--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

EXECUTION
 
 
 
 
 

                                     
WASTE WATER FACILITIES AND SOLID WASTE FACILITIES
         
LOAN AGREEMENT
               
Between
               
OHIO WATER DEVELOPMENT AUTHORITY
               
and
               
FIRSTENERGY NUCLEAR GENERATION CORP.
                           
Dated as of December 1, 2006
                               

 

 

--------------------------------------------------------------------------------

 

TABLE OF CONTENTS

     
Page
I.
Background, Representations and Findings.
   
Section 1.1
Background
1
 
Section 1.2
Company Representations
4
 
Section 1.3
Issuer Findings and Representations
7
       
II.
Completion of the Project.
   
Section 2.1
Acquisition, Construction and Installation
7
 
Section 2.2
Plans and Specifications
7
       
III.
Refunding the Refunded Bonds.
   
Section 3.1
Issuance of Bonds
8
 
Section 3.2
Investment of Fund Moneys
9
       
IV.
Loan and Repayment.
   
Section 4.1
Amount and Source of Loan
9
 
Section 4.2
Repayment of Loan
9
 
Section 4.3
The Note
10
 
Section 4.4
Acceleration of Payment to Redeem Bonds
10
 
Section 4.5
No Defense or Set-Off
10
 
Section 4.6
Assignment of Issuer’s Rights
11
 
Section 4.7
Credit Facility; Conversion
11
       
V.
Covenants of the Company.
   
Section 5.1
Maintenance and Operation of Project
11
 
Section 5.2
Corporate Existence
12
 
Section 5.3
Payment of Trustee’s Compensation and Expenses
12
 
Section 5.4
Payment of Issuer’s Expenses
12
 
Section 5.5
Indemnity Against Claims
13
 
Section 5.6
Limitation of Liability of the Issuer
14
 
Section 5.7
Insurance
14
 
Section 5.8
Default, etc.
14
 
Section 5.9
Deficiencies in Revenues
14
 
Section 5.10
Rebate Fund
14
 
Section 5.11
Assignment of Agreement in Whole or in Part by Company
14
 
Section 5.12
Assignment of Agreement in Whole by Company
15
       
VI.
Miscellaneous.
   
Section 6.1
Notices
16
 
Section 6.2
Assignments
16
 
Section 6.3
Illegal, etc. Provisions Disregarded
16
 
Section 6.4
Applicable Law
16
 
Section 6.5
Amendments
16
 
Section 6.6
Term of Agreement
16
         
EXECUTION
 
17
EXHIBIT A - Project Description
 
EXHIBIT B - Form of Company Note
 

 
 
 
i

--------------------------------------------------------------------------------

 
 
 
WASTE WATER FACILITIES and SOLID WASTE FACILITIES LOAN AGREEMENT, dated as of
December 1, 2006 (the “Agreement”) between the OHIO WATER DEVELOPMENT AUTHORITY
(the “Issuer”) and FIRSTENERGY NUCLEAR GENERATION CORP. (the “Company”).

I. Background, Representations and Findings.

1.1 Background. The Issuer is a body corporate and politic, duly organized and
existing under Chapters 6121 and 6123 of the Ohio Revised Code, as amended (the
“Act”). Pursuant to the Act the Issuer is authorized and empowered to issue
State of Ohio revenue bonds to finance, in whole or in part, the cost of the
acquisition and construction of “waste water facilities” and “solid waste
facilities” within the meaning of the Act and to issue revenue refunding bonds
to refund such revenue bonds.

Under the Act, the Issuer may make loans to private corporations for the
acquisition or construction of waste water facilities and solid waste facilities
by such corporations or to assist in the refinancing of such facilities. The
Issuer has heretofore authorized the issuance of several issues of revenue bonds
of the State of Ohio, including the Refunded Bonds, as hereinafter defined,
currently outstanding in the aggregate principal amount of $135,550,000, and
loaned the proceeds thereof to The Cleveland Electric Illuminating Company
(“CEI”), Ohio Edison Company (“OE”) and The Toledo Edison Company (“TE”), each
an Ohio corporation (collectively, the “Companies”) in order to assist the
Companies in refinancing a portion of the cost of acquiring, constructing and
installing certain waste water facilities and solid waste facilities generally
described in Exhibit A to this Agreement (the “Project”). The Companies are
affiliates of FirstEnergy Corp. (“FirstEnergy”) and transferred their respective
ownership interests in the Project on December 16, 2005 as part of the planned
FirstEnergy Intra-System Generation Asset Transfers described in Forms 8-K dated
May 19, 2005 and December 16, 2005 of FirstEnergy and the respective Companies
filed with the Securities and Exchange Commission (“SEC”) and as further
described in the Form 10-K for the fiscal year ended December 31, 2005 and the
Forms 10-Qs for the quarters ended March 31, June 30 and September 30, 2006 of
FirstEnergy and the respective Companies filed with the SEC, and in connection
therewith FirstEnergy and the respective Companies have requested that the
Issuer authorize the refunding of a corresponding portion of the outstanding
aggregate principal amount of the Issuer’s $41,000,000 State of Ohio Pollution
Control Revenue Refunding Bonds, Series 1999-A (Ohio Edison Company Project)
(the “1999 OE Bonds”); $33,200,000 State of Ohio Pollution Control Revenue
Refunding Bonds, Series 2000-A (The Toledo Edison Company Project) (the “2000 TE
Bonds”); $20,450,000 State of Ohio Pollution Control Revenue Refunding Bonds,
Series 2004-B (The Cleveland Electric Illuminating Company Project) (the “2004
CEI Bonds”); and $40,900,000 State of Ohio Pollution Control Revenue Refunding
Bonds, Series 2005-A (The Cleveland Electric Illuminating Company Project) (the
“2005 CEI Bonds”, and together with the 1999 OE Bonds, the 2000 TE Bonds and the
2004 CEI Bonds, the “Refunded Bonds”) through the issuance of revenue refunding
bonds to assist the Company, an Affiliate (as defined in the Indenture
identified in Section 3.1 hereof) of the Companies and FirstEnergy, in the
refunding of the Refunded Bonds.

1

--------------------------------------------------------------------------------

The 1999 OE Bonds were issued under and pursuant to a Trust Indenture dated as
of June 1, 1999 (the “1999 OE Indenture”) between the Issuer and the trustee
thereunder, currently The Bank of New York Trust Company, N.A. (the “1999 OE
Trustee”), the proceeds of which were loaned by the Issuer to OE pursuant to a
Waste Water Facilities and Solid Waste Facilities Loan Agreement dated as of
June 1, 1999 (the “1999 OE Agreement”) between the Issuer and OE for the purpose
of refunding the Issuer’s State of Ohio Pollution Control Revenue Refunding
Bonds, 1989 Series A (Ohio Edison Company Project) (the “1989 OE Bonds”)
originally issued under and pursuant to a Trust Indenture dated as of June 15,
1989 (the “1989 OE Indenture”) between the Issuer and the trustee thereunder,
the proceeds of which were loaned by the Issuer to OE pursuant to a Waste Water
Facilities and Solid Waste Facilities Loan Agreement dated as of June 15, 1989
(the “1989 OE Agreement”) between the Issuer and OE for the purpose of refunding
the Issuer’s State of Ohio Pollution Control Revenue Bonds, Series 1984 (Ohio
Edison Company Project) (the “1984 OE Bonds”) originally issued under and
pursuant to a Trust Indenture dated as of October 1, 1984 (the “1984 OE
Indenture”) between the Issuer and the trustee thereunder, the proceeds of which
were loaned by the Issuer to OE pursuant to a Loan Agreement dated as of October
1, 1984 (the “1984 OE Agreement”) between the Issuer and OE to assist OE in the
financing of a portion of the cost of acquiring, constructing and installing the
Project.

