INDENTURE OF TRUST

Exhibit 10.2

INDENTURE OF TRUST

by and between

ADAIR COUNTY INDUSTRIAL AUTHORITY
as the Authority

and

BANK OF OKLAHOMA, N.A. ,
as Trustee

Relating to the Issuance of:

$13,515,000
Adair County Industrial Authority
Solid Waste Recovery Facilities Revenue Bonds
(Advanced Environmental Recycling Technologies, Inc. Project)
Series 2007

Dated as of December 1, 2007

TABLE OF CONTENTS
		Page
ARTICLE I
DEFINITIONS; BOND INDENTURE TO CONSTITUTE CONTRACT
Section 1.01. Definitions			12
Section 1.02. Indenture to Constitute Contract			27
ARTICLE II
AUTHORIZATION, TERMS,
Section 2.01. Authorized Amount of Bonds			28
Section 2.02. All Bonds Equally and Ratably Secured by Trust Estate Except as Expressly Provided Herein; Limited Obligation of Bonds and Pledges Securing the Same			28
Section 2.03. Authorization of Bonds			28
Section 2.04. Execution of Bonds			31
Section 2.05. Registration, Transfer and Exchange of Bonds, Persons Treated as Owner			31
Section 2.06. Lost, Stolen, Destroyed and Mutilated Bonds			32
Section 2.07. Delivery of Bonds			32
Section 2.08. Trustee’s Authentication Certificate			33
Section 2.09. Cancellation and Destruction of Bonds by the Trustee			33
Section 2.10. Temporary Bonds			33
Section 2.11. Transfer Restrictions			33
ARTICLE III
REVENUES AND FUNDS
Section 3.01. Pledge of Trust Estate			34
Section 3.02. Establishment of Funds and Accounts			34
Section 3.03. Payments Into the Bond Principal Fund and the Bond Interest Fund			34
Section 3.04. Use of Monies in the Bond Principal Fund and the Bond Interest Fund			35
Section 3.05. Custody of the Bond Principal Fund and the Bond Interest Fund			35
Section 3.06. Payments Into the Reserve Fund			35
Section 3.07. Use of Moneys in the Reserve Fund			36
Section 3.08. Custody of the Reserve Fund			36
Section 3.09. Project Fund			36
Section 3.10. Custody of the Project Fund			38
Section 3.11. Nonpresentment of Bonds			38
Section 3.12. Monies to Be Held in Trust			38
Section 3.13. Repayment From the Funds			38

		Page
Section 3.14. Creation of Additional Accounts and Subaccounts; Transfers of Monies Among Funds			39
Section 3.15. Rebate Fund			39
Section 3.16. Rebate Deposits			39
Section 3.17. Rebate Disbursements			39
Section 3.18. Tax Certificate			40
Section 3.19. Reserved			40
Section 3.20. Cost of Issuance Fund			40
Section 3.21. Custody of the Cost of Issuance Fund			40
Section 3.22. Capitalized Interest Fund			40
ARTICLE IV
COVENANTS OF THE AUTHORITY
Section 4.01. Performance of Covenants			41
Section 4.02. Instruments of Further Assurance			41
Section 4.03. Payment of Principal, Premium, If Any, and Interest			41
Section 4.04. Conditions Precedent			41
Section 4.05. Supplemental Indentures; Recordation or Filing of Security Instruments			42
Section 4.06. Rights Under the Loan Agreement			42
Section 4.07. Compliance with the Tax Certificate			42
ARTICLE V
REDEMPTION OF SERIES 2007 BONDS PRIOR TO MATURITY
Section 5.01. Redemption of Bonds Upon Occurrence of Certain Events			42
Section 5.02. Redemption of Bonds Upon a Determination of Taxability			43
Section 5.03. Sinking Fund			43
Section 5.04. Method of Selecting Bonds			44
Section 5.05. Notice of Redemption			44
Section 5.06. Bonds Due and Payable on Redemption Date; Interest Ceases to Accrue			45
Section 5.07. Cancellation			45
Section 5.08. Partial Redemption of Bonds			45
ARTICLE VI
INVESTMENTS
Section 6.01. Investment of Funds			46
Section 6.02. Arbitrage			47
Section 6.03. Allocation and Transfers of Investment Income			47

		Page
ARTICLE VII
DISCHARGE OF INDENTURE
Section 7.01. Discharge of This Indenture			48
Section 7.02. Liability of Authority Not Discharged			49
ARTICLE VIII
DEFAULTS AND REMEDIES
Section 8.01. Events of Default			49
Section 8.02. Remedies on Events of Default			50
Section 8.03. Majority of Bondholders and Holders of Parity Indebtedness May Control Proceedings			51
Section 8.04. Rights and Remedies of Bondholders			51
Section 8.05. Application of Monies			52
Section 8.06. Trustee May Enforce Rights Without Bonds			53
Section 8.07. Trustee to File Proofs of Claim in Receivership, Etc			53
Section 8.08. Delay or Omission No Waiver			54
Section 8.09. No Waiver of One Default to Affect Another			54
Section 8.10. Discontinuance of Proceedings on Default; Position of Parties Restored			54
Section 8.11. Waivers of Events of Default			54
Section 8.12. Trustee to Notify Parties of Default and Disclose Information Relating to Default			54
ARTICLE IX
CONCERNING THE TRUSTEE
Section 9.01. Duties of the Trustee			55
Section 9.02. Fee and Expenses of Trustee			57
Section 9.03. Resignation or Replacement of Trustee			58
Section 9.04. Conversion, Consolidation or Merger of Trustee			59
Section 9.05. Trustee to Retain Information			59
ARTICLE X
SUPPLEMENTAL INDENTURES AND AMENDMENTS OF THE LOAN AGREEMENT
Section 10.01. Supplemental Indentures			59
Section 10.02. Execution of Supplemental Indentures			60
Section 10.03. Amendments, Etc., of the Loan Agreement			60

		Page
ARTICLE XI
MISCELLANEOUS
Section 11.01. Evidence of Signature of Bondholders and Ownership of Bonds			61
Section 11.02. Parties Interested Herein			61
Section 11.03. Titles, Headings, Etc			62
Section 11.04. Severability			62
Section 11.05. Governing Law			62
Section 11.06. Execution in Counterparts			62
Section 11.07. Notices			62
Section 11.08. Payments Due on Nonbusiness Days			63
Section 11.09. Provision of General Application			63
Section 11.10. Waiver of Personal Liability			63

INDENTURE OF TRUST

      THIS INDENTURE OF TRUST , dated as of December 1, 2007 (as supplemented and amended, this “Indenture”), is executed by and between ADAIR COUNTY INDUSTRIAL AUTHORITY (the “Authority”), a public trust duly organized and existing under the laws of the State of Oklahoma for the benefit of Adair County, Oklahoma, and BANK OF OKLAHOMA, N.A. , a national banking association having a corporate trust office located in the State of Oklahoma, as Trustee (the “Trustee”), being authorized to accept and execute trusts of the character herein set out under and by virtue of the laws of the State of Oklahoma.

W I T N E S S E T H :

     WHEREAS, Advanced Environmental Recycling Technologies, Inc., a corporation duly organized and existing under the laws of the State of Delaware (the “Company”), requested that the Authority finance and refinance costs of acquiring, constructing and equipping certain solid waste recovery facilities located within Adair County, Oklahoma, in accordance with that certain Loan Agreement, dated as of December 1, 2007 (as amended, the “Loan Agreement”), between the Authority and the Company; and

     WHEREAS, Title 60 Oklahoma Statutes 2001 Section 176 et seq., as amended, (the “Act”), authorizes the Authority to finance such costs; and

     WHEREAS, in order to finance such costs, the Authority shall issue its Adair County Industrial Authority Solid Waste Recovery Facilities Revenue Bonds (Advanced Environmental Recycling Technologies, Inc. Project) Series 2007 (the “Bonds”) pursuant to and secured by this Indenture; and

     WHEREAS, in accordance with the Loan Agreement, the Authority will loan the proceeds of the Bonds to the Company, and the Company will obligate itself to repay such loan to the Authority; and

     WHEREAS, the Bonds shall be secured as provided herein and in the Loan Agreement; and

     WHEREAS, the Bonds and the Trustee’s authentication certificate are to be substantially in the following form, with such necessary or appropriate variations, omissions and insertions as permitted or required by this Indenture:

[Remainder of page intentionally left blank]

[FORM OF SERIES 2007 BOND]

UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE AUTHORITY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY BOND ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

EXCEPT AS PROVIDED IN THE INDENTURE HEREIN DESCRIBED, UPON ANY TRANSFER OF A BENEFICIAL OWNERSHIP INTEREST (AS DEFINED IN THE INDENTURE) IN THE SERIES 2007 BOND, THE PURCHASER THEREOF SHALL BE DEEMED TO HAVE CERTIFIED TO THE TRUSTEE AND ACKNOWLEDGED, REPRESENTED AND AGREED WITH THE COMPANY AND THE UNDERWRITER (AS SUCH TERMS ARE DEFINED IN THE INDENTURE DESCRIBED HEREIN) THAT SUCH PURCHASER IS ACQUIRING THE SERIES 2007 BOND FOR ITS OWNS ACCOUNT AND THAT IT IS (A) A “QUALIFIED INSTITUTIONAL BUYER” WITHIN THE MEANING OF RULE 144A PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR (B) AN INSTITUTIONAL “ACCREDITED INVESTOR,” AS DEFINED IN RULE 501(A)(1), (2), (3), OR (7) OF THE 1933 ACT.

