SECURITY AGREEMENT

 EXHIBIT 10.16
                               

                               

                      SECURITY AGREEMENT
                               
                      Dated July 31, 1996
                               
                              by
                               
              PANDA-ROSEMARY FUNDING CORPORATION
                               
                              to
                               
                     FLEET NATIONAL BANK,
                      as Collateral Agent
                               
                               

                               

                               

                               

                      SECURITY AGREEMENT
                               
This SECURITY AGREEMENT, dated July 31, 1996, is made by PANDA-
ROSEMARY FUNDING CORPORATION, a Delaware corporation (the
"Grantor"), to FLEET NATIONAL BANK, a national banking
association established under the laws of the United States of
America, as collateral agent (in such capacity, together with
its successors, assigns and designees in such capacity, the
"Collateral Agent") for the benefit of the Secured Parties (as
defined herein).

                     W I T N E S S E T H :
                               
WHEREAS, Panda-Rosemary, L.P., a Delaware limited partnership
(the "Partnership"), owns a natural gas-fired cogeneration
facility with approximately 180 MW of electric generating
capacity located in Roanoke Rapids, North Carolina (the
"Project");

WHEREAS, the Partnership has caused the Grantor to be formed
as a wholly-owned subsidiary for the purposes of facilitating
the refinancing of the Project;

WHEREAS, the Grantor has duly authorized the creation and
issuance of its First Mortgage Bonds to be issued in one or
more series (the "Bonds") pursuant to the Trust Indenture,
dated as of July 31, 1996 (as amended, restated, supplemented
or otherwise modified from time to time, the "Indenture"),
among the Grantor, the Partnership and Fleet National Bank, as
trustee;

WHEREAS, the proceeds of the sale of the Bonds will, together
with other funds available to the Partnership, be used, among
other things, to refinance the Partnership's outstanding
indebtedness incurred in connection with the construction and
initial financing of the Project, to fund a debt service
reserve fund for the Bonds, to redeem a limited partner
interest in the Partnership, to pay certain transaction costs
associated with the offering of the Bonds and to fund certain
modification costs in the future, if necessary, some of the
foregoing being financed by the loan by the Grantor of the
proceeds from the issuance of the Bonds to the Partnership,
which loan, as well as loans by the Grantor to the Partnership
with respect to Additional Permitted Debt (as defined
below)(collectively, the "Loans"), will be secured by
substantially all the assets of the Partnership and certain
other collateral;

WHEREAS, in order to satisfy certain requirements of the
Partnership under the Project Agreements (as defined in the
Indenture) and for other purposes permitted under the
Indenture, the Partnership may incur additional debt permitted
by Sections 6.16(a)(v) and 6.16(b)(ii) of the Indenture
("Additional Permitted Debt"), either directly or indirectly
through the Grantor, the obligations under which shall be
secured by substantially all the assets of the Partnership and
certain other collateral;

WHEREAS, all of the Grantor's obligations under the Bonds will
be unconditionally guaranteed by the Partnership pursuant to a
guaranty of the Partnership, the performance of which will be
secured by substantially all the assets of the Partnership;

WHEREAS, the Partnership intends to arrange for the issuance
of certain letters of credit pursuant to one or more Credit
Bank Reimbursement Agreements (as defined in the Indenture),
the obligations under which may be secured by substantially
all the assets of the Partnership and certain other
collateral;

WHEREAS, at the closing, certain moneys held by The Fuji Bank
and Trust Company, as collateral agent, in connection with an
existing letter of credit facility, will be transferred into
the appropriate Funds (as defined in a certain Deposit and
Disbursement Agreement, dated as of July 31, 1996 (as amended,
restated, supplemented or otherwise modified from time to
time, the "Depositary Agreement"), by and among the Grantor,
the Partnership, the Collateral Agent and Fleet National Bank,
as depositary agent thereunder (in such capacity, together
with its successors, assigns and designees in such capacity,
the "Depositary Agent"));

WHEREAS, the Secured Parties signatories thereto (the "Secured
Parties"), the Grantor, the Partnership, the Collateral Agent
and the Depositary Agent have entered into a Collateral Agency
and Intercreditor Agreement, dated as of July 31, 1996 (as
amended, restated, supplemented or otherwise modified from
time to time, the "Intercreditor Agreement"), appointing the
Collateral Agent as collateral agent and setting forth certain
rights and obligations of the Collateral Agent acting on
behalf of the Secured Parties with respect to the Collateral,
including, without limitation, the Funds; and

WHEREAS, the execution and delivery of this Security Agreement
(as amended, supplemented, restated or otherwise modified from
time to time, this "Security Agreement" or this "Agreement")
by the Grantor are conditions precedent to the Collateral
Agent and the Secured Parties entering into the transactions
contemplated by, among other things, the Indenture and the
Credit Bank Documents (as each such term is defined in the
Indenture).

NOW, THEREFORE, in consideration of the premises and in order
to induce the Collateral Agent and the Secured Parties to
enter into the transactions contemplated by, among other
things, the Indenture and the Credit Bank Documents, the
Grantor hereby agrees with the Collateral Agent, for the
benefit of the Secured Parties, as follows:

l.  Defined Terms.

(a)  Unless otherwise defined herein, all capitalized terms
used herein shall have the meanings set forth in, and the
interpretations applicable thereto, under the Intercreditor
Agreement (including the definitions in the Indenture
incorporated in the Intercreditor Agreement).  Unless
otherwise specified herein, (i) all references to Sections,
paragraphs or other subdivisions herein are to this Agreement
and (ii) the words "include," "includes," and "including" are
deemed to be followed by "without limitation" whether or not
they are, in fact, followed by such words or words of like
import.  Unless otherwise defined herein or in the Indenture,
terms defined in Article 9 of the Uniform Commercial Code as
in effect from time to time in the State of New York are used
herein as therein defined.  The following terms shall have the
following meanings, unless the context otherwise requires:

"Accounts Receivable" means all accounts (as defined in the
Code) now or hereafter owned by the Grantor and in any event
shall include, but not be limited to, (i) accounts receivable,
instruments (as defined in the Code), documents, contract
rights (including any rights to liquidated damages payments)
and chattel paper (as defined in the Code), created by or
arising from sales of electricity, steam, output, fuel,
capacity or recoverable materials and/or thermal energy or
other services in connection with the Project, and all
accounts (as defined in the Code) arising from any sale or
rendition of services made under any trade name or style,
whether or not earned by performance, (ii) guarantees,
warranties, endorsements, indemnifications or collateral on,
of or for any of the foregoing and any rents, revenues, income
and profits in respect of the Site or the Project,
(iii) insurance policies or rights relating to any of the
foregoing, (iv) cash and non-cash Proceeds of any and all of
the foregoing and (v) all powers of attorney for the execution
of any evidence of indebtedness or security or other writings
in connection therewith.

"Assigned Agreements" means (i) the Loan Agreement, dated as
of July 31, 1996, between the Grantor and the Partnership (as
amended, supplemented, restated or otherwise modified from
time to time, the "Company Loan Agreement"); (ii) the
Promissory Note made by the Partnership to the order of the
Grantor, dated July 31, 1996, in the original principal amount
of $111,400,000; (iii) the Grantor's interest in the
Intercreditor Agreement; (iv) the Grantor's interest in the
Depositary Agreement and (vi) the Grantor's interest, if any,
in any Additional Permitted Debt Document, as items (i)
through (vi), above, may be amended, modified, restated,
replaced, substituted or otherwise supplemented from time to
time.

"Code" means the Uniform Commercial Code as the same may from
time to time be in effect in the State of New York.

"Collateral" shall have the meaning set forth in Section 2.

"Collateral Records" means (a) all original copies of all
documents, instruments or other writings evidencing any of the
other Collateral and (b) all books, correspondence, credit or
other files and records.

