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Modes of Operation of Bonds • General. The Bonds may operate in one or more of three Modes of operation, being the Weekly Mode, the Adjustable Long Mode and the Fixed Mode. While any single Bond may operate in only one Mode at any given time, other Bonds may operate in different Modes at the same time; provided, however, that consent of the Initial Credit Facility Issuer is required for a conversion of fewer than all Bonds to a Fixed Mode. Generally, the Modes have different operating features. Except as otherwise described below, once a Mode is designated for any particular Bond, such Bond shall remain in that Mode until the Remarketing Agent designates a new Mode for such Bond; provided, however, that Bonds converted to bear interest at the Fixed Rate shall remain in the Fixed Mode until Maturity or redemption thereof prior to Maturity. The Remarketing Agent shall select such a principal amount of Bonds for conversion from one Mode to another as will allow Bonds after conversion to be sold in the minimum Authorized Denominations applicable to such Mode. All Bonds in the Weekly Mode shall bear interest at the same interest rate. Bonds operating in the Adjustable Long Mode may bear interest at different rates for different Rate Periods. Owners of Bonds in the Weekly Mode will be entitled to demand the purchase of their Bonds. As described below, Bonds are subject to mandatory purchase on an Adjustment Date: Bonds operating in an Adjustable Long Mode are also subject to mandatory purchase on each Rate Change Date (other than the Rate Change Date which is the first day of such Adjustable Long Mode). Bonds bearing interest at a Fixed Rate shall not be supported by the Credit Facility and are not subject to optional or mandatory tender for purchase. Designation of Weekly and Adjustable Long Modes. • The Bonds will be initially issued in the Weekly Mode. Thereafter, except in the instances where a Bond is in the Fixed Mode, the Remarketing Agent may designate a subsequent Mode for each Bond to commence on an Adjustment Date. The Remarketing Agent may designate an Adjustment Date to occur with respect to any Bond during a Weekly Mode on any Business Day, and with respect to any Bond during an Adjustable Long Mode on any Rate Change Date. An Adjustment Date for any Bond in a particular Mode will be a mandatory purchase date for such Bond. The Remarketing Agent may select such subsequent Adjustment Periods and, within an Adjustable Long Mode, Rate Periods as will, in the judgment of the Remarketing Agent, result in the lowest aggregate cost payable by the Authority with respect to the Bonds, taking into account interest and any other determinable fees and expenses. The Remarketing Agent may establish different Adjustment Periods and, within an Adjustable Long Mode, different Rate Periods for Bonds on the same Adjustment Date in order to achieve an average duration of Adjustment Periods and/or Rate Periods that, in the judgment of the Remarketing Agent, is most likely to achieve the lowest total aggregate cost payable by the Authority with respect to the Bonds, taking into account interest and any other determinable fees and expenses. The Remarketing Agent's determination shall be based upon the market for and the relative yields of the Bonds and other securities that bear interest at a variable rate or at fixed rates -that, in the judgment of the Remarketing Agent, are otherwise comparable to the Bonds, or any fact or circumstance relating to the Bonds or affecting the market for the Bonds or affecting such other comparable securities in a manner that, in the judgment of the Remarketing Agent, will affect the market for the Bonds. The Remarketing Agent, in .its discretion, may consider such information and resources as it deems appropriate in making the determinations described above, but the Remarketing Agent's determination shall be based solely upon the Remarketing Agent's judgment, and the Remarketing Agent's determination shall be conclusive and binding upon all parties. If the Authority designates a Mode for any Bond different from that then in effect with respect to such Bond or designate an Adjustment Period which is an Adjustable Long Mode that succeeds an Adjustable Long Mode where the Adjustable Long Mode or the Rate Periods therein change from a duration of 366 days or less to a duration of more than 366 days, or vice versa, the Authority shall cause to be delivered to the Trustee, the Tender Agent, the Remarketing Agent and the Credit Facility Issuer, and no such designation of an Adjustment Period, Rate ',, ._>- ' -7-