UNITED STATES OF AMERICA
STATE OF OKLAHOMA

No. R-___		$

ADAIR COUNTY INDUSTRIAL AUTHORITY
SOLID WASTE RECOVERY FACILITIES REVENUE BONDS
(ADVANCED ENVIRONMENTAL RECYCLING TECHNOLOGIES, INC. PROJECT)
SERIES 2007

Interest Rate		Maturity Date		Original Issue Date		CUSIP
8.00%		December 15, 2023		December 19, 2007		005407 AA9

REGISTERED OWNER:		**CEDE & CO.**

PRINCIPAL AMOUNT:		**THIRTEEN MILLION FIVE HUNDRED FIFTEEN THOUSAND DOLLARS**

     The Adair County Industrial Authority (the “Authority”), a public trust organized and existing under the laws of the State of Oklahoma for the benefit of Adair County, Oklahoma (the “County”), for value received, hereby promises to pay, from the sources hereinafter described, the Principal Amount stated above, in lawful money of the United States of America, to the Registered Owner stated above or the registered assigns, on the Maturity Date stated above (unless this Bond shall have been called for prior redemption, in which case on such redemption date), upon the presentation and surrender hereof at the designated corporate trust office of Bank of Oklahoma, N.A., as Trustee (the “Trustee”), in Oklahoma, City, Oklahoma, or at the principal office of its successor in trust under an Indenture of Trust, dated as of December 1, 2007 (the “Indenture”), between the Authority and the Trustee, and to pay, from like sources, to the Registered Owner stated above as of the close of business on the first day of the calendar month immediately prior to an Interest Payment Date (the “Regular Record Date”), by check or draft mailed by the Trustee on the Interest Payment Date to such Registered Owner at his address as it last appears on the registration books kept for that purpose at the office of the Trustee, interest on said sum in like coin or currency from the Original Issue Date stated above or from the most recent date from which interest has been paid or duly provided for, at the Interest Rate stated above, payable semiannually on June 15 and December 15 of each year, commencing June 15, 2008, on the basis of a 360-day year composed of twelve 30-day months, until payment of the principal hereof has been made or provided for. The Trustee may make payments of principal at maturity or upon redemption and payment of interest by wire transfer within the United States to any owner of at least $1,000,000 in aggregate principal amount of the Bonds requesting the same in writing addressed to the Trustee as provided in this Indenture. Any interest not timely paid or duly provided for shall cease to be payable to the Registered Owner hereof at the close of business on the applicable Regular Record Date and shall be payable to the Registered Owner hereof at the close of business on a Special Record Date (as defined in the Indenture) for the payment of any defaulted interest. Such Special Record Date shall be fixed by the Trustee whenever monies become available for payment of the defaulted interest, and notice of such Special Record Date shall be given to the Registered Owner hereof not less than ten calendar days prior thereto. If the date for making any payment or the last day for performance of any act or the exercise of any right, as provided in this Bond, shall not be a “Business Day” as defined in this Indenture, such payment may be made or act performed or right exercised on the next succeeding Business Day with the same force and effect as if done on the nominal date provided in this Bond. Notwithstanding anything herein to the contrary, when this Bond is registered in the name of a Depository (as defined in this Indenture) or its nominee, the principal and redemption price of and interest on this Bond shall be payable in same day or federal funds delivered or transmitted to the Depository or its nominee.

     This Bond is one of a duly authorized series of bonds of the Authority designated as “Adair County Industrial Authority Solid Waste Recovery Facilities Revenue Bonds (Advanced Environmental Recycling Technologies, Inc. Project) Series 2007” (the “Bonds”). The Bonds have been issued under Title 60 Oklahoma Statutes 2001, Section 176 et seq., as amended (the “Act”), to finance and refinance costs of acquiring, constructing and equipping certain solid waste recovery facilities (the “Facilities”); to fund six months of capitalized interest on the Series

2007 Bonds; to fund a reserve fund with respect to the Series 2007 Bonds; and to fund certain costs of issuing the Series 2007 Bonds.

     This Bond is a limited obligation of the Authority payable solely from and secured by (a) a pledge of certain rights of the Authority under and pursuant to the Loan Agreement dated as of December 1, 2007 (the “Loan Agreement”), between the Authority and Advanced Environmental Recycling Technologies, Inc. (the “Company”); (b) a pledge of the Funds and Pledged Revenues other than the Rebate Fund (all as defined in the Indenture); (c) a mortgage interest on the Springdale Property, the Watts Property, the Lowell Property and the Junction Property (each as defined in the Indenture) (including personal property and equipment); (d) a Patent and Trademark Security Agreement from the Company for the benefit of the Trustee; and (e) an assignment of the Weyerhaeuser Agreement (as defined in the Indenture).

     This Bond shall not constitute or become an indebtedness, a debt or a liability of or a charge against the general credit or taxing power of the State of Oklahoma or any political subdivision thereof, including the County, but shall constitute a special, limited revenue obligation of the Authority only payable solely from and only to the extent of the revenues pledged in the Indenture, and neither the State of Oklahoma, nor any political subdivision thereof, including the County, shall be liable hereon; nor shall this Bond constitute the giving, pledging, or loaning of the faith and credit of the State of Oklahoma, or any political subdivision thereof, including the County. The issuance of this Bond shall not, directly or indirectly or contingently, obligate the State of Oklahoma or any political subdivision thereof, including the County, to levy or collect any form of taxes or assessments therefor or to create any indebtedness payable out of taxes or assessments or make any appropriation for the payment of this Bond, and such appropriation or levy is prohibited. The Authority has no taxing power.

     Reference is hereby made to the Indenture and the Loan Agreement for a description of the revenues pledged, the nature and extent of the security, the rights, duties and obligations of the Authority, the Trustee and the Registered Owners of the Bonds and the terms and conditions upon which the Bonds are, and are to be, secured, and a statement of the rights, duties, immunities and obligations of the Authority and the Trustee.

     The Bonds are subject to optional redemption by the Authority upon the written direction of the Company Representative as a whole or in part at any time, at a redemption price equal to the principal amount thereof to be redeemed and accrued but unpaid interest to the redemption date, in certain events of damage, destruction or condemnation to the property of the Company located in Watts, Oklahoma. The Bonds are also subject to optional redemption by the Authority upon the written direction of the Company Representative, as a whole, but not in part, at redemption prices equal to 110% of the outstanding principal amount thereof to be redeemed and accrued but unpaid interest to the redemption date, as a condition precedent to the acquisition of substantially all of the assets of the Company or in the event of the merger or consolidation of the Company, as provided in the Loan Agreement.

     The Bonds are also subject to mandatory sinking fund redemption by lot in such manner as the Trustee may determine pursuant to the Indenture, at a redemption price equal to 100% of the principal amount thereof and accrued but unpaid interest to the redemption date.

     Upon the occurrence of a Determination of Taxability, as defined in this Indenture, the Bonds are subject to mandatory redemption in whole at a redemption price equal to 105% of the Outstanding principal amount thereof, plus unpaid interest accrued to the redemption date, at the earliest practicable date selected by the Trustee, after consultation with the Company, but in no event later than 45 calendar days following the Trustee’s notification of the Determination of Taxability. The occurrence of a Determination of Taxability with respect to the Bonds will not constitute an Event of Default under this Indenture and the sole remedy of the holders of the Bonds is the mandatory redemption of the Bonds pursuant to this paragraph.