"Copyrights" means, collectively, all of the following now
owned or hereafter created or acquired by Grantor:  (a) all
copyrights, rights and interests in copyrights, works
protectable by copyright, copyright registrations and
copyright applications; (b) all renewals of any of the
foregoing; (c) all income, royalties, damages and payments now
or hereafter due and/or payable under any of the foregoing or
with respect to any of the foregoing, including, without
limitation, damages or payments for past or future
infringements of any of the foregoing; (d) the right to sue
for past, present and future infringements of any of the
foregoing; (e) all rights corresponding to any of the
foregoing throughout the world; and (f) all goodwill
associated with any symbolized by any of the foregoing.

"Default Rate" means two percent (2%) in excess of the "prime
rate" from time to time publicly quoted by the Collateral
Agent in its individual capacity, or any successor thereto.

"Equipment" means any equipment or fixtures located on the
Site now or hereafter owned by the Grantor or used in
connection with the Project and, in any event, means and
includes, but shall not be limited to, all machinery,
packaging, processing, manufacturing, distribution, selling,
data processing, computer, office, furnishing, fixtures,
appliances, trade fixtures, vehicles, vessels, aircraft,
rolling stock, tools, tooling, molds, dies, supplies and other
equipment of any kind and nature, wherever situated, and any
and all additions, substitutions and replacements of any of
the foregoing, wherever located, together with all
attachments, components, parts, equipment, improvements,
upgrades and accessories installed thereon or affixed thereto
and all designs, plans and specifications relating to the Site
or the Project owned by Grantor on the date hereof or
hereafter acquired.

"General Intangibles" means all general intangibles now or
hereafter owned by the Grantor, and, in any event, means and
includes, but shall not be limited to, all contract rights,
interests, choses in action, causes of action and all other
intangible personal property of the Grantor of every kind and
nature (other than Accounts Receivable), now owned or
hereafter acquired by the Grantor, including, without
limitation, corporate or other business records, loans and
other obligations receivable, inventions, designs, patents,
patent applications, service marks, service mark applications,
trademarks, trademark applications, trade names, trade
secrets, goodwill, registrations, licenses, leasehold
interests in real and personal property, franchises,
dealership agreements, customer lists, customer and supplier
contracts, firm sale orders, partnership and joint venture
interests, other contracts and contract rights, tax refund
claims, deposit accounts (general or special) with, and all
credits and claims against, any financial institution, rights
and claims against carriers and shippers, rights to
indemnification, all compensation, awards, damages, rights of
action and proceeds arising from any taking by any lawful
power and or authority by exercise of the right of
condemnation or eminent domain with respect to any of the
Collateral or the Project, reversionary interests in pension
and profit sharing plans and reversionary, beneficial and
residual interests in trusts, rights to proceeds of insurance
of which the Grantor is beneficiary, any letters of credit,
including, without limitation, guaranties, warranties,
security interests or liens of any kind held by or granted to
the Grantor to secure payment of any obligation owing by any
person or entity to the Grantor, and the like, however and
whenever arising and all pollution allowances, offsets and
similar rights, including, without limitation, all acid rain
allowances under the Clean Air Amendment of 1990 and any
implementing state Laws.

"Insurance Policies" means all Proceeds of all insurance
policies in which the Grantor is named as owner or
beneficiary.

"Inventory" means all of the Grantor's inventory (as defined
in the Code), goods, merchandise and other personal property
furnished or to be furnished under any contract of service or
intended for sale or lease, including, without limitation, all
raw materials, components, whole goods and materials and
supplies of any kind which are used or consumed in the
Grantor's business, and all documents of title or documents
representing the same, in each instance whether now owned or
hereafter acquired by the Grantor and wherever located,
whether in the possession of the Grantor or of a bailee or
other person for sale, storage, transit, processing, use or
otherwise.

"Marks" means any trademarks, trademark registrations and
trademark applications pending, now held or hereafter acquired
by the Grantor including, without limitation, registrations,
recordings and applications of or with the United States
Patent and Trademark Office or any similar agency in any
foreign jurisdiction (which the Grantor has adopted and used
and is using or hereafter acquires or under which the Grantor
is licensed), as well as all other trademarks, trade names,
fictitious business names, business names, company names,
business identifiers, prints, labels, trade styles and service
marks not registered, and trade dress, including logos and/or
designs related to the foregoing.

"Money" means "money" as such term is defined in Section 
1-201(24) of the Code.

"Obligations" means, (i) all obligations of the Grantor or the
Partnership to the Collateral Agent, the Depositary Agent or
the Secured Parties now or hereafter existing under the Bonds,
the Indenture, the Partnership Notes, the Partnership
Guarantee, any Additional Permitted Debt, any Credit Bank
Working Capital Agreement, any Credit Bank Reimbursement
Agreement, any Interest Rate Protection Agreement, this
Agreement or the Collateral Documents, whether for principal,
interest (including, without limitation, interest accruing
following the filing by or against the Grantor or the
Partnership of a bankruptcy petition, whether or not allowed
as a claim in a bankruptcy proceeding), fees, indemnification,
expenses or otherwise, and (ii) all other liabilities,
obligations, covenants and duties owing to the Collateral
Agent, the Depositary Agent or the Secured Parties from or by
the Grantor or the Partnership of any kind or nature, present
or future, whether or not evidenced by any note, guaranty or
other instrument, arising under, or in connection with the
Indenture, each Partnership Guarantee, the Partnership Notes,
any Additional Permitted Debt, any Credit Bank Working Capital
Agreement, any Credit Bank Reimbursement Agreement, any
Interest Rate Protection Agreements, the Foreign Exchange
Protection Agreement, this Agreement or the Collateral
Documents, whether or not for the payment of money, whether
direct or indirect (including those acquired by assignment),
joint or several, absolute or contingent, liquidated or
unliquidated, due or to become due, now existing or hereafter
arising, renewed or restructured, whether or not from time to
time decreased or extinguished and later increased, created or
incurred, and including, without limitation, all indebtedness
of the Grantor or the Partnership under any instrument now or
hereafter evidencing or securing any of the foregoing and
however acquired.

"Patent" means any letter patent and any patent registration
and any patent application pending, including, without
limitation, registrations, recordings and applications
registered or recorded in the United States Patent and
Trademark Office or any similar agency in any foreign
jurisdiction in respect to which the Grantor has any rights
whatsoever.

"Permits" means all applicable authorizations, certificates,
licenses, approvals, waivers, exemptions, variances,
franchises, permissions and permits of any Governmental
Authority required or obtained in connection with the
purchase, acquisition, design, construction, installation,
ownership and/or operation of the Project or in connection
with any transaction contemplated by the Indenture and the
Project Documents.

"Proceeds" means all proceeds (as defined in the Code) of any
Collateral and, in any event, shall include, without
limitation, (i) any and all proceeds of any insurance,
indemnity, warranty or guaranty payable to the Grantor from
time to time with respect to any of the Collateral, (ii) any
and all payments (in any form whatsoever) made or due and
payable to the Grantor from time to time in connection with
any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral or the Project
by any Governmental Authority (or any Person acting under
color of Governmental Authority), (iii) any and all other
amounts from time to time paid or payable under or in
connection with any of the Collateral or the Project and
(iv) any Proceeds of Proceeds.

"Project Bank Deposits" means (i) the Funds (and any sub-funds
opened within any Fund) and each cash collateral account
established by the Depositary Agent, as agent for the
Collateral Agent for the benefit of the Secured Parties (and
designated by the Depositary Agent, as agent for the
Collateral Agent, as a Fund) on behalf of the Grantor in
connection with the Depositary Agreement, all sums of money,
from any source whatsoever, now or hereafter transferred to
and comprising the Funds, including, without limitation, all
credit balances therein, any and all funds, cash, investments,
instruments and securities at any time on deposit in the
Funds, and any and all interest and dividends or other income
derived from any such monies, credit balances, funds, cash,
investments, instruments and securities, (ii) all statements,
certificates, passbooks and instruments representing the Funds
and all other property from time to time received, receivable
or otherwise distributed in respect of or in exchange for the
Funds; and (iii) all deposits, cash, notes, certificates of
deposit or other instruments or documents from time to time
credited to the Funds for or on behalf of the Grantor, and all
additions thereto and substitutions therefor, and all interest
and dividends thereon, including, without limitation,
Permitted Investments and Proceeds thereof.

