Exhibit 10.3

EXEMPT FACILITIES LOAN AGREEMENT

Between

PENNSYLVANIA ECONOMIC DEVELOPMENT FINANCING AUTHORITY

and

ALLEGHENY ENERGY SUPPLY COMPANY, LLC

Dated as of July 1, 2009

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Table of Contents

 

             Page

I.

  Background, Definitions, Representations and Findings.    1   Section 1.1  
Background    1   Section 1.2   Definitions    1   Section 1.3   Company
Representations    4   Section 1.4   Issuer Findings and Representations    5

II.

  The Project Facilities.    6   Section 2.1   Acquisition of Project Facilities
   6   Section 2.2   Additions and Changes to Project Facilities    7   Section
2.3   Issuance of Bonds; Application of Proceeds    7   Section 2.4  
Disbursements from Project Fund    7   Section 2.5   Company Required to Pay
Costs in Event Project Fund Insufficient    8   Section 2.6   Completion    8  
Section 2.7   Investment and Use of Fund Moneys    8   Section 2.8   Rebate Fund
   9

III.

  Loan By Issuer; Loan Payments; Other Payments    9   Section 3.1   Loan by
Issuer    9   Section 3.2   Loan Payments    9   Section 3.3   Additional
Payments    9   Section 3.4   Obligations Unconditional    10   Section 3.5  
Assignment of Issuer’s Rights    10

IV.

  Additional Covenants Of Company    10   Section 4.1   Maintenance of Existence
   10   Section 4.2   Compliance with Laws; Commencement and Continuation of
Operations at Project Facilities; No Sale, Removal or Demolition of Project
Facilities; Maintenance of Employment    10   Section 4.3   Right of Inspection
   11   Section 4.4   Lease by Company    11   Section 4.5   Financial
Statements; Books and Records    12   Section 4.6   Taxes, Other Governmental
Charges and Utility Charges    12   Section 4.7   Insurance    12   Section 4.8
  Damage to or Condemnation of Project Facilities    13   Section 4.9   Misuse
of Bond Proceeds; Litigation Notice    13   Section 4.10   Indemnification    13
  Section 4.11   Tax Covenants of Company and Issuer    15   Section 4.12  
Further Tax Covenants of Company    15   Section 4.13   Nondiscrimination/Sexual
Harassment Clause    17   Section 4.14   Right-to-Know    17

V.

  Redemption of Bonds    17   Section 5.1   Optional Redemption    17

 

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  Section 5.2   Extraordinary Optional Redemption    17   Section 5.3   Special
Mandatory Redemption    19   Section 5.4   Actions by Issuer    19

VI.

  Events Of Default And Remedies    19   Section 6.1   Events of Default    19  
Section 6.2   Remedies on Default.    20   Section 6.3   Remedies Not Exclusive
   21   Section 6.4   Payment of Legal Fees and Expenses    22   Section 6.5  
No Waiver    22   Section 6.6   Notice of Default    22

VII.

  Miscellaneous    22   Section 7.1   Term of Agreement    22   Section 7.2  
Notices    22   Section 7.3   Limitation of Liability; No Personal Liability   
23   Section 7.4   Binding Effect    23   Section 7.5   Amendments    24  
Section 7.6   Counterparts    24   Section 7.7   Severability    24   Section
7.8   Governing Law    24   Section 7.9   Assignment    24   Section 7.10  
Receipt of Indenture    24

 

EXHIBIT A – Description of Project Facilities

   A-1

EXHIBIT B – Form of Disbursement Request

   B-1

EXHIBIT C – Form of Exempt Facilities Note

   C-1

EXHIBIT D – Nondiscrimination /Sexual Harassment Clause

   D-1

EXHIBIT E – Right-to-Know Law Provisions

   E-1

 

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EXEMPT FACILITIES LOAN AGREEMENT dated as of July 1, 2009 (the “Agreement”)
between PENNSYLVANIA ECONOMIC DEVELOPMENT FINANCING AUTHORITY (the “Issuer”) and
ALLEGHENY ENERGY SUPPLY COMPANY, LLC (together with permitted successors and
assigns, the “Company”).

I. Background, Definitions, Representations and Findings.

Section 1.1 Background Pursuant to the Pennsylvania Economic Development
Financing Law (Act No. 102, approved August 23, 1967, P.L. 251, as amended) (the
“Act”), the Greene County Industrial Development Authority has authorized and
approved the Project Facilities (as defined herein) and the financing thereof by
the Issuer through the issuance of the Issuer’s Exempt Facilities Revenue Bonds,
Series 2009 (Allegheny Energy Supply Company, LLC Project) in the original
aggregate principal amount of $235,000,000 (the “Bonds”). The Company proposes
to construct certain emissions control facilities at the three-unit,
1,710-megawatt, coal-fired Hatfield’s Ferry Power Station (the “Plant”) in
Greene County, Pennsylvania.

The Company has requested the Issuer to issue Bonds to finance a portion of the
cost of certain “pollution control facilities” for purposes of the Act at the
Plant, which facilities are more fully described in Exhibit A (the “Project
Facilities”). The Project Facilities will be owned by the Company, a Delaware
limited liability company. The Bonds will be issued under a Trust Indenture
dated as of the date hereof (the “Indenture”) between the Issuer and The Bank of
New York Mellon Trust Company, N.A., as trustee (the “Trustee”). The Company and
the Issuer are entering into this Agreement in order to provide for the issuance
of the Bonds and the loan of the proceeds of the Bonds to the Company.

The obligation of the Company to repay the loan of the proceeds of the Bonds
made pursuant hereto will be evidenced by the Company’s Exempt Facilities Note
(Pennsylvania Economic Development Financing Authority) Series 2009 in the
principal amount of $235,000,000 (the “Note”) issued to the Trustee as the
assignee of the Issuer under the Indenture. Nothing herein shall require the
Company to maintain any credit facility.

The Issuer and the Company intend that substantially all of the Project
Facilities constitute or will constitute “pollution control facilities” for
purposes of the Act and solid waste disposal facilities for the purposes of the
Internal Revenue Code of 1986, as amended (the “Code”), so that interest on the
Bonds will not be included in gross income of the holders thereof for federal
income tax purposes under the Code (except for such holders who are “substantial
users” of the Project Facilities or “related persons” as provided in
Section 147(a) of the Code).

Section 1.2 Definitions. Terms used in this Agreement which are defined in the
Indenture and are not otherwise defined in this Agreement shall have the
meanings set forth in the Indenture unless the context or use clearly indicates
another meaning or intent. In addition to the terms defined in the recital
clauses of this Agreement, as used herein:

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“Additional Payments” means the amounts required to be paid by the Company
pursuant to Section 3.3.

“Agreement” means this Exempt Facilities Loan Agreement, as amended or
supplemented from time to time.

“Authorized Representative” means, with respect to the Issuer, each person at
the time designated to act on behalf of the Issuer by written certificate
furnished to the Trustee containing the specimen signature of such person and
signed on behalf of the Issuer by its Secretary or Assistant Secretary, and with
respect to the Company, each person at the time designated to act on behalf of
the Company by written certificate furnished to the Trustee containing the
specimen signature of such person and signed on behalf of the Company by its
President, Vice President, Treasurer, Secretary, Assistant Treasurer or
Assistant Secretary.

“Completion Date” means the date that the Company certifies to the Trustee and
the Issuer that the Project Facilities have been completed.

“Debt Service” means, for any period or payable at any time, the principal of,
premium, if any, on and interest on the Bonds for that period or payable at the
time whether due on an Interest Payment Date, at maturity or upon acceleration
or redemption.

“Issue Date” means July 6, 2009.

“Issuer’s Fee” means an amount equal to 0.2% of the amount of the Loan.

“Loan” means the loan by the Issuer to the Company of the proceeds of the Bonds
pursuant to Section 3.1 in the original principal amount of $235,000,000.

“Loan Payments” means the amounts required to be paid by the Company in
repayment of the Loan pursuant to Section 3.2.

“Local Entity” means the Greene County Industrial Development Financing
Authority.

“Misuse of Bond Proceeds” means the implementation or operation of the Project
Facilities in a manner which would cause the Project Facilities to not be a
“project” as defined in the Act or the use of the proceeds of the Bonds for any
purpose materially different from the Project Facilities as described to and
approved by the Issuer.

“Project Costs” means costs of the Project Facilities permitted under the Act,
including, but not limited to, the following:

(a) Costs incurred in connection with the acquisition, construction,
installation, equipment or improvement of the Project Facilities, including
costs incurred in respect of the Project Facilities for preliminary planning and
studies; architectural, engineering, accounting, consulting, legal and other
professional fees and expenses; labor, services and materials;

 

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(b) Fees, charges and expenses incurred in connection with the authorization,
sale, issuance and delivery of the Bonds, including without limitation bond
discount, printing expense, title insurance, recording fees and the initial and
first year annual fees and expenses of the Trustee, Issuer and Local Entity;
provided that the amount of the proceeds of the Bonds used to finance issuance
costs (but excluding the Issuer’s Fee) shall not exceed 2% of the aggregate face
amount of the Bonds within the meaning of Section 147(g) of the Code;

(c) Payment of interest on the Bonds and fees and expenses of the Trustee
accruing prior to the Completion Date; and

(d) Any other costs, expenses, fees and charges properly chargeable to the cost
of acquisition, construction, installation, equipment or improvement of the
Project Facilities.

“Rehabilitation Expenditure” shall mean a “rehabilitation expenditure” as such
term is defined in Section 147(d)(3) of the Code, including, without limiting
the generality of the foregoing, a capital expenditure incurred in connection
with the rehabilitation of a building or structure which is part of the Project
Facilities, if such expenditure is incurred by Company, the seller of such
building to the Company (if incurred pursuant to the sales contract between such
seller and the Company) or a successor to the Company; provided, that:

(1) if an integrated operation is contained in such building or structure before
its acquisition by Company, expenditures incurred to rehabilitate existing
equipment or to replace existing equipment with equipment having substantially
the same function is treated as incurred in connection with the rehabilitation
of such building or structure; and

(2) notwithstanding the foregoing, the term “Rehabilitation Expenditure” does
not include any expenditure:

(a) with respect to which the method and period of depreciation is other than
the straight line method over a period determined under Section 168(c) or (g) of
the Code, unless the alternative depreciation system of Section 168(g) of the
Code applies to such expenditure by reason of Section 168(g)(1)(B) or (C) of the
Code;

(b) for the cost of acquiring any building or interest therein;

(c) attributable to enlargement of an existing building;

(d) attributable to the rehabilitation of a certified historic structure or a
building in a registered historic district, unless either the rehabilitation is
a certified rehabilitation or, with respect to a building other than a certified
historic structure, the Secretary of the Interior has certified to the Secretary
of the Treasury that the building is not of historic significance to the
district (all terms used in this paragraph (d) have the meanings assigned in
Section 47(c)(2)(B) of the Code);

(e) allocable to the portion of such building which is, or may reasonably be
expected to be, tax-exempt use property within the meaning of Section 168(h) of
the Code; or

 

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(f) by a lessee of such building.

