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tions of any kind or nature or create or cause or permit to be created any debt, lien, pledge, assignment or encumbrance or charge payable from or enjoying a lien upon any of the Pledged Funds ranking prior and superior to the lien created by this Instrument for the benefit of the holders of the Bonds. 4.03 arbitrage. No u,e will be made of the proceeds of the Bonds or the Pledged Funds which will cause the Bonds to be "arbitrage bonds" within the meaning of the Internal Revenue Code. The Issuer at all times while the Bonds and the interest thereon are outstanding will comply with the requirements of Section 103(c) of the Internal Revenue Code and any valid and applicable rules and regulations of the Internal Revenue Service issued thereunder. 4.04 Defeasance. If, at any time, the Issuer shall have paid, or shall have made provision for payment of, the principal, interest and redemption premiums, if any, with respect to the Bonds, then, and in that event, the pledge of and lien on the Pledged Funds in favor of the holders of the Bonds shall be no longer in effect. For purposes of the preceding sentence, deposit by the Issuer of direct obligations of, or obligations the principal of and interest on which are guaranteed by, the United States of America; none of which shall be redeemable prior to maturity at the option of the obligor (collectively, the "Federal Securities"), or bank certificates of deposit fully secured as to principal and interest by Federal Securities (or deposit of any other securities or investments which may be authorized by law from time to time and sufficient under such law to effect such a defeasance) in irrevocable trust with a banking institution or trust company, for the sole benefit of the holders of the Bonds, in an aggregate principal amount which, together with interest to accrue thereon, will be sufficient to make timely payment of the principal of and redemption premiums, if any, and interest on the Bonds in accordance with their terms, the paying agents' fees and expenses with respect thereto and any other expenses occasioned by escrow arrangements or provision for redemption, shall be considered provision for payment." Nothing herein shall be deemed to require the Issuer to call any of the outstanding Bonds for redemption prior to maturity pursuant to any applicable optional redemption provisions, or to impair the discretion of the Issuer in determining whether to exercise any such option for early redemption. -15-