     In the event less than all Bonds are to be redeemed pursuant to the optional or special redemption provisions of this Indenture, they shall be redeemed in such order of maturity as the Company Representative shall determine (less than all of the Bonds of a single maturity to be selected by lot in such manner as the Trustee may determine). Except as hereinafter provided, notice of the call for redemption shall be given by the Trustee by mailing by first class mail a copy of the redemption notice not more than 45 days nor less than 30 days prior to the redemption date to the Registered Owners of Bonds to be redeemed in whole or in part at the address of such Registered Owner last showing on the registration books. Failure to give such notice or any defect therein shall not affect the validity of any proceedings for the redemption of such Bonds for which no such failure or defect occurs. All Bonds called for redemption will cease to bear interest after the specified redemption date, provided collected funds for their payment are on deposit at the place of payment at the time of redemption.

     Notwithstanding the foregoing, no additional notice shall be required with respect to mandatory sinking fund redemption unless requested by the holders of 100% of the principal amount of the Bonds, and Bonds need not be presented for mandatory sinking fund redemption payment.

     The Bonds are issuable only as fully registered bonds in the minimum denominations of $100,000 and in any integral multiple of $5,000 in excess thereof. The Bonds shall initially be registered in the name of Cede & Co., as nominee for The Depository Trust Company (“DTC”), to be held in a book-entry system and: (a) such Bonds shall be registered in the name of the DTC or its nominee, as Bondholder, and immobilized in the custody of DTC; (b) unless otherwise requested by DTC, there shall be a single Bond certificate for each maturity; and (c) such Bonds shall not be transferable or exchangeable, except for transfer to another Depository or another nominee of a Depository, without further action by the Authority. The owners of beneficial interest in the Bonds shall not have any right to receive Bonds in the form of physical certificates. If any Depository determines not to continue to act as a Depository for the Bonds for use in a book-entry system, the Authority may attempt to have established a securities depository/book-entry system relationship with another qualified Depository under this Indenture. If the Authority does not or is unable to do so, the Authority and the Trustee, after the Trustee has made provision for notification to the owners of beneficial interests by the then Depository, shall permit withdrawal of the Bonds from the Depository, and authenticate and deliver Bond certificates in fully registered form (in authorized denominations of not less than $100,000) to the assignees of the Depository or its nominee.

     While a depository is the sole holder of the Bonds, delivery or notation of partial redemption of Bonds shall be effected in accordance with the provisions of the Letter of Representations, as defined in this Indenture.

     In addition to the words and terms defined elsewhere in this Bond, the following terms shall have the following meanings:

     “ Beneficial Owner ” means, with respect to the Bonds, a person owning a Beneficial Ownership Interest therein, as evidenced to the satisfaction of the Trustee.

     “ Beneficial Ownership Interest ” means the beneficial right to receive payments and notices with respect to the Bonds which are held by a Depository under a book-entry system.

     “ Book-entry form ” or “ book-entry system ” means, with respect to the Bonds, a form or system, as applicable, under which (a) the Beneficial Ownership Interests may be transferred only through a book-entry; and (b) physical Bond certificates in fully registered form are registered only in the name of a Depository or its nominee as holder, with the physical Bond certificates “immobilized” in the custody of the Depository. The book-entry system maintained by and the responsibility of the Depository (and not maintained by or the responsibility of the Authority or the Trustee) is the record that identifies, and records the transfer of the interests of, the owners of beneficial (book-entry) interests in the Bonds.

     “ Depository ” means any securities depository that is a clearing agency under federal law operating and maintaining, with its participants or otherwise, a book-entry system to record ownership of book-entry interests in Bonds, and to effect transfers of book-entry interests in Bonds, and includes and means initially The Depository Trust Company (a limited purpose trust company), New York, New York.

     “ Direct Participant ” means a Participant as defined in the Letter of Representations.

     “ Indirect Participant ” means a person utilizing the book-entry system of the Depository by, directly or indirectly, clearing through or maintaining a custodial relationship with a Direct Participant.

     NEITHER THE COUNTY, THE COMPANY, NOR THE TRUSTEE WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO ANY DIRECT PARTICIPANT, INDIRECT PARTICIPANT OR ANY BENEFICIAL OWNER OR ANY OTHER PERSON NOT SHOWN ON THE REGISTRATION BOOKS OF THE TRUSTEE AS BEING A HOLDER WITH RESPECT TO: (A) THE BONDS; (B) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY DIRECT PARTICIPANT OR INDIRECT PARTICIPANT; (C) THE TIMELY OR ULTIMATE PAYMENT BY DTC OR ANY DIRECT PARTICIPANT OR INDIRECT PARTICIPANT OF ANY AMOUNT DUE TO ANY BENEFICIAL OWNER IN RESPECT OF THE PRINCIPAL OR REDEMPTION PRICE OF OR INTEREST ON THE BONDS; (D) THE DELIVERY BY ANY DIRECT PARTICIPANT OR INDIRECT PARTICIPANT OF ANY NOTICE TO ANY BENEFICIAL OWNER WHICH IS REQUIRED OR PERMITTED UNDER THE TERMS OF THIS INDENTURE TO BE GIVEN TO REGISTERED OWNERS; (E) THE SELECTION OF THE BENEFICIAL OWNERS TO RECEIVE PAYMENT IN THE EVENT OF ANY PARTIAL REDEMPTION OF THE

BONDS; OR (F) ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC AS REGISTERED OWNER.

     Except for the 15 days next preceding the mailing of notice of redemption of the Bonds (and, if this Bond or portion thereof is called, the period following the giving of such notice), this Bond is fully transferable by the Registered Owner hereof in person or by his duly authorized attorney on the registration books kept at the designated office of the Trustee upon surrender of this Bond, together with a duly executed written instrument of transfer satisfactory to the Trustee. Upon such transfer, a new fully registered bond or bonds of authorized denomination or denominations for the same aggregate principal amount and maturity will be issued to the transferee in exchange therefor, all upon payment of the charges and subject to the terms and conditions set forth in this Indenture. The Authority and the Trustee may deem and treat the person in whose name this Bond is registered as the absolute owner hereof, whether or not this Bond shall be overdue, for the purpose of receiving payment (except as provided above with respect to Regular and Special Record Dates) and for all other purposes, and neither the Authority nor the Trustee shall be affected by any notice to the contrary. Bonds which are reissued upon transfer, exchange or other replacement shall bear interest from the most recent Interest Payment Date to which interest has been paid or duly provided for, or if no interest has been paid, then from the Original Issue Date.

     To the extent permitted by, and as provided in the Indenture, modifications or amendments of the Indenture, or of any indenture supplemental thereto, and of the rights and obligations of the Authority and of the owners of the Bonds may be made with the consent of the Authority and, in certain instances, with the consent of the owners of not less than a majority in aggregate principal amount of the Bonds then Outstanding; provided, however, that no such modification or amendment shall be made which will affect the terms of payment of the principal of, premium, if any, or interest on any of the Bonds which are unconditional, unless consented to by all Bondholders. Any such consent by the owner of this Bond shall be conclusive and binding upon such owner and upon all future owners of this Bond and of any bond issued upon the transfer or exchange of this Bond whether or not notation of such consent is made upon this Bond.

     The owner of this Bond shall have no right to enforce the provisions of the Indenture, the provisions of which are incorporated herein by this reference, or to institute action to enforce the pledge, assignment or covenants made therein or to take any action with respect to an Event of Default under the Indenture or to institute, appear in or defend any suit, action or other proceeding at law or in equity with respect thereto, except as provided in this Indenture. In case an Event of Default under the Indenture shall occur, the principal of all the Bonds at any such time Outstanding under the Indenture may be declared or may become due and payable, upon the conditions and in the manner and with the effect provided in this Indenture. The Indenture provides that such declaration may in certain events be rescinded and annulled by the Trustee under certain circumstances.

     Neither the members of the Authority nor any person executing the Bonds shall be liable personally on the Bonds or be subject to any personal liability or accountability by reason of the issuance thereof.