“Related Person” shall have the meaning set forth in Section 144(a)(3) of the
Code and shall include (to the extent there provided) any parent, subsidiary,
affiliated corporation or unincorporated enterprise, majority shareholder and
commonly owned entity.

“Resolutions” means the resolutions of the Issuer approving and authorizing the
Bonds, the Indenture and this Agreement.

“Unassigned Issuer’s Rights” means all of the rights of the Issuer to receive
Additional Payments under Section 3.3, to be held harmless and indemnified under
Section 4.10, to be reimbursed for attorney’s fees and expenses under
Section 6.4, and to give or withhold consent to or approval of amendments,
modifications, termination or assignment of this Agreement, or sale, transfer,
assignment, lease (or assignment of lease) or other disposal of the Project
Facilities, under Section 4.1, Section 4.2, Section 4.4, Section 7.5 and
Section 7.9.

Section 1.3 Company Representations. The Company represents as of the date
hereof that:

(a) It is a limited liability company duly formed and validly existing under the
laws of the State of Delaware, is duly qualified to do business in the
Commonwealth of Pennsylvania, and has requisite power and legal right to enter
into this Agreement and perform its obligations hereunder. The making and
performance of this Agreement on the part of the Company have been duly
authorized by all necessary corporate action.

(b) The Project Facilities will abate, reduce, remediate or aid in the
prevention, control, collection, treatment, disposal or monitoring of solid
waste and other pollutants and will facilitate compliance with the environmental
requirements of federal, state or local agencies exercising jurisdiction
thereover.

(c) Neither the execution and delivery of this Agreement nor the consummation of
the transactions contemplated hereby will conflict with or constitute a
violation or breach of, or a default under, the Company’s certificate of
formation or LLC operating agreement, or any indenture, mortgage, deed of trust
or other material agreement or instrument to which the Company is a party or by
which it or any of its property is bound.

(d) This Agreement and the Note have been duly authorized, executed and
delivered by the Company and are valid instruments legally binding upon the
Company (except as may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws affecting the
enforcement of creditors’ rights generally, by general equitable proceedings
(whether considered in a proceeding in equity or at law) and by an implied
covenant of good faith, fair dealing and reasonableness).

(e) The Company is not a Disqualified Contractor.

(f) The Project Facilities will promote the public purposes of the Act and will
not cause, directly or indirectly, the removal, either in whole or in part, of a
plant, facility or establishment from one area of the Commonwealth of
Pennsylvania to another. The Project

 

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Facilities are located within the boundaries of the county, city, town, borough
or township which organized the Local Entity (or within the boundaries of the
county in which such city, town, borough or township is located or in which such
Local Entity is certified by the Pennsylvania Industrial Development Authority
to act as an industrial development agency as defined in the Act).

(g) The Company has acquired or will acquire before they are needed all permits
and licenses including, without limitation, all required environmental permits
or approvals, and has satisfied or will satisfy other requirements necessary,
for the acquisition, construction, installation and/or operation of the Project
Facilities. The Project Facilities are a project within the meaning of the Act
and will be operated as such.

(h) The Company presently intends to use or operate or cause to be used or
operated the Project Facilities in a manner consistent with the Act until the
date on which the Bonds have been fully paid and knows of no reason why the
Project Facilities will not be so used or operated.

(i) The information furnished by the Company and used by the Issuer in preparing
the arbitrage certificate pursuant to Section 148 of the Code and information
statement pursuant to Section 149(e) of the Code is accurate and complete as of
the Issue Date.

(j) The proceeds of the Bonds will not exceed the Project Costs.

(k) The costs of issuance financed with proceeds of the Bonds, including any
bond discount on the sale of the Bonds will not exceed 2% of the proceeds of the
Bonds.

(l) No costs of the Project Facilities to be financed with the proceeds of the
Bonds, except for certain preliminary costs such as architectural, engineering,
surveying, soil testing and similar costs incurred before the start of
construction of the Project Facilities, have been paid by or on behalf of the
Company, the Affiliates or any Related Person more than 60 days prior to the
date of the Project Facilities Approval.

Section 1.4 Issuer Findings and Representations. The Issuer hereby confirms its
findings and represents that:

(a) The Issuer is a public body corporate and politic established in the
Commonwealth of Pennsylvania pursuant to the laws of the Commonwealth of
Pennsylvania (including the Act). Under the Act, the Issuer has the power to
enter into the Indenture, the Purchase Agreement and this Agreement and to carry
out its obligations thereunder and to issue the Bonds to finance the Project
Facilities.

(b) By adoption of the Resolutions at one or more duly convened meetings of the
Issuer at which a quorum was present and acting throughout, the Issuer has duly
authorized the execution and delivery of the Indenture, the Purchase Agreement
and this Agreement and performance of its obligations thereunder and the
issuance of the Bonds. Simultaneously with the execution and delivery of this
Agreement, the Issuer has duly executed and delivered the Indenture and issued
and sold the Bonds.

 

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(c) Based on representations and information furnished to the Issuer by or on
behalf of the Company and the Local Entity, the Issuer has found that the
Company is qualified to be a beneficiary of financing provided by the Issuer
pursuant to the Act.

(d) Based on representations and information furnished to the Issuer by or on
behalf of the Company, the Issuer has found that the Project Facilities (i) will
promote the public purposes of the Act, (ii) are located within the boundaries
of the Commonwealth of Pennsylvania and within the boundaries of the county,
city, town, borough or township which organized the Local Entity (or within the
boundaries of the county in which such city, town, borough or township is
located or in which such Local Entity is certified by The Pennsylvania
Industrial Development Authority to act as an industrial development agency as
defined in the Act), and (iii) will constitute a project within the meaning of
the Act.

(e) The Issuer has filed a Preliminary Allocation Request (“PAR”) for purposes
of receiving an allocation of the tax-exempt bond authority of the Commonwealth
of Pennsylvania and has received approval of the PAR from the Pennsylvania
Department of Community and Economic Development (the “Department”), certifying
approval of such allocation for the Project Facilities as required by
Section 146 of the Code. The Issuer will simultaneously with the issuance of the
Bonds deliver a Final Allocation Request to the Department to obtain a final
confirmation of such allocation.

(f) The Project Facilities have been approved (1) by the Local Entity, as
required by the Act, (2) by the Pennsylvania Secretary of Community and Economic
Development, as required by the Act, (3) by the Governor or Lieutenant Governor
of the Commonwealth of Pennsylvania as the “applicable elected representative”,
as that term is defined under the Code, after a public hearing held upon
reasonable notice, as required by the Code, and (4) by the Issuer by adoption of
the Resolutions, as required by the Act.

(g) The Issuer has not and will not pledge the income and revenues derived from
this Agreement other than pursuant to and as set forth in the Indenture.

II. The Project Facilities.

Section 2.1 Acquisition of Project Facilities. The Company (a) has or will have
acquired, constructed, installed and equipped the Project Facilities
substantially in all material respects in accordance with the description
thereof in Exhibit A attached hereto and applicable law, (b) has procured or
caused to be procured or will procure or cause to be procured all permits and
licenses necessary for the prosecution of any and all work on the Project
Facilities, and (c) has paid or will pay when due all costs and expenses
incurred in connection with such acquisition, construction, installation,
equipping and improvement from funds made available therefor in accordance with
this Agreement or otherwise. It is understood the Company owns or will own or
leases or will lease the Project Facilities and that any contracts made by the
Company with respect thereto and any work to be done by the Company on the
Project Facilities are made or done by the Company, as applicable, on its own
behalf and not as agent or contractor for the Issuer.

 

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Section 2.2 Additions and Changes to Project Facilities. Subject to the
provisions of Section 4.11 and Section 4.12, the Company may, at its option and
at its own cost and expense, at any time and from time to time, revise the
description of the Project Facilities in Exhibit A attached hereto and/or make
such additions, deletions and changes to the Project Facilities as it, in its
discretion, may deem to be desirable for its uses and purposes, provided that
(i) any such additions and changes shall, when made, constitute part of the
Project Facilities for purposes of this Agreement, (ii) the Company shall
supplement the information contained in Exhibit A attached hereto by filing with
the Issuer and the Trustee such supplemental information as is necessary to
reflect such additions, deletions and changes so that the Issuer will be
reasonably able to ascertain the nature and cost of the facilities included in
the Project Facilities and covered by this Agreement, (iii) such additions,
deletions and changes will not result in a Misuse of Bond Proceeds, and (iv) if
an addition, deletion or change is substantial in relation to the Project
Facilities, the Company shall have first obtained and filed with the Issuer and
the Trustee an opinion of Bond Counsel to the effect that such addition,
deletion or change is authorized or permitted under the Act and will not
adversely affect the exclusion from gross income of interest on the Bonds under
the Code. In any case, the Company shall obtain the Issuer’s approval of the
addition to the Project Facilities of any material changes to the proposed
facilities or any other material changes not generally described or contemplated
in Exhibit A attached hereto on the date of delivery of this Agreement, which
approval shall not be unreasonably withheld, and the Company shall delete any
facilities from the Project Facilities if such deletion is necessary to avoid a
Misuse of Bond Proceeds or to maintain the exclusion from gross income of
interest on the Bonds under the Code.

Section 2.3 Issuance of Bonds; Application of Proceeds. To provide funds to make
the Loan for purposes of paying Project Costs, the Issuer will issue the Bonds
in the aggregate principal amount of $235,000,000. The Bonds will be issued
pursuant to the Indenture and will bear interest, mature and be subject to
redemption all as set forth therein. The Company hereby approves the terms and
conditions of the Indenture and the Bonds, and the terms and conditions under
which the Bonds will be issued, sold and delivered.

The proceeds from the sale of the Bonds (including any bond discount) shall be
loaned to the Company pursuant to Section 3.1 and such proceeds (net of any bond
discount) shall be paid over to the Trustee for deposit in the Project Fund as
provided in the Indenture. Pending disbursement pursuant to Section 2.4, the
proceeds of the Bonds so deposited in the Project Fund, together with any
investment earnings thereon, shall constitute a part of the Trust Estate and
shall be subject to the lien of the Indenture pursuant to the granting clauses
therein as security for the obligations described in such granting clauses, and
to such end the Company hereby grants to the Trustee as security for such
obligations a security interest in all of the Company’s right, title and
interest in and to the Project Fund.