The 2000 TE Bonds were issued under and pursuant to a Trust Indenture dated as
of April 1, 2000, as amended and restated by an Amended and Restated Trust
Indenture dated as of October 1, 2004 (as amended and restated, the “2000 TE
Indenture”) between the Issuer and the trustee thereunder, currently U.S. Bank
National Association (the “2000 TE Trustee”), the proceeds of which were loaned
by the Issuer to TE pursuant to a Waste Water Facilities and Solid Waste
Facilities Loan Agreement dated as of April 1, 2000 (the “2000 TE Agreement”)
between the Issuer and TE for the purpose of refunding the Issuer’s State of
Ohio Collateralized Pollution Control Revenue Refunding Bonds, 1990 Series A
(The Toledo Edison Company Project) (the “1990 TE Bonds”) originally issued
under and pursuant to a Trust Indenture dated as of May 15, 1990 (the “1990 TE
Indenture”) between the Issuer and the trustee thereunder, the proceeds of which
were loaned by the Issuer to TE pursuant to a Loan Agreement dated as of May 15,
1990 (the “1990 TE Agreement”) between the Issuer and TE for the purpose of
refunding the Issuer’s State of Ohio Pollution Control Revenue Bonds, Series
1985A (The Toledo Edison Company Project) (the “1985 TE Bonds”) originally
issued under and pursuant to a Trust Indenture dated as of August 1, 1985 (the
“1985 TE Indenture”) between the Issuer and the trustee thereunder, the proceeds
of which were loaned by the Issuer to TE pursuant to a Loan Agreement dated as
of August 1, 1985 (the “1985 TE Agreement”) between the Issuer and TE to assist
TE in the financing of a portion of the cost of acquiring, constructing and
installing the Project.

The 2004 CEI Bonds were issued under and pursuant to a Trust Indenture dated as
of October 1, 2004 (the “2004 CEI Indenture”) between the Issuer and the trustee
thereunder, currently The Bank of New York Trust Company, N.A. (the “2004 CEI
Trustee”), the proceeds of which were loaned by the Issuer to CEI pursuant to a
Waste Water Facilities and Solid Waste Facilities Loan Agreement dated as of
October 1, 2004 (the “2004 CEI Agreement”) between the Issuer and CEI for the
purpose of refunding a portion of the Issuer’s $23,255,000 State of Ohio
Pollution Control Revenue Refunding Bonds, Series 1998-A (The Cleveland Electric
Illuminating Company Project) (the “1998 CEI Bonds”) originally issued under and
pursuant to a Trust Indenture dated as of October 1, 1998 (the “1998 CEI
Indenture”) between the Issuer and the trustee thereunder, the proceeds of which
were loaned by the Issuer to CEI pursuant to a Waste Water Facilities and Solid
Waste Facilities Loan Agreement dated as of October 1, 1998 (the “1998 CEI
Agreement”) between the Issuer and CEI for the purpose of refunding a portion of
the Issuer’s State of Ohio Floating Rate Collateralized Pollution Control
Revenue Bonds, 1984 Series A (The Cleveland Electric Illuminating Company
Project) (the “1984 CEI Bonds”) originally issued under and pursuant to a Trust
Indenture dated as of December 1, 1984 (the “1984 CEI Indenture”) between the
Issuer and the trustee thereunder, the proceeds of which were loaned by the
Issuer to CEI pursuant to a Loan Agreement dated as of December 1, 1984 (the
“1984 CEI Agreement”) between the Issuer and CEI to assist CEI in the financing
of a portion of the cost of acquiring, constructing and installing the Project.

2

--------------------------------------------------------------------------------

The 2005 CEI Bonds were issued under and pursuant to a Trust Indenture dated as
of July 1, 2005 (the “2005 CEI Indenture”, and together with the 1999 OE
Indenture, the 2000 TE Indenture and the 2004 CEI Indenture, the “Refunded Bonds
Indenture”) between the Issuer and the trustee thereunder, currently The Bank of
New York Trust Company, N.A. (the “2005 CEI Trustee”, and together with the 1999
OE Trustee, the 2000 TE Trustee and the 2004 CEI Trustee, the “Refunded Bonds
Trustee”), the proceeds of which were loaned by the Issuer to CEI pursuant to a
Waste Water Facilities and Solid Waste Facilities Loan Agreement dated as of
July 1, 2005 (the “2005 CEI Agreement”, and together with the 1999 OE Agreement,
the 2000 TE Agreement and the 2004 CEI Agreement, the “Refunded Bonds
Agreement”) between the Issuer and CEI for the purpose of refunding the Issuer’s
State of Ohio Collateralized Pollution Control Revenue Refunding Bonds, Series
1995 (The Cleveland Electric Illuminating Company Project) (the “1995 CEI
Bonds”) originally issued under and pursuant to a Trust Indenture dated as of
August 1, 1995 (the “1995 CEI Indenture”) between the Issuer and the trustee
thereunder, the proceeds of which were loaned by the Issuer to CEI pursuant to a
Loan Agreement dated as of August 1, 1995 (the “1995 CEI Agreement”) between the
Issuer and CEI for the purpose of refunding the Issuer’s State of Ohio
Collateralized Pollution Control Revenue Bonds, 1985 Series A (The Cleveland
Electric Illuminating Company Project) (the “1985 CEI Bonds”, and together with
the 1984 CEI Bonds, the 1984 OE Bonds and the 1985 TE Bonds, the “Original
Bonds”, and the Original Bonds, together with the 1989 OE Bonds, the 1990 TE
Bonds, the 1995 CEI Bonds, the 1998 CEI Bonds and the Refunded Bonds, the “Prior
Bonds”) originally issued under and pursuant to a Trust Indenture dated as of
August 1, 1985 (the “1985 CEI Indenture”, and together with the 1984 CEI
Indenture, the 1984 OE Indenture, the 1985 TE Indenture, the 1989 OE Indenture,
the 1990 TE Indenture, the 1995 CEI Indenture, the 1998 CEI Indenture and the
Refunded Bonds Indenture, the “Prior Bonds Indenture”) between the Issuer and
the trustee thereunder, the proceeds of which were loaned by the Issuer to CEI
pursuant to a Loan Agreement dated as of August 1, 1985 (the “1985 CEI
Agreement”, and together with the 1984 CEI Agreement, the 1984 OE Agreement and
the 1985 TE Agreement, the “Original Bonds Agreement”, and the Original Bonds
Agreements, together with the 1989 OE Agreement, the 1990 TE Agreement, the 1995
CEI Agreement, the 1998 CEI Agreement and the Refunded Bonds Agreement, the
“Prior Bonds Agreement”) between the Issuer and CEI to assist CEI in the
financing of a portion of the cost of acquiring, constructing and installing the
Project.

The Issuer and the Company intend that the Project will constitute “waste water
facilities” and “solid waste facilities” within the meaning of the Act and
qualified facilities for purposes of Section 103(b)(4) of the Internal Revenue
Code of 1954, as amended and as in effect prior to passage of the Tax Reform Act
of 1986 (the “1954 Code”), so that interest on the bonds issued by the Issuer to
finance or refinance the Project, including the Refunded Bonds, will not be
included in gross income under the Code (as defined herein). The Issuer has
agreed to issue, sell and deliver the State of Ohio Pollution Control Revenue
Refunding Bonds, Series 2006-B (FirstEnergy Nuclear Generation Corp. Project) in
the aggregate principal amount of $135,550,000 (the “Bonds”) and to lend the
proceeds to be derived from the sale thereof to the Company, to assist in the
refunding of the Refunded Bonds, on the terms and conditions set forth in the
subsequent sections of this Agreement.