(b)  Any reference in this Agreement to a Project Document
shall include only such documents that have been entered into
and have not reached their stated termination date (if any),
have not been fully and finally performed in accordance with
their respective terms or have not been replaced, terminated
or canceled in accordance with the terms of the Indenture or
the Intercreditor Agreement.

2.  Assignment and Grant of Security.

(i) As collateral security for the prompt and complete payment
and performance when due (whether at stated maturity, by
redemption, acceleration or otherwise) of all of the
Obligations, the Grantor hereby assigns, pledges, transfers,
conveys and sets over to the Collateral Agent for the benefit
of the Secured Parties, and grants to the Collateral Agent for
the benefit of the Secured Parties a security interest in and
continuing lien on, all of its estate, right, title and
interest in, to and under the following property of the
Grantor, whether now owned or existing or hereafter acquired
or arising and wherever located (all of which being herein
collectively referred to as the "Collateral"):

(a)  the Assigned Agreements, including, without limitation,
(i) all amounts and claims for amounts payable to or for the
account of the Grantor under the Assigned Agreements, (ii) all
claims, rights, privileges and remedies on the part of the
Grantor, whether arising under the Assigned Agreements or by
statute or at law or in equity or otherwise, arising out of or
in connection with any failure by any party to any Assigned
Agreement to make any payment assigned hereunder, including,
without limitation, all claims of the Grantor for damages
arising out of or for breach of or a default under the
Assigned Agreements, (iii) all amounts payable by any party
pursuant to any Assigned Agreement as a result of the exercise
of any such claim, right, privilege or remedy, including all
rights and claims of the Grantor under any bonding, insurance,
indemnity, guarantee, warranty and liquidated damages arising
out of or in connection therewith, (iv) all rights of the
Grantor to take any action to terminate, amend, supplement,
modify or waive performance of the Assigned Agreements, to
perform thereunder and to compel performance thereunder, and
(v) all rights of the Grantor to exercise any election or
option or to give or receive any notice, consent, waiver or
approval under or in respect of the Assigned Agreements, and
the right (but not the obligation) to exercise or enforce any
and all covenants, remedies, powers and privileges thereunder
and to do any and all other things the Grantor is entitled to
do thereunder together with full power and authority, in the
name of the Grantor or otherwise, to enforce, collect, receive
and give receipt for any and all of the foregoing;

(b)  all Accounts Receivable;

(c)  all Copyrights;

(d)  all documents, instruments, letters of credit and chattel
paper;

(e)  all Equipment;

(f)  all General Intangibles;

(g)  all goods;

(h)  all Fuel Hedges and Interest Rate Protection Agreements;

(i)  all Insurance Policies;

(j)  all Inventory;

(k)  all Marks;

(l)  all Money;

(m)  all Patents;

(n)  to the extent permitted by applicable law, all Permits
owned by or granted to or for the benefit of the Grantor or
the Project;

(o)  all Project Bank Deposits and all deposits and accounts
with other financial institutions;

(p)  any and all property in the possession of or under the
control of the Collateral Agent or any Secured Party;

(q)  all other tangible and intangible personal property;

(r)  all Collateral Records;

(s)  all replacements, substitutions, additions or accessions
to or for any of the foregoing;

(t)  all Proceeds and products of any or all of the foregoing;
and

(u)  to the extent not included in the foregoing, all
Permitted Investments of the Grantor and proceeds, products
and accessions of and to any and all of the foregoing
Collateral, including, without limitation, "proceeds," as
defined in Section 9-306(l) of the Code, including, without
limitation, whatever is received upon any collection,
exchange, sale or other disposition of any of the Collateral,
and any property into which any of the Collateral is
converted, whether cash or non-cash proceeds, and any and all
other amounts paid or payable under or in connection with any
of the Collateral.

The assignment of the payments and rights provided for in this
Section 2 shall be effective immediately upon the execution
and delivery of this Agreement and shall not be conditioned
upon the occurrence of any default hereunder or of any other
contingency or event.

(ii)  It is the intention of the parties hereto that the
description of the Collateral set forth in Sections 2(i)(a)
through 2(i)(u), above be sufficient to enable the Collateral
Agent, on behalf of the Secured Parties, to take possession
of, and foreclose upon, all of the right, title and interest
of the Grantor, if any, in and to the Site and the Project and
any and all real property and personal property, tangible and
intangible, used or usable in connection therewith, and to
enable the Collateral Agent or its designee to operate, sell
or otherwise dispose of the entire interest of the Grantor, if
any, in and to the Site and the Project or any part thereof,
in each case upon the occurrence and during the continuance of
an Event of Default or a Trigger Event.

3.  Delivery of Collateral; Perfection of Accounts; Assigned
Agreements.

(a)  Delivery of Collateral.  All sums of money, funds and
cash, from time to time constituting the Collateral, together
with all certificates, instruments, investments and securities
representing or evidencing the Collateral, shall be delivered
to, dealt with and held by the Collateral Agent pursuant to
the terms of the Indenture and the terms hereof; provided,
that all such sums, certificates, investments, securities or
instruments representing or evidencing any Fund shall be
delivered to, dealt with and held by the Depositary Agent, as
agent for the Collateral Agent, for the benefit of the Secured
Parties.  All such certificates, investments, securities and
instruments shall be in suitable form for transfer by delivery
or shall be accompanied by duly executed instruments of
transfer or assignment in blank, all in form and substance
satisfactory to the Depositary Agent or the Collateral Agent.

(b)  Perfection of Accounts.  For the purpose of perfecting
the security interest of the Secured Parties in and to the
Funds and all funds, cash, investments, instruments and
securities at any time on deposit in the Funds, the Depositary
Agent shall be deemed to be holding the Funds and all such
funds, cash, investments, instruments and securities as agent
for the Collateral Agent and the Secured Parties.

(c)  Assigned Agreements.  So long as no Event of Default or a
Trigger Event has occurred and is continuing, the Grantor may
exercise all of the Grantor's rights, powers, privileges,
elections, options and remedies under the Assigned Agreements
(including, without limitation, lending the proceeds of any
Additional Permitted Debt to the Partnership) and any other
contract or agreement included in the Collateral, subject to
the terms of the Indenture and the other Project Documents.
Except as provided in Section 4, upon the occurrence and
during the continuance of an Event of Default or a Trigger
Event, the Collateral Agent may exercise any right, remedy,
election or option or give any notice, consent, waiver or
approval under, or deliver any requisition for payment under,
or take any other action in respect of, any Assigned Agreement
or other such agreement without any approval of or action by
the Grantor, but the Grantor will nevertheless execute and
deliver any instrument requested by the Collateral Agent to be
executed and delivered by the Grantor in connection with the
exercise by the Collateral Agent of any such right, remedy,
election or option or the giving by the Collateral Agent of
any such notice, consent, waiver or approval or the taking by
the Collateral Agent of any such other action.

4.  Rights and Duties of Grantor under Assigned Agreements.
Notwithstanding any other provision of this Agreement, the
Grantor shall have the right, but not to the exclusion of the
Collateral Agent, to receive from the parties to the Assigned
Agreements all notices and other communications and copies of
all documents and all information which such parties are
permitted or required to give or furnish to the Grantor.  The
Grantor at its expense will perform and comply with all of the
terms of each Assigned Agreement to be performed or complied
with by it, will do all things necessary on its part to
maintain each Assigned Agreement in full force and effect,
will do all things necessary to keep unimpaired all of its
rights, powers and remedies thereunder and to prevent any
forfeiture or impairment thereof, will enforce each Assigned
Agreement in accordance with its terms and will take all such
action to that end or to enforce any Assigned Agreement as
from time to time may be requested by the Collateral Agent,
except as otherwise expressly limited under or permitted by,
or to the extent that the failure to so do would not result in
an Event of Default under, the Indenture.