Section 2.4 Disbursements from Project Fund. Subject to the provisions below,
disbursements from the Project Fund shall be made to reimburse or pay the
Company, another Affiliate or any Person designated by the Company, for Project
Costs. The Company agrees that the sums so disbursed from the Project Fund will
be used only for the payment of Project Costs, and will not be used for any
other purpose.

 

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Any disbursements from the Project Fund for the payment of the Project Costs
shall be made by the Trustee only upon the written order of an Authorized
Representative of the Company delivered to the Trustee. Each such written order
shall be substantially in the form of the disbursement request attached hereto
as Exhibit B and shall be consecutively numbered and accompanied by a statement
in reasonable detail listing the Project Costs to be paid to any contractors,
materialmen or suppliers or incurred by the Company for which it is to be
reimbursed. Any disbursement for any item which is inconsistent with the
information statement filed by the Issuer in connection with the issuance of the
Bonds as required by Section 149(e) of the Code, shall be accompanied by an
opinion of a Bond Counsel to the effect that such disbursement will not result
in the interest on the Bonds becoming included in the gross income of the
holders thereof for federal income tax purposes. In case any contract provides
for the retention by the Company of a portion of the contract price, there shall
be paid from the Project Fund only the net amount remaining after deduction of
any such portion, and only when that retained amount is due and payable, may it
be paid from the Project Fund.

Section 2.5 Company Required to Pay Costs in Event Project Fund Insufficient. If
moneys in the Project Fund are not sufficient to reimburse the Company for all
Project Costs, the Company will not be entitled to any reimbursement for excess
expense from the Issuer, the Trustee or any Bondholder; nor shall the Company be
entitled to any abatement, diminution or postponement of the Loan Payments.

Section 2.6 Completion. When the Company certifies to the Trustee and the Issuer
that the Project Facilities have been completed, any amount then remaining in
the Project Fund shall be reduced to cash and delivered by the Trustee in
accordance with the provisions of the Indenture.

Section 2.7 Investment and Use of Fund Moneys. At the written request of an
Authorized Representative of the Company, any moneys held as part of the Bond
Fund (except moneys representing principal of, or premium, if any, or interest
on, any Bonds which are deemed paid under Section 16.01 of the Indenture) or the
Project Fund shall be invested or reinvested by the Trustee as provided in
Section 8.02 of the Indenture. The Issuer and the Company each hereby covenants
that it will restrict that investment and reinvestment and the use of the
proceeds of the Bonds in such manner and to such extent, if any, as may be
necessary, after taking into account reasonable expectations at the time of
delivery of and payment for the Bonds, so that the Bonds will not constitute
arbitrage bonds under Section 148 of the Code.

Any Authorized Representative of the Issuer having responsibility for issuing
the Bonds is authorized and directed, alone or in conjunction with an Authorized
Representative of the Company and/or any other officer, partner, employee or
agent of or consultant to the Issuer or the Company, to give an appropriate
certificate of the Issuer pursuant to Section 148 of the Code, for inclusion in
the transcript of proceedings for the issuance of the Bonds, setting forth the
reasonable expectations of the Issuer regarding the amount and use of the
proceeds of the Bonds and the facts, estimates and circumstances on which those
expectations are based, all as of the Issue Date. The Company shall provide the
Issuer with, and the Issuer’s certificate may be based on, a certificate of the
Authorized Representative of the Company or other appropriate officer, partner,
employee or agent of or consultant to the Company setting forth the reasonable

 

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expectations of the Company on the Issue Date regarding the amount and use of
the proceeds of the Bonds and the facts, estimates and circumstances on which
they are based.

Section 2.8 Rebate Fund. The Company agrees to make such payments to the Trustee
as are required of the Company under Section 6.05 of the Indenture. The
obligation of the Company to make such payments shall remain in effect and be
binding upon the Company notwithstanding the release and discharge of the
Indenture.

III. Loan By Issuer; Loan Payments; Other Payments

Section 3.1 Loan by Issuer. Upon the terms and conditions of this Agreement, the
Issuer will make the Loan to the Company on the Issue Date in a principal amount
equal to the aggregate principal amount of the Bonds. The Loan shall be deemed
fully advanced upon deposit of the proceeds of the Bonds (net of any bond
discount) in the Bond Fund and the Project Fund pursuant to Section 2.3.

Section 3.2 Loan Payments. In consideration of the issuance, sale and delivery
of the Bonds by the Issuer, the Company hereby agrees to pay to the Trustee for
the account of the Issuer Loan Payments in such amounts and manner so as to
enable the Trustee to make payment of the principal of, premium, if any, on and
accrued interest on the Bonds as the same shall become due and payable whether
by acceleration, redemption or otherwise in accordance with the terms of the
Indenture; provided, however, that the obligation of the Company to make any
Loan Payments hereunder shall be reduced by the amount of any reduction under
the Indenture of the amount of the corresponding payment required to be made by
the Issuer thereunder in respect of the principal of or premium or interest on
the Bonds and shall be reduced to the extent that other moneys on deposit with
the Trustee are available for such purpose and a credit in respect thereof has
been granted pursuant to the Indenture. Pursuant to the Indenture, the Issuer
directs the Trustee to apply such Loan Payments in the manner provided in the
Indenture. Whenever payment or provision for payment has been made in respect of
the principal or redemption price of and interest on all of the Bonds, the Loan
Payments shall be deemed paid in full.

The obligation of the Company to make the Loan Payments directly to the Trustee,
as the assignee of the Issuer under the Indenture, shall be evidenced by the
Company’s Note substantially in the form of Exhibit C hereto, which shall be
delivered concurrently with the delivery by the Issuer of the Bonds.

Section 3.3 Additional Payments. The Company shall pay as Additional Payments
hereunder: (a) to the Issuer, the Issuer’s Fee on the Issue Date and any and all
costs and expenses (including reasonable legal fees and expenses) incurred or to
be paid by the Issuer in connection with the issuance and delivery of the Bonds
or otherwise related to actions taken by the Issuer under this Agreement or the
Indenture or any amendment thereof, supplement thereto or consent or waiver
thereunder, including without limitation any annual charge made by a rating
agency to maintain a rating on the Bonds; (b) to the Local Entity, the Local
Entity’s fee on the Issue Date and any and all costs and expenses incurred or to
be paid by the Local Entity in connection with the Project Facilities; and
(c) to the Trustee, the reasonable fees, charges and

 

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expenses of the Trustee and its agents (including reasonable legal fees and
expenses) for acting as such under the Indenture.

Section 3.4 Obligations Unconditional. The obligations of the Company to make
Loan Payments and Additional Payments shall be absolute and unconditional, and
the Company shall make such payments without abatement, diminution or deduction
regardless of any cause or circumstances whatsoever including without limitation
any defense, set-off, recoupment or counterclaim which the Company may have or
assert against the Issuer, the Trustee or any other Person, whether express or
implied, or any duty, liability or obligation arising out of or connected with
this Agreement, it being the intention of the parties that the payments required
of the Company hereunder will be paid in full when due without any delay or
diminution whatsoever. Loan Payments required to be paid by or on behalf of the
Company hereunder shall be received by the Issuer or the Trustee as net sums and
the Company agrees to pay or cause to be paid all charges against or which might
diminish such net sums.

Section 3.5 Assignment of Issuer’s Rights. To secure the payment of the Debt
Service, the Issuer shall pledge and assign to the Trustee all the Issuer’s
rights in, to and under this Agreement (except for the Unassigned Issuer’s
Rights), the Revenues and the other property comprising the Trust Estate. The
Company consents to such pledge and assignment and agrees to make or cause to be
made Loan Payments directly to the Trustee without defense or set-off by reason
of any dispute between the Company and the Trustee. Whenever the Company is
required to obtain the consent of the Issuer hereunder, the Company shall also
obtain the consent of the Trustee; provided that, except as otherwise expressly
stipulated herein or in the Indenture, the Company shall not be required to
obtain the Trustee’s consent with respect to the Unassigned Issuer’s Rights.

IV. Additional Covenants Of Company

Section 4.1 Maintenance of Existence. So long as the Bonds are Outstanding, the
Company will maintain its existence and its qualification to do business in
Pennsylvania, except that it may (with the consent of the Issuer, which consent
shall not be unreasonably withheld) dissolve or otherwise dispose of all or
substantially all of its assets and may consolidate with or merge into any other
entity or permit one or more entities to consolidate or merge into it so long as
(i) the surviving, resulting or transferee entity, if other than the Company,
assumes in writing all of the obligations of the Company hereunder and under the
Note and is an entity organized under the laws of one of the states of the
United States of America, is duly qualified to do business in Pennsylvania and
is not a Disqualified Contractor, (ii) immediately thereafter neither the
Company nor its successor will be in default under this Agreement or the Note
and (iii) the provisions of Section 7.9 are satisfied.

Section 4.2 Compliance with Laws; Commencement and Continuation of Operations at
Project Facilities; No Sale, Removal or Demolition of Project Facilities;
Maintenance of Employment.

(a) The Company will acquire, construct and install the Project Facilities and
will operate and maintain or cause to be operated and maintained the Project
Facilities in such

 

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manner as to comply with the Act and to comply in all material respects with all
applicable requirements of federal, state and local laws and the regulations,
rules and orders of any federal, state or local agency, board, commission or
court having jurisdiction over the Project Facilities or the operation thereof,
including without limitation applicable zoning, planning, building and
environmental laws, regulations, rules and orders; provided that the Company
shall be deemed in compliance with this Section so long as it is contesting in
good faith any such requirement by appropriate legal proceedings.

(b) The Company shall not cause, permit or suffer to exist a Misuse of Bond
Proceeds.

(c) The Company (or its lessee permitted by Section 4.4 or successor permitted
by Section 4.1) shall complete the Project Facilities (except for immaterial
items), commence operation of the Project Facilities within three years from the
Issue Date and operate or cause to be operated the Plant throughout the term of
this Agreement.

(d) The Company shall not permit the Project Facilities or any material portion
thereof to be sold, transferred or otherwise disposed of (other than as
permitted by Section 4.1 and Section 4.4), or undertake or permit the demolition
or removal of the Project Facilities or any material portion thereof, without
the prior written consent of the Issuer; provided that the Company shall be
permitted (i) to sell, transfer, assign or otherwise dispose of or remove all or
any portion of the Project Facilities which are obsolete, retired or replaced in
the ordinary course of business; and (ii) to demolish or remove a portion of the
Project Facilities, in each case if the Company shall have first obtained an
opinion of Bond Counsel to the effect that such demolition or removal is
authorized or permitted under the Act and will not adversely affect the
exclusion from gross income of interest on the Bonds for federal income tax
purposes.