     It is hereby certified, recited and declared that all conditions, acts and things required by the Constitution or statutes of the State of Oklahoma or by the Act or the Indenture to exist, to have happened or to have been performed precedent to or in the issuance of this Bond exist, have happened and have been performed.

     This Bond shall not be entitled to any benefit under this Indenture or any indenture supplemental thereto, or become valid or obligatory for any purpose until the Trustee shall have signed the certificate of authentication hereon.

     IN WITNESS WHEREOF, Adair County Industrial Authority has caused this Bond to be signed in its name and on its behalf by the manual or facsimile signature of its Chairman, and a facsimile of its corporate seal to be affixed hereon and attested by the manual or facsimile signature of its Secretary.

[SEAL]

		ADAIR COUNTY INDUSTRIAL AUTHORITY
		By
				, Chairman

Attest:
By
		Secretary

[FORM OF TRUSTEE’S CERTIFICATE OF AUTHENTICATION]

     This is one of the Bonds described in the within mentioned Indenture of Trust.

		Bank of Oklahoma, N.A., as Trustee
		By
				Authorized Officer

[End Form of Trustee’s Certificate of Authentication]

[FORM OF ASSIGNMENT]

     FOR VALUE RECEIVED, the undersigned hereby sells. assigns and transfers unto

     

     

the within Bond and all rights thereunder, and hereby irrevocably constitutes and appoints attorney to transfer the within Bond on the books kept for registration thereof, with full power of substitution in the premises.

Dated:
				NOTICE: The signature to this assignment must correspond with the name as it appears upon the face of the within Bond in every particular, without alteration or enlargement or any change whatever. Signature must be guaranteed by a member of a Medallion Signature Program.

[End Form of Assignment]

[End of Form of Series 2007 Bond]

     WHEREAS, all things necessary to make the Bonds, when authenticated by the Trustee and issued as in this Indenture provided, the valid, binding and legal obligations of the Authority and to constitute this Indenture a valid, binding and legal instrument for the security of the Bonds in accordance with its terms, have been done and performed;

     NOW, THEREFORE, THIS INDENTURE WITNESSETH:

GRANTING CLAUSES

     That the Authority, in consideration of the premises and of the mutual covenants herein contained and of the purchase and acceptance of the Bonds by the owners thereof and of the sum of One Dollar to it duly paid by the Trustee at or before the execution and delivery of these presents, and for other good and valuable consideration, the receipt of which is hereby acknowledged, in order to secure the payment of the principal of, premium, if any, and interest on all Bonds at any time Outstanding under this Indenture according to their tenor and effect and to secure the performance and observance of all the covenants and conditions in the Bonds and herein contained, and to declare the terms and conditions upon and subject to which the Bonds are issued and secured, has executed and delivered this Indenture and has granted, bargained, sold, alienated, assigned, pledged, set over and confirmed, and by these presents does grant, bargain, sell, alienate, assign, pledge, set over and confirm unto Bank of Oklahoma, N.A., as Trustee, and to its successors and assigns forever, all and singular the following described property, franchises and income:

GRANTING CLAUSE FIRST

     The Loan Agreement, including the rights of the Authority under and pursuant to the Loan Agreement (other than the rights of the Authority under Sections 5.01(f), 8.05 and 10.04 of the Loan Agreement and other than the rights of the Authority to perform certain discretionary acts as reserved in the Loan Agreement) and the rights, title and interests granted, pledged, bargained, sold, conveyed and mortgaged by the Company therein, including Pledged Revenues (as herein defined):

GRANTING CLAUSE SECOND

     All Funds (except the Rebate Fund) established under this Indenture, except for monies deposited with or paid to the Trustee for the redemption of Bonds, notice of the redemption or tender of which has been duly given, and all Pledged Revenues payable to the Trustee by or for the account of the Authority pursuant to the Loan Agreement and this Indenture, subject only to the provisions of this Indenture permitting the application thereof for the purposes and on the terms and conditions set forth in this Indenture:

GRANTING CLAUSE THIRD

     Any and all other interests in real or personal property of every name and nature from time-to-time hereafter by delivery or by writing of any kind specifically mortgaged, pledged or hypothecated, as and for additional security hereunder by the Authority or by anyone in its behalf or with its written consent in favor of the Trustee, which is hereby authorized to receive any and

all such property at any and all times and to hold and apply the same subject to the terms hereof; and

     TO HAVE AND TO HOLD the same with all privileges and appurtenances hereby conveyed and assigned, or agreed or intended to be, to the Trustee and its successors in said trust and assigns forever;

     IN TRUST, NEVERTHELESS, upon the terms herein set forth for the equal and proportionate benefit, security and protection of all owners of the Bonds issued under and secured by this Indenture without privilege, priority or distinction as to the lien or otherwise of any of the Bonds over any other of the Bonds except as specifically provided herein:

     PROVIDED, HOWEVER, that if the Authority, its successors or assigns shall well and truly pay, or cause to be paid, the principal of the Bonds and the premium, if any, and the interest due or to become due thereon, at the times and in the manner mentioned in the Bonds according to the true intent and meaning thereof, and shall cause the payments to be made into the Bond Principal Fund and the Bond Interest Fund as hereinafter required or shall provide, as permitted hereby, for the payment thereof by depositing with the Trustee the entire amount due or to become due thereon, or certain securities as herein permitted, and shall well and truly keep, perform and observe all the covenants and conditions pursuant to the terms of this Indenture to be kept, performed and observed by it, and shall pay or cause to be paid to the Trustee all sums of money due or to become due to it in accordance with the terms and provisions hereof, then upon such final payments, this Indenture and the rights hereby granted shall cease, terminate and be void; otherwise, this Indenture to be and remain in full force and effect.

     THIS INDENTURE FURTHER WITNESSETH and it is expressly declared that all Bonds issued and secured hereunder are to be issued, authenticated and delivered, and all said property, rights, interests and revenues and funds hereby pledged and assigned are to be dealt with and disposed of under, upon and subject to the terms, conditions, stipulations, covenants, agreements, trusts, uses and purposes as hereinafter expressed, and the Authority has agreed and covenanted, and does hereby agree and covenant with the Trustee and with the respective owners from time-to-time of the Bonds as follows:

ARTICLE I

DEFINITIONS; BOND INDENTURE TO CONSTITUTE CONTRACT

      Section 1.01. Definitions . All words and phrases not otherwise defined herein shall have the same meanings as assigned to such words and phrases in Article I of the Loan Agreement and in Article I of this Indenture. In addition, the following terms, except where the context indicates otherwise, shall have the respective meanings set forth below:

     “ Act ” means Title 60 Oklahoma Statutes 2001 Section 176 et seq., as amended.

     “ Additional Indebtedness ” means all Indebtedness of the Company other than the Loan.

     “ Approved Purchasers ” means (a) Weyerhaeuser Company or any division or subsidiary or parent thereof, (b) Lowe’s Companies, Inc. or any division or subsidiary or parent thereof, and

(c) any additional purchaser approved by the holders of a majority in principal amount of the Bonds.

     “ Audited Financial Statements ” means, as to the Company, financial statements for a Fiscal Year, or for such other period for which an audit has been performed, prepared in accordance with generally accepted accounting principles, which have been audited and reported upon by independent certified public accountants.

     “ Authority ” means Adair County Industrial Authority, or any public entity succeeding to its rights and obligations under the Loan Agreement.

     “ Authority Officer ” means the Chairman, Vice Chairman or other officer of the Authority, and, when used with reference to an act or document, also means any other person authorized by resolution of the Authority to perform such act or sign such document.

     “ Balloon Long-Term Indebtedness ” means Long-Term Indebtedness 20% or more of the principal payments of which are due in any 12-month period, which portion of the principal is not required by the documents pursuant to which such Indebtedness is issued to be amortized by redemption prior to such date.

     “ Beneficial Owner ” means, with respect to any Bonds in Book-Entry Form, a Person owning a Beneficial Ownership Interest therein, as evidenced to the satisfaction of the Trustee.

     “ Beneficial Ownership Interest ” means the beneficial right to receive payments and notices with respect to the Bonds which are held by a Depository under a book-entry system.

     “ Board ” means the Board of Directors of the Company.

     “ Bonds ” or “ Series 2007 Bonds ” means the Adair County Industrial Authority Solid Waste Recovery Facilities Revenue Bonds (Advanced Environmental Recycling Technologies, Inc. Project) Series 2007.