5.  Grantor Remains Liable.  Anything herein to the contrary
notwithstanding, except to the extent expressly limited under
or permitted by, or to the extent that the failure to so do
would not result in an Event of Default under, the Indenture
and except as set forth in the next succeeding sentence, the
Grantor shall remain liable under the Assigned Agreements and
the other contracts and agreements included in the Collateral
to the extent set forth therein and shall perform all of its
duties and obligations thereunder to the same extent as if
this Agreement had not been executed.  The exercise by the
Collateral Agent of any of its rights hereunder shall not
release the Grantor from any of its duties or obligations
under the Assigned Agreements and the other contracts and
agreements included in the Collateral, except in the event of
foreclosure upon the Collateral (and only to the extent of
such foreclosure on the particular items of Collateral) by the
Collateral Agent, the exercise by the Collateral Agent of its
rights to sell the Collateral or the conveyance of the
Collateral by the Collateral Agent in lieu of foreclosure, in
which event the Grantor shall be released from obligations
arising under the Assigned Agreements and the other contracts
and agreements constituting Collateral after such event (but
only to the extent such obligations arise after such exercise
of rights).  Neither the Collateral Agent nor any of the
Secured Parties shall have any obligation or liability under
any of the Assigned Agreements or other contracts and
agreements included in the Collateral by reason of or arising
out of this Agreement or the receipt of any payment relating
to the Assigned Agreements or any other Collateral pursuant
hereto (except as provided under the first sentence of
Section 9-207(l) of the Code), nor shall the Collateral Agent
or any of the Secured Parties be obligated to perform any of
the obligations or duties of the Grantor thereunder, to make
any payment required thereunder, to make any inquiry as to the
sufficiency of any payment received by it or as to the
sufficiency of any performance by any party thereunder, to
present or file any claim or to take any action to collect or
enforce any claim for payment assigned hereunder.

6.  Representations and Warranties.  The Grantor hereby makes
the following representations and warranties, which shall
survive the Closing Date:

(a)  The Grantor has good, marketable and valid title in and
to all of the Collateral, free and clear of all Liens, rights
or claims of all other Persons, other than Permitted Liens,
and the Grantor has full power and authority to grant the
liens and security interests in and to the Collateral
hereunder.  The Grantor has full power and authority to own
its property and to carry on its business as now being
conducted and as proposed to be conducted.

(b)  No security agreement, financing statement, mortgage,
equivalent security or lien instrument or continuation
statement covering all or any part of the Collateral is on
file or of record in any public office, except for the
financing statements filed by the Grantor in the public
offices listed on Schedule A hereto or as otherwise permitted
by the Indenture.

(c)  Appropriate financing statements or other appropriate
instruments have been or will be filed pursuant to the Code in
the public offices listed on Schedule A attached hereto as may
be necessary to perfect any security interest granted or
purported to be granted hereby (to the extent such security
interest may be perfected by the filing of a financing
statement) and no other filings are necessary to perfect the
security interests granted herein, except for Copyrights,
Marks and Patents registered or otherwise located outside of
the United States.  Upon the Grantor's execution and delivery
of this Security Agreement, the Collateral Agent, on behalf of
the Secured Parties, will have a valid and continuing Lien on
and, upon (i) the filing of appropriate financing statements
in the public offices listed on Schedule A attached hereto and
(ii) the taking of possession by the Collateral Agent of the
Collateral in which a security interest is perfected by
possession, perfected security interest in the Collateral,
except for Copyrights, Marks and Patents registered or
otherwise located outside of the United States, superior and
prior to all other Liens and security interests, existing or
future (except for Permitted Liens) and the security interests
herein granted shall be enforceable as such against creditors
of and purchasers from the Grantor (except for Permitted
Liens) and against any owner or mortgagee of the real property
where any of the Collateral is located and against any
purchaser of real property and any present or future creditor
obtaining a Lien on such real property, except to the extent
otherwise expressly permitted by the Indenture.  All action
that can be taken by the Grantor necessary or desirable to
protect and perfect such Lien on and security interest in each
item of the Collateral, except for Copyrights, Marks and
Patents registered or otherwise located outside of the United
States, has been or will be duly taken and the Grantor shall
defend the Collateral against all claims and demands of all
Persons at any time claiming the same or any interest therein
adverse to the Collateral Agent.

(d)  The principal place of business and the chief executive
office of the Grantor is located at 4100 Spring Valley Road,
Suite 1001, Dallas, Texas 75244.  The originals of the
Collateral Records are located at the chief executive office
of the Grantor.  All Accounts Receivable and Assigned
Agreements (other than those in the possession of the
Collateral Agent) are maintained at, and controlled and
directed, including, without limitation, for general
accounting purposes, from the chief executive office of the
Grantor.

(e)  On the date each Account Receivable is created, each such
Account Receivable (i) is and thereafter will be the genuine,
legal, valid and binding obligation of the account debtor in
respect thereof, representing an unsatisfied obligation of
such account debtor, (ii) is and thereafter will be
enforceable in accordance with its terms, (iii) is not and
thereafter will not be subject to any setoff, defense, tax or
counterclaim (except (x) with respect to refunds, defenses,
returns and allowances in the ordinary course of business,
(y) to the extent that such Account Receivable may not yet
have been earned by performance and (z) common law rights of
setoff or other rights, defenses or counterclaims arising by
application of law as the result of contracts or agreements
between the Grantor and an account debtor and under which the
Grantor may owe an obligation) and (iv) is and will be in
compliance with all applicable laws, whether federal, state,
local or foreign.  None of the account debtors in respect of
any Account Receivable is the government of the United States
or an instrumentality thereof.  No Accounts Receivable which
are evidenced by chattel paper require the consent of the
account debtor in respect thereof in connection with their
assignment hereunder (other that such as to which required
consents have been obtained).

(f)  The only name under which the Grantor has conducted
business, and the correct name of the Grantor, is Panda-
Rosemary Funding Corporation.  The Grantor does not have any
other corporate, partnership, trade or fictitious name.

7.  Affirmative Covenants.  The Grantor covenants and agrees
with the Collateral Agent for the benefit of the Secured
Parties that from and after the date hereof and until the Debt
Termination Date:

(a)  Further Documentation, Pledge of Instruments.  At any
time and from time to time, upon the request of the Collateral
Agent and at the sole expense of the Grantor, the Grantor will
promptly execute and deliver any and all such further
instruments and documents and take such further action as the
Collateral Agent may deem desirable in order to obtain the
full benefits of this Security Agreement and of the rights and
powers granted or purported to be granted hereby, including,
without limitation, (i) the filing of any financing or
continuation statements under the Uniform Commercial Code in
effect in any jurisdiction necessary or advisable (in the
Collateral Agent's sole discretion) to perfect, or to maintain
the perfection of, the liens and security interests granted
hereby, and (ii) placing the interest of the Collateral Agent
as lien holder on the certificate of title of any vehicle.
The Grantor also hereby authorizes the Collateral Agent to
file any such financing or continuation statement without the
signature of the Grantor to the extent permitted by applicable
Law.  A photocopy or other reproduction of this Agreement
shall be sufficient as a financing statement and may be filed
in lieu of the original to the extent permitted by applicable
Law.  The Grantor will pay or reimburse the Collateral Agent
for all filing fees and related expenses (including reasonable
attorneys' fees) and will make or reimburse the Collateral
Agent for making all searches deemed reasonably necessary by
the Collateral Agent to establish and determine the priority
of the security interests of the Collateral Agent or to
determine the presence or priority of other secured parties.
If any amount payable under or in connection with any of the
Collateral shall be or become evidenced by any chattel paper
or any promissory note or other instrument, such chattel
paper, promissory note or instrument shall be immediately
pledged and delivered to the Collateral Agent for the benefit
of the Secured Parties hereunder, duly endorsed in a manner
satisfactory to the Collateral Agent.

