privileges or options pertaining to any of the Pledged Bonds as if it were the absolute owner thereof, the Administrative Agent shall have no duty to exercise any of the aforesaid rights, privileges or options, shall not be responsible for any failure to do so or delay in so doing and, in any event, may do so without liability. Section 7. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PLEDGOR. The Pledgor represents and warrants that: (a) the Pledged Bonds are subject to no pledge, lien, mortgage, hypothecation, security interest, charge, option or other encumbrance or any ownership interest whatsoever, except the lien and security interest created by this Agreement; (b) the pledge, assignment and delivery of the Pledged Bonds pursuant to this Agreement, together with possession by the Administrative Agent of the Pledged Bonds, creates a valid first lien on and a perfected first priority security interest in such Pledged Bonds, and the proceeds thereof, subject to no other pledge, lien, mortgage, hypothecation, security interest, charge, option or encumbrance or to any agreement purporting to grant to any third party a security interest in the Pledged Bonds; (c) the Pledged Bonds have been duly and validly issued and authenticated, are in full force and effect and are entitled to all the benefits provided by the Mortgage; (d) the Pledged Bonds (i) are outstanding for all purposes of the Mortgage and (ii) do not constitute "Company-owned" Bonds for any purposes of the Mortgage; (e) (i) the mortgage interest in real estate and security interest in personalty of the First Mortgage Trustee in the Specified Mortgage Collateral created by the Mortgage has priority over the mortgage interest in real estate and the security interest in personalty of the Second Mortgage Trustee in the Specified Mortgage Collateral created by the General and Refunding Mortgage Indenture; and (ii) the exercise by holders of Second Mortgage Bonds of rights in respect of the Specified Mortgage Collateral pursuant to the General and Refunding Mortgage Indenture will not extinguish or affect the priority of the mortgage interest and security interest created by the Mortgage; (f) the Mortgage has been duly recorded in all places where required by law to preserve the lien thereof, and all filings required under the Uniform Commercial Code as in effect in the State of Maine and any other applicable jurisdiction to perfect and continue the perfection of the lien thereof have been made and are in full force and effect; (g) the Mortgage constitutes a valid and perfected first priority security interest and lien upon the franchises held by the Pledgor and substantially all of the Pledgor's utility plant as security for the First Mortgage Bonds and the other obligations purported to be secured by the Mortgage, subject, however, to the exceptions set forth in the description of mortgaged properties in the Mortgage and in the deeds referred to in such descriptions; and (h) the Pledgor covenants and agrees that it will defend the Administrative Agent's and the Banks' right, title and security interest in and to the Pledged Bonds and the proceeds thereof against the claims and demands of all Persons whomsoever. Section 8. FURTHER ASSURANCES. The Pledgor agrees that at any time and from time to time upon the written request of the Administrative Agent, the Pledgor will execute and deliver such documents and do such further acts and things as the Administrative Agent may reasonably request in order to effect the purposes of this Agreement including, without limitation, with respect to the filing or recordation hereof or any financing statements with respect hereto. The Pledgor hereby authorizes the Administrative Agent, to the extent permitted by applicable law, to make any such filings or recordations without the signature of the Pledgor. All costs and expenses in connection with any such actions and filings shall be payable by the Pledgor on demand. Section 9. THE ADMINISTRATIVE AGENT'S APPOINTMENT AS ATTORNEY-IN- FACT. The Pledgor hereby irrevocably constitutes and appoints the Administrative Agent and any officer thereof with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of the Pledgor and in the name of the Pledgor or in its own name, to file any claims or take any action (in law or equity or as otherwise deemed appropriate by the Administrative Agent) which the Administrative Agent may deem necessary or desirable to accomplish the purposes of this Agreement. Section 10. INDEMNITY. The Pledgor shall pay, and save the Administrative Agent and the Banks harmless from, any and all liabilities with respect to, or resulting from any delay in paying, any and all stamp, excise, sales or other taxes and any and all recording and filing fees which may be payable or determined to be payable with respect to any of the Collateral or in connection with any of the transactions contemplated by this Agreement. Section 11. REDELIVERY OF PLEDGED BONDS UPON PAYMENT OF THE OBLIGATIONS. (a) If (i) the Pledgor makes a scheduled installment payment in respect of the Term Loans and (ii) the Administrative Agent shall have received the financial statements and certificates referred to in Sections 6.1(b) and (c) of the Credit Agreement in respect of the fiscal quarter of the Company ending on the scheduled date of such installment, then, unless a Default or Event of Default shall have occurred and be continuing, the Administrative Agent shall forthwith assign and deliver to the Second Mortgage Trustee, without recourse, representation or warranty, Pledged Bonds having an aggregate principal amount equal to the amount of the Term Loan installment so paid. (b) No later than ninety-one days after final payment in full of the Obligations and the termination of the Commitments, the Administrative Agent shall return to the Pledgor any Pledged Bonds not previously assigned pursuant to paragraph (a) above, without recourse, representation or warranty. Section 12. REINSTATEMENT. This Agreement and the pledge created hereby and the obligations of the Pledgor with respect to the Pledged Bonds shall continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Obligations is rescinded or must otherwise be restored or returned by the Administrative Agent or any Bank upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Pledgor or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee, custodian or similar officer for, the Pledgor or any substantial part of its property, or otherwise, all as though such payments had not been made. Section 13. SEVERABILITY. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 14. NO WAIVER; CUMULATIVE REMEDIES. Neither the Administrative Agent nor the Banks shall by any act, delay, omission or otherwise be deemed to have waived any of its or their rights or remedies hereunder or under the Pledged Bonds and no waiver shall be valid unless in writing, signed by the Administrative Agent on behalf of the Banks, and then only to the extent therein set forth. A waiver by the Administrative Agent of any right or remedy hereunder or under the Pledged Bonds on any one occasion shall not be construed as a bar to any right or remedy which the Administrative Agent or the Banks would otherwise have on any future occasion. No failure to exercise nor any delay in exercising on the part of the Administrative Agent or the Banks, any right, power or privilege hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or under the Pledged Bonds preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided or under the Pledged Bonds are cumulative and may be exercised singly or concurrently, and are not exclusive of any rights or remedies provided by law. Section 15. AUTHORITY OF AGENT. The Pledgor acknowledges that the rights and responsibilities of the Administrative Agent under this Agreement with respect to any action taken by the Administrative Agent or the exercise or non-exercise by the Administrative Agent of any option, voting right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Agreement shall, as between the Administrative Agent and the Banks, be governed by the Credit Agreement and by such other agreements with respect thereto as may exist from time to time among them, but, as between the Administrative Agent and the Pledgor, the Administrative Agent shall be conclusively presumed to be acting as agent for the Banks with full and valid authority so to act or refrain from acting, and the Pledgor shall not be under any obligation, or entitlement, to make any inquiry respecting such authority. Section 16. SECTION HEADINGS. The section headings used in this Agreement are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof. Section 17. WAIVERS, AMENDMENTS; APPLICABLE LAW. None of the terms or provisions of this Agreement may be waived, altered, modified or amended except by an instrument in writing, duly executed by the Administrative Agent on behalf of the Banks. This Agreement and all obligations of the Pledgor hereunder shall be binding upon the successors and assigns of the Pledgor, and shall, together with the rights and remedies of the Administrative Agent hereunder, inure to the benefit of the Administrative Agent, the Banks and their respective successors and assigns. This Agreement shall be governed by, and be construed and interpreted in accordance with, the laws of the State of New York. IN WITNESS WHEREOF, the Pledgor has caused this Agreement to be duly executed and delivered as of the day and year first above written. BANGOR HYDRO-ELECTRIC COMPANY By:___________________________ Title: EXHIBIT G LIST OF SUBSIDIARIES OF BANGOR HYDRO-ELECTRIC COMPANY Voting Percentages of Securities owned State of directly or through Incorporation Subsidiary ------------- ------------------- East Branch Improvement Company Maine 60% Godfrey's Falls Dam Company Maine 100% The Sawtelle Brook Dam and Improvement Company Maine 100% Sebois Dam Company Maine 100% Pleasant River Gulf Improvement Company Maine 100% Northeastern Company Maine 100% Eastern Development Company Maine 100% Penobscot Hydro Co., Inc. Maine 100% Bangor Var Company, Inc. Maine 100% East Branch Improvement Company is a water storage subsidiary, operating on the East Branch of the Penobscot River. The capital stock of this subsidiary consists of 3,029 25/100 shares of the par value of $100 each, of which the Company owns 1,817 55/100 shares, the balance being owned by Great Northern Paper Company. Godfrey's Falls Dam Company has a capital stock consisting of 114 shares of $50 par value each, all of which are owned by East Branch Improvement Company. Ownership has been acquired to permit future water storage development in the East Branch Basin. The Sawtelle Brook Dam and Improvement Company has 42 shares of its capital stock outstanding. Each of these shares is of the par value of $100, and all are owned by East Branch Improvement Company. This subsidiary controls certain dams and water rights in the basin of the East Branch of the Penobscot River and was acquired to permit future water storage development in the East Branch Basin. Sebois Dam Company is a Maine corporation organized to improve the navigation of certain of the Sebois waters which enter the Piscataquis River. It has the right to maintain dams for the driving of logs and lumber. It is presently an inactive corporation and has no income. Pleasant River Gulf Improvement Company is a corporation organized under Maine law. It is a water improvement company authorized by its charter to erect and maintain dams and to improve the flow of water in the West Branch of the Piscataquis River in Maine for the purpose of making the West Branch floatable and facilitating the driving of logs and lumber upon the same. It is presently an inactive corporation and has no income. Northeastern Company is an inactive corporation organized under Maine law. It was acquired to hold certain real and personal properties useful at the time of the acquisition thereof in the conduct of the business of Bangor Hydro-Electric Company. Its holdings have since been disposed of, and at the present time it has outstanding three shares of capital stock of the par value of $100 each, all of which are owned by Bangor Hydro-Electric Company. Eastern Development Company is an inactive corporation organized under Maine law. It was organized to acquire and hold certain properties for ultimate transfer to Bangor Hydro-Electric Company. All holdings have been disposed of and the corporation has no present assets or liabilities. Penobscot Hydro Co., Inc. is a 50% joint venturer in the ownership and operation of a hydro-electric project in West Enfield, Maine. Bangor Var Co., Inc. is a 50% joint venturer in the ownership and operation of a static var compensator in Chester, Maine. A static var compensator is electrical equipment constructed in connection with the Hydro-Quebec Phase 2 Project, and all its capital and operating costs are supported by the participants in that Project. EXHIBIT H TRANSACTIONS POSSIBLY CONSTRUED AS "GUARANTEES" 1. Contractual obligations of the Company with respect to its status as a stockholder and sponsor of Maine Yankee Atomic Power Company ("MAINE YANKEE") and as a stockholder of Maine Electric Power Company, Inc. ("MEPCO") and a participant in MEPCO's transmission support agreements. 2. Obligations of the Company in connection with the decommissioning of Maine Yankee, including contractual obligations with respect to the payment of the Company's share of the costs of decommissioning, contractual obligations with respect to contribution among sponsors in the event of the imposition of joint and several liability for the safe and proper decommissioning of Maine Yankee, and obligations imposed by law or regulation. 3. Contractual obligations of the Company with respect to its participation in the Hydro-Quebec Phase 1 interconnection as set forth in a letter of the Company dated April 11, 1983, previously furnished to the Bank. 4. Contractual obligations of the Company with respect to its participation in the Hydro-Quebec Phase 2 project as set forth in a letter of the Company dated January 16, 1986, previously furnished to the Bank. 5. Contractual obligations of the Company under a Capital Support Agreement dated January 29, 1987 with lenders in connection with the financing of the hydro-electric project in West Enfield, Maine. EXHIBIT I HAS BEEN PROVIDED SEPARATELY EX-4 5 EXHIBIT 4.3 FINANCE AUTHORITY OF MAINE Taxable Electric Rate Stabilization Revenue Notes Series 1995A (Bangor Hydro-Electric Company) PURCHASE CONTRACT PURCHASE CONTRACT dated as of June 28, 1995 ("Purchase Contract") among the FINANCE AUTHORITY OF MAINE, a body corporate and politic and a public instrumentality of the State of Maine (the "Authority"), BANGOR HYDRO- ELECTRIC COMPANY, a Maine corporation (the "Company") and PRUDENTIAL SECURITIES INCORPORATED, as representative (the "Representative") of itself, Chemical Securities Inc., PaineWebber Incorporated and Smith Barney Inc. (collectively with the Representative, the "Initial Purchasers"). 1. BACKGROUND. (a) The Authority proposes to issue $126,000,000 in aggregate principal amount of its Taxable Electric Rate Stabilization Revenue Notes Series 1995A (Bangor Hydro-Electric Company) (the "Notes"), of which: (i) $105,000,000 in aggregate principal amount will be loaned to the Company pursuant to the Agreement (defined below) to finance a portion of the costs associated with the buy back of the power purchase agreements between the Company and (A) Babcock-Ultrapower West Enfield and (B) Babcock-Ultrapower Jonesboro, respectively, and to pay costs of issuance of the Notes, and (ii) $21,000,000 in aggregate principal amount will be used to fund the Capital Reserve Fund (as defined in the Indenture referred to herein); (b) The Notes will mature on July 1, 2005, and will not be subject to redemption prior to maturity. The interest rate on the Notes shall be 7.03% per annum. The Notes will be issued pursuant to a resolution adopted on May 18, 1995 by the members of the Authority (the "Note Resolution"), and will be secured under a Trust Indenture (the "Indenture"), dated as of June 1, 1995, between the Authority and First Fidelity Bank, a Connecticut bank and trust company, as trustee (the "Trustee") for the holders of the Notes. Terms used and not otherwise defined herein shall have the meanings assigned to them in the Indenture. The Notes will be payable from the Trust Estate, as defined in the Indenture, including the Pledged Revenues, as defined in a Loan Agreement (the "Agreement"), dated as of June 1, 1995, between the Authority and the Company, pursuant to which the Authority will loan a portion of the proceeds of the Notes to the Company for the purposes therein described. To evidence, secure and provide for the repayment of the Loan, the Company will deliver to the Authority its Second Mortgage Bonds (as defined in the Agreement), of like principal amount, maturity date and interest rate as the Notes. The Mortgage Bonds are not subject to redemption prior to maturity at the option of the Company. (c) The Notes will be further secured by the Capital Reserve Fund established by the Authority with the Trustee pursuant to the provisions of Chapter 110, Title 10 of the Maine Revised Statutes, as amended (the "Act"), which provides that in order to maintain the Capital Reserve Fund at the Reserve Requirement, there shall be paid from the State Contingency Account and, to the extent sufficient moneys are unavailable therein, appropriated by the Maine State Legislature annually and paid to the Authority, such sum as shall be certified by the Authority on or before December 1, annually, as necessary to restore the amount in the Capital Reserve Fund to the Reserve Requirement. While the Notes and the aforesaid provisions of the Act do not constitute a legally enforceable obligation of the State nor create a debt on behalf of the State, there is no constitutional bar to future Legislatures to appropriate such sum as shall have been certified by the Authority to the Governor as necessary to restore the Capital Reserve Fund to the Reserve Requirement. (d) It is intended that the issuance of the Notes and the use of the proceeds thereof will conform with the provisions of the Act; and that the Notes may be purchased by the Initial Purchasers without registration of any security under the Securities Act of 1933, as amended (the "Securities Act"), or qualification of any indenture under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). The Initial Purchasers have advised the Authority and the Company that the Initial Purchasers will offer and sell the Notes purchased by them hereunder in accordance with Section 4 hereof as soon as they deem advisable. (e) To induce the Authority to enter into this Purchase Contract and to issue and deliver the Notes, the Company has joined in this Purchase Contract. (f) The Notes are being issued in book-entry only form, and the parties acknowledge that, where appropriate, references herein to Notes shall mean beneficial interests therein. 2. PURCHASE AND SALE OF THE NOTES. Upon the terms and conditions and in reliance upon the representations and warranties of the Authority and the Company set forth herein, the Authority agrees to sell, and each Initial Purchaser agrees, severally and not jointly, to purchase from the Authority at a purchase price of 99.29% of the aggregate principal amount of the Notes, the principal amount of the Notes set forth opposite the name of such Purchaser on Exhibit A hereto. The purchase price for the Notes shall be $125,105,400, which shall be determined as set forth in Schedule I hereto, and payable as set forth in Section 3 hereto. In addition, the Company shall pay or cause to be paid costs and expenses including, but not limited to, reasonable fees and expenses of the Initial Purchasers' counsel and such other costs and expenses, if any, described in Section 13 hereof incurred by the Initial Purchasers and the other parties mentioned in said Section 13 as of the Closing (all such costs and expenses to be submitted to the Company prior to, or as soon as practicable after, the Closing). 3. DELIVERY AND PAYMENT FOR THE NOTES. The issuance, sale and purchase, and delivery of the Notes shall take place at the offices of Hawkins, Delafield & Wood, 67 Wall Street, New York, New York 10005 at 10:00 a.m., at a closing (the "Closing") on June 30, 1995 or on such other business day and at such other offices as may be agreed upon by the Authority, the Company, and the Representative. At the Closing, the Authority will deliver to the Representative through the facilities of The Depository Trust Company ( DTC") a note dated the date of such Closing (the "Global Note") representing all of the Notes to be purchased on such date, against delivery by the several Initial Purchasers to the Authority or to its order of immediately available funds in the amount of the purchase price thereof. The Global Note so delivered to the Representative shall be registered in the name of Cede & Co., as nominee for DTC. Delivery of such Global Note representing the Notes shall be made at such location as the Representative shall reasonably designate at least two business days in advance of the Closing date. If at the Closing, (i) the Authority shall fail to deliver the Global Note to the Initial Purchasers, (ii) any of the conditions specified in Section 8 hereof shall not have been fulfilled to the Initial Purchasers' satisfaction, or (iii) the Initial Purchasers' obligations hereunder shall have terminated pursuant to Section 9 hereof, the Initial Purchasers shall, at the Initial Purchasers election, be relieved of all further obligations under this Purchase Contract without thereby waiving any other rights the Initial Purchasers may have by reason of such failure or such nonfulfillment. The Authority and the Company agree to have the Notes available for inspection, checking and packaging by the Representative in New York, New York not later than 1:00 p.m. on the business day prior to the Closing. 4. OFFERING OF NOTES. Each Initial Purchaser represents and warrants to and agrees with the Authority and the Company that: (a) It has not offered or sold, and will not offer or sell, any Notes except (i) to those it reasonably believes to be qualified institutional buyers (as defined in Rule 144A under the Securities Act) and that, in connection with each such sale, it has taken or will take reasonable steps to ensure that the purchaser of such Notes is aware that such sale is being made in reliance on Rule 144A, (ii) to a limited number of institutional accredited investors" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act) that, prior to the purchase of any Notes offered hereby, deliver to the Initial Purchasers a letter containing certain representations and agreements relating to resale or transfer and (iii) pursuant to offers and sales that occur outside the United States within the meaning of regulation S under the Securities Act. (b) Neither it nor any person acting on its behalf has made or will make offers or sales of the Notes by means of any form of general solicitation or general advertising (within the meaning of Regulation D). 5. PLACEMENT MEMORANDUM. In connection with the sale of the Notes, the Authority and the Company have prepared a preliminary private placement memorandum, dated June 19, 1995, including any and all exhibits thereto and any information incorporated by reference therein (the "Preliminary Private Placement Memorandum"), and a final private placement memorandum, dated June 28, 1995, including any and all exhibits thereto and any information incorporated by reference therein (the "Private Placement Memorandum") (collectively, the "Placement Memorandum"). The Authority and the Company hereby ratify the use by the Initial Purchasers prior to the date hereof of the Preliminary Private Placement Memorandum and the Private Placement Memorandum in connection with the offering, sale and distribution of the Notes by the Initial Purchasers on the terms provided herein and therein. The Placement Memorandum may be amended or supplemented only by the Authority and the Company, with the consent of the Initial Purchasers, which consent shall not be unreasonably withheld. The Authority and the Company hereby consent to the use of the forms of the Indenture and the Agreement, the Notes, and other documents referred to in the Placement Memorandum (the "Financing Documents" as defined in the Agreement) in connection with the offering, sale and distribution of the Notes on the terms provided in the Placement Memorandum. 6. REPRESENTATIONS AND WARRANTIES OF THE AUTHORITY. The Authority represents and warrants to the Initial Purchasers, as of the date hereof and as of the date of the Closing, as follows: (a) The Authority is a body corporate and politic and a public instrumentality of the State of Maine, and has full power and authority under the Act, among other things, (i) to issue revenue obligation securities, such as the Notes, and to make the proceeds of such Notes available to persons such as the Company for the purposes described in the Indenture and the Agreement, payable from and secured by a pledge of the Trust Estate, and (ii) to secure such Notes in the manner contemplated by the Indenture. (b) The Authority has full legal right, power and authority (i) to adopt the Note Resolution, (ii) to enter into this Purchase Contract, the Indenture, and the Agreement, (iii) to issue, sell and deliver the Notes as provided herein, and (iv) to carry out and consummate all other transactions contemplated by each of the aforesaid documents to be performed by the Authority, and the Authority has complied with all provisions of applicable law, including the Act, in all matters relating to such transactions. (c) The Authority has duly authorized (i) the issuance and sale of the Notes upon the terms set forth herein and in the Indenture, (ii) the execution, delivery and due performance by the Authority of this Purchase Contract, the Notes, the Indenture, and the Agreement, and (iii) the taking of any and all such actions as may be required on the part of the Authority to carry out, give effect to and consummate the transactions contemplated by such instruments including the use of the Placement Memorandum. All consents or approvals of any court or governmental agency or body, if any, necessary to be obtained by the Authority in connection with the foregoing have been received, and the consents or approvals so received, if any, are still in full force and effect; provided that (x) the Authority makes no representation or warranty as to any required consents or approvals under the Blue Sky or other securities laws or regulations of any jurisdiction in connection with the offer and sale of the Notes to or by the Initial Purchasers and (y) an order of the Treasurer of the State of Maine pursuant to Section 1044(2) of the Act must be obtained prior to the Closing. (d) The Note Resolution has been duly adopted by the Authority and is in full force and effect. This Purchase Contract when executed and delivered by the parties hereto constitutes, and the Indenture and the Agreement, when duly executed and delivered by the parties thereto, will constitute legal, valid and binding obligations of the Authority enforceable in accordance with their respective terms, except that enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws heretofore or hereafter enacted affecting creditors' rights, and is subject to the application of principles of equity relating to or affecting the enforcement of contractual obligations, whether such enforcement is considered in a proceeding in equity or at law, and no representation is made as to the availability of any particular remedy. (e) When duly authenticated by the Trustee, delivered to the Initial Purchasers and paid for at the Closing in accordance with the provisions of this Purchase Contract, the Notes will have been duly authorized, executed, issued and delivered and will constitute legal, valid and binding limited obligations of the Authority in conformity with the laws of the State of Maine, including the Act, will be entitled to the benefit and security of the Agreement and the Indenture, and will be enforceable in accordance with their terms, except that enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws heretofore or hereafter enacted affecting creditors' rights, and is subject to the application of principles of equity relating to or affecting the enforcement of contractual obligations, whether such enforcement is considered in a proceeding in equity or at law, and no representation is made as to the availability of any particular remedy. (f) Neither the adoption by the Authority of the Note Resolution, the execution and delivery by the Authority of this Purchase Contract, the Notes, the Indenture or the Agreement, nor the consummation of the transactions contemplated therein or the compliance with the provisions thereof by or on the part of the Authority, will conflict with, or constitute on the part of the Authority a violation of, or a breach of or default under, any statute, indenture, mortgage, commitment, note or other agreement or instrument to which the Authority is a party or by which it is bound, or under any provision of the Maine Constitution or under any existing law, rule, regulation, resolution, charter, judgment, order or decree to which the Authority is subject. (g) To the best of the Authority's knowledge, there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, public board or body, pending or threatened against the Authority, which in any way questions or otherwise affects the corporate existence of the Authority, or the titles of its officers to their respective offices, the powers of the Authority referred to in paragraph (a) above, or the validity of any proceedings taken by the Authority in connection with the issuance of the Notes, or wherein an unfavorable decision, ruling or finding would materially adversely affect the transactions contemplated by, or the validity or enforceability of, the Note Resolution, the Indenture, the Agreement, the Notes or this Purchase Contract. (h) By official action of the Authority prior to the acceptance hereof, the Authority has duly authorized the Preliminary Private Placement Memorandum and the Private Placement Memorandum. As of the respective dates of the Preliminary Private Placement Memorandum and the Private Placement Memorandum, and as of the time of the Authority's acceptance hereof, the information contained in the Preliminary Private Placement Memorandum and the Private Placement Memorandum under the caption The Authority" is true, correct and complete in all material respects, and such information in the Preliminary Private Placement Memorandum and the Private Placement Memorandum does not contain any untrue or misleading statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they are made, not misleading. As of the Closing Date, the information contained in the Placement Memorandum under the caption The Authority," as supplemented or amended in accordance with Section 5 hereof, will not contain any untrue statement of a material fact or omit to state any material fact which should be included therein for the purposes for which the Placement Memorandum is to be used or which is necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. 7. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. The Company represents and warrants to and agrees with the Initial Purchasers, as of the date hereof and as of the date of the Closing, as follows: (a) The Company is a corporation duly organized and validly existing in good standing under the laws of the State of Maine, qualified to do business in Maine, and with full corporate power to own the Company's properties and conduct the Company's business. The purposes for which the proceeds of the Notes will be used by the Company will constitute an "electric rate stabilization project" within the meaning of the Act. The Company has full legal right, power and authority to execute and deliver this Purchase Contract, the Agreement and the Second Mortgage Bonds, to authorize the distribution and use of the Preliminary Private Placement Memorandum and the Private Placement Memorandum, to provide for the buy back of the power purchase agreements between the Company and (i) Babcock-Ultrapower West Enfield and (ii) Babcock-Ultrapower Jonesboro, and to take any and all such action as may be required on its part to carry out, give effect to and consummate the transactions contemplated by this Purchase Contract, the Second Mortgage Bonds and the Agreement. (b) The Company has duly authorized, executed and delivered this Purchase Contract, and on the Closing Date will have duly authorized, executed and delivered the Second Mortgage Bonds and the Agreement, and has taken all such action as may be required on the part of the Company to carry out, give effect to and consummate the transactions contemplated by each of such documents. This Purchase Contract constitutes, and the Agreement and the Second Mortgage Bonds, when executed and delivered, will constitute legal, valid and binding obligations of the Company, enforceable in accordance with their respective terms, except that enforceability may be limited by laws relating to bankruptcy, reorganization or other similar laws affecting the rights of creditors or by equitable principles which may affect the availability of specific performance or other equitable remedies. (c) Neither the execution and delivery of this Purchase Contract, the Agreement or the Second Mortgage Bonds, nor the consummation of the transactions contemplated therein or the compliance with the provisions thereof, will conflict with, or constitute on the part of the Company a violation of, or a breach of or default under the Company's Articles of Incorporation or By-laws or any material indenture, mortgage, commitment, note or other agreement or instrument to which the Company is a party or by which the Company is bound, or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any of its activities or properties. All consents, approvals, authorizations and orders of governmental or regulatory authorities which are required for the Company's execution and delivery of, consummation of the transactions contemplated by and compliance with the provisions of this Purchase Contract, the Agreement and the Second Mortgage Bonds have been obtained, including without limitation all necessary approving orders of the Maine Public Utilities Commission ( MPUC"). (d) There is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, public board or body, pending or, to the best of the knowledge of the Company, threatened, against or affecting the Company, or the actions taken or contemplated to be taken by the Company, nor, to the best of the knowledge of the Company, is there any basis therefor, wherein an unfavorable decision, ruling or finding would materially adversely affect the business, financial condition or operations of the Company, or the transactions contemplated by, or the validity or enforceability of, this Purchase Contract, the Agreement and the Second Mortgage Bonds. (e) No event has occurred and no condition exists which, upon issuance of the Notes, would constitute (or with the giving of notice or lapse of time, or both, would constitute) an Event of Default under the Agreement. (f) The Company is not in violation of any provisions of, or in default under, its Articles of Incorporation or ByLaws and is not in violation of any provision or in default of any statute, indenture, mortgage, commitment, note or other agreement or instrument to which it is a party or by which it is bound, or any order, rule, regulation or decision of any court or governmental agency or body having jurisdiction over it or any of its activities or properties, which violation would materially and adversely affect its business or financial condition. (g) The information contained in the Preliminary Private Placement Memorandum and the Private Placement Memorandum (except for the information and statements pertaining to the Authority under the captions "The Authority" and "Plan of Offering" as to which the Company makes no representations) was or will be, as of their respective dates, and as of the Closing Date will be, true, correct and complete in all material respects, and the Preliminary Private Placement Memorandum and the Private Placement Memorandum do not and will not contain any untrue or misleading statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they are made, not misleading; provided, however, that the Company makes no representation or warranty as to the information contained in or omitted from the Placement Memorandum in reliance upon and in conformity with information furnished in writing to the Company by or on behalf of the Initial Purchasers through the Representative specifically for inclusion therein. (h) The Company will furnish such information, execute such instruments, and cooperate with the Initial Purchasers as the Initial Purchasers may reasonably request in order for the Initial Purchasers (i) to qualify the Notes, or perfect an exemption from registration, for offer and sale of the Notes under the Blue Sky or other securities laws and regulations of such states and other jurisdictions of the United States as the Initial Purchasers may designate, and (ii) to determine the eligibility of the Notes for investment under the laws of such states and other jurisdictions, and the Company will use its best effort to continue such exemption or qualification in effect so long as required for distribution of the Notes. (i) Any certificate signed by any officer of the Company and delivered to the Authority, Note Counsel, and the Initial Purchasers of the Notes at or before the Closing Date shall be deemed a representation and warranty by the Company to the Authority, Note Counsel, and the Initial Purchasers as to the truth of the statements therein contained. (j) Neither the Company, nor any of its Affiliates (as defined in Rule 501(b) of Regulation D under the Securities Act ("Regulation D")), nor any person acting on its or their behalf has, directly or indirectly, made offers or sales of any Note, or solicited offers to buy any Note, under circumstances that would require the registration of the Notes under the Securities Act. (k) Neither the Company, nor any of its Affiliates, nor any person acting on its or their behalf has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with any offer or sale of the Notes in the United States. (l) The Notes satisfy the eligibility requirements of Rule 144A(d)(3) under the Securities Act. (m) The Company is not an "investment company" within the meaning of the Investment Company Act of 1940, as amended (the "Investment Company Act"), without taking account of any exemption arising out of the number of holders of the Company's securities. (n) The Company is subject to and in full compliance with the reporting requirements of Section 13 or Section 15(d) of the Exchange Act. (o) The Company has not paid or agreed to pay to any person any compensation for soliciting another to purchase any securities of the Company (except as contemplated by this Purchase Contract). (p) So long as any of the Notes are "restricted securities" within the meaning of Rule 144(a)(3) under the Securities Act, the Company will, during any period in which it is not subject to and in compliance with Section 13 or 15(d) of the Exchange Act or it is not exempt from such reporting requirements pursuant to and in compliance with Rule 12g3-2(b) under the Exchange Act, provide to each holder of such restricted securities and to each prospective purchaser (as designated by such holder) of such restricted securities, upon the request of such holder or prospective purchaser, any information required to be provided by Rule 144A(d)(4) under the Securities Act. This covenant is intended to be for the benefit of the Initial Purchasers and the prospective purchasers designated by such Initial Purchasers, from time to time of such Notes. (q) If at any time prior to the completion of the sale of the Notes by the Initial Purchasers (as determined by the Representative), any event occurs as a result of which the Placement Memorandum, as then amended or supplemented, would include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it should be necessary to amend or supplement the Placement Memorandum to comply with applicable law, the Company will promptly notify the Representative of the same and prepare and provide to the Representative an amendment or supplement which will correct such statement or omission or effect such compliance. (r) The Company was not required or coerced by any Initial Purchaser or any affiliate of any Initial Purchaser to designate or to cause to be designated any Initial Purchaser as a purchaser of the Notes, as a condition to the extension of credit by such Initial Purchaser or an affiliate thereof. 8. CERTAIN CONDITIONS TO INITIAL PURCHASERS OBLIGATIONS. The obligations of the Initial Purchasers to purchase and pay for the Notes to be sold to the Initial Purchasers at the Closing shall be subject to (i) the performance by the Authority of its obligations to be performed hereunder, (ii) the performance by the Company of its obligations under the Agreement to be performed at and prior to the Closing and (iii) the fulfillment to the Initial Purchasers' satisfaction, prior to or at the Closing with respect to the Notes, of the following conditions: (a) The representations and warranties of the Authority and the Company herein shall be true on and as of the date of the Closing and shall be confirmed by appropriate certificates at Closing as may be reasonably requested by the Purchasers; (b) None of the Authority or the Company shall be in default in the performance of any of their respective covenants pursuant to the Indenture, the Agreement or herein; (c) At the time of Closing (i) the Indenture, the Agreement, the Second Mortgage Bonds, and the Global Note shall have been duly authorized, executed and delivered by the respective parties thereto, shall be in full force and effect and shall not have been amended, modified or supplemented except as may have been agreed to in writing by the Initial Purchasers and (ii) the Authority and the Company shall have duly adopted and there shall be in full force and effect such authorizations as shall be necessary in connection with the transactions contemplated hereby; (d) At the Closing Date, (i) any Authority action in connection with the Notes and the approval of the Project (as defined in the Placement Memorandum) by the MPUC shall be final and no longer subject to appeal or reconsideration and (ii) the MPUC approval of the borrowing by the Company under the Agreement shall be final and no appeal of such approval of the borrowing shall affect the validity of the Second Mortgage Bonds. (e) At or prior to the Closing, the Initial Purchasers shall have received two (2) executed or otherwise certified copies of each of the following documents, in form and substance satisfactory to the Initial Purchasers and their counsel: (i) an opinion or opinions of Hawkins, Delafield & Wood, Note Counsel to the Authority, dated the date of the Closing, addressed to the Initial Purchasers (or addressed to the Authority with appropriate reliance letters to the Company and the Initial Purchasers) to the effect that: (1) the Authority has been duly created and is validly existing under the Act, and has good right and lawful authority to loan funds to the Company and to receive and pledge the repayments of such loan and other amounts therefrom in accordance with the terms of the Agreement and as provided in the Indenture; (2) the Authority has the right and power pursuant to the Act to enter into the Agreement and the Indenture, and the Agreement and the Indenture have each been duly authorized, executed and delivered by the Authority, are in full force and effect, and constitute valid and binding agreements of the Authority enforceable against the Authority in accordance with their terms (subject to customary enforceability exceptions); (3) the Notes have been duly authorized and issued by the Authority in accordance with law and the terms of the Indenture and are valid and binding special obligations of the Authority payable solely out of the Trust Estate under the Indenture for the payment thereof, and the Notes are enforceable in accordance with their terms and the terms of the Indenture and conditions precedent to the delivery of the Notes have been fulfilled (subject to customary enforceability exceptions); (4) the Indenture creates the valid pledge and assignment to the Trustee which it purports to create of all of the Authority's right, title and interest in the Second Mortgage Bonds and the Agreement (except the rights specifically reserved thereunder); (5) the Notes are not subject to the registration requirements of the Securities Act, and the Indenture is exempt from qualification pursuant to the Trust Indenture Act; and (6) (x) the information contained in the Placement Memorandum under the captions "The Notes" (other than under "Book-Entry Only System"), "Security for the Notes," "Tax Matters," and "Legality for Investment" does not contain any untrue or misleading statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they are made, not misleading, and (y) the statements contained in the Placement Memorandum (other than under the foregoing sections identified in clause (x) above) with respect to the Notes and the Capital Reserve Fund (as defined in the Indenture), the obligations of the Authority and the State of Maine with respect to the Notes and the Capital Reserve Fund, and the information contained in Exhibit B and Exhibit C to the Placement Memorandum, insofar as such statements purport to summarize certain provisions of law and of the Indenture and the Agreement, present a fair and accurate summary of such provisions for the purpose of use in the Placement Memorandum; (ii) an opinion of Frederick S. Samp, Esq., General Counsel to the Company dated the date of Closing, addressed to the Authority and the Initial Purchasers, to the effect that: (1) the Company is a corporation validly existing and in good standing under the laws of the State of Maine, with full corporate power and authority to execute, deliver and perform its obligations under the Second Mortgage Bonds, the Agreement, and this Purchase Contract (together, the "Company Documents"), and each has been duly authorized, executed and delivered by the Company and constitutes a valid and binding agreement of the Company enforceable in accordance with its terms, except to the extent that the indemnification provisions of the Company Documents may be unenforceable; (2) the Company has power to carry on its business in Maine as presently conducted and as contemplated by the Placement Memorandum and the Company Documents; (3) except for those which have been obtained, no consent of or authorization by or license or approval of or registration or declaration with any governmental authority is required in connection with the execution, delivery and performance by the Company of, or the validity or enforceability of, any of the Company Documents; (4) the execution and delivery of the Company Documents and the performance of its obligations thereunder by the Company have not resulted and will not result in a violation of any law or regulation or of the certificate of incorporation of the Company or its by-laws or constitute a default under any indenture, mortgage, deed, trust agreement or other instrument known to them which the Company is a party or by which it is bound; (5) the Company has duly authorized the taking of any and all action necessary to carry out and give effect to the transactions contemplated to be performed on its part by the Company Documents; (6) there is no action, suit, proceeding or investigation at law or in equity before any court, public board or body, pending or threatened against or affecting the Company, nor is there any basis therefor, wherein an unfavorable decision, ruling or finding would adversely affect the transactions contemplated by the Company Documents or the validity or enforceability of any of such documents; (7) (x) the information contained in the Placement Memorandum under the captions "The Borrower," "The Project," "Concurrent Financing" and "Risk Factors" does not contain any untrue or misleading statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they are made, not misleading, and (y) without passing upon or assuming responsibility for the accuracy, completeness or fairness of the statements contained in the Placement Memorandum (except as set forth in clause (x) above), and without having undertaken to independently verify the accuracy, completeness or fairness of such statements, nothing has come to his attention which leads him to believe that the Placement Memorandum as of its date, contained any untrue or misleading statement of a material fact or omitted to state any material fact necessary to make the statements therein, in light of the circumstances under which they are made, not misleading (other than financial and statistical data, as to which he need express no opinion); (iii) an opinion of Winthrop, Stimson, Putnam & Roberts, special counsel to the Company dated the date of Closing, addressed to the Initial Purchasers and the Authority, to the effect that (1) the information contained in the Placement Memorandum under the captions "The Borrower," "The Project," "Concurrent Financing" and "Risk Factors" does not contain any untrue or misleading statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they are made, not misleading, and (2) without passing upon or assuming responsibility for the accuracy, completeness or fairness of the statements contained in the Placement Memorandum (except as set forth in clause (1) above), and without having undertaken to independently verify the accuracy, completeness or fairness of such statements, nothing has come to their attention which leads them to believe that the information with respect to the Company contained in the Placement Memorandum as of its date, contained any untrue or misleading statement of a material fact or omitted to state any material fact necessary to make the statements therein, in light of the circumstances under which they are made, not misleading (other than financial and statistical data, as to which they need express no opinion); (iv) a certificate of an authorized officer of the Authority, dated the date of the Closing, addressed to the Initial Purchasers, to the effect that the representations and warranties of the Authority in Section 6 of this Purchase Contract are true and correct as of the date hereof and as of the date of the Closing; (v) a certificate of the Company dated the date of the Closing and signed by an authorized official of the Company, addressed to the Initial Purchasers and the Authority, to the effect that the representations and warranties of the Company included in Section 7 of this Purchase Contract are true and correct as of the date hereof and as of the date of the Closing; (vi) opinions, dated the date of the Closing, of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. and Preti, Flaherty, Beliveau & Pachios, co-counsel to the Initial Purchasers, addressed to the Initial Purchasers, in form satisfactory to the Initial Purchasers; (vii) the Placement Memorandum; (viii) executed or certified copies of the Indenture, the Agreement, the Second Mortgage Bonds, and the Global Note; (ix) a certificate of one or more duly authorized officers of the Trustee dated the date of Closing, as to the due acceptance of the Indenture by the Trustee and the due authentication and delivery of the Global Note by the Trustee thereunder and as to payment for the Notes; (x) a certificate, dated the date of Closing, of an officer of the Trustee to the effect that: (1) the Trustee has been duly organized, is validly existing and is in good standing under the laws of the State of Connecticut, has the power and lawful authority to act as a trustee and may validly and legally execute the Indenture and accept the duties and obligations established thereunder; and (2) the Trustee has duly accepted the duties and obligations of Trustee imposed upon the Trustee by the Indenture and has duly executed and delivered the Indenture and it is a valid, binding and enforceable obligation of the Trustee; (xi) an opinion or opinions of counsel to the Trustee, dated the date of Closing and addressed to the Initial Purchasers and to the Authority, to the effect that: (1) the Trustee is duly organized, validly existing and in good standing under the laws of the State of Connecticut; (2) the Trustee is lawfully empowered and authorized to execute the Indenture and to carry out its duties and obligations as Trustee under, and to accept the duties and obligations contemplated by, the Indenture; (3) the Trustee has duly authorized the acceptance of the duties and obligations contemplated by the Indenture and has duly accepted the duties and obligations of Trustee thereunder; (4) the Trustee has duly authorized and executed the Indenture; and (5) the Indenture constitutes a valid and legally binding obligation of the Trustee, enforceable in accordance with its terms; (xii) evidence satisfactory to the Initial Purchasers to the effect that since the date of this Purchase Contract there has been no reduction in any rating accorded to the Company's debt securities by any "nationally recognized statistical rating organization," as that term is defined by the Securities and Exchange Commission for purposes of Rule 436(g)(2) under the Securities Act, and no such organization shall have publicly announced that it has placed any debt securities of the Company on what is commonly termed a "watch list" for possible down-grading; (xiii) a letter from the Company s auditors, dated a date not less than five (5) business days prior to the Closing, addressed to the Initial Purchasers, in form and substance satisfactory to the Initial Purchasers; (xiv) an opinion of counsel to the Authority, dated the date of the Closing, addressed to the Initial Purchasers and the Company, to the effect that the information contained in the Placement Memorandum under the caption entitled "The Authority," as of the date of the Placement Memorandum and as of the date of the Closing, does not contain any untrue or misleading statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; and (xv) other certificates of the Authority and the Company and such additional certificates, proceedings, instruments and other documents as the Initial Purchasers may reasonably request to evidence compliance by the Authority and the Company with legal requirements, the truth and accuracy, as of the time of Closing, of the respective representations of the Authority contained in the Indenture, the Agreement and herein and of the Company contained in the Agreement and the due performance or satisfaction by the Authority and the Company at or prior to such time of all agreements then to be performed and all conditions then to be satisfied by the Authority and the Company. All such opinions, certificates, letters, agreements and documents will be in compliance with the provisions hereof only if they are satisfactory in form and substance to the Initial Purchasers and their counsel. 9. TERMINATION. The Initial Purchasers shall have the right to cancel their obligation to purchase the Notes if: (a) Legislation shall be favorably reported by a Committee of the House of Representatives or the Senate of the Congress of the United States or be introduced by committee, by amendment or otherwise, in, or be enacted by, the House of Representatives or the Senate, or be recommended by the President of the United States or by committee of the House of Representatives or the Senate to the Congress of the United States for passage by the Congress of the United States, or a decision by a court of the United States shall be rendered, or a stop order, ruling, regulation or official statement by, or on behalf of, the United States Securities and Exchange Commission or other governmental agency having jurisdiction of the subject matter shall be made or proposed, to the effect that the offering or sale of obligations of the general character of the Notes, as contemplated hereby, is or would be in violation of any provision of the Securities Act as then in effect or the Securities Exchange Act of 1934, as amended and as then in effect (the "Exchange Act"), or that the Indenture shall be required to be qualified under the Trust Indenture Act, or with the purpose or effect of otherwise prohibiting the offering or sale of obligations of the same general character of the Notes, or of the Notes, as contemplated hereby, without registration under the Securities Act or qualification of the Trust Indenture under the Trust Indenture Act ; or (b) Any information shall have become known, which, in the Initial Purchasers' reasonable opinion, makes untrue, incorrect or misleading in any material respect any statement or information contained in the Placement Memorandum, as then supplemented or amended in accordance with Section 5 hereof, or causes the Placement Memorandum, as so supplemented or amended, to contain any untrue statement of a material fact or to omit to state a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading; or (c) Legislation shall be favorably reported by a committee of the House of Representatives or the Senate of the Congress of the United States or be introduced by committee, by amendment or otherwise, in, or be enacted by, the House of Representatives or the Senate, or be recommended by the President of the United States or by committee of the House of Representatives or the Senate to the Congress of the United States for passage by the Congress of the United States or any legislation, regulation, ordinance, rule or resolution shall be enacted, by any federal governmental body, department or agency of the United States that would adversely effect the validity and enforceability of the Notes; or (d) Except as provided in clause (a) hereof, any legislation, resolution, ordinance, rule or regulation shall be introduced in, or be enacted by, any federal governmental body, department or agency of the United States, or a decision by any court of competent jurisdiction within the United States shall be rendered which, in the Initial Purchasers sole judgment, materially adversely affects the marketability of the Notes; or (e) Additional restrictions not in force as of the date hereof shall have been imposed upon trading in securities in the U.S. generally by any governmental authority or by any national securities exchange which, in the Initial Purchasers sole judgment, materially adversely affects the marketability of the Notes; or (f) Any U.S. governmental authority shall impose, as to the Notes, or obligations of the general character of the Notes, any restrictions on the Notes not now in force, or increase those now in force which, in the Initial Purchasers sole judgment, materially adversely affects the marketability of the Notes; or (g) There shall have been an outbreak or escalation of hostilities or any calamity or crisis having an effect on the financial markets or the market for the Notes and other similar securities that, in the sole judgment of the Initial Purchasers, makes it impracticable to proceed with the offering or the delivery of the Notes as contemplated herein and by the Placement Memorandum; or (h) Any state "blue sky" or securities commission shall have withheld registration, exemption or clearance of the offering, and, in the reasonable judgment of the Initial Purchasers, the market for the Notes is materially affected thereby. If the Authority or the Company shall be unable to satisfy any of the conditions to the obligations of the Initial Purchasers contained in this Purchase Contract and such condition is not waived by the Initial Purchasers, or if the obligations of the Initial Purchasers to purchase and accept delivery of the Notes shall be terminated or canceled for any reason permitted by this Purchase Contract, this Purchase Contract shall terminate and neither the Initial Purchasers nor the Authority shall be under further obligation hereunder; except that the respective obligations to pay expenses, as provided in Section 13 hereof, shall continue in full force and effect. 10. INDEMNIFICATION. The Company shall indemnify and hold harmless the Initial Purchasers, the Authority and each of their respective directors, officers, employees and agents and each person, if any, who controls the Initial Purchasers within the meaning of Section 15 of the Securities Act (any such person being herein sometimes called an "Indemnified Party"), against any and all losses, claims, damages or liabilities, joint or several, to which such Indemnified Party may become subject under any statute or at law or in equity or otherwise, and shall reimburse any such Indemnified Party for any legal or other expenses incurred by it in connection with investigating any claims against it and defending any actions, but only to the extent that such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Placement Memorandum, as amended or supplemented in accordance with Section 5 hereof, or the omission or alleged omission to state therein a material fact necessary to make the statements therein not misleading; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability or action arises out of, or is based upon, any untrue statement or alleged untrue statement of a material fact or omission of a material fact or alleged omission of a material fact made in reliance upon and in conformity with written information furnished to the Company or the Authority by or on behalf of the Initial Purchasers specifically for use in the Placement Memorandum, and provided, further, that the Company shall not be liable to the Authority, or its directors, officers, employees or agents, in any such case to the extent that any such loss, claim, damage, liability or action arises out of, or is based upon, any untrue statement or alleged untrue statement of a material fact or omission of a material fact or alleged omission of a material fact made in reliance upon and in conformity with written information furnished to the Company by or on behalf of the Authority specifically for use in the Placement Memorandum. This indemnity agreement shall not be construed as a limitation on any other liability which the Company may otherwise have to any Indemnified Party provided that in no event shall the Company be obligated for double indemnification. Promptly after receipt by an Indemnified Party under this Section 10 of notice of the commencement of any action or proceeding (including a governmental investigation), such Indemnified Party will, if a claim in respect thereof is to be made against the Company under this Section 10, notify the Company of the commencement thereof; but the omission so to notify the Company (i) will not relieve it from any liability under this Section 10 unless and to the extent it did not otherwise learn of such action and such failure results in the forfeiture by the Company of substantial rights and defenses and (ii) will not, in any event, relieve the Company from any obligations to any Indemnified Party other than the indemnification obligation provided in this Section 10. In case any such action is brought against any Indemnified Party, and it notifies the Company of the commencement thereof, the Company will be entitled to participate therein and, to the extent that it may wish, to assume the defense thereof, with counsel reasonably satisfactory to such Indemnified Party; provided, however, that if the defendants in any such action include both the Indemnified Party and the Company and the Indemnified Party shall have reasonably concluded that there may be one or more legal defenses available to it and/or other Indemnified Parties which are different from or additional to those available to the Company, the Company shall not have the right to direct the defense of such action on behalf of such Indemnified Party or Parties and such Indemnified Party or Parties shall have the right to select separate counsel to defend such action on behalf of such Indemnified Party or Parties. After notice from the Company to such Indemnified Party of its election so to assume the defense thereof and approval by such Indemnified Party of counsel appointed to defend such action, the Company will not be liable to such Indemnified Party under this Section 10 for any legal or other expenses, other than reasonable costs of investigation, subsequently incurred by such Indemnified Party in connection with the defense thereof, unless (i) the Indemnified Party shall have employed separate counsel in accordance with the proviso to the next preceding sentence (it being understood, however, that in connection with such action the Company shall not be liable for the expenses of more than one separate counsel (in addition to local counsel) in any one action or separate but substantially similar actions in the same jurisdiction arising out of the same general allegations or circumstances, designated by the Initial Purchasers, representing the Indemnified Parties under this Section 10 who are parties to such action or actions) or (ii) the Company has authorized the employment of counsel for the Indemnified Party at the expense of the Company. After such notice from the Company to such Indemnified Party, the Company will not be liable for the costs and expenses of any settlement of such action effected by such Indemnified Party without the consent of the Company (which consent shall not, in light of such action and the defenses available to the Indemnified Party, be unreasonably withheld), unless such Indemnified Party waived its rights under this Section 10 in which case the Indemnified Party may effect such a settlement without such consent. 11. DEFAULT OF INITIAL PURCHASERS. If one or more of the Initial Purchasers default in their obligations to purchase Notes hereunder and the aggregate principal amount of such Notes that such defaulting Initial Purchaser or Initial Purchasers agreed but failed to purchase is seven and five tenths percent (7.5%) or less of the aggregate principal amount of Notes to be purchased by all of the Initial Purchasers at such time hereunder, the other Initial Purchasers may make arrangements satisfactory to the Representative for the purchase of such Notes by other persons (who may include one or more of the non-defaulting Initial Purchasers), but if no such arrangements are made by the date of the Closing, the other Initial Purchasers shall be obligated severally in proportion to their respective commitments hereunder to purchase the Notes that such defaulting Initial Purchaser or Initial Purchasers agreed but failed to purchase. If one or more Initial Purchasers so defaults and the aggregate principal amount of Notes that such defaulting Initial Purchaser or Initial Purchasers agreed but failed to purchase is more than ten percent of the aggregate principal amount of Notes to be purchased by all the Initial Purchasers at such time hereunder, and if arrangements satisfactory to the Representative are not made within 36 hours after such default for the purchase by other persons (who may include one or more of the non-defaulting Initial Purchasers) of the Notes with respect to which such default occurs, this Purchase Contract will terminate without liability on the part of any non-defaulting Initial Purchaser or the Company or the Authority other than as provided in Section 12 hereof. In the event of any default by one or more Initial Purchasers as described in this Section 11, the Representative shall have the right to postpone the Closing as provided in Section 3 hereof for not more than seven business days in order that any necessary changes may be made in the arrangements or documents for the purchase and delivery of the Notes. As used in this Agreement, the term "Initial Purchaser" includes any person substituted for an Initial Purchaser under this Section 11. Nothing herein shall relieve any defaulting Initial Purchaser from liability for its default. 12. SURVIVAL OF REPRESENTATIONS. The respective representations, warranties, agreements, covenants, indemnifications and other statements of the Company, the Authority, their respective officers and officials and the Initial Purchasers set forth in the Indenture, the Agreement, or herein, or made by or on behalf of them, respectively, pursuant to this Purchase Contract, shall remain operative and in full force and effect, regardless of (i) any investigation made by or on behalf of the Initial Purchasers, any of their directors, officers, officials, employees or agents or any controlling person referred to in Section 10 hereof, and (ii) delivery and payment for the Notes. The respective agreements, covenants, indemnities and other statements set forth in Section 10 and 13 hereof shall remain in full force and effect, regardless of any termination or cancellation of this Purchase Contract. 13. PAYMENT OF EXPENSES. The Initial Purchasers shall have no obligation for the payment of any expenses or costs to effect the authorization, issuance, sale and delivery of the Notes other than their internal operating expenses except as expressly set forth herein. Upon the sale of the Notes by Authority to the Initial Purchasers, the Initial Purchasers shall be under no obligation to pay any expenses incident to the performance of the obligations of the Authority hereunder. All expenses and costs to effect the authorization, preparation, issuance, delivery and sale of the Notes shall be paid by the Company, irrespective of whether the Notes are issued other than as a result of a default by any of the Initial Purchasers (in which case the defaulting Initial Purchaser shall pay all costs, expenses and damages related to its default and actions taken pursuant to this Purchase Contract in respect thereof). Such costs and expenses include, but shall not be limited to: (a) the fees and expenses of the Initial Purchasers co-counsel, (b) the costs and expenses for the preparation, printing, photocopying, execution and delivery of this Purchase Contract, the Placement Memorandum, and the Financing Documents and other agreements and documents contemplated hereby and such other expenses incurred by the Initial Purchasers in connection with the transactions contemplated hereby, (c) the fees of the Authority, (d) the fees of the Trustee and its counsel and (e) the fees of Hawkins, Delafield & Wood, as Note Counsel. 14. NOTICES. Any notice or other communication to be given under this Purchase Contract shall be given in writing and mailed, telegraphed, telecopied or delivered to: FOR THE INITIAL PURCHASERS: Prudential Securities Incorporated One New York Plaza, 14th Floor New York, NY 10292-2014 Attention: Aaron M. Barman Telephone: (212) 778-4774 Telecopier: (212) 778-3443 THE AUTHORITY: Finance Authority of Maine 83 Western Avenue P.O. Box 949 Augusta, ME 04332-0949 Attention: Tim Agnew cc: Duncan MacKellar Telephone: (207) 623-3263 Telecopier: (207) 623-0095 THE COMPANY: Bangor Hydro-Electric Company 33 State Street P. O. Box 932 Bangor, Maine 04402-0932 Attention: Robert Weiser Telephone: (207) 990-6925 Telecopier: (207) 990-6954 15. PARTIES; SUCCESSORS. This Purchase Contract shall inure to the benefit of and shall be binding upon the Authority, the Company and the Initial Purchasers, and their respective successors and legal representatives, and nothing expressed or mentioned in this Purchase Contract is intended or shall be construed to give any other person any legal or equitable right, remedy or claim under or in respect of this Purchase Contract, or any provisions herein contained, this Purchase Contract and all conditions and provisions hereof being intended to be and being for the sole and exclusive benefit of such persons except that the indemnities of the Company contained in Section 10 of this Purchase Contract shall also be for the benefit of the directors, officers, employees and agents of the Authority and any Initial Purchaser and any person or persons who control any Initial Purchaser within the meaning of Section 15 of the Securities Act. 16. NO PECUNIARY LIABILITY OF AUTHORITY. No provision, covenant, or agreement contained in this Purchase Contract, and no obligation herein imposed upon the Authority, or the breach thereof, shall constitute an indebtedness of the Authority or the State of Maine or any political subdivision thereof or give rise to a pecuniary liability of the Authority or the State of Maine or any political subdivision thereof. In making the agreements, provisions and covenants set forth in this Purchase Contract, the Authority has not obligated itself, except to the extent that the Authority is authorized to act pursuant to Maine law and except with respect to the Trust Estate. The Authority and any of its officials, officers, employees, members or agents shall have no monetary liability arising out of the obligations of the Authority hereunder or in connection with any covenant, representation or warranty made by the Authority herein, and neither the Authority nor its officials shall be obligated to pay any amounts in connection with the transactions contemplated hereby other than from the Trust Estate. 17. GOVERNING LAW. This Purchase Contract will be governed by and construed in accordance with the laws of the State of Maine. 