3

--------------------------------------------------------------------------------

1.2 Company Representations. The Company represents that:

(a) It is a corporation duly organized and existing in good standing under Ohio
law and duly qualified to do business in Ohio, with full power and legal right
to enter into this Agreement and the Note (all as hereinafter defined) and
perform its obligations hereunder and thereunder. The making and performance of
this Agreement and the Note on the Company’s part have been duly authorized by
the Company and will not violate or conflict with the Company’s Articles of
Incorporation, Code of Regulations or any agreement, indenture or other
instrument by which the Company or its properties are bound. This Agreement and
the Note have been duly executed and delivered by the Company and constitute the
valid and binding obligations of the Company enforceable in accordance with
their respective terms except as the enforcement thereof may be limited by
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
other similar laws relating to or affecting the enforcement of creditors’ rights
generally, to general equitable principles (whether considered in a proceeding
in equity or at law) and to an implied covenant of good faith and fair dealing.

(b) The Project constitutes “waste water facilities” and “solid waste
facilities” as defined in the Act and is consistent with the purposes of Section
13 of Article VIII of the Ohio Constitution and of the Act.

(c) None of the proceeds of the Original Bonds have been or will be used
directly or indirectly to acquire land or any interest therein or for the
acquisition of any property or interest therein unless the first use of such
property was pursuant to such acquisition.

(d) At least 90% of the proceeds of the Original Bonds were used to provide
“pollution control facilities” and “sewage and solid waste disposal facilities”
within the meaning of Sections 103(b)(4)(E) and (F) of the 1954 Code and the
original use of which facilities commenced with the Companies, the construction
of which facilities began before and was completed after September 26, 1985, and
which facilities were described in an inducement resolution adopted by the
Issuer before September 26, 1985. All of the proceeds of the Original Bonds have
been spent for the Project or to pay costs of issuance of the Original Bonds.
All of such pollution control facilities and sewage and solid waste disposal
facilities consist either of land or of property of a character subject to the
allowance for depreciation provided in Section 167 of the Code.

(e) Less than an insubstantial portion of the proceeds of each of the Original
Bonds and the Refunded Bonds were, and none of the proceeds of the Bonds will
be, used to provide working capital.

(f) None of the proceeds of the Original Bonds and the Refunded Bonds were used
and none of the proceeds of the Bonds will be used to provide any airplane,
skybox or other private luxury box, or health club facility; any facility
primarily used for gambling; any store the principal business of which is the
sale of alcoholic beverages for consumption off premises.

4

--------------------------------------------------------------------------------

(g) The 1984 OE Bonds were issued on October 24, 1984; the 1984 CEI Bonds were
issued on December 12, 1984; the 1985 CEI Bonds were issued on August 7, 1985;
the 1985 TE Bonds were issued on August 27, 1985; the 1989 OE Bonds were issued
on July 13, 1989; the 1990 TE Bonds were issued on May 17, 1990; the 1995 CEI
Bonds were issued on August 17, 1995; the 1998 CEI Bonds were issued on October
14, 1998; the 1999 OE Bonds were issued on June 4, 1999; the 2000 TE Bonds were
issued on May 3, 2000; the 2004 CEI Bonds were issued on October 1, 2004; and
the 2005 CEI Bonds were issued on July 1, 2005.

 
(h) No construction, reconstruction or acquisition of the Project was commenced
prior to the taking of official action by the Issuer with respect thereto except
for preparation of plans and specifications and other preliminary engineering
work.
 
(i) Acquisition, construction and installation of the Project has been
accomplished and the Project is being utilized substantially in accordance with
the purposes of the Project and consistently with the Act and in conformity with
all applicable zoning, planning, building, environmental and other applicable
governmental regulations and all permits, variances and orders issued or granted
pursuant thereto, which permits, variances and orders have not been withdrawn or
otherwise suspended.

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

(k) Neither the Original Bonds, the Refunded Bonds nor the Bonds are or will be
“federally guaranteed,” as defined in Section 149(b) of the Internal Revenue
Code of 1986, as amended (the “Code”; references to the Code and Sections of the
Code (or, as applicable, to the 1954 Code and Sections thereof) include relevant
applicable regulations and proposed regulations thereunder and under the 1954
Code and any successor provisions to those Sections, regulations or proposed
regulations and, in addition, all applicable official rulings and judicial
determinations under the foregoing applicable to the Original Bonds, the
Refunded Bonds or the Bonds, as applicable).

(l) At no time will any funds constituting gross proceeds of the Bonds be used
in a manner as would constitute failure of compliance with Section 148 of the
Code.

(m) None of the proceeds (within the meaning of Section 147(g) of the Code) of
the Bonds will be used to pay for any costs of issuance of the Bonds.

5

--------------------------------------------------------------------------------

(n) The proceeds derived from the sale of the Bonds (other than any accrued
interest thereon) will be, and the proceeds derived from the sale of the 1989 OE
Bonds, the 1990 TE Bonds, the 1995 CEI Bonds, the 1998 CEI Bonds, the 1999 OE
Bonds, the 2000 TE Bonds, the 2004 CEI Bonds and the 2005 CEI Bonds (other than
accrued interest thereon) (collectively, the “Prior Refunding Bonds”) were, used
exclusively to refund the principal of the Refunded Bonds and the 1984 OE Bonds,
the 1985 TE Bonds, the 1985 CEI Bonds, the 1984 CEI Bonds, the 1989 OE Bonds,
the 1990 TE Bonds, a portion of the 1998 CEI Bonds and the 1995 CEI Bonds
(collectively, the “Prior Refunded Bonds”), respectively. The principal amount
of the Bonds does not, and the principal amount of the Prior Refunding Bonds did
not, exceed the principal amount of the Refunded Bonds and the Prior Refunded
Bonds, respectively. The redemption of the outstanding principal amount of the
Refunded Bonds with such proceeds of the Bonds will, and the redemption of the
outstanding principal amount of the Prior Refunded Bonds with such proceeds of
the Prior Refunding Bonds did, occur not later than 90 days after the date of
issuance of the Bonds and the Prior Refunding Bonds, respectively. All earnings
derived from the investment of such proceeds of the Bonds will be, and all
earnings derived from the investment of such proceeds of the Prior Refunding
Bonds were, fully needed and used on such respective redemption dates to pay a
portion of any redemption premium and interest accrued and payable on the
Refunded Bonds and the Prior Refunded Bonds, respectively.

(o) On the respective dates of issuance and delivery of the Original Bonds and
the Refunded Bonds, the Companies reasonably expected that all of the proceeds
of the respective Original Bonds and the Refunded Bonds would be used to carry
out the governmental purposes of such issues within the 3-year period beginning
on the date such issues were issued and none of the proceeds of such issues, if
any, were invested in nonpurpose investments having a substantially guaranteed
yield for 3 years or more.

(p) The respective average maturities of the Original Bonds, the Refunded Bonds
and the Bonds do not exceed 120% of the average reasonably expected economic
life of the facilities financed or refinanced by the respective proceeds of the
Original Bonds, the Refunded Bonds and the Bonds (determined under Section
147(b) of the Code).

(q) It is not anticipated, as of the date hereof, that there will be created any
“replacement proceeds,” within the meaning of Section 1.148-1(c) of the Treasury
Regulations, with respect to the Bonds; however, in the event that any such
replacement proceeds are deemed to have been created, such amounts will be
invested in compliance with Section 148 of the Code.