(b)  Maintenance of Records.  The Grantor will keep and
maintain, at its chief executive office and at its own cost
and expense, complete records of the Collateral including,
without limitation, a record of all payments received and all
credits granted with respect to Assigned Agreements and
Accounts Receivable and all other dealings with the
Collateral, including, without limitation, Collateral Records.
The Grantor will mark its Collateral Records and any chattel
paper held by the Grantor to evidence this Agreement and the
security interests granted hereby.

(c)  Further Identification of Collateral.  The Grantor will
furnish to the Collateral Agent from time to time statements
and schedules further identifying and describing the
Collateral and such other reports in connection with the
Collateral as the Collateral Agent or any Secured Party
(through the Collateral Agent) may request, all in reasonable
detail and in form satisfactory to the Collateral Agent.

(d)  Continuous Perfection.  The Grantor will not change its
corporate structure, principal place of business, chief
executive office, name or identity in any manner or use any
fictitious or trade names without obtaining the express prior
written consent of the Collateral Agent and without taking, at
the Grantor's own expense, all actions necessary or reasonably
requested by the Collateral Agent in order to continue the
perfection and priority of the Liens and security interests in
the Collateral created and intended to be created by this
Security Agreement.

(e)  Letters of Credit.  Upon receipt by the Grantor of any
letter of credit naming it as beneficiary and constituting
Collateral hereunder, the Grantor shall (i) pledge and deliver
the original of such letter of credit to the Collateral Agent,
(ii) if such letter of credit is transferable, cause such
letter of credit to be transferred into the name of the
Collateral Agent and (iii) if such letter of credit is non-
transferable, either use its best efforts to cause the letter
of credit to be re-issued with the Collateral Agent to be
named the sole beneficiary under such letter of credit or use
its best efforts to cause such letter of credit to be reissued
in transferable form.  The Grantor shall do all things
necessary to cause each such letter of credit not theretofore
transferred to be drawn upon when available in accordance with
its terms and to cause all proceeds thereof to be paid
directly into the Funds as provided in the Depositary
Agreement.

(f)  Right of Inspection.  Upon reasonable notice and at such
reasonable times as the Collateral Agent or any Secured Party
shall reasonably request, the Collateral Agent and the other
Secured Parties shall have full and free access during normal
business hours to all the books, correspondence and records of
the Grantor relating to the Collateral and the Collateral
Agent and the other Secured Parties and their respective
representatives may examine the same, take extracts therefrom
and make photocopies thereof, and the Grantor agrees to render
to the Collateral Agent and the other Secured Parties, at the
Grantor's cost and expense, such clerical and other assistance
as may be reasonably requested with regard thereto.  The
Collateral Agent and the other Secured Parties and their
respective representatives shall at all times, upon reasonable
notice, also have the right to enter into and upon any
premises where any of the Inventory is located for the purpose
of inspecting the same, observing its use or otherwise
protecting its interests therein.

(g)  Notice of Adverse Claims.  The Grantor shall, promptly
and in no event later than five (5) days after the Grantor
becomes aware of any information or has knowledge of any claim
against the Collateral adverse to the interest of the Secured
Parties, deliver to the Collateral Agent notice of each such
claim.

8.  Negative Covenants.  The Grantor covenants and agrees with
the Collateral Agent, for the benefit of the Secured Parties,
that from and after the date hereof and until the Debt
Termination Date:

(a)  No Impairment.  The Grantor will not take or permit to be
taken any action which could impair the Collateral Agent's
rights in the Collateral.

(b)  Negative Pledge.  The Grantor will not create, incur or
permit to exist, will defend the Collateral and all of the
Grantor's right, title and interest thereto against, and will
take such other action as is necessary to remove, any Lien or
claim on or to the Grantor's right, title or interest in, to
or under the Collateral, other than the Liens created hereby
and other than the Permitted Liens, and will defend the right,
title and interest of the Collateral Agent in and to any of
the Collateral against the claims and demands of all Persons
whomsoever.

(c)  Modification of Terms of Accounts Receivable.  Except as
may be otherwise permitted under, or would not result in an
Event of Default under, the Indenture, the Grantor shall not
rescind or cancel any indebtedness evidenced by any Accounts
Receivable or modify any term thereof or make any adjustment
with respect thereto, or extend or renew the same, or
compromise or settle any dispute, claim, suit or legal
proceeding relating thereto, or sell any Accounts Receivable
or interest therein, without the prior written consent of the
Collateral Agent.  The Grantor will duly fulfill all
obligations on its part to be fulfilled under or in connection
with the Accounts Receivable and will do nothing to impair the
rights of the Secured Parties in the Accounts Receivable.

(d)  Collection of Accounts Receivable.  The Grantor shall
endeavor to cause to be collected from the account debtor
named in each of its Accounts Receivable, as and when due (in
accordance with generally accepted collection procedures in
accordance with all applicable laws), any and all amounts
owing under or on account of such Accounts Receivable, and
apply forthwith upon receipt thereof all such amounts as are
so collected to the outstanding balance of such Accounts
Receivable.  The costs and expenses (including, without
limitation, attorneys' fees) of collection, whether incurred
by the Grantor or the Collateral Agent, shall be borne by the
Grantor.

9.  Appointment of Collateral Agent as Attorney-in-Fact.

(a)  The Grantor hereby irrevocably constitutes and appoints
the Collateral Agent and any officer or agent 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 Grantor and in the name of the Grantor or in
its own name, from time to time, after an Event of Default has
occurred and so long as it is continuing, in its sole
discretion, to take any and all appropriate action and to
execute any and all documents and instruments which may be
necessary or desirable to accomplish the purposes of this
Agreement or cause performance or compliance with the terms of
this Agreement and, without limiting the generality of the
foregoing, hereby gives the Collateral Agent the power and
right, on behalf of the Grantor, without notice to or assent
by the Grantor, to do the following:

(i)  to pay or discharge taxes, Liens, security
interests or other encumbrances levied or placed on or
threatened against the Collateral, to effect any
repairs or any insurance called for by the terms of the
Indenture or the other Project Documents and to pay all
or any part of the premiums therefor and the costs
thereof;

(ii)  to require, demand, receive and give acquittance
for any sums of money due or received in connection
with the Assigned Agreements or any other Collateral,
to exercise the rights, powers and remedies relating
thereto, to take possession of and endorse and collect
any checks, drafts, notes, acceptances or other
instruments or orders in connection therewith or to
file any claims or take any action or institute any
proceedings which the Collateral Agent may deem to be
necessary or advisable and to exercise any election or
option or give any notice, consent, waiver or approval
under, or deliver any requisition for payment under, or
take any other action in respect of, any of the
Assigned Agreements;

(iii)  to prepare, sign and file any financing
statement in the name of the Grantor as debtor; and

(iv)  (A) to direct any party liable for any payment
under any Collateral to make payment of any and all
monies due or to become due thereunder directly to the
Collateral Agent (or to any Person as the Collateral
Agent may direct), (B) to ask, demand, collect, receive
and give acquittance and receipts for any and all
monies due and to become due under, arising out of, in
respect of, or in connection with any Collateral and,
in the name of the Grantor or its own name or
otherwise, to take possession of and endorse and
collect any checks, drafts, notices, acceptances or
other instruments for the payment of monies due under
any Collateral, (C) to sign and endorse any invoice,
freight or express bill, bill of lading, storage or
warehouse receipt, draft against a debtor, assignment,
verification and notice in connection with accounts and
other documents relating to the Collateral, (D) to
commence and prosecute any suits, actions or
proceedings at law or in equity in any court of
competent jurisdiction or to take any other action
deemed appropriate by the Collateral Agent to enforce
any Assigned Agreement or to collect the Collateral or
any portion thereof or any amounts due thereunder
whenever payable and to enforce any other right in
respect of any Collateral, (E) to defend any suit,
action or proceeding brought against the Grantor with
respect to any Collateral, (F) to settle, compromise or
adjust any suit, action or proceeding described above
and, in connection therewith, to give such discharges
or releases as the Collateral Agent may deem
appropriate, and (G) generally to sell, transfer,
pledge, make any agreement with respect to or otherwise
deal with any of the Collateral as fully and completely
as though the Collateral Agent was the absolute owner
thereof for all purposes, and to do, at the Collateral
Agent's option and the Grantor's expense, at any time,
or from time to time, all acts and things which the
Collateral Agent deems necessary to protect, preserve
or realize upon the Collateral and the Collateral
Agent's security interest therein in order to effect
the intent of this Agreement, all as fully and
effectively as the Grantor might do.