18. GENERAL. This Purchase Contract constitutes the entire agreement, and supersedes all prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof. This Purchase Contract may be executed in several counterparts, each of which shall be regarded as an original and all of which will constitute one and the same instrument. The section headings of this Purchase Contract are for convenience of reference only and shall not affect its interpretation. IN WITNESS WHEREOF, the Authority, the Company and the Initial Purchasers have caused this Purchase Contract to be duly executed and delivered by their representatives thereunto duly authorized to be effective as of the date first above written. FINANCE AUTHORITY OF MAINE By: s/Timothy P. Agnews -------------------- Title: Chief Executive Officer BANGOR HYDRO-ELECTRIC COMPANY By: s/Robert C. Weiser -------------------- Title: Treasurer PRUDENTIAL SECURITIES, INC. CHEMICAL SECURITIES INC. PAINEWEBBER INCORPORATED SMITH BARNEY INC. By: PRUDENTIAL SECURITIES, INC. By: s/Aaron M. Barman -------------------- Title: Managing Director EXHIBIT A Principal Amount of Taxable Electric Rate Stabilization Revenue Notes Series 1995A (Bangor Hydro- Initial Purchaser Percentage (Electric Company) ---------------------------------- ----------- ------------------ Prudential Securities Incorporated 77.5% $96,956,685 Chemical Securities Inc. 7.5 9,382,905 PaineWebber Incorporated 7.5 9,382,905 Smith Barney, Inc. 7.5 9,382,905 FINANCE AUTHORITY OF MAINE Taxable Electric Rate Stabilization Revenue Notes Series 1995A (Bangor Hydro-Electric Company) Schedule I to Purchase Contract Deposit to Project Loan Fund $103,239,477.76 Deposit to Capital Reserve Fund 21,191,940.00 Costs of Issuance 673,982.24 --------------- Purchase Price $125,105,400.00 EX-4 6 EXHIBIT 4.4 GENERAL AND REFUNDING MORTGAGE INDENTURE AND DEED OF TRUST BANGOR HYDRO-ELECTRIC COMPANY TO CHEMICAL BANK, AS TRUSTEE DATED AS OF JUNE 1, 1995 TABLE OF CONTENTS PAGE ---- ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION Section 1.01. General Definitions. . . . . . . . . . . . . . . . . . . . . 7 Section 1.02. Bonded; Funded Cash . . . . . . . . . . . . . . . . . . . 23 Section 1.03. Net Earnings Certificate; Adjusted Net Earnings; Annual Interest Requirements . . . . . . . . . . 24 Section 1.04. Property Additions; Cost. . . . . . . . . . . . . . . . . 27 Section 1.05. Compliance Certificates and Opinions. . . . . . . . . . . 30 Section 1.06. Form of Documents Delivered to Trustee. . . . . . . . . . 32 Section 1.07. Acts of Holders . . . . . . . . . . . . . . . . . . . . . 32 Section 1.08. Notices, Etc., to Trustee and Company . . . . . . . . . . 34 Section 1.09. Notice to Holders of Bonds; Waiver. . . . . . . . . . . . 35 Section 1.10. Conflict with Trust Indenture Act . . . . . . . . . . . . 35 Section 1.11. Effect of Headings and Table of Contents. . . . . . . . . 36 Section 1.12. Successors and Assigns. . . . . . . . . . . . . . . . . . 36 Section 1.13. Separability Clause . . . . . . . . . . . . . . . . . . . 36 Section 1.14. Benefits of Indenture . . . . . . . . . . . . . . . . . . 36 Section 1.15. Governing Law . . . . . . . . . . . . . . . . . . . . . . 36 Section 1.16. Legal Holidays. . . . . . . . . . . . . . . . . . . . . . 36 Section 1.17. Investment of Cash Held by Trustee. . . . . . . . . . . . 37 Section 1.18. Approval of Signers . . . . . . . . . . . . . . . . . . . 37 ARTICLE TWO BOND FORMS Section 2.01. Forms Generally . . . . . . . . . . . . . . . . . . . . . 38 Section 2.02. Form of Trustee's Certificate of Authentication . . . . . . . . . . . . . . . . . . . . . . 38 ARTICLE THREE THE BONDS Section 3.01. Limit on Amount of Bonds; Issuable in Series. . . . . . . 39 Section 3.02. Denominations . . . . . . . . . . . . . . . . . . . . . . 42 Section 3.03. Execution, Dating, Certificate of Authentication . . . . . . . . . . . . . . . . . . . . . . 42 Section 3.04. Temporary Bonds . . . . . . . . . . . . . . . . . . . . . 43 Section 3.05. Registration, Registration of Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . 44 Section 3.06. Mutilated, Destroyed, Lost and Stolen Bonds . . . . . . . 45 Section 3.07. Payment of Interest; Interest Rights Preserved. . . . . . . . . . . . . . . . . . . . . . . . . 46 Section 3.08. Persons Deemed Owners . . . . . . . . . . . . . . . . . . 48 Section 3.09. Cancellation by Bond Registrar. . . . . . . . . . . . . . 48 Section 3.10. Computation of Interest . . . . . . . . . . . . . . . . . 48 Section 3.11. Payment to Be in Proper Currency. . . . . . . . . . . . . 49 ARTICLE FOUR ISSUANCE OF BONDS Section 4.01. General . . . . . . . . . . . . . . . . . . . . . . . . . 49 Section 4.02. Issuance of Bonds on the Basis of Pledged Bonds; Disposition and Exchange of Bank Collateral Bonds . . . . . . . . . . . . . . . . . . . . . 52 Section 4.03. Issuance of Bonds on the Basis of Property Additions. . . . . . . . . . . . . . . . . . . . . . . . . 55 Section 4.04. Issuance of Bonds on the Basis of Retired Bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Section 4.05. Issuance of Bonds Upon Deposit of Cash with Trustee . . . . . . . . . . . . . . . . . . . . . . . 59 Section 4.06. Issuance of General and Refunding Mortgage Bonds, Series A. . . . . . . . . . . . . . . . . . . . . . 60 ARTICLE FIVE REDEMPTION OF BONDS Section 5.01. Applicability of Article. . . . . . . . . . . . . . . . . 61 Section 5.02. Election to Redeem; Notice to Trustee . . . . . . . . . . 61 Section 5.03. Selection of Bonds to Be Redeemed . . . . . . . . . . . . 61 Section 5.04. Notice of Redemption. . . . . . . . . . . . . . . . . . . 62 Section 5.05. Bonds Payable on Redemption Date. . . . . . . . . . . . . 63 Section 5.06. Bonds Redeemed in Part. . . . . . . . . . . . . . . . . . 63 ARTICLE SIX REPRESENTATIONS AND COVENANTS Section 6.01. Payment of Bonds; Lawful Possession; Maintenance of Lien. . . . . . . . . . . . . . . . . . . . 64 Section 6.02. Maintenance of Office or Agency . . . . . . . . . . . . . 64 Section 6.03. Money for Bond Payments to Be Held in Trust . . . . . . . 65 Section 6.04. Corporate Existence . . . . . . . . . . . . . . . . . . . 67 Section 6.05. Maintenance of Properties . . . . . . . . . . . . . . . . 67 Section 6.06. Payment of Taxes; Discharge of Liens. . . . . . . . . . . 67 Section 6.07. Insurance . . . . . . . . . . . . . . . . . . . . . . . . 68 Section 6.08. Recording, Filing, Etc. . . . . . . . . . . . . . . . . . 71 Section 6.09. Limitation on Additional Issuances of Bonds Under 1936 Mortgage. . . . . . . . . . . . . . . . . 72 Section 6.10 Waiver of Certain Covenants. . . . . . . . . . . . . . . . 72 Section 6.11. Certificate to Trustee. . . . . . . . . . . . . . . . . . 73 ARTICLE SEVEN PLEDGED BONDS; ADDITIONAL CLASS "A" MORTGAGES; DISCHARGE OF CLASS "A" MORTGAGE Section 7.01. Registration and Ownership of Pledged Bonds . . . . . . . 73 Section 7.02. Payments on Pledged Bonds . . . . . . . . . . . . . . . . 73 Section 7.03. Surrender of Pledged Bonds. . . . . . . . . . . . . . . . 74 Section 7.04. No Transfer of Pledged Bonds. . . . . . . . . . . . . . . 74 Section 7.05. Voting of Pledged Bonds and Bank Collateral Bonds . . . . . . . . . . . . . . . . . . . . . 74 Section 7.06. Designation of Additional Class "A" Mortgages. . . . . . . . . . . . . . . . . . . . . . . . . 76 Section 7.07. Discharge of Class "A" Mortgage . . . . . . . . . . . . . 78 ARTICLE EIGHT POSSESSION, USE AND RELEASE OF MORTGAGED PROPERTY Section 8.01. Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . 82 Section 8.02. Dispositions Without Release. . . . . . . . . . . . . . . 83 Section 8.03. Release of Mortgaged Property if Bonding Ratio Test Satisfied . . . . . . . . . . . . . . . . . . . 84 Section 8.04. Release of Limited Amount of Mortgaged Property . . . . . . . . . . . . . . . . . . . . . . . . . 85 Section 8.05. Release of Mortgaged Property Not Subject to a Class "A" Mortgage. . . . . . . . . . . . . . . . . . 86 Section 8.06. Withdrawal or Other Application of Funded Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . 89 Section 8.07. Release of Property Taken by Eminent Domain, Etc. . . . . . . . . . . . . . . . . . . . . . . . 91 Section 8.08. Alternative Release Provision . . . . . . . . . . . . . . 92 Section 8.09. Disclaimer or Quitclaim . . . . . . . . . . . . . . . . . 92 Section 8.10. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . 93 ARTICLE NINE SATISFACTION AND DISCHARGE Section 9.01. Satisfaction and Discharge of Bonds . . . . . . . . . . . 94 Section 9.02. Satisfaction and Discharge of Indenture . . . . . . . . . 96 Section 9.03. Application of Trust Money. . . . . . . . . . . . . . . . 97 ARTICLE TEN EVENTS OF DEFAULT; REMEDIES Section 10.01. Events of Default. . . . . . . . . . . . . . . . . . . . 97 Section 10.02. Acceleration of Maturity; Rescission and Annulment . . . . . . . . . . . . . . . . . . . . . . . . 99 Section 10.03. Entry Upon Mortgaged Property. . . . . . . . . . . . . . 100 Section 10.04. Power of Sale; Suits for Enforcement . . . . . . . . . . 100 Section 10.05. Incidents of Sale. . . . . . . . . . . . . . . . . . . . 101 Section 10.06. Collection of Indebtedness and Suits for Enforcement by Trustee. . . . . . . . . . . . . . . . . . 103 Section 10.07. Application of Money Collected. . . . . . . . . . . . 104 Section 10.08. Receiver . . . . . . . . . . . . . . . . . . . . . . . . 104 Section 10.09. Trustee May File Proofs of Claim . . . . . . . . . . . . 105 Section 10.10. Trustee May Enforce Claims Without Possession of Bonds . . . . . . . . . . . . . . . . . . . 105 Section 10.11. Limitation on Suits. . . . . . . . . . . . . . . . . . . 106 Section 10.12. Unconditional Right of Holders to Receive Principal, Premium and Interest . . . . . . . . . . . . . 106 Section 10.13. Restoration of Rights and Remedies. . . . . . . . . . 107 Section 10.14. Rights and Remedies Cumulative. . . . . . . . . . . . . . 107 Section 10.15. Delay or Omission Not Waiver. . . . . . . . . . . . . 107 Section 10.16. Control by Holders of Bonds . . . . . . . . . . . . . 107 Section 10.17. Waiver of Past Defaults . . . . . . . . . . . . . . . 108 Section 10.18. Undertaking for Costs . . . . . . . . . . . . . . . . . . 108 Section 10.19. Waiver of Appraisement and Other Laws . . . . . . . . . . 109 Section 10.20. Defaults Under Class "A" Mortgages. . . . . . . . . . . . 109 ARTICLE ELEVEN THE TRUSTEE Section 11.01. Certain Duties and Responsibilities. . . . . . . . . . . 109 Section 11.02. Notice of Defaults . . . . . . . . . . . . . . . . . . . 110 Section 11.03. Certain Rights of Trustee. . . . . . . . . . . . . . . . 110 Section 11.04. Not Responsible for Recitals or Issuance of Bonds. . . . . . . . . . . . . . . . . . . . . . . . . 111 Section 11.05. May Hold Bonds . . . . . . . . . . . . . . . . . . . . . 112 Section 11.06. Money Held in Trust. . . . . . . . . . . . . . . . . . . 112 Section 11.07. Compensation and Reimbursement . . . . . . . . . . . . . 112 Section 11.08. Disqualification; Conflicting Interests. . . . . . . . . 113 Section 11.09. Corporate Trustee Required; Eligibility. . . . . . . . . 113 Section 11.10. Resignation and Removal; Appointment of Successor . . . . . . . . . . . . . . . . . . . . . . . . 114 Section 11.11. Acceptance of Appointment by Successor . . . . . . . . . 115 Section 11.12. Merger, Conversion, Consolidation or Succession to Business. . . . . . . . . . . . . . . . . . 116 Section 11.13. Preferential Collection of Claims Against Company . . . . . . . . . . . . . . . . . . . . . . . . . 116 Section 11.14. Co-Trustees and Separate Trustees. . . . . . . . . . . . 117 Section 11.15. Appointment of Authenticating Agent. . . . . . . . . . . 118 ARTICLE TWELVE LISTS OF HOLDERS; REPORTS BY TRUSTEE AND COMPANY Section 12.01. Lists of Holders; Preservation of Information . . . . . . . . . . . . . . . . . . . . . . . 120 Section 12.02. Reports by Trustee and Company . . . . . . . . . . . . . 121 ARTICLE THIRTEEN CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE Section 13.01. Company May Consolidate, Etc., Only on Certain Terms . . . . . . . . . . . . . . . . . . . . . . 121 Section 13.02. Successor Corporation Substituted. . . . . . . . . . . . 123 Section 13.03. Extent of Lien Hereof on Property of Successor Corporation . . . . . . . . . . . . . . . . . . 124 Section 13.04. Release of Company Upon Conveyance Other Transfer. . . . . . . . . . . . . . . . . . . . . . . . . 124 Section 13.05. Merger into Company; Extent of Lien Hereof . . . . . . . 124 ARTICLE FOURTEEN SUPPLEMENTAL INDENTURES Section 14.01. Supplemental Indentures Without Consent of Holders. . . . . . . . . . . . . . . . . . . . . . . . 125 Section 14.02. Supplemental Indentures With Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . 127 Section 14.03. Execution of Supplemental Indentures . . . . . . . . . . 129 Section 14.04. Effect of Supplemental Indentures. . . . . . . . . . . . 129 Section 14.05. Conformity With Trust Indenture Act. . . . . . . . . . . 130 Section 14.06. Reference in Bonds to Supplemental Indentures. . . . . . . . . . . . . . . . . . . . . . . . 130 ARTICLE FIFTEEN MEETINGS OF HOLDERS; ACTION WITHOUT MEETING Section 15.01. Purposes for Which Meetings May be Called. . . . . . . . 130 Section 15.02. Call, Notice and Place of Meetings . . . . . . . . . . . 130 Section 15.03. Persons Entitled to Vote at Meetings; Record Date . . . . . . . . . . . . . . . . . . . . . . . 131 Section 15.04. Quorum; Action . . . . . . . . . . . . . . . . . . . . . 132 Section 15.05. Attendance at Meetings; Determination of Voting Rights; Conduct and Adjournment of Meetings . . . . . . . . . . . . . . . . . . . . . . . 133 Section 15.06. Counting Votes and Recording Action of Meetings. . . . . . . . . . . . . . . . . . . . . . . . . 134 Section 15.07. Action Without Meeting . . . . . . . . . . . . . . . . . 135 ARTICLE SIXTEEN IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS Section 16.01. Liability Solely Corporate . . . . . . . . . . . . . . . 135 EXHIBIT A Description of Property EXHIBIT B Modification to the 1936 Mortgage GENERAL AND REFUNDING MORTGAGE INDENTURE AND DEED OF TRUST, dated as of June 1, 1995, between BANGOR HYDRO-ELECTRIC COMPANY, a Maine corporation, the post office address of which is 33 State Street, Bangor, Maine 04401, and CHEMICAL BANK, a corporation organized and existing under the laws of the State of New York, the post office address of which is 450 West 33rd Street, New York, New York 10001, as Trustee; W I T N E S S E T H : WHEREAS, all capitalized terms used in this Indenture have the respective meanings set forth in Article One; and WHEREAS, the Company deems it necessary to borrow and, pursuant to this Indenture, to issue Bonds for its corporate purposes from time to time, and to mortgage and pledge the property hereinafter described to secure payment of the Bonds; and WHEREAS, all acts and things have been done and performed which are necessary to make this Indenture, when duly executed and delivered, a valid and binding mortgage and deed of trust for the security of all Bonds duly issued hereunder and Outstanding from time to time; and the execution and delivery of this Indenture have been in all respects duly authorized. NOW, THEREFORE, to secure the payment of the principal of, premium, if any, and interest, if any, on all Bonds issued and Outstanding under this Indenture when payable in accordance with the provisions thereof and hereof, and to secure the performance by the Company of, and its compliance with, the covenants and conditions of this Indenture, and in consideration of the premises and of One Dollar paid to the Company by the Trustee, the Company hereby grants, bargains, sells, releases, conveys, assigns, transfers, mortgages, pledges, sets over and confirms to Chemical Bank, as Trustee, and grants to the Trustee a security interest in, the following: GRANTING CLAUSE FIRST All right, title and interest of the Company in and to property (other than Excepted Property), real, personal and mixed and wherever situated, in any case used or to be used in or in connection with the Primary Purposes of the Company's Business (whether or not such use is the sole use of such property), including without limitation (a) all land and interests in land subject to the Lien of and referenced in the 1936 Mortgage and in supplements thereto (and related real estate property descriptions), which mortgage and supplements (and descriptions) are described in Exhibit A to this Indenture, except land and interests in land which have been specifically released from such Lien from time to time; (b) all other lands, easements, servitudes and other rights and interests in or relating to real property or the occupancy or use of the same; (c) all plants, generators, turbines, engines, boilers, fuel handling and transportation facilities, air and water pollution control and sewage and solid waste disposal facilities and other machinery and facilities for the generation of electric energy; (d) all switchyards, lines, towers, substations, transformers and other machinery and facilities for the transmission of electric energy; (e) all lines, poles, conduits, conductors, meters, regulators and other machinery and facilities for the transmission or distribution of electric energy; (f) all buildings, offices, warehouses and other structures; and (g) all pipes, cables, insulators, ducts, tools, equipment, apparatus and facilities and all other property, of whatever kind and nature, ancillary to or otherwise used or to be used in conjunction with any or all of the foregoing or otherwise, directly or indirectly, in furtherance of the Primary Purposes of the Company's Business; GRANTING CLAUSE SECOND Subject to the applicable exceptions permitted by Section 8.10, Section 13.03 and Section 13.05, all property (other than Excepted Property) of the kind and nature described in Granting Clause First which may be hereafter acquired by the Company, it being the intention of the Company that all such property acquired by the Company after the date of the execution and delivery of this Indenture shall be as fully embraced within and subjected to the Lien hereof as if such property were owned by the Company as of the date of the execution and delivery of this Indenture; GRANTING CLAUSE THIRD Any Excepted Property, and any other property of the Company, real, personal or mixed, not described in Granting Clause First or Granting Clause Second, which may, from time to time after the date of the execution and delivery of this Indenture, by delivery or by one or more supplemental indentures, be subjected to the Lien hereof by the Company or by anyone in its behalf, the Trustee being hereby authorized to receive the same at any time as additional security hereunder; it being understood that any such subjection to the Lien hereof of any Excepted Property or other property as additional security may be made subject to such reservations, limitations or conditions respecting the use and disposition of such property or the proceeds thereof as shall be set forth in such instrument; and GRANTING CLAUSE FOURTH All bonds of the Collateral Series due July 1, 2000 issued by the Company under the 1936 Mortgage and pursuant to the supplemental indenture relating to such series, assigned to the Trustee from time to time and held as security for all Bonds outstanding hereunder (the "Bank Collateral Bonds"). GRANTING CLAUSE FIFTH All other property of whatever kind and nature subjected or intended to be subjected to the Lien of this Indenture by any of the terms and provisions hereof; TOGETHER WITH (Subject to the provisions of Section 8.01 hereof) the tolls, rents, revenues, issues, earnings, income, product and profits appertaining to the aforesaid property or any part thereof. EXCEPTED PROPERTY Expressly excepting and excluding, however, from the Lien and operation of this Indenture the following property of the Company, whether now owned or hereafter acquired (the "Excepted Property"): (a) all cash on hand, in banks or in other financial institutions with which the Company maintains deposits, shares of stock, bonds, notes, evidences of indebtedness and other securities (including without limitation stock of subsidiaries or affiliates, partnership interests and member interests in limited liability companies) not hereafter paid or delivered to, deposited with, or held by, the Trustee hereunder or required so to be; (b) accounts receivable and unbilled revenues; (c) all contracts, leases and other agreements of whatsoever kind and nature (including pole attachment agreements and joint pole agreements), contract rights, bills, notes and other instruments, claims, credits, demands, judgments, choses in action, patents, patent licenses and other patent rights, patent applications, trade names, trademarks and other general intangibles; (d) all permits, licenses, franchises (including municipal franchises and other rights to use public ways) and rights (however characterized) granted by any governmental entity; (e) all motor vehicles, automobiles, buses, trucks, truck cranes, tractors, trailers and similar vehicles, movable equipment, all rolling stock, railcars, containers and other railroad equipment, all vessels, boats, barges and other marine equipment, all airplanes, airplane engines and flight equipment, and all components, spare parts, accessories, supplies and fuel used or to be used in connection with any of the foregoing; (f) all goods, wares, merchandise, equipment, spare parts and tools held for sale or lease in the ordinary course of business or for use or consumption in, or in the operation of, any properties of, or for the benefit of, the Company, or held in advance of use thereof for maintenance or replacement purposes; all fuel, materials and supplies and other personal property which are consumable (otherwise than by ordinary wear and tear) in their use for one or more of the Primary Purposes of the Company's Business (including without limitation nuclear fuel in whatever form); (g) all office furniture and office equipment; all satellites and other equipment and materials used or to be used in outer space; all business machines; all communications equipment (including telephone equipment); and all computer, record production, storage and retrieval equipment used exclusively for corporate administrative or clerical purposes, and all components, spare parts, accessories, and supplies used or to be used in connection with any of the foregoing; (h) all crops, timber, sand, gravel, rocks, earth, natural gas, coal, ore, uranium, gas, oil and other minerals harvested, mined or extracted or otherwise separated from the land, or lying or being upon, within or under any properties of the Company, including the Mortgaged Property, all mineral rights, leases and royalties and income therefrom, and all rights to explore for minerals, and gas or oil wells or any lease or real estate acquired for the purpose of obtaining gas or oil rights; (i) all emissions or pollution allowances or credits (or similar rights) created under the Clean Air Act or under any similar existing or future law relating to abatement or control of pollution of the atmosphere, water or soil; (j) all electric energy, gas, steam, water, ice and other products generated, manufactured, produced, provided or purchased by the Company for sale, transmission or distribution or used or to be used by the Company; (k) all leasehold interests and leasehold improvements; (l) all property, real, personal and mixed, which is: (A) not specifically subjected or required to be subjected to the Lien of this Indenture by any express provision hereof; and (B) not used or to be used for one or more of the Primary Purposes of the Company's Business, or in connection with the operation of any property specifically subjected or required to be subjected to the Lien of this Indenture by the express provisions hereof; and (m) the Company's franchise to be a corporation. it being understood that the Company may, however, pursuant to Granting Clause Third, subject to the Lien of this Indenture any Excepted Property, whereupon the same shall cease to be Excepted Property. PROVIDED, HOWEVER, that (x) if, at any time after the occurrence of an Event of Default, the Trustee, or any separate trustee or co-trustee appointed under Section 11.14 or any receiver appointed pursuant to statutory provision or order of court, shall have entered into possession of all or substantially all of the Mortgaged Property, all the Excepted Property described or referred to in the foregoing clauses (c), (d) and (e), then owned or held or thereafter acquired by the Company shall immediately, and, in the case of any Excepted Property described or referred to in clause (k), upon demand of the Trustee or such other trustee or receiver, become subject to the Lien of this Indenture to the extent permitted by law (but subject to Liens in effect at such time on such Excepted Property of the Company which is then in existence), and the Trustee or such other trustee or receiver may, to the extent permitted by law, at the same time likewise take possession thereof, and (y) whenever all Events of Default shall have been cured and the possession of all or substantially all of the Mortgaged Property shall have been restored to the Company, such Excepted Property shall again be excepted and excluded from the Lien hereof to the extent set forth above; it being understood that the Company may, however, pursuant to Granting Clause Third, subject to the Lien of this Indenture any Excepted Property, whereupon the same shall cease to be Excepted Property; TO HAVE AND TO HOLD all such properties, rights and interests in property granted, bargained, sold, warranted, released, conveyed, assigned, transferred, mortgaged, pledged, set over and confirmed or in which a security interest has been granted by the Company in this Indenture or intended or agreed to be so granted, together with all the appurtenances thereto, unto the Trustee and its successors and assigns forever. SUBJECT, HOWEVER, to Permitted Liens and to Liens which have been granted by the Company to other Persons prior to the date of the execution and delivery of this Indenture (including, without limitation, the Lien of the 1936 Mortgage), and subject also, as to any property hereafter acquired by the Company, to vendors' Liens, purchase money mortgages and other Liens thereon at the time of the acquisition thereof (including, but not limited to, the Lien of any Class "A" Mortgage), it being understood that with respect to any of such property which is now or hereafter becomes subject to the Lien of any Class "A" Mortgage, the Lien of this Indenture shall at all times be junior and subordinate to the Lien of such Class "A" Mortgage; BUT IN TRUST, NEVERTHELESS, for the equal and proportionate benefit and security of all present and future Holders of the Bonds, and to secure the payment of the principal of, premium, if any, and interest, if any, on the Bonds issued and Outstanding under this Indenture when payable in accordance with the provisions thereof and hereof, and to secure the performance by the Company of, and its compliance with, the covenants and conditions of this Indenture without any preference, priority or distinction of any one Bond over any other Bond by reason of priority in the issue or negotiation thereof or otherwise; PROVIDED, HOWEVER, and these presents are made upon the condition, that if the Company shall pay or cause to be paid the principal of, premium, if any, and interest, if any, on the Bonds at the times and in the manner therein and herein provided, or shall provide, in the manner permitted hereby, for the payment thereof, and if the Company shall also pay or cause to be paid all other sums payable hereunder by it and perform all of the covenants and comply with all of the conditions of this Indenture, then this Indenture and the estate and rights hereby granted shall cease, terminate and be void; and IT IS HEREBY COVENANTED AND AGREED, by and between the Company and the Trustee, that all Bonds are to be authenticated, delivered and issued, and that all Mortgaged Property is to be held, subject to the further covenants, conditions, uses and trusts hereinafter set forth, and the Company, for itself and its successors and assigns, does hereby covenant and agree to and with the Trustee and its successors in trust, for the benefit of all Holders of the Bonds, as follows: ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION Section 1.001. GENERAL DEFINITIONS. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (a) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; (b) all terms used herein (and which are not specifically defined herein) which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (c) all terms used herein (and which are not specifically defined herein) which are defined in the Uniform Commercial Code (as in effect in Maine) have the meanings assigned to them therein; (d) the word "or" is not exclusive; (e) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with Generally Accepted Accounting Principles; and (f) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. "ACT", when used with respect to any Holder of a Bond, has the meaning specified in Section 1.07(a). "ADJUSTED NET EARNINGS" means the amount calculated in accordance with Section 1.03(a); PROVIDED, HOWEVER, that if any of the property of the Company owned by it at the time of the making of any Net Earnings Certificate (a) shall have been acquired during or after any period for which Adjusted Net Earnings of the Company are to be computed, (b) shall not have been acquired in exchange or substitution for property the net earnings of which have been included in the Adjusted Net Earnings of the Company, and (c) had been operated as a separate unit and items of revenue and expense attributable thereto are readily ascertainable, then the net earnings of such property (computed in the manner provided for the computation of the Adjusted Net Earnings of the Company) during such period or such part of such period as shall have preceded the acquisition thereof, to the extent that the same have not otherwise been included in the Adjusted Net Earnings of the Company, shall be so included. "AFFILIATE" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person; "AFFILIATED" has a meaning correlative to the foregoing. For the purposes of this definition, "CONTROL" when used with respect to any specified Person means the power to direct generally the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "CONTROLLING" and "CONTROLLED" have meanings correlative to the foregoing. "ANNUAL INTEREST REQUIREMENTS" means the amount calculated in accordance with Section 1.03(b). "APPRAISER" means a Person engaged in the business of appraising property or competent to determine the Fair Value or fair market value of the particular property in question, and who or which, unless required to be Independent, may be employed by or Affiliated with the Company. "APPRAISER'S CERTIFICATE" means a certificate signed by an Appraiser; any Appraiser's Certificate which is relied upon by an Independent Engineer, for purposes of an Independent Engineer's Certificate, shall be signed by an Independent Appraiser. "AUTHENTICATING AGENT" means any Person (other than the Company or an Affiliate of the Company) authorized by the Trustee to act on behalf of the Trustee to authenticate one or more series of Bonds. "AUTHORIZED EXECUTIVE OFFICER" means the Chairman of the Board, the Chief Executive Officer, the President, any Vice President (whether or not his or her title includes a modifier such as "Executive", "Senior" or the like), the Treasurer, the Controller, the Secretary, the Clerk or any other officer of the Company designated in an Officer's Certificate delivered to the Trustee to be an Authorized Executive Officer. "AUTHORIZED PUBLICATION" means a newspaper or financial journal of general circulation, printed in the English language and customarily published on each Business Day, whether or not published on Saturdays, Sundays or holidays; or, in the alternative, shall mean such form of communication as may have come into general use for the dissemination of information of similar import. In the event that successive weekly publications in an Authorized Publication are required hereunder they may be made (unless otherwise expressly provided herein) on the same or different days of the week and in the same or in different Authorized Publications. In case, by reason of the suspension of publication of any Authorized Publication, or by reason of any other cause, it shall be impractical without extraordinary expense to make publication of any notice in an Authorized Publication as required by this Indenture, then such method of publication or notification as shall be made with the approval of the Trustee shall be deemed the equivalent of the required publication of such notice in an Authorized Publication. "AUTHORIZED PURPOSES" means the authentication and delivery of Bonds, the release of property, the discharge of a Class "A" Mortgage or the withdrawal of cash under any of the provisions of this Indenture. "BANK COLLATERAL BONDS" has the meaning specified in Granting Clause Fourth. "BOARD OF DIRECTORS" means either the board of directors of the Company or any duly authorized committee thereof. "BOARD RESOLUTION" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee. "BOND REGISTER" and "BOND REGISTRAR" have the respective meanings specified in Section 3.05(a). "BONDED" has the meaning specified in Section 1.02(a). "BONDS" means any bonds authenticated and delivered under this Indenture. "BUSINESS DAY", when used with respect to a Place of Payment or any other particular location specified in the Bonds or this Indenture, means any day, other than a Saturday or Sunday, which is not a day on which banking institutions or trust companies in such Place of Payment or other location so specified are generally authorized or required by law, regulation or executive order to remain closed, except as may be otherwise specified as contemplated by Section 3.01. "CLASS "A" BONDS" means bonds or other obligations now or hereafter issued and Outstanding under the 1936 Mortgage or any other Class "A" Mortgage. "CLASS "A" MORTGAGE" means, collectively, the 1936 Mortgage and each other mortgage or deed of trust or similar indenture entered into by any corporation that is subsequently merged into or consolidated with the Company, or into which the Company is merged, and hereafter designated an additional Class "A" Mortgage in an indenture supplemental hereto complying with the requirements of Section 7.06(b)(i). "CLEAN AIR ACT" means the Clean Air Act (42 U.S.C. Sections 740 ET SEQ.) and any amendments to or regulations promulgated thereunder in effect from time to time. "COMMISSION" means the Securities and Exchange Commission, as from time to time constituted, created under the Securities Exchange Act of 1934, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body (if any) performing such duties at such time. "COMPANY" means Bangor Hydro-Electric Company, a Maine corporation, unless and until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor Person. "COMPANY ORDER" or "COMPANY REQUEST" means a written order or request signed in the name of the Company by an Authorized Executive Officer and delivered to the Trustee. "CORPORATE TRUST OFFICE" means the office of the Trustee at which at any particular time its corporate trust business shall be principally administered, which office at the date of execution of this Indenture is located at 450 West 33rd Street, New York, New York 10001, Attention: Corporate Trustee Administration Department. "COST" with respect to Property Additions has the meaning specified in Section 1.04(c). "CUSTOMARY EXCEPTIONS" means, with respect to any Opinion of Counsel required to be delivered hereunder, such exceptions to opinions as are customarily expressed in opinions of counsel rendered in connection with similar transactions at the time such Opinion of Counsel is to be delivered and, in any event, shall include exceptions based upon limitations imposed by (a) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other laws affecting the enforcement of mortgagees' and other creditors' rights, and (b) general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law). "DEFAULTED INTEREST" has the meaning specified in Section 3.07(b). "DISCOUNT BOND" means any Bond pursuant to the terms of which an amount less than the principal amount thereof may be due and payable upon a declaration of acceleration of the Maturity thereof. "DOLLAR" or "$" means a dollar or other equivalent unit in such coin or currency of the United States as at the time shall be legal tender for the payment of public and private debts. "ELIGIBLE OBLIGATIONS" means: (a) with respect to Bonds denominated in Dollars, Government Obligations; or (b) with respect to Bonds denominated in a currency other than Dollars or in a composite currency, such other obligations or instruments as shall be specified with respect to such Bonds, as contemplated by Section 3.01. "ENGINEER" means a Person engaged in the engineering profession or otherwise qualified to pass on engineering matters (including, without limitation, a Person licensed as a professional engineer, whether or not then engaged in the engineering profession) or an Appraiser or other Person (including without limitation an investment banking firm) engaged in the business of appraising property or otherwise competent to determine the value of the particular property in question, who, in each case, unless required to be Independent, may be employed by or Affiliated with the Company. "ENGINEER'S CERTIFICATE" means a certificate signed by an Authorized Executive Officer and by an Engineer; PROVIDED, HOWEVER, that, in connection with the release of any property from the Lien of this Indenture, the Engineer's Certificate as to the Fair Value of such property, and as to the nonimpairment by reason of such release of the security of this Indenture in contravention of the provisions hereof, shall be made by an Independent Engineer if the Fair Value of such property and of all other property released since the commencement of the then current calendar year, as set forth in the certificates required by this Indenture, is ten percent (10%) or more of the aggregate principal amount of the Bonds at the time Outstanding; but such a certificate of an Independent Engineer shall not be required in the case of any release of property, if the Fair Value thereof as set forth in the certificates required by this Indenture is less than Twenty-Five Thousand Dollars ($25,000) or less than one percent (1%) of the aggregate principal amount of the Bonds at the time Outstanding; and PROVIDED, FURTHER, that at the option of the Company the percentages set forth in the foregoing proviso (and in any similar calculation involving the valuation of Property Additions or property used or operated by others than the Company) may be calculated with reference to the sum of the principal amount of the Bonds at the time Outstanding plus the principal amount of the Class A Bonds at the time Outstanding other than Pledged Bonds, if the Trustee shall have received an Opinion of Counsel satisfactory to the Trustee to the effect that such calculation is not inconsistent with the Trust Indenture Act. "EVENT OF DEFAULT" has the meaning specified in Section 10.01. "EXCEPTED PROPERTY" has the meaning specified in the "Excepted Property" clause set forth above. "FAIR VALUE" when applied to property means its value as determined without deduction for any Prior Liens upon such property and without deduction to reflect that such property may be of value only to the Company or another operator of the Mortgaged Property as a whole, which value may be determined without physical inspection by use of accounting and engineering records and other data maintained by, or available to, the Company. "FUNDED CASH" has the meaning specified in Section 1.02(b). "GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" means, with respect to any computation required or permitted under this Indenture, such accounting principles as are generally accepted in the United States at the date of such computation or, at the option of the Company from time to time, at the date of the execution and delivery of this Indenture or any Class "A" Mortgage which then remains in effect; PROVIDED, HOWEVER, that in determining generally accepted accounting principles applicable to the Company for purposes of making any computation required or permitted hereunder, the Company may, but shall not be required to, reflect any accounting pronouncement, order, rule or regulation of any accounting standard setting body, administrative agency, regulatory authority or other governmental body having jurisdiction over the Company. "GOVERNMENT OBLIGATIONS" means: (a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America, and which are entitled to the benefit of the full faith and credit thereof; and (b) certificates, depositary receipts or other instruments which evidence a direct ownership interest in obligations described in clause (a) above or in any specific interest or principal payments due in respect thereof; PROVIDED, HOWEVER, that the custodian of such obligations or specific interest or principal payments shall be a bank or trust company subject to federal or state supervision or examination with a combined capital and surplus of at least $100,000,000; and PROVIDED, FURTHER, that except as may be otherwise required by law, such custodian shall be obligated to pay to the holders of such certificates, depositary receipts or other instruments the full amount received by such custodian in respect of such obligations or specific payments and shall not be permitted to make any deduction therefrom. "GOVERNMENTAL AUTHORITY" means the government of the United States or any state or territory thereof or of the District of Columbia or of any county, municipality or other political subdivision of any thereof, or any department, agency, authority or other instrumentality of any of the foregoing. "HOLDER" means a Person in whose name a Bond is registered in the Bond Register. "INDENTURE" means this instrument as originally executed, and as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof, including the terms of particular series of Bonds established as contemplated by Section 3.01. "INDEPENDENT", when applied to any accountant or Engineer, means such a Person who (a) is in fact independent, (b) does not have any direct material financial interest in the Company or in any other obligor upon the Bonds or in any Affiliate of the Company or of such other obligor, (c) is not connected with the Company or such other obligor as an officer, employee, promoter, underwriter, trustee, partner, director or any Person performing similar functions, and (d) is selected by an Authorized Executive Officer and approved by the Trustee in the exercise of reasonable care. "INDEPENDENT ENGINEER'S CERTIFICATE" means a certificate signed by an Independent Engineer. "INTEREST PAYMENT DATE", when used with respect to any Bond, means the Stated Maturity of an installment of interest on such Bond. "INVESTMENT SECURITIES" means any of the following obligations or securities on which neither the Company nor an Affiliate thereof is the obligor: (a) Government Obligations; (b) interest bearing deposit accounts (which may be represented by certificates of deposit) in national or state banks (which may include the Trustee or any Paying Agent) having a combined capital and surplus of not less than One Hundred Million Dollars ($100,000,000); (c) bankers' acceptances drawn on and accepted by commercial banks (which may include the Trustee or any Paying Agent) having a combined capital and surplus of not less than One Hundred Million Dollars ($100,000,000); (d) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, any state or territory of the United States of America or the District of Columbia, or any political subdivision of any of the foregoing, which are rated in any of the three highest rating categories (without regard to modifiers) by a nationally recognized statistical rating organization; (e) bonds or other obligations of any agency or instrumentality of the United States of America; (f) commercial or finance company paper which is rated in any of the two highest rating categories (without regard to modifiers) by a nationally recognized statistical rating organization; (g) corporate debt securities rated in either of the two highest rating categories (without regard to modifiers) by a nationally recognized statistical rating organization; (h) repurchase agreements with banking or financial institutions having a combined capital and surplus of not less than One Hundred Million Dollars ($100,000,000) (which may include the Trustee or any Paying Agent) with respect to any of the foregoing obligations or securities; and (i) securities issued by any regulated investment company (including any investment company for which the Trustee is the advisor), as defined in Section 851 of the Internal Revenue Code of 1986, as amended, or any successor section of such Code or successor federal statute, provided that the portfolio of such investment company is limited to obligations that are bonds, notes, certificates of indebtedness, treasury bills or other securities now or hereafter issued by, or which are guaranteed as to principal and interest by the full faith and credit of, the United States of America, which portfolio may include repurchase agreements which are fully collateralized by any such obligations. "LIEN" means any mortgage, pledge, security interest, encumbrance, easement, lease, reservation, restriction, servitude, charge or similar right or lien of any kind, including, without limitation, any conditional sale or other title retention agreement, any lease in the nature thereof, any filing of, or agreement to give, any financing statement under the Uniform Commercial Code of any jurisdiction, and any defect or irregularity in record title. "MATURED EVENT OF DEFAULT", when used with respect to any Class "A" Mortgage, means the occurrence of any default or any other event under such Class "A" Mortgage, and the expiration of the applicable grace period, if any, specified in such Class "A" Mortgage, if the effect of such default or other event is to accelerate, or to permit the acceleration of, the maturity of any amount due under such Class "A" Mortgage. "MATURITY", when used with respect to any Bond, means the date on which the principal of such Bond or an installment of principal becomes due and payable as provided in such Bond or in this Indenture, whether at the Stated Maturity, by declaration of acceleration, upon call for redemption or otherwise. "MORTGAGED PROPERTY" means as of any particular time all property which at such time is subject, or is intended by the terms of this Indenture to be subject, to the Lien of this Indenture. Nothing in this Indenture is intended to prohibit the Lien of this Indenture from continuing to extend to Mortgaged Property after it is transferred by the Company to a subsidiary or Affiliate of the Company, or to another third party, if the Company retains, pursuant to binding agreements in form acceptable to the Trustee, the ability to cause such subsidiary, Affiliate or third party to comply with the agreements and covenants required on the part of the Company to be complied with hereunder with respect to such Mortgaged Property; PROVIDED, HOWEVER, that any such transferred property shall not constitute Property Additions or be available for use as a basis for an Authorized Purpose hereunder after the date of transfer. "NET EARNINGS CERTIFICATE" has the meaning specified in Section 1.03. "1936 MORTGAGE" means the Mortgage and Deed of Trust dated as of July 1, 1936 from the Company to Citibank, N.A., successor by merger to City Bank Farmers Trust Company, as trustee, as from time to time amended and supplemented. "OFFICER'S CERTIFICATE" means a certificate signed by an Authorized Executive Officer. "OPINION OF COUNSEL" means a written opinion of counsel, who may be employed by or Affiliated with or be counsel to the Company. "OUTSTANDING", when used: (a) with respect to Bonds, means, as of the date of determination, all Bonds theretofore authenticated and delivered under this Indenture, except: (i) Bonds theretofore paid, retired, redeemed, discharged or canceled, or delivered to the Trustee for cancellation; (ii) Bonds deemed to have been paid in accordance with Section 9.01; (iii) Bonds deposited with or held in pledge by the Trustee under any of the provisions of this Indenture, including any so held under any sinking, improvement, maintenance, replacement or analogous fund; and (iv) Bonds which have been paid pursuant to Section 3.06 or in exchange for or in lieu of which other Bonds have been authenticated and delivered pursuant to this Indenture, other than any such Bonds in respect of which there shall have been presented to the Trustee proof satisfactory to it and the Company that such Bonds are held by a bona fide purchaser in whose hands such Bonds are valid obligations of the Company; PROVIDED, HOWEVER, that in determining whether or not the Holders of the requisite principal amount of the Bonds Outstanding under this Indenture, or the Outstanding Bonds of any series or Tranche, have given any request, demand, authorization, direction, notice, consent or waiver hereunder or whether or not a quorum is present at a meeting of Holders of Bonds: (x) Bonds owned by the Company or any other obligor upon the Bonds or any Affiliate of the Company or of such other obligor (unless the Company, such Affiliate or such obligor owns all Bonds Outstanding under this Indenture, or (except for purposes of actions to be taken by holders of Bonds generally under Sections 10.16 or 10.17 hereof) all Outstanding Bonds of each such series and each such Tranche, as the case may be, determined without regard to this clause (x)) shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver or upon any such determination as to the presence of a quorum, only Bonds which the Trustee knows to be so owned shall be so disregarded; PROVIDED, HOWEVER, that Bonds so owned which have been pledged in good faith may be regarded as Outstanding if it is established to the reasonable satisfaction of the Trustee that the pledgee, and not the Company, or any such other obligor or Affiliate of either thereof, has the right so to act with respect to such Bonds and that the pledgee is not the Company or any other obligor upon the Bonds or any Affiliate of the Company or of such other obligor; and (y) the principal amount of a Discount Bond that shall be deemed to be Outstanding for such purposes shall be the amount of the principal thereof that would be due and payable as of the date of such determination upon a declaration of acceleration of the Maturity thereof pursuant to Section 10.02(a); and (b) with respect to Class "A" Bonds, has the meaning specified in the related Class "A" Mortgage. "PAYING AGENT" means any Person, including the Company or an Affiliate of the Company, authorized by the Company to pay the principal of and premium, if any, or interest, if any, on any Bonds on behalf of the Company. "PERCENTAGE CALCULATION PROVISO" means the adjustment to the calculations used to determine whether a certificate of an Independent Engineer or an Independent public accountant is required for a purpose under this Indenture, in each case described in the FURTHER PROVISO to the definition of "ENGINEER'S CERTIFICATE". "PERIODIC OFFERING" means an offering of Bonds of a series from time to time any or all of the specific terms of which Bonds, including without limitation the rate or rates of interest, if any, thereon, the Stated Maturity or Maturities thereof and the redemption provisions, if any, with respect thereto, are to be determined by the Company or its agents at or about the time of the authentication of such Bonds. "PERMITTED LIENS" means, at any time, any of the following: (a) the Lien of this Indenture and all liens and encumbrances junior thereto; (b) Liens for taxes, assessments and other governmental charges or requirements not delinquent or which are currently being contested in good faith by appropriate proceedings; (c) mechanics', workmen's, repairmen's, materialmen's, warehousemen's and carriers' Liens, Liens or privileges of any employees of the Company for salary or wages earned, but not yet payable, and other Liens, including without limitation Liens for worker's compensation awards, arising in the ordinary course of business for charges or requirements which are not delinquent or which are being contested in good faith and by appropriate proceedings; (d) any attachment, judgment and other similar Lien arising in connection with court proceedings (i) in an amount not in excess of the greater of Five Million Dollars ($5,000,000) or three percent (3%) of the principal amount of the sum of (x) the principal amount of Bonds Outstanding at the time such attachment, judgment or Lien arises, and (y) the principal amount of the Class "A" Bonds Outstanding at the time such attachment, judgment or Lien arises, other than Pledged Bonds, or (ii) with respect to which the Company shall (A) in good faith be prosecuting an appeal or other proceeding for review and with respect to which the Company shall have secured a stay of execution pending such appeal or other proceeding, or (B) have the right to prosecute an appeal or other proceeding for review; (e) easements, leases, reservations or other rights of others in, on or over, and laws, regulations and restrictions affecting, and defects and irregularities in record title to, the Mortgaged Property or any part thereof; PROVIDED, HOWEVER, that such easements, leases, reservations, rights, laws, regulations, restrictions, defects and irregularities do not in the aggregate materially impair the use by the Company of the Mortgaged Property considered as a whole for the purposes for which it is held by the Company; (f) any defects or irregularities in title to any rights-of- way or to any real estate used or to be used primarily for right-of-way purposes or held under lease, easement, license or similar right; PROVIDED, HOWEVER, that (i) the Company shall have obtained from the apparent owner of the lands or estates therein covered by any such right-of-way a sufficient right, by the terms of the instrument granting such right-of-way, lease, easement, license or similar right, to the use thereof for the purpose for which the Company acquired the same, (ii) the Company has power under eminent domain, or similar statutes, to remove such defects or irregularities, or (iii) such defects or irregularities may be otherwise remedied without undue effort or expense; (g) Liens securing indebtedness neither created, assumed nor guaranteed by the Company, nor on account of which it customarily pays interest, upon property of the Company, existing at the date of the execution and delivery of this Indenture, or, as to property hereafter acquired, at the time of the acquisition thereof by the Company, upon real estate or rights in or relating to real estate acquired by the Company to be used for one or more of the Primary Purposes of the Company's Business; (h) leases existing at the date of the execution and delivery of this Indenture affecting property owned by the Company at said date and renewals and extensions thereof and leases for a term of not more than fifteen (15) years (including extensions or renewals at the option of the tenant) affecting property acquired by the Company after said date; (i) any Lien vested in any lessor, licensor or permitter for rent to become due or for other obligations or acts to be performed, the payment of which rent or the performance of which other obligations or acts is required under leases, subleases, licenses or permits, so long as the payment of such rent or the performance of such other obligations or acts is not delinquent or is being contested in good faith and by appropriate proceedings; (j) any controls, restrictions, obligations, duties or other burdens imposed by any federal, state, municipal or other law, or by any rule, regulation or order of any Governmental Authority, upon any property of the Company or the operation or use thereof or upon the Company with respect to any of its property or the operation or use thereof or with respect to any franchise, grant, license, permit or public purpose requirement, or any rights reserved to or otherwise vested in any Governmental Authority to impose any such controls, restrictions, obligations, duties or other burdens; (k) Liens granted on air or water pollution control, sewage or solid waste disposal, or other similar facilities of the Company in connection with the issuance of pollution control revenue bonds (or bonds issued to refund such bonds) in order to finance the cost of, or the construction or acquisition of, such facilities; (l) any right which any Governmental Authority may have by virtue of any franchise, license, contract or statute to purchase, or designate a purchaser of or order the sale of, any property of the Company upon payment of cash or reasonable compensation therefor or to terminate any franchise, license or other rights or to regulate the property and business of the Company; (m) any Liens which have been bonded for the full amount in dispute or for the payment of which other adequate security arrangements have been made; (n) agreements for and obligations relating to the joint or common use of property owned solely by the Company or owned by the Company in common or jointly with one or more parties; (o) liens securing indebtedness incurred by a Person, other than the Company, which indebtedness has been neither assumed nor guaranteed by the Company nor on which it customarily pays interest, existing on property which the Company owns jointly or in common with such Person or such Person and others, if there is a bar against partition of such property, which would preclude the sale of such property by such other Person or the holder of such lien without the consent of the Company; (p) liens in favor of a government or governmental entity securing (i) payments pursuant to a statute (other than taxes and assessments), or (ii) indebtedness incurred to finance all or part of the purchase price or Cost of construction of the property subject to such lien; (q) any other liens or encumbrances of whatever nature or kind which do not, individually or in the aggregate, materially impair the Lien of this Indenture or the security afforded thereby for the benefit of the Bondholders, as evidenced by an Opinion of Counsel to such effect; (r) any trustee's lien hereunder; and (s) Prepaid Liens. "PERSON" means any individual, corporation, association, partnership, joint venture, trust or unincorporated organization or any Governmental Authority. "PLACE OF PAYMENT" when used with respect to the Bonds of any series, or any Tranche thereof, means the place or places, specified as contemplated by Section 3.01, at which, subject to Section 6.02, principal of and premium, if any, and interest, if any, on the Bonds of such series or Tranche are payable upon presentation. "PLEDGED BONDS" means Class "A" Bonds issued and delivered to, and held by, the Trustee hereunder. "PREDECESSOR BOND" of any particular Bond means every previous Bond evidencing all or a portion of the same debt as that evidenced by such particular Bond; and, for the purposes of this definition, any Bond authenticated and delivered under Section 3.06 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Bond shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Bond. "PREPAID LIEN" means any Lien securing indebtedness for the payment of which money in the necessary amount (taking into consideration the amount of income reasonably projected to be earned on such amount) shall have been irrevocably deposited in trust with the trustee or other holder of such Lien; PROVIDED, HOWEVER, that if such indebtedness is to be redeemed or otherwise prepaid prior to the stated maturity thereof, any notice requisite to such redemption or prepayment shall have been given in accordance with the mortgage or other instrument creating such Lien or irrevocable instructions to give such notice shall have been given to such trustee or other holder. "PRIMARY PURPOSES OF THE COMPANY'S BUSINESS" means the generation, production, transmission or distribution of electric energy in any form and for any purpose in the State of Maine. "PRIOR LIEN" means each Class "A" Mortgage and any other mortgage, lien, charge, encumbrance, security interest on or in, or pledge of, any Mortgaged Property existing both at and immediately prior to the time of the acquisition by the Company of such Mortgaged Property, or created as a purchase money mortgage on such Mortgaged Property at the time of, or in connection with, its acquisition by the Company, in each case ranking prior to or on a parity with the Lien of this Indenture. "PROPERTY ADDITIONS" has the meaning specified in Section 1.04(a). "REDEMPTION DATE", when used with respect to any Bond to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture. "REDEMPTION PRICE", when used with respect to any Bond to be redeemed, means the price (or stated percentage of the principal amount thereof) at which it is to be redeemed pursuant to this Indenture. "REGULAR RECORD DATE" for the interest payable on any Interest Payment Date on the Bonds of any series means the date specified for that purpose as contemplated by Section 3.01. "REQUIRED CURRENCY" has the meaning specified in Section 3.11. "RESPONSIBLE OFFICER", when used with respect to the Trustee, means the chairman or any vice-chairman of the board of directors, the chairman or any vice-chairman of the executive committee of the board of directors, the chairman of the trust committee, the president, any vice president, the secretary, any assistant secretary, the treasurer, any assistant vice president, any assistant treasurer, the cashier, any assistant cashier, any senior trust officer, trust officer or assistant trust officer, the controller or any assistant controller or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer of the Trustee to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "RETIRED BONDS" means (A) any Bonds authenticated and delivered under this Indenture which (a) no longer remain Outstanding by reason of the applicability of subclause (i) or (ii) of clause (a) in the definition of "Outstanding", (b) have not been made the basis under any of the provisions of the Indenture of one or more Authorized Purposes, and (c) have not been, and are not to be, paid, redeemed, purchased or otherwise retired by the application thereto of Funded Cash and (B) any Class "A" Bonds Outstanding as of the date of authentication and delivery of the Series A Bonds (and not having been made the basis under any of the provisions of this Indenture of the authentication and delivery of Bonds, or the withdrawal of cash or the release of property under the Class "A" Mortgage, subject to any provisions thereof permitting the revocation of the waiver of the right to the authentication and delivery of bonds thereunder), which subsequent thereto shall have been paid, retired, redeemed, discharged or canceled or surrendered to the trustee under the Class "A" Mortgage for cancellation, or for the purchase, payment or redemption of which moneys in the necessary amount shall have been deposited with or shall then be held by the trustee under the Class "A" Mortgage with irrevocable direction so to apply the same (provided that any such purchase, payment, retirement, redemption, cancellation or surrender of bonds shall not have been, or shall not be, effected with cash which has been used as the basis for the release of property or the issuance of additional bonds under the Class "A" Mortgage or which represents the proceeds of insurance deposited with the trustee thereunder); PROVIDED, HOWEVER, that, in the case of redemption, the notice required by the Class "A" Mortgage shall have been given or have been provided for to the satisfaction of the trustee under the Class "A" Mortgage as evidenced by an Officer's Certificate. For purposes of any Officer's Certificate delivered pursuant to Section 4.04(b)(ii) hereof, bonds otherwise conforming to the requirements of this definition, which will, concurrently with the authentication and delivery of the bonds as to which said Officer's Certificate pertains, be surrendered to the Trustee hereunder or to the trustee under the Class "A" Mortgage, as the case may be, for cancellation (otherwise than upon exchanges or transfers of bonds), shall be deemed to be "Retired Bonds". "SERIES A BONDS" means the series of Bonds issued pursuant to the provisions of Section 4.06. "SPECIAL RECORD DATE" for the payment of any Defaulted Interest on the Bonds of any series means a date fixed by the Trustee pursuant to Section 3.07. "STATED INTEREST RATE" means a rate more than zero at which an obligation by its terms is stated to bear simple interest, which rate may be a variable rate. Any calculation or other determination to be made under this Indenture by reference to the Stated Interest Rate on a Bond shall be made without regard to the effective interest cost to the Company of such Bond and without regard to the Stated Interest Rate on, or the effective cost to the Company of, any other obligation for which such Bond is pledged or otherwise delivered as security. "STATED MATURITY", when used with respect to any obligation or any installment of principal thereof or interest thereon, means the date on which the principal of such obligation or such installment of principal (whether as a result of scheduled amortization or otherwise) or interest is due and payable (without regard to any provisions for redemption, prepayment, acceleration, purchase or extension). "SUCCESSOR CORPORATION" has the meaning set forth in Section 13.01(b). "TRANCHE" means a group of Bonds which (a) are of the same series, and (b) have identical terms except as to principal amount or date of issuance (other than original issuance). "TRUST INDENTURE ACT" means, as of any time, the Trust Indenture Act of 1939, or any successor statute, as in force at such time. "TRUSTEE" means Chemical Bank, a corporation organized and existing under the laws of the State of New York, until a successor Trustee shall have become such with respect to one or more series of Bonds pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean or include each Person who is then a Trustee hereunder, and if at any time there is more than one such Person, "Trustee" as used with respect to the Bonds of any series shall mean the Trustee with respect to Bonds of that series. "UNBONDED" as applied to Bonds (including Retired Bonds), Class "A" Bonds or Property Additions means that such Bonds, Class "A" Bonds or Property Additions are not Bonded. "UNITED STATES" means the United States of America, its territories, its possessions and other areas subject to its political jurisdiction. Section 1.001. BONDED; FUNDED CASH. (a) "BONDED" as applied to Bonds (including Retired Bonds), Class "A" Bonds or Property Additions means that such Bonds, Class "A" Bonds or Property Additions are within one or more of the following classes: (i) the aggregate amount of Property Additions which have been used as a basis for the authentication and delivery of Bonds pursuant to Section 4.03, the withdrawal of cash pursuant to Section 4.05(c) or the withdrawal of cash pursuant to Section 8.06(a)(i); (ii) Bonds which have been used as a basis for the authentication and delivery of Bonds pursuant to Section 4.04, the withdrawal of cash pursuant to Section 4.05(c) or the withdrawal of cash pursuant to Section 8.06(a)(ii), and Bonds paid, purchased or redeemed with money used or applied by the Trustee pursuant to Section 8.06(a)(v); (iii) Bonds, Class "A" Bonds and Property Additions which have been used as the basis of the release of property from the Lien of this Indenture; (iv) Bonds with respect to which the Company has waived its right to the authentication and delivery of Bonds pursuant to Section 4.02 or Section 4.03; (v) Bonds, Class "A" Bonds and Property Additions which have been allocated or used as a basis for any credit against the requirements of any improvement, maintenance or replacement fund for any series of Bonds; PROVIDED, HOWEVER, that any such Bonds, Class "A" Bonds or Property Additions so allocated or used shall be reinstated as Unbonded when all of the Bonds of the series of Bonds in connection with which such fund was established are retired; (vi) Class "A" Bonds which have been (w) used as a basis for the authentication and delivery of Bonds pursuant to Section 4.02 or the withdrawal of cash pursuant to Section 4.05(c), (x) used as a basis for the authentication and delivery of Bonds pursuant to Section 4.04, (y) used as a basis for the issuance of Class "A" Bonds then Outstanding under a Class "A" Mortgage, or (z) used as a basis for the release of property or the withdrawal of cash under any Class "A" Mortgage; and (vii) the aggregate amount of Property Additions designated in an Engineer's Certificate delivered to the Trustee pursuant to clause (iii) of Section 7.07(a) to be deemed to have been made the basis of the authentication and delivery of Bonds then Outstanding which shall have been originally authenticated and delivered under Section 4.02 on the basis of Pledged Bonds. (b) "FUNDED CASH" means: (i) cash, held by the Trustee hereunder, to the extent that it represents the proceeds of insurance on, or cash deposited in connection with the release of property, or the proceeds of the release of obligations secured by a purchase money mortgage which obligations have been delivered to the Trustee pursuant to Article Eight and used as a credit in any application for the release of property hereunder, or the proceeds of payment to the Trustee on account of the principal of obligations secured by a purchase money mortgage which obligations have been delivered to it pursuant to Article Eight and used as a credit in any application for the release of property hereunder, all subject, however, to the provisions of Section 8.06(c); (ii) any cash deposited with the Trustee under Section 4.05; and (iii) any cash received by the Trustee from the payment of the principal of Pledged Bonds. Section 1.002. NET EARNINGS CERTIFICATE; ADJUSTED NET EARNINGS; ANNUAL INTEREST REQUIREMENTS. A "NET EARNINGS CERTIFICATE" means a certificate signed by an Authorized Executive Officer and an accountant (who may be employed by or Affiliated with the Company), stating: (a) the "ADJUSTED NET EARNINGS" of the Company for a period of twelve (12) consecutive calendar months within the eighteen (18) calendar months immediately preceding the first day of the month in which the Company Order requesting the authentication and delivery under this Indenture of Bonds is delivered to the Trustee, specifying: (i) its operating revenues (which may include revenues of the Company subject when collected or accrued to possible refund at a future date); (ii) its operating expenses, excluding (A) expenses for taxes on income or profits and other taxes measured by, or dependent on, net income, (B) provisions for reserves for renewals, replacements, depreciation, depletion or retirement of property (or any expenditures therefor), or provisions for amortization of assets, (C) expenses or provisions for interest on any indebtedness of the Company, for the amortization of debt discount, premium, expense or loss on reacquired debt, for any maintenance and replacement, improvement or sinking fund or other device for the retirement of any indebtedness, or for other similar amortization, (D) expenses or provisions for any non-recurring charge to income or to retained earnings of whatever kind or nature (including without limitation the recognition of expense or impairment due to the non-recoverability of assets or expense), whether or not recorded as a non-recurring charge in the Company's books of account, and (E) provisions for any refund of revenues previously collected or accrued by the Company subject to possible refund; (iii) the amount remaining after deducting the amount required to be stated in such certificate by clause (ii) above from the amount required to be stated therein by clause (i) above; (iv) its other income, net of related expenses, which other income may include any portion of the allowance for funds used during construction and other deferred costs (or any analogous amounts) which is not included in "other income" (or any analogous item) in the Company's books of account; and (v) the Adjusted Net Earnings of the Company for such period of twelve (12) consecutive calendar months (being the sum of the amounts required to be stated in such certificate by clauses (iii) and (iv) above); and (b) the "ANNUAL INTEREST REQUIREMENTS", being the interest requirements for one year, at the respective Stated Interest Rates, if any, borne prior to Maturity, upon: (i) all Bonds Outstanding hereunder at the date of such certificate, except any for the payment or redemption of which the Bonds applied for are to be issued; PROVIDED, HOWEVER, that, if Outstanding Bonds of any series bear interest at a variable rate or rates, then the interest requirement on the Bonds of such series shall be determined by reference to the rate or rates in effect on the day immediately preceding the date of such certificate; (ii) all Bonds then applied for in pending applications for new Bonds, including the application in connection with which such certificate is made; PROVIDED, HOWEVER, that if Bonds of any series are to bear interest at a variable rate or rates, then the interest requirement on the Bonds of such series shall be determined by reference to the rate or rates to be in effect at the time of the initial authentication and delivery of such Bonds; and PROVIDED, FURTHER, that the determination of the interest requirement on Bonds of a series subject to a Periodic Offering shall be further subject to the provisions