(r) The information furnished by the Companies and used by the Issuer in
preparing the certification pursuant to Section 148 of the Code and in preparing
the information statement pursuant to Section 149(e) of the Code was accurate
and complete as of the respective dates of issuance of the Original Bonds and
the Refunded Bonds, and the information furnished by the Company and used by the
Issuer in preparing the certification pursuant to Section 148 of the Code and in
preparing the information statement pursuant to Section 149(e) of the Code will
be accurate and complete as of the date of issuance of the Bonds.

6

--------------------------------------------------------------------------------

(s) The Project does not include any office except for offices (i) located on
the site of the Project and (ii) not more than a de minimis amount of the
functions to be performed at which is not directly related to the day-to-day
operations of the Project.

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

(a) The Project qualifies as a “water development project” and a “development
project” for the purposes of the Act, and is consistent with the public purposes
of the Act.

(b) The Project constitutes “waste water facilities” and “solid waste
facilities” under the Act.

(c) The Issuer has the necessary power under the Act, and has duly taken all
action on its part required, to execute and deliver this Agreement and to
undertake the refunding of the Refunded Bonds through the issuance of the Bonds.
The execution and performance of this Agreement by the Issuer will not violate
or conflict with any instrument by which the Issuer or its properties are bound.

(d) The Issuer adopted the resolution authorizing the 1984 OE Bonds on October
11, 1984; the 1984 CEI Bonds on November 29, 1984; the 1985 CEI Bonds on July
16, 1985; the 1985 TE Bonds on August 15, 1985; the 1989 OE Bonds on June 22,
1989; the 1990 TE Bonds on December 21, 1989; the 1995 CEI Bonds on July 27,
1995; the 1998 CEI Bonds on September 24, 1998; the 1999 OE Bonds on March 25,
1999; the 2000 TE Bonds on May 2, 2000; the 2004 CEI Bonds on July 29, 2004; the
2005 CEI Bonds on May 26, 2005; and the Bonds on August 25, 2005.

(e) Following reasonable notice, a public hearing was held with respect to the
issuance of the Bonds, as required by Section 147(f) of the Code.

II. Completion of the Project.

2.1 Acquisition, Construction and Installation. The Company represents and
agrees that the Project has been acquired, constructed and installed on the site
thereof as described in the Original Bonds Agreement, substantially in
accordance with the plans and specifications for the Project filed with the
Issuer prior to the issuance of the Original Bonds and in conformance with the
Original Bonds Agreement, Section 6121.061 of the Ohio Revised Code, and all
applicable zoning, planning, building and other similar regulations of all
governmental authorities having jurisdiction over the Project and all permits,
variances and orders issued in respect of the Project by the Ohio Environmental
Protection Agency (“EPA”) and that the proceeds derived from the Prior Bonds,
including any investment thereof, have been expended in accordance with the
Prior Bonds Indenture and the Prior Bonds Agreement.

2.2 Plans and Specifications. The plans and specifications identified in the
Refunded Bonds Agreement and the description of the Project may be changed from
time to time by, or with the consent of, the Company, provided that any such
change shall also be filed with the Issuer in accordance with the Refunded Bonds
Agreement and provided further that no amendment in the plans and specifications
shall materially change the function of the Project without (i) an engineer’s
certificate that such changes will not impair the significance or character of
the Project as waste water facilities and solid waste facilities and (ii) an
opinion or written advice of nationally recognized bond counsel or ruling of the
IRS that such amendment will not adversely affect the exclusion from gross
income for federal income tax purposes of the interest paid on either the Bonds
or the Refunded Bonds.

7

--------------------------------------------------------------------------------

III. Refunding the Refunded Bonds.

3.1 Issuance of Bonds. In order to assist the Company in the refunding of the
Refunded Bonds, the Issuer, concurrently with the execution hereof, will issue,
sell and deliver the Bonds. The proceeds of the Bonds shall be loaned to the
Company in accordance with Section 4.1. The Bonds will be issued under and
pursuant to the Trust Indenture (as amended from time to time, the “Indenture”)
dated as of December 1, 2006 between the Issuer and The Bank of New York Trust
Company, N.A., as trustee (in that capacity, the “Trustee”), and will be issued
in the aggregate principal amount, will bear interest, will mature and will be
subject to redemption 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 have been issued, sold and delivered.

The proceeds from the sale of the Bonds (other than any accrued interest) shall
be loaned to the Company to assist the Company in refunding the Refunded Bonds.
Those proceeds shall be delivered as follows:

(a) $102,350,000 to the Escrow Trustee under the CEI/OE Escrow Agreement, each
as defined in and provided in the Indenture, to be held, together with any
interest earnings thereon, in trust, as provided in the CEI/OE Escrow Agreement
for the purpose of paying, together with any moneys provided by the Company, CEI
or OE, all of the remaining principal and interest due on the 2004 CEI Bonds and
the 2005 CEI Bonds to their respective dates of redemption and on the 1999 OE
Bonds to the date of their mandatory tender for purchase under the 1999 OE
Indenture, which 1999 OE Bonds shall be purchased for cancellation; and

(b) $33,200,000 to the Escrow Trustee under the TE Escrow Agreement, each as
defined in and provided in the Indenture, to be held, together with any interest
earnings thereon, in trust, as provided in the TE Escrow Agreement for the
purpose of paying, together with any moneys provided by the Company or TE, all
of the remaining principal and interest due on the 2000 TE Bonds to the date of
redemption.

The Company acknowledges that the proceeds of the Bonds will be insufficient to
pay the full costs of refunding the Refunded Bonds and that the Issuer has made
no representation or warranty with respect to the sufficiency thereof. The
Company further acknowledges that it and the Companies are (and will remain
after the issuance of the Bonds) obligated to, and hereby confirms that it and
the respective Companies will, pay all costs of the refunding of the Refunded
Bonds, whether by redemption or by purchase and cancellation. The Issuer
acknowledges and confirms that the 2004 CEI Bonds Trustee has been notified, on
behalf of and at the direction of CEI, that the entire outstanding principal
amount of the 2004 CEI Bonds has been conditionally called for redemption on
December 13, 2006.

The Company, on behalf of and at the direction of the Companies, hereby requests
that the Issuer notify the 2000 TE Trustee and the 2005 CEI Trustee, pursuant to
the 2000 TE Bonds Indenture, the 2005 CEI Bonds Indenture and the respective
Escrow Agreements, that the entire outstanding principal amount of the 2000 TE
Bonds and the 2005 CEI Bonds are to be redeemed on December 20, 2006 and
December 21, 2006, respectively, all as set forth and provided for in the
respective Escrow Agreements. The Company acknowledges and confirms that OE has
directed the 1999 OE Trustee, as Tender Agent under the 1999 OE Bonds Indenture,
to purchase the 1999 OE Bonds for cancellation on December 5, 2006, as provided
for in the CEI/OE Escrow Agreement. The Issuer acknowledges and confirms that it
has directed the 2000 TE Trustee and the 2005 CEI Trustee to call the 2000 TE
Bonds and the 2005 CEI Bonds for optional redemption on December 20, 2006 and
December 21, 2006, respectively.

8

--------------------------------------------------------------------------------

3.2 Investment of Fund Moneys. Any moneys held as part of the Bond Fund or the
Rebate Fund shall be invested or reinvested by the Trustee as provided in the
Indenture. The Issuer (to the extent it retained or retains direction or
control) and the Company each hereby represent that the investment and
reinvestment and the use of the proceeds of the Refunded Bonds were restricted
in such manner and to such extent as was necessary so that the Refunded Bonds
would not constitute arbitrage bonds under Section 148 of the Code and 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 so that the Bonds will not constitute arbitrage bonds under
Section 148 of the Code. The Company further covenants and represents that it
has taken and caused to be taken and shall take and cause to be taken all
actions that may be required of it for the interest on the Bonds to be and to
remain excluded from gross income for federal income tax purposes, and that it
has not taken or permitted to be taken on its behalf, and covenants that it will
not take, or permit to be taken on its behalf, any action which, if taken, would
adversely affect that exclusion under the provisions of the Code.