(e) The Company shall not assign its interest under this Agreement in violation
of Section 7.9.

(f) The Company shall use its best efforts to require affiliated entities to
maintain at least 50% of the employment levels stated in the Local Entity’s
application to the Issuer on behalf of the Company pursuant to which the Bonds
are issued or shall seek a waiver of this requirement from the Pennsylvania
Department of Community and Economic Development.

Section 4.3 Right of Inspection. Subject to reasonable security and safety
regulations and upon reasonable advance, written notice, the Issuer and the
Trustee, and their respective agents, shall have the right during normal
business hours to inspect the Project Facilities.

Section 4.4 Lease by Company. The Company may, subject to the provisions of
Section 4.11 and Section 4.12, lease the Project Facilities, in whole or in
part, to one or more Persons, provided that:

(a) No such lease shall relieve the Company from its obligations under this
Agreement or the Indenture;

 

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(b) In connection with any such lease the Company shall retain such rights and
interests as will permit it to comply with its obligations under this Agreement
and the Indenture;

(c) No such lease shall impair materially the accomplishment of the purposes of
the Act to be accomplished by operation of the Project Facilities as herein
provided;

(d) Any such lease shall require the lessee to operate the Project Facilities as
a “project” under the Act as long as the Bonds are Outstanding;

(e) In the case of a lease to a new lessee or an assignment of an existing lease
to a new lessee of substantially all of the Project Facilities, (i) such new
lessee shall not be a Disqualified Contractor and (ii) unless the new lessee is
an affiliate of the Company, such new lessee shall have been approved by the
Issuer (such approval not to be unreasonably withheld); and

(f) Any lessees under any such leases, including any leases in force on the date
of issuance of the Bonds, shall be subject to the applicable terms and
conditions of Section 4.12.

Section 4.5 Financial Statements; Books and Records. The Company shall prepare
or have prepared financial statements in accordance with generally accepted
accounting principles and shall keep true and proper books of records and
accounts in which full and correct entries are made of all its business
transactions. Copies of such financial statements shall be provided to the
Issuer and the Trustee promptly upon request.

Section 4.6 Taxes, Other Governmental Charges and Utility Charges. The Company
shall pay, or cause to be paid before the same become delinquent, all taxes,
assessments, whether general or special, and governmental charges of any kind
whatsoever that may at any time be lawfully assessed or levied against or with
respect to the Project Facilities, including any equipment or related property
installed or brought by the Company therein or thereon, and all utility and
other charges incurred in the operation, maintenance, use, occupancy and upkeep
of the Project Facilities; provided that with respect to special assessments or
other governmental charges that lawfully may be paid in installments over a
period of years, the Company shall be obligated to pay only such installments as
are required to be paid during the term hereof. The Company may, at its expense,
in good faith contest any such taxes, assessments and other charges and, in the
event of any such contest, may permit the taxes, assessments or other charges so
contested to remain unpaid during the period of such contest and any appeal
therefrom. The Company shall also comply in all material respects at its own
cost and expense with all notices received from public authorities with respect
to the Project Facilities, subject to the Company’s right to contest such
notices in good faith.

Section 4.7 Insurance. The Company shall at its own cost and expense obtain or
cause to be obtained insurance policies against such risks, and in such amounts,
as are customarily insured against by entities owning facilities of like size
and type to the Project Facilities, paying, as the same become due and payable,
all premiums in respect thereof;

 

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provided that the Company may self-insure in such amounts and against such risks
as the Company shall deem reasonable and prudent.

Section 4.8 Damage to or Condemnation of Project Facilities. In the event of
damage, destruction or condemnation of part or all of the Project Facilities or
the Plant such that the Company has the right to call the Bonds for
extraordinary optional redemption pursuant to Section 5.2, the Company shall be
obligated to either: (i) restore the Project Facilities or the Plant, as the
case may be to the extent necessary to ensure the continued character of the
Project Facilities as solid waste disposal facilities, or (ii) if permitted by
the terms of the Bonds, direct the Issuer to call the Bonds for redemption as
set forth in Section 5.2. Damage to, destruction of or condemnation of all or a
portion of the Project Facilities shall not terminate this Agreement or cause
any abatement of or reduction in the payments to be made by the Company under
this Agreement.

Section 4.9 Misuse of Bond Proceeds; Litigation Notice. The Company shall give
the Issuer and the Trustee prompt written notice of any Misuse of Bond Proceeds
or action, suit or proceeding pending or threatened against it at law or in
equity, or before any governmental instrumentality or agency, which, if
adversely determined, would materially impair the right of the Company to carry
on the business which is contemplated in connection with the Project Facilities
or would materially and adversely affect its business, operations, properties,
assets or condition.

Section 4.10 Indemnification. The Company will indemnify and hold harmless the
Issuer, the Trustee and each member, director, officer, employee, attorney and
agent of the Issuer or the Trustee for and against any and all claims, losses,
damages or liabilities (including the costs and expenses of defending against
any such claims) to which the Issuer or the Trustee or any member, director,
officer, employee or agent of the Issuer or the Trustee may become subject,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise directly or indirectly out of (a) any loss or damage to property
or injury to or death of or loss by any person that may be occasioned by any
cause whatsoever pertaining to the construction, maintenance, operation and use
of the Project Facilities; (b) any breach or default on the part of the Company
in the performance of any covenant or agreement of the Company under this
Agreement or the Note or any related document, or arising from any act or
failure to act by the Company or any of its agents, contractors, servants,
employees or licensees; (c) the authorization, issuance and sale of the Bonds,
or the provision of any information or certification furnished in connection
therewith concerning the Bonds, the Project Facilities or the Company
(including, without limitation, any information furnished by the Company for
inclusion in any certification made by the Issuer or for inclusion in, or as a
basis for preparation of, the information statements furnished by the Issuer and
any information or certification obtained from the Company) to assure the
exclusion of the interest on the Bonds from the gross income of the holders
thereof for federal income tax purposes; (d) the Company’s failure to comply
with any requirements of this Agreement pertaining to compliance with the Code
to assure such exclusion of the interest or the provisions set forth in
Section 4.11 and Section 4.12; (e) any failure by the Company to comply with the
provisions of the Act; and (f) any claim, action or proceeding brought with
respect to any matter set forth in clause (a), (b), (c), (d) or (e) above.

 

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The Company will indemnify and hold the Trustee and its directors, officers,
agents and employees (collectively, the “Indemnitees”) harmless from and against
any and all claims, liabilities, losses, damages, fines, penalties and expenses,
including out-of-pocket expenses, incidental expenses, reasonable legal fees and
expenses, and the reasonable costs and expenses of defending against any such
claim (“Losses”) that may be imposed on, incurred by or asserted against, the
Indemnitees or any of them for following any instruction or other direction upon
which the Trustee is authorized to rely pursuant to the terms of this Agreement,
the Bonds, the Note or the Indenture. In addition to and not in limitation of
the immediately preceding sentence, the Company also agrees to indemnify and
hold the Indemnitees and each of them harmless from and against any and all
Losses that may be imposed on, incurred by or asserted against the Indemnitees
or any of them in connection with or arising out of the Trustee’s performance
under this Agreement, the Bonds or the Indenture, or in collecting under the
Note, except in any case as a result of the gross negligence, willful misconduct
or bad faith of the Trustee.

In case any action or proceeding is brought against the Issuer or the Trustee in
respect of which indemnity may be sought hereunder, the party seeking indemnity
promptly shall give notice of that action or proceeding to the Company, and the
Company upon receipt of that notice shall have the obligation and the right to
assume the defense of the action or proceeding; provided that failure of a party
to give that notice shall not relieve the Company from any of its obligations
under this Section unless (and then only to the extent) that failure prejudices
the defense of the action or proceeding by the Company. At its own expense, an
indemnified party may employ separate counsel and participate in the defense.
The Issuer or the Trustee, as the case may be, will cooperate with the Company,
at the Company’s expense, with respect to its assumption of the defense of any
such action or proceeding, and will take such reasonable actions as are
requested of it by the Company, at the Company’s expense, in connection
therewith. Company shall not be liable for any settlement made without its
consent, which shall not be unreasonably withheld. The Company shall not approve
any settlement involving the Trustee without the Trustee’s prior written
consent, which shall not be unreasonably withheld.

The indemnification set forth above is intended to and shall (i) include the
indemnification of all affected directors, officers, agents and employees of the
Issuer and the Trustee, respectively, and (ii) be enforceable by the Issuer and
the Trustee, respectively, to the full extent permitted by law.

The provisions of this Section shall survive the termination of this Agreement
and the Indenture, payment or defeasance of the Bonds and the removal or
resignation of the Trustee in accordance with the Indenture for any reason.

 

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Section 4.11 Tax Covenants of Company and Issuer. The Company covenants and
represents that it will at all times do and perform all acts and things
necessary or desirable and within its reasonable control in order to assure that
interest paid on the Bonds shall not be includable in the gross income of any
holder thereof for federal income tax purposes, unless such holder is a
“substantial user” of the Project Facilities or a “related person” of such a
user within the meaning of Section 147(a) of the Code. The Company also
covenants and represents that it shall not take or omit to take, or permit to be
taken on its behalf, any actions which, if taken or omitted, would adversely
affect the excludability from the gross income of the holder of interest paid on
the Bonds for federal income tax purposes. The Issuer and the Company mutually
covenant for the benefit of the Bondholders that they will not use the proceeds
of the Bonds, any moneys derived, directly or indirectly, from the use or
investment thereof or any other moneys on deposit in any fund or account
maintained in respect of the Bonds (whether such moneys were derived from the
proceeds of the sale of the Bonds or from other sources) in a manner which would
cause the Bonds to be treated as “arbitrage bonds” within the meaning of
Section 148 of the Code.

Section 4.12 Further Tax Covenants of Company. The Company further represents
and covenants as follows:

(a) Action to Maintain Tax-Exempt Status. The Company will take such actions as
shall be necessary or desirable, from time to time and within its reasonable
control, to cause all of the representations and warranties in this Section to
remain true and correct during such periods as shall be necessary to maintain
the exclusion of interest paid on the Bonds from the gross income of the holders
thereof for federal income tax purposes (other than a holder who is a
“substantial user” of the Project Facilities or a “related person” as those
terms are used in Section 147(a) of the Code), pursuant to the requirements of
the Code.