of clause (iv) of Section 4.01(a); (iii) all Class "A" Bonds Outstanding under Class "A" Mortgages at the date of such certificate, except any Pledged Bonds and except any for the payment or redemption of which the Bonds applied for are to be issued; PROVIDED, HOWEVER, that, if the Outstanding Class "A" Bonds of any series bear interest at a variable rate or rates, then the interest requirement on the Class "A" Bonds of such series shall be determined by reference to the rate or rates in effect on the day immediately preceding the date of such certificate; and (iv) the principal amount of all other indebtedness (except (A) Pledged Bonds, (B) industrial development revenue bonds issued with respect to air or water pollution control, sewage or solid waste disposal, or other similar facilities of the Company to the extent that any other indebtedness of the Company issued to support the repayment of such indebtedness is included in Annual Interest Requirements pursuant to one of the other clauses of this definition, (C) indebtedness for the payment of which the Bonds applied for are to be issued, and (D) indebtedness secured by a Prepaid Lien prior to the Lien of this Indenture upon property subject to the Lien of this Indenture), outstanding on the date of such certificate and secured by a Lien prior to the Lien of this Indenture upon property subject to the Lien of this Indenture, if such indebtedness has been issued, assumed or guaranteed by the Company or if the Company customarily pays the interest upon the principal thereof; PROVIDED, HOWEVER, that if any such indebtedness bears interest at a variable rate or rates, then the interest requirement on such indebtedness shall be determined by reference to the rate or rates in effect on the day immediately preceding the date of such certificate. In any case where a Net Earnings Certificate is required as a condition precedent to the authentication and delivery of Bonds, such certificate shall be accompanied by a certificate signed by an Independent public accountant if the aggregate principal amount of Bonds then applied for plus the aggregate principal amount of Bonds authenticated and delivered hereunder since the commencement of the then current calendar year (other than those with respect to which a Net Earnings Certificate is not required, or with respect to which a Net Earnings Certificate accompanied by a certificate signed by an Independent public accountant has previously been furnished to the Trustee) is ten percent (10%) or more of the aggregate principal amount of the Bonds at the time Outstanding (subject to the Percentage Calculation Proviso), which certificate shall provide that such Independent public accountant has reviewed the Net Earnings Certificate and that such Independent public accountant has no knowledge that any statements in such Net Earnings Certificate are not true; but no such certificate need be signed by an Independent public accountant, as to dates or periods not covered by annual reports required to be filed by the Company, with respect to conditions precedent which depend upon a state of facts as of a date or dates or for a period or periods different from that required to be covered by such annual reports. Section 1.003. PROPERTY ADDITIONS; COST. (a) "PROPERTY ADDITIONS" means, as of any particular time, any item, unit or element of property which at such time is owned by the Company and is subject to the Lien of this Indenture. Property Additions: (i) need not consist of a specific or completed development, plant, betterment, addition, extension, improvement or enlargement, but may include construction work in progress and property in the process of purchase insofar as the Company shall have acquired legal title to such property, and may include the following: (A) fractional and other undivided interests of the Company in property owned jointly or in common with other Persons, whether or not there are with respect to such property, other agreements or obligations on the part of the Company, if there is a bar against partition of such property which would preclude the sale of such property by any or all of such other Persons or the holder or holders of any lien or liens on the interest of any of such other Persons in such property, without the consent of the Company; (B) engineering, economic, environmental, financial, geological and legal or other surveys, data processing equipment and software, preliminary to or associated with the acquisition or construction of property included or intended to be included in the Mortgaged Property, provided that any such property is not Excepted Property or, if it is Excepted Property, such property has been subjected to the Lien and operation of this Indenture as provided in Granting Clause Third; (C) paving, grading and other improvements to, under or upon highways, bridges, parks or other public property of analogous character required for or in connection with the installation or repair of overhead, surface or underground facilities and paid for and used or to be used by the Company, notwithstanding that the Company may not hold legal title thereto; (D) property located over, on or under property owned by other Persons, including governmental or municipal agencies, bodies or subdivisions, under permits, licenses, easements, franchises and other similar privileges, if the Company shall have the right to remove the same; (E) intangible property (including any acquisition premium paid in connection with the acquisition of any property), regardless of whether the Cost thereof is permitted to be recorded in the plant account of the Company or is permitted to be recovered by the Company through the rates that it charges its customers; and (ii) may include renewals, replacements and substitution of property not excluded from the definition of "Property Additions"; but (iii) shall not include: (A) Excepted Property (other than Excepted Property which has been subjected to the Lien and operation of this Indenture as provided in Granting Clause Third); or (B) any property the cost of acquisition or construction of which is properly chargeable to an operating expense account of the Company. (b) When any Property Additions are certified to the Trustee as the basis of any Authorized Purpose (except as otherwise provided in Section 8.06): (i) there shall be deducted from the Cost or Fair Value thereof to the Company, as the case may be (as of the date so certified), an amount equal to the Cost (or as to Property Additions of which the Fair Value to the Company at the time the same became Property Additions was less than the Cost as determined pursuant to subsection (c) of this Section, then such Fair Value in lieu of Cost) of all Property Additions retired to the date of such certification (other than the Property Additions, if any, in connection with the application for release of which such certificate is filed) and not theretofore deducted from the Cost or Fair Value to the Company of Property Additions theretofore certified to the Trustee; and (ii) there may, at the option of the Company, be added to such Cost or Fair Value, as the case may be, the sum of: (A) the principal amount of any obligations secured by a purchase money mortgage and any cash (other than proceeds of such purchase money obligations), not theretofore so added and which the Company then elects so to add, received by the Trustee representing the proceeds of insurance on, or of the release or other disposition of, Property Additions retired; and (B) twenty-fifteenths (20/15ths) of the principal amount of any Bond or Bonds, or portion of such principal amount, not theretofore so added and which the Company then elects so to add, the right to the authentication and delivery of which under the provisions of Section 4.04 and subclause (B) of clause (iii) of Section 8.05(a) shall at any time theretofore have been waived as the basis of the release of Property Additions retired; PROVIDED, HOWEVER, that the aggregate of the amounts added under clause (ii) above shall in no event exceed the amounts deducted under clause (i) above. (c) The term "COST" with respect to Property Additions made the basis for one or more Authorized Purposes shall mean the sum of (i) any cash or its equivalent forming a part of such Cost, plus all costs and allowances for funds used during the construction thereof and other deferred costs relating to such construction, but only to the extent of the greater of the amount permitted by Generally Accepted Accounting Principles or the amount permitted by accounting regulations or orders issued by any governmental regulatory commission, (ii) an amount equivalent to the fair market value in cash (as of the date of delivery) of any securities or other property delivered in payment therefor or for the acquisition thereof, (iii) the principal amount of any obligations secured by a Prior Lien (other than a Class "A" Mortgage) upon such Property Additions outstanding at the time of the acquisition of such Property Additions, and (iv) the principal amount of any other indebtedness incurred or assumed as all or part of the Cost to the Company of such Property Additions; PROVIDED, HOWEVER, that, notwithstanding any other provision of this Indenture, in any case where Property Additions shall have been acquired (otherwise than by construction) by the Company without any consideration consisting of cash, securities or other property or the incurring or assumption of indebtedness, no determination of Cost shall be required, and wherever in this Indenture provision is made for Cost or Fair Value, the Cost, in such case, shall mean an amount equal to the greater of (x) the Fair Value thereof, or (y) the book value of such acquired Property Additions at the time of the acquisition thereof. (d) If any Property Additions are shown by the Engineer's Certificate provided for in clause (ii) of Section 4.03(b) to include property which has been used or operated by others than the Company in a business similar to that in which it has been or is to be used or operated by the Company, the Cost thereof may include the amount of cash or the value of any portion of the securities paid or delivered for any goodwill or going concern value rights simultaneously acquired for which no separate or distinct consideration shall have been paid or apportioned, and in such case the term Property Additions as defined herein may include such goodwill and going concern value rights, regardless of whether such Cost is permitted to be recorded in the plant account of the Company or is permitted to be recovered by the Company through the rates that it charges its customers. (e) For the purposes of the deductions required by this Section, the Cost or the Fair Value to the Company of Property Additions retired shall be the Cost or the Fair Value thereof to the Company at the time such property became Property Additions. (f) All Property Additions which shall be retired, abandoned, destroyed, released or otherwise disposed of (including damaged or destroyed Property Additions (or portions thereof) for which the Company shall have received proceeds pursuant to Section 6.07(b) but with respect to which the Company shall have elected not to rebuild or repair) shall for the purpose of this Section 1.04 be deemed Property Additions retired and for other purposes of this Indenture shall thereupon cease to be Property Additions, but may at any time thereafter again become Property Additions as provided in this Indenture. Neither any reduction in the Cost or book value of property recorded in the plant account of the Company, nor the transfer of any amount appearing in such account to intangible or adjustment accounts, otherwise than in connection with actual retirements of physical property abandoned, destroyed, released or disposed of, and otherwise than in connection with the removal of such property in its entirety from plant account, shall be deemed to constitute a retirement of Property Additions. Section 1.004. COMPLIANCE CERTIFICATES AND OPINIONS. (a) Except as otherwise expressly provided in this Indenture, upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall, if requested by the Trustee, furnish to the Trustee an Officer's Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, it being understood that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. (b) Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture other than the certificate required by Section 6.11 shall include: (i) a statement that each individual or counsel signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (ii) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (iii) a statement that, in the opinion of each such individual or counsel, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (iv) a statement as to whether, in the opinion of each such individual or counsel, such condition or covenant has been complied with. (c) Any Opinion of Counsel provided for herein may be based, insofar as it relates to factual matters, upon statements made by the Company in documents filed with any governmental regulatory commission or upon a certificate or opinion of, or representations by, an officer or officers of the Company, unless, in the case of such a certificate or opinion, such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. If, in order to render any Opinion of Counsel provided for herein, the signer thereof shall deem it necessary that additional facts or matters be stated in any Engineer's Certificate provided for herein, then such Engineer's Certificate may state all such additional facts or matters as the signer of such Opinion of Counsel may request. In addition, in giving any Opinion of Counsel provided for herein, counsel may rely upon (i) prior opinions of counsel for the Company, (ii) opinions of special counsel for the Company and its subsidiaries, (iii) opinions of in-house counsel for any of the Company's divisions or subsidiaries, and (iv) title insurance policies, title insurance commitments and reports, lien search certificates and other similar evidences of the existence of liens on property. Section 1.005. FORM OF DOCUMENTS DELIVERED TO TRUSTEE. (a) In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. (b) Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. (c) Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. Section 1.006. ACTS OF HOLDERS. (a) Any request, demand, authorization, direction, notice, consent, election, waiver or other action provided by this Indenture to be made, given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing or, alternatively, may be embodied in and evidenced by the record of Holders voting in favor thereof, either in person or by proxies duly appointed in writing, at any meeting of Holders duly called and held in accordance with the provisions of Article Fifteen, or a combination of such instruments and any such record. Except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments or record or both are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments and any such record (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments and so voting at any such meeting. Proof of execution of any such instrument or of a writing appointing any such agent, or of the holding by any Person of a Bond, shall be sufficient for any purpose of this Indenture and (subject to Section 11.01) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. The record of any meeting of Holders shall be proved in the manner provided in Section 15.06. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof or may be proved in any other manner which the Trustee and the Company deem sufficient. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. (c) The principal amount (except as otherwise contemplated in clause (y) of the proviso to clause (a) of the definition of "Outstanding") and serial numbers of Bonds held by any Person, and the date of holding the same, shall be proved by the Bond Register. (d) Any request, demand, authorization, direction, notice, consent, election, waiver or other Act of a Holder shall bind every future Holder of the same Bond and the Holder of every Bond issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Bond. (e) Until such time as written instruments shall have been delivered to the Trustee with respect to the requisite percentage of principal amount of Bonds for the action contemplated by such instruments, any such instrument executed and delivered by or on behalf of the Holder may be revoked with respect to any or all of such Bonds by written notice by such Holder or any subsequent Holder, proven in the manner in which such instrument was proven. (f) Bonds of any series, or any Tranche thereof, authenticated and delivered after any Act of Holders may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any action taken by such Act of Holders. If the Company shall so determine, new Bonds of any series, or any Tranche thereof, so modified as to conform, in the opinion of the Trustee and the Company, to such action may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Bonds of such series or Tranche. (g) If the Company shall solicit from Holders any request, demand, authorization, direction, notice, consent, waiver or other Act, the Company may, at its option, by Company Order, fix in advance a record date for the determination of Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but the Company shall have no obligation to do so. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given before or after such record date, but only the Holders of record at the close of business on the record date shall be deemed to be Holders for the purposes of determining whether Holders of the requisite proportion of the Outstanding Bonds have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for that purpose the Outstanding Bonds shall be computed as of the record date. Section 1.007. NOTICES, ETC., TO TRUSTEE AND COMPANY. (a) Any request, demand, authorization, direction, notice, consent, election, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with, the Trustee by any Holder or by the Company, or the Company by the Trustee or by any Holder, shall be sufficient for every purpose hereunder (unless otherwise expressly provided herein) if the same shall be in writing and delivered personally to an officer or other responsible employee of the addressee, or transmitted by telecopy, telex or other direct written electronic means, or transmitted by registered mail or reputable overnight courier, charges prepaid to the applicable address set opposite such party's name below or to such other address as either party hereto may from time to time designate: If to the Trustee, to: Chemical Bank 450 West 33rd Street New York, New York 10001 Attention: Corporate Trustee Administration Department Telephone: (212) 946-3347 Telecopy: (212) 946-7799 or 7800 If to the Company, to: Bangor Hydro-Electric Company 33 State Street Bangor, Maine 04401 Attention: Chief Financial Officer Telephone: (207) 945-5621 Telecopy: (207) 990-6954 (b) Any communication contemplated herein shall be deemed to have been made, given, furnished and filed if personally delivered, on the date of delivery, if transmitted by telecopy, telex or other direct written electronic means, on the date of transmission, and if transmitted by registered mail or reputable overnight courier, on the date of receipt. Section 1.008. NOTICE TO HOLDERS OF BONDS; WAIVER. (a) Except as otherwise expressly provided herein, where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given, and shall be deemed given, to Holders if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at the address of such Holder as it appears in the Bond Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. (b) In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice to Holders by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. (c) Any notice required by this Indenture may be waived in writing by the Person entitled to receive such notice, either before or after the event otherwise to be specified therein, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. Section 0.10. CONFLICT WITH TRUST INDENTURE ACT. If any provision of this Indenture limits, qualifies or conflicts with any duties under any required provision of the Trust Indenture Act imposed hereon by Section 318(c) thereof, or any successor section of such Act, such required provision shall control. Section 0.11. EFFECT OF HEADINGS AND TABLE OF CONTENTS. The Article and Section headings in this Indenture and the Table of Contents are for convenience only and shall not affect the construction hereof. Section 0.12. SUCCESSORS AND ASSIGNS. All covenants and agreements in this Indenture by the Company shall bind its successors and assigns, whether so expressed or not. Section 0.13. SEPARABILITY CLAUSE. In case any provision in this Indenture or the Bonds shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 0.14. BENEFITS OF INDENTURE. Nothing in this Indenture or the Bonds, express or implied, shall give to any Person, other than the parties hereto, their successors hereunder and the Holders, any benefit or any legal or equitable right, remedy or claim under this Indenture. Section 0.15. GOVERNING LAW. This Indenture and the Bonds shall be governed by and construed in accordance with the laws of the State of Maine, except (a) to the extent that the law of any other jurisdiction shall be mandatorily applicable, (b) to the extent that perfection and the effect of perfection of the Lien of this Indenture may be governed by the laws of states other than the State of Maine as provided by law, and (c) that the rights, duties, obligations, immunities and standard of care of the Trustee shall be governed by the laws of the jurisdiction in which its Corporate Trust Office shall be located. Section 0.16. LEGAL HOLIDAYS. In any case where any Interest Payment Date, Redemption Date, Maturity or Stated Maturity of any Bond shall not be a Business Day at any Place of Payment, then (notwithstanding any other provision of this Indenture or of the Bonds other than a provision in Bonds of any series, or any Tranche thereof, or in the indenture supplemental hereto which establishes the terms of such Bonds or Tranche, which specifically states that such provision shall apply in lieu of this Section) payment of interest or principal and premium, if any, need not be made at such Place of Payment on such date, but may be made on the next succeeding Business Day at such Place of Payment with the same force and effect as if made on the Interest Payment Date or Redemption Date, at Maturity or at the Stated Maturity, and, if such payment is made or duly provided for on such Business Day, no interest shall accrue on the amount so payable for the period from and after such Interest Payment Date, Redemption Date, Maturity or Stated Maturity, as the case may be, to such Business Day. Section 0.17. INVESTMENT OF CASH HELD BY TRUSTEE. Any cash held by the Trustee or any Paying Agent under any provision of this Indenture (other than unclaimed moneys held under Section 6.03(e)) shall, except as otherwise provided in Article Nine, at the request of the Company evidenced by Company Order, be invested or reinvested in Investment Securities designated by the Company and certified in such Company Order to constitute Investment Securities, and any interest on such Investment Securities shall be promptly paid over to the Company as received free and clear of any Lien; PROVIDED, HOWEVER, that following the occurrence and during the continuance of an Event of Default, the Trustee shall not pay such interest over to the Company, but shall instead hold such interest as part of the Mortgaged Property. Such Investment Securities shall be held subject to the same provisions hereof as the cash used to purchase the same, but upon a like request of the Company shall be sold, in whole or in designated part, and the proceeds of such sale shall be held subject to the same provisions hereof as the cash used to purchase the Investment Securities so sold. If such sale shall produce a net sum less than the cost of the Investment Securities so sold, the Trustee shall have no liability for such deficiency and the Company shall pay to the Trustee or any such Paying Agent, as the case may be, such amount in cash as, together with the net proceeds from such sale, shall equal the cost of the Investment Securities so sold, and if such sale shall produce a net sum greater than the cost of the Investment Securities so sold, the Trustee or any such Paying Agent, as the case may be, shall, upon Company Order, promptly pay over to the Company an amount in cash equal to such excess, free and clear of any Lien. Section 0.18. APPROVAL OF SIGNERS. The acceptance by the Trustee of any document, the signer of which is required by some provision hereof to be approved by the Trustee, shall be sufficient evidence of its approval of the signer within the meaning of this Indenture. ARTICLE TWO BOND FORMS Section 1.001. FORMS GENERALLY. (a) The definitive Bonds of each series shall be in substantially the forms established in the indenture supplemental hereto establishing such series, or in a Board Resolution relating to such series, or in an Officer's Certificate pursuant to a supplemental indenture or Board Resolution, in any case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture (including, without limitation, as are appropriate for the establishment of a global security to be registered in the name of a depository or its nominee), and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or depository or as may, consistently herewith, be determined by the officers executing such Bonds, as evidenced by their execution of the Bonds. If the forms of Bonds of any series are established in a Board Resolution or in an Officer's Certificate pursuant to a Board Resolution, such Board Resolution and Officer's Certificate, if any, shall be delivered to the Trustee at or prior to the delivery of the Company Order contemplated by clause (ii) of Section 4.01(a) for the authentication and delivery of such Bonds. (b) The Bonds of each series shall be issuable in registered form without coupons. The definitive Bonds shall be produced in such manner as shall be determined by the officers executing such Bonds, as evidenced by their execution thereof. Section 1.002. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION. The Trustee's certificate of authentication shall be in substantially the form set forth below: This is one of the Bonds of the series designated therein referred to in the within-mentioned Indenture. Chemical Bank, as Trustee By:________________________ Authorized Officer ARTICLE THREE THE BONDS Section 1.001. LIMIT ON AMOUNT OF BONDS; ISSUABLE IN SERIES. (a) The aggregate principal amount of Bonds which may be authenticated and delivered under this Indenture shall be unlimited. (b) The Bonds may be issued in one or more series. Subject to subsection (c) of this Section, there shall be established in one or more indentures supplemental hereto, or in a Board Resolution, or an Officer's Certificate pursuant to a supplemental indenture or a Board Resolution, prior to the issuance of Bonds of any series: (i) the title of the Bonds of such series (which title shall contain the words "General and Refunding Mortgage Bonds" but shall otherwise distinguish the Bonds of such series from Bonds of all other series); (ii) any limit upon the aggregate principal amount of the Bonds of such series which may be authenticated and delivered under this Indenture (except for Bonds authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Bonds of such series pursuant to Section 3.04, 3.05, 3.06, 5.06 or 14.06 and except for any Bonds which, pursuant to Section 3.03(d), are deemed never to have been authenticated and delivered hereunder); (iii) the Person (without specific identification) to whom interest on the Bonds of such series, or any Tranche thereof, shall be payable on any Interest Payment Date, if other than the Person in whose name that Bond (or one or more Predecessor Bonds) is registered at the close of business on the Regular Record Date for such interest; (iv) the date or dates on which the principal of the Bonds of such series (including any scheduled amortization payments payable prior to the final Maturity of the Bonds) is payable; (v) the rate or rates at which the Bonds of such series, or any Tranche thereof, shall bear interest, if any (including the rate or rates at which overdue principal, premium or interest shall bear interest, if any), or any method or methods by which such rate or rates shall be determined, the date or dates from which such interest shall accrue, the Interest Payment Dates on which such interest shall be payable and the Regular Record Date for the interest payable on the Bonds on any Interest Payment Date; and the basis of computation of interest, if other than as provided in Section 3.10; (vi) the place or places where (A) the principal of (including installments of principal, if any, payable prior to the final Maturity of the Bonds) and premium, if any, and interest, if any, on the Bonds of such series, or any Tranche thereof, shall be payable upon presentation thereof (and, if payments of principal are to be paid prior to the final Maturity thereof without surrender of a certificate evidencing the Bonds, the method, if any, of evidencing the payment of such principal amounts), (B) any Bonds of such series, or any Tranche thereof, may be surrendered for registration of transfer, (C) Bonds of such series, or any Tranche thereof, may be surrendered for exchange, and (D) notices and demands to or upon the Company in respect of the Bonds of such series, or any Tranche thereof, and this Indenture may be served; (vii) the period or periods within which, the price or prices at which and the terms and conditions upon which the Bonds of such series, or any Tranche thereof, may be redeemed, in whole or in part, at the option of the Company; (viii) the obligation, if any, of the Company to redeem or purchase the Bonds of such series, or any Tranche thereof, pursuant to any sinking fund or analogous provisions or at the option of a Holder thereof and the period or periods within which, the price or prices at which and the terms and conditions upon which such Bonds shall be redeemed or purchased, in whole or in part, pursuant to such obligation; (ix) the denominations in which Bonds, if any, of such series, or any Tranche thereof, shall be issuable if other than denominations of $1,000 and any integral multiple thereof; (x) the currency or currencies, including composite currencies, in which payment of the principal of and premium, if any, and interest, if any, on the Bonds of such series, or any Tranche thereof, shall be payable (if other than in Dollars); PROVIDED, HOWEVER, that, unless otherwise expressly provided herein, for purposes of calculations under this Indenture (including, without limitation, calculations of Annual Interest Requirements contemplated by Section 1.03 and calculations of principal amount under Article Four), any amounts denominated in a currency other than Dollars or in a composite currency shall be converted to Dollar equivalents by calculating the amount of Dollars which could have been purchased by the amount of such other currency based (A) on the average of the mean of the buying and selling spot rates quoted by three banks which are members of the New York Clearing House Association selected by the Company in effect at 11:00 A.M. (New York time) in The City of New York on the fifth Business Day preceding the date of such calculation, or (B) if on such fifth Business Day it shall not be possible or practical to obtain such quotations from such three banks, on such other quotations or alternative methods of determination as shall be selected by an Authorized Executive Officer and which shall be reasonably acceptable to the Trustee; (xi) if the principal of or premium, if any, or interest, if any, on the Bonds of such series, or any Tranche thereof, are to be payable, at the election of the Company or a Holder thereof, in a coin or currency other than that in which the Bonds are stated to be payable, the period or periods within which, and the terms and conditions upon which, such election may be made; (xii) if the principal of or premium, if any, or interest, if any, on the Bonds of such series, or any Tranche thereof, are to be payable, or are to be payable at the election of the Company or a Holder thereof, in securities or other property, the type and amount of such securities or other property, or the method by which such amount shall be determined, and the period or periods within which, and the terms and conditions upon which, any such election may be made; PROVIDED, HOWEVER, that, notwithstanding any provision of this Indenture to the contrary, for purposes of calculations under this Indenture (including without limitation calculations under Article Four), any such election shall be disregarded; (xiii) if the amount of payments of principal of or premium, if any, or interest, if any, on the Bonds of such series, or any Tranche thereof, may be determined with reference to an index or other fact or event ascertainable outside of this Indenture, the manner in which such amounts shall be determined; (xiv) if other than the principal amount thereof, the portion of the principal amount of Bonds of such series, or any Tranche thereof, which shall be payable upon declaration of acceleration of the Maturity thereof pursuant to Section 10.02(a); (xv) the terms, if any, pursuant to which the Bonds of such series, or Tranche thereof, may be converted into or exchanged for shares of capital stock or other securities of the Company or any other Person; (xvi) the obligations or instruments, if any, which shall be considered Eligible Obligations in respect of the Bonds of such series, or any Tranche thereof, denominated in a currency other than Dollars or in a composite currency, and any additional or alternative provisions for the reinstatement of the Company's indebtedness in respect of such Bonds after the satisfaction and discharge thereof as provided in Section 9.01; (xvii) if a service charge will be made for the registration of transfer or exchange of Bonds of such series, or any Tranche thereof, the amount or terms thereof; (xviii) any exceptions to Section 1.16, or variation in the definition "Business Day", with respect to the Bonds of such series, or any Tranche thereof; and (xix) any other terms of the Bonds of such series, or any Tranche thereof, not inconsistent with the provisions of this Indenture (including, without limitation, as are appropriate for the establishment of a global security to be registered in the name of a depository or its nominee). (c) With respect to Bonds of a series subject to a Periodic Offering, the indenture supplemental hereto which establishes such series or the Board Resolution or Officer's Certificate pursuant to such supplemental indenture or Board Resolution, as the case may be, may provide general terms or parameters for Bonds of such series and provide either that the specific terms of particular Bonds of such series shall be specified in a Company Order or that such terms shall be determined by the Company or its agent in accordance with a Company Order as contemplated by clause (ii) of Section 4.01(a). Section 1.002. DENOMINATIONS. Unless otherwise provided as contemplated by Section 3.01 with respect to any series of Bonds, the Bonds of each series shall be issuable in denominations of $1,000 and any integral multiple thereof. Section 1.003. EXECUTION, DATING, CERTIFICATE OF AUTHENTICATION. (a) The Bonds shall be executed on behalf of the Company by an Authorized Executive Officer, and may have the corporate seal of the Company affixed thereto reproduced thereon and attested by any other Authorized Executive Officer. The signature of any or all of these officers on the Bonds may be manual or facsimile. (b) Bonds bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Bonds or did not hold such offices at the date of such Bonds. (c) Each Bond shall be dated the date of its authentication. (d) No Bond shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Bond a certificate of authentication substantially in the form provided for herein executed by the Trustee or an Authenticating Agent by manual signature of an authorized officer thereof, and such certificate upon any Bond shall be conclusive evidence, and the only evidence, that such Bond has been duly authenticated and delivered hereunder and is entitled to the benefits of this Indenture. Notwithstanding the foregoing, if any Bond shall have been authenticated and delivered hereunder to the Company, or any Person acting on its behalf, but shall never have been issued and sold by the Company, and the Company shall deliver such Bond to the Bond Registrar for cancellation or shall cancel such Bond and deliver evidence of such cancellation to the Trustee, in each case as provided in Section 3.09, together with a written statement (which need not comply with Section 1.05 and need not be accompanied by an Opinion of Counsel) stating that such Bond has never been issued and sold by the Company, for all purposes of this Indenture such Bond shall be deemed never to have been authenticated and delivered hereunder and shall never be entitled to the benefits hereof. Section 1.004. TEMPORARY BONDS. (a) Pending the preparation of definitive Bonds of any series or Tranche, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Bonds which are printed, lithographed, typewritten, mimeographed, photocopied or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Bonds in lieu of which they are issued, with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Bonds may determine, as evidenced by their execution of such Bonds, PROVIDED, HOWEVER, that temporary Bonds need not recite specific redemption, sinking fund, conversion or exchange provisions. (b) After the preparation of definitive Bonds of such series or Tranche, the temporary Bonds of such series or Tranche shall be exchangeable for definitive Bonds of such series or Tranche upon surrender of the temporary Bonds of such series or Tranche at the office or agency of the Company maintained pursuant to Section 6.02 in a Place of Payment for such series, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Bonds of any series or Tranche, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor definitive Bonds of the same series or Tranche, of authorized denominations and of like tenor and aggregate principal amount. (c) Until exchanged in full as hereinabove provided, the temporary Bonds shall in all respects be entitled to the same benefits under this Indenture as definitive Bonds of the same series or Tranche and of like tenor authenticated and delivered hereunder. Section 1.005. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE. (a) The Company shall cause to be kept in one of the offices designated pursuant to Section 6.02 a register (the register kept in accordance with this Section being referred to herein as the "Bond Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Bonds and the registration of transfer thereof. The Person maintaining the Bond Register is referred to herein as the "Bond Registrar." Anything herein to the contrary notwithstanding, the Company may designate one of its offices as the office in which the Bond Register shall be maintained, in which event the Company shall act as Bond Registrar. (b) Upon surrender for registration of transfer of any Bond of a series at the office or agency of the Company maintained pursuant to Section 6.02 in a Place of Payment for such series, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Bonds of the same series and Tranche, of authorized denominations and of like tenor and aggregate principal amount. (c) At the option of the Holder, any Bond may be exchanged for one or more new Bonds of the same series and Tranche, of authorized denominations and of like tenor and aggregate principal amount, upon surrender of the Bonds to be exchanged at any such office or agency. Whenever any Bonds are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Bonds which the Holder making the exchange is entitled to receive. (d) All Bonds issued upon any registration of transfer or exchange of Bonds shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Bonds surrendered upon such registration of transfer or exchange. (e) Every Bond presented or surrendered for registration of transfer or for exchange shall (if so required by the Company or the Trustee or any transfer agent) be duly endorsed or shall be accompanied by a written instrument of transfer in form satisfactory to the Company and the Bond Registrar or any transfer agent duly executed by the Holder thereof or his attorney duly authorized in writing. (f) Unless otherwise provided in an indenture supplemental hereto, Board Resolution or Officer's Certificate with respect to Bonds of any series, or any Tranche thereof, no service charge shall be made for any registration of transfer or exchange of Bonds, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Bonds, other than exchanges pursuant to Section 3.04, 5.06 or 14.06 not involving any transfer. (g) The Company shall not be required to issue and the Bond Registrar shall not be required to register the transfer of or to exchange (a) Bonds of any series during a period of 15 days immediately preceding the date notice is given identifying the serial numbers of the Bonds of such series called for redemption, or (b) any Bond so selected for redemption in whole or in part, except the unredeemed portion of any Bond being redeemed in part. Section 1.006. MUTILATED, DESTROYED, LOST AND STOLEN BONDS. (a) If any mutilated Bond is surrendered to the Trustee, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Bond of the same series and Tranche, and of like tenor and principal amount and bearing a number not contemporaneously outstanding. (b) If there shall be delivered to the Company and the Trustee (i) evidence to their satisfaction of the ownership of and the destruction, loss or theft of any Bond, and (ii) such security or indemnity as may be reasonably required by them to save each of them and any agent of either of them harmless, then, in the absence of notice to the Company or the Trustee that such Bond has been acquired by a bona fide purchaser, the Company shall execute and the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Bond, a new Bond of the same series and Tranche, and of like tenor and principal amount and bearing a number not contemporaneously outstanding. (c) Notwithstanding the foregoing, in case any such mutilated, destroyed, lost or stolen Bond has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Bond, pay such Bond. (d) Upon the issuance of any new Bond under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other reasonable expenses (including the fees and expenses of the Trustee) connected therewith. (e) Every new Bond of any series issued pursuant to this Section in lieu of any destroyed, lost or stolen Bond shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Bond shall be at any time enforceable by anyone, and any such new Bond shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Bonds of such series duly issued hereunder. (f) The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Bonds. Section 1.007. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED. (a) Unless otherwise provided as contemplated by Section 3.01 with respect to the Bonds of any series, or any Tranche thereof, interest on any Bond which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Bond (or one or more Predecessor Bonds) is registered at the close of business on the Regular Record Date for such interest. (b) Any interest on any Bond of any series which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease to be payable to the Holder on the related Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in clause (i) or (ii) below. (i) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Bonds of such series (or their respective Predecessor Bonds) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Bond of such series and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as provided in this clause (i). Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall promptly cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder of Bonds of such series at the address of such Holder as it appears in the Bond Register, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Bonds of such series (or their respective Predecessor Bonds) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following clause (ii). (ii) The Company may make payment of any Defaulted Interest on the Bonds of any series in any other lawful manner not inconsistent with the requirements of any securities exchange on which such Bonds may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause (ii), such manner of payment shall be deemed practicable by the Trustee. (c) Subject to the foregoing provisions of this Section and Section 3.05, each Bond delivered under this Indenture upon registration of, transfer of, or in exchange for, or in lieu of, any other Bond shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Bond. Section 1.008. PERSONS DEEMED OWNERS. The Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name any Bond is registered as the absolute owner of such Bond for the purpose of receiving payment of principal of and premium, if any, and (subject to Sections 3.05 and 3.07) interest, if any, on such Bond and for all other purposes whatsoever, whether or not such Bond be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary. Section 1.009. CANCELLATION BY BOND REGISTRAR. All Bonds surrendered for payment, redemption, registration of transfer or exchange, or upon purchase or other acquisition by or on behalf of the Company, shall, if surrendered to any Person other than the Bond Registrar, be delivered to the Bond Registrar and, if not theretofore canceled, shall be promptly canceled by the Bond Registrar. The Company may at any time deliver to the Bond Registrar for cancellation any Bonds previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever or which the Company shall not have issued and sold, and all Bonds so delivered shall be promptly canceled by the Bond Registrar. No Bonds shall be authenticated in lieu of or in exchange for any Bonds canceled as provided in this Section, except as expressly permitted by this Indenture. All canceled Bonds held by the Bond Registrar shall be disposed of in accordance with a Company Order and the Bond Registrar shall promptly deliver a certificate of disposition to the Company unless, by a Company Order, the Company shall direct that canceled Bonds be returned to it. The Bond Registrar shall promptly deliver evidence of any cancellation of a Bond in accordance with this Section to the Trustee and the Company. Section 0.10. COMPUTATION OF INTEREST. Except as otherwise specified as contemplated by Section 3.01 for Bonds of any series, or any Tranche thereof, interest (if any) on the Bonds of each series shall be computed on the basis of a 360-day year consisting of twelve 30-day months. Section 0.11. PAYMENT TO BE IN PROPER CURRENCY. In the case of any Bonds denominated in any currency other than Dollars or in a composite currency (the "Required Currency"), except as otherwise provided therein, the obligation of the Company to make any payment of the principal thereof, or the premium, if any, or interest, if any, thereon, shall not be discharged or satisfied by any tender by the Company, or recovery by the Trustee, in any currency other than the Required Currency, except to the extent that such tender or recovery shall result in the Trustee timely holding the full amount of the Required Currency then due and payable. If any such tender or recovery is in a currency other than the Required Currency, the Trustee may take such actions as it considers appropriate to exchange such currency for the Required Currency. The costs and risks of any such exchange, including without limitation the risks of delay and exchange rate fluctuation, shall be borne by the Company, the Company shall remain fully liable for any shortfall or delinquency in the full amount of Required Currency then due and payable, and in no circumstances shall the Trustee be liable therefor except in the case of its negligence or willful misconduct. The Company hereby waives any defense of payment based upon any such tender or recovery which is not in the Required Currency, or which, when exchanged for the Required Currency by the Trustee, is less than the full amount of Required Currency then due and payable. ARTICLE FOUR ISSUANCE OF BONDS Section 1.001. GENERAL. (a) Subject to the provisions of Section 4.02, 4.03, 4.04, 4.05 or 4.06, whichever may be applicable, the Trustee shall authenticate and deliver Bonds of a series, for original issue, at one time or from time to time in accordance with the Company Order referred to below, upon receipt by the Trustee of: (i) if the terms of such series are established in an indenture supplemental hereto, Board Resolution or Officer's Certificate, as contemplated by Section 3.01, the indenture supplemental hereto, Board Resolution or Officer's Certificate establishing such series; (ii) a Company Order requesting the authentication and delivery of such Bonds and, to the extent that the terms of such Bonds shall not have been established in the indenture supplemental hereto which established such series or in a Board Resolution or in an Officer's Certificate, all as contemplated by Section 3.01, either establishing such terms or, in the case of Bonds of a series subject to a Periodic Offering, specifying procedures, acceptable to the Trustee, by which such terms are to be established (which procedures may provide for authentication and delivery pursuant to oral or electronic instructions from the Company or any agent or agents thereof, which oral instructions are to be promptly confirmed electronically or in writing); (iii) the Bonds of such series or Tranche, executed on behalf of the Company as provided herein; (iv) a Net Earnings Certificate showing the Adjusted Net Earnings of the Company for the period therein specified to have been not less than an amount equal to two (2) times the Annual Interest Requirements therein specified, all in accordance with the provisions of Section 1.03; PROVIDED, HOWEVER, that the Trustee shall not be entitled to receive a Net Earnings Certificate hereunder if the Bonds of such series are to have no Stated Interest Rate prior to Maturity; and PROVIDED, FURTHER, that, with respect to Bonds of a series subject to a Periodic Offering, other than Bonds theretofore authenticated and delivered, (A) it shall be assumed in such Net Earnings Certificate that none of such Bonds shall have a Stated Interest Rate in excess of a maximum rate to be stated therein, and no Bonds which would have a Stated Interest Rate at the time of the initial authentication and delivery thereof in excess of such maximum rate shall be authenticated and delivered under the authority of such Net Earnings Certificate, and (B)the Trustee shall be entitled to receive such Net Earnings Certificate only once, at or prior to the time of the first authentication and delivery of the Bonds of such series (unless the Company Order or the oral or electronic instructions referred to in clause (ii) above requesting the authentication and delivery of such Bonds is delivered on or after the date which is two years after the most recent Net Earnings Certificate with respect to such series was delivered pursuant to this clause (iv), in which case this subclause (B) shall not apply); (v) an Opinion of Counsel to the effect that: (A) the forms of such Bonds have been duly authorized by the Company and have been established in conformity with the provisions of this Indenture; (B) the terms of such Bonds have been duly authorized by the Company and have been established in conformity with the provisions of this Indenture; and (C) such Bonds, when authenticated and delivered by the Trustee and issued and delivered by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will have been duly issued under this Indenture and will constitute valid and legally binding obligations of the Company, entitled to the benefits provided by this Indenture, and enforceable in accordance with their terms, subject to the Customary Exceptions; PROVIDED, HOWEVER, that, with respect to Bonds of a series subject to a Periodic Offering, the Trustee shall be entitled to receive such Opinion of Counsel only once at or prior to the time of the first authentication and delivery of Bonds of such series and that the opinions described in subclauses (B) and (C) of clause (v) above may state, respectively: (1) that, when the terms of such Bonds shall have been established pursuant to a Company Order or Orders or pursuant to such procedures as may be specified from time to time by a Company Order or Orders, all as contemplated by and in accordance with the indenture supplemental hereto, Board Resolution or Officer's Certificate delivered pursuant to clause (i) above, such terms will have been duly authorized by the Company and will have been established in conformity with the provisions of this Indenture; and (2) that such Bonds, when authenticated and delivered by the Trustee in accordance with this Indenture and the Company Order or Orders or the specified procedures referred to in subclause (1) above and issued and delivered by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will have been duly issued under this Indenture and will constitute valid and legally binding obligations of the Company, entitled to the benefits provided by this Indenture, and enforceable in accordance with their terms, subject to the Customary Exceptions; (vi) an Officer's Certificate to the effect that, to the knowledge of the signer, no Event of Default, or event which with notice or lapse of time or both would constitute an Event of Default, has occurred and is continuing; PROVIDED, HOWEVER, that with respect to Bonds of a series subject to a Periodic Offering, either (A) such an Officer's Certificate shall be delivered at the time of the authentication and delivery of each Bond of such series, or (B) the Officer's Certificate delivered at the time of the first authentication and delivery of the Bonds of such series shall state that the statements therein shall be deemed to be made at the time of each subsequent authentication and delivery of Bonds of such series; and (vii) such other Opinions of Counsel, certificates and other documents as may be required under Section 4.02, 4.03, 4.04 or 4.05, whichever may be applicable to the authentication and delivery of the Bonds of such series. (b) With respect to Bonds of a series subject to a Periodic Offering, the Trustee may conclusively rely, as to the authorization by the Company of any of such Bonds, the forms and terms thereof, the legality, validity, binding effect and enforceability thereof and the compliance of the authentication and delivery thereof with the terms and conditions of this Indenture, upon the Opinion or Opinions of Counsel and the certificates and other documents delivered pursuant to this Article Four at or prior to the time of the first authentication and delivery of Bonds of such series until any of such opinions, certificates or other documents have been superseded or revoked or expire by their terms. (c) In connection with the authentication and delivery of Bonds of a series subject to a Periodic Offering, the Trustee shall be entitled to assume that the Company's instructions to authenticate and deliver such Bonds do not violate any laws with respect to, or any rules, regulations or orders of, any governmental agency or commission having jurisdiction over the Company. Section 1.002. ISSUANCE OF BONDS ON THE BASIS OF PLEDGED BONDS; DISPOSITION AND EXCHANGE OF BANK COLLATERAL BONDS. (a) Bonds of any one or more series may be authenticated and delivered upon the basis of, and in an aggregate principal amount not exceeding, the aggregate principal amount of Unbonded Class "A" Bonds issued and delivered to the Trustee for such purpose. (b) No Bonds of any series shall be authenticated and delivered by the Trustee upon the basis of the issuance and delivery to the Trustee of Class "A" Bonds until the Trustee shall have received: (i) Class "A" Bonds (A) maturing on such dates and in such principal amounts that, at each Stated Maturity of the Bonds of such series (or the Tranche thereof then to be authenticated and delivered), there shall mature Class "A" Bonds equal in principal amount to the Bonds of such series or Tranche then to mature, and (B) containing, in addition to any mandatory redemption provisions applicable to all Class "A" Bonds Outstanding under the related Class "A" Mortgage, mandatory redemption provisions correlative to the provisions, if any, for the mandatory redemption (pursuant to a sinking fund or otherwise) of the Bonds of such series or Tranche or for the redemption thereof at the option of the Holder; it being expressly understood that such Class "A" Bonds (1) may, but need not, bear interest, any such interest to be payable at the same times as interest on the Bonds of such series or Tranche, (2) may, but need not, contain provisions for the redemption thereof at the option of the Company, any such redemption to be made at a redemption price or prices not less than the principal amount thereof, and (3) shall be held by the Trustee in accordance with Article Seven; (ii) the documents with respect to the Bonds of such series specified in Section 4.01; PROVIDED, HOWEVER, that no Net Earnings Certificate shall be required to be delivered if there shall be delivered an Officer's Certificate to the effect that such Class "A" Bonds have been authenticated and delivered under the related Class "A" Mortgage on the basis of retired Class "A" Bonds, except that a Net Earnings Certificate shall nevertheless be required to be delivered if: (A) the Stated Maturity of the Class "A" Bonds on the basis of which the Class "A" Bonds to be made the basis of the authentication and delivery of Bonds under this Section are to be or have been authenticated and delivered under the related Class "A" Mortgage is a date more than five years after the date of the Company Order requesting the authentication and delivery of such Bonds under this Section; and (B) the Stated Interest Rate, if any, on such retired Class "A" Bonds in effect immediately prior to Maturity is less than the Stated Interest Rate, if any, on such Bonds to be in effect upon the initial authentication and delivery thereof (such Stated Interest Rate to be determined, in the case of a series subject to a Periodic Offering, as provided in Section 4.01(a)(iv)); (iii) an Opinion of Counsel to the effect that: (A) the forms of such Class "A" Bonds have been duly authorized by the Company and have been established in conformity with the provisions of the related Class "A" Mortgage; (B) the terms of such Class "A" Bonds have been duly authorized by the Company and have been established in conformity with the provisions of the related Class "A" Mortgage; and (C) such Class "A" Bonds have been duly issued under the related Class "A" Mortgage and constitute valid and legally binding obligations of the Company, entitled to the benefits provided by such Class "A" Mortgage, and enforceable in accordance with their terms, subject to the Customary Exceptions; PROVIDED, HOWEVER, that, with respect to Bonds of a series subject to a Periodic Offering, the Trustee shall be entitled to receive such Opinion of Counsel only once at or prior to the time of the first authentication and delivery of Bonds of such series (and shall be entitled to rely on such Opinion of Counsel with respect to the Class "A" Bonds to the same extent as provided in Section 4.01(b)) and that the opinions described in subclauses (B) and (C) of clause (iii) above may state, respectively: (1) that, when the terms of such Class "A" Bonds shall have been established in accordance with the instrument or instruments creating the series of which such Class "A" Bonds are a part, such terms will have been duly authorized by the Company and will have been established in conformity with the provisions of the related Class "A" Mortgage; and (2) that such Class "A" Bonds, when authenticated and delivered by the trustee under the related Class "A" Mortgage in accordance with such instrument or instruments and issued and delivered by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will have been duly issued under such Class "A" Mortgage, and will constitute valid and legally binding obligations of the Company, entitled to the benefits provided by such Class "A" Mortgage, and enforceable in accordance with their terms, subject to the Customary Exceptions; and (iv) an Officer's Certificate stating that no part of the principal amount of the Class "A" Bonds upon the basis of which the Bonds are to be authenticated and delivered has theretofore been Bonded. (c) The Bank Collateral Bonds shall be assigned to the Trustee from time to time as contemplated by the 1936 Mortgage and held as security for all Bonds Outstanding. Notwithstanding any other provision of this Indenture to the contrary, unless an Event of Default shall have occurred and be continuing, and provided that the Trustee shall have received a Company Order citing this subsection and an Officer's Certificate stating that no Event of Default has occurred and is continuing, the Trustee shall execute appropriate documents and instruments (in the form provided by the Company) releasing without recourse the interest of the Trustee in and the Lien of this Indenture on all or a specified portion of the Bank Collateral Bonds, and shall deliver such Bank Collateral Bonds (i) to the Company, upon the maturity of such Bank Collateral Bonds, without any payment of principal being or required to be made thereon, (ii) to the Company, in exchange for an equal principal amount of Pledged Bonds to be concurrently issued by the Company to the Trustee under Section 29 of the 1936 Mortgage as the basis for the authentication and delivery of Bonds in compliance with this Section, or (iii) to the trustee under the 1936 Mortgage concurrently with the delivery of all Pledged Bonds to such trustee pursuant to Section 7.07. The Company shall deliver any Bank Collateral Bonds received by it from the Trustee to the trustee under the 1936 Mortgage for cancellation. Section 1.003. ISSUANCE OF BONDS ON THE BASIS OF PROPERTY ADDITIONS. (a) Bonds of any one or more series may be authenticated and delivered upon the basis of Property Additions which do not constitute Bonded Property Additions in a principal amount not exceeding seventy- five percent (75%) of the balance of the Cost or of the Fair Value of such Unbonded Property Additions to the Company (whichever shall be less) after making any deductions and any additions pursuant to Section 1.04(b). (b) No Bonds of any series shall be authenticated and delivered by the Trustee upon the basis of Property Additions until the Trustee shall have received: (i) the documents with respect to the Bonds of such series specified in Section 4.01; (ii) an Engineer's Certificate dated as of a date not more than ninety (90) days prior to the date of the Company Order requesting the authentication and delivery of such Bonds: (A) describing in reasonable detail all such property and stating that all such property constitutes Property Additions; (B) stating that such Property Additions are desirable for use in the proper conduct of the business of the Company; (C) stating that no part of such Property Additions is then Bonded; (D) stating the Cost of Property Additions made the basis for such application; (E) stating, except as to Property Additions acquired, made or constructed wholly through the delivery of securities or other property, that the amount of cash forming all or part of the Cost thereof was equal to or more than an amount to be stated therein; (F) briefly describing, with respect to any Property Additions acquired, made or constructed in whole or in part through the delivery of securities or other property, the securities or other property so delivered and stating the date of such delivery; (G) stating what part, if any, of such Property Additions includes property which within six months prior to the date of acquisition thereof by the Company had been used or operated by others than the Company in a business similar to that in which it has been or is to be used or operated by the Company and stating whether or not, in the judgment of the signers, the Fair Value thereof to the Company, as of the date of such certificate, is less than Twenty-Five Thousand Dollars ($25,000) and whether or not such Fair Value is less than one percent (1%) of the aggregate principal amount of Bonds then Outstanding (subject to the Percentage Calculation Proviso); (H) stating, in the judgment of the signers, the Fair Value to the Company, as of the date of such certificate, of such Property Additions, except any thereof with respect to the Fair Value to the Company of which a statement is to be made in an Independent Engineer's Certificate as provided for in clause (iii) below; (I) stating the amount (if any) required to be deducted under clause (i) of Section 1.04(b) and the amount (if any) elected to be added under subclauses (A) and (B) of clause (ii) of Section 1.04(b); (J) stating the amount of such Property Additions remaining after any deductions or additions pursuant to subclause (I); and (K) stating that the Liens, if any, of the character described in clause (e) of the definition of "Permitted Liens" to which any property included in such Property Additions is subject do not, in the judgment of the signers, materially impair the use of such property for the purposes for which the same is held by the Company; (iii) in case any Property Additions are shown by the Engineer's Certificate provided for in clause (ii) above to include property which, within six months prior to the date of acquisition thereof by the Company, had been used or operated by others than the Company in a business similar to that in which it has been or is to be used or operated by the Company and such certificate does not show the Fair Value thereof to the Company, as of the date of such certificate, to be less than Twenty-Five Thousand Dollars ($25,000) or less than one percent (1%) of the aggregate principal amount of Bonds then Outstanding (subject to the Percentage Calculation Proviso), an Independent Engineer's Certificate stating, in the judgment of the signer, the Fair Value to the Company, as of the date of such Independent Engineer's Certificate, of (A) such Property Additions which have been so used or operated and (at the option of the Company) as to any other Property Additions included in the Engineer's Certificate provided for in clause (ii) above, and (B) in case such Independent Engineer's Certificate is being delivered in connection with the authentication and delivery of Bonds, any property so used or operated which has been subjected to the Lien of this Indenture since the commencement of the then current calendar year as the basis for the authentication and delivery of Bonds and as to which an Independent Engineer's Certificate has not previously been furnished to the Trustee; (iv) in case any Property Additions are shown by the Engineer's Certificate provided for in clause (ii) above to have been acquired, made or constructed in whole or in part through the delivery of securities or other property, a written appraisal of an Engineer stating, in the judgment of the Engineer, the Fair Value in cash of such securities or other property at the time of delivery thereof in payment for or for the acquisition of such Property Additions; (v) an Opinion of Counsel to the effect: (A) that (except as to paving, grading and other improvements to, under or upon highways, bridges, parks or other public property of analogous character) this Indenture is, or upon the delivery of, or the filing or recording in the proper places and manner of, the instruments of conveyance, assignment or transfer, if any, specified in said opinion, will be, a Lien on all the Property Additions to be made the basis of the authentication and delivery of such Bonds, subject to no Lien thereon prior to the Lien of this Indenture except Permitted Liens, the Lien of the 1936 Mortgage and the Lien of any other Class "A" Mortgage; and (B) that the Company has corporate authority to operate the Property Additions with respect to which such application is made; and (vi) copies of the instruments of conveyance, assignment and transfer, if any, specified in the Opinion of Counsel provided for in clause (v) above. (c) The amount of the Cost of any Property Additions and the Fair Value thereof to the Company and the Fair Market Value in cash of any securities or other property so delivered in payment therefor or for the acquisition thereof and the amount of any deductions and any additions made pursuant to Section 1.04 shall be determined for the purposes of this Section by the appropriate certificate provided for in this Section. Section 1.004. ISSUANCE OF BONDS ON THE BASIS OF RETIRED BONDS. (a) Bonds of any one or more series may be authenticated and delivered upon the basis of, and in an aggregate principal amount not exceeding the aggregate principal amount of, Unbonded Retired Bonds. (b) No Bonds of any series shall be authenticated and delivered by the Trustee upon the basis of Retired Bonds until the Trustee shall have received: (i) the documents with respect to the Bonds of such series specified in Section 4.01; PROVIDED, HOWEVER, that no Net Earnings Certificate shall be required to be delivered unless: (A) the Stated Maturity of the Retired Bonds to be made the basis of the authentication and delivery of such Bonds under this Section is a date more than five years after the date of the Company Order requesting the authentication and delivery of such Bonds; and (B) the Stated Interest Rate, if any, on such Retired Bonds in effect immediately prior to Maturity is less than the Stated Interest Rate, if any, on such Bonds to be in effect upon the initial authentication and delivery thereof (such Stated Interest Rate to be determined, in the case of a series subject to a Periodic Offering, as provided in Section 4.01(a)(iv)); and (ii) an Officer's Certificate stating that Retired Bonds, specified by series, in an aggregate principal amount not less than the aggregate principal amount of Bonds to be authenticated and delivered, have theretofore been authenticated and delivered and, as of the date of such Officer's Certificate, constitute Retired Bonds and are the basis for the authentication and delivery of such Bonds. Section 1.005. ISSUANCE OF BONDS UPON DEPOSIT OF CASH WITH TRUSTEE. (a) Bonds of any one or more series may be authenticated and delivered upon the basis of, and in an aggregate principal not exceeding the amount of, any deposit with the Trustee of cash for such purpose. (b) No Bonds of any series shall be authenticated and delivered by the Trustee upon the basis of the deposit of cash until the Trustee shall have received the documents with respect to the Bonds of such series specified in Section 4.01. (c) All cash deposited with the Trustee under the provisions of this Section, and all cash required by Section 7.02(a) to be applied in accordance with the provisions of this Section, shall be held by the Trustee as a part of the Mortgaged Property and may be withdrawn from time to time by the Company, upon application of the Company to the Trustee, in an amount equal to the aggregate principal amount of Bonds to the authentication and delivery of which the Company shall be entitled under any of the provisions of this Indenture by virtue of compliance with all applicable provisions of this Indenture (except as otherwise provided in subsection (d) of this Section). If such application is made pursuant to Section 4.02, then such application must be made prior to the maturity of the Bonds authenticated and delivered pursuant to this Section on the basis of the cash to be so withdrawn, and the terms of the Class "A" Bonds made the basis of such application shall, to the extent required by Section 4.02(b)(i), correspond to the terms of such Bonds. (d) Upon any such application for withdrawal, the Company shall comply with all applicable provisions of this Indenture relating to the authentication and delivery of Bonds except that the Company shall not in any event be required to comply with Section 4.01 or to deliver a Net Earnings Certificate. (e) Any withdrawal of cash under subsection (c) of this Section shall operate as a waiver by the Company of its right to the authentication and delivery of the Bonds on which it is based and such Bonds may not thereafter be authenticated and delivered hereunder. Any Property Additions which have been made the basis of any such right to the authentication and delivery of Bonds so waived shall have the status of Bonded Property Additions and shall be deemed to have been made the basis of the withdrawal of such cash; any Retired Bonds which have been made the basis of any such right to the authentication and delivery of Bonds so waived shall be deemed to have been made the basis of the withdrawal of such cash; and any Pledged Bonds which have been made the basis of any such right to the authentication and delivery of Bonds so waived shall be deemed to have been made the basis of the withdrawal of such cash. (f) If at any time the Company shall so direct, any sums deposited with the Trustee under the provisions of this Section may be used or applied to the purchase, redemption or payment of Bonds in the manner and subject to the conditions provided in clauses (iv) and (v) of Section 8.06(a); PROVIDED, HOWEVER, that, none of such cash shall be applied to the payment of more than the principal amount of any Bonds so purchased, redeemed or paid, except to the extent that the aggregate principal amount of all Bonds theretofore, and of all Bonds then to be, purchased, redeemed or paid with cash deposited under this Section is not less than the aggregate cost (certified to the Trustee in an Officers' Certificate) for principal, premium, if any, interest, if any, and brokerage commission, if any, on or with respect to all Bonds theretofore, and on or with respect to all Bonds then to be, purchased, redeemed or paid with cash so deposited. Section 1.006. ISSUANCE OF GENERAL AND REFUNDING MORTGAGE BONDS, SERIES A. (a) At any time after the execution and delivery of this Indenture (whether before or after the recording hereof), upon the application of the Company, a series of Bonds entitled "General and Refunding Mortgage Bonds, Series A" may be authenticated and delivered by the Trustee in an aggregate principal amount not exceeding $126,000,000. (b) No Series A Bonds shall be authenticated and delivered by the Trustee until the Trustee shall have received the documents with respect to the Series A Bonds specified in Section 4.01 (PROVIDED, HOWEVER, that no Net Earnings Certificate shall be required to be delivered) and Sections 4.02, 4.03, 4.04 and 4.05 need not be complied with. ARTICLE FIVE REDEMPTION OF BONDS Section 1.001. APPLICABILITY OF ARTICLE. Bonds of any series, or any Tranche thereof, which are redeemable before their Stated Maturity shall be redeemable in accordance with their terms and (except as otherwise specified as contemplated by Section 3.01 for Bonds of such series or Tranche) in accordance with this Article. Section 1.002. ELECTION TO REDEEM; NOTICE TO TRUSTEE. The election of the Company to redeem any Bonds shall be evidenced by a Board Resolution or an Officer's Certificate. The Company shall, at least 45 days prior to the Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee in writing of such Redemption Date and of the series, Tranche and principal amount of such Bonds to be redeemed. In the case of any redemption of Bonds (a) prior to the expiration of any restriction on such redemption provided in the terms of such Bonds or elsewhere in this Indenture, or (b) pursuant to an election of the Company which is subject to a condition specified in the terms of such Bonds, the Company shall furnish the Trustee with an Officer's Certificate evidencing compliance with such restriction or condition. Section 1.003. SELECTION OF BONDS TO BE REDEEMED. (a) If less than all the Bonds of any series, or any Tranche thereof, are to be redeemed, the particular Bonds (or portions thereof) to be redeemed shall be selected by the Bond Registrar from the Outstanding Bonds of such series or Tranche not previously called for redemption, by such method as shall be provided for any particular series, or, in the absence of any such provision, by such method as the Bond Registrar shall deem fair and appropriate and which may, in any case, provide for the selection for redemption of portions (equal to the minimum authorized denomination for Bonds of such series or Tranche or any integral multiple thereof) of the principal amount of Bonds of such series or Tranche of a denomination larger than the minimum authorized denomination for Bonds of such series or Tranche; PROVIDED, HOWEVER, that if, as indicated in an Officer's Certificate, the Company shall have offered to purchase all Bonds then Outstanding of any series, or any Tranche thereof, and less than all of such Bonds shall have been tendered to the Company for such purchase, the Bond Registrar, if so directed by Company Order, shall select for redemption all such Bonds which have not been so tendered. (b) The Bond Registrar shall promptly notify the Company and the Trustee in writing of the Bonds selected for redemption and, in the case of any Bonds selected to be redeemed in part, the principal amount thereof to be redeemed. (c) For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Bonds shall relate, in the case of any Bonds redeemed or to be redeemed only in part, to the portion of the principal amount of such Bonds which has been or is to be redeemed. Section 1.004. NOTICE OF REDEMPTION. (a) Notice of redemption shall be given in the manner provided in Section 1.09 to the Holders of the Bond to be redeemed not less than 30 days prior to the Redemption Date. (b) All notices of redemption shall state: (i) the Redemption Date; (ii) the Redemption Price; (iii) if less than all the Bonds of any series or Tranche are to be redeemed, the identification of the particular Bonds to be redeemed and the portion of the principal amount of any Bond to be redeemed in part; (iv) that on the Redemption Date the Redemption Price, together with accrued interest, if any, to the Redemption Date, will become due and payable upon each such Bond to be redeemed and, if applicable, that interest thereon will cease to accrue on and after said date; (v) the place or places where such Bonds are to be surrendered for payment of the Redemption Price; (vi) that the redemption is for a sinking or other fund, if such is the case; and (vii) such other matters as the Company shall deem desirable or appropriate. (c) With respect to any notice of redemption of Bonds at the election of the Company, unless, upon the giving of such notice, such Bonds shall be deemed to have been paid in accordance with Section 9.01, such notice may state that such redemption shall be conditional upon the receipt by the Trustee, on or prior to the date fixed for such redemption, of money sufficient to pay the principal of and premium, if any, and interest, if any, on such Bonds and that if such money shall not have been so received such notice shall be of no force or effect and the Company shall not be required to redeem such Bonds. In the event that such notice of redemption contains such a condition and such money is not so received, the redemption shall not be made and within a reasonable time thereafter notice shall be given, in the manner in which the notice of redemption was given, that such money was not so received and such redemption was not required to be made. (d) Notice of redemption of Bonds to be redeemed at the election of the Company, and any notice of non-satisfaction of a condition for redemption as aforesaid, shall be given by the Company or, at the Company's request, by the Bond Registrar in the name and at the expense of the Company. Notice of mandatory redemption of Bonds shall be given by the Bond Registrar in the name and at the expense of the Company. Section 1.005. BONDS PAYABLE ON REDEMPTION DATE. Notice of redemption having been given as aforesaid, and the conditions, if any, set forth in such notice having been satisfied, the Bonds or portions thereof so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after such date (unless, in the case of an unconditional notice of redemption, the Company shall default in the payment of the Redemption Price and accrued interest, if any) such Bonds or portions thereof, if interest-bearing, shall cease to bear interest. Upon surrender of any such Bond for redemption in accordance with such notice, such Bond or portion thereof shall be paid by the Company at the Redemption Price, together with accrued interest, if any, to the Redemption Date; PROVIDED, HOWEVER, that any installment of interest on any Bond the Stated Maturity of which is on or prior to the Redemption Date shall be payable to the Holder of such Bond, or one or more Predecessor Bonds, registered as such at the close of business on the related Regular Record Date according to the terms of such Bond and subject to the provisions of Section 3.07. Section 1.006. BONDS REDEEMED IN PART. Any Bond which is to be redeemed only in part shall be surrendered at a Place of Payment therefor (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of such Bond, without service charge, a new Bond or Bonds of the same series and Tranche, of any authorized denomination requested by such Holder and of like tenor and in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Bond so surrendered; PROVIDED, HOWEVER, that the payment of any principal in accordance with the scheduled amortization payments specified for the Bonds of any series, or any Tranche thereof, as contemplated by Section 3.01, shall not constitute a redemption in part subject to this Section 5.06 (except as otherwise specified as contemplated by Section 3.01 for Bonds of such series or Tranche). ARTICLE SIX REPRESENTATIONS AND COVENANTS Section 1.001. PAYMENT OF BONDS; LAWFUL POSSESSION; MAINTENANCE OF LIEN. (a) The Company shall pay the principal of and premium, if any, and interest, if any, on the Bonds of each series in accordance with the terms of such Bonds and this Indenture. (b) At the date of the execution and delivery of this Indenture, the Company is lawfully possessed of the Mortgaged Property and has good right and lawful authority to mortgage and pledge the Mortgaged Property. (c) The Company shall maintain and preserve the Lien of this Indenture so long as any Bonds shall remain Outstanding. Section 1.002. MAINTENANCE OF OFFICE OR AGENCY. (a) The Company shall maintain in each Place of Payment for the Bonds of any series, or any Tranche thereof, an office or agency where such Bonds may be presented or surrendered for payment, where such Bonds may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of such Bonds and this Indenture may be served. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency and prompt notice to the Holders of any such change in the manner specified in Section 1.09. If at any time the Company shall fail to maintain any such required office or agency in respect of Bonds of any series, or any Tranche thereof, or shall fail to furnish the Trustee with the address thereof, such presentations and surrenders of such Bonds may be made and notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive such respective presentations, surrenders, notices and demands. (b) The Company may also from time to time designate one or more other offices or agencies where the Bonds of one or more series, or any Tranche thereof, may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; PROVIDED, HOWEVER, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency for such purposes in each Place of Payment for such Bonds in accordance with the requirements set forth above. The Company shall give prompt written notice to the Trustee, and prompt notice to the Holders in the manner specified in Section 1.09, of any such designation or rescission and of any change in the location of any such other office or agency. (c) Anything herein to the contrary notwithstanding, any office or agency required by this Section may be maintained at an office of the Company, in which event the Company shall perform all functions to be performed at such office or agency. Section 1.003. MONEY FOR BOND PAYMENTS TO BE HELD IN TRUST. (a) If the Company shall at any time act as its own Paying Agent with respect to the Bonds of any series, or any Tranche thereof, it shall, on or before each due date of the principal of and premium, if any, or interest, if any, on any of such Bonds, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal and premium or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and shall promptly notify the Trustee of its action or failure so to act. (b) Whenever the Company shall have one or more Paying Agents for the Bonds of any series, or any Tranche thereof, it shall, on or before each due date of the principal of and premium, if any, or interest, if any, on such Bonds, deposit with such Paying Agents sums sufficient (without duplication) to pay the principal and premium or interest so becoming due, such sums to be held in trust for the benefit of the Persons entitled to such principal, premium or interest, and (unless such Paying Agent is the Trustee) the Company shall promptly notify the Trustee of its action or failure so to act. (c) The Company shall cause each Paying Agent for the Bonds of any series, or any Tranche thereof, other than the Trustee, to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent shall: (i) hold all sums held by it for the payment of the principal of and premium, if any, or interest, if any, on the Bonds of such series or Tranche in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (ii) give the Trustee notice of any default by the Company (or any other obligor upon the Bonds of such series) in the making of any payment of principal of and premium, if any, or interest, if any, on the Bonds of such series or Tranche; and (iii) at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent and furnish to the Trustee such information as it possesses regarding the names and addresses of the Persons entitled to such sums. (d) The Company may at any time pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent and, if so stated in a Company Order delivered to the Trustee, in accordance with the provisions of Article Nine; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. (e) Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of and premium, if any, or interest, if any, on any Bond and remaining unclaimed for two years after such principal and premium, if any, or interest, if any, has become due and payable shall be paid to the Company on Company Request, or, if then held by the Company, shall be discharged from such trust; and the Holder of such Bond shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; PROVIDED, HOWEVER, that the Trustee or such Paying Agent, before being required to make any such payment to the Company, may at the expense of the Company cause to be mailed, on one occasion only, notice to such Holder that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such mailing, any unclaimed balance of such money then remaining will be paid to the Company. Section 1.004. CORPORATE EXISTENCE. Subject to the rights of the Company under Article Thirteen and Section 8.02(e), the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and the rights (charter and statutory) of the Company; PROVIDED, HOWEVER, that the Company shall not be required to preserve any such right if, in the judgment of the Company, the preservation thereof is no longer desirable in the conduct of the business of the Company and the loss thereof would not adversely affect the interests of the Holders in any material respect. Section 1.005. MAINTENANCE OF PROPERTIES. The Company shall cause (or, with respect to property owned in common with others, make reasonable effort to cause) the Mortgaged Property, as a whole, to be maintained and kept in good condition, repair and working order and shall cause (or, with respect to property owned in common with others, make reasonable effort to cause) to be made such repairs, renewals, replacements, betterments and improvements thereof, as, in the judgment of the Company, may be necessary in order that the operation of the Mortgaged Property, considered as a whole, may be conducted in accordance with common industry practice; PROVIDED, HOWEVER, that nothing in this Section shall prevent the Company from discontinuing, or causing the discontinuance of, the operation and maintenance of any of its properties (including, without limitation, such of its properties as are used predominantly for the generation of electric energy) if such discontinuance is, in the judgment of the Company, desirable in the conduct of its business. Section 1.006. PAYMENT OF TAXES; DISCHARGE OF LIENS. The Company shall pay all taxes and assessments and other governmental charges lawfully levied or assessed upon the Mortgaged Property, or upon any part thereof, or upon the interest of the Trustee in the Mortgaged Property, before the same shall become delinquent, and will duly observe and conform in all material respects to all valid requirements of any Governmental Authority relative to any of the Mortgaged Property; and all covenants, terms and conditions upon or under which any of the Mortgaged Property is held; and the Company shall not suffer any Lien to be hereafter created upon the Mortgaged Property, or any part thereof, prior to the Lien hereof, other than Permitted Liens and other than, in the case of property hereafter acquired, vendors' Liens, purchase money mortgages and any other Lien thereon at the time of the acquisition thereof (including, but not limited to, the Lien of the 1936 Mortgage and any other Class "A" Mortgage); and within four months after any lawful claim or demand for labor, materials, supplies or other objects has become delinquent which if unpaid would or might by law be given precedence over the Lien of this Indenture as a Lien upon any of the Mortgaged Property, the Company shall pay or cause to be discharged or make adequate provisions to satisfy or discharge the same; PROVIDED, HOWEVER, that nothing in this Section contained shall require the Company to observe or conform to any requirement of Governmental Authority or to cause to be paid or discharged, or to make provision for, any such Lien, or to pay any such tax, assessment or governmental charge so long as the validity thereof shall be contested in good faith and by appropriate legal proceedings; and PROVIDED, FURTHER, that nothing in this Section contained shall require the Company to pay, discharge or make provisions for any tax, assessment or other governmental charge the validity of which shall not be so contested if adequate security for the payment of such tax, assessment or other governmental charge and for any damages which may reasonably be anticipated from failure to pay the same shall be given to the Trustee, nor shall anything in this Section require the Company to pay, discharge or make provisions for any Liens existing on the Mortgaged Property at the date of execution and delivery of this Indenture. Section 1.007. INSURANCE. (a) The Company will keep or cause to be kept all the Mortgaged Property insured with reasonable deductibles and retentions against loss by fire and other risks of casualty to the extent that property of similar character is usually so insured by companies similarly situated and operating like properties, by insurance companies which the Company believes to be reputable; or the Company will, in lieu of or supplementing such insurance in whole or in part, adopt some other method or plan of protection or, alone or in conjunction with any other Person or Persons, create an insurance fund to protect the Mortgaged Property against such losses. (b) Proceeds of any insurance or alternative method or plan of protection of the Company against losses of the kind specified in Section 6.07(a) shall be paid to the Company, and the Company shall be under no obligation to use such proceeds to rebuild or repair damaged or destroyed Mortgaged Property to the extent that the Fair Value of all of the Mortgaged Property after the damage or destruction of Mortgaged Property with respect to which such proceeds are payable equals or exceeds an amount equal to twenty-fifteenths (20/15ths) of the aggregate principal amount of Bonds Outstanding and Class "A" Bonds Outstanding (other than Pledged Bonds), as evidenced by: (i) an Engineer's Certificate delivered to the Trustee stating that the Fair Value of the Mortgaged Property remaining after such damage or destruction of Mortgaged Property is a specified amount; and (ii) an Officer's Certificate delivered to the Trustee stating that the Fair Value of all of the Mortgaged Property, as certified in the Engineer's Certificate provided for in clause (i) of Section 6.07(b) equals or exceeds an amount equal to twenty-fifteenths (20/15ths) of the aggregate principal amount of Bonds Outstanding and Class "A" Bonds Outstanding (other than Pledged Bonds). (c) If the Company cannot deliver the Engineer's Certificate and Officer's Certificate described in clauses (i) and (ii) of Section 6.07(b), (i) the proceeds of such insurance paid with respect to any such loss shall be paid to the Trustee within 30 days of the receipt by the Company of such proceeds, as the interest of the Trustee may appear, or to the trustee of a Class "A" Mortgage, or to the trustee or other holder of any mortgage or other Lien prior hereto upon the Mortgaged Property so destroyed or damaged, if the terms thereof require such proceeds so to be paid; and (ii) if the Company shall adopt such other method or plan, it will pay or cause to be paid to the Trustee on account of any losses of the kind specified in Section 6.07(a) sustained because of the destruction or damage of any Mortgaged Property within 90 days of the occurrence of such destruction or damage, an amount of cash equal to such loss less any amount otherwise paid with respect to such loss to the Trustee, or to the trustee of a Class "A" Mortgage, or to the trustee or other holder of any mortgage or other Lien prior hereto upon the Mortgaged Property so destroyed or damaged, if the terms thereof require payments for such loss so to be paid. Any amounts of cash so required to be paid by the Company pursuant to any such method or plan shall for the purposes of this Indenture be deemed to be proceeds of insurance. (d) Any moneys paid to the Trustee by the Company or received by the Trustee as proceeds of any insurance shall be held by the Trustee and shall, at the request of the Company, be paid by the Trustee to the Company to reimburse the Company for an equal amount spent for the purchase or other acquisition of property which becomes Mortgaged Property at the time of such purchase or acquisition, or in the rebuilding or renewal of the Mortgaged Property destroyed or damaged, upon receipt by the Trustee of: (i) an Officer's Certificate requesting such reimbursement and stating that the item for which reimbursement is being requested has not previously been reimbursed by the trustee under any Class "A" Mortgage; (ii) an Engineer's Certificate stating the amounts so expended or committed for expenditure and the nature of such rebuilding or renewal and the Fair Value to the Company of the property purchased or acquired or rebuilt or renewed or to be rebuilt or renewed and if: (A) within six months prior to the date of acquisition thereof by the Company, such property has been used or operated, by a Person other than the Company, in a business similar to that in which it has been or is to be used or operated by the Company, and (B) the Fair Value to the Company of such property as set forth in such Engineer's Certificate is not less than Twenty-Five Thousand Dollars ($25,000) and not less than one percent (1%) of the aggregate principal amount of the Bonds at the time Outstanding (subject to the Percentage Calculation Proviso), the Engineer making such certificate shall be an Independent Engineer; and (iii) an Opinion of Counsel stating that, in the opinion of the signer, the property so purchased or acquired or rebuilt or renewed or to be rebuilt or renewed is or will be subject to the Lien hereof to the same extent as was the property so destroyed or damaged. (e) Any such money not so applied within eighteen (18) months after its receipt by the Trustee, or in respect of which notice in writing of intention to apply the same to the work of rebuilding or renewal then in progress and uncompleted or to the purchase or other acquisition of property shall not have been given to the Trustee by the Company within such eighteen (18) months, or which the Company shall at any time notify the Trustee is not to be so applied, shall thereafter be withdrawn, used or applied in the manner, to the extent and for the purposes, and subject to the conditions, provided in Section 8.06. (f) Whenever under the provisions of this Section the Company is required to deliver moneys to the Trustee and at the same time shall have satisfied the conditions set forth herein for reimbursement, there shall be paid to or retained by the Trustee or reimbursed to the Company, as the case may be, only the net amount. (g) In the event that the Company adopts a method or plan of protection other than insurance as provided in Section 6.07(a), the Company shall furnish to the Trustee a certificate of a qualified Person appointed by the Company with respect to the adequacy of such method or plan. Section 1.008. RECORDING, FILING, ETC. (a) The Company shall cause this Indenture and all indentures and instruments supplemental hereto (or notices, memoranda or financing statements or continuation statements as may be recorded or filed to place third parties on notice thereof) to be promptly recorded and filed and re-recorded and re-filed in such manner and in such places, as may be required by law in order fully to preserve, protect and perfect the security of the Holders of the Bonds and all rights of the Trustee, and shall furnish to the Trustee: (i) promptly after the execution and delivery of this Indenture and of each supplemental indenture, an Opinion of Counsel either stating that in the opinion of such counsel this Indenture or such supplemental indenture (or notice or memorandum thereof or financing statement in connection therewith) has been properly recorded and filed, so as to make effective and perfect the Lien intended to be created hereby or thereby, and reciting the details of such action, or stating that in the opinion of such counsel no such action is necessary to make such Lien effective or to perfect such Lien. The Company shall be deemed to be in compliance with this clause (i) if (A) the Opinion of Counsel herein required to be delivered to the Trustee shall state that this Indenture or such supplemental indenture (or financing statement or notice or memorandum thereof) has been received for recording or filing in each jurisdiction in which it is required to be recorded or filed and that, in the opinion of counsel (if such is the case), such receipt for recording or filing makes effective and perfects the Lien intended to be created by this Indenture or such supplemental indenture, and (B) such opinion is delivered to the Trustee within such time, following the date of the execution and delivery of this Indenture or such supplemental indenture, as shall be practicable having due regard to the number and distance of the jurisdictions in which this Indenture or such supplemental indenture is required to be recorded or filed; and (ii) on or before June 1 of each year, beginning June 1, 1996, an Opinion of Counsel either stating that in the opinion of the signer such action has been taken, since the date of the most recent Opinion of Counsel furnished pursuant to this clause (ii) or the first Opinion of Counsel furnished pursuant to clause (i) of this subsection (a), with respect to the recording, filing, re-recording, and re-filing of this instrument and of each indenture supplemental to this Indenture (or financing statement or continuation statement or notice or memorandum thereof), as is necessary to maintain and perfect the Lien hereof, and reciting the details of such action (such counsel may rely on earlier Opinions of Counsel reciting such details), or stating that in the opinion of such counsel no such action is necessary to maintain or perfect such Lien. (b) The Company shall execute and deliver such supplemental indenture or indentures and such further instruments and do such further acts as the Trustee may reasonably request upon the advice of its counsel or as may be necessary or proper to carry out more effectually the purposes of this Indenture and to make subject to the Lien hereof any property hereafter acquired, made or constructed, intended to be subject to the Lien hereof, and to transfer to any new trustee or trustees or co-trustee or co-trustees, the estate, powers, instruments or funds held in trust hereunder. Section 1.009. LIMITATION ON ADDITIONAL ISSUANCES OF BONDS UNDER 1936 MORTGAGE. The Company covenants and agrees that, from and after the date of authentication and delivery of the Series A Bonds, the Company will not issue any additional bonds under the 1936 Mortgage except for issuances of such bonds to the Trustee as Pledged Bonds pursuant to Section 4.02 hereof. Upon the payment in full of all indebtedness secured by the 1936 Mortgage (other than bonds held by the Trustee) the Company will promptly take all necessary action, including without limitation pursuant to Section 7.07, to obtain and effect the release and cancellation of the lien of the 1936 Mortgage upon any of the Mortgaged Property and the discharge and satisfaction of the 1936 Mortgage. Section 0.10 WAIVER OF CERTAIN COVENANTS. The Company may omit in any particular instance to comply with any term, provision or condition set forth in (a) any additional covenant or restriction specified with respect to the Bonds of any series, or any Tranche thereof, as contemplated by Section 3.01 if before the time for such compliance the Holders of at least a majority in aggregate principal amount of the Outstanding Bonds of all series and Tranches with respect to which compliance with such additional covenant or restriction is to be omitted, considered as one class, shall, by Act of such Holders, either waive such compliance in such instance or generally waive compliance with such term, provision or condition, and (b) Section 6.04, 6.05, 6.06, 6.07 or 6.09 or Article Thirteen if before the time for such compliance the Holders of at least a majority in aggregate principal amount of Bonds Outstanding under this Indenture shall, by Act of such Holders, either waive such compliance in such instance or generally waive compliance with such term, provision or condition; but, in the case of (a) or (b), no such waiver shall extend to or affect such term, provision or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and the duties of the Trustee in respect of any such term, provision or condition shall remain in full force and effect. Section 0.11. CERTIFICATE TO TRUSTEE. The Company will deliver to the Trustee on or before June 1 in each year (beginning with 1996) an Officer's Certificate (which need not comply with Section 1.05) as to whether or not to the best knowledge of the signer thereof the Company is in default in the performance and observance of the terms, provisions, covenants and conditions of this Indenture (without regard to any period of grace or requirements of notice provided hereunder) and if the Company shall be in default, specifying all such defaults and the nature and status thereof of which the signer may have knowledge. The signatory to such Officer's Certificate shall be either the principal executive officer, principal financial officer or principal accounting officer of the Company. ARTICLE SEVEN PLEDGED BONDS; ADDITIONAL CLASS "A" MORTGAGES; DISCHARGE OF CLASS "A" MORTGAGE Section 1.001. REGISTRATION AND OWNERSHIP OF PLEDGED BONDS. All Pledged Bonds shall be registered in the name of the Trustee or its nominee and shall be owned and held by the Trustee, subject to the provisions of this Indenture, for the benefit of the Holders of all Bonds from time to time Outstanding, and the Company shall have no interest therein. The Trustee shall be entitled to exercise all rights of bondholders under each Class "A" Mortgage either in its discretion or as otherwise provided in this Article or in Article Ten. Section 1.002. PAYMENTS ON PLEDGED BONDS. (a) Any payment by the Company of principal of or premium or interest on any Pledged Bonds shall be applied by the Trustee to the payment of any principal, premium or interest, as the case may be, in respect of the Bonds which is then due, and, to the extent of such application, the obligation of the Company hereunder to make such payment in respect of the Bonds shall be deemed to have been satisfied and discharged. If, at the time of any such payment of principal of Pledged Bonds, there shall be no principal then due in respect of the Bonds, the proceeds of such payment in respect of the Pledged Bonds shall be deemed to constitute Funded Cash and shall be held by the Trustee as part of the Mortgaged Property, to be withdrawn, used or applied in the manner, to the extent and for the purposes, and subject to the conditions, provided in Section 4.05. If, at the time of any such payment of premium or interest on Pledged Bonds, there shall be no premium or interest, as the case may be, then due in respect of the Bonds, the proceeds of such payment in respect of the Pledged Bonds shall be remitted to the Company upon receipt by the Trustee of a Company Order requesting the same; PROVIDED, HOWEVER, that following the occurrence and during the continuance of an Event of Default, the Trustee shall not pay such proceeds over to the Company, but shall instead hold such proceeds as part of the Mortgaged Property. (b) Each supplemental indenture pursuant to which any Pledged Bonds are issued shall contain a provision to the effect that any payment by the Company hereunder of principal of or premium or interest on Bonds which shall have been authenticated and delivered upon the basis of the issuance and delivery to the Trustee of such Pledged Bonds (other than by the application of the proceeds of a payment in respect of such Pledged Bonds) shall, to the extent thereof, be deemed to satisfy and discharge the obligation of the Company, if any, to make a payment of principal, premium or interest, as the case may be, in respect of such Pledged Bonds which is then due. Section 1.003. SURRENDER OF PLEDGED BONDS. At the time any Bonds of any series, or any Tranche thereof, which shall have been authenticated and delivered upon the basis of Pledged Bonds, cease to be Outstanding (other than as a result of the application of the proceeds of the payment or redemption of such Pledged Bonds), the Trustee shall surrender to or upon the order of the Company an equal principal amount of such Pledged Bonds having the same Stated Maturity and provisions, if any, for mandatory redemption as such Bonds. Section 1.004. NO TRANSFER OF PLEDGED BONDS. The Trustee shall not sell, assign or otherwise transfer any Pledged Bonds except to a successor trustee under this Indenture. The Company may take such actions as it shall deem necessary, desirable or appropriate to effect compliance with such restrictions on transfer, including the placing of a legend on each Pledged Bond and the issuance of stop-transfer instructions to the trustee under the related Class "A" Mortgage or any other transfer agent thereunder. Section 1.005. VOTING OF PLEDGED BONDS AND BANK COLLATERAL BONDS. (a) The Trustee shall, as the holder of Pledged Bonds Outstanding under each Class "A" Mortgage, attend such meeting or meetings of bondholders under such Class "A" Mortgage or, at its option, deliver its proxy in connection therewith, as relate to matters with respect to which it is entitled to vote or consent. So long as no Event of Default hereunder shall have occurred and be continuing, either at any such meeting or meetings, or otherwise when the consent of the holders of the Class "A" Bonds Outstanding under any Class "A" Mortgage is sought without a meeting, the Trustee shall vote as holder of such Pledged Bonds, or shall consent with respect thereto, as follows: (i) the Trustee shall vote all Pledged Bonds Outstanding under the 1936 Mortgage then held by it, or consent with respect thereto, in favor of any or all amendments or modifications of the 1936 Mortgage of substantially the same tenor and effect as any or all of those set forth in Exhibit B to this Indenture; and (ii) with respect to any other amendments or modifications of the 1936 Mortgage and to any amendments or modifications of any other Class "A" Mortgage: (A) at any time when the Pledged Bonds Outstanding constitute less than a majority in aggregate principal amount of the Class "A" Bonds then Outstanding under such Class "A" Mortgage, the Trustee shall vote all Pledged Bonds Outstanding under such Class "A" Mortgage then held by it, or consent with respect thereto, proportionately with what the Trustee reasonably believes, which belief may be based on an Officer's Certificate of the Company or a certificate of the trustee under said Class "A" Mortgage (provided that in the case of a discrepancy the certificate of such trustee shall control), will be the vote or consent of the holders of all other Class "A" Bonds Outstanding under such Class "A" Mortgage the holders of which are eligible to vote or consent; PROVIDED, HOWEVER, that the Trustee shall not so vote in favor of, or so consent to, any amendment or modification of a Class "A" Mortgage which, if it were an amendment or modification of this Indenture, would require the consent of Holders, without the prior consent, obtained in the manner prescribed in Section 14.02, of Holders of Bonds which would be required under said Section 14.02 for such an amendment or modification of this Indenture; and (B) at any time when the Pledged Bonds Outstanding constitute at least a majority in aggregate principal amount of the Class "A" Bonds then Outstanding under such Class "A" Mortgage, the Trustee shall vote all Pledged Bonds Outstanding under such Class "A" Mortgage then held by it, or consent with respect thereto, in accordance with the written direction of the Company evidenced by an Officer's Certificate or, in the absence of any such direction, proportionately with what the Trustee reasonably believes, which belief may be based on a certificate of the trustee under said Class "A" Mortgage, will be the vote or consent of the holders of all other Class "A" Bonds Outstanding under such Class "A" Mortgage the holders of which are eligible to vote or consent; PROVIDED, HOWEVER, that the Trustee shall not so vote in favor of, or so consent to, any amendment or modification of a Class "A" Mortgage which, if it were an amendment or modification of this Indenture, would require the consent of Holders, without the prior consent, obtained in the manner prescribed in Section 14.02, of Holders of Bonds which would be required under said Section 14.02 for such an amendment or modification of this Indenture. (b) Notwithstanding anything in Section 7.05(a) to the contrary, so long as no Event of Default hereunder shall have occurred and be continuing, when any vote or consent of the holders of Bank Collateral Bonds is sought, the Trustee shall vote any Bank Collateral Bonds, or shall consent with respect thereto, in accordance with written instructions received by the Trustee from the holder or holders of a majority in aggregate principal amount of the Bank Collateral Bonds then Outstanding other than the Trustee. Section 1.006. DESIGNATION OF ADDITIONAL CLASS "A" MORTGAGES. (a) In the event that, after the date of the execution and delivery of this Indenture, a corporation which was the mortgagor under a mortgage or deed of trust or similar indenture is merged into or with or consolidated with the Company, such mortgage, deed of trust or similar indenture may be designated an additional Class "A" Mortgage upon delivery to the Trustee of the following: (i) a Company Order authorizing the designation of such mortgage, deed of trust or similar indenture as an additional Class "A" Mortgage; (ii) an Officer's Certificate (A) stating that no event has occurred and is continuing which entitles the trustee under such mortgage, deed of trust or similar indenture to accelerate the maturity of the obligations outstanding thereunder, (B) reciting the aggregate principal amount of obligations theretofore issued under such mortgage, deed of trust or similar indenture and the aggregate principal amount of obligations then outstanding thereunder, and (C) either (x) stating that all obligations outstanding under such mortgage, deed of trust or similar indenture that were issued on the basis of property additions were issued in principal amounts that did not exceed seventy-five percent (75%) of the balance of the cost or Fair Value of such property additions to the issuer thereof (whichever was less) after making deductions and additions similar to those provided for in Section 1.04 hereof, or (y) in the event that the foregoing clause (x) is not the case, stating that the Company has irrevocably waived its right to the authentication and delivery of further obligations under such mortgage, deed of trust or similar indenture in a principal amount equal to the excess of the aggregate dollar amount of property additions certified to the trustee under such mortgage, deed of trust or similar indenture as the basis for all obligations outstanding thereunder that were issued on the basis of property additions (and outstanding obligations issued on the basis of retirements of obligations issued on the basis of property additions) over twenty-fifteenths (20/15ths) of the aggregate principal amount of all such outstanding obligations; and (iii) an Opinion of Counsel to the effect that (A) the corporation that was the mortgagor under such mortgage, deed of trust or similar indenture has been duly and lawfully merged into or with or consolidated with the Company; (B) such mortgage, deed of trust or similar indenture is qualified under the Trust Indenture Act; (C) the Company has duly assumed and agreed to perform and pay the obligations of the mortgagor under such mortgage, deed of trust or similar indenture; (D) such mortgage, deed of trust or similar indenture constitutes a Lien upon the property described therein prior to the Lien of this Indenture; (E) the Lien of this Indenture constitutes a Lien on the property described in such mortgage, deed of trust or similar indenture of the character described in Granting Clause First, and in any subsequent generic grant of unspecified property as contemplated in Granting Clause Third, acquired by the Company from such corporation by virtue of such merger or consolidation, subject to no Lien thereon prior to the Lien of this Indenture except the Lien of such mortgage, deed of trust or similar indenture, Permitted Liens and Liens of the character permitted to exist or to be hereafter created under Section 6.06; (F) the terms of such mortgage, deed of trust or similar indenture, as then in effect do not permit the further issuance of obligations thereunder except on the basis of cash, property additions of a character substantially similar to Property Additions or the retirement of outstanding obligations; (G) the terms of such mortgage, deed of trust or similar indenture, as then in effect and taking into account any waiver contemplated by clause (y) of subclause (C) of clause (ii) above, do not permit the further issuance of obligations thereunder upon the basis of property additions in a principal amount exceeding seventy-five percent (75%) of the balance of the cost or the Fair Value thereof to the issuer thereof (whichever shall be less) after making deductions and additions similar to those provided for in Section 1.04; and (H) the indentures supplemental hereto and to the Class "A" Mortgage referred to in subsection (b) of this Section comply with the applicable requirements of clauses (i) and (ii) of said subsection (b). (b) At such time as the Company and the Trustee (in the case of clause (i) below) or the trustee under the Class "A" Mortgage (in the case of clause (ii) below) have executed, and the Company has caused to be recorded: (i) an indenture supplemental hereto (A) in which such mortgage, deed of trust or similar indenture has been designated as an additional Class "A" Mortgage, and (B) by which the Company has specifically imposed the Lien of this Indenture upon properties of the character described in Granting Clause First, and in any subsequent generic grant of unspecified property as contemplated in Granting Clause Third, acquired by the Company from such corporation by virtue of the merger or consolidation (and later improvements, extensions and additions thereto and renewals and replacements thereof) as contemplated by Section 13.05(b); and (ii) an indenture supplemental to such mortgage, deed of trust or similar indenture by which such mortgage, deed of trust or similar indenture has been amended to provide that a Matured Event of Default thereunder shall include an Event of Default hereunder or a Matured Event of Default under any other Class "A" Mortgage; PROVIDED, HOWEVER, that the waiver or cure of such Event of Default or Matured Event of Default and the rescission and annulment of the consequences thereof shall constitute a waiver of the corresponding Matured Event of Default under such mortgage, deed of trust or similar indenture and a rescission and annulment of the consequences thereof; then such mortgage, deed of trust or similar indenture and all obligations issued and outstanding thereunder shall for all purposes hereof be treated as a Class "A" Mortgage and as Class "A" Bonds, respectively, to the full and same extent as if specifically identified in Article One. Section 1.001. DISCHARGE OF CLASS "A" MORTGAGE. (a) The Trustee shall surrender for cancellation to the trustee under any Class "A" Mortgage all Pledged Bonds then held by the Trustee issued under such Class "A" Mortgage upon receipt by the Trustee of: (i) a Company Order requesting such surrender for cancellation of such Pledged Bonds; (ii) an Officer's Certificate to the effect that no Class "A" Bonds are Outstanding under such Class "A" Mortgage other than Pledged Bonds and that promptly upon such surrender such Class "A" Mortgage will be satisfied and discharged pursuant to the terms thereof; (iii) an Engineer's Certificate: (A) describing in reasonable detail all property constituting Property Additions designated by the Company, in its discretion, to be deemed, on and after the date of such surrender for cancellation and for all purposes of this Indenture, to have been made the basis of the authentication and delivery of all Bonds then Outstanding which shall have been authenticated and delivered under Section 4.02 on the basis of Pledged Bonds authenticated and delivered under such Class "A" Mortgage, such Property Additions to have, in the aggregate, a Cost (or as to Property Additions of which the Fair Value to the Company specified pursuant to subclause (H) or clause (iv) below is less than the Cost thereof, then such Fair Value in lieu of Cost) not less than twenty-fifteenths (20/15ths) of the aggregate principal amount of such Bonds; (B) stating that all such property constitutes Property Additions; (C) stating that such Property Additions are desirable for use in the proper conduct of the business of the Company; (D) stating that such Property Additions, to the extent of the Cost (or as to Property Additions of which the Fair Value to the Company specified pursuant to subclause (H) or clause (iv) below is less than the Cost thereof, then such Fair Value in lieu of Cost) to the Company to be deemed to have been made the basis of the authentication and delivery of such Bonds, will no longer constitute Bonded Property Additions (other than pursuant to clause (vii) of the definition of "Bonded") upon the discharge of the Class "A" Mortgage pursuant to which such Pledged Bonds were issued; (E) stating, except as to Property Additions acquired, made or constructed wholly through the delivery of securities or other property, that the amount of cash forming all or part of the Cost thereof was equal to or more than an amount to be stated therein; (F) briefly describing, with respect to any Property Additions acquired, made or constructed in whole or in part through the delivery of securities or other property, the securities or other property so delivered and stating the date of such delivery; (G) stating what part, if any, of such Property Additions included property which within six months prior to the date of acquisition thereof by the Company had been used or operated by others than the Company in a business similar to that in which it has been or is to be used or operated by the Company and stating whether or not, in the judgment of the signers, the Fair Value thereof to the Company, as of the date of such certificate, is less than Twenty-Five Thousand Dollars ($25,000) and whether or not the fair value thereof to the Company, as of such date, is less than one percent (1%) of the aggregate principal amount of Bonds then Outstanding (subject to the Percentage Calculation Proviso); (H) stating, in the judgment of the signers, the Fair Value to the Company, as of the date of such certificate, of such Property Additions, except any thereof with respect to the Fair Value to the Company of which a statement is to be made in an Independent Engineer's Certificate as provided for in clause (iv) below; PROVIDED, HOWEVER, that if any such Property Additions shall have theretofore been certified to the trustee under such Class "A" Mortgage as the basis for the authentication and delivery of Class "A" Bonds: (1) which are Pledged Bonds as of the date of such certificate; or (2) the retirement of which shall have theretofore been made the basis (whether directly or indirectly when considered in light of the issuance and retirement of successive issues of Class "A" Bonds) of the authentication and delivery of Pledged Bonds then held by the Trustee; then there may be stated, in lieu of the Fair Value of such Property Additions as of the date of such certificate, the Fair Value thereof as so certified to the trustee under such Class "A" Mortgage; and (I) stating that the Liens, if any, of the character described in clause (e) of the definition of "Permitted Liens" to which any property included in such Property Additions is subject do not, in the judgment of the signers, materially impair the use of such property for the purposes for which the same is held by the Company; (iv) in case any Property Additions are shown by the Engineer's Certificate provided for in clause (iii) above to include property which, within six months prior to the date of acquisition thereof by the Company, had been used or operated by others than the Company in a business similar to that in which it has been or is to be used or operated by the Company and such certificate does not show the Fair Value thereof to the Company, as of the date of such certificate, to be less than Twenty-Five Thousand Dollars ($25,000) or less than one percent (1%) of the aggregate principal amount of Bonds then Outstanding (subject to the Percentage Calculation Proviso), an Independent Engineer's Certificate stating, in the judgment of the signer, the Fair Value to the Company, as of the date of such Independent Engineer's Certificate, of (A) such Property Additions which have been so used or operated and (at the option of the Company) as to any other Property Additions included in the Engineer's Certificate provided for in clause (iii) above, and (B) any property so used or operated which has been subjected to the Lien of this Indenture since the commencement of the then current calendar year as the basis for the authentication and delivery of Bonds and as to which an Independent Engineer's Certificate has not previously been furnished to the Trustee; (v) in case any Property Additions are shown by the Engineer's Certificate provided for in clause (iii) above to have been acquired, made or constructed in whole or in part through the delivery of securities or other property, a written appraisal of an Engineer stating, in the judgment of the Engineer, the Fair Value in cash of such securities or other property at the time of delivery thereof in payment for or for the acquisition of such Property Additions; (vi) an Opinion of Counsel to the effect: (A) that (except as to paving, grading and other improvements to, under or upon highways, bridges, parks or other public property of analogous character) this Indenture is, or upon (x) the delivery of, or the filing or recording in the proper places and manner of, the instruments of conveyance, assignment or transfer, if any, specified in said opinion, or (y) the satisfaction and discharge of the Class "A" Mortgage to be satisfied and discharged pursuant to this Section, will be, a Lien on all the Property Additions to be deemed to have been made the basis of the authentication and delivery of Bonds then Outstanding which shall have been authenticated and delivered under Section 4.02 on the basis of Pledged Bonds authenticated and delivered under such Class "A" Mortgage, subject to no Lien thereon prior to the Lien of this Indenture except Permitted Liens; and (B) that the Company has corporate authority to operate the Property Additions with respect to which such application is made; (vii) an Opinion of Counsel to the effect that upon satisfaction and discharge of such Class "A" Mortgage the Lien of this Indenture on the property formerly subject to the Lien of such Class "A" Mortgage, to the extent the same is part of the Mortgaged Property, will be subject to no Lien prior to the Lien of this Indenture except Permitted Liens and Liens of the character permitted to exist or to be hereafter created under Section 6.06; and (viii) copies of the instruments of conveyance, assignment and transfer, if any, specified in the Opinion of Counsel provided for in clause (vi) above. (b) The amount of the Cost of any Property Additions and the Fair Value thereof to the Company and the fair market value in cash of any securities or other property so delivered in payment therefor or for the acquisition thereof shall be determined for the purposes of this Section by the appropriate certificate provided for in this Section. ARTICLE EIGHT POSSESSION, USE AND RELEASE OF MORTGAGED PROPERTY Section 1.001. QUIET ENJOYMENT. Unless one or more Events of Default shall have occurred and be continuing, the Company shall be permitted to possess, use and enjoy the Mortgaged Property (except such cash as is expressly required to be deposited with the Trustee and except, to the extent not otherwise provided herein, such securities as are expressly required to be deposited with the Trustee). Section 1.002. DISPOSITIONS WITHOUT RELEASE. Unless an Event of Default shall have occurred and be continuing, the Company may at any time and from time to time, without any release or consent by, or report to, the Trustee: (a) sell or otherwise dispose of, free from the Lien of this Indenture, or abandon or otherwise retire, any machinery, apparatus, equipment, frames, towers, poles, wire, pipe, cable, conduit, mains tubes, drains, valves, tools, or implements, or any other fixture or personalty, then subject to the Lien hereof, which shall have become old, inadequate, obsolete, worn out, unfit, unadapted, unserviceable, undesirable or unnecessary for use in one or more of the Primary Purposes of the Company's Business; (b) cancel or make changes in or alterations of or substitutions for any and all leases; (c) alter, change the location of, add to, repair and replace any and all transmission and distribution lines, pipes, substations, machinery, fixtures and other equipment; (d) cancel, make changes in or substitutions for or dispose of any and all rights of way (including easements and licenses); (e) surrender or assent to the modification of any franchise (including in that term, without limitation, any ordinances, permits, licenses or other operating rights, however denominated, granted by federal, state, municipal or other governmental authority) under which the Company or any of its property may be operating if, in the judgment of the Company, it is advisable to do so; (f) abandon, or permit the abandonment of, the operation of any Mortgaged Property, if, in the judgment of the Company, the operation of such Mortgaged Property is not, under the circumstances, necessary or important for the operation of the remaining Mortgaged Property, or whenever the Company deems such abandonment to be advisable for any reason; PROVIDED HOWEVER, that if the amount at which such Mortgaged Property and all other Mortgaged Property so abandoned during the same calendar year was originally charged to the fixed property accounts of the Company is equal to ten percent (10%) or more of the aggregate principal amount of Bonds Outstanding (subject to the Percentage Calculation Proviso) immediately prior to such abandonment, there shall be furnished to the Trustee an Independent Engineer's Certificate to the effect that such Mortgaged Property is not, under the circumstances, necessary or important for the operation of the remaining property of the Company or that such abandonment is advisable for some other specified reason, and that such abandonment will not impair the security under this Indenture in contravention of the provisions hereof; and (g) grant, free from the Lien of this Indenture, easements, ground leases or rights of way in, upon, over or across the property or rights of way of the Company for the purpose of roads, pipelines, transmission lines, distribution lines, communication lines, railways, removal of coal or other minerals or timber, and other like purposes, or for the joint or common use of real property, rights of way, facilities or equipment; PROVIDED, HOWEVER, that such grant shall not materially impair the use of the property or rights of way for the purposes for which such property or rights of way are held by the Company. Section 1.003. RELEASE OF MORTGAGED PROPERTY IF BONDING RATIO TEST SATISFIED. Unless an Event of Default shall have occurred and be continuing, upon receipt of a Company Order requesting the release of Mortgaged Property pursuant to this Section 8.03, the Trustee shall execute and deliver to the Company the documents and instruments described in Section 8.03(a), releasing from the Lien of this Indenture such Mortgaged Property if the Fair Value of all of the Mortgaged Property (excluding the Mortgaged Property to be released but including any Property Additions to be acquired by the Company with the proceeds of, or otherwise in connection with, such release) stated on the Engineer's Certificates delivered pursuant to Section 8.03(b) and Section 8.03(c), equals or exceeds an amount equal to twenty- fifteenths (20/15ths) of the aggregate principal amount of Bonds Outstanding at the date of such Company Order as stated on the Officer's Certificate delivered pursuant to Section 8.03(d), upon receipt by the Trustee of: (a) appropriate documents and instruments releasing without recourse the interest of the Trustee in the Mortgaged Property to be released, and describing in reasonable detail the Mortgaged Property to be released; (b) an Engineer's Certificate, dated the date of such Company Order, stating (i) that the signers of such Engineer's Certificate have examined the Officer's Certificate delivered pursuant to Section 8.03(d) in connection with such release, (ii) the Fair Value, in the opinion of the signers of such Engineer's Certificate, of (A) all of the Mortgaged Property, and (B) the Mortgaged Property to be released, in each case as of a date not more than 90 days prior to the date of such Company Order, and (iii) that in the judgment of such signers, such release (A) will not materially adversely affect the Primary Purposes of the Company's Business, and (B) will not impair the security under this Indenture in contravention of the provisions hereof; (c) in case any Property Additions are being acquired by the Company with the proceeds of, or otherwise in connection with, such release, (i) an Engineer's Certificate, dated the date of such Company Order, as to the Fair Value, as of a date not more than 90 days prior to the date of such Company Order, of the Property Additions being so acquired (and if within six months prior to the date of acquisition by the Company of the Property Additions being so acquired, any property included within such Property Additions had been used or operated by others than the Company in a business similar to that in which it has been or is to be used or operated by the Company, and the Fair Value thereof to the Company, as set forth in such Engineer's Certificate, is not less than Twenty-Five Thousand Dollars ($25,000) and not less than one percent (1%) of the aggregate principal amount of Bonds then Outstanding (subject to the Percentage Calculation Proviso), such certificate shall be an Independent Engineer's Certificate), and (ii) an Opinion of Counsel to the effect of Section 4.03(b)(v); and (d) an Officer's Certificate, dated the date of such Company Order, (i) setting forth the aggregate principal amount of Outstanding Bonds at the date of such Company Order, and stating that the Fair Value of all of the Mortgaged Property (excluding the Mortgaged Property to be released but including any Property Additions to be acquired by the Company with the proceeds of, or otherwise in connection with, such release) stated on the Engineer's Certificates filed pursuant to Sections 8.03(b) and (if applicable) 8.03(c) equals or exceeds an amount equal to twenty-fifteenths (20/15ths) of such aggregate principal amount, and (ii) that, to the knowledge of the signer, no Event of Default has occurred and is continuing. Section 1.004. RELEASE OF LIMITED AMOUNT OF MORTGAGED PROPERTY. If the Company is unable, or elects not, to obtain, in accordance with Section 8.03, the release from the Lien of this Indenture of Mortgaged Property, unless an Event of Default shall have occurred and be continuing, upon receipt of a Company Order requesting the release of Mortgaged Property pursuant to this Section 8.04, the Trustee shall execute and deliver to the Company the documents and instruments described in Section 8.04(a) releasing from the Lien of this Indenture such Mortgaged Property if the Fair Value thereof, as stated on the Engineer's Certificate delivered pursuant to Section 8.04(b), is less than one percent (1%) of the sum of (i) the principal amount of Bonds Outstanding and (ii) the principal amount of the Class "A" Bonds Outstanding other than Pledged Bonds at the date of such Company Order, provided that the aggregate Fair Value of all Mortgaged Property released pursuant to this Section 8.04, as stated on all Engineer's Certificates filed pursuant to this Section 8.04(b) in any period of 12 consecutive calendar months which includes the date of such Engineer's Certificate, shall not exceed three percent (3%) of the aggregate principal amount of Bonds Outstanding and Class "A" Bonds Outstanding (other than Pledged Bonds) at the date of such Company Order as stated on the Officer's Certificate delivered pursuant to Section 8.04(c), upon receipt by the Trustee of: (a) appropriate documents and instruments releasing without recourse the interest of the Trustee in the Mortgaged Property to be released, and describing in reasonable detail the Mortgaged Property to be released; (b) an Engineer's Certificate, dated the date of such Company Order, stating (i) that the signers of such Engineer's Certificate have examined the Officer's Certificate delivered pursuant to Section 8.04(c) in connection with such release, (ii) the Fair Value, in the opinion of the signers of such Engineer's Certificate, of such Mortgaged Property to be released as of a date not more than 90 days prior to the date of such Company Order, and (iii) that in the judgment of such signers, such release will not impair the security under this Indenture in contravention of the provisions hereof; (c) an Officer's Certificate, dated the date of such Company Order, (i) setting forth the sum of (x) the principal amount of Bonds Outstanding and (y) the principal amount of the Class "A" Bonds Outstanding other than Pledged Bonds at the date of such Company Order, (ii) stating that one percent (1%) of such aggregate principal amount exceeds the Fair Value of the Mortgaged Property for which such release is applied for, (iii) stating that three percent (3%) of such aggregate principal amount equals or exceeds the aggregate Fair Value of all Mortgaged Property released from the Lien of this Indenture pursuant to this Section 8.04, as shown by all Engineer's Certificates filed pursuant to Section 8.04(b) in such period of 12 consecutive calendar months, and (iv) stating that, to the knowledge of the signer, no Event of Default has occurred and is continuing. Section 1.005. RELEASE OF MORTGAGED PROPERTY NOT SUBJECT TO A CLASS "A" MORTGAGE. (a) If the Company is unable, or elects not, to obtain, in accordance with Section 8.03, the release from the Lien of this Indenture of Mortgaged Property which is not subject to a Class "A" Mortgage, unless an Event of Default shall have occurred and be continuing and on the basis of cash, Government Obligations, purchase money obligations, Property Additions acquired by the Company with the proceeds of, or otherwise in connection with, such release, or the waiver of the right to the authentication and delivery of Bonds as described in subclause (B) of clause (iii) of this Section 8.05(a), or a combination thereof, upon receipt of a Company Order requesting the release of Mortgaged Property pursuant to this Section 8.05, the Trustee shall execute and deliver to the Company the documents and instruments described in Section 8.05(a)(i) releasing such Mortgaged Property from the Lien of this Indenture, upon receipt by the Trustee of: (i) appropriate documents and instruments releasing without recourse the interest of the Trustee in the Mortgaged Property to be released, describing in reasonable detail the Mortgaged Property to be released and stating the amount and character of the proceeds to be received by the Company therefor; (ii) an Engineer's Certificate, dated the date of such Company Order, stating (A) the Fair Value, in the opinion of the signers of such Engineer's Certificate, of the Mortgaged Property to be released as of a date not more than 90 days prior to the date of such Company Order, (B) the fair market value in cash, in the opinion of such signers (which opinion may be based on an Appraiser's Certificate dated within 90 days of the date of such Company Order), of any Government Obligations and purchase money obligations included in the consideration for such release, and (C) that in the judgment of such signers, such release will not impair the security under this Indenture in contravention of the provisions hereof; (iii) (A) an aggregate amount of Government Obligations and purchase money obligations having a fair market value in cash as evidenced by such Appraiser's Certificate, cash and evidence of the acquisition by the Company of Property Additions with the proceeds of, or otherwise in connection with, such release (the amount of such Property Additions shall be the Fair Value thereof as of a date not more than 90 days prior to the date of such Company Order, as evidenced to the Trustee by an Engineer's Certificate dated the date of such Company Order, and if within six months prior to the date of acquisition by the Company of the Property Additions being so acquired, any property included within such Property Additions had been used or operated by others than the Company in a business similar to that in which it has been or is to be used or operated by the Company, and the Fair Value thereof to the Company, as set forth in such Engineer's Certificate, is not less than Twenty- Five Thousand Dollars ($25,000) and not less than one percent (1%) of the aggregate principal amount of Bonds then Outstanding (subject to the Percentage Calculation Proviso), such certificate shall be an Independent Engineer's Certificate), not less than the Fair Value of the Mortgaged Property to be released, or (B) an Officer's Certificate, dated the date of such Company Order, waiving the right of the Company to the authentication and delivery of an aggregate principal amount of Bonds up to the amount required by subclause (A) of clause (iii) of this Section 8.05(a), on the basis of Retired Bonds under Section 4.04, and stating the matters required to be stated in the Officer's Certificates provided for in clause (vi) of Section 4.01(a) and Section 4.04 (except that the Company shall not in any event be required to deliver a Net Earnings Certificate), in either case appropriately modified to reflect that the action being taken is the waiver of the right to, rather than a request for, the authentication and delivery of Bonds, or (C), a combination of the items specified subclauses (A) and (B) of clause (iii) of this Section 8.05(a); (iv) in case any obligations secured by purchase money mortgage upon the Mortgaged Property to be released are included in the consideration for such release and are delivered to the Trustee in connection with such release, an Opinion of Counsel, dated the date of the Company Order, stating that, in the opinion of the signer, such obligations are valid obligations enforceable in accordance with their terms, subject to the Customary Exceptions, and that the purchase money mortgage securing the same is sufficient to afford a valid purchase money Lien upon the property to be released subject to no Lien prior thereto except Permitted Liens and such Liens, if any, as shall have existed thereon just prior to such release as Liens prior to the Lien of this Indenture; and (v) an Officer's Certificate, dated the date of such Company Order, stating that, to the knowledge of the signer, no Event of Default has occurred and is continuing. In connection with any use of Property Additions permitted by subclause (iii) of this subsection, the Trustee shall also be entitled to receive an Opinion of Counsel to the effect of Section 4.03(b)(v). (b) Any purchase money obligations received or to be received by the Trustee under this Indenture in consideration for the release of any Mortgaged Property from the Lien of this Indenture by the Trustee, and the purchase money mortgage securing such purchase money obligations, shall upon Company Order be released by the Trustee from the Lien of this Indenture and delivered or assigned to the Company, or as it shall request, upon payment by the Company to the Trustee of the unpaid principal of such purchase money mortgage and/or of the obligations thereby secured; the principal of any such purchase money obligations not so released shall be paid to or collected by the Trustee as and when such principal shall become payable, and the Company shall take any action which in its judgment may be desirable or which shall be necessary to preserve the security of such purchase money mortgage. (c) Any cash deposited with the Trustee under this Section 8.05 may thereafter be withdrawn, used or applied in the manner, to the extent and for the purposes, and subject to the conditions, provided in Section 8.06. Section 1.006. WITHDRAWAL OR OTHER APPLICATION OF FUNDED CASH. (a) Subject to the provisions of Section 4.05 and Section 7.02(a) and except as hereafter in this Section provided, unless an Event of Default shall have occurred and be continuing, any Funded Cash held by the Trustee, and any other cash which is required to be withdrawn, used or applied as provided in this Section: (i) may be withdrawn from time to time by the Company to the extent of the Cost or the Fair Value to the Company (whichever is less) of Unbonded Property Additions, after making any deductions and additions pursuant to Section 1.04, described in an Engineer's Certificate, dated not more than ninety (90) days prior to the date of the Company Order requesting such withdrawal and complying with clause (ii) of Section 4.03(b), delivered to the Trustee; PROVIDED, HOWEVER, that the deductions and additions contemplated by Section 1.04 shall not be required to be made if such Property Additions were acquired, made or constructed on or after the ninetieth (90th) day preceding the date of such Company Order; (ii) may be withdrawn from time to time by the Company (A) in the case of cash deposited with the Trustee under Section 4.05, to the extent of the amount thereof, and (B) in the case of all other Funded Cash and any other cash, in an amount equal to twenty-fifteenths (20/15ths) of the aggregate principal amount of Bonds the authentication and delivery of which the Company shall be entitled under the provisions of Section 4.04, by virtue of compliance with all applicable provisions of Section 4.04 (except as hereinafter in this Section otherwise provided); PROVIDED, HOWEVER, that such withdrawal of cash shall operate as a waiver by the Company of the right to the authentication and delivery of such Bonds and, to such extent no such Bonds may thereafter be authenticated and delivered hereunder; and any such Bonds which were the basis of such right to the authentication and delivery of Bonds so waived shall be deemed to have been made the basis of such withdrawal of cash; (iii) may be withdrawn from time to time by the Company in an amount equal to twenty-fifteenths (20/15ths) of the aggregate principal amount of any Outstanding Bonds delivered to the Trustee; (iv) may, upon the request to the Company, be used by the Trustee for the purchase of Bonds in the manner, at the time or times, in the amount or amounts, at the price or prices (not exceeding twenty-fifteenths (20/15ths) of the principal amount thereof) and otherwise as directed or approved by the Company; or (v) may, upon the request of the Company, be applied by the Trustee to the payment at Stated Maturity of any Bonds or to the redemption of any Bonds which are, by the terms, redeemable, in each case of such series as may be designated by the Company, any such redemption to be in the manner and as provided in Article Five. (b) Such moneys shall, from time to time, be paid or used or applied by the Trustee, as aforesaid, upon the request of the Company in a Company Order, and upon receipt by the Trustee of an Officer's Certificate stating that no Event of Default has occurred and is continuing. If and to the extent that the withdrawal of cash is based upon Unbonded Property Additions (as permitted under the provisions of clause (i) of Section 8.06(a)), the Company shall, subject to the provisions of said clause (i) and except as hereafter in this subsection (b) provided, comply with all applicable provisions of this Indenture as if such