The Company shall provide the Issuer with, and the Issuer may base its
certificate and statement, each authorized by Section 8(a) of the legislation
authorizing the Bonds, on, a certificate of an appropriate officer, employee or
agent of or consultant to the Company for inclusion in the transcript of
proceedings for the Bonds, setting forth the reasonable expectations of the
Company on the date of delivery of and payment for the Bonds regarding the
amount and use of the proceeds of the Bonds and the facts, estimates and
circumstances on which those expectations are based.

IV. Loan and Repayment.

4.1 Amount and Source of Loan. Concurrently with the delivery of the Bonds, the
Issuer will, upon the terms and conditions of this Agreement, lend the proceeds
of the Bonds (other than any accrued interest) to the Company, by deposit
thereof in accordance with the provisions of the Indenture. The Bonds may be
sold by the Issuer at a discount from their principal amount, and in such event,
the amount of such discount shall be deemed to have been loaned to the Company.
To the extent that accrued interest on the Bonds is received by the Issuer upon
the sale of the Bonds and is deposited into the Bond Fund under the Indenture,
such accrued interest shall be applied to the first interest payment due on the
Bonds with a corresponding credit on the amounts otherwise due under the Note
(as hereinafter defined).

4.2 Repayment of Loan. The Company agrees to repay the loan made by the Issuer
under Section 4.1 in installments which, as to amount, shall correspond to the
payments of principal on the Bonds and, if applicable, any redemption price and
shall bear interest at the rate or rates and at the times payable on the Bonds,
when such principal, redemption price, if applicable, or interest is due in
accordance with the terms of the Indenture whether on scheduled payment dates,
at maturity, by acceleration, by redemption or otherwise; provided that such
amount 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 such Indenture. All such repayments made by the Company
pursuant to this Agreement shall be made in funds that will be available to the
Trustee no later than 4:00 p.m. (New York City time) on the corresponding
principal or applicable redemption price or interest payment date or other date
for payment on the Bonds. The Company also agrees to pay to the Tender Agent (as
defined in the Indenture) the amounts necessary to purchase Bonds pursuant to
Section 5.01 of the Indenture to the extent that moneys are not otherwise
available therefor pursuant to Section 5.03 of the Indenture. To evidence its
obligation to pay such amounts, the Company will deliver the Note, as described
under Section 4.3.

9

--------------------------------------------------------------------------------

4.3 The Note. Concurrently with the issuance by the Issuer of the Bonds, the
Company will execute and deliver to the Trustee a debt instrument of the
Company, which debt instrument shall be in the form of a nonnegotiable
promissory note (the “Note”), which Note shall be in substantially the form of
the Waste Water Facilities and Solid Waste Facilities Note, Series 2006-B,
attached hereto as Exhibit B. The Note shall:

(a) be payable to the Trustee;

(b) be in a principal amount equal to the aggregate principal amount of the
Bonds;

(c) provide for payments of interest at least equal to the payments of interest
on the Bonds, except to the extent provision is made for the payment of accrued
interest;

(d) require payments of principal plus a premium, if any, equal to the
corresponding payments on the Bonds;

(e) contain provisions in respect of the prepayment of principal and premium, if
any, corresponding to the redemption provisions of the Bonds; and

(f) require all payments on the Note to be made on or prior to the due date for
the corresponding payment to be made on the Bonds.

4.4 Acceleration of Payment to Redeem Bonds. The Issuer will redeem any of the
Bonds or portions thereof upon the occurrence of an event which gives rise to
any mandatory redemption specified therein and in accordance with the provisions
of the Indenture. Whenever the Bonds are subject to optional redemption, the
Issuer will, but only upon request of the Company, redeem the same in accordance
with such request and the Indenture. In either event, the Company will pay an
amount equal to the applicable redemption price as a prepayment of the Note,
together with interest accrued to the date of redemption, as provided in the
Note.

In the event that the Company receives notice from the Trustee pursuant to the
Indenture that a proceeding has been instituted against a Bondholder which could
lead to a final determination that interest on the Bonds is taxable and subject
to special mandatory redemption of Bonds as contemplated by the Indenture, the
Company shall promptly notify in writing the Trustee and the Issuer whether or
not it intends to contest such proceeding. In the event that the Company chooses
to so contest, it will use its best efforts to obtain a prompt final
determination or decision in such proceeding or litigation and will keep the
Trustee and the Issuer informed of the progress of any such proceeding or
litigation.

4.5 No Defense or Set-Off. The obligations of the Company to make payments on
the Note shall be absolute and unconditional without defense or setoff by reason
of any default by the Issuer under this Agreement or under any other agreement
between the Company and the Issuer or by a Credit Facility Issuer (as defined in
the Indenture), if any, under a Credit Facility (as defined in the Indenture),
if any, or for any other reason, including without limitation, loss or
impairment of investments in the Bond Fund, any acts or circumstances that may
constitute failure of consideration, destruction of or damage to the Project,
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 this Agreement, it being the
intention of the parties that the payments required hereunder will be paid in
full when due without any delay or diminution whatsoever.

10

--------------------------------------------------------------------------------

4.6 Assignment of Issuer’s Rights. As the source of payment for the Bonds, the
Issuer will assign to the Trustee pursuant to the Indenture all the Issuer’s
rights under this Agreement with respect to the Bonds (except rights to receive
payments under Sections 5.4 and 5.5) including all of its right, title and
interest in the Note and the moneys payable thereunder. The Company consents to
such assignment and agrees to make payments on the Note and interest thereon
directly to the Trustee without defense or setoff by reason of any dispute
between the Company and the Issuer or the Trustee. The Company acknowledges and
agrees that the Trustee and the Credit Facility Issuer are each a third party
beneficiary of this Agreement and may enforce the obligations of the Company
hereunder as if it were a party hereto. The Company further agrees to observe
and perform all covenants and agreements required to be observed and performed
by it under the Indenture.

4.7 Credit Facility; Conversion. Concurrently with the issuance of the Bonds,
the Company shall cause to be delivered to the Trustee an irrevocable letter of
credit issued by a bank or trust company having the terms specified in the
Indenture. Nothing herein shall require the Company to maintain the Letter of
Credit (as defined in the Indenture) or any other Credit Facility with respect
to the Bonds. As provided in the Indenture, the Interest Rate Mode (as defined
in the Indenture) for any of the Bonds is subject to Conversion (as defined in
the Indenture) to a different Interest Rate Mode or Modes from time to time by
the Company and the Company may from time to time change any of the Bonds from
one Long-Term Rate Period (as defined in the Indenture) to another Long-Term
Rate Period or Periods.

V. Covenants of the Company.

5.1 Maintenance and Operation of Project. The Company shall use its best efforts
to cause the Project, including all appurtenances thereto and any personal
property therein or thereon, to be kept and maintained in good repair and good
operating condition so that the Project will continue to constitute a Waste
Water Facility and a Solid Waste Facility (each as defined in the Act) for the
purposes of the operation thereof as required hereby. So long as such shall not
be in violation of the Act or impair the character of the Project as a Waste
Water Facility and a Solid Waste Facility, as the case may be, and provided
there is continued compliance with applicable laws and regulations of
governmental entities having jurisdiction thereof, the Company shall have the
right to remodel the Project or make additions, modifications and improvements
thereto, from time to time as it, in its discretion, may deem to be desirable
for its uses and purposes, the cost of which remodeling, additions,
modifications and improvements shall be paid by the Company and the same shall,
when made, become a part of the Project.