     “ Bond Interest Fund ” means the Bond Interest Fund created in this Indenture.

     “ Bond Principal Fund ” means the Bond Principal Fund created in this Indenture.

     “ Bondholder ” or “ holder ” or “ owner ” of Bonds means the Registered Owner of any Bond.

     “ Book-Entry Form ” or “ book-entry system ” means, with respect to any Bonds, a form or system, as applicable, under which (a) the Beneficial Ownership Interests may be transferred only through a book-entry and (b) physical Bond certificates in fully registered form are registered only in the name of a Depository or its nominee as holder, with the physical Bond certificates “immobilized” in the custody of the Depository. The book-entry system maintained by and the responsibility of the Depository (and not maintained by or the responsibility of the Authority or the Trustee) is the record that identifies, and records the transfer of the interests of, the owners of book-entry interests in such Bonds.

     “ Business Day ” means any day other than a Saturday, a Sunday or any other day on which the New York Stock Exchange or banks are authorized or obligated by law or executive order to close in New York, New York, or any city in which the designated corporate trust office of the Trustee is located.

     “ Capitalized Interest Fund ” means the Capitalized Interest Fund created pursuant to Section 3.22 hereof.

     “ Code ” means the Internal Revenue Code of 1986, and the regulations issued from time-to-time thereunder.

     “ Commitment Indebtedness ” means the obligation of the Company to repay amounts disbursed pursuant to a commitment from a financial institution to refinance when due other Indebtedness (including accrued and unpaid interest thereon) of the Company or to purchase when tendered for purchase by the holder thereof in accordance with the terms thereof other Indebtedness (including accrued and unpaid interest thereon) of the Company, which other Indebtedness was incurred in accordance with the provisions of the Loan Agreement, plus any fees payable to such financial institution for such commitment and any other expenses (including collection) thereunder, including, without limitation, amounts disbursed and fees and expenses payable in connection with any Credit Facility.

     “ Company ” or “ Corporation ” means Advanced Environmental Recycling Technologies, Inc., a Delaware corporation, and its successors and assigns.

     “ Company Representative ” or “ Corporation Representative ” means the executive director or chief financial officer of the Company or any other person designated as such by an instrument in writing delivered to the Authority and the Trustee by the chief executive officer of the Company or chief financial officer.

     “ Completion Date ” means the date of the completion of the acquisition, construction, improvement and equipping of the Facilities described in Exhibit A to the Loan Agreement, as evidenced by the certificate of the Company filed with the Trustee as required by the Loan Agreement.

     “ Completion Indebtedness ” means any Long-Term Indebtedness incurred by the Company for the purpose of financing the completion of the acquisition, construction or equipping of the facilities for which Long-Term Indebtedness has theretofore been incurred in accordance with the provisions of the Loan Agreement, to the extent necessary to provide a completed and equipped facility of the type and scope contemplated at the time that such Long-Term Indebtedness theretofore incurred was originally incurred, and, to the extent the same shall be applicable, in accordance with the general plans and specifications for such facility as originally prepared with only such changes as have been made in conformance with the documents pursuant to which such Long-Term Indebtedness theretofore incurred was originally incurred.

     “ Consultant ” means a firm or firms designated in a certificate of the Company Representative which is not, and no member, stockholder, director, officer, trustee or employee of which is, an officer, director, trustee or employee of the Company, and which is a professional

management consultant of national repute for having the skill and experience necessary to render the particular report required by the provision of the Loan Agreement in which such requirement appears.

     “ Cost of Issuance Fund ” means the Cost of Issuance Fund created pursuant to this Indenture.

     “ Cost of the Project ” means the sum total of all reasonable or necessary costs incidental to the financing of the Facilities described in the Loan Agreement.

     “ County ” means Adair County, Oklahoma, a political subdivision of the State of Oklahoma, and the beneficiary of the Authority and on whose behalf the Bonds are issued by the Authority.

     “ Credit Facility ” means a line of credit, letter of credit, standby bond purchase agreement or similar credit enhancement or liquidity facility established in connection with the issuance of Indebtedness to provide credit or liquidity support for such Indebtedness.

     “ Current Assets ” means unrestricted cash of the Company or other assets of the Company which are expected to be converted into cash or consumed in the production of income within the greater of one year and the normal operating cycle of the Company, all determined in according with generally accepted accounting principles.

     “ Current Liabilities ” means liabilities of the Company expected to be liquidated in the greater of one year and the normal operating cycle of the Company, excluding any liability otherwise classified as current which will be settled from other than Current Assets, all determined in according with generally accepted accounting principles.

     “ Current Ratio ” means the ratio of Current Assets to Current Liabilities.

     “ Debt to Equity Ratio ” means the ratio of (a) Indebtedness, to (b) excess of total assets of the Company over total liabilities.

      “Deposit Account Control Agreement” means that certain Deposit Account Control Agreement, dated as of December 1, 2007, among the Trustee, the Authority, the Depository Bank and the Company.

     “ Depository ” means any securities depository that is a clearing agency under federal law operating and maintaining, with its participants or otherwise, a book-entry system to record ownership of book-entry interests in bonds, and to effect transfers of book-entry interests in bonds in book-entry form, and includes and means initially The Depository Trust Company (a limited purpose trust company), New York, New York.

     “ Depository Bank ” means Liberty Bank of Arkansas, or any subsequent depository bank named pursuant to the Deposit Account Control Agreement.

     “ Determination of Taxability ” means and shall occur when, (a) the Trustee receives written notice from the Company or a majority of Bondholders, supported by an Opinion of

Bond Counsel which shall be a nationally recognized firm with expertise in the area of federal taxation of municipal bonds, that interest on the Bonds is includable in the gross income of holders of the Bonds of any series for federal income tax purposes; or (b) the Internal Revenue Service shall claim in writing that interest on the Bonds of any series is includable in the gross income of holders of such Bonds for federal income tax purposes.

     “ Direct Participant ” means a Participant as defined in the Letter of Representations.

     “ Environmental Law ” means (a) the Comprehensive Environmental Response, Compensation and Liability Act of 1976, 42 U.S.C. §§ 9601 et seq.; (b) the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by SARA, 42 U.S.C. §§ 1820 et seq.; (c) the Hazardous Materials Transportation Act, 49 U.S.C. §§ 1810 et seq.; (d) the Toxic Substances Control Act, 15 U.S.C. §§ 2601 et seq.; (e) the Resource Conservation and Recovery Act, as amended, 42 U.S.C. §§ 9601 et seq.; (f) the Clean Water Act, 33 U.S.C. §§ 1251 et seq.; (g) the Clean Air Act, 42 U.S.C. §§ 7412 et seq.; and (h) and any related laws of the State of Oklahoma or ordinances or resolutions of any subdivision thereof, as any such acts, powers and duties may be amended, modified or supplemented and any regulations promulgated pursuant to any of the foregoing statutes.

     “ Escrowed Interest ” means amounts (but not including any interest earnings thereon, except as otherwise provided in the Loan Agreement) deposited in escrow in connection with the issuance of Long-Term Indebtedness and either held as cash or invested in noncallable Government Obligations to pay interest on such Long-Term Indebtedness (but shall not include capitalized or borrowed interest).

     “ Equipment ” means those items of machinery, equipment or other personal property installed in the Springdale Property, Lowell Property, Junction Property or Watts Property and pledged to the repayment of the Loan pursuant to the Loan Agreement, and any item of machinery, equipment or other personal property or fixtures acquired and installed in substitution or replacement thereof, less such machinery, equipment or other personal property or fixtures as may be released from such pledge pursuant to the Loan Agreement or taken by exercise of the power of eminent domain as provided in the Loan Agreement, as such items may at any time exist.

     “ Event of Default ” or “event of default” means those defaults specified in this Indenture or the Loan Agreement, as appropriate.

     “ Facilities ” means the plastic waste reclamation and recycling facilities of the Company financed or refinanced with proceeds of the Series 2007 Bonds, located in the City of Watts, Oklahoma, as more particularly described in Exhibit A to the Loan Agreement.

     “ Fiscal Year ” means the fiscal year of the Company.

     “ Funds ” means the Project Fund, the Bond Principal Fund, the Bond Interest Fund, the Reserve Fund, the Capitalized Interest Fund, the Costs of Issuance Fund and the Rebate Fund, and any account created therein, all as established and created by this Indenture.