(b) Operation as Solid Waste Disposal Facilities. As long as the Company (or its
lessee or transferee) is required to operate or cause to be operated the Project
Facilities under Section 4.2, the Company (or its lessee or transferee) shall
operate or cause to be operated the Project Facilities as “solid waste disposal
facilities” within the meaning of Section 142(a)(6) of the Code.

(c) Ninety-five Percent Capital Costs Test. The Company will spend not less than
95% of the net proceeds of the Bonds for capital costs of land or property of a
character subject to allowance for depreciation under Section 167 of the Code
and constituting “solid waste disposal facilities” for purposes of
Section 142(a)(6) of the Code.

(d) Land Acquisition Limitation. The Company will not use, directly or
indirectly, 25% or more of the net proceeds of the Bonds for the acquisition of
land or an interest therein.

(e) Existing Facility and Rehabilitation Limitations. The Company will not use
any proceeds of the Bonds to acquire any property of which the Company would not
be the first user, except as permitted by the next sentence. If any proceeds of
the Bonds are used to acquire (i) an existing building, (ii) an existing
building and equipment thereof, (iii) an existing structure (other than a
building), or (iv) an existing structure and equipment thereof, then the

 

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Company will, within two years of the later of the Issue Date or the date the
Company acquires such building or structure, incur Rehabilitation Expenditures
in an amount at least equal to (x) 15% of the portion of the cost of acquiring
all existing buildings and equipment thereof which is financed with net proceeds
of the Bonds, plus (y) 100% of the portion of the cost of acquiring all existing
structures (other than a building) and equipment thereof which is financed with
net proceeds of the Bonds.

(f) Limitation on Financing Certain Facilities. The Company will not use more
than 25% of the net proceeds of the Bonds to provide any portion of the Project
Facilities the primary purpose of which is to provide retail food or beverage
services (exclusive of grocery stores), automobile sales or services, or the
provision of recreation or entertainment.

(g) Prohibition on Financing Certain Facilities. The Company will not use any
portion of the proceeds of the Bonds to provide any portion of the Project
Facilities to be used for a private or commercial golf course, country club,
massage parlor, tennis club, skating facility (including roller skating,
skateboard and ice skating), racquet sports facility (including any handball or
racquetball court), hot tub facility, suntan facility or racetrack. The Company
will not use any proceeds of the Bonds to provide any airplane, any sky box or
other private luxury box, any health club facility, any facility primarily used
for gambling, or any store the principal business of which is the sale of
alcoholic beverages for consumption off premises.

(h) Lease or Transfer of Project Facilities. In connection with any lease or
transfer by the Company of the Project Facilities financed with Bond proceeds,
the Company will require that the lessee or transferee and all Related Persons
with respect to such lessee or transferee will not violate the covenants set
forth in this Section.

(i) Bond Maturity Limitation. The average maturity of the Bonds, as determined
pursuant to Section 147(b) of the Code, will not exceed 120% of the average
reasonably expected economic life of the property financed with the proceeds of
the Bonds, disregarding land.

(j) Nonpurpose Investments. After the expiration of any applicable temporary
period under Section 148(c) of the Code, not more than the lesser of 5% of the
proceeds of the Bonds or $100,000 (in addition to the amounts allowed under
Sections 148(c) and (d) of the Code and subject to the yield adjustment
provisions of Treasury Regulations §1.148-5(C)) of the proceeds of the Bonds
will be invested in higher yielding investments.

At no time will any funds constituting gross proceeds of the Bonds be used to
acquire investments at other than fair market value within the meaning of the
applicable Treasury Regulations pertaining to, or in any other fashion as would
constitute failure of compliance with, Section 148 of the Code. Investments or
deposits in certificates of deposit or pursuant to investment contracts shall
not be made without compliance, at or prior to such investment or deposit, with
the requirements of Treasury Regulations Section 1.148-5(d)(6)(ii) and (iii),
respectively, or with any successor provisions thereto.

 

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The terms “proceeds”, “gross proceeds”, and “higher yielding investments” have
the meanings assigned to them for purposes of Section 148 of the Code.

(k) Notice. The Company shall provide a written statement signed by its
Authorized Representative to the Issuer and the Trustee reasonably promptly upon
the Company’s becoming aware of a violation of any of the covenants set forth in
this Section, setting forth in detail the facts, nature and scope of such
violation.

(l) Arbitrage Rebate. As required by Section 2.8, the Company will pay to or for
the account of the Issuer all amounts needed to comply with the requirements of
Section 148 of the Code, concerning arbitrage bonds, including Section 148(f),
which requires generally a rebate payment to the United States of America of
arbitrage profit from investment of the proceeds of the Bonds in obligations
other than tax-exempt obligations. The obligation of the Company to make such
payments is unconditional and is not limited to funds representing the proceeds
of the Bonds or income from the investment thereof or any other particular
source.

Section 4.13 Nondiscrimination/Sexual Harassment Clause. The Company hereby
accepts and agrees to be bound by the standard Nondiscrimination/Sexual
Harassment Clause set forth in Exhibit D attached hereto. For purposes of such
Nondiscrimination/Sexual Harassment Clause, the parties hereto understand that
(i) this Agreement is the “contract” and (ii) there is no subcontractor for the
performance of the Company’s obligations under this Agreement.

Section 4.14 Right-to-Know. The Company hereby accepts and agrees to be bound by
the Right-to-Know provisions as set forth in Exhibit E hereto.

V. Redemption of Bonds

Section 5.1 Optional Redemption. At any time and from time to time, the Company
may deliver or cause to be delivered Loan Payments to the Trustee in addition to
the scheduled Loan Payments required to be made under Section 3.2 and direct the
Trustee in writing to use the Loan Payments so delivered for the purpose of
calling Bonds for optional redemption in accordance with the applicable
provisions of the Indenture and redeeming such Bonds at the redemption price
stated in the Indenture. Such Loan Payments shall be held and applied as
provided in Section 6.02 of the Indenture and delivery thereof shall not operate
to abate or postpone Loan Payments otherwise becoming due or to alter or suspend
any other obligations of the Company under this Agreement. Whenever the Bonds
are subject to optional redemption pursuant to the Indenture, the Issuer will,
but only upon direction of the Company, direct the Trustee in writing to call
the same for redemption as provided in the Indenture.

Section 5.2 Extraordinary Optional Redemption. The Company shall have, subject
to the conditions hereinafter imposed, the option to direct the redemption of
the Bonds in accordance with the applicable provisions of the Indenture upon the
occurrence of any of the following events:

 

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(a) any federal, state or local body exercising governmental or judicial
authority has taken any action which results in the imposition of burdens or
liabilities with respect to the Project Facilities, or any facilities serviced
thereby, rendering impracticable or uneconomical in the sole judgment of the
Company the operation of all or a substantial portion of the Project Facilities
(or the facilities serviced thereby) by the Company, including, without
limitation, the condemnation or taking by eminent domain of all or a substantial
portion of the Project Facilities or any facilities serviced thereby; or

(b) changes in the economic availability of raw materials, operating supplies,
or facilities or technological or other changes have made the continued
operation of all or a substantial portion of the Project Facilities, or the
operation of the facilities serviced thereby, uneconomical in the sole judgment
of the Company; or

(c) all or a substantial portion of the Project Facilities have been damaged or
destroyed to such an extent that it is not practicable or desirable to rebuild,
repair or restore the Project Facilities; or

(d) as a result of any changes in the Constitution of the Commonwealth of
Pennsylvania or the Constitution of the United States of America or by
legislative or administrative action (whether state or federal) or by final
decree, judgment or order of any court or administrative body (whether state or
federal) after any contest thereof by the Company in good faith, the Indenture,
the Agreement, the Note or the Bonds shall become void or unenforceable or
impossible of performance in accordance with the intent and purposes of the
parties as expressed in the Indenture or the Agreement; or

(e) any court or administrative body shall enter a judgment, order or decree, or
shall take administrative action, requiring the Company to cease all or any
substantial part of its operations served by the Project Facilities to such
extent that the Company is or will be prevented from carrying on its normal
operations at the facilities being served by such Project Facilities for a
period of at least six consecutive months; or

(f) the Company permanently has terminated operations at the Project Facilities.

To exercise such option, the Company shall, within 90 days following the event
giving rise to the exercise of that option, or at any time during the
continuation of the condition referred to in clause (b) above, give written
notice to the Issuer and the Trustee specifying the date on which the Company
will deliver the funds required for such redemption, which date shall be not
more than 90 days from the date such notice is mailed and shall make
arrangements satisfactory to the Trustee for the giving of the required notice
of redemption.

The amount payable by the Company in the event of its exercise of the option
granted in this Section shall be the sum of (i) an amount of money which, when
added to the moneys and investments held to the credit of the Bond Fund, will be
sufficient to pay, or provide for the payment of, the redemption price of Bonds
on the redemption date, such amount to be paid to the Trustee, plus (ii) an
amount of money equal to the Additional Payments accrued and to accrue until
actual final payment and redemption of the Bonds, such amount or applicable

 

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portions thereof to be paid to the Trustee or to the Persons to whom those
Additional Payments are or will be due. The requirement of clause (ii) above
with respect to Additional Payments to accrue may be met if provisions
satisfactory to the Trustee and the Issuer are made for paying those amounts as
they accrue.

Section 5.3 Special Mandatory Redemption. The Company shall deliver or cause to
be delivered to the Trustee the moneys needed to redeem the Bonds in accordance
with the special mandatory redemption provisions set forth in the Bonds and the
Indenture. Whenever the Bonds are subject to special mandatory redemption
pursuant to the Indenture, the Company will cooperate with the Issuer and the
Trustee in effecting such redemption.

Section 5.4 Actions by Issuer. At the request of the Company or the Trustee, the
Issuer shall take all steps required of it under the applicable provisions of
the Indenture or the Bonds to effect the redemption of all or a portion of the
Bonds pursuant to this Article.