To the extent not heretofore commenced, the Company shall not be under any
obligation to renew, repair or replace any inadequate, obsolete, worn out,
unsuitable, undesirable or unnecessary portions of the Project, except to the
extent, if any, necessary to ensure the continued character of the Project as a
Waste Water Facility and a Solid Waste Facility. The Company shall have the
right from time to time to substitute personal property or fixtures for any
portions of the Project, provided that the personal property or fixtures so
substituted shall not impair the character of the Project as a Waste Water
Facility and a Solid Waste Facility. Any such substituted property or fixtures
shall, when so substituted, become a part of the Project. The Company shall also
have the right to remove any portions of the Project, without substitution
therefor, provided that the Company shall deliver to the Trustee a certificate
upon which the Trustee may conclusively rely signed by an engineer describing
said portions of the Project and stating that the removal of such property or
fixtures will not impair the character of the Project as a Waste Water Facility
and a Solid Waste Facility.

11

--------------------------------------------------------------------------------

The Company shall, subject to its obligations and rights to maintain, repair or
remove portions of the Project, as herein provided, use its best efforts to
cause the operation of the Project to continue so long as and to the extent that
operation thereof is required to comply with laws or regulations of governmental
entities having jurisdiction thereof or unless the Issuer shall have approved
the discontinuance of such operation (which approval shall not be unreasonably
withheld). The Company agrees that it will, within the design capacities
thereof, cause the Project to be operated and maintained in accordance with all
applicable, valid and enforceable rules and regulations of the EPA and the
Department of Health of the State of Ohio or any successor body, agency,
commission or department to either, including those regulations relating to the
prevention, control and abatement of water and solid waste pollution and the
prescribing of waste water and solid waste standards for that area of the State
of Ohio in which the Project is located; provided, that the Company reserves the
right to contest in good faith any such laws or regulations.

Nothing in this Section shall (a) require the Company to operate or cause to be
operated any portion of any property after it is no longer economical and
feasible, in the Company’s judgment, to do so or (b) prevent or restrict the
Company, in its sole discretion, at any time, from discontinuing or suspending
either permanently or temporarily its use of any facility of the Company served
by the Project and in the event such discontinuance or suspension shall render
unnecessary the continued operation of the Project, the Company shall have the
right to discontinue the operation of the Project during the period of any such
discontinuance or suspension.

5.2 Corporate Existence. So long as the Bonds are outstanding, the Company will
maintain its corporate existence and its qualification to do business in Ohio,
except that it may dissolve or otherwise dispose of all or substantially all of
its assets and may consolidate with or merge into another corporation or permit
one or more corporations to consolidate with or merge into it, if the surviving,
resulting or transferee corporation, if other than the Company, is solvent, has
a net worth equal to the net worth of the Company immediately prior to the
transaction, and assumes in writing all of the obligations of the Company
hereunder and under the Note and is a corporation organized under one of the
states of the United States of America and is duly qualified to do business in
Ohio.

5.3 Payment of Trustee’s Compensation and Expenses. The Company will pay the
Trustee’s compensation and expenses under the Indenture, including
out-of-pocket, incidental and attorneys’ fees and expenses and all costs of
redeeming Bonds thereunder and the compensation and expenses of any
authenticating agent, the Bond Registrar, the Tender Agent and the Paying Agent
appointed in respect of the Bonds, including, out-of-pocket, incidental and
attorneys’ fees and expenses.

5.4 Payment of Issuer’s Expenses. The Company will pay the Issuer’s
administrative fees and expenses, including legal and accounting fees, incurred
by the Issuer in connection with the issuance of the Bonds and the performance
by the Issuer of any and all of its functions and duties under this Agreement or
the Indenture, including, but not limited to, all duties which may be required
of the Issuer by the Trustee and the Bondholders.

12

--------------------------------------------------------------------------------

5.5 Indemnity Against Claims. The Company releases the Issuer from, agrees that
the Issuer shall not be liable for, and indemnifies the Issuer against, all
liabilities, claims, costs and expenses imposed upon or asserted against the
Issuer on account of: (a) the maintenance, operation and use of the Project; (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 arising
from any act or failure to act by the Company under such documents; (c) the
refunding of the Refunded Bonds, the issuance of the Bonds, and the provision of
any information furnished by the Company in connection therewith concerning the
Project or the Company (including, without limitation, any information furnished
by the Company for inclusion in any certifications made by the Issuer under
Section 3.2 or for inclusion in, or as a basis for preparation of, the
information statements filed by the Issuer pursuant to the Code) or the
subsequent remarketing or determination of the interest rate or rates on the
Bonds; (d) any audit of the tax status of the interest on the Bonds; and (e) any
claim or action or proceeding with respect to the matters set forth in (a), (b),
(c) and (d) above brought thereon, except to the extent that any liability,
claim, cost or loss was due to the Issuer’s willful misconduct.

The Company agrees to indemnify the Trustee and to hold the Trustee harmless
against, any and all loss, claim, damage, fine, penalty, liability or expense
incurred by it, including out-of-pocket and incidental expenses and legal fees
and expenses (“Losses”), arising out of or in connection with the acceptance or
administration of the Indenture or the trusts thereunder or the performance of
its duties thereunder or under this Agreement, including the costs and expenses
of defending itself against or investigating any claim (whether asserted by the
Issuer, the Company, a Bondholder, or any other person) of liability in the
premises, except to the extent that any such loss, liability or expense was due
to its own negligence or bad faith. In addition to and not in limitation of the
preceding sentence, the Company agrees to indemnify the Trustee and any
predecessor Trustee and its agents, officers, directors and employees for any
Losses that may be imposed on, incurred by or asserted against it for following
any instructions or directions upon which the Trustee is authorized to rely
pursuant to the Indenture.

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 shall promptly 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 to give that notice shall not relieve the Company from any of its
obligations under this section except to the extent, and only to the extent,
that such failure prejudices the defense of the claim, demand, action or
proceeding by the Company. At its own expense, an indemnified party may employ
separate counsel and participate in the defense; provided, however, where it is
ethically inappropriate for one firm to represent the interests of the Issuer
and any other indemnified party or parties, the Company shall pay the Issuer’s
or the Trustee’s legal expenses, respectively, in connection with the Issuer’s
or the Trustee’s retention of separate counsel. The Company shall not be liable
for any settlement made without its consent.

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

13

--------------------------------------------------------------------------------

5.6 Limitation of Liability of the Issuer. All covenants, stipulations,
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, stipulation, obligation or agreement shall be
deemed to be a covenant, stipulation, obligation or agreement of any present or
future member, officer, agent or employee of the Issuer in other than his
official capacity, and neither the members of the Issuer nor any 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, stipulations, obligations or agreements of the Issuer
contained in this Agreement or in the Indenture. Furthermore, no obligation of
the Issuer hereunder or under the Bonds shall be deemed to constitute a pledge
of the faith and credit of the Issuer, or the faith and credit or taxing power
of the State of Ohio or of any other political subdivision thereof, but shall be
payable solely out of Revenues provided under the Indenture.

5.7 Insurance. The Company, at its expense, shall procure and maintain, or cause
to be procured and maintained, continuously during the term of this Agreement,
insurance policies with respect to the Project against such risks (including all
liability for injury to persons or property arising from the operation of the
Project) and in such amounts as property of a similar character is usually
insured by corporations similarly situated and operating like properties.