     “ Governing Body ” means the Board of Directors of the Company.

     “ Government Obligations ” means:

     (a) Direct obligations (other than an obligation subject to variation in principal repayment) of the United States of America;

     (i) obligations fully and unconditionally guaranteed as to timely payment of principal and interest by the United States of America;

     (ii) obligations fully and unconditionally guaranteed as to timely payment of principal and interest by any agency or instrumentality of the United States of America when such obligations are backed by the full faith and credit of the United States of America;

     (iii) evidences of ownership or proportionate interests in future interest and principal payments on obligations described above held by a bank or trust company as custodian, under which the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor and the underlying government obligations are not available to any person claiming through the custodian or to whom the custodian may be obligated, provided, however, that Government Obligations described in this subsection (iii) may only be used in connection with a defeasance of the Bonds under this Indenture; or

     (iv) securities of or other interests in any open-end or closed-end management type investment company or investment trust registered under the federal “Investment Company Act of 1940,” 15 U.S.C. Section 80(a)-1 et seq., if the portfolio of such investment company or investment trust is limited to United States of America obligations which are backed by the full faith and credit of the United States of America and to repurchase agreements fully collateralized by such obligations and if any such investment company or investment trust actually takes delivery of such collateral, either directly or through an authorized custodian.

     (b) Pre-refunded municipal obligations rated “AAA” by Standard & Poor’s Rating Services and “AAA” by Moody’s Investors Service meeting the following requirements:

     (i) the municipal obligations are (A) not subject to redemption prior to maturity; or (B) the bond trustee therefor has been given irrevocable instructions concerning their call and redemption and the issuer of the municipal obligations has covenanted not to redeem such municipal obligations other than as set forth in such instructions;

     (ii) the municipal obligations are secured by cash or obligations described in paragraphs (a)(i), (ii), (iii), (iv) or (v) above, which may be applied only to payment of the principal of, interest and premium on such municipal obligations;

     (iii) the principal of and interest on the obligations described in paragraphs (a)(i), (ii), (iii), (iv) or (v) above (plus any cash in the escrow) has been verified by the report of independent certified public accountants to be sufficient to pay in full all principal of, interest and premium, if any, due and to become due to the municipal obligations (“Verification”);

     (iv) the cash or obligations described in paragraph (a) above serving as security for the municipal obligations are held by an escrow agent or trustee in trust for owners of the municipal obligations;

     (v) no substitution of an obligation described in paragraph (a) above shall be permitted except with another obligation described in paragraph (a) above and upon delivery of a new Verification; and

     (vi) the cash or obligations described in paragraph (a) above are not available to satisfy any other claims, including those by or against the bond trustee or escrow agent.

     “ Guaranty ” means any obligation of the Company guaranteeing in any manner, directly or indirectly, any obligation of any Person, which obligation of such other Person would, if such obligation were the obligation of the Company, constitute Indebtedness under the Loan Agreement. For the purposes of the Loan Agreement, so long as no payments are required to be made under such Guaranty and so long as such Guaranty constitutes a contingent liability under generally accepted accounting principles, the aggregate principal amount of any indebtedness in respect of which the Company shall have executed and delivered its Guaranty shall be deemed to be equal to 20% of the principal amount borrowed under such guaranteed indebtedness Outstanding at the time any computation is being made, and the aggregate annual principal and interest payments on any indebtedness in respect of which the Company shall have executed and delivered its Guaranty shall be deemed to be equal to 20% of the amount which would be payable as principal of and the interest on the indebtedness for which a Guaranty shall have been issued during the Fiscal Year for which any computation is being made, provided that if there shall have occurred a default under the guaranteed obligation of any direct or indirect payment by the Company on such Guaranty, then, during the period commencing on the date of such default of payment and ending as the case may be on the day on which such default is cured or on the day which is two years after such other Person resumes making all payments on such guaranteed obligation, 100% of such guaranteed indebtedness shall be taken into account.

     “ Hazardous Material ” means: (a) any substances defined as “hazardous substances,” “pollutants,” “contaminants,” “hazardous materials,” “hazardous wastes,” or “hazardous or toxic substances” or related materials as now or hereafter defined in any Environmental Law; (b) those substances listed or otherwise identified as substances of the type referred to in the preceding subsection (a) in the regulations adopted and issued pursuant to any Environmental Law, as the same may be amended, modified or supplemented; (c) any friable asbestos, airborne asbestos in excess of that generally found in the atmosphere, respectively, where the facilities of the Company are located, or any substance or material containing asbestos, excluding any such materials located on the solid waste disposal or manufacturing facilities of the Company prior to the date of the Loan Agreement so long as such materials are contained, maintained, abated, or

removed in compliance with all applicable Environmental Laws; and (d) any substance the presence of which on the Facilities is prohibited by any applicable Environmental Law; provided that Hazardous Material shall not include any such substances used in or resulting from the ordinary operation of a facility constituting solid waste recycling facilities or for the cleaning of the Facilities; provided that such substances are stored, handled and disposed of in compliance with all applicable Environmental Laws and other applicable laws and regulations.

     “ Improvements ” means the real property improvements located on the Site and pledged pursuant to the Loan Agreement.

     “ Income Available for Debt Service ” means, as to any Fiscal Year or other specified period, (a) excess of revenues over expenses of the Company before depreciation, amortization and interest expense on Long-Term Indebtedness, as determined from the Audited Financial Statements or as otherwise herein provided, provided that unrealized gains and losses on investments will not be recognized in the calculation of Income Available for Debt Service, plus (b) capitalized or funded interest available for and scheduled to be applied to interest obligations accrued during such period; provided, however, that (i) no determination thereof shall take into account any gain or loss resulting from either the extinguishment of Indebtedness or the sale, exchange or other disposition of capital assets not made in the ordinary course of business, and (ii) revenues shall not include earnings from the investment of Escrowed Interest or earnings constituting Escrowed Interest.

     “ Indebtedness ” means (a) all obligations of the Company for borrowed money including, but not limited to, the Loan; (b) all installment sales, conditional sales and capital lease obligations incurred or assumed by the Company as purchaser; and (c) all Guaranties, whether constituting Long-Term Indebtedness or Short-Term Indebtedness. Indebtedness shall not include any other obligation incurred by the Company in the ordinary course of business, any obligation to contribute to self-insurance, pension or other risk management programs, indemnification obligations incurred with respect to Commitment Indebtedness, or any fees or expenses payable in connection with the incurrence of Indebtedness.

     “ Indenture ” means this Indenture of Trust between the Authority and the Trustee, including any indentures supplemental thereto made in conformity therewith, pursuant to which the Bonds are authorized to be issued and secured.

     “ Independent Architect ” means an architect, engineer or firm of architects and engineers selected by the Company with the approval of a majority in principal amount of the Bondholders.

     “ Indirect Participant ” means a Person utilizing the book-entry system of the Depository by, directly or indirectly, clearing through or maintaining a custodial relationship with a Direct Participant.

     “ Insurance Consultant ” means a firm or Person selected by the Company Representative and approved by a majority of the Bondholders or Beneficial Owners which is not, and no member, stockholder, director, trustee, officer or employee of which is, an officer, director, trustee or employee of the Company and which is qualified to survey risks and to recommend

insurance coverage for solid waste recycling facilities and services and organizations engaged in such operations and which may provide insurance coverage for the Company.

     “ Interest Payment Dates ” means June 15 and December 15 of each year, commencing June 15, 2008.

     “ Junction Deed of Trust ” means the Mortgage, Assignment of Leases and Rents, Security Agreement and Financing Statement, dated as of the date hereof, with respect to certain property of the Company located in Junction, Texas.

     “ Junction Property ” means the real property described in the Junction Deed of Trust.

     “ Letter of Representations ” means any Letter of Representations from the Authority and the Trustee to the Depository which may be entered into in connection with the issuance of the Bonds in a book-entry system, as supplemented and amended from time-to-time.

     “ Lien ” means any mortgage, deed of trust or pledge of, security interest in, or encumbrance on the assets of the Company, or sale of accounts receivable with recourse to, the Company which secures any Indebtedness.

     “ Loan ” means the loan by the Authority to the Company of the proceeds from the sale of the Bonds (exclusive of accrued interest paid by the initial purchasers of any Bonds) pursuant to the Loan Agreement.