Property Additions were made the basis for the authentication and delivery of Bonds equal in principal amount to seventy-five percent (75%) of the cash so to be withdrawn. If and to the extent that the withdrawal of cash is based upon the right to the authentication and delivery of Bonds (as permitted under the provisions of clause (ii) of Section 8.06(a)), the Company shall, except as hereafter in this subsection (b) provided, comply with all applicable provisions of Section 4.04 relating to such authentication and delivery. Notwithstanding the foregoing provisions of this subsection (b), in no event shall the Company be required to comply with Section 4.01 or to deliver a Net Earnings Certificate. (c) The principal of and interest on any obligations secured by a purchase money mortgage held by the Trustee shall be collected by the Trustee as and when the same become payable. Unless an Event of Default shall have occurred and be continuing, the interest received by the Trustee on any such obligations shall be remitted to the Company, and any payments received by the Trustee on account of the principal of any such obligations in excess of the amount of credit used by the Company in respect of such obligations upon the release of any property from the Lien hereof shall be deemed not to constitute Funded Cash and shall also be remitted to the Company. (d) The Trustee shall have and may exercise all the rights and powers of any owner of such obligations and of all substitutions therefor and, without limiting the generality of the foregoing, may collect and receive all insurance moneys payable to it under any of the provisions thereof and apply the same in accordance with the provisions thereof, may consent to extensions thereof at a higher or lower rate of interest, may join in any plan or plans of voluntary or involuntary reorganization or readjustment or rearrangement and may accept and hold hereunder new obligations, stocks or other securities issued in exchange therefor under any such plan. Any discretionary action which the Trustee may be entitled to take in connection with any such obligations or substitutions therefor shall be taken, so long as no Event of Default shall exist, in accordance with a Company Order, and, during the existence of an Event of Default, in its own discretion. (e) Any Bonds received by the Trustee pursuant to the provisions of this Section shall forthwith be canceled by the Trustee. Section 1.007. RELEASE OF PROPERTY TAKEN BY EMINENT DOMAIN, ETC. Should any of the Mortgaged Property, or any interest therein, be taken by exercise of the power of eminent domain or be sold to an entity possessing the power of eminent domain under a threat to exercise the same, and should the Company not elect to obtain the release of such property pursuant to other provisions of this Article Eight, the Trustee shall, upon request of the Company evidenced by a Company Order, release from the Lien hereof all its right, title and interest in and to the property so taken or sold (or with respect to an interest in property, subordinate the Lien hereof to such interest), upon receiving (a) an Opinion of Counsel to the effect that such property has been taken by exercise of the power of eminent domain or has been sold to an entity possessing the power of eminent domain under threat of an exercise of such power, an Officer's Certificate stating the amount of net proceeds received or to be received for such property so taken or sold under threat of exercise of such power, and the amount so stated shall be deemed to be the Fair Value of such property, and (c) a deposit by the Company of an amount in cash equal to the Cost of the Mortgaged Property so taken or sold (or, if the Fair Value to the Company of such property at the time the same became Mortgaged Property was less than the Cost thereof as certified to the Trustee in an Officer's Certificate, then such Fair Value in lieu of Cost); PROVIDED, HOWEVER, that no such deposit shall be required to be made hereunder if the proceeds of such taking or sale shall, as indicated in an Officer's Certificate delivered to the Trustee, have been deposited with the trustee or other holder of a Class "A" Mortgage or other Lien prior to the Lien of this Indenture. Any cash deposited with the Trustee under this Section may thereafter be withdrawn, used or applied in the manner, to the extent and for the purposes, and subject to the conditions, provided in Section 8.06. Section 1.008. ALTERNATIVE RELEASE PROVISION. In lieu of the other provisions for the release of the Mortgaged Property provided in this Indenture, unless an Event of Default shall have occurred and be continuing, the Company may in the alternative obtain the release of any part of the Mortgaged Property which is subject to the Lien of a Class "A" Mortgage (except cash or obligations secured by a purchase money mortgage) by delivery to the Trustee of an Officer's Certificate as to the non-existence of an Event of Default referred to above, an Engineer's Certificate as to the Fair Value of the property to be released and a copy of a release of such part of the Mortgaged Property from the Lien of such Class "A" Mortgage executed by the trustee thereunder; PROVIDED, HOWEVER, that this Section shall not apply with respect to any release of Mortgaged Property from the Lien of any Class "A" Mortgage in connection with the discharge of such Class "A" Mortgage. Section 1.009. DISCLAIMER OR QUITCLAIM. In case the Company has sold, exchanged, dedicated or otherwise disposed of, or has agreed or intends to sell, exchange, dedicate or otherwise dispose of, or a Governmental Authority has lawfully ordered the Company to divest itself of, any property of a character excepted from the Lien hereof, or the Company desires to disclaim or quitclaim title to property to which the Company does not purport to have title, the Trustee shall, from time to time, execute such instruments of disclaimer or quitclaim as may be appropriate upon receipt by the Trustee of the following: (a) an Officer's Certificate describing in reasonable detail the property to be disclaimed or quitclaimed and having attached thereto such instruments of disclaimer or quitclaim to be executed by the Trustee; and (b) an Opinion of Counsel stating the signer's opinion that such property is not subject to the Lien hereof or required to be subject thereto by any of the provisions hereof and that the execution of such disclaimer or quitclaim is appropriate. Section 8.10. MISCELLANEOUS. (a) If the Mortgaged Property shall be in the possession of a receiver or trustee, lawfully appointed, the powers hereinbefore conferred upon the Company with respect to the release of any part of the Mortgaged Property or any interest therein or the withdrawal of cash may be exercised, with the approval of the Trustee, by such receiver or trustee, notwithstanding that an Event of Default may have occurred and be continuing, and any request, certificate, appointment or approval made or signed by such receiver or trustee for such purposes shall be as effective as if made by the Company or any of its officers or appointees in the manner herein provided; and if the Trustee shall be in possession of the Mortgaged Property under any provision of this Indenture, then such powers may be exercised by the Trustee in its discretion notwithstanding that an Event of Default may have occurred and be continuing. (b) If any property released from the Lien of this Indenture as provided in Section 8.03, 8.04 or 8.05 shall continue to be owned by the Company after such release, this Indenture shall not become or be, or be required to become or be, a Lien upon such property or any improvement, extension or addition to such property or renewals, replacements or substitutions of or for any part or parts of such property unless the Company shall execute and deliver to the Trustee an indenture supplemental hereto, in recordable form, containing a grant, conveyance, transfer and mortgage thereof to the Trustee. (c) Notwithstanding the occurrence and continuance of an Event of Default, the Trustee, in its discretion, may release from the Lien hereof any part of the Mortgaged Property or permit the withdrawal of cash, upon compliance with the other conditions specified in this Article in respect thereof. (d) No purchaser in good faith of property purporting to have been released hereunder shall be bound to ascertain the authority of the Trustee to execute the release, or to inquire as to any facts required by the provisions hereof for the exercise of this authority; nor shall any purchaser or grantee of any property or rights permitted by this Article to be sold, granted, exchanged, dedicated or otherwise disposed of, be under obligation to ascertain or inquire into the authority of the Company to make any such sale, grant, exchange, dedication or other disposition. ARTICLE NINE SATISFACTION AND DISCHARGE Section 1.001. SATISFACTION AND DISCHARGE OF BONDS. (a) Any Bond or Bonds, or any portion of the principal amount thereof, shall be deemed to have been paid for all purposes of this Indenture, and the entire indebtedness of the Company in respect thereof shall be deemed to have been satisfied and discharged, if there shall have been irrevocably deposited with the Trustee, in trust: (i) money (including Funded Cash not otherwise applied pursuant to Section 8.06) in an amount which shall be sufficient, or (ii) in the case of a deposit made prior to the Maturity of such Bonds or portions thereof, Eligible Obligations, which shall not contain provisions permitting the redemption or other prepayment thereof at the option of the issuer thereof, the principal of and the interest on which when due, without any regard to reinvestment thereof, will provide moneys which shall be sufficient, or (iii) a combination of (i) or (ii) which shall be sufficient, to pay when due the principal of and premium, if any, and interest, if any, due and to become due on such Bonds or portions thereof; PROVIDED, HOWEVER, that in the case of the provision for payment or redemption of less than all the Bonds of any series or Tranche, such Bonds or portions thereof shall have been selected by the Bond Registrar as provided herein and, in the case of a redemption, the notice requisite to the validity of such redemption shall have been given or irrevocable authority shall have been given by the Company to the Trustee to give such notice, under arrangements satisfactory to the Trustee; and PROVIDED, FURTHER, that the Company shall have delivered to the Trustee: (x) if such deposit shall have been made prior to the Maturity of such Bonds, a Company Order stating that the money and Eligible Obligations deposited with the Trustee in accordance with this Section shall be held by the Trustee, in trust, as provided in Section 9.03; and (y) if Eligible Obligations shall have been deposited with the Trustee, an Opinion of Counsel that the obligations so deposited with the Trustee constitute Eligible Obligations and do not contain provisions permitting the redemption or other prepayment at the option of the issuer thereof, and an opinion of an Independent public accountant of nationally recognized standing, selected by the Company, to the effect that the other requirements set forth in clause (ii) above have been satisfied. (b) Upon receipt by the Trustee of money or Eligible Obligations, or both, in accordance with this Section, together with the documents required by clauses (x) and (y) of Section 9.01(a), (i) the Holders of the Bonds or portions thereof in respect of which such deposit was made shall no longer be entitled to the benefit of the covenants of the Company under Article Six (except the covenants contained in Sections 6.02 and 6.03), and (ii) the Trustee shall, upon receipt of a Company Request, acknowledge in writing that such Bonds or portions thereof are deemed to have been paid for all purposes of this Indenture and that the entire indebtedness of the Company in respect thereof is deemed to have been satisfied and discharged. (c) If payment at Stated Maturity of less than all of the Bonds of any series, or any Tranche thereof, is to be provided for in the manner and with the effect provided in this Section, the Bond Registrar shall select such Bonds, or portions of principal amount thereof in the manner specified by Section 5.03 for selection for redemption of less than all the Bonds of a series or Tranche, unless a different manner is specified as contemplated by Section 3.01 for Bonds of such series or Tranche. (d) In the event that Bonds which shall be deemed to have been paid as provided in this Section do not mature and are not to be redeemed within the sixty (60) day period commencing with the date of the deposit with the Trustee of moneys or Eligible Obligations as aforesaid, the Company shall, as promptly as practicable, give a notice, in the same manner as a notice of redemption with respect to such Bonds, to the Holders of such Bonds to the effect that such deposit has been made and the effect thereof. (e) Notwithstanding the satisfaction and discharge of any Bonds as aforesaid, the obligations of the Company and the Trustee in respect of such Bonds under Sections 3.04, 3.05, 3.06, 5.04, 6.02, 6.03, 11.07 and 11.15, Article Seven and this Article Nine shall survive. (f) The Company shall pay, and shall indemnify the Trustee and each Holder of Bonds which are deemed to have been paid as provided in this Section against, any tax, fee or other charge imposed on or assessed against the Eligible Obligations deposited with the Trustee or the principal or interest received by the Trustee in respect of such Eligible Obligations. (g) Anything herein to the contrary notwithstanding, if, at any time after a Bond would be deemed to have been satisfied or discharged pursuant to this Section (without regard to the provisions of this subsection (g)), the Trustee shall be required to return the money or Eligible Obligations, or combination thereof, deposited with it as aforesaid to the Company or its representative under any applicable federal or state bankruptcy, insolvency or other similar law, the indebtedness of the Company in respect of such Bond shall thereupon be deemed retroactively not to have been satisfied and discharged, as aforesaid, and to remain Outstanding. Section 1.002. SATISFACTION AND DISCHARGE OF INDENTURE. (a) This Indenture shall upon Company Request cease to be of further effect (except as hereinafter expressly provided), and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when (i) either: (A) all Bonds theretofore authenticated and delivered (other than (1) Bonds which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 3.06, and (2) Bonds deemed to have been paid in accordance with Section 9.01) have been delivered to the Trustee for cancellation; or (B) all Bonds not theretofore delivered to the Trustee for cancellation (other than Bonds described in clause (1) of subclause (A) above) shall be deemed to have been paid in accordance with Section 9.01; (ii) the Company has paid or caused to be paid all other sums payable hereunder by the Company; and (iii) the Company has delivered to the Trustee an Officer's Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with. (b) Notwithstanding the satisfaction and discharge of this Indenture as aforesaid, the obligations of the Company and the Trustee under Sections 11.07 and 11.15 and, if subclause (a)(i)(B) of this Section is applicable, Sections 3.04, 3.05, 3.06, 5.04, 6.02 and 6.03 and this Article Nine shall survive. (c) Upon satisfaction and discharge of this Indenture as provided in this Section, the Trustee shall assign, transfer, reconvey and otherwise turn over to the Company the Mortgaged Property (other than money and Eligible Obligations held by the Trustee pursuant to Section 9.03) and shall execute and deliver to the Company such deeds and other instruments as, in the judgment of the Company, shall be necessary, desirable or appropriate to effect or evidence such assignment, transfer, reconveyance and turning over and the release and discharge of the Lien of this Indenture. Section 1.003. APPLICATION OF TRUST MONEY. Neither the Eligible Obligations nor the money deposited with the Trustee pursuant to Section 9.01, nor the principal or interest payments on any such Eligible Obligations, shall be withdrawn or used for any purpose other than, and shall be held in trust for, the payment of the principal of and premium, if any, and interest, if any, on the Bonds or portions of principal amount thereof in respect of which such deposit was made, all subject, however, to the provisions of Section 6.03; PROVIDED, HOWEVER, that, unless an Event of Default shall have occurred and be continuing, any cash received from such principal or interest payments on such Eligible Obligations deposited with the Trustee, if not then needed for such purpose, shall upon Company Order, to the extent practicable, be invested in Eligible Obligations of the type described in clause (ii) of Section 9.01(a) maturing at such times and in such amounts as shall be sufficient to pay when due the principal of and premium, if any, and interest, if any, due and to become due on such Bonds or portions thereof on and prior to Maturity thereof, and interest earned from such reinvestment shall be paid over to the Company as received by the Trustee, free and clear of the Lien of this Indenture; and PROVIDED, FURTHER, that unless an Event of Default shall have occurred and be continuing, any moneys held in trust in accordance with this Section on the Maturity of all such Bonds in excess of the amount required to pay the principal of and premium, if any, and interest, if any, then due on such Bonds shall upon Company Order be paid over to the Company free and clear of the Lien of this Indenture. ARTICLE TEN EVENTS OF DEFAULT; REMEDIES Section 1.001. EVENTS OF DEFAULT. An "Event of Default", wherever used herein with respect to the Bonds, means any one the following events: (a) failure to pay interest, if any, on any Bond within sixty (60) days after same becomes due and payable; or (b) failure to pay the principal of or premium, if any, on any Bond after its Maturity; or (c) failure to perform or breach of any covenant or warranty of the Company in this Indenture (other than a covenant or warranty a default in the performance of which or breach of which is elsewhere in this Section specifically dealt with) for a period of sixty (60) days after there has been given, by registered or certified mail, to the Company by Trustee, or to the Company and the Trustee by the Holders of at least 50% in principal amount of the Bonds then Outstanding, a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder, unless the Trustee, or the Trustee and the Holders of a principal amount of Bonds not less than the principal amount of Bonds the Holders of which gave such notice, as the case may be, shall agree in writing to an extension of such period prior to its expiration; PROVIDED, HOWEVER, that the Trustee, or the Trustee and the Holders of such principal amount of Bonds, as the case may be, shall be deemed to have agreed to an extension of such period if corrective action is initiated by the Company within such period and is being diligently pursued; or (d) the entry by a court having jurisdiction in the premises of (i) a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law, or (ii) a decree or order adjudging the Company a bankrupt or insolvent, or approving as properly filed a petition by one or more Persons other than the Company seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under applicable federal or state law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official for the Company or for any substantial part of its property, or ordering the winding up or liquidation of its affairs, and any such decree or order for relief or any such other decree or order shall have remained unstayed and in effect for a period of ninety (90) consecutive days; or (e) the commencement by the Company of a voluntary case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree or order for relief in respect of the Company in a case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable federal or state law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of the Company or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the authorization of such action by the Board of Directors; or (f) the occurrence of a Matured Event of Default under any Class "A" Mortgage; PROVIDED, HOWEVER, that, anything in this Indenture to the contrary notwithstanding, the waiver or cure of such event of default under such Class "A" Mortgage and the rescission and annulment of the consequences thereof shall constitute a waiver of the corresponding Event of Default hereunder and a rescission and annulment of the consequences thereof. Section 1.002. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT. (a) If an Event of Default shall have occurred and be continuing, then in every such case the Trustee or the Holders of not less than a majority in aggregate principal amount of the Bonds then Outstanding may declare the principal amount (or, if any of the Bonds are Discount Bonds, such portion of the principal amount of such Bonds as may be specified in the terms thereof as contemplated by Section 3.01) of all of the Bonds to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by Holders), and upon receipt by the Company of notice of such declaration such principal amount (or specified amount), together with premium, if any, and accrued interest, if any, thereon, shall become immediately due and payable. (b) At any time after such a declaration of acceleration of the maturity of the Bonds then Outstanding shall have been made, but before any sale of any of the Mortgaged Property has been made and before a judgment or decree for payment of the money due shall have been obtained by the Trustee as provided in this Article, the Event or Events of Default giving rise to such declaration of acceleration shall, without further act, be deemed to have been waived, and such declaration and its consequences shall, without further act, be deemed to have been rescinded and annulled, if: (i) the Company shall have paid or deposited with the Trustee a sum sufficient to pay (A) all overdue interest, if any, on all Bonds then Outstanding; (B) the principal of and premium, if any, on any Bonds then Outstanding which have become due otherwise than by such declaration of acceleration and interest thereon at the rate or rates prescribed therefor in such Bonds; and (C) all amounts due to the Trustee under Section 11.07; and (ii) any Event or Events of Default, other than the non-payment of the principal of Bonds which shall have become due solely by such declaration of acceleration, shall have been cured or waived as provided in Section 10.17. No such rescission shall affect any subsequent Event of Default or impair any right consequent thereon. Section 1.003. ENTRY UPON MORTGAGED PROPERTY. If an Event of Default shall have occurred and be continuing, the Company, upon demand of the Trustee and if and to the extent permitted by law, shall forthwith surrender to the Trustee the actual possession of, and the Trustee, by such officers or agents as it may appoint, may enter upon and take possession of, the Mortgaged Property; and the Trustee may hold, operate and manage the Mortgaged Property and make all needful repairs and such renewals, replacements, betterments and improvements as to the Trustee shall seem prudent; and the Trustee may receive the rents, issues, profits, revenues and other income of the Mortgaged Property; and, after deducting the costs and expenses of entering, taking possession, holding, operating and managing the Mortgaged Property, as well as payments for insurance and taxes and other proper charges upon the Mortgaged Property prior to the Lien of this Indenture and reasonable compensation to itself, its agents and counsel, the Trustee may apply the same as provided in Section 10.07. Whenever all that is then due in respect of the principal of and premium, if any, and interest, if any, on the Bonds and under any of the terms of this Indenture shall have been paid and all defaults hereunder shall have been cured, the Trustee shall surrender possession of the Mortgaged Property to the Company. Section 1.004. POWER OF SALE; SUITS FOR ENFORCEMENT. If an Event of Default shall have occurred and be continuing, the Trustee, by such officers or agents as it shall appoint, with or without entry, in its discretion may, subject to the provisions of Section 10.16 and if and to the extent permitted by law: (a) sell, subject to any mandatory requirements of applicable law, the Mortgaged Property as an entirety, or in such parcels as the Holders of a majority in aggregate principal amount of the Bonds then Outstanding shall in writing request, or in the absence of such request, as the Trustee may determine, to the highest bidder at public auction at such place and at such time (which sale may be adjourned by the Trustee from time to time in its discretion by announcement at the time and place fixed for such sale, without further notice) and upon such terms as the Trustee may fix and briefly specify in a notice of sale to be published once in each week for three successive weeks prior to such sale in an Authorized Publication in each Place of Payment for the Bonds of each series; or (b) proceed to protect and enforce its rights and the rights of the Holders of Bonds under this Indenture by sale pursuant to judicial proceedings or by a suit, action or proceeding in equity or at law or otherwise, whether for the specific performance of any covenant or agreement contained in this Indenture or in aid of the execution of any power granted in this Indenture or for the foreclosure of this Indenture or for the enforcement of any other legal, equitable or other remedy, as the Trustee, being advised by counsel, shall deem most effectual to protect and enforce any of the rights of the Trustee or the Holders of Bonds. The security afforded by this Indenture is given primarily for a business and commercial purpose. The real estate encumbered by this Indenture is not used exclusively for residential purposes. The power of sale granted by subsection (a) of this Section is made in addition to and not in derogation of the Statutory Power of Sale set forth in Sec. 501-A of Chapter 9 of Title 33 of Maine Revised Statutes Annotated, as it may be amended from time to time, which is hereby incorporated by reference herein. To the extent, if any, that said subsection (a), or any part thereof, is found to be unenforceable because of a conflict with the provisions of the Statutory Power of Sale, or any related provisions of Maine law, then such Statutory Power of Sale shall control. Section 1.005. INCIDENTS OF SALE. Upon any sale of any of the Mortgaged Property, whether made under the power of sale hereby given or pursuant to judicial proceedings, to the extent permitted by law: (a) the principal amount (or, if any of the Bonds are Discount Bonds, such portion of the principal amount of such Bonds as may be specified in the terms thereof as contemplated by Section 3.01) of all Outstanding Bonds, if not previously due, shall at once become and be immediately due and payable together with premium, if any, and accrued interest, if any, thereon; (b) any Holder or Holders of Bonds or the Trustee may bid for and purchase the property offered for sale, and upon compliance with the terms of sale may hold, retain and possess and dispose of such property, without further accountability, and may, in paying the purchase money therefor, deliver any Outstanding Bonds or claims for interest thereon in lieu of cash to the amount which shall, upon distribution of the net proceeds of such sale, be payable thereon, and such Bonds, in case the amounts so payable thereon shall be less than the amount due thereon, shall be returned to the Holders thereof after being appropriately stamped to show partial payment; (c) the Trustee may make and deliver to the purchaser or purchasers a good and sufficient deed, bill of sale and instrument of assignment and transfer of the property sold; (d) the Trustee is hereby irrevocably appointed the true and lawful attorney of the Company, in its name and stead, to make all necessary deeds, bills of sale and instruments of assignment and transfer of the property so sold; and for that purpose it may execute all necessary deeds, bills of sale and instruments of assignment and transfer, and may substitute one or more persons, firms or corporations with like power, the Company hereby ratifying and confirming all that its said attorney or such substitute or substitutes shall lawfully do by virtue hereof; but, if so requested by the Trustee or by any purchaser, the Company shall ratify and confirm any such sale or transfer by executing and delivering to the Trustee or to such purchaser or purchasers all proper deeds, bills of sale, instruments of assignment and transfer and releases as may be designated in any such request; (e) all right, title, interest, claim and demand whatsoever, either at law or in equity or otherwise, of the Company of, in and to the property so sold shall be divested and such sale shall be a perpetual bar both at law and in equity against the Company, its successors and assigns, and against any and all persons claiming or who may claim the property sold or any part thereof from, through or under the Company; and (f) the receipt of the Trustee or of the officer making such sale shall be a sufficient discharge to the purchaser or purchasers at such sale for his or their purchase money and such purchaser or purchasers and his or their assigns or personal representatives shall not, after paying such purchase money and receiving such receipt, be obliged to see to the application of such purchase money, or be in anywise answerable for any loss, misapplication or nonapplication thereof. Section 1.006. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE. (a) If an Event of Default described in Section 10.01(a) or 10.01(b) shall have occurred and be continuing, the Company shall, upon demand of the Trustee, pay to it, for the benefit of the Holders of the Bonds with respect to which such Event of Default shall have occurred, the whole amount then due and payable on such Bonds for principal and premium, if any, and interest, if any, and, in addition thereto, such further amount as shall be sufficient to cover any amounts due to the Trustee under Section 11.07. (b) If the Company shall fail to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company or any other obligor upon such Bonds and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon such Bonds, wherever situated. (c) The Trustee shall, to the extent permitted by law, be entitled to sue and recover judgment as aforesaid either before, during or after the pendency of any proceedings for the enforcement of the Lien of this Indenture, and in case of a sale of the Mortgaged Property or any part thereof and the application of the proceeds of sale as aforesaid, the Trustee, in its own name and as trustee of an express trust, shall be entitled to enforce payment of, and to receive, all amounts then remaining due and unpaid upon the Bonds then Outstanding for principal, premium if any, and interest, if any, for the benefit of the Holders thereof, and shall be entitled to recover judgment for any portion of the same remaining unpaid, with interest as aforesaid. No recovery of any such judgment by the Trustee and no levy of any execution upon any such judgment upon any of the Mortgaged Property or any other property of the Company shall affect or impair the Lien of this Indenture upon the Mortgaged Property or any part thereof or any rights, powers or remedies of the Trustee hereunder, or any rights, powers or remedies of the Holders of the Bonds. (d) If an Event of Default occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. Section 1.007. APPLICATION OF MONEY COLLECTED. Any money collected by the Trustee pursuant to this Article, including any rents, profits, revenues and other income collected pursuant to Section 10.03 (after the deductions therein provided) and any proceeds of any sale (after deducting the costs and expenses of such sale, including a reasonable compensation to the Trustee, its agents and counsel, and any taxes, assessments or Liens prior to the Lien of this Indenture, except any thereof subject to which such sale shall have been made), whether made under any power of sale herein granted or pursuant to judicial proceedings, and any money collected by the Trustee under Sections 7.02 and 8.06(c) or (d), together with, in the case of an entry or sale or as otherwise provided herein, any other sums then held by the Trustee as part of the Mortgaged Property, shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal or premium, if any, or interest, if any, upon presentation of the Bonds and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: FIRST: To the payment of all amounts due the Trustee under Section 11.07; SECOND: To the payment of the whole amount then due and unpaid upon the Outstanding Bonds for principal and premium, if any, and interest, if any, in respect of which or for the benefit of which such money has been collected; and in case such proceeds shall be insufficient to pay in full the whole amount so due and unpaid upon such Bonds, then to the payment of such principal and interest, if any, without any preference or priority, ratably according to the aggregate amount so due and unpaid, with any balance then remaining to the payment of premium, if any, ratably as aforesaid; PROVIDED, HOWEVER, that any money collected by the Trustee pursuant to Sections 7.02 and 8.06(c) in respect of interest and Section 10.03 shall first be applied to the payment of interest so due; and THIRD: To the payment of the remainder, if any, to the Company or to whomsoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may order. Section 1.008. RECEIVER. If an Event of Default shall have occurred and, during the continuance thereof, the Trustee shall have commenced judicial proceedings to enforce any right under this Indenture, the Trustee shall, to the extent permitted by law, be entitled, as against the Company, without notice or demand and without regard to the adequacy of the security for the Bonds or the solvency of the Company, to the appointment of a receiver of the Mortgaged Property. Section 1.009. TRUSTEE MAY FILE PROOFS OF CLAIM. (a) In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Bonds or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of the Bonds shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of overdue principal or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise: (i) to file and prove a claim for the whole amount of principal, premium, if any, and interest, if any, owing and unpaid in respect of the Bonds and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for amounts due to the Trustee under Section 11.07) and of the Holders allowed in such judicial proceeding; and (ii) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amounts due it under Section 11.07. (b) Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Bonds or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. Section 0.10. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF BONDS. All rights of action and claims under this Indenture or on the Bonds 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 proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders in respect of which such judgment has been recovered. Section 0.11. LIMITATION ON SUITS. No Holder shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless: (a) such Holder shall have previously given written notice to the Trustee of a continuing Event of Default; (b) the Holders of not less than a majority in aggregate principal amount of the Bonds then Outstanding shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (c) such Holder or Holders shall have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (d) the Trustee for sixty (60) days after its receipt of such notice, request and offer of indemnity shall have failed to institute any such proceeding; and (e) no direction inconsistent with such written request shall have been given to the Trustee during such sixty-day period by the Holders of a majority in aggregate principal amount of the Bonds then Outstanding; it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other of such Holders or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all of such Holders. Section 0.12. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL, PREMIUM AND INTERESt. Notwithstanding any other provision in this Indenture, the Holder of any Bond shall have the right, which is absolute and unconditional to receive payment of the principal of and premium, if any, and (subject to Section 3.07) interest, if any, on such Bond on the Stated Maturity or Maturities expressed in such Bond (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder. Section 0.13. RESTORATION OF RIGHTS AND REMEDIES. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding shall have been discontinued or abandoned for any reason, or shall have been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, and Trustee and such Holder shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and such Holder shall continue as though no such proceeding had been instituted. Section 0.14. RIGHTS AND REMEDIES CUMULATIVE. Except as otherwise provided in Section 3.06(f), no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and, subject to Section 10.11, every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. Section 0.15. DELAY OR OMISSION NOT WAIVER. No delay or omission of the Trustee or of any Holder to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. Section 0.16. CONTROL BY HOLDERS OF BONDS. If an Event of Default shall have occurred and be continuing, the Holders of a majority in aggregate principal amount of the Bonds then Outstanding shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee herein; PROVIDED, HOWEVER, that (a) such direction shall not be in conflict with any rule of law or with this Indenture, and could not involve the Trustee in personal liability in circumstances where indemnity would not, in the Trustee's sole discretion, be adequate; (b) such direction shall not be unduly prejudicial to the rights of the nonassenting Holders; and (c) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. Section 0.17. WAIVER OF PAST DEFAULTS. (a) Before any sale of any of the Mortgaged Property and before a judgment or decree for payment of the money due shall have been obtained by the Trustee as hereinafter in this Article provided, the Holders of not less than a majority in aggregate principal amount of the Bonds then Outstanding may on behalf of the Holders of all the Bonds then Outstanding waive any past default hereunder and its consequences, except a default: (i) in the payment of the principal of or premium, if any, or interest, if any, on any Bond Outstanding, or (ii) in respect of a covenant or provision hereof which under Section 14.02(a) cannot be modified or amended without the consent of the Holder of each Outstanding Bond of any series or Tranche affected. (b) Upon any such waiver, such default shall cease to exist, and any and all Events of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. Section 0.18. UNDERTAKING FOR COSTS. The Company and the Trustee agree, and each Holder of Bonds by its acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to any suit instituted by the Company, to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in aggregate principal amount of the Bonds then Outstanding, or to any suit instituted by any Holder for the enforcement of the payment of the principal of or premium, if any, or interest, if any, on any Bond on or after the Stated Maturity or Maturities expressed in such Bond (or, in the case of redemption, on or after the Redemption Date). Section 0.19. WAIVER OF APPRAISEMENT AND OTHER LAWS. To the full extent that it may lawfully so agree, the Company shall not at any time set up, claim or otherwise seek to take the benefit or advantage of any appraisement, valuation, stay, extension or redemption law now or hereafter in effect, in order to prevent or hinder the enforcement of this Indenture or the absolute sale of the Mortgaged Property, or any part thereof, or the possession thereof, or any part thereof, by any purchaser at any sale under this Article; and the Company, for itself and all who may claim under it, so far as it or they now or hereafter may lawfully do so, hereby waives the benefit of all such laws. The Company, for itself and all who may claim under it, waives, to the extent that it may lawfully do so, all right to have the Mortgaged Property marshalled upon any foreclosure of the Lien hereof, and agrees that any court having jurisdiction to foreclose the Lien of this Indenture may order the sale of the Mortgaged Property as an entirety. Section 0.20. DEFAULTS UNDER CLASS "A" MORTGAGES. In addition to every other right and remedy provided herein, the Trustee may exercise any right or remedy available to the Trustee in its capacity as owner and holder of Pledged Bonds which arises as a result of a default or Matured Event of Default under any Class "A" Mortgage, whether or not an Event of Default shall then have occurred and be continuing. ARTICLE ELEVEN THE TRUSTEE Section 1.0021. CERTAIN DUTIES AND RESPONSIBILITIES. (a) The Trustee shall have and be subject to all the duties and responsibilities specified with respect to an indenture trustee in the Trust Indenture Act. (b) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (c) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section. Section 1.0022. NOTICE OF DEFAULTS. (a) The Trustee shall give the Holders notice of any default hereunder in the manner and to the extent required to do so by the Trust Indenture Act, unless such default shall have been cured or waived; PROVIDED, HOWEVER, that in the case of any default of the character specified in Section 10.01(c), no such notice to Holders shall be given until at least forty-five (45) days after the occurrence thereof. For the purpose of this Section, the term "default" means any event which is, or after notice or lapse of time, or both, would become, an Event of Default. (b) The Trustee shall give to the trustee under each Class "A" Mortgage a copy of each notice of default given to the Holders pursuant to this Section. In addition, the Trustee shall give to the Holders copies of each notice of default under any Class "A" Mortgage given to the Trustee in its capacity as owner and holder of Pledged Bonds issued and outstanding thereunder. Section 1.0023. CERTAIN RIGHTS OF TRUSTEE. Subject to the provisions of Section 11.01: (a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order, or as otherwise expressly provided herein, and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution; (c) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence is specifically prescribed herein) may, in the absence of bad faith on its part, rely upon an Officer's Certificate; (d) the Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any Holder pursuant to this Indenture, unless such Holder shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall (subject to applicable legal requirements) be entitled to examine, during normal business hours, the books, records and premises of the Company, personally or by agent or attorney; (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; and (h) except as otherwise provided in Section 10.01(c), the Trustee shall not be charged with knowledge of any Event of Default unless either (i) a Responsible Officer of the Trustee assigned to the Corporate Trustee Administration Department of the Trustee (or any successor division or department of the Trustee) shall have actual knowledge of the Event of Default, or (ii) written notice of such Event of Default shall have been given to the Trustee by the Company, any other obligor on the Bonds or by any Holder of such Bonds or, in the case of an Event of Default described in Section 10.01(f), by the trustee under the related Class "A" Mortgage. Section 1.0024. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF BONDS. The recitals contained herein and in the Bonds (except the Trustee's certificates of authentication) shall be taken as the statements of the Company and neither the Trustee nor any Authenticating Agent assumes any responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Bonds or of any security therefor. Neither the Trustee nor any Authenticating Agent shall be accountable for the use or application by the Company of Bonds or the proceeds thereof. The Trustee shall have no responsibility for filing any document or notice at any time in any public office for the purpose of perfecting, maintaining the perfection of, or making effective the Lien of this Indenture or for any other purpose and shall have no responsibility for seeing to the insurance on the Mortgaged Property or for paying any taxes relating thereto. Section 1.0025. MAY HOLD BONDS. Each of the Trustee, any Authenticating Agent, any Paying Agent, any Bond Registrar or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Bonds and, subject to Sections 11.08 and 11.13, may otherwise deal with the Company with the same rights it would have if it were not such Trustee, Authenticating Agent, Paying Agent, Bond Registrar or other agent. Section 1.0026. MONEY HELD IN TRUST. Money held by the Trustee in trust hereunder need not be segregated from other funds, except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed with the Company. Section 1.0027. COMPENSATION AND REIMBURSEMENT. (a) The Company shall: (i) pay to the Trustee from time to time reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (ii) except as otherwise expressly provided herein, reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances reasonably incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel). except any such expense, disbursement or advance as may be attributable to its negligence, wilful misconduct or bad faith; and (iii) indemnify the Trustee and hold it harmless from and against any loss, liability or expense incurred without negligence, wilful misconduct or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the reasonable costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. (b) As security for the performance of the obligations of the Company under this Section, the Trustee shall have a Lien prior to the Bonds upon the Mortgaged Property and any money collected by the Trustee as proceeds of the Mortgaged Property, other than property and funds held in trust under Section 9.03. Section 1.0028. DISQUALIFICATION; CONFLICTING INTERESTS. If the Trustee shall have or acquire any conflicting interest within the meaning of the Trust Indenture Act, it shall either eliminate such conflicting interest or resign to the extent, in the manner and with the effect, and subject to the conditions, provided in the Trust Indenture Act and this Indenture. Section 1.0029. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY. There shall at all times be a Trustee hereunder which shall be: (a) a corporation organized and doing business under the laws of the United States of America, any state or territory thereof or the District of Columbia, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $50,000,000 and subject to supervision or examination by federal or state authority, or (b) if and to the extent permitted by the Commission by rule, regulation or order upon application, a corporation or other Person and doing business under the laws of a foreign government, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $50,000,000 or the Dollar equivalent of the applicable foreign currency and subject to supervision or examination by authority of such foreign government or a political subdivision thereof substantially equivalent to supervision or examination applicable to United States institutional trustees, and, in either case, qualified and eligible under this Article and not otherwise disqualified under Section 310(a)(5) of the Trust Indenture Act. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of such supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition' so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. Section 0.10. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 11.11. (b) The Trustee may resign at any time by giving written notice thereof to the Company. If the instrument of acceptance by a successor Trustee required by Section 11.11 shall not have been delivered to the Trustee within thirty (30) days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee. (c) The Trustee may be removed at any time by Act of the Holders of a majority in principal amount of the Bonds then Outstanding delivered to the Trustee and to the Company. (d) If at any time: (i) the Trustee shall fail to comply with Section 11.08 after written request therefor by the Company or by any Holder who has been a bona fide Holder for at least six months, or (ii) the Trustee shall cease to be eligible under Section 11.09 and shall fail to resign after written request therefor by the Company or by any such Holder, or (iii) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, (x) the Company by a Board Resolution may remove the Trustee, or (y) subject to Section 10.18, any Holder who has been a bona fide Holder for at least six months may, on behalf of itself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee or Trustees. (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause (other than as contemplated in clause (y) of subsection (d) of this Section), the Company, by a Board Resolution, shall take prompt steps to appoint a successor Trustee or Trustees and shall comply with the applicable requirements of Section 11.11. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee shall be appointed by Act of the Holders of a majority in principal amount of the Bonds then Outstanding delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment in accordance with the applicable requirements of Section 11.11, become the successor Trustee and to that extent supersede the successor Trustee appointed by the Company. If no successor Trustee shall have been so appointed by the Company or the Holders and accepted appointment in the manner required by Section 11.11, any Holder who has been a bona fide Holder of a Bond for at least six months may, on behalf of itself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. (f) The Company shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee by mailing written notice of such event by first-class mail, postage prepaid, to all Holders as their names and addresses appear in the Bond Register. Each notice shall include the name of the successor Trustee and the address of its corporate trust office. Section 0.11. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR. (a) In case of the appointment hereunder of a successor Trustee, every such successor Trustee so appointed shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on the request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of all sums owed to it, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. (b) Upon request of any such successor Trustee, the Company shall execute any instruments which fully vest in and confirm to such successor Trustee all rights, powers and trusts referred to in subsection (a) of this Section. (c) No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article. Section 0.12. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Bonds shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Bonds so authenticated with the same effect as if such successor Trustee had itself authenticated such Bonds. Section 0.13. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. If the Trustee shall be or become a creditor of the Company (or any other obligor upon the Bonds), the Trustee shall be subject to any and all applicable provisions of the Trust Indenture Act regarding the collection of claims against the Company (or such other obligor). For purposes of Section 311(b)(4) and (6) of the Trust Indenture Act: (a) "cash transaction" means any transaction in which full payment for goods or securities sold is made within seven days after delivery of the goods or securities in currency or in checks or other orders drawn upon banks or bankers and payable upon demand; and (b) "self-liquidating paper" means any draft, bill of exchange, acceptance or obligation which is made, drawn, negotiated or incurred by the Company (or any such obligor) for the purpose of financing the purchase, processing, manufacturing, shipment, storage or sale of goods, wares or merchandise and which is secured by documents evidencing title to, possession of, or a lien upon, the goods, wares or merchandise or the receivables or proceeds arising from the sale of the goods, wares or merchandise previously constituting the security, provided the security is received by the Trustee simultaneously with the creation of the creditor relationship with the Company (or any such obligor) arising from the making, drawing, negotiating or incurring of the draft, bill of exchange, acceptance or obligation. Section 0.14. CO-TRUSTEES AND SEPARATE TRUSTEES. (a) At any time or times, for the purpose of meeting the legal requirements of any jurisdiction in which any of the Mortgaged Property may at the time be located, the Company and the Trustee shall have power to appoint, and, upon the written request of the Trustee or of the Holders of at least a majority in aggregate principal amount of the Bonds then Outstanding, the Company shall for such purpose join with the Trustee in the execution and delivery of all instruments and agreements necessary or proper to appoint, one or more Persons approved by the Trustee either to act as co-trustee, jointly with the Trustee, of all or any part of the Mortgaged Property, or to act as separate trustee of any such property, in either case with such powers as may be provided in the instrument of appointment, and to vest in such Person, in the capacity aforesaid, any property, title, right or power deemed necessary or desirable, subject to the other provisions of this Section. If the Company does not join in such appointment within fifteen (15) days after the receipt by it of a request so to do, or if an Event of Default shall have occurred and be continuing, the Trustee alone shall have the power to make such appointment. (b) Should any written instrument or instruments from the Company be required by any co-trustee or separate trustee so appointed to more fully confirm to such co-trustee or separate trustee such property, title, right or power, any and all such instruments shall, on request, be executed, acknowledged and delivered by the Company. (c) Every co-trustee or separate trustee shall, to the extent permitted by law, but to such extent only, be appointed subject to the following conditions: (i) the Bonds shall be authenticated and delivered, and all rights, powers, duties and obligations hereunder in respect of the custody of securities, cash and other personal property held by, or required to be deposited or pledged with, the Trustee hereunder, shall be exercised solely, by the Trustee; (ii) the rights, powers, duties and obligations hereby conferred or imposed upon the Trustee in respect of any property covered by such appointment shall be conferred or imposed upon and exercised or performed either by the Trustee or by the Trustee and such co-trustee or separate trustee jointly, as shall be provided in the instrument appointing such co-trustee or separate trustee, except to the extent that under any law of any jurisdiction in which any particular act is to be performed, the Trustee shall be incompetent or unqualified to perform such act, in which event such rights, powers, duties and obligations shall be exercised and performed by such co-trustee or separate trustee; (iii) the Trustee at any time, by an instrument in writing executed by it, with the concurrence of the Company, may accept the resignation of or remove any co- trustee or separate trustee appointed under this Section, and, if an Event of Default shall have occurred and be continuing, the Trustee shall have power to accept the resignation of, or remove, any such co-trustee or separate trustee without the concurrence of the Company. Upon the written request of the Trustee, the Company shall join with the Trustee in the execution and delivery of all instruments and agreements necessary or proper to effectuate such resignation or removal. A successor to any co-trustee or separate trustee so resigned or removed may be appointed in the manner provided in this Section; (iv) no co-trustee or separate trustee hereunder shall be personally liable by reason of any act or omission of the Trustee, or any other such trustee hereunder; and (v) any Act of Holders delivered to the Trustee shall be deemed to have been delivered to each such co-trustee and separate trustee. Section 0.15. APPOINTMENT OF AUTHENTICATING AGENT. (a) The Trustee may appoint an Authenticating Agent or Agents with respect to the Bonds of one or more series, or any Tranche thereof, which shall be authorized to act on behalf of the Trustee to authenticate Bonds of such series or Tranche issued upon original issuance, exchange, registration of transfer or partial redemption thereof or pursuant to Section 3.06, and Bonds so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Wherever reference is made in this Indenture to the authentication and delivery of Bonds by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company and shall at all times be a corporation organized and doing business under the laws of the United States of America, any state or territory thereof or the District of Columbia or the Commonwealth of Puerto Rico, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $50,000,000 and subject to supervision or examination by federal or state authority. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section. (b) Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to the corporate agency or corporate trust business of an Authenticating Agent, shall continue to be an Authenticating Agent, provided such corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent. (c) An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and to the Company. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Trustee may appoint a successor Authenticating Agent which shall be acceptable to the Company. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section. (d) The Company agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section, and the Trustee shall have no liability for such payments. The Trustee shall not be responsible for any misconduct, bad faith or negligence on the part of any Authenticating Agent appointed with due care by the Trustee hereunder. (e) The provisions of Sections 3.08, 11.04 and 11.05 shall be applicable to each Authenticating Agent. (f) If an appointment with respect to the Bonds of one or more series, or any Tranche thereof, shall be made pursuant to this Section, the Bonds of such series or Tranche may have endorsed thereon, in addition to or in lieu of the Trustee's certificate of authentication, an alternate certificate of authentication substantially in the following form: This is one of the Bonds of the series designated therein referred to in the within-mentioned Indenture. Chemical Bank, as Trustee By____________________________ As Authenticating Agent By____________________________ Authorized Officer (g) If all of the Bonds of a series, or any Tranche thereof, may not be originally issued at one time, and if the Trustee does not have an office capable of authenticating Bonds upon original issuance located in a Place of Payment where the Company wishes to have Bonds of such series or such Tranche authenticated upon original issuance, the Trustee, if so requested by the Company in writing (which writing need not comply with Section 1.05 and need not be accompanied by an Opinion of Counsel), shall appoint, in accordance with this Section and in accordance with such procedures as shall be acceptable to the Trustee, an Authenticating Agent having an office in a Place of Payment designated by the Company with respect to such series of Bonds or such Tranche. ARTICLE TWELVE LISTS OF HOLDERS; REPORTS BY TRUSTEE AND COMPANY Section 1.0016. LISTS OF HOLDERS; PRESERVATION OF INFORMATION. Semiannually, not later than May 15 and November 15 in each year, and at such other times as the Trustee may request in writing, the Company shall furnish or cause to be furnished to the Trustee information as to the names and addresses of the Holders, and the Trustee shall preserve such information and similar information received by it in any other capacity and afford to the Holders access to information so preserved by it, all to such extent, if any, and in such manner as shall be required by the Trust Indenture Act. Every Holder of Bonds, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any agent of either of them shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Holders of Bonds in accordance with Section 312 of the Trust Indenture Act, or any successor section of such Act, regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under Section 312(b) of the Trust Indenture Act, or any successor section of such Act. Section 1.0017. REPORTS BY TRUSTEE AND COMPANY. Annually, not later than sixty (60) days after May 15 in each year commencing with the first May 15th following the first issuance of Bonds pursuant to Section 3.01, if required by Section 313(a) of the Trust Indenture Act, or any successor section of such Act, the Trustee shall transmit to the Holders and the Commission a report with respect to any events described in Section 313(a) of the Trust Indenture Act, or any successor section of such Act, in such manner and to the extent required by the Trust Indenture Act. The Trustee shall transmit to the Holders and the Commission, and the Company shall file with the Trustee and transmit to the Holders, such other information, reports and other documents, if any, at such times and in such manner, as shall be required by the Trust Indenture Act. A copy of each report required to be transmitted to the Holders pursuant to Section 313 of the Trust Indenture Act shall, at the time of such transmission to the Holders, be furnished to the Company and be filed by the Trustee with each stock exchange. if any, upon which the Bonds of any series, or any Tranche thereof, are listed and also with the Commission. The Company agrees to notify the Trustee when and as the Bonds of such series, of any such Tranche, become admitted to trading on any national securities exchange. ARTICLE THIRTEEN CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE Section 1.0018. COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS. The Company shall not consolidate with or merge into any other corporation or convey, or otherwise transfer or lease, subject to the Lien of this Indenture, the Mortgaged Property as or substantially as an entirety to any Person, unless: (a) such consolidation, merger, conveyance, other transfer or lease shall be on such terms as shall fully preserve in all material respects the Lien and security of this Indenture and the rights and powers of the Trustee and the Holders of the Bonds hereunder; (b) the corporation formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance or other transfer, or which leases, the Mortgaged Property as or substantially as an entirety shall be a corporation organized and existing under the laws of the United States of America, any state or territory thereof or the District of Columbia (such corporation being hereinafter sometimes called the ("Successor Corporation") and shall execute and deliver to the Trustee an indenture supplemental hereto, in form recordable and satisfactory to the Trustee, which: (i) in the case of a consolidation, merger, conveyance or other transfer, or in the case of a lease if the term thereof extends beyond the last Stated Maturity of the Bonds then Outstanding, contains an assumption by the Successor Corporation of the due and punctual payment of the principal of and premium, if any, and interest, if any, on all the Bonds then Outstanding and the performance and observance of every covenant and condition of this Indenture to be performed or observed by the Company, and (ii) in the case of a consolidation, merger, conveyance or other transfer, contains a grant, conveyance, transfer and mortgage by the Successor Corporation, of the same tenor of the Granting Clauses herein: (A) confirming the Lien of this Indenture on the Mortgaged Property (as constituted immediately prior to the time such transaction became effective) and subjecting to the Lien of this Indenture all property real, personal and mixed, thereafter acquired by the Successor Corporation which shall constitute an improvement, extension or addition to the Mortgaged Property (as so constituted) or a renewal, replacement or substitution of or for any part thereof, and (B) at the election of the Successor Corporation, subjecting to the Lien of this Indenture such property, real, personal or mixed, in addition to the property described in subclause (A) above, then owned or thereafter acquired by the Successor Corporation as the Successor Corporation shall, in its sole discretion, specify or describe therein, and the Lien confirmed or created by such grant, conveyance, transfer and mortgage shall have force, effect and standing similar to those which the Lien of this Indenture would have had if the Company had not been a party to such consolidation, merger, conveyance or other transfer and had itself, after the time such transaction became effective, purchased, constructed or otherwise acquired the property subject to such grant, conveyance, transfer and mortgage; (c) in the case of a lease, such lease shall be made expressly subject to termination by the Company or by the Trustee at any time during the continuance of an Event of Default, and also by the purchaser of the property so leased at any sale thereof hereunder, whether such sale be made under the power of sale hereby conferred or pursuant to judicial proceedings; and (d) the Company shall have delivered to the Trustee an Officer's Certificate and an Opinion of Counsel, each of which shall state that such consolidation, merger, conveyance or other transfer or lease, and such supplemental indenture, comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with. Section 1.0019. SUCCESSOR CORPORATION SUBSTITUTED. Upon any consolidation or merger or any conveyance or other transfer, subject to the Lien of this Indenture, of the Mortgaged Property as or substantially as an entirety in accordance with Section 13.01, the Successor Corporation shall succeed to, and be substituted for, and may exercise every power and right of, the Company under this Indenture with the same effect as if such Successor Corporation had been named as the "Company" herein. Without limiting the generality of the foregoing: (a) all property of the Successor Corporation then subject to the Lien of this Indenture, of the character described in Section 1.04(a), shall constitute Property Additions; (b) the Successor Corporation may execute and deliver to the Trustee, and thereupon the Trustee shall, subject to the provisions of Article Four, authenticate and deliver, Bonds upon the basis of Property Additions or upon any other basis provided in Article Four; and (c) the Successor Corporation may, subject to the applicable provisions of this Indenture, cause Property Additions to be applied to any other Authorized Purpose. All Bonds so executed by the Successor Corporation, and authenticated and delivered by the Trustee, shall in all respects be entitled to the same benefit of the Lien and security of this Indenture as all Bonds executed, authenticated and delivered prior to the time such consolidation, merger, conveyance or other transfer became effective. Section 1.0020. EXTENT OF LIEN HEREOF ON PROPERTY OF SUCCESSOR CORPORATION. Unless, in the case of a consolidation, merger, conveyance or other transfer contemplated by Section 13.01, the indenture supplemental hereto contemplated in clause (ii) of Section 13.01(b), or any other indenture, contains a grant, conveyance, transfer and mortgage by the Successor Corporation as described in subclause (B) thereof, neither this Indenture nor such supplemental indenture shall become or be required to become or be a Lien upon any of the properties then owned or thereafter acquired by the Successor Corporation except properties acquired from the Company in or as a result of such transaction and improvements, extensions and additions to such properties and renewals, replacements and substitutions of or for any part or parts of such properties. Section 1.0021. RELEASE OF COMPANY UPON CONVEYANCE OTHER TRANSFER. In the case of a conveyance or other transfer contemplated in Section 13.01, upon the satisfaction of all the conditions specified in Section 13.01 the Company (such term being used in this Section without giving effect to such transaction) shall be released and discharged from all obligations and covenants under this Indenture and on and under all Bonds then Outstanding unless the Company shall have delivered to the Trustee an instrument in which it shall waive such release and discharge. Section 1.0022. MERGER INTO COMPANY; EXTENT OF LIEN HEREOF. (a) Nothing in this Indenture shall be deemed to prevent or restrict any consolidation or merger after the consummation of which the Company would be the surviving or resulting corporation or any conveyance or other transfer or lease, subject to the Lien of this Indenture, of any part of the Mortgaged Property which does not constitute the entirety, or substantially the entirety, thereof. (b) Unless, in the case of a consolidation or merger described in subsection (a) of this Section, an indenture supplemental hereto shall otherwise provide, this Indenture shall not become or be, or be required to become or be, a Lien upon any of the properties acquired by the Company in or as a result of such transaction or any improvements, extensions or additions to such properties or any renewals, replacements or substitutions of or for any part or parts of such properties. ARTICLE FOURTEEN SUPPLEMENTAL INDENTURES Section 1.0023. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS. (a) Without the consent of any Holders, the Company and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes: (i) to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants of the Company herein and in the Bonds, all as provided in Article Thirteen; or (ii) to add one or more covenants of the Company or other provisions for the benefit of all Holders or for the benefit of the Holders of, or to remain in effect only so long as there shall be Outstanding, Bonds of one or more specified series, or one or more specified Tranches thereof, or to surrender any right or power herein conferred upon the Company; or (iii) to correct or amplify the description of any property at any time subject to the Lien of this Indenture, or better to assure, convey and confirm unto the Trustee any property subject or required to be subjected to the Lien of this Indenture, or to subject to the Lien of this Indenture additional property; or (iv) to convey, transfer and assign to the Trustee and to subject to the Lien of this Indenture with the same force and effect as if included in the Granting Clauses herein, property of subsidiaries of the Company used or to be used for one or more purposes which if owned by the Company would constitute property used or to be used for one or more of the Primary Purposes of the Company's Business, which property shall for all purposes of this Indenture be deemed to be property of the Company, together with such other provisions as may be appropriate to express the respective rights of the Trustee and the Company in regard thereto; (v) to change or eliminate any provision of this Indenture or to add any new provision to this Indenture; PROVIDED, HOWEVER, that if such change, elimination or addition shall adversely affect the interests of the Holders of Bonds of any series or Tranche in any material respect, such change, elimination or addition shall become effective with respect to such series or Tranche only when no Bond of such series or Tranche remains Outstanding; or (vi) to establish the form or terms of Bonds of any series or Tranche as contemplated by Sections 2.01 and 3.01; or (vii) to provide for the authentication and delivery of bearer bonds and coupons appertaining thereto representing interest, if any, thereon and for the procedures for the registration, exchange and replacement thereof and for the giving of notice to, and the solicitation of the vote or consent of, the holders thereof, and for any and all other matters incidental thereto; or (viii) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee or by a co-trustee or separate trustee; or (ix) to provide for the procedures required to permit the Company to utilize, at its option, a non-certificated system of registration for all, or any series or Tranche of, the Bonds; or (x) to change any place or places where (A) the principal of and premium, if any, and interest, if any, on all or any series of Bonds, or any Tranche thereof, shall be payable, (B) all or any series of Bonds, or any Tranche thereof, may be surrendered for registration of transfer, (C) all or any series of Bonds, or any Tranche thereof, may be surrendered for exchange, and (D) notices and demands to or upon the Company in respect of all or any series of Bonds, or any Tranche thereof, and this Indenture may be served; or (xi) to cure any ambiguity, to correct or supplement any provision herein which may be defective or inconsistent with any other provision herein; or to make any changes to the provisions hereof or to add other provisions with respect to matters or questions arising under this Indenture, provided that such other changes or additions shall not adversely affect the interests of the Holders of Bonds of any series or Tranche in any material respect; or (xii) to reflect changes in Generally Accepted Accounting Principles; or (xiii) to provide the terms and conditions of the exchange or conversion, at the option of the holders of Bonds of any series, of the Bonds of such series for or into Bonds of other series or stock or other securities of the Company or any other corporation; or (xiv) to change the words "General and Refunding Mortgage Bonds" to "First Mortgage Bonds" in the descriptive title of all Outstanding Bonds at any time after the discharge of the 1936 Mortgage; or (xv) to comply with the rules or regulations of any national securities exchange on which any of the Bonds may be listed; or (xvi) to modify Section 3.01(a) to change the aggregate principal amount of Bonds which may be authenticated and delivered under this Indenture. (b) Without limiting the generality of the foregoing, if the Trust Indenture Act as in effect at the date of the execution and delivery of this Indenture or at any time thereafter shall be amended and: (i) if any such amendment shall require one or more changes to any provisions hereof or the inclusion herein of any additional provisions, or shall by operation of law be deemed to effect such changes or incorporate such provisions by reference or otherwise, this Indenture shall be deemed to have been amended so as to conform to such amendment to the Trust Indenture Act, and the Company and the Trustee may, without the consent of any Holders, enter into an indenture supplemental hereto to evidence such amendment hereof; or (ii) if any such amendment shall permit one or more changes to, or the elimination of, any provisions hereof which, at the date of the execution and delivery hereof or at any time thereafter, are required by the Trust Indenture Act to be contained herein or are contained herein to reflect any provisions of the Trust Indenture Act as in effect at such date, the Company and the Trustee may, without the consent of any Holders, enter into an indenture supplemental hereto to effect such changes or elimination. Section 1.0024. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS. (a) With the consent of the Holders of not less than a majority in aggregate principal amount of the Bonds of all series then Outstanding under this Indenture, considered as one class, by Act of said Holders delivered to the Company and the Trustee, the Company, when authorized by a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, this Indenture; PROVIDED, HOWEVER, that if there shall be Bonds of more than one series Outstanding hereunder and if a proposed supplemental indenture shall directly affect the rights of the Holders of Bonds of one or more, but less than all, of such series, then the consent only of the Holders of a majority in aggregate principal amount of the Outstanding Bonds of all series so directly affected, considered as one class, shall be required; and PROVIDED, FURTHER, that if the Bonds of any series shall have been issued in more than one Tranche and if the proposed supplemental indenture shall directly affect the rights of the Holders of Bonds of one or more, but less than all, of such Tranches, then the consent only of the Holders of a majority in aggregate principal amount of the Outstanding Bonds of all Tranches so directly affected, considered as one class, shall be required; and PROVIDED, FURTHER, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Bond of each series or Tranche so directly affected: (i) change the Stated Maturity of the principal of, or any installment of principal of or interest on, any Bond, or reduce the principal amount thereof or the rate of interest thereon (or the amount of any installment of interest thereon) or change the method of calculating such rate or reduce any premium payable upon the redemption thereof, or reduce the amount of the principal of a Discount Bond that would be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 10.02(a), or change the coin or currency (or other property), in which any Bond or any premium or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date); or (ii) permit the creation of any Lien ranking prior to the Lien of this Indenture with respect to all or substantially all of the Mortgaged Property or terminate the Lien of this Indenture on all or substantially all of the Mortgaged Property, or deprive such Holder of the benefit of the security of the Lien of this Indenture; or (iii) reduce the percentage in principal amount of the Outstanding Bonds of such series or Tranche, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver of compliance with any provision of this Indenture or of any default hereunder and its consequences, or reduce the requirements of Section 15.04(a) for quorum or voting; or (iv) modify any of the provisions of this Section, Section 6.10 or Section 10.17, except to increase the percentages in principal amount referred to in this Section or such other Sections or to provide that other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Bond affected thereby. (b) A supplemental indenture which (i) changes or eliminates any covenant or other provision of this Indenture which has expressly been included solely for the benefit of the Holders of, or which is to remain in effect only so long as there shall be Outstanding, Bonds of one or more specified series, or one or more Tranches thereof, or (ii) modifies the rights of the Holders of Bonds of such series or Tranches with respect to such covenant or other provision, shall be deemed not to affect the rights under this Indenture of the Holders of Bonds of any other series or Tranche. (c) It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. Section 14.03. EXECUTION OF SUPPLEMENTAL INDENTURES. In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 11.01) shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties, immunities or liabilities under this Indenture or otherwise. Section 14.04. EFFECT OF SUPPLEMENTAL INDENTURES. Upon the execution of any supplemental indenture under this Article this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Bonds theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. Any supplemental indenture permitted by this Article may restate this Indenture in its entirety, and, upon the execution and delivery thereof, any such restatement shall supersede this Indenture as theretofore in effect for all purposes. Section 14.05. CONFORMITY WITH TRUST INDENTURE ACT. Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect. Section 14.06. REFERENCE IN BONDS TO SUPPLEMENTAL INDENTURES. Bonds of any series, or any Tranche thereof, authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Bonds of any series, or any Tranche thereof, so modified as to conform, in the opinion of the Trustee and the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered in exchange for Outstanding Bonds of such series or Tranche. ARTICLE FIFTEEN MEETINGS OF HOLDERS; ACTION WITHOUT MEETING Section 1.0025. PURPOSES FOR WHICH MEETINGS MAY BE CALLED. A meeting of Holders of Bonds of one or more, or all, series, or any Tranche or Tranches thereof, may be called at any time and from time to time pursuant to this Article to make, give or take any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be made, given or taken by Holders of Bonds of such series or Tranches. Section 1.0026. CALL, NOTICE AND PLACE OF MEETINGS. (a) The Trustee may at any time call a meeting of Holders of Bonds of one or more, or all, series, or any Tranche or Tranches thereof, for any purpose specified in Section 15.01, to be held at such time and (except as provided in subsection (b) of this Section) at such place in the Borough of Manhattan as the Trustee shall determine, or, with the approval of the Company, at any other place. Notice of every such meeting, setting forth the time and the place of such meeting and in general terms the action proposed to be taken at such meeting, shall be given, in the manner provided in Section 1.09, not less than twenty- one (21) nor more than one hundred and eighty (180) days prior to the date fixed for the meeting. (b) The Trustee may be asked to call a meeting of the Holders of Outstanding Bonds of one or more, or all, series, or any Tranche or Tranches thereof, by the Company or by the Holders of 25% in aggregate principal amount of all of such series and Tranches, considered as one class, for any purpose specified in Section 15.01, by written request setting forth in reasonable detail the action proposed to be taken at the meeting. If the Trustee shall have been asked by the Company to call such a meeting, the Company shall determine the time and place for such meeting by giving notice thereof in the manner provided in subsection (a) of this Section, or shall direct the Trustee, in the name and at the expense of the Company, to give such notice. If the Trustee shall have been asked to call such a meeting by Holders in accordance with this subsection (b), and the Trustee shall not have given the notice of such meeting within twenty-one (21) days after receipt of such request or shall not thereafter proceed to cause the meeting to be held as provided herein, then the Holders of Bonds of such series and Tranches in the amount above specified, may determine the time and the place in the Borough of Manhattan, or in such other place as shall be determined or approved by the Company, for such meeting and may call such meeting for such purposes by giving notice thereof as provided in subsection (a) of this Section. (c) Any meeting of Holders of Bonds of one or more, or all, series, or any Tranche or Tranches thereof, shall be valid without notice if the Holders of all Outstanding Bonds of such series or Tranches are present in person or by proxy and if representatives of the Company and the Trustee are present, or if notice is waived in writing before or after the meeting by the Holders of all Outstanding Bonds of such series, or any Tranche or Tranches thereof, or by such of them as are not present at the meeting in person or by proxy, and by the Company. Section 1.0027. PERSONS ENTITLED TO VOTE AT MEETINGS; RECORD DATE. To be entitled to vote at any meeting of Holders of Bonds of one or more, or all, series, or any Tranche or Tranches thereof, a Person shall be (a) a Holder of one or more Outstanding Bonds of such series or Tranches on the record date fixed as provided below, or (b) a Person appointed by an instrument in writing by a Holder or Holders of one or more Outstanding Bonds of such series or Tranches on the record date fixed as provided below as proxy for such Holder or Holders. The only Persons who shall be entitled to attend any meeting of Holders of Bonds of any series or Tranche shall be the Persons entitled to vote at such meeting, any representatives of the Trustee and its counsel and any representatives of the Company and its counsel. The Company may fix in advance a record date in accordance with Section 1.07(g) for the determination of Holders who are entitled to vote at a meeting called pursuant to Section 15.02 and, if the Company does not so fix a record date, the Trustee may do so. Section 1.0028. QUORUM; ACTION. (a) The Persons entitled to vote a majority in aggregate principal amount of the Outstanding Bonds of the series and Tranches with respect to which a meeting shall have been called as hereinbefore provided, considered as one class, shall constitute a quorum for a meeting of Holders of Bonds of such series and Tranches; PROVIDED, HOWEVER, that if any action is to be taken at such meeting which this Indenture expressly provides may be taken by the Holders of a specified percentage, which is less than a majority, in principal amount of the Outstanding Bonds of such series and Tranches, considered as one class, the Persons entitled to vote such specified percentage in principal amount of the Outstanding Bonds of such series and Tranches, considered as one class, shall constitute a quorum. In the absence of a quorum within one hour of the time appointed for any such meeting, the meeting shall, if convened at the request of Holders of Bonds of such series and Tranches, be dissolved. In any other case the meeting may be adjourned for such period as may be determined by the chairman of the meeting prior to the adjournment of such meeting. In the absence of a quorum at any such adjourned meeting, such adjourned meeting may be further adjourned for such period as may be determined by the chairman of the meeting prior to the adjournment of such adjourned meeting. Except as provided by Section 15.05(e), notice of the reconvening of any meeting adjourned for more than thirty (30) days shall be given as provided in Section 1.09 not less than ten (10) days prior to the date on which the meeting is scheduled to be reconvened. Notice of the reconvening of an adjourned meeting shall state expressly the percentage, as provided above, of the principal amount of the Outstanding Bonds of such series and Tranches which shall constitute a quorum. (b) Except as limited by Section 14.02, any resolution presented to a meeting or adjourned meeting duly reconvened at which a quorum is present as aforesaid may be adopted only by the affirmative vote of the Holders of a majority in aggregate principal amount of the Outstanding Bonds of the series and Tranches with respect to which such meeting shall have been called, considered as one class; PROVIDED, HOWEVER, that, except as so limited, any resolution with respect to any action which this Indenture expressly provides may be taken by the Holders of a specified percentage, which is less than a majority, in principal amount of the Outstanding Bonds of such series and Tranches, considered as one class, may be adopted at a meeting or an adjourned meeting duly reconvened and at which a quorum is present as aforesaid by the affirmative vote of the Holders of such specified percentage in principal amount of the Outstanding Bonds of such series and Tranches, considered as one class. (c) Any resolution passed or decision taken at any meeting of Holders of Bonds duly held in accordance with this Section shall be binding on all the Holders of Bonds of the series and Tranches with respect to which such meeting shall have been held, whether or not present or represented at the meeting. Section 1.0029. ATTENDANCE AT MEETINGS; DETERMINATION OF VOTING RIGHTS; CONDUCT AND ADJOURNMENT OF MEETINGS. (a) Attendance at meetings of Holders of Bonds may be in person or by proxy; and, to the extent permitted by law, any such proxy shall remain in effect and be binding upon any future Holder of the Bonds with respect to which it was given unless and until specifically revoked by the Holder or future Holder of such Bonds before being voted; provided that if a record date has been established in accordance with Section 15.03, only a Holder of Bonds as to which a proxy was given who was the Holder thereof on such record date may subsequently revoke such proxy. (b) Notwithstanding any other provisions of this Indenture, the Trustee may make such reasonable regulations as it may deem advisable for any meeting of Holders of Bonds in regard to proof of the holding of such Bonds and of the appointment of proxies and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall deem appropriate. Except as otherwise permitted or required by any such regulations, the holding of Bonds shall be proved in the manner specified in Section 1.07 and the appointment of any proxy shall be proved in the manner specified in Section 1.07. Such regulations may provide that written instruments appointing proxies, regular on their face, may be presumed valid and genuine without the proof specified in Section 1.07 or other proof. (c) The Trustee shall, by an instrument in writing, appoint a temporary chairman of the meeting, unless the meeting shall have been called by the Company or by Holders as provided in Section 15.02(b), in which case the Company or the Holders of Bonds of the series and Tranches calling the meeting, as the case may be, shall in like manner appoint a temporary chairman. A permanent chairman and a permanent secretary of the meeting shall be elected by vote of the Persons entitled to vote a majority in aggregate principal amount of the Outstanding Bonds of all series and Tranches represented at the meeting, considered as one class. (d) At any meeting each Holder or proxy shall be entitled to one vote for each $1,000 principal amount of Outstanding Bonds held or represented by him; PROVIDED, HOWEVER, that no vote shall be cast or counted at any meeting in respect of any Bond challenged as not Outstanding and ruled by the chairman of the meeting to be not Outstanding. The chairman of the meeting shall have no right to vote, except as a Holder of a Bond or proxy. (e) Any meeting duly called pursuant to Section 15.02 at which a quorum is present may be adjourned from time to time by Persons entitled to vote a majority in aggregate principal amount of the Outstanding Bonds of all series and Tranches represented at the meeting, considered as one class; and the meeting may be held as so adjourned without further notice. Section 1.0030. COUNTING VOTES AND RECORDING ACTION OF MEETINGS. The vote upon any resolution submitted to any meeting of Holders shall be by written ballots on which shall be subscribed the signatures of the Holders or of their representatives by proxy and the principal amounts and serial numbers of the Outstanding Bonds, of the series and Tranches with respect to which the meeting shall have been called, held or represented by them. The permanent chairman of the meeting shall appoint two inspectors of votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports of all votes cast at the meeting. A record of the proceedings of each meeting of Holders shall be prepared by the secretary of the meeting and there shall be attached to said record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one or more persons having knowledge of the facts setting forth a copy of the notice of the meeting and showing that said notice was given as provided in Section 15.02 and, if applicable, Section 15.04. At least two copies shall be signed and verified by the affidavits of the permanent chairman and secretary of the meeting and one such copy shall be delivered to the Company, and the other to the Trustee to be preserved by the Trustee, the latter to have attached thereto the ballots voted at the meeting. Any record so signed and verified shall be conclusive evidence of the matters therein stated. Section 1.0031. ACTION WITHOUT MEETING. In lieu of a vote of Holders at a meeting as hereinbefore contemplated in this Article, any request, demand, authorization, direction, notice, consent, waiver or other action may be made, given or taken by Holders by written instruments as provided in Section 1.07. ARTICLE SIXTEEN IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS Section 1.0032. LIABILITY SOLELY CORPORATE. No recourse shall be had for the payment of the principal of or premium if any, or interest, if any, on any Bonds, or any part thereof, or for any claim based thereon or otherwise in respect thereof, or of the indebtedness represented thereby, or upon any obligation, covenant or agreement under this Indenture, against any incorporator, stockholder, officer or director, as such, past, present or future of the Company or of any predecessor or successor corporation (either directly or through the Company or a predecessor or successor corporation), whether by virtue of any constitutional provision, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly agreed and understood that this Indenture and all the Bonds are solely corporate obligations, and that no personal liability whatsoever shall attach to, or be incurred by, any incorporator, stockholder, officer or director, past, present or future, of the Company or of any predecessor or successor corporation, either directly or indirectly through the Company or any predecessor or successor corporation, because of the indebtedness hereby authorized or under or by reason of any of the obligations, covenants or agreements contained in this Indenture or in any of the Bonds or to be implied herefrom or therefrom, and that any such personal liability is hereby expressly waived and released as a condition of, and as part of the consideration for, the execution of this Indenture and the issuance of the Bonds. --------------------------------------------- This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed, all as of the day and year first above written. BANGOR HYDRO-ELECTRIC COMPANY By: /s/ Robert S. Briggs --------------------------- Title: President [Corporate Seal] Attest: /s/ Frederick S. Samp - ------------------------ Clerk CHEMICAL BANK, as Trustee By: /s/ W. B. Dodge ------------------------ Title: Vice President ------------------------- [Corporate Seal] Attest: /s/ Wanda Eiland ----------------------- Trust Officer STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On June 28, 1995 before me personally appeared the above-named ROBERT S. BRIGGS, a PRESIDENT, and FREDERICK S. SAMP, a CLERK, of Bangor Hydro-Electric Company, the corporation that executed the within and foregoing instrument, and severally acknowledged said instrument to be their free act and deed in their said capacities and the free act and deed of the said corporation. IN WITNESS WHEREOF, I have hereunto set my hand and seal on the day and year first above mentioned. /s/ Matthew H. Frances -------------------------- Notary Public #31-5032254 My Commission expires August 22, 1996 [NOTARIAL SEAL] STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On June 27, 1995 before me personally appeared the above-named W. B. Dodge, a Vice-President, and Wanda Eiland, a Trust Officer of Chemical Bank, the national banking institution that executed the within and foregoing instrument as Trustee, and severally acknowledged said instrument to be their free act and deed in their said capacities and the free act and deed of the said national banking institution, as such Trustee. IN WITNESS WHEREOF, I have hereunto set my hand and seal on the day and year first above mentioned. /s/ Emily Fayan ------------------------ Notary Public #24-4737006 My Commission expires December 31, 1995 [NOTARIAL SEAL] EXHIBIT A DESCRIPTION OF PROPERTY All land and interests in land subject to the lien of and referenced in the Mortgage and Deed of Trust, dated as of July 1, 1936, between Bangor Hydro-Electric Company and City Bank Farmers Trust Company (as predecessor to Citibank, N.A.), as supplemented and amended by duly recorded indentures supplemental thereto (and related real estate property descriptions) (the "1936 Mortgage") except land and interests in land which have been specifically released from such lien from time to time; and as originally recorded in the following places in the State of Maine: in Aroostook County Registry of Deeds, Book 444, Page 130; in Hancock County Registry of Deeds, in Book 654, Page 79; in Penobscot County Registry of Deeds, in Book 1117, Page 3, in Piscataquis County Registry of Deeds, in Book 257, Page 241, in Washington County Registry of Deeds, in Book 418, Page 102; in Cumberland County Registry of Deeds, in Book 3957, Page 1; in Waldo County Registry of Deeds, in Book 786, Page 119; in the City Clerk's Office for the City of Bangor, in Book 19, Page 304; and in the Rockingham County Registry of Deeds in the State of New Hampshire, in Book 2351, Page 203. Such land and interests in land are further described in certain supplemental indentures, dated respectively as of March 1, 1938, recorded in the Penobscot County Registry of Deeds in Book 1129, Page 380; January 17, 1939, recorded in the Penobscot County Registry of Deeds in Book 1134, Page 445; March 1, 1941, recorded in the Penobscot County Registry of Deeds in Book 1167, Page 226; February 11, 1942, recorded in the Penobscot County Registry of Deeds in Book 1177, Page 412; July 10, 1945, recorded in the Penobscot County Registry of Deeds in Book 1223, Page 382; July 8, 1947, recorded in the Penobscot County Registry of Deeds in Book 1268, Page 48; September 13, 1949, recorded in the Penobscot County Registry of Deeds in Book 1308, Page 446; May 20, 1952, recorded in the Penobscot County Registry of Deeds in Book 1363, Page 193; December 1, 1984, recorded in the Penobscot County Registry of Deeds in Book 3608, Page 117; March 15, 1989, recorded in the Penobscot County Registry of Deeds in Book 4408, Page 165; July 3, 1990, recorded in the Penobscot County Registry of Deeds in Book 4678, Page 205; March 31, 1992, recorded in the Penobscot County Registry of Deeds in Book 5037, Page 229; October 22, 1992, recorded in the Penobscot County Registry of Deeds in Book 5192, Page 1; and June 23, 1995. Additional supplemental indentures are recorded in certain other registries of deeds in the State of Maine. Recording information for such registrations are on file at the offices of the Company. EXHIBIT B Modifications to the 1936 Mortgage 1. The modification of Section 1 by modifying the definition of "net earnings of the Company" to incorporate the definition of "Adjusted Net Earnings" from the General and Refunding Mortgage Indenture and Deed of Trust, dated as of June 1, 1995. 2. The modification of the sixth paragraph of Section 27 of the 1936 Mortgage by (i) substituting "18 months" for "15 months," and (ii) deleting the phrase "at least twice the interest charges" and inserting in lieu thereof the phrase "one and one-half (1.50) times the interest charges." 3. The modification of Section 49 of the 1936 Mortgage by (i) deleting the last two sentences of the first paragraph thereof, and (ii) adding the words "in excess of $300,000 for any one loss" before the words "being payable to the Trustee as its interest may appear" in the first sentence of the first paragraph thereof. 4. The deletion of ARTICLE SEVENTH of the 1936 Mortgage in its entirety and all references thereto. 5. The modification of Section 86 of the 1936 Mortgage by deleting all provisions thereof after subsection (b). 6. The modification of Section 87 of the 1936 Mortgage by deleting the second paragraph thereof, beginning "Provided, however . . .". 7. The modification of Section 88 of the 1936 Mortgage by deleting (i) all provisions therein which relate to, incorporate or depend upon any provisions of Sections 86 and 87 referred to in paragraphs 5 and 6 above, and (ii) the last sentence thereof. EX-4 7 EXHIBIT 4.5 BANGOR HYDRO-ELECTRIC COMPANY TO CHEMICAL BANK, AS TRUSTEE _____________ SUPPLEMENTAL INDENTURE DATED AS OF JUNE 15, 1995 TO GENERAL AND REFUNDING MORTGAGE INDENTURE AND DEED OF TRUST DATED AS OF JUNE 1, 1995 SUPPLEMENTAL INDENTURE, dated as of June 15, 1995 (the "Supplemental Indenture"), made by and between BANGOR HYDRO-ELECTRIC COMPANY, a corporation organized and existing under the laws of the State of Maine (the "Company"), the post office address of which is 33 State Street, Bangor, Maine 04401, and CHEMICAL BANK, a corporation organized and existing under the laws of the State of New York (the "Trustee"), as Trustee under the General and Refunding Mortgage Indenture and Deed of Trust dated as of June 1, 1995, hereinafter mentioned, the post office address of which is 450 West 33rd Street, New York, New York 10001; WHEREAS, the Company has heretofore executed and delivered its General and Refunding Mortgage Indenture and Deed of Trust dated as of June 1, 1995 (the "Indenture"), to the Trustee, for the security of the bonds of the Company to be issued thereunder (the "Bonds"); and WHEREAS, the Company desires to create a new series of Bonds to be issued under the Indenture, to be known as General and Refunding Mortgage Bonds, Series A (the "Series A Bonds"); and WHEREAS, pursuant to a Loan Agreement dated as of June 1, 1995 between the Finance Authority of Maine ("FAME") and the Company (the "Loan Agreement"), One Hundred and Twenty-six Million Dollars ($126,000,000) aggregate principal amount of Series A Bonds are to be registered in the name of FAME, and assigned to First Fidelity Bank, the trustee (hereinafter, together with any successor trustee, called the "FAME Trustee") under a Trust Indenture, dated as of June 1, 1995 between FAME and the FAME Trustee (the "FAME Indenture"); and WHEREAS, the Series A Bonds are to be held in pledge to evidence and secure the obligations of the Company under the Loan Agreement and in particular for the security of the payment of the principal and interest on One Hundred and Twenty-six Million Dollars ($126,000,000) aggregate principal amount of Finance Authority of Maine Taxable Electric Rate Stabilization Revenue Notes, Series 1995A (Bangor Hydro-Electric Company) (the "FAME Bonds") being issued under the FAME Indenture and Additional Payments (as defined in the Loan Agreement); and WHEREAS, the Company, in the exercise of the powers and authority conferred upon and reserved to it under the provisions of the Indenture, has duly resolved and determined to make, execute and deliver to the Trustee a Supplemental Indenture in the form hereof for the purposes herein provided; and WHEREAS, all conditions and requirements necessary to make this Supplemental Indenture a valid, binding and legal instrument have been done, performed and fulfilled and the execution and delivery hereof have been in all respects duly authorized; NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH: THAT BANGOR HYDRO-ELECTRIC COMPANY, in consideration of the service by the Trustee, and its successors, under the Indenture and of One Dollar to it duly paid by the Trustee at or before the ensealing and delivery of these presents, the receipt whereof is hereby acknowledged, hereby covenants and agrees to and with the Trustee and its successors in the trust under the Indenture, for the benefit of those who shall hold the Bonds as follows: ARTICLE I. DESCRIPTION OF THE SERIES A BONDS. SECTION 1. The Company hereby creates a new series of Bonds to be known as "General and Refunding Mortgage Bonds, Series A" (hereinafter referred to as the "Series A Bonds"). The Series A Bonds shall be executed, authenticated and delivered in accordance with the provisions of, and shall in all respects be subject to, all of the terms, conditions and covenants of the Indenture, as supplemented and modified. The Series A Bonds shall be evidenced by registered Bonds in the aggregate principal amount of One Hundred and Twenty-six Million Dollars. The commencement of the first interest period for the Series A Bonds shall be June 30, 1995. The Series A Bonds shall mature as provided in Article III and shall bear interest at the rate of seven and three-hundredths percent (7.03%) per annum, payable semi-annually on the first day of January and the first day of July in each year, commencing January 1, 1996. The Series A Bonds shall upon issuance be delivered by the Company to and be registered in the name of FAME, shall be assigned by FAME to the FAME Trustee and shall be transferable thereafter only (i) to the Company as provided herein, or (ii) as required to effect an assignment thereof to a successor trustee under the FAME Indenture. To the extent that the Company, pursuant to the Loan Agreement, furnishes directly to the FAME Trustee at its principal corporate trust office all funds required for any and all payments of principal of and interest on the FAME Bonds, such payments shall be deemed to constitute corresponding payments of interest and installments of principal on the Series A Bonds. Unless payment then is or has been made pursuant to the next preceding paragraph, payment of the principal of and interest on the Series A Bonds shall be made in any coin or currency of the United States which at the time of payment is legal tender for the payment of public and private debts at the principal corporate trust office of the FAME Trustee, by wire transfer to the FAME Trustee for the account of FAME in funds immediately available at said office of the FAME Trustee, in each case on or prior to 11:00 a.m. of the second Business Day preceding the due date for such payment. Any such payment of principal or interest shall be credited as and used to make a corresponding payment of principal and interest on the FAME Bonds. The Trustee may at any and all times conclusively assume that the obligations of the Company to make payments with respect to the principal of and interest on Series A Bonds, so far as such payments shall at the time have become due, has been fully satisfied and discharged unless and until the Trustee shall have received a written notice from the FAME Trustee signed by one of its officers, stating (i) that the Company is in arrears as to the payments required to be made by it to the FAME Trustee pursuant to the Loan Agreement and (ii) the amount of the arrearage. The FAME Trustee, by acceptance of the assignment of the Series A Bonds, agrees that it shall upon the payment or cancellation of any FAME Bonds (other than through the application of funds drawn from the Capital Reserve Fund (as defined in the Loan Agreement) or otherwise provided directly by FAME (and in each case not reimbursed by the Company)), deliver to the Company a like principal amount of Series A Bonds, and shall surrender the remaining Series A Bonds to the Company upon final payment of the FAME Bonds. Any notice affecting or relating to the Series A Bonds required or permitted to be given under the Indenture to Holders may be given by mailing the same by first class mail, postage prepaid, to the FAME Trustee at 10 State House Square, Hartford, Connecticut 06103 and to FAME at 83 Western Avenue, Augusta, Maine 04330-7226 or at such other address as may be provided to the Trustee by written notice from the FAME Trustee or FAME, as the case may be. The certificate of the Trustee that such mailing has been effective shall be conclusive evidence of compliance with the requirements of this Section, whether or not the FAME Trustee or FAME receive such notice. The Trustee hereunder shall, by virtue of its office as such Trustee, be the Registrar and Transfer Agent of the Company for the purpose of registering and transferring Series A Bonds, and shall maintain a Bond register for the Series A Bonds. SECTION 2. The Series A Bonds and the Trustee's Certificate of Authentication shall be substantially in the following forms, respectively: [FORM OF FACE OF BOND] NOTE: THE HOLDER OF THIS BOND BY ACCEPTANCE HEREOF AGREES TO RESTRICTIONS ON TRANSFER OF THIS BOND AS SET FORTH BELOW. IN ADDITION, THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND SUCH SECURITY MAY NOT BE TRANSFERRED WITHOUT COMPLIANCE WITH APPLICABLE SECURITIES LAWS. THIS BOND IS NOT TRANSFERABLE EXCEPT (I) TO THE COMPANY OR (II) TO THE TRUSTEE OR SUCCESSOR TRUSTEE UNDER THE TRUST INDENTURE DATED AS OF JUNE 1, 1995 BETWEEN THE FINANCE AUTHORITY OF MAINE AND FIRST FIDELITY BANK, AS TRUSTEE. BANGOR HYDRO-ELECTRIC COMPANY GENERAL AND REFUNDING MORTGAGE BOND, SERIES A No. A- $___________ BANGOR HYDRO-ELECTRIC COMPANY, a corporation organized and existing under the laws of the State of Maine (the "Company", which term shall include any successor corporation as defined in the Indenture hereinafter referred to), for value received, hereby promises to pay to the Finance Authority of Maine or registered assigns, the principal sum of _______________ Dollars on the 1st day of July, ____, in any coin or currency of the United States of America which at the time of payment is legal tender for public and private debts, and to pay interest thereon in like coin or currency from June 30, 1995, payable semi-annually, on the first days of January and July in each year, commencing January 1, 1996, at the rate of seven and three-hundredths per cent (7.03%) per annum, until the Company's obligation with respect to the payment of such principal shall be discharged as provided in the Indenture hereinafter mentioned. This bond shall not be entitled to any benefit under the Indenture or any indenture supplemental thereto, or become valid or obligatory for any purpose, until the form of certificate of authentication endorsed hereon shall have been signed by or on behalf of Chemical Bank, the Trustee under the Indenture, or a successor trustee thereto under the Indenture, or by an authenticating agent duly appointed by the Trustee in accordance with the terms of the Indenture. The provisions of this bond are continued on the reverse hereof and such continued provisions shall for all purposes have the same effect as though fully set forth at this place. IN WITNESS WHEREOF, Bangor Hydro-Electric Company has caused this bond to be signed (manually or by facsimile signature) in its name by an Authorized Executive Officer, as defined in the aforesaid Indenture, and its corporate seal (or a facsimile thereof) to be hereto affixed and attested (manually or by facsimile signature) by an Authorized Executive Officer, as defined in such Indenture, on the date hereof. Dated ________________ BANGOR HYDRO-ELECTRIC COMPANY, By ------------------------------ Authorized Executive Officer ATTEST: ____________________________ Authorized Executive Officer [FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION] This is one of the Bonds of the series designated therein referred to in the within-mentioned Indenture. CHEMICAL BANK, Trustee By ------------------------ Authorized Officer [FORM OF REVERSE OF BOND] This bond is one of the bonds of the Company (the "Bonds") issued and to be issued under and secured by a General and Refunding Mortgage Indenture and Deed of Trust (the "Indenture"), dated as of June 1, 1995, executed by the Company to Chemical Bank, as Trustee (the "Trustee"), to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the properties mortgaged and pledged, the nature and extent of the security, the rights of registered owners of the Bonds and of the Trustee in respect thereof, and the terms and conditions upon which the Bonds are, and are to be, secured. The Bonds may be issued in series, for various principal sums, may mature at different times, may bear interest at different rates and may otherwise vary as provided in the Indenture. This Bond is one of a series designated as the "General and Refunding Mortgage Bonds, Series A" (the "Series A Bonds") of the Company, issued under and secured by the Indenture and described in the supplemental indenture dated as of June 15, 1995, between the Company and the Trustee (the "Supplemental Indenture"). This Bond is issued to the Finance Authority of Maine ("FAME") to evidence and secure the obligation of the Company to pay the principal of and interest on a like amount of bonds (the "FAME Bonds") issued under a Trust Indenture dated as of June 1, 1995 ("FAME Indenture") between FAME and First Fidelity Bank, as trustee ("FAME Trustee"), pursuant to a Loan Agreement dated as of June 1, 1995 (the "Loan Agreement") and to secure Additional Payments (as defined in the Loan Agreement). To the extent that the Company, pursuant to the Loan Agreement, furnishes directly to the FAME Trustee at its principal corporate trust office all funds required for any and all payments of principal of and interest on the FAME Bonds, such payments shall be deemed to constitute corresponding payments of interest and installments of principal on this Series A Bond. Unless payment then is or has been made pursuant to the next preceding paragraph, payment of the principal of and interest on this Series A Bond shall be made in any coin or currency of the United States which at the time of payment is legal tender for the payment of public and private debts at the principal corporate trust office of the FAME Trustee, by wire transfer to the FAME Trustee for the account of FAME in funds immediately available at said office of the FAME Trustee, in each case on or prior to 11:00 a.m. of the second Business Day preceding the due date for such payment. Any such payment of principal or interest shall be credited as and used to make a corresponding payment of principal and interest on the FAME Bonds. The Trustee may at any and all times conclusively assume that the obligations of the Company to make payments with respect to the principal of and interest on this Series A Bond, so far as such payments shall at the time have become due, has been fully satisfied and discharged unless and until the Trustee shall have received a written notice from the FAME Trustee signed by one of its officers, stating (i) that the Company is in arrears as to the payments required to be made by it to the FAME Trustee pursuant to the Loan Agreement and (ii) the amount of the arrearage. The FAME Trustee, by acceptance of the assignment of this Series A Bond, agrees that it shall upon the payment or cancellation of a portion of the principal amount of the FAME Bonds (other than through the application of funds drawn from the Capital Reserve Fund (as defined in the Loan Agreement) or otherwise provided directly by FAME (and in each case not reimbursed by the Company)), deliver to the Company a like principal amount of Series A Bonds, and shall surrender the remaining Series A Bonds to the Company upon final payment of the FAME Bonds. Any notice affecting or relating to the Series A Bonds required or permitted to be given under the Indenture to Holders may be given by mailing the same by first class mail, postage prepaid, to the FAME Trustee and FAME. The certificate of the Trustee that such mailing has been effective shall be conclusive evidence of compliance with the requirements of the Supplemental Indenture, whether or not the FAME Trustee or FAME receive such notice. The Trustee hereunder shall, by virtue of its office as such Trustee, be the Registrar and Transfer Agent of the Company for the purpose of registering and transferring Series A Bonds, and shall maintain a Bond register for the Series A Bonds. As more fully described in the Supplemental Indenture, Series A Bonds shall be redeemed in whole by payment of the principal amount hereof plus accrued interest hereon, if any, to the date fixed for redemption, upon receipt by the Trustee of a written advice from the FAME Trustee stating that the principal amount of all the FAME Bonds then outstanding under the FAME Indenture has been declared due and payable pursuant to the provisions of Section 7.03 of the FAME Indenture. This Series A Bond is not otherwise redeemable prior to maturity. Principal of the Series A Bonds shall be payable on the following principal payment dates and in the respective amounts as follows: Principal Payment Dates (July 1) Amount --------- ----------- 1998 $12,300,000 1999 13,100,000 2000 14,000,000 2001 15,100,000 2002 16,100,000 2003 17,200,000 2004 18,400,000 2005 19,800,000 To the extent permitted by, and as provided in, the Indenture, modifications or alterations of the Indenture, or of any indenture supplemental thereto, and of the rights and obligations of the Company and of the holders of the Bonds may be made with the consent of the Company by an affirmative vote or consent of the holders of a majority in aggregate principal amount of the Bonds entitled to vote or consent then outstanding and by an affirmative vote or consent of the holders of a majority in aggregate principal amount of the Bonds of all series or tranches of any series entitled to vote or consent then outstanding and affected by such modification or alteration, in case one or more but less than all of the series of Bonds or of any tranche or tranches of any series of Bonds then outstanding under the Indenture are so affected; provided, however, that without the consent of the Holder of this bond, no such modification or alteration shall be made which will affect the terms of payment of the principal of, or interest or premium, if any, on this bond. Notwithstanding the foregoing, whenever the vote or the consent of the holder of any Series A Bond is required, the consent of FAME shall also be required for any such vote or consent to be given effect. In case an Event of Default, as defined in the Indenture, shall occur, the principal of all the Series A Bonds at any such time outstanding may be declared or may become due and payable, upon the conditions and in the manner and with the effect provided in the Indenture. The Indenture provides that such declaration may be rescinded under certain circumstances. ARTICLE II. ISSUE OF SERIES A BONDS. SECTION 1. The Company hereby exercises the right to obtain the authentication of $126,000,000 principal amount of Bonds pursuant to the terms of Section 4.06 of the Indenture. All such Bonds shall be Series A Bonds. SECTION 2. Such Series A Bonds may be authenticated and delivered prior to the filing for recordation of this Supplemental Indenture. ARTICLE III. PRINCIPAL PAYMENTS. Principal of the Series A Bonds shall be payable on the principal payment dates and in the respective amounts as follows: Principal Payment Dates (July 1) Amount --------- ----------- 1998 $12,300,000 1999 13,100,000 2000 14,000,000 2001 15,100,000 2002 16,100,000 2003 17,200,000 2004 18,400,000 2005 19,800,000 ARTICLE IV. REDEMPTION OF THE SERIES A BONDS. SECTION 1. The Series A Bonds shall be redeemed in whole, by payment of the principal amount thereof plus accrued interest thereon, if any, to the date fixed for redemption, upon receipt by the Trustee of a written advice from the FAME Trustee stating (i) that the principal amount of all the FAME Bonds then outstanding under the FAME Indenture has been declared due and payable pursuant to the provisions of Section 7.03 of the FAME Indenture, specifying the date of the accelerated maturity of such FAME Bonds and the date from which interest on the FAME Bonds issued under the FAME Indenture has then accrued, stating such declaration of maturity has not been annulled and demanding payment of the principal amount of the Series A Bonds plus accrued interest thereon, if any, to the date fixed for redemption and (ii) the date fixed for such redemption, and the Trustee hereby waives any other right to receive a notice of redemption under the Indenture; provided, however, that the date fixed for such redemption shall be not earlier than the fifth day and not later than the 45th day after receipt by the Trustee of such advice. The FAME Trustee, by acceptance of the assignment of the Series A Bonds, waives notice of such redemption pursuant to Section 5.04 of the Indenture. The aforementioned notice of redemption from the FAME Trustee shall become null and void for all purposes hereunder and the Indenture upon receipt by the Trustee of written notice from the FAME Trustee of the annulment of the acceleration of the maturity of the FAME Bonds then outstanding under the FAME Indenture and of the rescission of the aforesaid written advice prior to the redemption date specified in such notice of redemption, and thereupon no redemption of the Series A Bonds and no payment in respect thereof as specified in such notice of redemption shall be effected or required. But no such annulment or rescission shall extend to any subsequent written advice from the FAME Trustee or impair any right consequent on such subsequent written advice. The Series A Bonds are not otherwise redeemable prior to maturity. ARTICLE IV. THE TRUSTEE. The Trustee hereby accepts the trusts hereby declared and provided, and agrees to perform the same upon the terms and conditions in the Indenture set forth and upon the following terms and conditions: The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or the due execution hereof by the Company or for or in respect of the recitals contained herein, all of which recitals are made by the Company solely. ARTICLE V. MISCELLANEOUS PROVISIONS. Section 1. The Company covenants and agrees that it will not enter into an indenture supplemental to the Indenture which amends this Supplemental Indenture in any manner that affects the rights of FAME set forth herein without the written consent of FAME. Section 2. This Supplemental Indenture may be simultaneously executed in any number of counterparts, each of which when so executed shall be deemed to be an original; but such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, said Bangor Hydro-Electric Company has caused this Supplemental Indenture to be executed on its behalf by an Authorized Executive Officer as defined in the Indenture, and its corporate seal to be hereto affixed and said seal and this Supplemental Indenture to be attested by an Authorized Executive Officer as defined in the Indenture; and Chemical Bank, in evidence of its acceptance of the trust hereby created, has caused this Supplemental Indenture to be executed on its behalf by its President or one of its Vice Presidents and its corporate seal to be hereto affixed and said seal and this Supplemental Indenture to be attested by its Secretary or one of its Trust Officers all as of the date first above written. BANGOR HYDRO-ELECTRIC COMPANY By /s/ Robert S. Briggs -------------------------- [CORPORATE SEAL] President and Chief Executive Officer ATTEST: /s/ Federick S. Samp - ----------------------- Clerk CHEMICAL BANK By /s/ W. B. Dodge --------------------- [CORPORATE SEAL] Vice President ATTEST: /s/ Wanda Eiland - --------------------- Trust Officer STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) BE IT REMEMBERED, that on this 28th day of June, 1995, before me, the undersigned, Matthew Hilton Frances, a Notary Public within and for the County and State aforesaid, personally came Robert S. Briggs, President and Chief Executive Officer, and Frederick S. Samp, Clerk, of Bangor Hydro- Electric Company, a corporation duly organized, incorporated and existing under the laws of the State of Maine, who are personally known to me to be such officers, and who are personally known to me to be the same persons who executed as such officers the within instrument of writing, and such persons duly acknowledged that they signed, sealed and delivered the said instrument as their free and voluntary act as such President and Chief Executive Officer and Clerk, respectively, and as the free and voluntary act of said Bangor Hydro-Electric Company for the uses and purposes therein set forth. IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed my official seal on the day and year last above written. /s/ Matthew H. Frances -------------------------- Notary Public #31-5032254 [NOTARIAL SEAL] STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) BE IT REMEMBERED, that on this 27th day of June, 1995, before me, the undersigned Emily Fayan, a Notary Public within and for the County and State aforesaid, personally came W. B. Dodge, a Vice-President and Wanda Eiland, a Trust Officer, of Chemical Bank, a corporation organized and existing under the laws of State of New York, who are personally known to me to be the same persons who executed as such officers the within instrument of writing, and such persons duly acknowledged that they signed, sealed and delivered the said instrument as their free and voluntary act as such Vice- President and Trust Officer, respectively, and as the free and voluntary act of Chemical Bank for the uses and purposes therein set forth. IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed my official seal on the day and year last above written. /s/ Emily Fayan --------------------------- Notary Public #24-4737006 [NOTARIAL SEAL] EX-4 8 EXHIBIT 4.6 BANGOR HYDRO-ELECTRIC COMPANY To CITIBANK, N.A., As Trustee _____________________________ SUPPLEMENTAL INDENTURE Dated as of June 29, 1995 ______________________________ Re: $115,000,000 First Mortgage Bonds Collateral Series Due 2000 Supplemental to Mortgage and Deed of Trust Dated as of July 1, 1936 SUPPLEMENTAL INDENTURE, dated as of June 29, 1995, between BANGOR HYDRO-ELECTRIC COMPANY, a corporation organized and existing under the laws of the State of Maine (hereinafter called the "COMPANY"), party of the first part, CITIBANK, N.A. (successor to City Bank Farmers Trust Company), a national banking association organized under the laws of the United States of America, having its corporate trust office at 111 Wall Street, in the Borough of Manhattan, City and State of New York, as Trustee under the Mortgage and Deed of Trust hereinafter referred to (hereinafter called the "TRUSTEE"), party of the second part. WHEREAS, the Company heretofore executed and delivered to City Bank Farmers Trust Company, as Trustee, its Mortgage and Deed of Trust dated as of July 1, 1936 (hereinafter referred to as the "ORIGINAL INDENTURE", and hereinafter as heretofore supplemented and amended by duly recorded Indentures supplemental thereto, referred to as the "INDENTURE"); and WHEREAS, City Bank Farmers Trust Company was converted as of the close of business on January 30, 1959, into a national banking association named First National City Trust Company and having its head office at 55 Wall Street, in the Borough of Manhattan, City, County and State of New York; and WHEREAS, First National City Trust Company was merged on January 15, 1963 into First National City Bank, a national banking association incorporated and existing under the laws of the United States of America and having its head office at 55 Wall Street, in the Borough of Manhattan, City, County and State of New York and said First National City Bank has succeeded to First National City Trust Company, as Trustee under the Indenture and is hereinabove denominated as Trustee; and WHEREAS, First National City Bank changed its name to Citibank, N.A., effective March 1, 1976; and WHEREAS, the Original Indenture was recorded in the following places in the State of Maine: in Aroostook County Registry of Deeds, Book 444, Page 130; in Hancock County Registry of Deeds, in Book 654, Page 79; in Penobscot County Registry of Deeds, in Book 1117, Page 3, in Piscataquis County Registry of Deeds, in Book 257, Page 241, in Washington County Registry of Deeds, in Book 418, Page 102; in Cumberland County Registry of Deeds, in Book 3957, Page 1; in Waldo County Registry of Deeds, in Book 786, Page 119; in the City Clerk's Office for the City of Bangor, in Book 19, Page 304; and in the Rockingham County Registry of Deeds in the State of New Hampshire, in Book 2351, Page 203; and WHEREAS, pursuant to the provisions of the Indenture, the Company duly issued the following First Mortgage Bonds: 3 % Series due 1966 in the aggregate principal amount of $7,108,000, none of which is now outstanding, 3% Series due 1966 in the aggregate principal amount of $500,000, none of which is now outstanding; 3% Series due 1975 in the aggregate principal amount of $5,000,000, none of which is now outstanding; 3% Series due 1977 in the aggregate principal amount of $2,500,000, none of which is now outstanding; 2 % Series due 1980 in the aggregate principal amount of $2,000,000, none of which is now outstanding; 3.25% Series due 1982 in the aggregate principal amount of $1,000,000, none of which is now outstanding: 3-1/8% Series due 1984 in the aggregate principal amount of $1,000,000, none of which is now outstanding; 3.25% Series due 1985 in the aggregate principal amount of $1,500,000, none of which is now outstanding; 4% Series due 1988 in the aggregate principal amount of $2,500,000, none of which is now outstanding; 4% Series due 1993 in the aggregate principal amount of $3,500,000, none of which is now outstanding; 6 % Series due 1998 in the aggregate principal amount of $2,500,000, all of which are now outstanding; 8.25% Series due 1999 in the aggregate principal amount of $3,500,000, [none] of which are now outstanding; 10.5% Series due 2000 in the aggregate principal amount of $5,000,000, none of which is now outstanding; 9.25% Series due 2001 in the aggregate principal amount of $3,000,000, none of which are now outstanding; 8.60% Series due 2003 in the aggregate principal amount of $2,500,000, none of which are now outstanding; 10.25% Series due 2004 in the aggregate principal amount of $7,000,000, none of which is now outstanding; 15.25% Series due 1996 in the aggregate principal amount of $5,000,000, none of which is now outstanding; 16.50% Series due 1996 in the aggregate principal amount of $15,000,000, none of which is now outstanding; 12.50% Series due 1998 in the aggregate principal amount of $19,500,000, none of which are now outstanding; 17.35% Series due 1994 in the aggregate principal amount of $11,000,000, none of which are now outstanding; 10.25% Series due 2019 in the aggregate principal amount of $15,000,000, all of which are now outstanding; 10.25% Series due 2020 in the aggregate principal amount of $30,000,000, all of which are now outstanding; 8.98% Series due 2022 in the aggregate principal amount of $20,000,000, all of which are now outstanding; 7.38% Series due 2002 in the aggregate principal amount of $20,000,000, all of which are now outstanding; 12.25% Series due 2001 in the aggregate principal amount of $14,316,422, $9,773,040 of which are now outstanding; and 7.30% Series due 2003 in the aggregate principal amount of $15,000,000, all of which are now outstanding; and WHEREAS, the Company has determined to create and issue, in the aggregate principal amount of $115,000,000, another series of Bonds under the Indenture to be designated "Collateral Series due 2000"; and in order to establish the terms, provisions and conditions of the Bonds of said series, the Company has determined to execute this Supplemental Indenture; and WHEREAS, all conditions and requirements necessary to make this Supplemental Indenture a valid, binding and legal instrument have been performed and fulfilled and the execution and delivery hereof have in all respects been duly authorized and all things necessary to make the Bonds of the Collateral Series due 2000, when authenticated by the Trustee and issued as in the Indenture and in this Supplemental Indenture provided, the valid, binding and legal obligations of the Company entitled in all respects to the security of the Indenture, have been done and performed; and WHEREAS, the Company and the Trustee deem it desirable to enter into this Supplemental Indenture; NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH, that in consideration of the premises and of the sum of One Dollar in lawful money of the United States of America to the Company duly paid by the Trustee at or before the execution and delivery of this Supplemental Indenture, the receipt whereof is hereby acknowledged, the Company hereby covenants and agrees with the Trustee and its successors in the Trust under the Indenture, as hereby supplemented by this Supplemental Indenture, for the benefit of those who shall hold the First Mortgage Bonds, and interest coupons, including the First Mortgage Bonds, Collateral Series due 2000, or any of them, issued or to be issued under the Indenture or any Indenture supplemental thereto, including this Supplemental Indenture, as follows: Section i. Section 3 of the Original Indenture is hereby amended by adding the following sentence at the end of said Section: "Notwithstanding the foregoing, the First Mortgage Bonds, Collateral Series due 2000 may be issued as Registered Bonds in the denomination of $1,000 and multiples of $1,000." Section ii. Section 11 of the Original Indenture is hereby further amended by deleting the last sentence at the end of the first paragraph of such Section 11, and substituting in its stead: "Notwithstanding the foregoing, the First Mortgage Bonds, 10.5% Series due 2000 shall bear interest from November 25, 1975; the First Mortgage Bonds, 10.25% Series due 2004 shall bear interest from the date of issuance thereof; the First Mortgage Bonds, 15.25% Series due 1996 shall bear interest from the date of issuance thereof; the First Mortgage Bonds, 16.50% Series due 1996 shall be dated as of, and shall bear interest from, July 30, 1981; the First Mortgage Bonds, 12.50% Series due 1998 shall bear interest from the date of issuance thereof; the First Mortgage Bonds, 17.35% Series due 1994 shall be dated as of and shall bear interest from, the date of issuance thereof; the First Mortgage Bonds, 10.25% Series due 2019 shall be dated and shall bear interest from, the date of issuance thereof; the First Mortgage Bonds, 10.25% Series due 2020 shall be dated and shall bear interest from, the date of issuance thereof; the First Mortgage Bonds, 8.98% Series due 2022 shall be dated and shall bear interest from, the date of issuance thereof; the First Mortgage Bonds, 7.38% Series due 2002 shall be dated and shall bear interest from, the date of issuance thereof; the First Mortgage Bonds, 7.30% Series due 2003 shall be dated and shall bear interest from the date of issuance thereof; and the First Mortgage Bonds, Collateral Series due 2000 shall be dated the date of issuance thereof and shall bear interest at a rate of 0%." Section iii. Section 11 of the Original Indenture is hereby further amended by adding the following sentence at the end of the second paragraph: "Notwithstanding the foregoing, upon the issuance of the First Mortgage Bonds, Collateral Series due 2000, there shall not be reserved unissued a Coupon Bond or Bonds of the same series." Section 4. Pursuant to paragraph (b) of Section 93 of the Indenture, the Indenture is hereby amended as follows, such amendments to remain in effect for so long as any Bonds of the Collateral Series due 2000 (as defined in Section 5 hereof) are outstanding: (a) Section 66 of the Indenture is hereby amended by adding the following after the word "expressed" in paragraph (a) thereof: ", upon a required redemption" (b) Section 66 of the Indenture is hereby further amended by adding the following after the word "notwithstanding" in the language immediately following paragraph (e) thereof: "(provided that if any default described in paragraph (d) or (e) occurs and is continuing, all of the Bonds then outstanding and the interest accrued thereon, if any, shall immediately become due and payable without declaration, presentment, demand or notice of any kind by the Trustee or any holder of Bonds)" Section 5. (i) The Company hereby creates a new series of Bonds to be issued under and secured by the Indenture, as hereby supplemented, in the aggregate principal amount of $115,000,000, to be designated as "FIRST MORTGAGE BONDS, COLLATERAL SERIES DUE 2000" (referred to herein as "BONDS OF THE COLLATERAL SERIES DUE 2000"). The Bonds of said series shall be payable as to principal on June 30, 2000, and shall not bear interest. The principal thereof shall be payable in any coin or currency of the United States of America which at the time of payment shall be legal tender for public and private debts and shall be payable at the corporate trust office of the Trustee in the Borough of Manhattan, City and State of New York. (ii) Definitive Bonds of the Collateral Series due 2000 shall be issued only as fully Registered Bonds without coupons. The definitive Registered Bonds without coupons shall be issuable in denominations of $1,000, and any integral multiple of $1,000 approved by the Company, such approval to be evidenced by the execution thereof. The several authorized denominations of Registered Bonds without coupons of said series shall be interchangeable in like aggregate principal amounts. (iii) The Bonds of the Collateral Series due 2000 are initially issued to the Administrative Agent (as defined below) pursuant to the terms of that certain Bond Pledge and Security Agreement, dated as of June 30, 1995, between the Company and the Administrative Agent (the "Pledge Agreement"), to secure the obligations of the Company (described in the Pledge Agreement) under a Credit Agreement, dated as of June 30, 1995, among the Company, the Banks named therein, the Co-Agents named therein and Chemical Bank, as administrative agent (in such capacity, together with any successor, the "Administrative Agent") (as amended from time to time, the "Credit Agreement"). To the extent that scheduled installment payments are made in respect of the term loans under the Credit Agreement, such payments shall constitute a credit against the payment obligations of the Company with respect to the Bonds of the Collateral Series due 2000 held by the Administrative Agent under the Pledge Agreement (the "Administrative Agent") or its transferees, provided that the making of any such payment shall not constitute a credit (i) in respect of Bonds of the Collateral Series due 2000 registered in the name of the Administrative Agent while any Default or Event of Default (as defined in the Credit Agreement) has occurred and is continuing under the Credit Agreement after giving effect to such payment, or (ii) to the extent a principal amount of Bonds of the Collateral Series due 2000 equal to the amount of any such payment is assigned by the Administrative Agent to the G&R Trustee (as defined below) as required by the Pledge Agreement. If any of the Bonds of the Collateral Series due 2000 are assigned by the Administrative Agent to the trustee (the "G&R Trustee") under the General and Refunding Mortgage Indenture and Deed of Trust, dated as of June 1, 1995 between the Company and Chemical Bank, as trustee (the "General and Refunding Mortgage"), as contemplated by the Pledge Agreement, no payments shall be required to be made in respect of the Bonds of the Collateral Series due 2000 so assigned unless and until (i) all Bonds of the Collateral Series due 2000 become or are declared to be due and payable pursuant to Section 66 of the Indenture, or (ii) demand for redemption of such Bonds is made by the G&R Trustee as provided in subsection (d) below. The Trustee may at any and all times conclusively assume that the obligations of the Company to make payments with respect to the Bonds of the Collateral Series due 2000, so far as such payments shall at the time have become due, have been fully satisfied and discharged unless and until (i) all Bonds of the Collateral Series due 2000 become or are declared to be due and payable pursuant to Section 66 of the Indenture, (ii) the Trustee shall have received a written notice from the Administrative Agent signed by one of its officers stating that the indebtedness of the Company has become, or has been declared to be, due and payable pursuant to the Credit Agreement and demanding redemption of such Bonds as provided in subsection (d) of this Section, or (iii) the Trustee shall have received the notice described in such subsection (d) from the G&R Trustee in the event any Bonds of the Collateral Series due 2000 are assigned to the G&R Trustee (and the Trustee has received written notice thereof). (iv) The Bonds of the Collateral Series due 2000 are not redeemable at the option of the Company at any time prior to maturity and are not redeemable by the operation of the General Reserve Fund provisions of the Indenture or by the use of proceeds of released Property.So long as the Bonds of the Collateral Series due 2000 are registered in the name of the Administrative Agent, such Bonds shall immediately be redeemed by the Company in whole, by payment of 100% of the outstanding principal amount thereof, on the date of receipt by the Trustee and the Company of a written notice (the "Acceleration Notice") from the Administrative Agent stating that the indebtedness of the Company has become, or has been declared to be, due and payable pursuant to the Credit Agreement. Each of the Administrative Agent and the Trustee hereby waives any other right to receive notices of redemption pursuant to Article Eighth of Indenture. If any Bonds of the Collateral Series due 2000 are assigned by the Administrative Agent to the G&R Trustee (and written notice thereof is received by the Trustee), as contemplated by the Pledge Agreement, such Bonds as are so assigned shall be subject to redemption by the Company at the option of the G&R Trustee as the holder thereof, by payment of 100% of the principal amount thereof, on the date of receipt by the Trustee of a written notice from the G&R Trustee stating that the indebtedness of the Company under the General and Refunding Mortgage has become, or has been declared to be, due and payable. So long as the Administrative Agent is the registered holder of any Bonds of the Collateral Series due 2000, receipt by the Trustee of any such notice and demand for redemption from the G&R Trustee shall be deemed also to constitute an Acceleration Notice with respect to any such Bonds held by the Administrative Agent. The Bonds of the Collateral Series due 2000 and the Trustee's certificate to be endorsed on such Bonds, shall be substantially in the following form: (FORM OF BOND) THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND SUCH SECURITY MAY NOT BE TRANSFERRED WITHOUT COMPLIANCE WITH APPLICABLE SECURITIES LAWS. No. R- $__________ BANGOR HYDRO-ELECTRIC COMPANY FIRST MORTGAGE BOND Collateral Series Due 2000 Due June 30, 2000 BANGOR HYDRO-ELECTRIC COMPANY, a corporation organized and existing under the laws of the State of Maine (hereinafter called the "COMPANY"), for value received, hereby promises to pay to ______________________________________________ or registered assigns, the principal sum of __________________________________ DOLLARS ($_________) on June 30, 2000 upon presentation and surrender hereof to the Trustee. This bond shall not bear interest. The principal of this Bond is payable in any coin or currency of the United States of America which at the time of payment shall be legal tender for public and private debts, at the corporate trust office of the Trustee hereinafter named, in the Borough of Manhattan, City and State of New York. This Bond is one of a duly authorized issue of First Mortgage Bonds of the Company, issuable in series and in fully registered form without interest coupons, and is one of a series designated as "COLLATERAL SERIES DUE 2000", all of which Bonds of whatever series are issued and to be issued under and, irrespective of the time of issue, are equally secured by a certain Mortgage and Deed of Trust dated as of July 1, 1936, executed by the Company to City Bank Farmers Trust Company (of which Citibank, N.A., a national banking association, is the successor), as Trustee, and all indentures amendatory thereto and supplemental thereto (all collectively herein called the "INDENTURE"), to which reference is hereby made for a description of the properties mortgaged, the nature and extent of the security, the rights of the holders of the Bonds with respect to such security and the terms and conditions upon which the Bonds are secured. In the manner provided in the Indenture, the rights and obligations of the Company and of the holders of the Bonds may be changed and modified at any time upon the consent and approval of the holders of 66-2/3% in aggregate principal amount of the Bonds then outstanding affected by such change or modification; PROVIDED, HOWEVER, that no such change or modification shall (a) alter or impair the obligation of the Company to pay the principal of and interest, if any, on any Bond at the time and place and at the rate and in the currency provided therein, without the consent of the holder of such Bond, or (b) permit the creation by the Company of any mortgage, or lien in the nature of a mortgage, or security interest ranking prior to or PARI PASSU with the lien of and security interest created by the Indenture, except as in the Indenture otherwise provided, or (c) permit the reduction of the percentage of outstanding Bonds affected required for any such change or modification. Bonds of this Series are not redeemable at the option of the Company at any time prior to Maturity and are not redeemable by the operation of the General Reserve Fund provisions of the Indenture or by the use of proceeds of released Property. The Bonds of this Series are subject to mandatory redemption as provided in the supplemental indenture, dated as of June 29, 1995, establishing such Series. In case a default, as defined in the Indenture, shall occur, the principal of all of the Bonds of each and every series issued and outstanding thereunder may be declared or may become due and payable before maturity in the manner and with the effect provided in the Indenture. Subject to compliance with applicable securities laws, this Bond is transferable by the registered owner in person or by a duly authorized attorney at the corporate trust office of the Trustee in the Borough of Manhattan, City and State of New York, upon the surrender and cancellation of this Bond, and thereupon a registered Bond of this series will be issued to the transferee in exchange therefor, as provided in the Indenture, and on payment, if the Company shall so require, of the charge therein provided for. Bonds of the Collateral Series due 2000 are issuable in the denominations of $1,000 and any integral multiple of $1,000 approved by the Company, such approval to be evidenced by the execution thereof. In the manner prescribed in the Indenture, any registered Bond of such series may be exchanged for a like aggregate principal amount of registered Bonds of such series of other authorized denominations. No recourse shall be had for the payment of any part of the principal of this Bond, or for any claim based hereon, or for the consequences of any default in the payment hereof, or otherwise in any manner in respect hereof or in respect of the Indenture or of the indebtedness represented hereby, to or against any incorporator, stockholder, officer or director, past, present or future, of the Company or of any predecessor or successor corporation, either directly or through the Company or any such predecessor or successor corporation, whether by virtue of any statute or constitutional provision or rule of law, or by the enforcement of any assessment or penalty or otherwise, or in any manner; all such liability, by the acceptance hereof, and as part of the consideration for the issue hereof, being expressly released, as provided in the Indenture. This Bond shall not be obligatory or valid for any purpose until authenticated by the execution by the Trustee of the certificate endorsed hereon. IN WITNESS WHEREOF, the Company has caused this Bond to be signed by its President or one of its Vice Presidents and impressed or imprinted with its corporate seal or a facsimile thereof, attested by its Treasurer or an Assistant Treasurer, as of June __, 1995. BANGOR HYDRO-ELECTRIC COMPANY By_______________________________ Its President [SEAL] ATTEST: By________________________ Its Treasurer (FORM OF TRUSTEE'S CERTIFICATE) TRUSTEE'S AUTHENTICATION CERTIFICATE This is one of the Bonds of the series designated therein, described in the within-mentioned Mortgage and Deed of Trust. CITIBANK, N.A., as Trustee, By______________________________ Its Authorized Officer Section 6. The Trustee accepts the trusts created by this Supplemental Indenture upon the terms and conditions hereof and of the Indenture. All covenants and provisions of the Indenture shall continue in full force and effect, as this Supplemental Indenture shall form part of the Indenture. Except as herein otherwise expressly provided, no duties, responsibilities or liabilities are assumed, or shall be construed to be assumed, by the Trustee by reason of this Supplemental Indenture, other than as set forth in the Indenture. The Trustee shall not be responsible for the recitals herein or in the Bonds, all of which are made by the Company solely. Section 7. This Supplemental Indenture may be executed in any number of counterparts, each of which, if so executed, shall be deemed to be an original; and all such counterparts shall together constitute but one and the same instrument IN WITNESS WHEREOF, Bangor Hydro-Electric Company has caused this Supplemental Indenture to be executed on its behalf by its President or one of its Vice Presidents and its corporate seal to be hereto affixed and attested by its Clerk; and Citibank, N.A., as Trustee as aforesaid, has caused this Supplemental Indenture to be executed on its behalf by one of its Vice Presidents and its corporate seal to be hereto affixed and attested by an Assistant Vice President, all as of the day and year first above written. BANGOR HYDRO-ELECTRIC COMPANY WITNESS /s/ Jeffrey M. Maddox By /s/ Robert S. Briggs ------------------------ ------------------------ Its President ATTEST /s/ Frederick S. Samp ------------------------ Its Clerk CITIBANK, N.A., as Trustee as aforesaid, WITNESS /s/ Reynaldo Duma By /s/ R.T. Kirchner --------------------- --------------------- Its Vice President ATTEST /s/ Carol Ng ---------------------- Assistant Vice President STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On June 28, 1995 before me personally appeared the above-named R.T. Kirchner, a Vice President, and Carol Ng, an Assistant Vice President, of Citibank, N.A., the national banking institution that executed the within and foregoing instrument as Trustee, and severally acknowledged said instrument to be their free act and deed in their said capacities and the free act and deed of the said national banking institution, as such Trustee. IN WITNESS WHEREOF, I have hereunto set my hand and seal on the day and year first above mentioned. /s/ Peter M. Pavlyshin ------------------------- Notary Public #41-4991297 My Commission expires January 27, 1996 [NOTARIAL SEAL] STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On June 28, 1995 before me personally appeared the above-named ROBERT S. BRIGGS, a PRESIDENT, and FREDERICK S. SAMP, a CLERK, of Bangor Hydro-Electric Company, the corporation that executed the within and foregoing instrument, and severally acknowledged said instrument to be their free act and deed in their said capacities and the free act and deed of the said corporation. IN WITNESS WHEREOF, I have hereunto set my hand and seal on the day and year first above mentioned. /s/ Matthew H. Frances ------------------------- Notary Public 31-5032254 My Commission expires August 22, 1996 [NOTARIAL SEAL] EX-10 9 EXHIBIT 10.1 PURCHASE AGREEMENT THIS PURCHASE AGREEMENT (this "Agreement") is made and entered into as of this 31st day of March, 1995 by and between BABCOCK-ULTRAPOWER JONESBORO, a joint venture formed as a California general partnership ("Seller"), and BANGOR HYDRO-ELECTRIC COMPANY, a Maine corporation ("Buyer"). RECITALS WHEREAS, Seller is the owner of a 24.5 MW wood-fired small power production facility located in Jonesboro, Maine (the "Facility"); WHEREAS, pursuant to a Power Purchase Agreement dated as of August 13, 1984 (as amended to date, the "Power Purchase Agreement") between Buyer and Seller, Buyer has committed to purchase the electric output of the Facility for a term and under such conditions as are set forth therein; WHEREAS, Buyer, based upon its examination and analysis, believes that it is acquiring the ability to achieve substantial net present value savings for its customers by reducing its overall cost of purchased power if it acquires all right, title and interest of Seller in and to the Power Purchase Agreement on the terms and conditions set forth herein, and that consummation of the transactions described herein is in the best interests of Buyer and its customers; and WHEREAS, Seller is willing to sell to Buyer all of its right, title and interest in and to the Power Purchase Agreement on the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the premises and the mutual representations, warranties and covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Buyer and Seller, intending to be legally bound, hereby agree as follows: ARTICLE 1 PURCHASE AND SALE; CLOSING 1.1 PURCHASE AND SALE. Subject to the terms and conditions set forth herein, Seller agrees to sell, assign, transfer, convey and deliver to Buyer on the Closing Date (as hereinafter defined), and Buyer agrees to purchase from Seller on the Closing Date, all right, title and interest of Seller in and to the Power Purchase Agreement. 