VI. Events Of Default And Remedies

Section 6.1 Events of Default. Each of the following shall be an Event of
Default:

(a) Failure by the Company to make or cause to be made any Loan Payment in the
amount and on or prior to the time necessary to enable the Trustee to pay the
corresponding principal of and premium, if any, and interest on the Bonds on or
prior to the date on which such payment by the Trustee is due and payable;

(b) Failure by the Company to observe and perform any other agreement, term or
condition contained in this Agreement or the Note and continuation of such
failure for a period of 60 days after written notice specifying such failure and
requesting that it be remedied has been given to the Company by the Issuer or
the Trustee, or for such longer period as the Issuer and the Trustee may agree
to in writing; provided that if the failure is other than the payment of money
and is of such nature that it can be corrected but not within the applicable
period, such failure shall not constitute an Event of Default so long as the
Company institutes curative action within the applicable period and diligently
pursues such action to completion;

(c) The Company shall (i) apply for or consent to the appointment of a receiver,
trustee, liquidator or custodian or the like of itself or of its property, or
(ii) admit in writing its inability to pay its debts generally as they become
due, or (iii) make a general assignment for the benefit of creditors, or (iv) be
adjudicated a bankrupt or insolvent, or (v) commence a voluntary case under the
United States Bankruptcy Code, or file a voluntary petition or answer seeking
reorganization, an arrangement with creditors or an order for relief, or seeking
to take advantage of any insolvency law or file an answer admitting the material
allegations of a petition filed against it in any bankruptcy, reorganization, or
insolvency proceeding, or corporate action shall be taken by it for the purpose
of effecting any of the foregoing, or (vi) have instituted against it, without
the application, approval or consent of the Company, a proceeding in any court
of competent jurisdiction, under any law relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking in respect of the Company an

 

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order for relief or an adjudication in bankruptcy, reorganization, dissolution,
winding up, liquidation, a composition or arrangement with creditors, a
readjustment of debts, the appointment of a trustee, receiver, liquidator or
custodian or the like of the Company or of all or any substantial part of their
assets, or other like relief in respect thereof under any bankruptcy or
insolvency law, and the same shall (A) result in the entry of an order for
relief or any such adjudication or appointment or (B) remain unvacated,
undismissed and undischarged for a period of 90 days;

(d) Any representation or warranty made by the Company herein or any statement
in any report, certificate, financial statement or other instrument furnished in
connection with this Agreement shall at any time prove to have been false or
misleading in any material respect when made or given; and

(e) For any reason the Bonds are declared due and payable by acceleration in
accordance with Section 9.02 of the Indenture.

The declaration of an Event of Default under paragraph (e) above, and the
exercise of remedies upon any such declaration, shall be subject to any
applicable limitations of federal bankruptcy law affecting or precluding that
declaration or exercise during the pendency of or immediately following any
bankruptcy, liquidation or reorganization proceedings.

Section 6.2 Remedies on Default.

(a) Whenever an Event of Default shall have happened and be subsisting uncured,
any one or more of the following remedial steps may be taken:

(1) If acceleration of the principal amount of the Bonds has been declared
pursuant to Section 9.02 of the Indenture, the Trustee, by notice in writing to
the Company, shall declare all Loan Payments and amounts due on the Note to be
immediately due and payable, whereupon the same shall become immediately due and
payable; and

(2) The Issuer or the Trustee may pursue any and all remedies now or hereafter
existing at law or in equity to collect all amounts then due and thereafter to
become due under this Agreement or to enforce the performance and observance of
any other obligation or agreement of the Company under this Agreement and the
Note.

(b) The Company covenants that, in case it shall fail to pay or cause to be paid
any Loan Payments as and when the same shall become due and payable whether at
maturity or by acceleration or otherwise, then, upon demand of the Trustee, the
Company will pay to the Trustee the whole amount that then shall have become due
and payable hereunder; and, in addition thereto, such further amounts as shall
be sufficient to cover the reasonable costs and expenses of collection,
including a reasonable compensation to the Trustee, its agents and counsel, and
any expenses or liabilities incurred by the Issuer or the Trustee, including
counsel fees and expenses. In case the Company shall fail forthwith to pay such
amounts upon such

 

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demand, the Trustee shall be entitled and empowered to institute any actions or
proceedings at law or in equity for the collection of the sums so due and
unpaid.

(c) In case there shall be pending proceedings for the bankruptcy or
reorganization of the Company under the federal bankruptcy laws or any other
applicable law, or in case a receiver or trustee shall have been appointed for
the benefit of the creditors or the property of the Company, the Trustee shall
be entitled and empowered, by intervention in such proceedings or otherwise, to
file and prove a claim or claims for the whole amount due hereunder, including
interest owing and unpaid in respect thereof, and, in case of any judicial
proceedings, to file such proofs of claim and other papers or documents as may
be necessary or advisable in order to have the claims of the Trustee allowed in
such judicial proceedings relative to the Company, its creditors or its
property, and to collect and receive any moneys or other property payable or
deliverable on any such claims, and to distribute the same after the deduction
of its charges and expenses. Any receiver, assignee or trustee in bankruptcy or
reorganization is hereby authorized to make such payments to the Issuer or the
Trustee, and to pay to the Issuer or the Trustee any amount due it for
compensation and expenses, including counsel fees and expenses incurred by it up
to the date of such distribution.

(d) Notwithstanding the foregoing, the Trustee shall not be obligated to take
any step which in its opinion will or might cause it to expend money or
otherwise incur liability unless and until a satisfactory indemnity bond has
been furnished to the Trustee at no cost or expense to the Trustee. Any amounts
collected as Loan Payments or applicable to Loan Payments and any other amounts
which would be applicable to payment of Debt Service collected pursuant to
action taken under this Section shall, after the deduction of the Trustee’s
charges and expenses, be paid into the Bond Fund and applied in accordance with
the provisions of the Indenture or, if the Outstanding Bonds have been paid and
discharged in accordance with the provisions of the Indenture, shall be paid as
provided in Section 5.02(d) of the Indenture for transfers of remaining amounts
in the Bond Fund.

(e) The provisions of this Section are subject to the further limitation that
the annulment by the Trustee of its declaration pursuant to Section 9.02 of the
Indenture that all of the Bonds are immediately due and payable also shall
constitute an annulment of any corresponding declaration made pursuant to
Section 6.2(a)(1); provided that no such waiver or rescission shall extend to or
affect any subsequent or other default or impair any right consequent thereon.

Section 6.3 Remedies Not Exclusive. No remedy conferred upon or reserved to the
Issuer or the Trustee by this Agreement is intended to be exclusive of any other
available remedy or remedies, including without limitation the remedies provided
in the Act, but each and every such remedy shall be cumulative and shall be in
addition to every other remedy given under this Agreement, or now or hereafter
existing at law or in equity. No delay or omission to exercise any right or
power accruing upon any default shall impair that right or power or shall be
construed to be a waiver thereof, but any such right and power may be exercised
from time to time and as often as may be deemed expedient. In order to entitle
the Issuer or the Trustee to exercise any remedy reserved to it in this Article,
it shall not be necessary to give any notice, other than any notice required by
law or for which express provision is made herein.

 

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Section 6.4 Payment of Legal Fees and Expenses. If an Event of Default should
occur and the Issuer or the Trustee should incur expenses, including reasonable
attorneys’ fees and expenses, in connection with the enforcement of this
Agreement, the Indenture, the Note or the collection of sums due hereunder or
thereunder, the Company shall reimburse the Issuer and the Trustee, as
applicable, for the expenses so incurred, upon demand.

Section 6.5 No Waiver. No failure by the Issuer or the Trustee to insist upon
the strict performance by the Company of any provision hereof or of the Note
shall constitute a waiver of their right to strict performance and no express
waiver shall be deemed to apply to any other existing or subsequent right to
remedy the failure by the Company to observe or comply with any provision
hereof.

The Trustee shall not waive an Event of Default under Section 6.1(f) without the
prior written consent of the Issuer.

Section 6.6 Notice of Default. The Company shall immediately notify the Trustee
and the Issuer in writing if it becomes aware of the occurrence of any Event of
Default hereunder or of any fact, condition or event which, with the giving of
notice or passage of time or both, would become an Event of Default.

VII. Miscellaneous

Section 7.1 Term of Agreement. This Agreement shall be and remain in full force
and effect from the Issue Date until such time as all of the Bonds shall have
been fully paid (or provision made for such payment) pursuant to the Indenture,
the Indenture shall have been released pursuant to Section 16.01 thereof, and
all other sums payable by the Company under this Agreement shall have been paid,
except for obligations of the Company under Section 4.10, which shall survive
any termination of this Agreement.

Section 7.2 Notices. All notices, certificates, requests or other communications
hereunder shall be in writing and shall be deemed to be sufficiently given when
mailed by registered or certified mail, postage prepaid, sent by telecopier or
nationally recognized overnight courier or delivered in person and addressed or
sent as follows:

If to the Company:    Allegheny Energy Supply Company, LLC

  800 Cabin Hill Drive

  Greensburg, Pennsylvania 15601

  Telecopier No. (724) 830-7736

  Attention: Treasurer

 

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If to the Issuer:    Pennsylvania Economic Development Financing Authority

Pa. Department of Community and Economic Development

Commonwealth Keystone Building

400 North Street, 4th Floor

Harrisburg, Pennsylvania 17120

Telecopier No. (717) 787-0879

Attention: Executive Director

If to the Trustee: The Bank of New York Mellon Trust Company, N.A.

Global Corporate Trust

525 William Penn Place, 7th Floor

Pittsburgh, Pennsylvania 15259

Telecopier No. (412) 236-0870

Attention: John J. Scarpiniti

The Company, the Issuer and the Trustee, by notice given hereunder to the
Persons listed above, may designate any further or different addresses or
telecopier numbers to which subsequent notices, certificates, requests or other
communications shall be sent.

Section 7.3 Limitation of Liability; No Personal Liability. In the exercise of
the powers of the Issuer or the Trustee hereunder or under the Indenture,
including without limitation the application of moneys and the investment of
funds, neither the Issuer or the Trustee nor their members, directors, officers,
employees or agents shall be accountable to the Company for any action taken or
omitted by any of them in good faith and with the belief that it is authorized
or within the discretion or rights or powers conferred. The Issuer, the Trustee
and their members, directors, officers, employees and agents shall be protected
in acting upon any paper or document believed to be genuine, and any of them may
conclusively rely upon the advice of counsel and may (but need not) require
further evidence of any fact or matter before taking any action. In the event of
any default by the Issuer hereunder, the liability of the Issuer to the Company
shall be enforceable only out of the Issuer’s interest under this Agreement and
there shall be no other recourse for damages by the Company against the Issuer,
its members, directors, officers, attorneys, agents and employees, or any of the
property now or hereafter owned by it or them. All covenants, obligations and
agreements of the Issuer contained in this Agreement or the Indenture shall be
effective to the extent authorized and permitted by applicable law. No such
covenant, obligation or agreement shall be deemed to be a covenant, obligation
or agreement of any present or future member, director, officer, agent or
employee of the Issuer, and no official 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 or by reason of the covenants,
obligations or agreements of the Issuer contained in this Agreement or the
Indenture.