     “ Loan Agreement ” means the Loan Agreement between the Authority and the Company, dated as of December 1, 2007, and any amendments and supplements thereto made in conformity with the requirements thereof and of this Indenture.

     “ Loan Payments ” means those payments required to be paid by the Company identified as Loan Payments pursuant to the Loan Agreement.

     “ Long-Term Debt Service Coverage Ratio ” means, except as otherwise provided in the Loan Agreement, for any Fiscal Year or other specified period, the ratio determined by dividing the Income Available for Debt Service by Maximum Annual Debt Service. When calculating the Long-Term Debt Service Coverage Ratio, (a) capitalized interest shall not be counted as income unless it will be available and applied in the same year as the Maximum Annual Debt Service will occur; and (b) payments to be made in respect of principal and interest on any revolving credit or similar agreement secured solely by a pledge of accounts receivable and inventory shall not be included in determining Maximum Annual Debt Service.

     “ Long-Term Debt Service Requirement ” means, for any Fiscal Year or other specified period, the aggregate of the payments to be made in respect of principal and interest (whether or not separately stated) on Outstanding Long-Term Indebtedness of the Company during such period, also taking into account:

     (a) with respect to Balloon Long-Term Indebtedness, (i) the amount of principal which would be payable in such period if such principal were amortized from the date of incurrence thereof over a period of 20 years on a level debt service basis at an

interest rate equal to the rate borne by such Indebtedness on the date calculated, except that if the date of calculation is within 12 months of the actual maturity of such Indebtedness, the full amount of principal payable at maturity shall be included in such calculation; or (ii) principal payments or deposits with respect to Indebtedness secured by an irrevocable letter of credit issued by, or an irrevocable line of credit with a bank having a combined capital and surplus of at least $50,000,000, or insured by an insurance policy issued by any insurance company rated at least “A” by Alfred M. Best Company or its successors in Best’s Insurance Reports or its successor publication, nominally due in the last Fiscal Year in which such Indebtedness matures may, at the option of the Company Representative, be treated as if such principal or interest payments or deposits were due as specified in any loan agreement issued in connection with such letter of credit, line of credit or insurance policy or pursuant to the repayment provisions of such letter of credit, line of credit or insurance policy, and interest on such Indebtedness after such Fiscal Year shall be assumed to be payable pursuant to the terms of such loan agreement or repayment provisions;

     (b) with respect to Long-Term Indebtedness which is Variable Rate Indebtedness, the interest on such Indebtedness shall be calculated at the rate which is equal to the average of the actual interest rates which were in effect (weighted according to the length of the period during which each such interest rate was in effect) for the most recent 12-month period immediately preceding the date of calculation for which such information is available (or such shorter period, but not less than six months, if such information is not available for a 12-month period), except that with respect to new Variable Rate Indebtedness, and Variable Rate Indebtedness issued within the last six months, the interest rate for such Indebtedness for the initial interest rate period shall be such interest rate as determined in writing delivered to the Trustee by a banking, investment banking or financial advisory firm, which shall be knowledgeable in matters relating to finance for solid waste recycling facilities; and

     (c) with respect to any Commitment Indebtedness providing for payment of other Long-Term Indebtedness, to the extent that amounts are not then due and owing for advances made by the creditor with respect thereto, the principal and interest relating to such Commitment Indebtedness shall not be included in any computations with respect to Income Available for Debt Service or the Long-Term Debt Service Requirement; provided, however, that interest shall be excluded from the determination of Long-Term Debt Service Requirement to the extent that Escrowed Interest is available to pay such interest (but the amount excluded shall not take into account interest earnings on such Escrowed Interest unless there shall have been delivered to the Trustee a report of an independent firm of nationally recognized certified public accountants verifying that such amount of interest can be timely paid from such escrow).

     “ Long-Term Indebtedness ” means all Indebtedness having a maturity longer than one year incurred or assumed by the Company, including:

     (a) money borrowed for an original term, or renewable at the option of the borrower for a period from the date originally incurred, longer than one year;

     (b) leases which are required to be capitalized in accordance with generally accepted accounting principles having an original term, or renewable at the option of the lessee for a period from the date originally incurred, longer than one year;

     (c) installment sale or conditional sale contracts incurred or assumed by the Company as purchaser having an original term in excess of one year;

     (d) Short-Term Indebtedness if a commitment by a financial lender exists to provide financing to retire such Short-Term Indebtedness and such commitment provides for the repayment of principal on terms which would, if such commitment were implemented, constitute Long-Term Indebtedness; and

     (e) the current portion of Long-Term Indebtedness.

     “ Lowell Mortgage ” means the Mortgage, Assignment of Leases and Rents, Security Agreement and Financing Statement, dated as of the date hereof, with respect to certain property of the Company located in Lowell, Arkansas.

     “ Lowell Property ” means the real property described in the Lowell Mortgage.

     “ Maximum Annual Debt Service ” means the highest Long-Term Debt Service Requirement for any current or succeeding Fiscal Year or other specified period.

     “ Monthly Payments ” means monthly payments to be made by the Company pursuant to the Loan Agreement in an amount as follows:

     (a) for the period from June 15, 2008 through December 14, 2008, inclusive, equal to the quotient obtained by dividing the interest due and payable on the Bonds on the next succeeding Interest Payment Date by six, plus any deposits to the Reserve Fund required pursuant to the Loan Agreement;

     (b) for the period from December 15, 2008 and thereafter, equal to (a) the sum of (i) the quotient obtained by dividing the amount of principal and redemption premium, if any, of the Bonds due and payable on the next succeeding payment date for principal (whether at their stated maturities, date called for optional redemption or by mandatory sinking fund redemption) by 12, and (ii) the quotient obtained by dividing the interest due and payable on the Bonds on the next succeeding Interest Payment Date by six; and (b) any deposits to the Reserve Fund required pursuant to the Loan Agreement.

     “ Net Book Value ” when used in connection with Property, Plant and Equipment or other property means the value of such property, net of accumulated depreciation or amortization, if applicable and as the case may be, as it is carried on the books of the Company in conformity with generally accepted accounting principles.

     “ Net Proceeds ” means the gross proceeds of any insurance or condemnation awards or the gross proceeds received pursuant to any title insurance policy with respect to any Property, Plant and Equipment pledged to the payment of the Loan pursuant to the Loan Agreement, the

Springdale Mortgage or the Watts Mortgage, less such fees and expenses incurred in collecting the same.

     “ Nonrecourse Indebtedness ” means any Indebtedness incurred to finance the purchase by the Company of tangible property secured solely by a Lien on such property, the liability for which is limited to the property subject to such Lien with no recourse, directly or indirectly, to any other assets of the Company.

     “ Notice Beneficial Owners ” means those Beneficial Owners who have given their addresses and facsimile numbers to the Company.

     “ Officer’s Certificate ” means a certificate signed by the Company Representative. Each Officer’s Certificate presented pursuant to the Loan Agreement shall state that it is being delivered pursuant to (and shall identify the section or subsection of), and shall incorporate by reference and use in all appropriate instances all terms defined in, the Loan Agreement.

     “ Operating Expenses ” shall mean all expenditures required in the operation and maintenance of the Improvements including those that result in both current period expenses as well as current assets or current liabilities under generally accepted accounting principles, and including, the following items, without intending to limit the generality of the foregoing:

     (a) expenditures for operation (including all utilities and fees payable under management and/or operating agreements), maintenance, repair, alterations, insurance and inspection;

     (b) salaries and expenditures for professional, managerial, supervisory, administrative, engineering, architectural, legal, financial, auditing and consulting services, including the reasonable annual compensation and expenses of the officers and directors of the Company allocable to the Improvements and including the fees of and other amounts payable to the Trustee and the Authority;

     (c) all taxes or contributions or payments in lieu thereof, assessments and charges, including, without intending to limit the generality of the foregoing, income, profits, sales, use, property, franchise, and excise taxes;

     (d) obligations under contracts for supplies, services and pensions and other employee benefits;

     (e) purchases of merchandise and other inventory items; and

     (f) rentals payable under leases not intended by the Company to evidence the acquisition of capital assets, as determined in accordance with generally accepted accounting principles; provided, however, that rentals payable under leases which, under generally accepted accounting principles would be treated as evidencing the acquisition of a capital asset shall be includable within Operating Expenses, if so designated by the Company; provided, however, the term “Operating Expenses” shall not be construed to include (i) depreciation, (ii) amortization, and (iii) the annual Long-Term Debt Service Requirement.