The Grantor hereby ratifies all that said attorney shall
lawfully do or cause to be done by virtue hereof.  This power
of attorney is a power coupled with an interest and shall be
irrevocable so long as any of the Collateral is subject to the
security interest granted hereunder.  The Collateral Agent
shall be accountable only for amounts that it actually
receives as a result of the exercise of such powers and
neither it nor any of its officers, directors, employees or
agents shall be responsible to the Grantor or any Partner for
any act or failure to act hereunder, except for its or their
own gross negligence or willful misconduct.

(b)  The Grantor hereby acknowledges and agrees that the
Collateral Agent shall have no duties as fiduciary or, except
as expressly provided in the Code, otherwise to the Grantor,
and the Grantor hereby waives any claims to the rights of a
beneficiary or a fiduciary relationship hereunder.

(c)  Upon the occurrence of an Event of Default or a Trigger
Event, the Grantor also authorizes the Collateral Agent (i) to
communicate in its own name with any party to any contract,
agreement or instrument included in the Collateral with regard
to the assignment of such contract, agreement or instrument
and other matters relating to such assignment and (ii) to
execute, in connection with any foreclosure or sale provided
for in this Agreement, any endorsement, assignment, bill of
sale or other instrument of conveyance or transfer with
respect to the Collateral on behalf of Grantor.

(d)  The powers conferred on the Collateral Agent hereunder
are solely to protect the Collateral Agent's interests in the
Collateral and shall not impose any duty upon it to exercise
any such powers.  The Collateral Agent shall be accountable
only for amounts that it actually receives as a result of the
exercise of such powers.

(e)  Anything herein to the contrary notwithstanding, the
Grantor shall remain liable under the Project Documents to
which it is a party to the extent set forth therein to perform
all of its duties and obligations thereunder to the same
extent as if this Agreement had not been executed.  The
exercise by the Collateral Agent of any right or remedy
hereunder shall not release the Grantor from any of its duties
or obligations under the Project Documents to which it is a
party, except in the event of foreclosure upon the Collateral
(and only to the extent of such foreclosure on the particular
Collateral).  All of the Collateral is hereby assigned to the
Collateral Agent solely as security and the Collateral Agent
shall have no duty, liability or obligation whatsoever with
respect to any of the Collateral unless the Collateral Agent
so elects consistent with its rights under this Agreement.

10.  Performance by the Collateral Agent of the Grantor's
Obligations.  If the Grantor fails to perform or comply with
any agreement contained herein, the Collateral Agent shall be
authorized (but in no event required) in its sole discretion
to so perform or comply or to cause such performance or
compliance for the Grantor's benefit and account, and the
reasonable expenses (including reasonable attorneys' fees) of
the Collateral Agent incurred in connection with such
performance or compliance, together with interest thereon at
the Default Rate, shall be payable by the Grantor to the
Collateral Agent on demand and shall constitute a part of the
Obligations secured hereby.

11.  Remedies Upon Event of Default.

(a)  If any Event of Default or a Trigger Event shall occur
and be continuing, the Collateral Agent may exercise, in
addition to all other rights and remedies granted to the
Collateral Agent in this Agreement and in any other Project
Document or other instrument or agreement securing, evidencing
or relating thereto, all rights and remedies of a secured
party under the Code and shall have all rights now or
hereafter existing under all other applicable Laws.  No
enumeration of rights in this Section 11 or elsewhere in this
Security Agreement or in any other Project Document or other
agreement shall be deemed to in any way limit the rights of
the Collateral Agent as described in this Section.  Without
limiting the generality of the foregoing, the Grantor
expressly agrees that in any such event the Collateral may be
sold or otherwise disposed of in one or more parcels at one or
more public or private sales conducted by any officer or agent
of, or auctioneer or attorney for, the Collateral Agent, at
any exchange or broker's board or at the Collateral Agent's
place of business or elsewhere, for cash, upon credit or for
other property, for immediate or future delivery, and at such
price or prices and on such terms as the Collateral Agent
shall, in its sole discretion, deem commercially reasonable.
The Collateral Agent or any Secured Party may be the purchaser
of any or all of the Collateral so sold at a public sale and
thereafter hold the same absolutely free from any right or
claim of whatsoever kind.  The Collateral Agent may, in its
sole discretion, at any such sale restrict the prospective
bidders or purchasers as to their number, nature of business
and investment intention.  Upon any such sale the Collateral
Agent shall have the right to deliver, assign and transfer to
the purchaser thereof (including the Collateral Agent or any
Secured Party) the Collateral so sold.  Each purchaser
(including the Collateral Agent or any Secured Party) at any
such sale shall hold the Collateral so sold absolutely free
from any claim or right of whatsoever kind, including any
equity or right of redemption of the Grantor, and the Grantor
hereby specifically waives, to the full extent it may lawfully
do so, all rights of redemption, stay or appraisal which it
has or may have under any rule of law or statute now existing
or hereafter adopted.  The Collateral Agent shall give the
Grantor at least ten (10) days' written notice (which the
Grantor agrees is reasonable notification within the meaning
of Section 9-504(c) of the Code) of any such public or private
sale.  Such notice shall state the time and place fixed for
any public sale and the time after which any private sale is
to be made.  Any such public sale shall be held at such time
or times within ordinary business hours as the Collateral
Agent shall fix in the notice of such sale.  At any such sale,
the Collateral may be sold in one lot as an entirety or in
separate parcels.  The Collateral Agent shall not be obligated
to make any sale pursuant to any such notice.  The Collateral
Agent may, without notice or publication, adjourn any public
or private sale or cause the same to be adjourned from time to
time by announcement at the time and place fixed for such sale
and any such sale may be made at any time or place to which
the same may be so adjourned without further notice or
publication.  In the case of any sale of all or any part of
the Collateral on credit or for future delivery, the
Collateral so sold may be retained by the Collateral Agent
until the full selling price is paid by the purchaser thereof,
but the Collateral Agent shall not incur any liability in case
of the failure of such purchaser to take up and pay for the
Collateral so sold, and, in case of any such failure, such
Collateral may again be sold pursuant to the provisions
hereof.  In the payment of the purchase price of the
Collateral, the purchaser shall be entitled to have credit on
account of the purchase price thereof of amounts owing to such
purchaser on account of any of the Obligations and any such
purchaser may deliver notes, claims for interest or claims for
other payment with respect to such Obligations in lieu of cash
up to the amount which would, upon distribution of the net
proceeds of such sale, be payable thereon.  Such notes, if the
amount payable hereunder shall be less than the amount due
thereon, shall be returned to the holder thereof after being
appropriately stamped to show partial payment.

(b)  Instead of exercising the power of sale provided in
Section 11(a), the Collateral Agent may proceed by a suit or
suits at law or in equity to foreclose the security interest
under this Agreement and sell the Collateral or any portion
thereof under a judgment or decree of a court or courts of
competent jurisdiction.