Section 7.4 Binding Effect. This Agreement shall inure to the benefit of and
shall be binding in accordance with its terms upon the Issuer, the Company and
their respective successors and assigns; provided that this Agreement may not be
assigned by the Company (except in connection with a sale or transfer of assets
pursuant to Section 4.1 or in compliance with Section 7.9) and may not be
assigned by the Issuer except to the Trustee pursuant to the

 

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Indenture or by the Trustee as successor Trustee, or as otherwise may be
necessary to enforce or secure payment of Debt Service. This Agreement may be
enforced only by the parties, their assignees and others who may, by law, stand
in their respective places.

Section 7.5 Amendments. Except as otherwise expressly provided in this Agreement
or the Indenture, subsequent to the issuance of the Bonds and unless and until
all conditions provided for in the Indenture for release of the Indenture are
met, this Agreement may not be effectively amended, modified or terminated
except by an instrument in writing signed by the Company and the Issuer,
consented to by the Trustee, and in accordance with the provisions of
Article XII of the Indenture as applicable.

Section 7.6 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be regarded as an original and all of which
shall constitute one and the same instrument.

Section 7.7 Severability. If any provision of this Agreement is determined by a
court to be invalid or unenforceable, such determination shall not affect any
other provision hereof, each of which shall be construed and enforced as if the
invalid or unenforceable portion were not contained herein. Such invalidity or
unenforceability shall not affect any valid and enforceable application thereof,
and each such provision shall be deemed to be effective, operative and entered
into in the manner and to the full extent permitted by applicable law.

Section 7.8 Governing Law. This Agreement shall be deemed to be a contract made
under the laws of the Commonwealth of Pennsylvania and for all purposes shall be
governed by and construed in accordance with the laws of the Commonwealth of
Pennsylvania.

Section 7.9 Assignment. Except as otherwise provided in this Section 7.9, the
Company shall not assign this Agreement or any interest of the Company herein,
either in whole or in part, without the prior written consent of the Trustee,
which consent shall be given if the following conditions are fulfilled: (i) the
assignee assumes in writing all of the obligations of the Company hereunder;
(ii) the assignee provides the Trustee with an opinion of Counsel satisfactory
to the Trustee to the effect that neither the validity nor the enforceability of
this Agreement shall be adversely affected by such assignment; (iii) the Project
Facilities shall continue in the opinion of Bond Counsel to be a “project” as
such term is defined in the Act after such assignment; (iv) such assignment
shall not, in the opinion of Bond Counsel, have an adverse effect on the
exclusion from gross income for federal income tax purposes of interest on the
Bonds; (v) the assignee shall not be a Disqualified Contractor and shall provide
a written certification to such effect to the Trustee and the Issuer; and
(vi) if the assignee is other than an Affiliate of the Company, consent by the
Issuer, which consent shall not be unreasonably withheld. Subject to the
foregoing, the terms “Issuer,” “Company” and “Trustee” shall, where the context
requires, include the respective successors and assigns of such persons.

Section 7.10 Receipt of Indenture. The Company hereby acknowledges that it has
received an executed copy of the Indenture and is familiar with its provisions,
and agrees that it is subject to and bound by the terms thereof and it will take
all such actions as are required or contemplated of it under the Indenture to
preserve and protect the rights of the Trustee and of the

 

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Bondholders thereunder and that it will not take any action which would cause a
default or Event of Default thereunder.

[Signatures appear on following page]

 

25

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IN WITNESS WHEREOF, the Issuer and the Company, intending to be legally bound,
have caused this Agreement to be duly executed in their respective names, all as
of the date first above written.

 

[SEAL]       PENNSYLVANIA ECONOMIC DEVELOPMENT FINANCING AUTHORITY Attest  

/s/ Brian Deamer

    By  

/s/ Stephen M. Drizos

  Assistant Secretary       Stephen M. Drizos,   Executive Director            
ALLEGHENY ENERGY SUPPLY COMPANY, LLC       By  

/s/ Barry E. Pakenham

        Treasurer

 

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EXHIBIT A

DESCRIPTION OF PROJECT FACILITIES

The Company owns Hatfield’s Ferry Generating Station (the “Station”), a steam
electric generating station located in Masontown, Greene County, Pennsylvania.
The Station consists of three pulverized coal-fired power generating units with
a nominal maximum operational generation capacity of 1,710 megawatts. The
Company is installing three limestone forced oxidation flue gas desulfurization
units (the “Scrubbers”) to remove sulfur dioxide (SO2) from the flue gas of the
three generating units (the “Project Facilities”). The Company has undertaken
construction and installation of the Project Facilities to provide additional
capacity for the disposal and processing of certain waste material generated
during operation of the Scrubbers. The Project Facilities include equipment,
structures and related systems and facilities functionally related and
subordinate thereto that will be used to collect, store, treat, transfer,
process or dispose of such waste material. The principal components of the
Project Facilities are absorber towers that operate to remove and collect waste
materials generated by the removal of SO2 from the boiler flue gas, oxidation
facilities, and facilities for dewatering, handling and disposing of the waste.

 

A-1

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EXHIBIT B

FORM OF DISBURSEMENT REQUEST

STATEMENT NO.             REQUESTING DISBURSEMENT OF FUNDS FROM PROJECT FUND
PURSUANT TO SECTION 2.4 OF THE EXEMPT FACILITIES LOAN AGREEMENT DATED AS OF JULY
1, 2009 (“LOAN AGREEMENT”) BETWEEN PENNSYLVANIA ECONOMIC DEVELOPMENT FINANCING
AUTHORITY (“ISSUER”) AND ALLEGHENY ENERGY SUPPLY COMPANY, LLC (“COMPANY”).

The terms used herein shall have the meanings specified for such terms in or
pursuant to the Loan Agreement. Pursuant to Section 2.4 of the Loan Agreement,
the undersigned Authorized Representative of the Company hereby requests and
authorizes the Trustee to pay to the Company or to the Person(s) listed on the
Disbursement Schedule attached hereto out of the moneys deposited in the Project
Fund the aggregate sum of $             to reimburse the Company or to pay such
Person(s), as indicated in the Disbursement Schedule, for the items of Project
Cost listed in the Disbursement Schedule. Such Payee(s) may be (i) the Company
in the case of work done by Company personnel and in the case of reimbursement
for payments previously made by the Company for Project Costs (other than
payments made by way of set-off of mutual claims between the Company and the
payee), (ii) the Trustee in the case of a requisition for payment of interest on
the Bonds during acquisition, construction, installation, equipment and
improvement of the Project Facilities, (iii) the United States of America in
respect of any amount required to be paid pursuant to Section 148(f) of the Code
and (iv) any other Person designated by the Company for Project Costs incurred
by such Person associated with the issuance of the Bonds. All such payments
shall be made by check or wire transfer in accordance with payment instructions
contained in the Disbursement Schedule and the Trustee shall have no duty or
obligation to authenticate such payment instructions or the authorization
thereof.

In connection with the foregoing request and authorization, the undersigned
hereby certifies that:

(a) Each item for which disbursement is requested hereunder is due, is an item
of incurred Project Cost properly reimbursable or payable out of the Project
Fund in accordance with the terms and conditions of the Loan Agreement, and none
of those items has formed the basis for any disbursement heretofore made from
the Project Fund.

(b) Each such item is or was necessary or appropriate in connection with the
acquisition, construction, installation, equipment and/or improvement of the
Project Facilities.

(c) Each such item is as described in the information statement filed by the
Issuer in connection with the issuance of the Bonds (as defined in the Loan
Agreement), as required by Section 149(e) of the Code; provided that if any such
item is not as described in that

 

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information statement, attached hereto is an opinion of Bond Counsel that such
disbursement will not result in the interest on the Bonds becoming included in
the gross income of the holders thereof for federal income tax purposes.

(d) The reimbursement or payment of the Project Costs requisitioned hereby will
comply with the restrictions contained in Section 2.4, Section 4.11 and
Section 4.12 of the Loan Agreement.

(e) This statement and all exhibits hereto, including the Disbursement Schedule,
shall constitute full warrant, protection and authority to the Trustee for its
actions taken pursuant hereto.

Dated:                     

 

ALLEGHENY ENERGY SUPPLY

COMPANY, LLC

By  

 

  Authorized Representative

 

 

DISBURSEMENT SCHEDULE

TO STATEMENT NO.              REQUESTING AND AUTHORIZING DISBURSEMENT OF FUNDS
FROM PROJECT FUND PURSUANT TO SECTION 2.4 OF THE EXEMPT FACILITIES LOAN
AGREEMENT DATED AS OF JULY 1, 2009 BETWEEN PENNSYLVANIA ECONOMIC DEVELOPMENT
FINANCING AUTHORITY AND ALLEGHENY ENERGY SUPPLY COMPANY, LLC.

 

PAYEE

  

PURPOSE

  

AMOUNT

                       

 

B-2

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EXHIBIT C

ALLEGHENY ENERGY SUPPLY COMPANY, LLC

EXEMPT FACILITIES NOTE

(PENNSYLVANIA ECONOMIC DEVELOPMENT FINANCING AUTHORITY)

SERIES 2009

This Note is issued pursuant to an Exempt Facilities Loan Agreement dated as of
July 1, 2009 (the “Agreement”) by and between the Pennsylvania Economic
Development Financing Authority (the “Issuer”) and the Company (as hereinafter
defined) relating to the financing of certain facilities (the “Project
Facilities”) at the Hatfield’s Ferry Power Station located in Greene County,
Pennsylvania. This Note is the Note referred to in the Agreement. Reference is
made to the Agreement for provisions for the prepayment hereof and the
acceleration of the maturity hereof. All of the terms, conditions, covenants,
representations and warranties of the Agreement are incorporated herein by
reference as if same were fully set forth at length herein. Each capitalized
term not otherwise defined herein shall have the meaning given to such term in
the Agreement.

ALLEGHENY ENERGY SUPPLY COMPANY, LLC (the “Company”), a Delaware limited
liability company, for value received, unconditionally promises to pay to THE
BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as Trustee (including its
successors in such capacity, the “Trustee”) under the Trust Indenture dated as
of July 1, 2009 (as the same may be amended and supplemented from time to time,
the “Indenture”) between the Trustee and the Issuer, the principal sum of TWO
HUNDRED THIRTY-FIVE MILLION AND 00/100 DOLLARS ($235,000,000) on July 15, 2039,
and to pay (i) interest thereon from the date hereof until the payment of such
principal sum has been made or provided for at a rate or rates at all times
equal to the interest rate or rates from time to time borne by the Issuer’s
Exempt Facilities Revenue Bonds, Series 2009 (Allegheny Energy Supply Company,
LLC Project) (the “Bonds”) and payable on each date that interest is payable on
the Bonds, and (ii) to the extent provided by law, on overdue interest at the
rate or rates borne by the Bonds.