5.8 Default, etc. In addition to all other rights of the Issuer granted herein,
in the Note, or otherwise by law, the Issuer shall have the right to
specifically enforce the performance and observation by the Company of any of
its obligations, agreements or covenants under this Agreement or under the Note
and may take any actions at law or in equity to collect any payments due or to
obtain other remedies. If the Company shall default under any provisions of this
Agreement or in any payment under this Agreement or the Note, and the Issuer
shall employ attorneys or incur other expenses for the collection of payments
due or for the enforcement of the performance or observation of any obligation
or agreement on the part of the Company contained herein or therein, the Company
will on demand therefor reimburse the reasonable fees of such attorneys and such
reasonable expenses so incurred.

5.9 Deficiencies in Revenues. If for any reason, including the Company’s being
required to withhold or pay any tax imposed by reason of its obligations
evidenced by the Note, amounts paid to the Trustee on the Note, together with
other moneys held by the Trustee and then available, would not be sufficient to
make the corresponding payments of principal or redemption price of, and
interest on, the Bonds when such payments become due, the Company will pay or
cause to be paid the amounts required from time to time, when due, to make up
any such deficiency.

5.10 Rebate Fund. If and to the extent required by Section 6.04 of the
Indenture, the Company shall calculate the amount of Excess Earnings (as defined
in the Indenture) as of the end of a Bond Year or the date of payment in full of
all outstanding Bonds and shall notify the Trustee of that amount in writing. If
the amount then on deposit in the Rebate Fund created under the Indenture is
less than the amount of Excess Earnings, the Company shall, within five days
after the date of the aforesaid calculation, pay to the Trustee for deposit in
the Rebate Fund an amount sufficient to cause the Rebate Fund to contain an
amount equal to the Excess Earnings. The obligation of the Company to make such
payments, if and to the extent required by Section 6.04 of the Indenture, shall
remain in effect and be binding upon the Company notwithstanding the release and
discharge of the Indenture or the repayment of the loan as contemplated by
Section 4.2. The Company shall obtain and keep such records of the calculations
made pursuant to this Section as are required under Section 148(f) of the Code.

5.11 Assignment of Agreement in Whole or in Part by Company. This Agreement may
be assigned in whole or in part by the Company without the necessity of
obtaining the consent of either the Issuer or the Trustee, subject, however, to
each of the following conditions:

14

--------------------------------------------------------------------------------

(a) No assignment (other than pursuant to Section 5.2 or Section 5.12 hereof)
shall relieve the Company from primary liability for any of its obligations
hereunder, and in the event of any such assignment the Company shall continue to
remain primarily liable for the payments under Sections 4.2, 5.3 and 5.4 hereof
and for performance and observance of the agreements on its part herein provided
to be performed and observed by it.

(b) Any assignment by the Company must retain for the Company such rights and
interests as will permit it to perform its remaining obligations under this
Agreement, and any assignee from the Company shall assume the obligations of the
Company hereunder to the extent of the interest assigned.

(c) The Company shall furnish to the Issuer, the Credit Facility Issuer and the
Trustee an opinion of Bond Counsel (as defined in the Indenture) addressed to
the Issuer, the Credit Facility Issuer and the Trustee that such assignment is
authorized or permitted by the Act and will not adversely affect the exclusion
from gross income of interest on the Bonds.

(d) The Company shall, within 30 days after execution thereof, furnish or cause
to be furnished to the Issuer, the Credit Facility Issuer and the Trustee a true
and complete copy of each such assignment together with any instrument of
assumption.

(e) Any assignment from the Company shall not materially impair fulfillment of
the purpose of the Project as herein provided.

5.12 Assignment of Agreement in Whole by Company. In addition to an assignment
contemplated by Sections 5.2 and 5.11 hereof, this Agreement may be assigned as
a whole by the Company, subject, however, to each of the following conditions:

(a) The Company’s rights, duties and obligations under this Agreement and all
related documents are assigned to, and assumed in full by, the assignee, all as
of a date the Bonds are subject to mandatory purchase under Section 5.01(b) of
the Indenture.

(b) The assignee and the Company shall execute an assignment and assumption
agreement, in form and substance reasonably acceptable to the Company, and
acknowledged and agreed to by the Issuer, the Credit Facility Issuer and the
Trustee, whereby the assignee shall confirm and acknowledge that it has assumed
all of the rights, duties and obligations of the Company under this Agreement
and all related documentation and agrees to be bound by and to perform and
comply with the terms and provisions of this Agreement and all related
documentation as if it had originally executed the same; provided, however, that
such acknowledgement and agreement by the Issuer, the Credit Facility Issuer and
the Trustee shall not be necessary if  the assignee is an Affiliate of the
Company.

(c) The Company shall furnish to the Issuer, the Credit Facility Issuer and the
Trustee an opinion of Bond Counsel (as defined in the Indenture) addressed to
the Issuer, the Credit Facility Issuer and the Trustee that such assignment is
authorized or permitted by the Act and will not adversely affect the exclusion
from gross income of interest on the Bonds.

(d) The Company shall, within 30 days after execution thereof, furnish or cause
to be furnished to the Issuer, the Credit Facility Issuer and the Trustee a true
and complete copy of such assignment and assumption agreement.

(e) Any assignment from the Company shall not materially impair fulfillment of
the purpose of the Project as herein provided.
 
 
15

--------------------------------------------------------------------------------

 

(f)  Upon the effectiveness of such assignment and assumption, the assignee
shall be deemed to be the “Company” hereunder and the assignor shall be relieved
of all liability hereunder.
 

    (g)   
  VI. Miscellaneous.

6.1 Notices. Notice hereunder shall be given in writing, either by registered
mail, to be deemed effective two days after mailing, by telegram, by telecopy or
other similar facsimile transmission, or by telephone, confirmed in writing,
addressed as follows:

The Issuer
-
Ohio Water Development Authority
   
480 South High Street
   
Columbus, Ohio 43215
   
Attention: Executive Director
     
The Company
-
FirstEnergy Nuclear Generation Corp.
   
76 South Main Street
   
Akron, Ohio 44308
   
Attention: Secretary
     
The Trustee
-
The Bank of New York Trust Company, N.A.
   
250 West Huron Road, 4th Floor
   
Cleveland, Ohio 44113
   
Attention: Corporate Trust Department

or to such other address as may be filed in writing with the parties to this
Agreement and with the Trustee.

6.2 Assignments. This Agreement may be assigned by the Company pursuant to
Sections 5.11 and 5.12. This Agreement may not be assigned by the Issuer without
the consent of the Company and the consent of the Trustee, which consent shall
not be unreasonably withheld, except that the Issuer may assign rights with
respect to the Bonds to the Trustee pursuant to Section 4.6 or to a successor
public body. The Issuer will do all things in its power in order to maintain its
existence or assure the assignment of its rights under this Agreement and the
Indenture to, and the assumption of its obligations under this Agreement and the
Indenture by, any successor public body. Notwithstanding the foregoing, no
merger or consolidation permitted under Section 5.2 shall be deemed to be an
assignment for purposes of this Section 6.2.

6.3 Illegal, etc. Provisions Disregarded. In case any provision of this
Agreement shall for any reason be held invalid, illegal or unenforceable in any
respect, this Agreement shall be construed as if such provision had never been
contained herein.

6.4 Applicable Law. This Agreement has been delivered in the State of Ohio and
shall be deemed to be governed by, and interpreted under, the laws of that
State.

6.5 Amendments. This Agreement may not be amended except by an instrument in
writing signed by the parties and consented to by the Trustee and otherwise in
compliance with the provisions of Section 15.03 of the Indenture.