(c)  The Collateral Agent and the Secured Parties shall incur
no liability as a result of the sale of the Collateral, or any
part thereof, at any private sale conducted in a commercially
reasonable manner.  The Grantor hereby waives, to the full
extent permitted by applicable law, all claims, damages and
demands against the Collateral Agent arising out of the
repossession, retention or sale of the Collateral, including,
without limitation, any claim against the Collateral Agent
arising by reason of the fact that the price at which the
Collateral, or any part thereof, was sold was less than may
have been obtained at a public sale or was less than the
aggregate amount of the Obligations, even if the Collateral
Agent accepts the first offer received which the Collateral
Agent in good faith deems to be commercially reasonable under
the circumstances and does not offer the Collateral to more
than one offeree.

(d)  No sale or other disposition of all or any part of the
Collateral by the Collateral Agent pursuant to this Section 11
shall be deemed to relieve the Grantor or the Partnership of
its obligations in respect of any Obligations except to the
extent the proceeds thereof are applied by the Collateral
Agent to the payment of such Obligations and except to the
extent provided in Section 11(a).

(e)  The Grantor agrees to pay all costs of the Collateral
Agent, including all reasonable attorneys' fees and legal
expenses, incurred with respect to the collection of any of
the Obligations and the enforcement of any of its rights
hereunder.

(f)  The proceeds of any Collateral obtained or disposed of
pursuant hereto shall be applied to the payment of the
Obligations as set forth in the Intercreditor Agreement and
the Depositary Agreement.

12.  Discontinuance of Proceedings.  In case the Collateral
Agent shall have instituted any proceeding to enforce any
right, power or remedy under this Security Agreement by
foreclosure, sale, entry or otherwise, and such proceeding
shall have been discontinued or abandoned for any reason or
shall have been determined adversely to the Collateral Agent,
then and in every such case, subject to the terms of any
judgment rendered in any such proceeding, the Grantor and the
Collateral Agent shall be returned to their former positions
and rights hereunder with respect to the Collateral subject to
the security interest created under this Security Agreement
and all rights, remedies and powers of the Collateral Agent
shall continue as if no such proceeding had been instituted.

l3.  Notices.  All notices, requests and demands to or upon
the respective parties hereto shall be effective as provided
in the Indenture.

14.  The Collateral Agent's Duties.  The powers conferred on
the Collateral Agent and the Secured Parties hereunder are
solely to protect its and the Secured Parties' interest in the
Collateral and shall not impose any duty on it or them to
exercise any such powers.  The Collateral Agent shall have no
duty as to any Collateral (except to the extent expressly
provided in the first sentence of Section 9-207(11) of the
Code) or as to the taking of any necessary steps to preserve
rights against prior parties pertaining to any Collateral.
Neither the Collateral Agent nor any of its directors,
officers, employees or agents shall be liable for failure to
demand, collect or realize upon all or any part of the
Collateral or for any delay in doing so or shall be under any
obligation to sell or otherwise dispose of any Collateral upon
the request of the Grantor or otherwise.  When Collateral is
in the Collateral Agent's possession, the risk of accidental
loss or damage shall be on the Grantor.

15.  Limitation on the Duty of Collateral Agent in Respect of
Collateral.  The Collateral Agent shall be deemed to have
exercised reasonable care as to any Collateral in its
possession or control if such Collateral is accorded treatment
substantially equal to that which the Collateral Agent accords
its own property.

16.  Severability.  In case any provision in or obligation
under this Agreement shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining provisions or obligations, or
of such provision or obligation in any other jurisdiction,
shall not in any way be affected or impaired thereby.

l7.  No Waiver, Remedies Cumulative.  No failure or delay on
the part of the Collateral Agent or the Secured Parties in
exercising any right, power or privilege under this Agreement
and no course of dealing between the Grantor and the
Collateral Agent or any Secured Party shall operate as a
waiver thereof, nor shall any single or partial exercise of
any right, power or privilege under this Agreement preclude
any other or further exercise thereof or the exercise of any
other right, power or privilege hereunder.  The rights and
remedies herein expressly provided are cumulative and not
exclusive of any right or remedy which the Collateral Agent or
any Secured Party would otherwise have.  No notice to or
demand on the Grantor in any case shall entitle the Grantor to
any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the
Collateral Agent or any Secured Party to any other or further
action in any circumstances without notice or demand.  The
Collateral Agent or any Secured Party shall not by any act,
delay, omission or otherwise be deemed to have waived any of
its rights or remedies hereunder and no waiver shall be valid
unless in writing, signed by the Collateral Agent or Secured
Party as to which such waiver is to be enforced, and then only
to the extent therein set forth.  A waiver by the Collateral
Agent of any right or remedy hereunder on any one occasion
shall not be construed as a bar to any right or remedy which
the Collateral Agent would otherwise have or have had on any
other occasion.

18.  Amendments, etc.  No amendment or waiver of any provision
of this Agreement, nor any consent to any departure by the
Grantor herefrom, shall in any event be effective unless the
same shall be in writing and signed by the Collateral Agent
and the Grantor and, with respect to any such waiver or
consent, such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which
given.

l9.  Successors and Assigns; Governing Law; Submission to
Jurisdiction.

(a)  This Agreement and all obligations hereunder shall be
binding upon the successors and assigns of the Grantor and
shall inure, together with the rights and remedies of the
Collateral Agent hereunder, to the benefit of the Collateral
Agent and the Secured Parties and their respective successors
and assigns.

(b)  THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO THE PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW (EXCEPT
SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).

(c)  Any legal action or proceeding with respect to this
Agreement and any action for enforcement of any judgment in
respect thereof may be brought in the courts of the State of
New York or of the United States of America for the Southern
District of New York and, by execution and delivery of this
Agreement, the Grantor hereby accepts for itself and in
respect of its property, generally and unconditionally, the
non-exclusive jurisdiction of the aforesaid courts and
appellate courts from any appeal thereof.  The Grantor
irrevocably consents to the service of process out of any of
the aforementioned courts in any such action or proceeding by
the mailing of copies thereof by registered or certified mail,
postage prepaid, to the Grantor at its address specified for
notices in the Indenture.  The Grantor hereby irrevocably
waives any objection which it may now or hereafter have to the
laying of venue of any of the aforesaid actions or proceedings
arising out of or in connection with this Agreement brought in
the courts referred to above and hereby further irrevocably
waives and agrees not to plead or claim in any such court that
any such action or proceeding brought in any such court has
been brought in an inconvenient forum.  Nothing herein shall
affect the right of the Collateral Agent to serve process in
any other manner permitted by law or to commence legal
proceedings or otherwise proceed against the Grantor in any
other jurisdiction.

20.  Waiver.  The Grantor hereby waives, to the extent
permitted by law, all rights of redemption, appraisement,
valuation, diligence, stay, extension, moratorium and all
right to have the Collateral marshaled upon any foreclosure
hereof, now or hereafter in force under any applicable law in
order to stay or delay the enforcement of this Security
Agreement, including the absolute sale of the Collateral or
any portion thereof, and the Grantor, for itself and all who
may claim under it, insofar as it or they now or hereafter
lawfully may, hereby waives the benefit of all such laws and
agrees that any court having jurisdiction to foreclose this
Agreement may order the sale of the Collateral as an entirety.

Without limiting the generality of the foregoing, the Grantor
hereby:  (i) authorizes the Collateral Agent and the Secured
Parties, in their sole discretion and without notice to or
demand upon the Grantor and without otherwise affecting the
obligations of the Grantor hereunder or in respect of the
Obligations, from time to time to take and hold other
collateral (in addition to the Collateral) for payment of any
Obligations, or any part thereof, and to exchange, enforce or
release such other collateral or any part thereof and to
accept and hold any endorsement or guarantee of payment of the
Obligations or any part thereof and to release or substitute
any endorser or guarantor or any other person granting
security for or in any other way obligated upon any
Obligations or any part thereof, and (ii) waives and releases
any and all right to require the Collateral Agent or any
Secured Party to collect any of the Obligations from any
specific item or items of the Collateral or from any other
party liable as guarantor or in any other manner in respect of
any of the Obligations or from any collateral (other than the
Collateral) for any of the Obligations.