1.2 PURCHASE PRICE; PAYMENTS AT CLOSING. (a) In consideration for the purchase referred to in Section 1.1 above, Buyer shall on the Closing Date pay to Seller (i) the amount of $41,500,000 in cash in immediately available funds and (ii) the principal amount of Loans to be outstanding as of the Escrow Release Date (as hereinafter defined) (subject to the adjustment described in Section 1.2(b) below) in immediately available funds, as specified in the notice delivered pursuant to Section 1.2(c) below (such amounts described in clauses (i) and (ii) of this Section 1.2(a) being hereinafter referred to collectively as the "Purchase Price") and (iii) the amounts described in Section 1.4(a) hereof. (b) If the Escrow Release Date does not occur on an Installment Payment Date (as hereinafter defined), the aggregate amount payable pursuant to Section 1.2(a)(ii) above shall be reduced by (i) the principal amount of the installment of Loans scheduled to be repaid on the following Installment Payment Date pursuant to Section 2.4(a)(i) (regularly scheduled payments) and Section 2.4(b) (accelerated prepayments) of the Loan Agreement (as hereinafter defined), multiplied by (ii) a fraction equal to the number of days from and including the previous Installment Payment Date to but not including the Escrow Release Date divided by the number of days from and including the previous Installment Payment Date to but not including the following Installment Payment Date. (c) The aggregate amount of any payment pursuant to Section 1.2(a)(ii) above shall be equal to the amount set forth in the certificate delivered by Seller to Buyer pursuant to Section 1.6(x) below. Except as expressly provided in Section 1.2 (a)(ii) and Section 6.1 of this Agreement, Seller shall pay all other amounts due and payable under the Loan Agreement and the Security Documents. (d) The terms "Agent", "Banks", "Loans", and "Installment Payment Date" shall have the meanings set forth in the Amended and Restated Construction and Term Loan Agreement dated as of October 1, 1989 (as amended to date, the "Loan Agreement") among Seller, the Banks party thereto and The Bank of New York, as Agent. 1.3 CLOSING DATE. (a) The consummation of the purchase referred to in Section 1.1 above and the payments set forth in Section 1.2(a) hereof (the "Closing") shall occur on June 9, 1995 at 10:00 a.m. (New York time), at the offices of White & Case, 1155 Avenue of the Americas, New York, New York 10036 or at such other time, not later than September 15, 1995, as Buyer may determine in accordance with this Section 1.3 (the "Closing Date") or such other place as Seller and Buyer may agree upon. Buyer may select such other Closing Date, not later than September 15, 1995, as Buyer may determine provided that such other Closing Date shall be a date not more than five nor less than four Eurodollar Business Days (as defined in the Loan Agreement) prior to the date on which the Loans may be prepaid in full pursuant to the Loan Agreement (unless the Agent otherwise agrees in writing to the prepayment of the Loans other than as set forth in the Loan Agreement). Buyer shall provide Seller not less than thirty days prior written notice of such other Closing Date. In the event Buyer is unable to consummate the purchase referred to in Section 1.1 on such Closing Date, Buyer may select another Closing Date (determined in accordance with this paragraph and which, without the consent of Seller, shall be not less than thirty days following the applicable Closing Date) by written notice to Seller given not less than five Eurodollar Business Days prior to the then applicable Closing Date. In the event that the Closing Date is extended beyond June 9, 1995, Seller agrees to select only thirty-day Interest Periods (as defined in the Loan Agreement) with respect to the Loans. Seller agrees not to amend the Loan Agreement in any manner that would increase the costs payable by Buyer hereunder or otherwise materially and adversely affect the obligations of Buyer to Seller under this Agreement. (b) Concurrently with the consummation of the Closing, Seller shall provide notice to the Agent and the Banks in accordance with the Loan Agreement of the prepayment of the Loans in full on the Escrow Release Date. 1.4 OTHER PAYMENTS AT CLOSING. (a) In addition to the payments required pursuant to Section 1.2(a)(i) and (ii), Buyer shall pay to Seller (or at the direction of Seller to the applicable third parties or counterparties) on the Closing Date in cash in immediately available funds an amount equal in the aggregate to: (i) (x) the book inventory value of, and (y) unless Buyer has delivered its written undertaking pursuant to Section 1.8 below, all of Seller's projected disposal costs associated with, the fuel located at the Facility on the Closing Date (excluding any such fuel which Seller intends to combust in order to satisfy a power sales commitment to a third party commencing within thirty days of the Closing Date), as set forth in the certificate delivered by Seller pursuant to Section 1.6(viii) below; provided that Buyer will not be responsible under this Section 1.4(a)(i) for the inventory value of any fuel in excess of the equivalent of 9,104 bone dry short tons or the disposal of any fuel in excess of the equivalent of 10,014 bone dry short tons; (ii) undisputed amounts payable by Buyer to Seller under and in accordance with the Power Purchase Agreement which will have accrued as of the Escrow Release Date less interest accrued from, and including, the Closing Date to, but excluding, the Escrow Release Date (the "Escrow Interest") on all indebtedness incurred by Buyer to fund the Purchase Price and the amounts payable pursuant to Section 1.4(a)(iii) (the "Escrow Debt"); provided that Buyer shall have notified Seller in writing of any amounts disputed in good faith under the Power Purchase Agreement and its reasons for such dispute at least one business day (which, for the purposes of this Agreement, shall mean any day other than a Saturday, Sunday or other day on which banks in New York City or the State of Maine are authorized or required by law to close) prior to the Closing Date; (iii) amounts payable to Seller's counterparties as a result of the termination as of the Escrow Release Date of the interest rate swap agreements entered into by Seller in respect of the Loans, as set forth in the certificate delivered by Seller pursuant to Section 1.6(ix) below; (iv) amounts reimbursable by Buyer pursuant to Section 6.1 hereof with respect to which Seller has provided invoices, and such supporting documentation as shall be reasonably available to Seller, to Buyer at least two business days prior to the Closing Date; and (v) Seller's aggregate projected costs in respect of employee retraining and employee retention, as set forth in the certificate delivered by Seller pursuant to Section 1.6(viii) below, which together with the costs described in Section 1.4(a)(v) of the West Enfield Purchase Agreement (as hereinafter defined) shall not exceed $265,000 in the aggregate. (b) The amounts payable on the Closing Date in respect of Sections 1.4(a)(i) and (v) above shall be as set forth in the certificate delivered by Seller to Buyer pursuant to Section 1.6(viii) below, and, with respect to amounts payable under Sections 1.4(a)(i)(y) and 1.4(a)(v), shall be subject to adjustment as provided in Section 1.7 below. The amounts payable on the Closing Date in respect of the Power Purchase Agreement under Section 1.4(a)(ii) above shall be determined in accordance with the provisions of the Power Purchase Agreement, shall be based, as provided therein, upon a reading of the Facility's meters on the Closing Date and shall be subject to adjustment for the period between the Closing Date and the Escrow Release Date as provided in Section 1.7 below based upon a reading of the Facility's meters on the Escrow Release Date. 1.5 DELIVERIES BY BUYER ON THE CLOSING DATE. On the Closing Date, Buyer shall deliver to Seller the following (provided that a completed draft (which may include estimates, as appropriate) of the document described in subsection (viii) shall be delivered to Seller at least four business days prior to the Closing Date): (i) an executed assignment, substantially in the form of Exhibit A hereto (the "Assignment"); (ii) a copy, certified as of the Closing Date by the Secretary of Buyer, of the resolutions of its Board of Directors, authorizing the execution, delivery and performance by it of this Agreement and the transactions contemplated hereby; (iii) a certificate, dated as of the Closing Date and signed by the Secretary of Buyer, as to the incumbency of the officers of Buyer signing this Agreement and any document or agreement which is to be signed by Buyer in connection with the Closing; (iv) a certificate, dated as of the Closing Date and signed by an officer of Buyer, on behalf of Buyer, to the effect that each of the representations and warranties of Buyer made in this Agreement are true and correct in all material respects on the Closing Date; (v) a Certificate of Good Standing of recent date for Buyer, issued by the appropriate authority in the State of Maine; (vi) an opinion of counsel to Buyer in substantially the form of Exhibit B hereto; (vii) all other documents, instruments and certificates reasonably required by Seller or its counsel to consummate the transactions contemplated hereby; and (viii) a certificate, dated the Closing Date, setting forth the amount of the Escrow Debt to be incurred by Buyer and the rate and amount of the Escrow Interest. 1.6 DELIVERIES BY SELLER ON THE CLOSING DATE . At the Closing, Seller shall deliver to Buyer the following (provided that completed drafts (which may include estimates, as appropriate) of the documents described in subsections (viii), (ix) and (x) shall be delivered to Buyer at least three business days prior to the Closing Date): (i) an executed Assignment; (ii) a copy, certified as of the Closing Date by the Secretary or an Assistant Secretary of each partner of Seller, of the resolutions of the Board of Directors of such partner, authorizing the execution, delivery and performance of this Agreement and the transactions contemplated hereby; (iii) a certificate, dated as of the Closing Date and signed by the Secretary or an Assistant Secretary of each partner of Seller, as to the incumbency of the officers of such partner signing this Agreement and any document or agreement which is to be signed by such partner in connection with the Closing; (iv) a certificate, dated as of the Closing Date and signed by an officer of each partner of Seller, on behalf of such partner, to the effect that each of the representations and warranties of Seller made in this Agreement, insofar as concerns such partner, and, to the best of such partner's knowledge, insofar as concerns Seller, are true and correct in all material respects on the Closing Date; (v) a Certificate of Good Standing of recent date for each partner of Seller, issued by the appropriate authority in its jurisdiction of incorporation; (vi) opinions of counsel to the Seller and of counsel to each partner of Seller substantially to the effect set forth in Exhibit C hereto; (vii) all other documents, instruments and certificates reasonably required by Buyer or its counsel to consummate the transactions contemplated hereby; (viii) a certificate, which shall set forth (A) the amounts payable under Section 1.4(a)(i)(x), (B) a good faith estimate by Seller as of the Closing Date of the amounts to be paid to Seller by Buyer pursuant to Sections 1.4(a)(i)(y) and 1.4(a)(v) above and (C) the amounts to be paid to Seller by Buyer pursuant to Section 1.4(a)(ii) above, in each case together with supporting data in reasonable detail and such supporting documentation as may be reasonably available to Seller; (ix) a certificate showing the amounts to be paid to Seller by Buyer on the Closing Date pursuant to Section 1.4(a)(iii) above, together with supporting data in reasonable detail and such supporting documentation as may be reasonably available to Seller; and (x) a certificate, dated as of the Closing Date, setting forth the aggregate amount of any payment to be made by Buyer as required pursuant to Section 1.2(a)(ii). 1.7 POST-CLOSING ADJUSTMENTS. (a) On or prior to the fifth business day after the Escrow Release Date, Seller shall make a final determination of the amounts payable by Buyer under the Power Purchase Agreement in accordance with the second sentence of Section 1.4(b) for the period between the Closing Date and the Escrow Release Date and shall deliver to Buyer a certificate setting forth such amounts and all calculations in reasonable detail necessary to support such amounts. Within two business days following delivery of such certificate, Buyer shall pay Seller in cash in immediately available funds the amount set forth in such certificate. (b) If Buyer has not delivered its written undertaking pursuant to Section 1.8 below, then on the forty-fifth day following the Escrow Release Date (or the first business day thereafter if such forty-fifth day is not a business day) or such later date as Seller shall determine if the effect of such delay is to reduce the amounts which may be payable by Buyer as hereinafter determined, Seller shall make a final determination of the amounts payable by Buyer pursuant to Section 1.4(a)(i)(y) above and shall deliver to Buyer a certificate setting forth such amounts and all calculations and documentation in reasonable detail necessary to support such amounts. Within two business days following delivery of such certificate, Seller shall pay Buyer in cash in immediately available funds (or Buyer shall pay Seller, as applicable) the difference between the aggregate amount set forth in such certificate and the aggregate amount paid by Buyer to Seller on the Closing Date pursuant to Section 1.4(a)(i)(y). (c) If Buyer has delivered its written undertaking pursuant to Section 1.8 below, during the period for disposal to be specified in the undertaking referred to in Section 1.8 below, Seller shall cooperate with Buyer to permit Buyer reasonable access to the Facility, and, to the extent available as reasonably determined by Seller, the assistance of Facility personnel in order for Buyer to conduct the disposal of the fuel in accordance with such undertaking. (d) On the six-month anniversary of the Escrow Release Date (or the first business day thereafter if such six-month anniversary is not a business day), Seller shall make a final determination of the amount payable by Buyer pursuant to Section 1.4(a)(v) above and shall deliver to Buyer a certificate setting forth such amount and all calculations and documentation in reasonable detail necessary to support them. Within two business days following delivery of such certificate, Seller shall pay Buyer in cash in immediately available funds (or Buyer shall pay Seller, as applicable) the difference between the amount set forth in such certificate and the amount paid by Buyer to Seller on the Closing Date pursuant to Section 1.4(a)(v), provided that the payments by Buyer pursuant to such Section 1.4(a)(v) and this Section 1.7(d), together with the payments by Buyer pursuant to Section 1.4(a)(v) and Section 1.7(d) of the West Enfield Purchase Agreement, shall in no event exceed $265,000 in the aggregate. 1.8 FUEL DISPOSAL ELECTION. Not later than May 15, 1995, Seller shall provide Buyer a summary of the terms and conditions to be applicable to any undertaking by Buyer to dispose of the fuel described in Section 1.4(a)(i). If Buyer wishes to undertake such disposal, Buyer shall negotiate with and deliver to Seller no later than May 23, 1995 a written undertaking to such effect substantially on the terms and conditions provided by and otherwise in form and substance reasonably acceptable to Seller. 1.9 DELIVERIES BY SELLER ON THE UNDERWRITING DATE. In the event Buyer shall finance all or a portion of the Purchase Price with an offering of debt securities, Seller shall deliver to Buyer the following not later than 12:01 p.m., prevailing New York time, on the date Buyer proposes to execute and deliver a purchase contract with respect to such securities (the "Underwriting Date"); provided that Buyer shall have given Seller five business days prior written notice of such Underwriting Date: (i) a certificate, dated as of the Underwriting Date and signed by an officer of each partner of Seller, on behalf of such partner, to the effect that each of the representations and warranties of Seller made in this Agreement, insofar as concerns such partner, and, to the best of such partner's knowledge, insofar as concerns Seller, are true and correct in all material respects on the Underwriting Date; (ii) an amendment to Schedule 6.3(b), if required, setting forth any additional claims of Seller under the Power Purchase Agreement arising from the Effective Date (as hereinafter defined) of this Agreement to the Underwriting Date which shall survive the consummation of the sale described in Section 1.1 hereof in accordance with Section 6.3(b) of this Agreement; and (iii) evidence satisfactory to Buyer that the releases and discharges described in Section 3.3 hereof shall have been delivered to the Escrow Agent under the Escrow Agreement hereinafter described. 1.10 ESCROW AGREEMENT. Seller and Buyer agree to execute and deliver, on or prior to the Underwriting Date, the Escrow Agreement hereinafter referred to in form and substance reasonably satisfactory to both Seller and Buyer with an escrow agent reasonably satisfactory to both Seller and Buyer. ARTICLE 2 CONDITIONS TO BUYER'S OBLIGATIONS The obligation of Buyer to consummate the Closing on the Closing Date is subject to the satisfaction (or waiver by Buyer), on or before the Closing Date, of each of the conditions set forth below. Each document required to be delivered on the Closing Date pursuant to this Article 2 shall be delivered in escrow pursuant to an escrow agreement (the "Escrow Agreement") which shall provide for the release of all such documents on the first date after the Closing Date on which the Loans may be prepaid in full pursuant to the Loan Agreement (the "Escrow Release Date"). 2.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations and warranties of Seller contained herein and in all certificates and other documents and agreements delivered by Seller to Buyer pursuant hereto or in connection with the transactions contemplated hereby shall be true and accurate in all material respects as of the date hereof and as of the Closing Date. 2.2 PERFORMANCE. Seller shall have performed and complied in all material respects with all agreements, obligations and conditions required by this Agreement to be performed or complied with by it and shall have delivered all items required to be delivered pursuant to Section 1.6 by it on or prior to the Closing Date. 2.3 FINANCING. Buyer shall have obtained the financing, on terms reasonably satisfactory to Buyer, necessary to pay the Purchase Price and the payments set forth in Section 1.4(a) above (other than Section 1.4(a)(ii)) on the Closing Date, which financing shall have been approved by the Maine Public Utilities Commission ("MPUC") on terms and conditions reasonably satisfactory to Buyer. 2.4 CONSENTS. Buyer shall have obtained, on terms reasonably satisfactory to Buyer, any required consents of its lenders under its revolving credit borrowing arrangements. 2.5 OTHER MPUC APPROVALS. (a) Buyer shall have obtained such orders or decrees of the MPUC as may be necessary in order to establish the costs of its performance under this Agreement as assets under generally accepted accounting principles and to recover such costs and amortize such assets through rates to customers over such period or periods as may be reasonably acceptable to Buyer and (b) Buyer shall, at its option, have secured a certificate of approval for an electric rate stabilization agreement pursuant to 35-A Me. Rev. Stat. Ann. Secion 3156. 2.6 UNITIL AGREEMENT. The agreement between Buyer and UNITIL Power Corp. ("UNITIL") amending that portion of the Power Sales Agreement (the "UNITIL Agreement") between Buyer and UNITIL dated as of March 26, 1986 relating to the resale of energy and capacity from the Facility shall have been approved by the Federal Energy Regulatory Commission. 2.7 NO LITIGATION. No litigation whose subject matter relates to any of the transactions contemplated by this Agreement shall be pending or threatened before any court or regulatory agency the outcome of which, in the reasonable opinion of Buyer, could materially adversely affect the ability of Buyer to consummate such transactions or to recover the payments made to Seller in its rates. 2.8 WEST ENFIELD. On the Closing Date, there shall have been consummated in accordance with the agreement of even date herewith (the "West Enfield Purchase Agreement") between Buyer and Babcock-Ultrapower West Enfield, a joint venture organized under the laws of California, the sale to the Buyer of all right, title and interest of Babcock-Ultrapower West Enfield in and to the Power Purchase Agreement, dated as of August 13, 1984, as amended to date, regarding the wood-fired small power production facility located in West Enfield, Maine. 2.9 SCHEDULE 6.3(B). Any claims under the Power Purchase Agreement which Seller shall have proposed to add to Schedule 6.3(b) after the Underwriting Date shall be reasonably satisfactory to Buyer. ARTICLE 3 CONDITIONS TO SELLER'S OBLIGATIONS The obligation of Seller to consummate the Closing on the Closing Date is subject to the satisfaction (or waiver by Seller), on or before the Closing Date, of each of the conditions set forth below. Each document required to be delivered on the Closing Date pursuant to this Article 3 and each payment to be made on the Closing Date pursuant to Article 1.2(a) shall be delivered or made, as the case may be, in escrow pursuant to the Escrow Agreement which shall provide for the release of all such documents and such payments on the Escrow Release Date and which shall also provide that any interest earned on amounts held pursuant to the Escrow Agreement shall be paid to Seller on the Escrow Release Date. 3.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations and warranties of Buyer contained herein and in all certificates, agreements and other documents delivered by Buyer to Seller pursuant hereto or in connection with the transactions contemplated herein shall be true and accurate in all material respects as of the date hereof and as of the Closing Date. 3.2 PERFORMANCE. Buyer shall have performed and complied in all material respects with all agreements, obligations and conditions required by this Agreement to be performed or complied with by it including, without limitation, payment of the Purchase Price and the payments set forth in Section 1.4(a) above and shall have delivered all items required to be delivered pursuant to Section 1.5 by it on or prior to the Closing Date. 3.3 TERMINATION AND RELEASE. (a) Seller shall have received a release and discharge executed by the Agent and (if necessary) the Banks, reasonably satisfactory in form and substance to Seller, whereby Seller is released from and discharged of its obligations under the Loan Agreement, the Security Documents and the Notes (each as defined in the Loan Agreement), and such release and discharge shall provide that the Agent and the Banks shall have released to Seller and otherwise discharged all mortgages, liens, security interests and encumbrances on any property of the Seller whatsoever (including without limitation, permits, goods, equipment, intangibles and deposit accounts) entered into or obtained by the Agent and the Banks in connection with Seller's obligations under the Loan Agreement, the Security Documents and the Notes. (b) On the Closing Date, Seller shall have received satisfactory assurances of payment in cash in immediately available funds on the Escrow Release Date of an amount equal to the balance to be on deposit on the Escrow Release Date, and all accrued interest thereon, in accounts held as cash collateral and/or reserve accounts in connection with the Loan Agreement and/or the Security Documents. 3.4 TRANSMISSION AGREEMENT. Seller and Buyer shall have entered into an agreement on terms and conditions reasonably satisfactory to Seller for the transmission of power generated at the Facility from the Facility to points at which Buyer's transmission system interconnects with the transmission system of other electric utilities for the purpose of enabling Seller (or any successor owner or user of the Facility) to compete for the sale of capacity and energy to other utilities in the bulk power supply market, or (except to the extent such restriction is prohibited by law) to entities that are not retail customers of Buyer. Such agreement shall provide for such transmission services at non-discriminatory rates customarily available among electric utilities. To the extent that the approval of the Federal Energy Regulatory Commission or other governmental agency is required as a condition to the effectiveness of such agreement, at Seller's request and upon payment by Seller to Buyer of any required filing fee, Buyer will use its best efforts to obtain the requisite approval; such approval, however, is not a condition to Seller's obligations to consummate the Closing on the Closing Date. 3.5 SPECIAL FACILITIES. Seller and Buyer shall have entered into an agreement, on terms and conditions reasonably satisfactory to Seller and no less favorable to Seller than under the Agreement for Installation of Special Facilities for Parallel Operation Between Bangor Hydro-Electric Company and Babcock-Ultrapower Jonesboro (the "Special Facilities Agreement") in effect as of the date of this Agreement, providing for the continued use of the Special Facilities (as defined in the Special Facilities Agreement) by Seller (or any successor owner or user of the Facility). To the extent that the approval of the MPUC or other governmental agency is required as a condition to the effectiveness of such agreement, at Seller's request, Buyer will use its best efforts to obtain the requisite approval; such approval, however is not a condition to Seller's obligation to consummate the Closing on the Closing Date. In the absence of such approved agreement, Buyer will make the Special Facilities available to Seller (and any such successor) pursuant to the applicable industrial tariff in effect from time to time. 3.6 DISPATCH SERVICES AGREEMENT. Seller and Buyer shall have entered into an agreement, on terms and conditions reasonably satisfactory to Seller, requiring Buyer to provide dispatch services to Seller (or any successor owner or user of the Facility) to allow Seller or such successor to sell energy and capacity into northeastern power markets. To the extent that the approval of the Federal Energy Regulatory Commission or other governmental agency is required as a condition to the effectiveness of such agreement, at Seller's request and upon payment by Seller to Buyer of any required filing fee, Buyer will use its best efforts to obtain the requisite approval; such approval, however, is not a condition to Seller's obligation to consummate the Closing on the Closing Date. 3.7 STATION SERVICE RATE AGREEMENT. Seller and Buyer shall have entered into an agreement, on terms and conditions and at a rate reasonably satisfactory to Seller, providing for the supply of electric power by Buyer to the Facility (notwithstanding any subsequent change in ownership of the Facility). To the extent that the approval of the MPUC or other governmental agency is required as a condition to the effectiveness of such agreement, at Seller's request, Buyer will use its best efforts to obtain the requisite approval; such approval, however, is not a condition to Seller's obligation to consummate the Closing on the Closing Date. In the absence of such approved agreement, Buyer will make electric power available to the Facility at rates and pursuant to terms and conditions on file with the MPUC. 3.8 WEST ENFIELD. On the Closing Date, there shall have been consummated in accordance with the West Enfield Purchase Agreement, the sale to the Buyer of all right, title and interest of Babcock-Ultrapower West Enfield in and to the Power Purchase Agreement, dated as of August 13, 1984, as amended to date, regarding the wood-fired small power production facility located in West Enfield, Maine. 3.9 NO LITIGATION. No litigation whose subject matter relates to any of the transactions contemplated by this Agreement shall be pending or threatened before any court or regulatory agency the outcome of which, in the reasonable opinion of Seller, could materially adversely affect the ability of Seller to consummate such transactions. 3.10 SCHEDULE 6.3(B). Any claims under the Power Purchase Agreement which Buyer shall have proposed to add to Schedule 6.3(b) after the Underwriting Date shall be reasonably satisfactory to Seller. ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER Buyer hereby represents and warrants to Seller on the date hereof and as of the Closing Date as follows: 4.1 ORGANIZATION. Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Maine and has the full corporate power and authority to carry on its business as it is now being conducted. 4.2 AUTHORIZATION. Buyer has the full corporate power and authority to enter into this Agreement, the Assignment and the agreements referred to in Sections 3.4 through 3.7 hereof (such agreements referred to in Sections 3.4. through 3.7 hereof collectively, the "Post-PPA Agreements") and to perform its obligations hereunder and thereunder. Buyer's execution, delivery and performance of this Agreement have been, and Buyer's execution, delivery and performance of the Assignment, the Post-PPA Agreements and all other documents or instruments incidental thereto will have been, prior to the execution thereof, approved by all necessary corporate action on the part of Buyer. Except where governmental approvals for Post-PPA Agreements may be required as noted in Sections 3.4 through 3.7, this Agreement is, and the Assignment and the Post-PPA Agreements, when executed and delivered, will be, the valid and binding obligations of Buyer enforceable in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, insolvency and other similar laws affecting creditors' rights generally and by general principles of equity, regardless of whether such equitable principles are considered in a proceeding at law or in equity. 4.3 CONSENTS AND APPROVALS OF GOVERNMENTAL AUTHORITIES AND THIRD PARTIES. Except for the approval of the MPUC referred to in Section 2.3 above and approvals described in Sections 3.4 to 3.7 with respect to the Post-PPA Agreements, no consent, approval or authorization of, or declaration, filing or registration with, any court or governmental or regulatory authority or any other third party is required to be made or obtained by Buyer in connection with the execution, delivery and performance of this Agreement, the Assignment or the Post-PPA Agreements. As of the Closing Date, the MPUC approval referred to in the preceding sentence has been obtained. Any stocks, bonds, notes or other evidence of indebtedness issued or sold or to be issued or sold pursuant to or in reliance on and in accordance with such MPUC approval are and shall be valid, binding and enforceable in accordance with their terms, including the terms of any agreement, instrument or document under or pursuant to which the stocks, bonds, notes or other evidences of indebtedness are issued. 4.4 LITIGATION. No actions, claims, proceedings, suits, investigations, orders to show cause, notices of violation or notices of apparent liability or forfeiture are pending, or to the best knowledge of Buyer threatened, against Buyer questioning or challenging the validity of this Agreement, the Assignment or the Post-PPA Agreements or any action taken or proposed to be taken by Buyer pursuant hereto or in connection with the transactions contemplated hereby or thereby. 4.5 NO VIOLATION. Subject to any necessary consents of Buyer's lenders referred to in Section 2.4 above, Buyer's execution, delivery and performance of this Agreement, the Assignment or the Post-PPA Agreements will not violate or conflict with, or require a consent or result in a default or event of default under, any material contract, agreement, note, mortgage or indenture, or any judgment, order or decree, to which Buyer is a party or by which it or its assets are bound. As of the Closing Date, the lenders' approval referred to in the preceding sentence has been obtained. ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF SELLER Seller hereby represents and warrants to Buyer on the date hereof and as of the Closing Date as follows: 5.1 ORGANIZATION. Seller is a joint venture formed as a general partnership duly organized, validly existing and in good standing under the laws of the State of California and has the full partnership power and authority to carry on its business as it is now being conducted. 5.2 AUTHORIZATION. Seller has the full power and authority to enter into this Agreement, the Assignment and the Post-PPA Agreements and to perform its obligations hereunder and thereunder. Seller's execution, delivery and performance of this Agreement have been, and Seller's execution, delivery and performance of the Assignment and the Post-PPA Agreements will have been, prior to the execution thereof, approved by all necessary partnership action on the part of Seller and by all corporate and partnership action on the part of its partners. This Agreement is, and the Assignment and the Post-PPA Agreements, when executed and delivered, will be, the valid and binding obligations of Seller enforceable in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, insolvency and other similar laws affecting creditors' rights generally and by general principles of equity, regardless of whether such equitable principles are considered in a proceeding at law or in equity. 5.3 CONSENTS AND APPROVALS OF GOVERNMENTAL AUTHORITIES. Except for any approvals described in Sections 3.4 to 3.7 with respect to the Post-PPA Agreements, no consent, approval or authorization of, or declaration, filing or registration with, any court or governmental or regulatory authority is required to be made or obtained by Seller in connection with its execution, delivery and performance of this Agreement, the Assignment or the Post-PPA Agreements. 5.4 LITIGATION. No actions, claims, proceedings, suits, investigations, orders to show cause, notices of violation or notices of apparent liability or forfeiture are pending, or to the best knowledge of Seller threatened, against Seller questioning or challenging the validity of this Agreement, the Assignment or the Post-PPA Agreements or any action taken or proposed to be taken by Seller pursuant hereto or in connection with the transactions contemplated hereby or thereby. 5.5 NO VIOLATION. Subject to consent of the Agent and the Banks under the Loan Agreement, Seller's execution, delivery and performance of this Agreement, the Assignment or the Post-PPA Agreements will not violate or conflict with, or require the consent or result in a default or event of default under, any material contract, agreement, note, mortgage or indenture, or any judgment, order or decree to which Seller is a party or by which it or its assets are bound. ARTICLE 6 MISCELLANEOUS PROVISIONS 6.1 TRANSACTION COSTS. (a) Buyer shall be responsible for all out-of-pocket costs and expenses incurred by or on behalf of Buyer in connection with this Agreement, including the fees and costs of its counsel, and shall also be responsible for fees and costs of counsel to Seller reasonably incurred in connection with this Agreement and the transactions contemplated hereby and of counsel to the Agent and the Banks (to the extent that Seller determines it is responsible for such fees and costs under the Loan Agreement and the Security Documents) incurred in connection with this Agreement and the transactions contemplated hereby, in each case whether or not the Closing occurs. In addition, Buyer shall be responsible for the travel expenses and out-of-pocket costs of Seller and each partner of Seller incurred in connection with this Agreement and the transactions contemplated hereby to the extent such costs exceed $15,000, whether or not the Closing occurs. Buyer shall also be responsible for all amendment, prepayment, breakage, termination, up-front, commitment or other Bank fees or costs or expenses payable in connection with the payment of the obligations of the Seller under the Loan Agreement as of the Escrow Release Date and the incurrence by Buyer of new debt in connection with the transactions contemplated hereby. (b) This obligation shall survive the Closing or any termination of this Agreement, and Buyer shall pay such fees, costs and expenses (i) within 15 days after receipt of invoices submitted to Buyer by Seller (together with such supporting data in reasonable detail and such supporting documentation as may be reasonably available to Seller) as such fees, costs and expenses are incurred, and (ii) at the Closing to the extent they are known and are the subject of invoices provided to Buyer pursuant to Section 1.4(a)(iv) hereof. 6.2 TERMINATION. This Agreement may be terminated at any time by the mutual agreement of Seller and Buyer, and will terminate at 12:01 A.M. (New York time) on September 16, 1995 unless extended by mutual agreement of Seller and Buyer. 6.3 SURVIVAL. (a) All covenants, agreements, representations, and warranties made by the parties to this Agreement or in any agreement, document, or instrument executed and delivered pursuant hereto or in connection with the transactions contemplated hereby shall survive the Closing, to the extent of and in accordance with their terms. (b) From and after the Closing Date and notwithstanding the consummation of the sale described in Section 1.1 hereof, all rights of Buyer and Seller against each other under the Power Purchase Agreement in respect of any claim of either Buyer or Seller which is described in Schedule 6.3(b) hereof, or any claim arising during the period from the date hereof until the Closing Date and which shall be described in Schedule 6.3(b) hereof as amended as of the Closing Date, shall survive and be preserved for further action by Buyer or Seller in accordance with the terms of the Power Purchase Agreement as in effect on the date hereof and applicable law. 6.4 TAX INDEMNIFICATION. (a) Buyer hereby agrees to indemnify and hold Seller and each partner of Seller (each, a "Tax-Indemnified Party") harmless on an After-Tax Basis from and against any and all taxes, fees, duties, impost, levies or charges of whatsoever nature (other than taxes of general applicability based on income) imposed by the State of Maine or any political subdivision thereof or any taxing authority of such State or political subdivision and all interest, penalties or similar liabilities with respect thereto (any such amounts, "Taxes") solely as a result of any payment made or to be made by Buyer to Seller pursuant to this Agreement or as a result of the purchase and sale of Seller's right, title and interest in and to the Power Purchase Agreement as contemplated by this Agreement but only to the extent such Taxes are imposed as a result of a Change in Law after the date of this Agreement. Buyer agrees to pay (or reimburse such Tax- Indemnified Party for payment of) any and all Taxes within 45 days of the date on which such Tax-Indemnified Party delivers to Buyer the documentation required by the immediately succeeding paragraph. Each Tax-Indemnified Party will (i) notify Buyer in writing within five business days of such Tax-Indemnified Party's receipt of an assessment, notice or request for payment of any such Tax from a taxing authority, and (ii) supply to Buyer not less than twenty business days in advance of the due date therefor calculations, documentation and forms of returns (or, at the option of such Indemnified Party, pertinent portions of or excerpts from such returns) demonstrating the nature, amount and calculation of any Tax which such Tax-Indemnified Party believes Buyer is obligated to pay pursuant to this Section. In no event will Buyer be obligated to pay interest, penalties or late charges due as a result of a Tax-Indemnified Party's failure to file returns or make Tax payments within the time periods required by law unless such failure is the result of the action or inaction of Buyer. Failure of a Tax-Indemnified Party to provide any notice or other item to Buyer as described in this paragraph by the time specified in this or the immediately succeeding paragraph shall not, however, affect such Tax-Indemnified Party's right to indemnification as provided in the first paragraph of this Section 6.4(a). Each Tax-Indemnified Party will promptly notify Buyer of any event which such Tax-Indemnified Party believes constitutes or may constitute a Change of Law promptly after becoming aware thereof. Buyer may, at its option, require such Tax-Indemnified Party, with funds provided by Buyer, to make any payment of Tax pursuant to this Section under protest and may at Buyer's sole expense contest the assessment or calculation of such Tax before the relevant taxing authority. Each Tax-Indemnified Party agrees to Buyer exercising direction and control of any such protest and any related proceeding, and will provide reasonable cooperation at Buyer's request and sole expense in the conduct thereof. (b) For purposes of Section 6.4(a) above, (i) "Change in Law" shall mean any finally adopted change in law, rule or regulation, or official published interpretation thereof in each instance, and (ii) "After-Tax Basis" shall mean on a basis such that any payment required to be paid on such basis shall, if necessary, be supplemented by a further payment so that the sum of the two payments, after deduction of all taxes, penalties, fines, interest and other charges resulting from the receipt (actual or constructive) of such payments imposed by or under any Federal, state or local governmental authority in the United States or subdivision or any taxing authority of any thereof (assuming for this purpose that each Tax-Indemnified Party is a tax- paying entity in the State of Maine subject to the maximum applicable corporate income tax rates then in effect), and after taking into account all related tax savings (whether by deduction, credit or otherwise) actually realized as a result of such payments or the event or circumstance giving rise thereto, shall be equal to the payment so required. (c) Each Tax-Indemnified Party agrees not to actively support the adoption of any Change in Law to which the indemnification contained in this Section 6.4 would apply and further agrees that none of its affiliates shall do so. In addition, each partner of Seller agrees that at the request and at the expense of Buyer it will use reasonable efforts to assist in any challenge to any such Change in Law. 6.5 GENERAL INDEMNIFICATION BY BUYER. Buyer shall defend, indemnify and hold Seller, each partner thereof, and each partner's directors, officers, employees, agents, attorneys, and affiliates (each, a "Seller Indemnified Party") harmless at all times against and in respect of any claim, action, loss, cost, expense, liability, penalty or interest, or damage (collectively, "Damages") suffered or incurred by such Seller Indemnified Party, and all other costs and expenses incurred by such Seller Indemnified Party in necessary investigation or, after notice to Buyer of its intent to do so, in attempting to avoid or oppose the imposition thereof, arising out of, relating to, or resulting from, (i) any breach of any representation, warranty, covenant, or agreement made by Buyer in this Agreement, or in any agreement, document, or instrument executed and delivered pursuant to or in connection with the transactions contemplated hereby or thereby; or (ii) the non-performance or malperformance of any obligation to be performed on the part of Buyer under this Agreement or in any agreement (including, without limitation, any agreement entered into pursuant to Section 1.8 hereof), document or instrument executed and delivered pursuant hereto or in connection with the transactions contemplated hereby or thereby; PROVIDED that Buyer shall not be obligated to indemnify any Seller Indemnified Party for any Damages suffered or incurred by such Seller Indemnified Party as a result of such Seller Indemnified Party's gross negligence or willful misconduct. 6.6 GENERAL INDEMNIFICATION BY SELLER. Seller shall defend, indemnify and hold Buyer, and each of Buyer's directors, officers, employees, agents, attorneys, and affiliates (each, a "Buyer Indemnified Party") harmless at all times against and in respect of any Damages suffered or incurred by such Buyer Indemnified Party, and all other costs and expenses incurred by such Buyer Indemnified Party in necessary investigation or, after notice to Seller of its intent to do so, in attempting to avoid or oppose the imposition thereof, arising out of, relating to, or resulting from, (i) any breach of any representation, warranty, covenant, or agreement made by Seller in this Agreement, or in any agreement, document, or instrument executed and delivered pursuant to or in connection with the transactions contemplated hereby or thereby; or (ii) the non-performance or malperformance of any obligation to be performed on the part of Seller under this Agreement or in any agreement, document or instrument executed and delivered pursuant hereto or in connection with the transactions contemplated hereby or thereby; PROVIDED that Seller shall not be required to indemnify any Buyer Indemnified Party for any Damages suffered or incurred by such Buyer Indemnified Party as a result of such Buyer Indemnified Party's gross negligence or willful misconduct. 6.7 DEFENSE AGAINST ASSERTED CLAIMS; LIMITATIONS. (a) If any claim or assertion for Damages is made or asserted against any Seller Indemnified Party or Buyer Indemnified Party, as applicable, as provided in Section 6.5 or 6.6, such Seller Indemnified Party or Buyer Indemnified Party (each hereinafter referred to as an "Indemnified Party") shall with reasonable promptness give to the other party (the "Indemnifying Party") written notice of the claim or assertion for Damages and request the Indemnifying Party to defend the same. The Indemnifying Party shall, at its expense, assume the defense of such claim or assertion with counsel reasonably satisfactory to the Indemnified Party. The Indemnified Party shall have the right to employ separate counsel in any such action and to participate in the defense thereof, but the fees and expenses of such separate counsel shall be at the expense of the Indemnified Party unless (i) the engagement of such counsel has been specifically authorized by the Indemnifying Party in writing, (ii) the Indemnifying Party has failed to assume the defense of such claim or assertion within ten (10) days after being notified of such claim, (iii) the named parties to such action (including any impleaded parties) include both the Indemnifying Party and the Indemnified Party, and the Indemnified Party shall have reasonably concluded that there may be one or more legal defenses available to the Indemnified Party which are different from or in addition to those available to the Indemnifying Party, or (iv) such action involves a criminal claim against such Indemnified Party. In the event the conditions set forth in clause (iii) of the preceding sentence are met, the Indemnifying Party shall not have the right to assume the defense of such action on behalf of the Indemnified Party as to such legal defenses available to the Indemnified Party which are different from or in addition to those available to the Indemnifying Party, but shall indemnify the Indemnified Party against all litigation expenses (including reasonable fees of counsel) in connection with such defenses. The indemnification to which this Section 6.7 relates shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received (together with such supporting data in reasonable detail and such supporting documentation as may be reasonably available to the Indemnified Party) or loss, damage, liability, cost, or expense is incurred; PROVIDED, that no settlement or compromise of any claim asserted or action commenced in respect of which the Indemnifying Party will be liable in accordance with its indemnity under this Agreement shall give rise to liability of such Indemnifying Party unless such Indemnifying Party shall have been notified in writing of the proposed settlement or compromise and shall have consented in writing thereto, which consent shall not be unreasonably withheld so long as any claims which have been or may be asserted against the Indemnifying Party in such action or any related or future action are to be released with prejudice in connection with such settlement or compromise, it being understood, however, that in the event the Indemnifying Party unreasonably withholds its consent to a settlement or compromise as to which it has agreed above that such consent shall not be unreasonably withheld, the Indemnified Party may proceed to consummate such settlement or compromise without the consent of the Indemnifying Party and may pursue its indemnification claims hereunder against the Indemnifying Party as provided herein in respect of the cost of such settlement or compromise. Buyer and Seller will cooperate with each other and shall take reasonable measures to obtain the cooperation of Seller's Indemnified Parties and Buyer's Indemnified Parties, as applicable, in the defense of any action and the relevant records of each shall be available to the other with respect to such defense. (b) In no event shall either party be liable to any Indemnified Party (as defined in Section 6.7) for any consequential, special, indirect or incidental damages, or loss of profits, cost of money, claims of customers or claims of financiers, or any amounts in settlement thereof, howsoever the same may be caused, in connection with any claim arising under this Agreement except to the extent any of the foregoing are included in a third party claim against a Seller Indemnified Party or Buyer Indemnified Party, as the case may be, to which the provisions of Section 6.5 or 6.6 apply. In addition, each Seller Indemnified Party and each Buyer Indemnified Party shall use reasonable efforts to mitigate any Damages which may be the subject of an indemnification claim by it pursuant to Section 6.5 or 6.6 hereof, as applicable. 6.8 CONDUCT PRIOR TO CLOSING. During the period from the date of this Agreement to the Closing Date, (i) Buyer shall confer on a regular and frequent basis with one or more representatives of Seller to report on the status of the various conditions set forth in Article 2 hereof, (ii) Seller agrees to provide reasonable cooperation to Buyer in connection with the possible minimization of the amounts payable pursuant to Section 1.4(a)(iii) hereof, and (iii) promptly upon learning thereof, each of Buyer and Seller shall notify the other of any breach of any representation or warranty set forth in Section 4 or Section 5 hereof. 6.9 NOTICES. All notices, requests or other communications required or permitted hereunder shall be given in writing and shall be deemed to have been duly given, if delivered in hand, on the date of receipt (or refusal), or if given by Federal Express or similar nationally recognized expedited overnight commercial courier, when delivered to Federal Express or similar nationally recognized expedited overnight commercial courier, addressed to the recipient of the notice, with all freight charges paid, or if given by facsimile transmission, when sent, to the following addresses and facsimile numbers: If to Seller, to: Babcock & Wilcox Jonesboro Power, Inc. 20 South Van Buren Avenue Barberton, Ohio 44203 Facsimile: 216-860-1868 Attention: Vice President, Operations and ESI Jonesboro Limited Partnership c/o ESI Energy, Inc. 1400 Centrepark Boulevard, Suite 600 West Palm Beach, Florida 33401 Facsimile: (407) 687-4932 Attention: Vice-President, Business Management and L.G.& E. Power 6 Incorporated 2030 Main Street, 12th Floor Irvine, California 92714 Facsimile: (714) 955-4333 Attention: President If to Buyer, to: Bangor Hydro-Electric Company P.O. Box 932 33 State Street Bangor, ME 04402-0932 Facsimile: 207-990-6963 Attention: Robert S. Briggs, President or to such other address or number as any party may have designated for itself by written notice to the other in the manner herein prescribed, except that notices of change of address shall be effective only upon receipt. 6.10 ASSIGNMENT. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by either of the parties hereto without the prior written consent of the other party and any assignment made absent such consent shall be void AB INITIO. 6.11 GOVERNING LAW. This agreement and the legal relations between the parties hereto shall be governed by and construed in accordance with the laws of the State of Maine. 6.12 COUNTERPARTS. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 6.13 HEADINGS. The headings contained in this Agreement are inserted for convenience only and are not intended to be determinative or interpretive of the substance of this Agreement. 6.14 ENTIRE AGREEMENT. This Agreement embodies the entire agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties, covenants or undertakings other than those expressly set forth or referred to herein. This Agreement supersedes all prior agreements and understandings between the parties with respect to the subject matter hereof. 6.15 EFFECTIVENESS. This Agreement shall become effective on the date (the "Effective Date") on which (i) Seller and Buyer shall have signed a copy hereof (whether the same or different copies), (ii) Buyer shall have delivered to Seller instruments with the same substantive effect as those required by Sections 1.5(ii) and (iii) to be delivered by Buyer on the Closing Date, (iii) Seller shall have delivered to Buyer instruments with the same substantive effect as those required by Sections 1.6(ii) and (iii) to be delivered by Seller on the Closing Date, and (iv) Seller shall have received any necessary consent of the Agent and the Banks under the Loan Agreement to its execution and delivery of this Agreement. 6.1 CONDITIONS PRECEDENT. Seller and Buyer agree to use reasonable efforts to satisfy, on or prior to the Closing Date, the conditions precedent to their respective obligations to consummate the Closing set forth in Article 2 and Article 3 hereof. 6.17 FUEL PURCHASE. Except as provided herein, Seller shall not purchase any fuel for use at the Facility unless Buyer shall have consented to such purchase. Seller may purchase fuel without Buyer's consent provided that Buyer shall not be obligated pursuant to Section 1.4(a)(i) and Section 1.7(b) to pay the book inventory value or disposal cost of any such fuel purchased without its consent. Any impairment of Seller's ability to comply with the Power Purchase Agreement as a result of the operation of this Section 6.17 shall not be the basis for any claim of a default on the part of the Seller under the Power Purchase Agreement. 6.18 DISCLOSURE. Each of Seller and Buyer agrees that the terms of this Agreement may be disclosed to any regulatory agency which has jurisdiction over Seller, Buyer, or any of their respective affiliates, to any of their respective lenders, in any filings under the securities laws, in any disclosure document delivered to its shareholders or in connection with any offering of its securities. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written. BANGOR HYDRO-ELECTRIC COMPANY, By: /s/ Robert S. Briggs --------------------- Name: Title: BABCOCK ULTRAPOWER JONESBORO, a California general partnership By: L.G.& E. POWER 6 INCORPORATED, its general partner By: /s/ Scott Noll ----------------- Name: Title: By: ESI JONESBORO LIMITED PARTNERSHIP, a Delaware Limited Partnership By: ESI JONESBORO, INC., its general partner By: /s/ Lori Bonilla ------------------ Name: Title: By: BABCOCK & WILCOX JONESBORO POWER, INC., its general partner By: /s/ Jack M. Arnold ---------------------- Name: Title: EXHIBIT A to Purchase Agreement ASSIGNMENT OF POWER PURCHASE AGREEMENT THIS ASSIGNMENT OF POWER PURCHASE AGREEMENT (this "Assignment") is made and entered into as of [closing date] by and between BABCOCK-ULTRAPOWER JONESBORO, a joint venture formed as a California general partnership (the "Assignor"), and BANGOR HYDRO-ELECTRIC COMPANY, a Maine corporation (the "Assignee"). W I T N E S E T H : WHEREAS, the Assignor and the Assignee are parties to the Power Purchase Agreement dated as of August 13, 1984 (as amended to date, the "Power Purchase Agreement"); WHEREAS, the Assignor has agreed to sell to the Assignee and the Assignee has agreed to purchase all of Assignor's right, title and interest in and to the Power Purchase Agreement on the terms and conditions set forth in the Purchase Agreement dated as of March 31, 1995 (the "Purchase Agreement") by and between the Assignor and the Assignee; and WHEREAS, it is a condition to the obligations of the parties under the Purchase Agreement that this Assignment be executed and delivered; NOW, THEREFORE, in consideration of the mutual promises contained herein and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. ASSIGNMENT. The Assignor hereby sells, assigns, transfers, conveys and delivers to the Assignee, without recourse (except for any misrepresentation regarding the subject matter stated in the immediately succeeding sentence) to the Assignor and without any warranty to the Assignee, either express or implied, as to any matter whatsoever and without representation except as herein expressly made, and the Assignee hereby purchases from the Assignor, all of the Assignor's right, title and interest in and to the Power Purchase Agreement (the "Interest"). The Assignor and each partner of the Assignor represent to the Assignee that the Assignor is the sole owner of the Interest herein conveyed and that such Interest of the Assignor is free and clear of all liens, security interests, claims or encumbrances whatsoever. 2. RELEASE OF CLAIMS. Except with respect to any claims which are to survive the execution and delivery of this Assignment and the consummation of the transactions contemplated by the Purchase Agreement pursuant to the terms of Section 6.3(b) of the Purchase Agreement, the Assignor and each partner of the Assignor hereby release the Assignee, its officers, directors, employees, agents and affiliates, and the Assignee hereby releases the Assignor, each partner of the Assignor and each partner's officers, directors, employees, agents and affiliates, fully, finally, and forever from all claims (known or unknown) which have been or could be asserted by the parties hereto arising out of, under or in connection with the Power Purchase Agreement under the statutory or common law of any jurisdiction, including, without limitation, any and all manner of actions, causes of action, suits, damages, sums of money, controversies, agreements, promises, court costs, judgments, attorneys' fees, claims for exemplary or punitive damages, claims for consequential damages, and all claims and demands of whatever type in law or in equity, which any party to this Assignment ever had, now has or which any party to this Assignment hereafter can, shall or may have for, upon, or by reason of the Power Purchase Agreement. 3. CAPITALIZED TERMS. All capitalized terms not otherwise defined in this Assignment shall have the meanings ascribed to such terms in the Purchase Agreement. 4. COUNTERPARTS. This Assignment may be executed in several counterparts each of which shall constitute but one and the same instrument. 5. GOVERNING LAW. This Assignment shall be governed by and construed in accordance with the laws of the State of Maine. 6. AMENDMENTS. This Assignment shall not be amended except by an instrument in writing executed by the parties through their duly authorized representatives. IN WITNESS WHEREOF, the parties hereto have caused this Assignment to be duly executed as of the day and year first written above. BABCOCK-ULTRAPOWER JONESBORO, a general partnership, as Assignor By: L.G.& E. POWER 6 INCORPORATED, its general partner By:_______________________ Name: Title: By: ESI JONESBORO LIMITED PARTNERSHIP, a Delaware Limited Partnership By: ESI JONESBORO, INC., its general partner By:_______________________ Name: Title: By: BABCOCK & WILCOX JONESBORO POWER, INC., its general partner By:_______________________ Name: Title: BANGOR HYDRO-ELECTRIC COMPANY, a corporation, as Assignee By________________________ Name: Title: EXHIBIT B [Opinion of Buyer's Counsel] [Closing date] re 24.5 MW Production Facility in Jonesboro, Maine Babcock & Wilcox Jonesboro Power, Inc. 20 South Van Buren Avenue Barberton, Ohio 44203 ESI Jonesboro Limited Partnership c/o ESI Energy, Inc. 1400 Centrepark Boulevard, Suite 600 West Palm Beach, Florida 33401 L.G.& E. Power 6 Incorporated 2030 Main Street, 12th Floor Irvine, California 92714 Ladies and Gentlemen: I am General Counsel and Corporate Clerk of Bangor Hydro-Electric Company ("Buyer"), a Maine corporation, and have acted as its counsel in connection with the execution and delivery of the Purchase Agreement dated as of March 31, 1995 (the "Agreement") by and between Babcock-Ultrapower Jonesboro ("Seller"), a joint venture formed as a California general partnership, and Buyer relating to the Power Purchase Agreement, dated as of August 13, 1984, as amended, by and between Seller and Buyer. All capitalized terms used herein and not otherwise defined shall have the respective meanings ascribed to such terms in the Agreement. In rendering this opinion, I have assumed the genuineness of all signatures, the authenticity of all documents submitted to me as originals and the conformity to authentic original documents of all documents submitted to me as certified, conformed or photostatic copies. I have examined and relied upon such documents, corporate records, certificates of corporate officers and representatives and other instruments and legal matters as I have deemed necessary for the purposes of the opinions expressed herein. Based upon the foregoing, it is my opinion that: 1. Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Maine. Buyer has full corporate authority and power to enter into the Agreement, the Post-PPA Agreements and the Assignment and to perform its obligations thereunder. 2. Except for such approvals with respect to the Post-PPA Agreements as are set forth in the Agreement, no consent, order, authorization, waiver, approval or any other action by, or registration, declaration or filing with, any person, board or body, public or private, is required for Buyer to enter into the Agreement, the Post-PPA Agreements or the Assignment or for Buyer to perform, and to be legally bound to perform, its obligations thereunder. 3. The Agreement, the Post-PPA Agreements and the Assignment have been duly and validly authorized by all requisite action on the part of Buyer, have been duly and validly executed and delivered by Buyer and, assuming due authorization, execution and delivery by Seller, constitute the legal, valid and binding obligations of Buyer, enforceable against it in accordance with their respective terms, except as enforceability may be limited by bankruptcy, insolvency or other similar laws applicable to creditors' rights generally and except as the availability of any particular remedy may be limited by general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law, and subject in the case of the Post-PPA Agreements to the receipt of such approvals as are described in Sections 3.4 through 3.7 of the Agreement. 4. The execution, delivery and performance of the Agreement, the Post-PPA Agreements and the Assignment will not result in any violation of the articles of incorporation or by-laws of Buyer or (subject in the case of the Post-PPA Agreements to the receipt of such approvals as are described in Sections 3.4 through 3.7 of the Agreement) any existing statute, law, governmental rule, regulation, decree or order applicable to Buyer or its properties, or contravene the provisions of or constitute a default under any material agreement, indenture, mortgage, lease or other instrument to which it or its property is or may be bound. 5. There is no action, suit, proceeding or investigation at law or in equity or by or before any court or administrative agency pending or, to the best of my knowledge threatened against or affecting Buyer which questions the validity of the Agreement, the Post-PPA Agreements or the Assignment which, individually or in the aggregate, would have a material adverse effect upon the ability of Buyer to enter into and carry out its obligations under the Agreement, the Post-PPA Agreements or the Assignment. I am a member of the Bar of the State of Maine and express no opinion as to any laws other than the laws of the State of Maine and the federal laws of the United States. I am furnishing this opinion to you solely for your benefit in connection with the transactions contemplated by the Agreement and this opinion is not to be used, circulated, quoted or otherwise referred to for any other purpose without my prior written approval in each instance. Very truly yours, EXHIBIT C Counsel to Seller and counsel to each partner of Seller shall deliver opinions, dated the Closing Date, to the effect that: 1. Seller is a general partnership duly organized, validly existing and in good standing under the laws of the State of California. Seller is fully authorized and empowered to enter into the Agreement, the Post-PPA Agreements and the Assignment and to perform its obligations thereunder. 2. No consent, order, authorization, waiver, approval or any other action by, or registration, declaration or filing with, any person, board or body, public or private, is required for Seller to enter into the Agreement, the Post-PPA Agreements or the Assignment for Seller to perform, and to be legally bound to perform, its obligations thereunder. 3. The Agreement, the Post-PPA Agreements and the Assignment have been duly and validly authorized by all requisite action on the part of Seller, have been duly and validly executed and delivered by Seller and constitute the legal, valid and binding obligation of Seller, enforceable against it in accordance with their respective terms, except as enforceability may be limited by bankruptcy, insolvency or other similar laws applicable to creditors' rights generally and except as the availability of any particular remedy may be limited by general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law. 4. The execution, delivery and performance of the Agreement, the Post-PPA Agreements and the Assignment will not result in any violation of the partnership agreement of Seller or any existing statute, law, governmental rule, regulation, decree or order applicable to Seller or its properties, or contravene the provisions of or constitute a default under any material agreement, indenture, mortgage, lease or other instrument to which it or its property is or may be bound. 5. There is no action, suit, proceeding or investigation at law or in equity or by or before any court or administrative agency pending or, to the best of our knowledge threatened against or affecting Seller which questions the validity of the Agreement, the Post-PPA Agreements or the Assignment which, individually or in the aggregate, would have a material adverse effect upon the ability of Seller to enter into and carry out its obligations under the Agreement, the Post-PPA Agreements or the Assignment. 