     “ Opinion of Bond Counsel ” means an opinion in writing signed by an attorney or firm of attorneys acceptable to the Trustee and experienced in the field of municipal bonds whose opinions are generally accepted by purchasers of municipal bonds.

     “ Opinion of Counsel ” means an opinion in writing signed by an attorney or firm of attorneys, acceptable to the Trustee, who may be counsel for the Company or other counsel acceptable to the Trustee.

     “ Outstanding ” means, as of any particular time, all Bonds which have been duly authenticated and delivered by the Trustee under this Indenture, except:

     (a) Bonds theretofore canceled by the Trustee or delivered to the Trustee for cancellation after purchase in the open market or because of payment at or redemption prior to maturity;

     (b) Bonds for the payment or redemption of which cash funds (or securities to the extent described in this Indenture) shall have been theretofore deposited with the Trustee (whether upon or prior to the maturity or redemption date of any such Bonds); provided that, if such Bonds are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given or arrangements satisfactory to the Trustee shall have been made therefor, or waiver of such notice satisfactory in form to the Trustee shall have been filed with the Trustee; and

     (c) Bonds in lieu of which other Bonds have been authenticated under this Indenture.

     Bonds which do not pay interest currently in accordance with their terms shall be deemed to be Outstanding in an amount equal to their accreted value at the applicable time.

     “ Parity Indebtedness ” means Indebtedness of the Company secured on a parity basis with the Bonds, except to the extent provided in Section 8.13 of the Loan Agreement.

     “ Patent and Trademark Security Agreement ” means the Patent and Trademark Security Agreement, dated as of the date hereof, from the Company for the benefit of the Trustee.

     “ Permitted Investments ” means any of the following which at the time are legal investments under the laws of the State of Oklahoma for moneys held under this Indenture and then proposed to be invested therein:

     (a) Government Obligations;

     (b) negotiable certificates of deposit issued by, or banker’s acceptances drawn on and accepted by, any bank, including the Trustee, the certificate of deposit or debt obligations of which (or if such bank, is the principal bank in a bank holding company, debt obligations of the bank holding company) are rated, at the time such certificates or acceptances are issued, in one of the two highest Rating Categories;

     (c) repurchase agreements with any U.S. commercial bank, or with any United States Government securities dealer, provided that such repurchase agreements are fully secured by Government Obligations, and provided further that (i) such collateral is held by the Trustee or any agent acting solely for the Trustee during the term of such repurchase agreement; (ii) such collateral is not subject to liens or claims of third parties and the Trustee has a perfected first security interest in the collateral; (iii) such collateral has a market value (determined at least once every 14 days) at least equal to 102% of the amount invested in the repurchase agreement; and (iv) the failure to maintain such collateral at the level required in (iii) above will require the Trustee to liquidate the collateral;

     (d) certificates of deposit issued by any bank, savings institution or trust company, including the Trustee, and time deposits in any bank, savings institution or trust company, including the Trustee, as to which principal is fully insured by a federally sponsored deposit insurance program; and

     (e) money market funds which are rated in the highest Rating Category and are fully collateralized by Government Obligations.

     “ Permitted Liens ” shall have the meaning assigned to it in Section 8.10(b) of the Loan Agreement.

     “ Person ” means an individual, association, unincorporated organization, corporation, partnership, joint venture, business trust or a government or an agency or a political subdivision thereof, or any other entity.

     “ Pledged Revenues ” means the rights to receive all the receipts, revenues, cash and income of the Company from whatever source derived, whether in the form of accounts receivable, contract rights, chattel paper, general intangibles, profits and income, or other rights, and the proceeds of such rights, whether now owned or held or hereafter coming into existence.

     “ Project ” means the acquisition, construction and equipping of the Facilities.

     “ Project Fund ” means the Project Fund created pursuant to this Indenture.

     “ Property, Plant and Equipment ” means real and personal, tangible and intangible property owned by the Company which is property, plant and equipment under generally accepted accounting principles.

     “ Rating Agency ” means Moody’s Investors Service, Inc. or Standard & Poor’s Ratings Services, a Division of The McGraw-Hill Companies, Inc., and their respective successors and assigns.

     “ Rating Category ” or “ Categories ” means the rating category or categories respectively of each Rating Agency.

     “ Rebate Analyst ” means an attorney or firm of attorneys or accountant or firm of accountants or other Person hired by the Company to assist the Company in compliance with the arbitrage rebate requirements of Section 4.06 of the Loan Agreement.

     “ Rebate Fund ” means the Rebate Fund created in this Indenture.

     “ Registered Owner” means the Registered Owner of any Bonds, as shown on the registration books of the Trustee.

     “ Regular Record Date ” means the close of business on the first day of the calendar month immediately preceding a regularly scheduled Interest Payment Date for the Bonds.

     “ Reserve Fund ” means the Reserve Fund created pursuant to this Indenture.

     “ Reserve Fund Credit Enhancement ” means any letter of credit credited to the Reserve Fund or any account therein as provided in the Loan Agreement in lieu of cash or Permitted Investments on deposit in the Reserve Fund.

     “ Reserve Requirement ” means the lesser of Maximum Annual Debt Service and 10% of the then-outstanding principal amount of the Bonds.

     “ Short-Term Indebtedness ” means Indebtedness with a term of less than one year.

     “ Significant Bondholder ” shall mean any one Beneficial Owner of greater than 50% of the Beneficial Ownership Interest in Bonds then Outstanding, and if no one Beneficial Owner owns greater than 50% of the Beneficial Ownership Interest in Bonds then Outstanding, then the provisions relating to the Significant Bondholder shall not apply

     “ Site ” means the real property described as the Watts Mortgage, less any such real property released under the provisions of the Loan Agreement.

     “ Special Record Date ” means a special record date fixed to determine the names and addresses of Registered Owners for purposes of paying interest on a special Interest Payment Date for the payment of defaulted interest, all as further provided in this Indenture.

     “ Springdale Mortgage ” means the Mortgage, Assignment of Leases and Rents, Security Agreement and Financing Statement, dated as of the date hereof, with respect to certain property of the Company located in Springdale, Arkansas.

     “ Springdale Property ” means the real property described in the Springdale Mortgage.

     “ Subordinated Debt ” means any Indebtedness the payment of which is specifically subordinated to the payment of principal and interest on the Bonds and evidenced by a writing which contains provisions substantially as provided in the Loan Agreement and for which the Company has received an Opinion of Counsel to the effect that such Indebtedness constitutes Subordinated Debt.

     “ Tax Certificate ” means the Tax Certificate as to Arbritrage and the Provisions of Sections 103 and 141-150 of the Internal Revenue Code, executed by the Authority and the Company relating to the tax-exempt status of the Bonds and including any amendments or supplements thereto.

     “ Transfer ” means any act or occurrence the result of which is to dispossess any Person of any asset or interest therein, including specifically, but without limitation, the forgiveness of any debt, but shall not include leases and operating contracts governed by the Loan Agreement.

     “ Trust Estate ” means the property pledged, assigned and mortgaged to the Trustee pursuant to the granting clauses of this Indenture.

     “ Trustee ” means Bank of Oklahoma, N.A., as trustee, and its successors and assigns.

     “ Underwriter ” means Gates Capital Corporation, and its successors and assigns; provided that any purchaser of a Bond from the Underwriter shall not be considered as successor or assign thereof.

     “ Variable Rate Indebtedness ” means any portion of Indebtedness the interest rate on which has not been established at a fixed or constant rate to maturity.

     “ Watts Mortgage ” means the Leasehold Mortgage, Assignment of Leases and Rents, Security Agreement and Financing Statement, dated as of the date hereof with respect to certain property leased by the Company in Watts, Oklahoma.

     “ Watts Property ” means collectively the Improvements and the Site.

     “ Weyerhaeuser Agreement ” means the agreement between the Company and Weyerhaeuser Company dated February 5, 2007, as amended from time to time.

     “ Weyerhaeuser Assignment Agreement ” means the Weyerhaeuser Assignment Agreement, dated as of the date hereof, from the Company for the benefit of the Trustee.

      Section 1.02. Indenture to Constitute Contract . In conside