2l.  Termination and Reinstatement.

(a)  This Agreement shall terminate on the Debt Termination
Date.  At the time of such termination or upon any release of
Collateral in accordance with the express provisions of this
Agreement (it being acknowledged by the Grantor that any such
release is permitted only to the extent any such disposition
of the Collateral is permitted under the terms and provisions
of this Agreement and all other Project Documents), the
Collateral Agent, at the request and expense of the Grantor,
will execute and deliver to the Grantor a proper instrument or
instruments acknowledging the satisfaction and termination of
this Agreement or, in the case of a release of a portion of
the Collateral, that such Collateral is to be released from
the Lien of this Agreement.  In the case of the termination of
this Agreement as provided above, the Collateral Agent will
duly assign, transfer and deliver at the Grantor's expense to
the Grantor such of the Collateral as has not yet theretofore
been sold or otherwise applied or released pursuant to this
Agreement, together with any moneys at the time held by the
Collateral Agent pursuant to this Agreement.

(b)  This Agreement shall continue to be effective or be
reinstated, as the case may be, if at any time any amount
received by the Collateral Agent or any Secured Party in
respect of the Obligations is rescinded or must otherwise be
restored or returned by the Collateral Agent or such Secured
Party upon the insolvency, bankruptcy, dissolution,
liquidation or reorganization of the Grantor or upon the
appointment of any intervenor or conservator of, or receiver
or similar official for, the Grantor or any substantial part
of its assets, or otherwise, all as though such payments had
not been made.

(c)  The security interest created hereunder shall be
automatically released with respect to any portion of the
Collateral that is sold, transferred or otherwise disposed of
in accordance with the terms of the Indenture and the
Collateral Agent will, upon the request and at the expense of
the Grantor, execute and deliver such documents as the Grantor
shall reasonably request to evidence such release.

22.  Security Interest Absolute.  All rights of the Collateral
Agent and security interests hereunder, and all obligations of
the Grantor hereunder, shall, subject to the terms of this
Agreement, be absolute and unconditional irrespective of:

(a)  any lack of validity or enforceability of the Indenture,
any other Project Document or any other agreement or
instrument relating thereto;

(b)  any change in the time, manner or place of payment of, or
in any other term of, all or any of the Obligations, or any
other amendment or waiver of or any consent to any departure
from the Indenture or any other Project Document;

(c)  any exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of or
consent to departure from any guaranty, for all or any of the
Obligations; or

(d)  any other circumstance which might otherwise constitute a
defense available to, or a discharge of, the Grantor, the
Partnership or a third party surety or pledgor.

23.  Payments Set Aside.  To the extent that the Grantor or
any other Person on behalf of the Grantor makes a payment or
payments to the Collateral Agent and/or any Secured Party, or
the Collateral Agent and/or any Secured Party enforce their
security interests or exercise their rights of set-off, and
such payment or payments or the proceeds of such enforcement
or set-off or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside and/or
required to be repaid to a Collateral Agent, receiver or any
other party under any bankruptcy law, state or federal law,
common law or equitable cause, then to the extent of such
recovery, the Obligations or any part thereof originally
intended to be satisfied, and this Agreement and all Liens,
rights and remedies therefor, shall be revived and continued
in full force and effect as if such payment had not been made
or such enforcement or set-off had not occurred.

24.  Waiver of Jury Trial.  TO THE EXTENT PERMITTED BY
APPLICABLE LAW, EACH OF THE GRANTOR, THE COLLATERAL AGENT AND
EACH OF THE SECURED PARTIES HEREBY IRREVOCABLY WAIVES ALL
RIGHT OF TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.

25.  Limitation of Liability.  Notwithstanding anything to the
contrary contained herein, the liability and obligation of the
Grantor or any past, present or future partner, officer,
director or stockholder of the Grantor under or by reason of
this Agreement shall be limited as provided in Section 4.12 of
the Intercreditor Agreement and the provisions of said Section
4.12 are incorporated herein by reference.

26.  Conflicts with the Intercreditor Agreement or the
Depositary Agreement.  Notwithstanding any other provision
hereof, in the event of any conflict between the terms of this
Agreement and the Intercreditor Agreement or the Depositary
Agreement, the provisions of the Intercreditor Agreement or
the Depositary Agreement, as the case may be, will apply.

27.  Exculpatory Provisions; Reliance by Collateral Agent.

(a)  Neither the Collateral Agent nor any Secured Party, nor
any of their respective officers, employees, servants,
controlling persons, executives, directors, agents, authorized
representatives, attorneys-in-fact or affiliates, shall be
liable to the Grantor for any action taken or omitted to be
taken by it or them under or in connection with this Agreement
or any other Project Document to which the Grantor is a party,
or responsible in any manner to any Person for any recital,
statement, representation or warranty made by the Grantor or
any officer thereof contained in this Agreement or any other
Project Document to which the Grantor is a party or in any
certificate, report, statement or other document referred to
or provided for in, or received by the Collateral Agent or any
Secured Party under or in connection with, this Agreement or
any other Project Document to which the Grantor is a party or
for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other
Project Document to which the Grantor is a party or for any
failure of the Grantor to perform any of the Obligations.
Neither the Collateral Agent nor any Secured Party shall be
under any obligation to any Person 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
Project Document to which the Grantor is a party, or to
inspect the properties or records of the Grantor.

(b)  The Collateral 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 Grantor), independent accountants and other
experts selected by the Collateral Agent.  The Collateral
Agent shall have no obligation to any Person to act or refrain
from acting or exercising any of its rights under this
Agreement.

IN WITNESS WHEREOF, each of the Grantor and the Collateral
Agent has caused this Security Agreement to be executed by its
duly authorized officer as of the date first above written.

PANDA-ROSEMARY FUNDING CORPORATION,
  a Delaware corporation

By
Name:  Robert W. Carter
Title: Chairman of the Board,
         President and Chief
         Executive Officer

FLEET NATIONAL BANK,
  as Collateral Agent

By
Name:    Kathy A. Larimore
Title:   Assistant Vice President 

SCHEDULE A

                UNIFORM COMMERCIAL CODE FILINGS
                               
                               
1.  Halifax County, North Carolina.

2.  Northampton County, North Carolina.

3.  North Carolina Secretary of State.

4.  Texas Secretary of State. 

Basic Info X:

Name: SECURITY AGREEMENT
Type: Security Agreement
Date: Oct. 18, 1996
Company: PANDA FUNDING CORP
State:

Other info:

Date:

  • July 31 , 1996

Organization:

  • First Mortgage Bonds
  • Partnership and Fleet National Bank
  • Credit Bank Reimbursement Agreements
  • Collateral Agent and Fleet National Bank
  • Credit Bank Documents
  • United States Patent and Trademark Office
  • Credit Bank Working Capital Agreement
  • Interest Rate Protection Agreements
  • Foreign Exchange Protection Agreement
  • Grant of Security
  • Project Bank Deposits
  • Delivery of Collateral
  • Duties of Grantor
  • Collateral Agent of the Collateral
  • Rosemary Funding Corporation
  • Pledge of Instruments
  • b Maintenance of Records
  • Further Identification of Collateral
  • e Letters of Credit
  • Right of Inspection
  • Notice of Adverse Claims
  • Modification of Terms of Accounts Receivable
  • Upon Event of Default
  • Duty of Collateral Agent in Respect of Collateral
  • Collateral Agent or Secured Party
  • Southern District of New York
  • Reliance by Collateral Agent
  • North Carolina Secretary of State
  • Texas Secretary of State

Location:

  • L.P.
  • Roanoke Rapids
  • State of New York
  • United States Patent
  • 4100 Spring Valley Road
  • Dallas
  • Texas
  • United States of America
  • Delaware
  • Halifax County
  • Northampton County
  • North Carolina

Money:

  • $ 111,400,000

Person:

  • Hedges
  • Robert W. Carter
  • Kathy A. Larimore

Percent:

  • 2 %