6. Seller is the sole owner of the Interest (as defined in the Assignment) conveyed under the Assignment and such Interest of the Seller is free and clear of all liens, security interests, claims or encumbrances whatsoever. PURCHASE AGREEMENT Schedule 6.3(b) DISPUTED ISSUES Jonesboro Facility METERING ISSUE Babcock-Ultrapower Jonesboro contends that the facility has experienced high purchased electricity charges based on inaccurate usage readings from a Bangor Hydro meter located at the Jonesboro substation. Extensive system checking and technical analysis, conducted by Bangor Hydro, Babcock- Ultrapower Jonesboro, and independent consultants, has demonstrated that the plant metering has been affected by harmonics in the Bangor Hydro system. These harmonics have caused imbalances in the system distribution lines that are improperly registered by Bangor Hydro's meter as electric usage at the facility. In January 1994 Babcock-Ultrapower Jonesboro, as a customer, notified Bangor Hydro of the alleged problem and the Partnership's concern about excessive past billings for electric usage and the potential for ongoing excessive electric charges if the situation was not corrected. Despite several follow up requests and the acknowledgement by Bangor Hydro technicians that a problem exists, a solution has not been implemented to date, nor have prior overbillings been corrected. OCTOBER 1994 CAPACITY AND ENERGY BILLINGS AND 1994 BONUS BILLINGS The facility completed its scheduled 1994 two-week maintenance outage a day and a half early and, as was the practice in the past, called Bangor Hydro for a dispatch order to either begin firm generation or curtail generation. The facility was instructed to curtail generation and received acknowledgments from the Bangor Dispatch Operators that the units were accepted back as available for service. The facility responded to these dispatch orders and Babcock-Ultrapower expected to receive decremental energy payments for the period commencing with Bangor's dispatch order; however, Bangor Hydro refused to pay the total invoiced amounts, claiming that a mandatory full two-week outage was required and that no decremental payments were due until this period was completed. Babcock-Ultrapower contends that the maintenance periods were terminated by Bangor Hydro's dispatch orders, and that these orders were to be relied upon based on past practices and actions of Bangor Hydro. The availability of decremental energy during this period also affects Babcock-Ultrapower's performance payment under the 1994 Bonus Billing. EX-10 10 EXHIBIT 10.2 PURCHASE AGREEMENT THIS PURCHASE AGREEMENT (this "Agreement") is made and entered into as of this 31st day of March, 1995 by and between BABCOCK-ULTRAPOWER WEST ENFIELD, a joint venture formed as a California general partnership ("Seller"), and BANGOR HYDRO-ELECTRIC COMPANY, a Maine corporation ("Buyer"). RECITALS WHEREAS, Seller is the owner of a 24.5 MW wood-fired small power production facility located in West Enfield, Maine (the "Facility"); WHEREAS, pursuant to a Power Purchase Agreement dated as of August 13, 1984 (as amended to date, the "Power Purchase Agreement") between Buyer and Seller, Buyer has committed to purchase the electric output of the Facility for a term and under such conditions as are set forth therein; WHEREAS, Buyer, based upon its examination and analysis, believes that it is acquiring the ability to achieve substantial net present value savings for its customers by reducing its overall cost of purchased power if it acquires all right, title and interest of Seller in and to the Power Purchase Agreement on the terms and conditions set forth herein, and that consummation of the transactions described herein is in the best interests of Buyer and its customers; and WHEREAS, Seller is willing to sell to Buyer all of its right, title and interest in and to the Power Purchase Agreement on the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the premises and the mutual representations, warranties and covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Buyer and Seller, intending to be legally bound, hereby agree as follows: ARTICLE 1 PURCHASE AND SALE; CLOSING 1.1 PURCHASE AND SALE. Subject to the terms and conditions set forth herein, Seller agrees to sell, assign, transfer, convey and deliver to Buyer on the Closing Date (as hereinafter defined), and Buyer agrees to purchase from Seller on the Closing Date, all right, title and interest of Seller in and to the Power Purchase Agreement. 1.2 PURCHASE PRICE; PAYMENTS AT CLOSING. (a) In consideration for the purchase referred to in Section 1.1 above, Buyer shall on the Closing Date pay to Seller (i) the amount of $41,500,000 in cash in immediately available funds and (ii) the principal amount of Loans to be outstanding as of the Escrow Release Date (as hereinafter defined) (subject to the adjustment described in Section 1.2(b) below) in immediately available funds, as specified in the notice delivered pursuant to Section 1.2(c) below (such amounts described in clauses (i) and (ii) of this Section 1.2(a) being hereinafter referred to collectively as the "Purchase Price") and (iii) the amounts described in Section 1.4(a) hereof. (b) If the Escrow Release Date does not occur on an Installment Payment Date (as hereinafter defined), the aggregate amount payable pursuant to Section 1.2(a)(ii) above shall be reduced by (i) the principal amount of the installment of Loans scheduled to be repaid on the following Installment Payment Date pursuant to Section 2.4(a)(i) (regularly scheduled payments) and Section 2.4(b) (accelerated prepayments) of the Loan Agreement (as hereinafter defined), multiplied by (ii) a fraction equal to the number of days from and including the previous Installment Payment Date to but not including the Escrow Release Date divided by the number of days from and including the previous Installment Payment Date to but not including the following Installment Payment Date. (c) The aggregate amount of any payment pursuant to Section 1.2(a)(ii) above shall be equal to the amount set forth in the certificate delivered by Seller to Buyer pursuant to Section 1.6(x) below. Except as expressly provided in Section 1.2 (a)(ii) and Section 6.1 of this Agreement, Seller shall pay all other amounts due and payable under the Loan Agreement and the Security Documents. (d) The terms "Agent", "Banks", "Loans", and "Installment Payment Date" shall have the meanings set forth in the Amended and Restated Construction and Term Loan Agreement dated as of October 1, 1989 (as amended to date, the "Loan Agreement") among Seller, the Banks party thereto and The Bank of New York, as Agent. 1.3 CLOSING DATE. (a) The consummation of the purchase referred to in Section 1.1 above and the payments set forth in Section 1.2(a) hereof (the "Closing") shall occur on June 9, 1995 at 10:00 a.m. (New York time), at the offices of White & Case, 1155 Avenue of the Americas, New York, New York 10036 or at such other time, not later than September 15, 1995, as Buyer may determine in accordance with this Section 1.3 (the "Closing Date") or such other place as Seller and Buyer may agree upon. Buyer may select such other Closing Date, not later than September 15, 1995, as Buyer may determine provided that such other Closing Date shall be a date not more than five nor less than four Eurodollar Business Days (as defined in the Loan Agreement) prior to the date on which the Loans may be prepaid in full pursuant to the Loan Agreement (unless the Agent otherwise agrees in writing to the prepayment of the Loans other than as set forth in the Loan Agreement). Buyer shall provide Seller not less than thirty days prior written notice of such other Closing Date. In the event Buyer is unable to consummate the purchase referred to in Section 1.1 on such Closing Date, Buyer may select another Closing Date (determined in accordance with this paragraph and which, without the consent of Seller, shall be not less than thirty days following the applicable Closing Date) by written notice to Seller given not less than five Eurodollar Business Days prior to the then applicable Closing Date. In the event that the Closing Date is extended beyond June 9, 1995, Seller agrees to select only thirty-day Interest Periods (as defined in the Loan Agreement) with respect to the Loans. Seller agrees not to amend the Loan Agreement in any manner that would increase the costs payable by Buyer hereunder or otherwise materially and adversely affect the obligations of Buyer to Seller under this Agreement. (b) Concurrently with the consummation of the Closing, Seller shall provide notice to the Agent and the Banks in accordance with the Loan Agreement of the prepayment of the Loans in full on the Escrow Release Date. 1.4 OTHER PAYMENTS AT CLOSING. (a) In addition to the payments required pursuant to Section 1.2(a)(i) and (ii), Buyer shall pay to Seller (or at the direction of Seller to the applicable third parties or counterparties) on the Closing Date in cash in immediately available funds an amount equal in the aggregate to: (i) (x) the book inventory value of, and (y) unless Buyer has delivered its written undertaking pursuant to Section 1.8 below, all of Seller's projected disposal costs associated with, the fuel located at the Facility on the Closing Date (excluding any such fuel which Seller intends to combust in order to satisfy a power sales commitment to a third party commencing within thirty days of the Closing Date), as set forth in the certificate delivered by Seller pursuant to Section 1.6(viii) below; provided that Buyer will not be responsible under this Section 1.4(a)(i) for the inventory value of any fuel in excess of the equivalent of 7,618 bone dry short tons or the disposal of any fuel in excess of the equivalent of 8,380 bone dry short tons; (ii) undisputed amounts payable by Buyer to Seller under and in accordance with the Power Purchase Agreement which will have accrued as of the Escrow Release Date less interest accrued from, and including, the Closing Date to, but excluding, the Escrow Release Date (the "Escrow Interest") on all indebtedness incurred by Buyer to fund the Purchase Price and the amounts payable pursuant to Section 1.4(a)(iii) (the "Escrow Debt"); provided that Buyer shall have notified Seller in writing of any amounts disputed in good faith under the Power Purchase Agreement and its reasons for such dispute at least one business day (which, for the purposes of this Agreement, shall mean any day other than a Saturday, Sunday or other day on which banks in New York City or the State of Maine are authorized or required by law to close) prior to the Closing Date; (iii) amounts payable to Seller's counterparties as a result of the termination as of the Escrow Release Date of the interest rate swap agreements entered into by Seller in respect of the Loans, as set forth in the certificate delivered by Seller pursuant to Section 1.6(ix) below; (iv) amounts reimbursable by Buyer pursuant to Section 6.1 hereof with respect to which Seller has provided invoices, and such supporting documentation as shall be reasonably available to Seller, to Buyer at least two business days prior to the Closing Date; and (v) Seller's aggregate projected costs in respect of employee retraining and employee retention, as set forth in the certificate delivered by Seller pursuant to Section 1.6(viii) below, which together with the costs described in Section 1.4(a)(v) of the Jonesboro Purchase Agreement (as hereinafter defined) shall not exceed $265,000 in the aggregate. (b) The amounts payable on the Closing Date in respect of Sections 1.4(a)(i) and (v) above shall be as set forth in the certificate delivered by Seller to Buyer pursuant to Section 1.6(viii) below, and, with respect to amounts payable under Sections 1.4(a)(i)(y) and 1.4(a)(v), shall be subject to adjustment as provided in Section 1.7 below. The amounts payable on the Closing Date in respect of the Power Purchase Agreement under Section 1.4(a)(ii) above shall be determined in accordance with the provisions of the Power Purchase Agreement, shall be based, as provided therein, upon a reading of the Facility's meters on the Closing Date and shall be subject to adjustment for the period between the Closing Date and the Escrow Release Date as provided in Section 1.7 below based upon a reading of the Facility's meters on the Escrow Release Date. 1.5 DELIVERIES BY BUYER ON THE CLOSING DATE. On the Closing Date, Buyer shall deliver to Seller the following (provided that a completed draft (which may include estimates, as appropriate) of the document described in subsection (viii) shall be delivered to Seller at least four business days prior to the Closing Date): (i) an executed assignment, substantially in the form of Exhibit A hereto (the "Assignment"); (ii) a copy, certified as of the Closing Date by the Secretary of Buyer, of the resolutions of its Board of Directors, authorizing the execution, delivery and performance by it of this Agreement and the transactions contemplated hereby; (iii) a certificate, dated as of the Closing Date and signed by the Secretary of Buyer, as to the incumbency of the officers of Buyer signing this Agreement and any document or agreement which is to be signed by Buyer in connection with the Closing; (iv) a certificate, dated as of the Closing Date and signed by an officer of Buyer, on behalf of Buyer, to the effect that each of the representations and warranties of Buyer made in this Agreement are true and correct in all material respects on the Closing Date; (v) a Certificate of Good Standing of recent date for Buyer, issued by the appropriate authority in the State of Maine; (vi) an opinion of counsel to Buyer in substantially the form of Exhibit B hereto; (vii) all other documents, instruments and certificates reasonably required by Seller or its counsel to consummate the transactions contemplated hereby; and (viii) a certificate, dated the Closing Date, setting forth the amount of the Escrow Debt to be incurred by Buyer and the rate and amount of the Escrow Interest. 1.6 DELIVERIES BY SELLER ON THE CLOSING DATE . At the Closing, Seller shall deliver to Buyer the following (provided that completed drafts (which may include estimates, as appropriate) of the documents described in subsections (viii), (ix) and (x) shall be delivered to Buyer at least three business days prior to the Closing Date): (i) an executed Assignment; (ii) a copy, certified as of the Closing Date by the Secretary or an Assistant Secretary of each partner of Seller, of the resolutions of the Board of Directors of such partner, authorizing the execution, delivery and performance of this Agreement and the transactions contemplated hereby; (iii) a certificate, dated as of the Closing Date and signed by the Secretary or an Assistant Secretary of each partner of Seller, as to the incumbency of the officers of such partner signing this Agreement and any document or agreement which is to be signed by such partner in connection with the Closing; (iv) a certificate, dated as of the Closing Date and signed by an officer of each partner of Seller, on behalf of such partner, to the effect that each of the representations and warranties of Seller made in this Agreement, insofar as concerns such partner, and, to the best of such partner's knowledge, insofar as concerns Seller, are true and correct in all material respects on the Closing Date; (v) a Certificate of Good Standing of recent date for each partner of Seller, issued by the appropriate authority in its jurisdiction of incorporation; (vi) opinions of counsel to the Seller and of counsel to each partner of Seller substantially to the effect set forth in Exhibit C hereto; (vii) all other documents, instruments and certificates reasonably required by Buyer or its counsel to consummate the transactions contemplated hereby; (viii) a certificate, which shall set forth (A) the amounts payable under Section 1.4(a)(i)(x), (B) a good faith estimate by Seller as of the Closing Date of the amounts to be paid to Seller by Buyer pursuant to Sections 1.4(a)(i)(y) and 1.4(a)(v) above and (C) the amounts to be paid to Seller by Buyer pursuant to Section 1.4(a)(ii) above, in each case together with supporting data in reasonable detail and such supporting documentation as may be reasonably available to Seller; (ix) a certificate showing the amounts to be paid to Seller by Buyer on the Closing Date pursuant to Section 1.4(a)(iii) above, together with supporting data in reasonable detail and such supporting documentation as may be reasonably available to Seller; and (x) a certificate, dated as of the Closing Date, setting forth the aggregate amount of any payment to be made by Buyer as required pursuant to Section 1.2(a)(ii). 1.7 POST-CLOSING ADJUSTMENTS. (a) On or prior to the fifth business day after the Escrow Release Date, Seller shall make a final determination of the amounts payable by Buyer under the Power Purchase Agreement in accordance with the second sentence of Section 1.4(b) for the period between the Closing Date and the Escrow Release Date and shall deliver to Buyer a certificate setting forth such amounts and all calculations in reasonable detail necessary to support such amounts. Within two business days following delivery of such certificate, Buyer shall pay Seller in cash in immediately available funds the amount set forth in such certificate. (b) If Buyer has not delivered its written undertaking pursuant to Section 1.8 below, then on the forty-fifth day following the Escrow Release Date (or the first business day thereafter if such forty-fifth day is not a business day) or such later date as Seller shall determine if the effect of such delay is to reduce the amounts which may be payable by Buyer as hereinafter determined, Seller shall make a final determination of the amounts payable by Buyer pursuant to Section 1.4(a)(i)(y) above and shall deliver to Buyer a certificate setting forth such amounts and all calculations and documentation in reasonable detail necessary to support such amounts. Within two business days following delivery of such certificate, Seller shall pay Buyer in cash in immediately available funds (or Buyer shall pay Seller, as applicable) the difference between the aggregate amount set forth in such certificate and the aggregate amount paid by Buyer to Seller on the Closing Date pursuant to Section 1.4(a)(i)(y). (c) If Buyer has delivered its written undertaking pursuant to Section 1.8 below, during the period for disposal to be specified in the undertaking referred to in Section 1.8 below, Seller shall cooperate with Buyer to permit Buyer reasonable access to the Facility, and, to the extent available as reasonably determined by Seller, the assistance of Facility personnel in order for Buyer to conduct the disposal of the fuel in accordance with such undertaking. (d) On the six-month anniversary of the Escrow Release Date (or the first business day thereafter if such six-month anniversary is not a business day), Seller shall make a final determination of the amount payable by Buyer pursuant to Section 1.4(a)(v) above and shall deliver to Buyer a certificate setting forth such amount and all calculations and documentation in reasonable detail necessary to support them. Within two business days following delivery of such certificate, Seller shall pay Buyer in cash in immediately available funds (or Buyer shall pay Seller, as applicable) the difference between the amount set forth in such certificate and the amount paid by Buyer to Seller on the Closing Date pursuant to Section 1.4(a)(v), provided that the payments by Buyer pursuant to such Section 1.4(a)(v) and this Section 1.7(d), together with the payments by Buyer pursuant to Section 1.4(a)(v) and Section 1.7(d) of the Jonesboro Purchase Agreement, shall in no event exceed $265,000 in the aggregate. 1.8 FUEL DISPOSAL ELECTION. Not later than May 15, 1995, Seller shall provide Buyer a summary of the terms and conditions to be applicable to any undertaking by Buyer to dispose of the fuel described in Section 1.4(a)(i). If Buyer wishes to undertake such disposal, Buyer shall negotiate with and deliver to Seller no later than May 23, 1995 a written undertaking to such effect substantially on the terms and conditions provided by and otherwise in form and substance reasonably acceptable to Seller. 1.9 DELIVERIES BY SELLER ON THE UNDERWRITING DATE. In the event Buyer shall finance all or a portion of the Purchase Price with an offering of debt securities, Seller shall deliver to Buyer the following not later than 12:01 p.m., prevailing New York time, on the date Buyer proposes to execute and deliver a purchase contract with respect to such securities (the "Underwriting Date"); provided that Buyer shall have given Seller five business days prior written notice of such Underwriting Date: (i) a certificate, dated as of the Underwriting Date and signed by an officer of each partner of Seller, on behalf of such partner, to the effect that each of the representations and warranties of Seller made in this Agreement, insofar as concerns such partner, and, to the best of such partner's knowledge, insofar as concerns Seller, are true and correct in all material respects on the Underwriting Date; (ii) an amendment to Schedule 6.3(b), if required, setting forth any additional claims of Seller under the Power Purchase Agreement arising from the Effective Date (as hereinafter defined) of this Agreement to the Underwriting Date which shall survive the consummation of the sale described in Section 1.1 hereof in accordance with Section 6.3(b) of this Agreement; and (iii) evidence satisfactory to Buyer that the releases and discharges described in Section 3.3 hereof shall have been delivered to the Escrow Agent under the Escrow Agreement hereinafter described. 1.10 ESCROW AGREEMENT. Seller and Buyer agree to execute and deliver, on or prior to the Underwriting Date, the Escrow Agreement hereinafter referred to in form and substance reasonably satisfactory to both Seller and Buyer with an escrow agent reasonably satisfactory to both Seller and Buyer. ARTICLE 2 CONDITIONS TO BUYER'S OBLIGATIONS The obligation of Buyer to consummate the Closing on the Closing Date is subject to the satisfaction (or waiver by Buyer), on or before the Closing Date, of each of the conditions set forth below. Each document required to be delivered on the Closing Date pursuant to this Article 2 shall be delivered in escrow pursuant to an escrow agreement (the "Escrow Agreement") which shall provide for the release of all such documents on the first date after the Closing Date on which the Loans may be prepaid in full pursuant to the Loan Agreement (the "Escrow Release Date"). 2.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations and warranties of Seller contained herein and in all certificates and other documents and agreements delivered by Seller to Buyer pursuant hereto or in connection with the transactions contemplated hereby shall be true and accurate in all material respects as of the date hereof and as of the Closing Date. 2.2 PERFORMANCE. Seller shall have performed and complied in all material respects with all agreements, obligations and conditions required by this Agreement to be performed or complied with by it and shall have delivered all items required to be delivered pursuant to Section 1.6 by it on or prior to the Closing Date. 2.3 FINANCING. Buyer shall have obtained the financing, on terms reasonably satisfactory to Buyer, necessary to pay the Purchase Price and the payments set forth in Section 1.4(a) above (other than Section 1.4(a)(ii)) on the Closing Date, which financing shall have been approved by the Maine Public Utilities Commission ("MPUC") on terms and conditions reasonably satisfactory to Buyer. 2.4 CONSENTS. Buyer shall have obtained, on terms reasonably satisfactory to Buyer, any required consents of its lenders under its revolving credit borrowing arrangements. 2.5 OTHER MPUC APPROVALS. (a) Buyer shall have obtained such orders or decrees of the MPUC as may be necessary in order to establish the costs of its performance under this Agreement as assets under generally accepted accounting principles and to recover such costs and amortize such assets through rates to customers over such period or periods as may be reasonably acceptable to Buyer and (b) Buyer shall, at its option, have secured a certificate of approval for an electric rate stabilization agreement pursuant to 35-A Me. Rev. Stat. Ann. Section 3156. 2.6 UNITIL AGREEMENT. The agreement between Buyer and UNITIL Power Corp. ("UNITIL") amending that portion of the Power Sales Agreement (the "UNITIL Agreement") between Buyer and UNITIL dated as of March 26, 1986 relating to the resale of energy and capacity from the Facility shall have been approved by the Federal Energy Regulatory Commission. 2.7 NO LITIGATION. No litigation whose subject matter relates to any of the transactions contemplated by this Agreement shall be pending or threatened before any court or regulatory agency the outcome of which, in the reasonable opinion of Buyer, could materially adversely affect the ability of Buyer to consummate such transactions or to recover the payments made to Seller in its rates. 2.8 JONESBORO. On the Closing Date, there shall have been consummated in accordance with the agreement of even date herewith (the "Jonesboro Purchase Agreement") between Buyer and Babcock-Ultrapower Jonesboro, a joint venture organized under the laws of California, the sale to the Buyer of all right, title and interest of Babcock-Ultrapower Jonesboro in and to the Power Purchase Agreement, dated as of August 13, 1984, as amended to date, regarding the wood-fired small power production facility located in Jonesboro, Maine. 2.9 SCHEDULE 6.3(B). Any claims under the Power Purchase Agreement which Seller shall have proposed to add to Schedule 6.3(b) after the Underwriting Date shall be reasonably satisfactory to Buyer. ARTICLE 3 CONDITIONS TO SELLER'S OBLIGATIONS The obligation of Seller to consummate the Closing on the Closing Date is subject to the satisfaction (or waiver by Seller), on or before the Closing Date, of each of the conditions set forth below. Each document required to be delivered on the Closing Date pursuant to this Article 3 and each payment to be made on the Closing Date pursuant to Article 1.2(a) shall be delivered or made, as the case may be, in escrow pursuant to the Escrow Agreement which shall provide for the release of all such documents and such payments on the Escrow Release Date and which shall also provide that any interest earned on amounts held pursuant to the Escrow Agreement shall be paid to Seller on the Escrow Release Date. 3.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations and warranties of Buyer contained herein and in all certificates, agreements and other documents delivered by Buyer to Seller pursuant hereto or in connection with the transactions contemplated herein shall be true and accurate in all material respects as of the date hereof and as of the Closing Date. 3.2 PERFORMANCE. Buyer shall have performed and complied in all material respects with all agreements, obligations and conditions required by this Agreement to be performed or complied with by it including, without limitation, payment of the Purchase Price and the payments set forth in Section 1.4(a) above and shall have delivered all items required to be delivered pursuant to Section 1.5 by it on or prior to the Closing Date. 3.3 TERMINATION AND RELEASE. (a) Seller shall have received a release and discharge executed by the Agent and (if necessary) the Banks, reasonably satisfactory in form and substance to Seller, whereby Seller is released from and discharged of its obligations under the Loan Agreement, the Security Documents and the Notes (each as defined in the Loan Agreement), and such release and discharge shall provide that the Agent and the Banks shall have released to Seller and otherwise discharged all mortgages, liens, security interests and encumbrances on any property of the Seller whatsoever (including without limitation, permits, goods, equipment, intangibles and deposit accounts) entered into or obtained by the Agent and the Banks in connection with Seller's obligations under the Loan Agreement, the Security Documents and the Notes. (b) On the Closing Date, Seller shall have received satisfactory assurances of payment in cash in immediately available funds on the Escrow Release Date of an amount equal to the balance to be on deposit on the Escrow Release Date, and all accrued interest thereon, in accounts held as cash collateral and/or reserve accounts in connection with the Loan Agreement and/or the Security Documents. 3.4 TRANSMISSION AGREEMENT. Seller and Buyer shall have entered into an agreement on terms and conditions reasonably satisfactory to Seller for the transmission of power generated at the Facility from the Facility to points at which Buyer's transmission system interconnects with the transmission system of other electric utilities for the purpose of enabling Seller (or any successor owner or user of the Facility) to compete for the sale of capacity and energy to other utilities in the bulk power supply market, or (except to the extent such restriction is prohibited by law) to entities that are not retail customers of Buyer. Such agreement shall provide for such transmission services at non-discriminatory rates customarily available among electric utilities. To the extent that the approval of the Federal Energy Regulatory Commission or other governmental agency is required as a condition to the effectiveness of such agreement, at Seller's request and upon payment by Seller to Buyer of any required filing fee, Buyer will use its best efforts to obtain the requisite approval; such approval, however, is not a condition to Seller's obligations to consummate the Closing on the Closing Date. 3.5 SPECIAL FACILITIES. Seller and Buyer shall have entered into an agreement, on terms and conditions reasonably satisfactory to Seller and no less favorable to Seller than under the Agreement for Installation of Special Facilities for Parallel Operation Between Bangor Hydro-Electric Company and Babcock-Ultrapower West Enfield (the "Special Facilities Agreement") in effect as of the date of this Agreement, providing for the continued use of the Special Facilities (as defined in the Special Facilities Agreement) by Seller (or any successor owner or user of the Facility). To the extent that the approval of the MPUC or other governmental agency is required as a condition to the effectiveness of such agreement, at Seller's request, Buyer will use its best efforts to obtain the requisite approval; such approval, however is not a condition to Seller's obligation to consummate the Closing on the Closing Date. In the absence of such approved agreement, Buyer will make the Special Facilities available to Seller (and any such successor) pursuant to the applicable industrial tariff in effect from time to time. 3.6 DISPATCH SERVICES AGREEMENT. Seller and Buyer shall have entered into an agreement, on terms and conditions reasonably satisfactory to Seller, requiring Buyer to provide dispatch services to Seller (or any successor owner or user of the Facility) to allow Seller or such successor to sell energy and capacity into northeastern power markets. To the extent that the approval of the Federal Energy Regulatory Commission or other governmental agency is required as a condition to the effectiveness of such agreement, at Seller's request and upon payment by Seller to Buyer of any required filing fee, Buyer will use its best efforts to obtain the requisite approval; such approval, however, is not a condition to Seller's obligation to consummate the Closing on the Closing Date. 3.7 STATION SERVICE RATE AGREEMENT. Seller and Buyer shall have entered into an agreement, on terms and conditions and at a rate reasonably satisfactory to Seller, providing for the supply of electric power by Buyer to the Facility (notwithstanding any subsequent change in ownership of the Facility). To the extent that the approval of the MPUC or other governmental agency is required as a condition to the effectiveness of such agreement, at Seller's request, Buyer will use its best efforts to obtain the requisite approval; such approval, however, is not a condition to Seller's obligation to consummate the Closing on the Closing Date. In the absence of such approved agreement, Buyer will make electric power available to the Facility at rates and pursuant to terms and conditions on file with the MPUC. 3.8 JONESBORO. On the Closing Date, there shall have been consummated in accordance with the Jonesboro Purchase Agreement, the sale to the Buyer of all right, title and interest of Babcock-Ultrapower Jonesboro in and to the Power Purchase Agreement, dated as of August 13, 1984, as amended to date, regarding the wood-fired small power production facility located in Jonesboro, Maine. 3.9 NO LITIGATION. No litigation whose subject matter relates to any of the transactions contemplated by this Agreement shall be pending or threatened before any court or regulatory agency the outcome of which, in the reasonable opinion of Seller, could materially adversely affect the ability of Seller to consummate such transactions. 3.10 SCHEDULE 6.3(B). Any claims under the Power Purchase Agreement which Buyer shall have proposed to add to Schedule 6.3(b) after the Underwriting Date shall be reasonably satisfactory to Seller. ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER Buyer hereby represents and warrants to Seller on the date hereof and as of the Closing Date as follows: 4.1 ORGANIZATION. Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Maine and has the full corporate power and authority to carry on its business as it is now being conducted. 4.2 AUTHORIZATION. Buyer has the full corporate power and authority to enter into this Agreement, the Assignment and the agreements referred to in Sections 3.4 through 3.7 hereof (such agreements referred to in Sections 3.4. through 3.7 hereof collectively, the "Post-PPA Agreements") and to perform its obligations hereunder and thereunder. Buyer's execution, delivery and performance of this Agreement have been, and Buyer's execution, delivery and performance of the Assignment, the Post-PPA Agreements and all other documents or instruments incidental thereto will have been, prior to the execution thereof, approved by all necessary corporate action on the part of Buyer. Except where governmental approvals for Post-PPA Agreements may be required as noted in Sections 3.4 through 3.7, this Agreement is, and the Assignment and the Post-PPA Agreements, when executed and delivered, will be, the valid and binding obligations of Buyer enforceable in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, insolvency and other similar laws affecting creditors' rights generally and by general principles of equity, regardless of whether such equitable principles are considered in a proceeding at law or in equity. 4.3 CONSENTS AND APPROVALS OF GOVERNMENTAL AUTHORITIES AND THIRD PARTIES. Except for the approval of the MPUC referred to in Section 2.3 above and approvals described in Sections 3.4 to 3.7 with respect to the Post-PPA Agreements, no consent, approval or authorization of, or declaration, filing or registration with, any court or governmental or regulatory authority or any other third party is required to be made or obtained by Buyer in connection with the execution, delivery and performance of this Agreement, the Assignment or the Post-PPA Agreements. As of the Closing Date, the MPUC approval referred to in the preceding sentence has been obtained. Any stocks, bonds, notes or other evidence of indebtedness issued or sold or to be issued or sold pursuant to or in reliance on and in accordance with such MPUC approval are and shall be valid, binding and enforceable in accordance with their terms, including the terms of any agreement, instrument or document under or pursuant to which the stocks, bonds, notes or other evidences of indebtedness are issued. 4.4 LITIGATION. No actions, claims, proceedings, suits, investigations, orders to show cause, notices of violation or notices of apparent liability or forfeiture are pending, or to the best knowledge of Buyer threatened, against Buyer questioning or challenging the validity of this Agreement, the Assignment or the Post-PPA Agreements or any action taken or proposed to be taken by Buyer pursuant hereto or in connection with the transactions contemplated hereby or thereby. 4.5 NO VIOLATION. Subject to any necessary consents of Buyer's lenders referred to in Section 2.4 above, Buyer's execution, delivery and performance of this Agreement, the Assignment or the Post-PPA Agreements will not violate or conflict with, or require a consent or result in a default or event of default under, any material contract, agreement, note, mortgage or indenture, or any judgment, order or decree, to which Buyer is a party or by which it or its assets are bound. As of the Closing Date, the lenders' approval referred to in the preceding sentence has been obtained. ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF SELLER Seller hereby represents and warrants to Buyer on the date hereof and as of the Closing Date as follows: 5.1 ORGANIZATION. Seller is a joint venture formed as a general partnership duly organized, validly existing and in good standing under the laws of the State of California and has the full partnership power and authority to carry on its business as it is now being conducted. 5.2 AUTHORIZATION. Seller has the full power and authority to enter into this Agreement, the Assignment and the Post-PPA Agreements and to perform its obligations hereunder and thereunder. Seller's execution, delivery and performance of this Agreement have been, and Seller's execution, delivery and performance of the Assignment and the Post-PPA Agreements will have been, prior to the execution thereof, approved by all necessary partnership action on the part of Seller and by all corporate and partnership action on the part of its partners. This Agreement is, and the Assignment and the Post-PPA Agreements, when executed and delivered, will be, the valid and binding obligations of Seller enforceable in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, insolvency and other similar laws affecting creditors' rights generally and by general principles of equity, regardless of whether such equitable principles are considered in a proceeding at law or in equity. 5.3 CONSENTS AND APPROVALS OF GOVERNMENTAL AUTHORITIES. Except for any approvals described in Sections 3.4 to 3.7 with respect to the Post- PPA Agreements, no consent, approval or authorization of, or declaration, filing or registration with, any court or governmental or regulatory authority is required to be made or obtained by Seller in connection with its execution, delivery and performance of this Agreement, the Assignment or the Post-PPA Agreements. 5.4 LITIGATION. No actions, claims, proceedings, suits, investigations, orders to show cause, notices of violation or notices of apparent liability or forfeiture are pending, or to the best knowledge of Seller threatened, against Seller questioning or challenging the validity of this Agreement, the Assignment or the Post-PPA Agreements or any action taken or proposed to be taken by Seller pursuant hereto or in connection with the transactions contemplated hereby or thereby. 5.5 NO VIOLATION. Subject to consent of the Agent and the Banks under the Loan Agreement, Seller's execution, delivery and performance of this Agreement, the Assignment or the Post-PPA Agreements will not violate or conflict with, or require the consent or result in a default or event of default under, any material contract, agreement, note, mortgage or indenture, or any judgment, order or decree to which Seller is a party or by which it or its assets are bound. ARTICLE 6 MISCELLANEOUS PROVISIONS 6.1 TRANSACTION COSTS. (a) Buyer shall be responsible for all out-of-pocket costs and expenses incurred by or on behalf of Buyer in connection with this Agreement, including the fees and costs of its counsel, and shall also be responsible for fees and costs of counsel to Seller reasonably incurred in connection with this Agreement and the transactions contemplated hereby and of counsel to the Agent and the Banks (to the extent that Seller determines it is responsible for such fees and costs under the Loan Agreement and the Security Documents) incurred in connection with this Agreement and the transactions contemplated hereby, in each case whether or not the Closing occurs. In addition, Buyer shall be responsible for the travel expenses and out-of-pocket costs of Seller and each partner of Seller incurred in connection with this Agreement and the transactions contemplated hereby to the extent such costs exceed $15,000, whether or not the Closing occurs. Buyer shall also be responsible for all amendment, prepayment, breakage, termination, up-front, commitment or other Bank fees or costs or expenses payable in connection with the payment of the obligations of the Seller under the Loan Agreement as of the Escrow Release Date and the incurrence by Buyer of new debt in connection with the transactions contemplated hereby. (b) This obligation shall survive the Closing or any termination of this Agreement, and Buyer shall pay such fees, costs and expenses (i) within 15 days after receipt of invoices submitted to Buyer by Seller (together with such supporting data in reasonable detail and such supporting documentation as may be reasonably available to Seller) as such fees, costs and expenses are incurred, and (ii) at the Closing to the extent they are known and are the subject of invoices provided to Buyer pursuant to Section 1.4(a)(iv) hereof. 6.2 TERMINATION. This Agreement may be terminated at any time by the mutual agreement of Seller and Buyer, and will terminate at 12:01 A.M. (New York time) on September 16, 1995 unless extended by mutual agreement of Seller and Buyer. 6.3 SURVIVAL. (a) All covenants, agreements, representations, and warranties made by the parties to this Agreement or in any agreement, document, or instrument executed and delivered pursuant hereto or in connection with the transactions contemplated hereby shall survive the Closing, to the extent of and in accordance with their terms. (b) From and after the Closing Date and notwithstanding the consummation of the sale described in Section 1.1 hereof, all rights of Buyer and Seller against each other under the Power Purchase Agreement in respect of any claim of either Buyer or Seller which is described in Schedule 6.3(b) hereof, or any claim arising during the period from the date hereof until the Closing Date and which shall be described in Schedule 6.3(b) hereof as amended as of the Closing Date, shall survive and be preserved for further action by Buyer or Seller in accordance with the terms of the Power Purchase Agreement as in effect on the date hereof and applicable law. 6.4 TAX INDEMNIFICATION. (a) Buyer hereby agrees to indemnify and hold Seller and each partner of Seller (each, a "Tax-Indemnified Party") harmless on an After-Tax Basis from and against any and all taxes, fees, duties, impost, levies or charges of whatsoever nature (other than taxes of general applicability based on income) imposed by the State of Maine or any political subdivision thereof or any taxing authority of such State or political subdivision and all interest, penalties or similar liabilities with respect thereto (any such amounts, "Taxes") solely as a result of any payment made or to be made by Buyer to Seller pursuant to this Agreement or as a result of the purchase and sale of Seller's right, title and interest in and to the Power Purchase Agreement as contemplated by this Agreement but only to the extent such Taxes are imposed as a result of a Change in Law after the date of this Agreement. Buyer agrees to pay (or reimburse such Tax- Indemnified Party for payment of) any and all Taxes within 45 days of the date on which such Tax-Indemnified Party delivers to Buyer the documentation required by the immediately succeeding paragraph. Each Tax-Indemnified Party will (i) notify Buyer in writing within five business days of such Tax-Indemnified Party's receipt of an assessment, notice or request for payment of any such Tax from a taxing authority, and (ii) supply to Buyer not less than twenty business days in advance of the due date therefor calculations, documentation and forms of returns (or, at the option of such Indemnified Party, pertinent portions of or excerpts from such returns) demonstrating the nature, amount and calculation of any Tax which such Tax-Indemnified Party believes Buyer is obligated to pay pursuant to this Section. In no event will Buyer be obligated to pay interest, penalties or late charges due as a result of a Tax-Indemnified Party's failure to file returns or make Tax payments within the time periods required by law unless such failure is the result of the action or inaction of Buyer. Failure of a Tax-Indemnified Party to provide any notice or other item to Buyer as described in this paragraph by the time specified in this or the immediately succeeding paragraph shall not, however, affect such Tax-Indemnified Party's right to indemnification as provided in the first paragraph of this Section 6.4(a). Each Tax-Indemnified Party will promptly notify Buyer of any event which such Tax-Indemnified Party believes constitutes or may constitute a Change of Law promptly after becoming aware thereof. Buyer may, at its option, require such Tax-Indemnified Party, with funds provided by Buyer, to make any payment of Tax pursuant to this Section under protest and may at Buyer's sole expense contest the assessment or calculation of such Tax before the relevant taxing authority. Each Tax-Indemnified Party agrees to Buyer exercising direction and control of any such protest and any related proceeding, and will provide reasonable cooperation at Buyer's request and sole expense in the conduct thereof. (b) For purposes of Section 6.4(a) above, (i) "Change in Law" shall mean any finally adopted change in law, rule or regulation, or official published interpretation thereof in each instance, and (ii) "After-Tax Basis" shall mean on a basis such that any payment required to be paid on such basis shall, if necessary, be supplemented by a further payment so that the sum of the two payments, after deduction of all taxes, penalties, fines, interest and other charges resulting from the receipt (actual or constructive) of such payments imposed by or under any Federal, state or local governmental authority in the United States or subdivision or any taxing authority of any thereof (assuming for this purpose that each Tax-Indemnified Party is a tax- paying entity in the State of Maine subject to the maximum applicable corporate income tax rates then in effect), and after taking into account all related tax savings (whether by deduction, credit or otherwise) actually realized as a result of such payments or the event or circumstance giving rise thereto, shall be equal to the payment so required. (c) Each Tax-Indemnified Party agrees not to actively support the adoption of any Change in Law to which the indemnification contained in this Section 6.4 would apply and further agrees that none of its affiliates shall do so. In addition, each partner of Seller agrees that at the request and at the expense of Buyer it will use reasonable efforts to assist in any challenge to any such Change in Law. 6.5 GENERAL INDEMNIFICATION BY BUYER. Buyer shall defend, indemnify and hold Seller, each partner thereof, and each partner's directors, officers, employees, agents, attorneys, and affiliates (each, a "Seller Indemnified Party") harmless at all times against and in respect of any claim, action, loss, cost, expense, liability, penalty or interest, or damage (collectively, "Damages") suffered or incurred by such Seller Indemnified Party, and all other costs and expenses incurred by such Seller Indemnified Party in necessary investigation or, after notice to Buyer of its intent to do so, in attempting to avoid or oppose the imposition thereof, arising out of, relating to, or resulting from, (i) any breach of any representation, warranty, covenant, or agreement made by Buyer in this Agreement, or in any agreement, document, or instrument executed and delivered pursuant to or in connection with the transactions contemplated hereby or thereby; or (ii) the non-performance or malperformance of any obligation to be performed on the part of Buyer under this Agreement or in any agreement (including, without limitation, any agreement entered into pursuant to Section 1.8 hereof), document or instrument executed and delivered pursuant hereto or in connection with the transactions contemplated hereby or thereby; PROVIDED that Buyer shall not be obligated to indemnify any Seller Indemnified Party for any Damages suffered or incurred by such Seller Indemnified Party as a result of such Seller Indemnified Party's gross negligence or willful misconduct. 6.6 GENERAL INDEMNIFICATION BY SELLER. Seller shall defend, indemnify and hold Buyer, and each of Buyer's directors, officers, employees, agents, attorneys, and affiliates (each, a "Buyer Indemnified Party") harmless at all times against and in respect of any Damages suffered or incurred by such Buyer Indemnified Party, and all other costs and expenses incurred by such Buyer Indemnified Party in necessary investigation or, after notice to Seller of its intent to do so, in attempting to avoid or oppose the imposition thereof, arising out of, relating to, or resulting from, (i) any breach of any representation, warranty, covenant, or agreement made by Seller in this Agreement, or in any agreement, document, or instrument executed and delivered pursuant to or in connection with the transactions contemplated hereby or thereby; or (ii) the non-performance or malperformance of any obligation to be performed on the part of Seller under this Agreement or in any agreement, document or instrument executed and delivered pursuant hereto or in connection with the transactions contemplated hereby or thereby; PROVIDED that Seller shall not be required to indemnify any Buyer Indemnified Party for any Damages suffered or incurred by such Buyer Indemnified Party as a result of such Buyer Indemnified Party's gross negligence or willful misconduct. 6.7 DEFENSE AGAINST ASSERTED CLAIMS; LIMITATIONS. (a) If any claim or assertion for Damages is made or asserted against any Seller Indemnified Party or Buyer Indemnified Party, as applicable, as provided in Section 6.5 or 6.6, such Seller Indemnified Party or Buyer Indemnified Party (each hereinafter referred to as an "Indemnified Party") shall with reasonable promptness give to the other party (the "Indemnifying Party") written notice of the claim or assertion for Damages and request the Indemnifying Party to defend the same. The Indemnifying Party shall, at its expense, assume the defense of such claim or assertion with counsel reasonably satisfactory to the Indemnified Party. The Indemnified Party shall have the right to employ separate counsel in any such action and to participate in the defense thereof, but the fees and expenses of such separate counsel shall be at the expense of the Indemnified Party unless (i) the engagement of such counsel has been specifically authorized by the Indemnifying Party in writing, (ii) the Indemnifying Party has failed to assume the defense of such claim or assertion within ten (10) days after being notified of such claim, (iii) the named parties to such action (including any impleaded parties) include both the Indemnifying Party and the Indemnified Party, and the Indemnified Party shall have reasonably concluded that there may be one or more legal defenses available to the Indemnified Party which are different from or in addition to those available to the Indemnifying Party, or (iv) such action involves a criminal claim against such Indemnified Party. In the event the conditions set forth in clause (iii) of the preceding sentence are met, the Indemnifying Party shall not have the right to assume the defense of such action on behalf of the Indemnified Party as to such legal defenses available to the Indemnified Party which are different from or in addition to those available to the Indemnifying Party, but shall indemnify the Indemnified Party against all litigation expenses (including reasonable fees of counsel) in connection with such defenses. The indemnification to which this Section 6.7 relates shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received (together with such supporting data in reasonable detail and such supporting documentation as may be reasonably available to the Indemnified Party) or loss, damage, liability, cost, or expense is incurred; PROVIDED, that no settlement or compromise of any claim asserted or action commenced in respect of which the Indemnifying Party will be liable in accordance with its indemnity under this Agreement shall give rise to liability of such Indemnifying Party unless such Indemnifying Party shall have been notified in writing of the proposed settlement or compromise and shall have consented in writing thereto, which consent shall not be unreasonably withheld so long as any claims which have been or may be asserted against the Indemnifying Party in such action or any related or future action are to be released with prejudice in connection with such settlement or compromise, it being understood, however, that in the event the Indemnifying Party unreasonably withholds its consent to a settlement or compromise as to which it has agreed above that such consent shall not be unreasonably withheld, the Indemnified Party may proceed to consummate such settlement or compromise without the consent of the Indemnifying Party and may pursue its indemnification claims hereunder against the Indemnifying Party as provided herein in respect of the cost of such settlement or compromise. Buyer and Seller will cooperate with each other and shall take reasonable measures to obtain the cooperation of Seller's Indemnified Parties and Buyer's Indemnified Parties, as applicable, in the defense of any action and the relevant records of each shall be available to the other with respect to such defense. (b) In no event shall either party be liable to any Idemnified Party (as defined in Section 6.7) for any consequential, special, indirect or incidental damages, or loss of profits, cost of money, claims of customers or claims of financiers, or any amounts in settlement thereof, howsoever the same may be caused, in connection with any claim arising under this Agreement except to the extent any of the foregoing are included in a third party claim against a Seller Indemnified Party or Buyer Indemnified Party, as the case may be, to which the provisions of Section 6.5 or 6.6 apply. In addition, each Seller Indemnified Party and each Buyer Indemnified Party shall use reasonable efforts to mitigate any Damages which may be the subject of an indemnification claim by it pursuant to Section 6.5 or 6.6 hereof, as applicable. 6.8 CONDUCT PRIOR TO CLOSING. During the period from the date of this Agreement to the Closing Date, (i) Buyer shall confer on a regular and frequent basis with one or more representatives of Seller to report on the status of the various conditions set forth in Article 2 hereof, (ii) Seller agrees to provide reasonable cooperation to Buyer in connection with the possible minimization of the amounts payable pursuant to Section 1.4(a)(iii) hereof, and (iii) promptly upon learning thereof, each of Buyer and Seller shall notify the other of any breach of any representation or warranty set forth in Section 4 or Section 5 hereof. 6.9 NOTICES. All notices, requests or other communications required or permitted hereunder shall be given in writing and shall be deemed to have been duly given, if delivered in hand, on the date of receipt (or refusal), or if given by Federal Express or similar nationally recognized expedited overnight commercial courier, when delivered to Federal Express or similar nationally recognized expedited overnight commercial courier, addressed to the recipient of the notice, with all freight charges paid, or if given by facsimile transmission, when sent, to the following addresses and facsimile numbers: If to Seller, to: Babcock & Wilcox West Enfield Power, Inc. 20 South Van Buren Avenue Barberton, Ohio 44203 Facsimile: 216-860-1868 Attention: Vice President, Operations and ESI West Enfield Limited Partnership c/o ESI Energy, Inc. 1400 Centrepark Boulevard, Suite 600 West Palm Beach, Florida 33401 Facsimile: (407) 687-4932 Attention: Vice-President, Business Management and L.G.& E. Power 5 Incorporated 2030 Main Street, 12th Floor Irvine, California 92714 Facsimile: (714) 955-4333 Attention: President If to Buyer, to: Bangor Hydro-Electric Company P.O. Box 932 33 State Street Bangor, ME 04402-0932 Facsimile: 207-990-6963 Attention: Robert S. Briggs, President or to such other address or number as any party may have designated for itself by written notice to the other in the manner herein prescribed, except that notices of change of address shall be effective only upon receipt. 6.10 ASSIGNMENT. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by either of the parties hereto without the prior written consent of the other party and any assignment made absent such consent shall be void AB INITIO. 6.11 GOVERNING LAW. This agreement and the legal relations between the parties hereto shall be governed by and construed in accordance with the laws of the State of Maine. 6.12 COUNTERPARTS. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 6.13 HEADINGS. The headings contained in this Agreement are inserted for convenience only and are not intended to be determinative or interpretive of the substance of this Agreement. 6.14 ENTIRE AGREEMENT. This Agreement embodies the entire agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties, covenants or undertakings other than those expressly set forth or referred to herein. This Agreement supersedes all prior agreements and understandings between the parties with respect to the subject matter hereof. 6.15 EFFECTIVENESS. This Agreement shall become effective on the date (the "Effective Date") on which (i) Seller and Buyer shall have signed a copy hereof (whether the same or different copies), (ii) Buyer shall have delivered to Seller instruments with the same substantive effect as those required by Sections 1.5(ii) and (iii) to be delivered by Buyer on the Closing Date, (iii) Seller shall have delivered to Buyer instruments with the same substantive effect as those required by Sections 1.6(ii) and (iii) to be delivered by Seller on the Closing Date, and (iv) Seller shall have received any necessary consent of the Agent and the Banks under the Loan Agreement to its execution and delivery of this Agreement. 6.16 CONDITIONS PRECEDENT. Seller and Buyer agree to use reasonable efforts to satisfy, on or prior to the Closing Date, the conditions precedent to their respective obligations to consummate the Closing set forth in Article 2 and Article 3 hereof. 6.17 FUEL PURCHASE. Except as provided herein, Seller shall not purchase any fuel for use at the Facility unless Buyer shall have consented to such purchase. Seller may purchase fuel without Buyer's consent provided that Buyer shall not be obligated pursuant to Section 1.4(a)(i) and Section 1.7(b) to pay the book inventory value or disposal cost of any such fuel purchased without its consent. Any impairment of Seller's ability to comply with the Power Purchase Agreement as a result of the operation of this Section 6.17 shall not be the basis for any claim of a default on the part of the Seller under the Power Purchase Agreement. 6.18 DISCLOSURE. Each of Seller and Buyer agrees that the terms of this Agreement may be disclosed to any regulatory agency which has jurisdiction over Seller, Buyer, or any of their respective affiliates, to any of their respective lenders, in any filings under the securities laws, in any disclosure document delivered to its shareholders or in connection with any offering of its securities. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written. BANGOR HYDRO-ELECTRIC COMPANY, By: /s/ Robert S. Briggs ----------------------- Name: Title: BABCOCK-ULTRAPOWER WEST ENFIELD, a California general partnership By: L.G.& E. POWER 5 INCORPORATED, its general partner By: /s/ Scott Noll ----------------- Name: Title: By: ESI WEST ENFIELD LIMITED PARTNERSHIP, a Delaware Limited Partnership By: ESI WEST ENFIELD, INC., its general partner By: /s/ Lori Bonilla ------------------- Name: Title: By: BABCOCK & WILCOX WEST ENFIELD POWER, INC., its general partner By: /s/ Jack M. Arnold -------------------- Name: Title: EXHIBIT A to Purchase Agreement ASSIGNMENT OF POWER PURCHASE AGREEMENT THIS ASSIGNMENT OF POWER PURCHASE AGREEMENT (this "Assignment") is made and entered into as of [closing date] by and between BABCOCK-ULTRAPOWER WEST ENFIELD, a joint venture formed as a California general partnership (the "Assignor"), and BANGOR HYDRO-ELECTRIC COMPANY, a Maine corporation (the "Assignee"). W I T N E S S E T H : WHEREAS, the Assignor and the Assignee are parties to the Power Purchase Agreement dated as of August 13, 1984 (as amended to date, the "Power Purchase Agreement"); WHEREAS, the Assignor has agreed to sell to the Assignee and the Assignee has agreed to purchase all of Assignor's right, title and interest in and to the Power Purchase Agreement on the terms and conditions set forth in the Purchase Agreement dated as of March 31, 1995 (the "Purchase Agreement") by and between the Assignor and the Assignee; and WHEREAS, it is a condition to the obligations of the parties under the Purchase Agreement that this Assignment be executed and delivered; NOW, THEREFORE, in consideration of the mutual promises contained herein and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. ASSIGNMENT. The Assignor hereby sells, assigns, transfers, conveys and delivers to the Assignee, without recourse (except for any misrepresentation regarding the subject matter stated in the immediately succeeding sentence) to the Assignor and without any warranty to the Assignee, either express or implied, as to any matter whatsoever and without representation except as herein expressly made, and the Assignee hereby purchases from the Assignor, all of the Assignor's right, title and interest in and to the Power Purchase Agreement (the "Interest"). The Assignor and each partner of the Assignor represent to the Assignee that the Assignor is the sole owner of the Interest herein conveyed and that such Interest of the Assignor is free and clear of all liens, security interests, claims or encumbrances whatsoever. 2. RELEASE OF CLAIMS. Except with respect to any claims which are to survive the execution and delivery of this Assignment and the consummation of the transactions contemplated by the Purchase Agreement pursuant to the terms of Section 6.3(b) of the Purchase Agreement, the Assignor and each partner of the Assignor hereby release the Assignee, its officers, directors, employees, agents and affiliates, and the Assignee hereby releases the Assignor, each partner of the Assignor and each partner's officers, directors, employees, agents and affiliates, fully, finally, and forever from all claims (known or unknown) which have been or could be asserted by the parties hereto arising out of, under or in connection with the Power Purchase Agreement under the statutory or common law of any jurisdiction, including, without limitation, any and all manner of actions, causes of action, suits, damages, sums of money, controversies, agreements, promises, court costs, judgments, attorneys' fees, claims for exemplary or punitive damages, claims for consequential damages, and all claims and demands of whatever type in law or in equity, which any party to this Assignment ever had, now has or which any party to this Assignment hereafter can, shall or may have for, upon, or by reason of the Power Purchase Agreement. 3. CAPITALIZED TERMS. All capitalized terms not otherwise defined in this Assignment shall have the meanings ascribed to such terms in the Purchase Agreement. 4. COUNTERPARTS. This Assignment may be executed in several counterparts each of which shall constitute but one and the same instrument. 5. GOVERNING LAW. This Assignment shall be governed by and construed in accordance with the laws of the State of Maine. 6. AMENDMENTS. This Assignment shall not be amended except by an instrument in writing executed by the parties through their duly authorized representatives. IN WITNESS WHEREOF, the parties hereto have caused this Assignment to be duly executed as of the day and year first written above. BABCOCK-ULTRAPOWER WEST ENFIELD, a general partnership, as Assignor By: L.G.& E. POWER 5 INCORPORATED, its general partner By:_______________________ Name: Title: By: ESI WEST ENFIELD LIMITED PARTNERSHIP, a Delaware Limited Partnership By: ESI WEST ENFIELD, INC., its general partner By:_______________________ Name: Title: By: BABCOCK & WILCOX WEST ENFIELD POWER, INC., its general partner By:_______________________ Name: Title: BANGOR HYDRO-ELECTRIC COMPANY, a corporation, as Assignee By________________________ Name: Title: EXHIBIT B [Opinion of Buyer's Counsel] [Closing date] re 24.5 MW Production Facility in West Enfield, Maine Babcock & Wilcox West Enfield Power, Inc. 20 South Van Buren Avenue Barberton, Ohio 44203 ESI West Enfield Limited Partnership c/o ESI Energy, Inc. 1400 Centrepark Boulevard, Suite 600 West Palm Beach, Florida 33401 L.G.& E. Power 5 Incorporated 2030 Main Street, 12th Floor Irvine, California 92714 Ladies and Gentlemen: I am General Counsel and Corporate Clerk of Bangor Hydro-Electric Company ("Buyer"), a Maine corporation, and have acted as its counsel in connection with the execution and delivery of the Purchase Agreement dated as of March 31, 1995 (the "Agreement") by and between Babcock-Ultrapower West Enfield ("Seller"), a joint venture formed as a California general partnership, and Buyer relating to the Power Purchase Agreement, dated as of August 13, 1984, as amended, by and between Seller and Buyer. All capitalized terms used herein and not otherwise defined shall have the respective meanings ascribed to such terms in the Agreement. In rendering this opinion, I have assumed the genuineness of all signatures, the authenticity of all documents submitted to me as originals and the conformity to authentic original documents of all documents submitted to me as certified, conformed or photostatic copies. I have examined and relied upon such documents, corporate records, certificates of corporate officers and representatives and other instruments and legal matters as I have deemed necessary for the purposes of the opinions expressed herein. Based upon the foregoing, it is my opinion that: 1. Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Maine. Buyer has full corporate authority and power to enter into the Agreement, the Post-PPA Agreements and the Assignment and to perform its obligations thereunder. 2. Except for such approvals with respect to the Post-PPA Agreements as are set forth in the Agreement, no consent, order, authorization, waiver, approval or any other action by, or registration, declaration or filing with, any person, board or body, public or private, is required for Buyer to enter into the Agreement, the Post-PPA Agreements or the Assignment or for Buyer to perform, and to be legally bound to perform, its obligations thereunder. 3. The Agreement, the Post-PPA Agreements and the Assignment have been duly and validly authorized by all requisite action on the part of Buyer, have been duly and validly executed and delivered by Buyer and, assuming due authorization, execution and delivery by Seller, constitute the legal, valid and binding obligations of Buyer, enforceable against it in accordance with their respective terms, except as enforceability may be limited by bankruptcy, insolvency or other similar laws applicable to creditors' rights generally and except as the availability of any particular remedy may be limited by general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law, and subject in the case of the Post-PPA Agreements to the receipt of such approvals as are described in Sections 3.4 through 3.7 of the Agreement. 4. The execution, delivery and performance of the Agreement, the Post-PPA Agreements and the Assignment will not result in any violation of the articles of incorporation or by-laws of Buyer or (subject in the case of the Post-PPA Agreements to the receipt of such approvals as are described in Sections 3.4 through 3.7 of the Agreement) any existing statute, law, governmental rule, regulation, decree or order applicable to Buyer or its properties, or contravene the provisions of or constitute a default under any material agreement, indenture, mortgage, lease or other instrument to which it or its property is or may be bound. 5. There is no action, suit, proceeding or investigation at law or in equity or by or before any court or administrative agency pending or, to the best of my knowledge threatened against or affecting Buyer which questions the validity of the Agreement, the Post-PPA Agreements or the Assignment which, individually or in the aggregate, would have a material adverse effect upon the ability of Buyer to enter into and carry out its obligations under the Agreement, the Post-PPA Agreements or the Assignment. I am a member of the Bar of the State of Maine and express no opinion as to any laws other than the laws of the State of Maine and the federal laws of the United States. I am furnishing this opinion to you solely for your benefit in connection with the transactions contemplated by the Agreement and this opinion is not to be used, circulated, quoted or otherwise referred to for any other purpose without my prior written approval in each instance. Very truly yours, EXHIBIT C Counsel to Seller and counsel to each partner of Seller shall deliver opinions, dated the Closing Date, to the effect that: 1. Seller is a general partnership duly organized, validly existing and in good standing under the laws of the State of California. Seller is fully authorized and empowered to enter into the Agreement, the Post-PPA Agreements and the Assignment and to perform its obligations thereunder. 2. No consent, order, authorization, waiver, approval or any other action by, or registration, declaration or filing with, any person, board or body, public or private, is required for Seller to enter into the Agreement, the Post-PPA Agreements or the Assignment for Seller to perform, and to be legally bound to perform, its obligations thereunder. 3. The Agreement, the Post-PPA Agreements and the Assignment have been duly and validly authorized by all requisite action on the part of Seller, have been duly and validly executed and delivered by Seller and constitute the legal, valid and binding obligation of Seller, enforceable against it in accordance with their respective terms, except as enforceability may be limited by bankruptcy, insolvency or other similar laws applicable to creditors' rights generally and except as the availability of any particular remedy may be limited by general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law. 4. The execution, delivery and performance of the Agreement, the Post-PPA Agreements and the Assignment will not result in any violation of the partnership agreement of Seller or any existing statute, law, governmental rule, regulation, decree or order applicable to Seller or its properties, or contravene the provisions of or constitute a default under any material agreement, indenture, mortgage, lease or other instrument to which it or its property is or may be bound. 5. There is no action, suit, proceeding or investigation at law or in equity or by or before any court or administrative agency pending or, to the best of our knowledge threatened against or affecting Seller which questions the validity of the Agreement, the Post-PPA Agreements or the Assignment which, individually or in the aggregate, would have a material adverse effect upon the ability of Seller to enter into and carry out its obligations under the Agreement, the Post-PPA Agreements or the Assignment. 6. Seller is the sole owner of the Interest (as defined in the Assignment) conveyed under the Assignment and such Interest of the Seller is free and clear of all liens, security interests, claims or encumbrances whatsoever. PURCHASE AGREEMENT Schedule 6.3(b) DISPUTED ISSUES West Enfield Facility OCTOBER 1994 CAPACITY AND ENERGY BILLINGS AND 1994 BONUS BILLINGS The facility completed its scheduled 1994 two-week maintenance outage a day and a half early and, as was the practice in the past, called Bangor Hydro for a dispatch order to either begin firm generation or curtail generation. The facility was instructed to curtail generation and received acknowledgments from the Bangor Dispatch Operators that the units were accepted back as available for service. The facility responded to these dispatch orders and Babcock-Ultrapower expected to receive decremental energy payments for the period commencing with Bangor's dispatch order; however, Bangor Hydro refused to pay the total invoiced amounts, claiming that a mandatory full two-week outage was required and that no decremental payments were due until this period was completed. Babcock-Ultrapower contends that the maintenance periods were terminated by Bangor Hydro's dispatch orders, and that these orders were to be relied upon based on past practices and actions of Bangor Hydro. The availability of decremental energy during this period also affects Babcock-Ultrapower's performance payment under the 1994 Bonus Billing. -----END PRIVACY-ENHANCED MESSAGE-----