If the Bonds become subject to redemption as provided therein and in the
Indenture, the Company shall, as provided in the Agreement, on or before the
proposed redemption date for the Bonds, pay to the Trustee the whole or
appropriate portion of the unpaid principal amount of this Note with interest
accrued to the proposed redemption date, together with such premium as is
necessary to pay the corresponding premium, if any, on the Bonds. Such amount
shall be paid by the Company to the Trustee on the date specified in a notice
from the Trustee.

If, for any reason, the amounts specified above are not sufficient to make
corresponding payments of principal of, premium, if any, and interest on, all of
the Bonds, when such payments are due, the Company shall pay as additional
amounts due hereunder, the amounts required from time to time to make up any
such deficiency. Whenever payment or provision for payment has been made in
respect of the principal or redemption price of, and

 

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interest on, all of the Bonds in accordance with the Indenture, this Note shall
be deemed paid in full and shall be canceled and returned to the Company.

All payments of principal, redemption price and interest shall be made to the
Trustee at its corporate trust office designated pursuant to the Indenture, in
such coin or currency of the United States of America as at the time of payment
shall be legal tender for the payment of public and private debts. All payments
shall be made in funds which will be available no later than 10:00 a.m. on the
applicable due date, and shall be in the full amount required hereunder unless
the Trustee notifies the Company that it is entitled to a credit under the
Agreement or the Indenture.

The obligations of the Company to make the payments required hereunder shall be
absolute and unconditional without defense or setoff by reason of any cause or
circumstance whatsoever, including without limitation, any acts or circumstances
that may constitute failure of consideration, destruction of or damage to the
Project Facilities or the Plant, commercial frustration of purpose, or failure
of the Issuer to perform and observe any agreement, whether express or implied,
or any duty, liability or obligation arising out of or connected with the
Agreement, it being the intention of the Company and the Issuer that the
payments hereunder will be paid in full when and as due without any delay or
diminution whatsoever.

In case one or more of the Events of Default specified in Section 6.1 of the
Agreement shall have occurred and be continuing, then and in each and every such
case, the Trustee, by notice in writing to the Company, may declare the unpaid
balance of this Note to be due and payable immediately, if concurrently with or
prior to such notice the unpaid principal amount of the Bonds has been declared
to be due and payable, and upon any such declaration the same shall become and
shall be immediately due and payable, anything in this Note or in the Agreement
to the contrary notwithstanding.

In case the Trustee shall have proceeded to enforce its rights under this Note
or the Agreement and such proceedings shall have been discontinued or abandoned
for any reason or shall have been determined adversely to the Trustee, then and
in every such case the Company and the Trustee shall be restored to their
respective positions and rights hereunder, and all rights, remedies and powers
of the Company and the Trustee shall continue as though no such proceeding had
been taken, subject to any such adverse determination.

In case the Company shall fail forthwith to pay all amounts due hereunder and
under the Agreement upon such demand, the Trustee shall be entitled and
empowered to institute any action or proceeding at law or in equity for the
collection of the sums so due and unpaid, and may prosecute any such action or
proceeding to judgment or final decree, and may enforce any such judgment or
final decree against the Company and collect, in the manner provided by law out
of the property of the Company, the moneys adjudged or decreed to be payable.

This Note shall be governed by and interpreted under the laws of the
Commonwealth of Pennsylvania.

 

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IN WITNESS WHEREOF, the Company has caused this Note to be duly executed and
delivered.

 

Dated: as of July 1, 2009   ALLEGHENY ENERGY SUPPLY COMPANY, LLC   By:  

 

  Name:     Title:  

 

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EXHIBIT D

NONDISCRIMINATION/SEXUAL HARASSMENT CLAUSE

During the term of this contract, the Company agrees as to itself and each
tenant of the Project Facilities controlling, controlled by or under common
control with the Company (each of the Company and each such tenant, a
“Contractor”) as follows:

1. In the hiring of any employee(s) for the manufacture of supplies, performance
of work, or any other activity required under the contract or any subcontract,
the Contractor, subcontractor, or any person acting on behalf of the Contractor
or subcontractor shall not, by reason of gender, race, creed, or color,
discriminate against any citizen of this Commonwealth who is qualified and
available to perform the work to which the employment relates.

2. Neither the Contractor nor any subcontractor nor any person on their behalf
shall in any manner discriminate against or intimidate any employee involved in
the manufacture of supplies, the performance of work, or any other activity
required under the contract on account of gender, race, creed, or color.

3. Contractors and subcontractors shall establish and maintain a written sexual
harassment policy and shall inform their employees of the policy. The policy
must contain a notice that sexual harassment will not be tolerated and employees
who practice it will be disciplined.

4. Contractors shall not discriminate by reason of gender, race, creed, or color
against any subcontractor or supplier who is qualified to perform the work to
which the contracts relates.

5. The Contractor and each subcontractor shall furnish all necessary employment
documents and records to and permit access to their books, records, and accounts
by the contracting agency and the Bureau of Contract Administration and Business
Development, for purposes of investigation, to ascertain compliance with
provisions of this Nondiscrimination/Sexual Harassment Clause. If the Contractor
or any subcontractor does not possess documents or records reflecting the
necessary information requested, the Contractor or subcontractor shall furnish
such information on reporting forms supplied by the contracting agency or the
Bureau of Contract Administration and Business Development.

6. The Contractor shall include the provisions of this Nondiscrimination/Sexual
Harassment Clause in every subcontract so that such provisions will be binding
upon each subcontractor.

7. The Commonwealth may cancel or terminate the contract, and all money due or
to become due under the contract may be forfeited for a violation of the terms
and conditions of this Nondiscrimination/Sexual Harassment Clause. In addition,
the agency may proceed with debarment or suspension and may place the Contractor
in the Contractor Responsibility File.

 

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EXHIBIT E

RIGHT-TO-KNOW LAW PROVISIONS

1. The Pennsylvania Right-to-Know Law (hereinafter referred to as the “RTKL”),
65 P.S. §§ 67.101-3104, applies to this Exempt Facilities Loan Agreement dated
as of July 1, 2009 (this “Agreement”), between Pennsylvania Economic Development
Financing Authority and Allegheny Energy Supply Company, LLC (the “Company”).
For the purpose of administering the matters relating to the RTKL set forth in
this Exhibit, the applicable “Commonwealth agency” as provided in the RTKL shall
be the Pennsylvania Economic Development Financing Authority, hereinafter
referred to as the “Agency.” Capitalized terms used but not otherwise defined
herein shall have the same meanings as in the RTKL.

2. If the Agency needs the Company’s and each tenants’ of the Project Facilities
controlling, controlled by or under common control with the Company (each of the
Company and each such tenant, a “Contractor”), assistance in any matter arising
out of the RTKL, the Agency shall notify the Contractor using the legal contact
information provided in this Agreement. The Contractor, at any time, may
designate a different contact for such purpose upon reasonable prior written
notice to the Agency.

3. Upon written notification from the Agency that it requires the Contractor’s
assistance in responding to a request under the RTKL for information that may be
in the Contractor’s possession, constituting, or alleged to constitute, a Public
Record in accordance with the RTKL, the Contractor shall:

 

  a. Provide the Agency, within ten (10) calendar days after receipt of such
notification, access to, and copies of, any document or information in the
Contractor’s possession arising out of this Agreement that the Agency reasonably
believes may be a Public Record under the RTKL (“Requested Information”), to
permit Agency to evaluate whether such Requested Information is, in fact, a
Public Record within the scope of the subject RTKL information request;
provided, however, that providing such Requested Information not previously in
the Agency’s possession shall not be considered an admission by the Contractor
that such records are Public Records under the RTKL; and

 

  b. Provide such other assistance as the Agency reasonably may request, in
order to comply with the RTKL.

If the Contractor fails to provide the Requested Information within ten
(10) calendar days after receipt of such request, the Contractor shall indemnify
and hold the Agency harmless for any damages, penalties, detriment or harm that
the Agency may incur under the RTKL as a result of the Contractor’s failure,
including any statutory damages assessed against the Agency.

4. If the Contractor considers the Requested Information not to be a Public
Record, due to the inclusion of trade secret, confidential proprietary
information, or any other reason for exemption from production as a Public
Record under the RTKL, the Contractor shall provide a

 

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written statement to the Agency within ten (10) days of receipt of Agency
request for the Requested Information. This statement shall be signed by a
representative of the Contractor, explaining why the Contractor considers the
Requested Information exempt from public disclosure.

5. If such a written statement is timely provided, the Agency will rely upon it
in denying a RTKL request for the information. Provided, however, that if the
Agency reasonably determines that such written statement is patently flawed or
the Requested Information is, on its face, clearly not protected from disclosure
under the RTKL, the Contractor shall, subject to its rights of appeal, provide
the Requested Information within five (5) business days.

6. The Contractor shall be entitled to challenge or appeal of any decision of
the Agency, Office of Open Records (“OOR”) or any applicable court mandating the
release of any record to the public which the Contractor believes is not
properly subject to disclosure under the RTKL; provided, however, that (i) the
Contractor shall be solely responsible for all costs related to such action; and
(ii) the Contractor shall indemnify and hold harmless the Agency from and
against any and all damages, penalties, detriment or harm that the Agency may
incur under the RTKL as a result of such action, including any statutory damages
assessed against the Agency. If the Contractor does not appeal or is not
successful after final appeal from a determination by the OOR or Pennsylvania
courts, the Contractor agrees to waive all rights or remedies that may be
available to it as a result of the Agency’s subsequent disclosure of Requested
Information pursuant to such a decision by the OOR or Pennsylvania courts. The
Agency will reimburse the Contractor for any costs associated with complying
with this provision, but only to the extent allowed under the fee schedule
established by the OOR, or as otherwise provided by the RTKL, if the fee
schedule is inapplicable.

7. Notwithstanding the foregoing, nothing set forth herein is intended, nor
shall it be construed, to expand the Contractor’s obligations, or the Agency’s
authority, beyond those obligations and authority, respectively, as are set
forth in the RTKL, and the sole remedy for any failure by the Contractor to
perform any obligation arising hereunder, or under the RTKL, shall be limited to
those specifically provided for pursuant to the RTKL and shall not constitute a
default or event of default under this Agreement.

 

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