6.6 Term of Agreement. This Agreement shall become effective upon its delivery
and shall continue in effect until all Bonds have been paid or provision for
such payment has been made in accordance with the Indenture, except that the
provisions hereof contained in Sections 1.2, 3.2, 4.4, 4.5, 5.1, 5.3, 5.4, 5.5,
5.6, 5.10 and 6.4, this Section 6.6 and the ninth paragraph of the Note shall
continue in effect thereafter.

16

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the parties hereto, in consideration of the mutual covenants
set forth herein and intending to be legally bound, have caused this Agreement
to be executed and delivered as of the date first written above.

 
OHIO WATER DEVELOPMENT AUTHORITY
   
By
   
Executive Director
         
FIRSTENERGY NUCLEAR GENERATION
CORP.
   
By
   
Assistant Treasurer

17

--------------------------------------------------------------------------------

EXHIBIT A
PROJECT DESCRIPTION
 
The following waste water facilities and solid waste facilities have been
installed at the Perry Nuclear Power Plant:

1.       Cooling Tower System

Waste heat from the Perry Nuclear Power Plant is discharged to the atmosphere
using a natural draft cooling tower. This closed cycle cooling water system
prevents thermal pollution by disposing of waste heat to the atmosphere instead
of into Lake Erie.

The natural draft cooling tower is a large structure with a hyperbolic vertical
shape. Cooling air flow is established through the tower by the natural draft
induced within the tower. One natural draft cooling tower is required for Unit 1
of the Perry Nuclear Power Plant. This tower will dissipate the waste heat of
the unit during normal operation which is 8.3 x 109 BTU per hour. The cooling
tower design flow rate is 545,000 gallons per minute.

At the base, the cooling tower is 395 feet in diameter and the height is 514
feet. The outer shell or “veil” of the cooling tower is reinforced concrete and
the tower stands over a 2.7 million gallon concrete basin.

The cooling tower location is east of the main plant structures. This location
required expansion of the site area. It also required an extension of the shore
protection barrier 750 feet to stabilize and protect the cooling tower
foundation area from erosion.

Heated circulating water flows from the plant to the fill section of the cooling
tower. As the warm water falls downward through the fill it transfers waste heat
to air rising upward through the fill. The cooled water falls to the bottom of
the tower and is collected in the cold-water basin before it flows back to the
plant. A circulating water pumphouse encloses the three 185,000 gpm circulating
water pumps. These large pumps move cooling water between the plant and cooling
towers in a closed loop. Buried 12 foot diameter reinforced fiberglass pipes
convey cooling water through the closed loop between the cooling tower and the
plant.

To compensate for evaporative and drift losses, make up water is supplied to the
cooling tower. Make up water is drawn from 2550 feet offshore into two submerged
intake structures in Lake Erie and flows through the 10 foot diameter intake
tunnel to the site.

Each offshore intake structure is 36 feet in diameter to provide a low approach
velocity. Inflow is through eight ports around the perimeter of each circular
intake structure. The ports are each 3.62 feet high by 12 feet wide and are
located 3 feet above the lake bottom.

Cooling tower blowdown is required to maintain dissolved solids in the
recirculating cooling water at acceptable levels. Accordingly, a continuous low
volume flow of recirculating cooling water is drawn from the system and
discharged. Heated service water discharge is combined with the cooling tower
blowdown. This combined effluent stream is then conveyed 1650 feet offshore in a
10 foot diameter tunnel and discharged. The submerged diffuser discharge nozzle
is located in about 19 feet of water.

To control algae and plant growth, a chlorine solution will be injected into the
cooling-tower circulating water. It is estimated that a daily dosage of
approximately 96,000 pounds of 0.8 percent sodium hypochlorite solution will be
required for the cooling tower circulating water system. The circulating water
system will be sampled, monitored and recorded for chlorine residual. The
chlorine solution is generated by equipment in the hypochlorite generation
building.

A-1

--------------------------------------------------------------------------------

Sodium sulfite will be injected into the cooling-tower blowdown at the discharge
tunnel entrance structure to remove any residual chlorine. This dechlorination
system will be operated in conjunction with the chlorine injection system.
During chlorination and dechlorination, the plant blowdown discharge will be
continuously sampled at the entrance to the plant discharge tunnel and monitored
for chlorine residual. Conductivity and pH will also be monitored. Sulfuric acid
will be added to the cooling tower circulating water system to prevent scale
formation. A total daily dosage of approximately 9,100 pounds of 93 percent
sulfuric acid will be required for the Unit 1 cooling tower circulating water
system. The sulfuric acid will be added on an automatic pH control basis to
maintain circulating water pH within desired operational limits.

In summary, the scope of the closed cycle cooling tower system includes the
following components and subsystems:

natural draft cooling tower
circulating water pump house
circulating water pumps
circulating water pipe
offshore intake structures
intake tunnel
discharge tunnel
discharge diffuser structure
hypochlorite generation subsystem
hypochlorite generation building
dechlorination subsystem
acid storage building and equipment
monitors
related civil, mechanical and electrical auxiliaries

 2.  
      Waste Water Runoff System

The waste water runoff system collects and treats yard area drainage. In
accordance with environmental requirements, it is necessary to treat yard runoff
to remove pollutants before discharge to Lake Erie.

Runoff from throughout the site area is collected by yard drains and catch
basins. These collection devices are arranged into three separate drainage and
treatment subsystems. Each of the three collection and drainage subsystems leads
to a retention settling pond where settleable solids are removed from the waste
water. The three retention settling ponds are formed by construction of a cutoff
dike across a ravine or natural drainage course. Each cutoff dike is provided
with an outfall to permit selective discharge of treated waste water and
retention of floating or settleable solids.

The scope of equipment included in this system includes:

catch basins
yard waste water drain pipe
retention-settling ponds with cutoff dikes

3.  
      Chemical and Oily Waste System

The chemical and oily waste treatment system collects, stores, processes, treats
and disposes of nonradioactive chemical and oily wastes. Waste water containing
chemicals, oil and other pollutants results from construction, start-up and
operation of the plant. These wastes are collected and treated to remove
pollutants.

A-2

--------------------------------------------------------------------------------

Water Treatment Waste:

Chemical wastes are produced by the water make up treatment plant during
construction, startup and normal operation. These wastes result from chemical
treatment and resin regeneration operations related to water filtration and
demineralization. Acid and caustic waste chemicals are collected in the waste
neutralizing sump located beneath the water make up treatment building.
Neutralization equipment, including acid and caustic tanks with associated pumps
and piping, is used to treat wastes in the sump. After treatment the waste is
transferred to the cooling water blowdown for discharge.

Sludge wastes are also produced by the make up treatment plant. This waste
results from pretreatment of raw make up water in the make up water coagulators.
Waste water containing sludge and other settleable solids is transferred to the
sludge lagoons for storage and disposal. Auxiliary boiler blowdown is also
routed to the sludge lagoon for storage and disposal.

System Flush Waste:

Preoperational chemical cleaning wastes are produced during startup chemical
flush of plant systems. The plant systems will be flushed with alkaline
chemicals including trisodium phosphate, disodium phosphate and biodegradable
detergent. Waste chemical flush water will be discharged to the chemical
cleaning waste lagoon and neutralized using acid and lime. Following chemical
flush, an additional water rinse will be conducted to flush the system and will
also be discharged to the chemical cleaning waste lagoon.

System chemical cleaning waste and final flush water will be transferred to the
chemical cleaning waste lagoon with temporary pipe installed for that purpose
only. The temporary pipe will extend 550 feet in length from the plant to the
lagoon.

Treatment in the chemical cleaning waste lagoon will precipitate phosphate in
the chemical flush waste water. Upon precipitation the water is transferred to
the stream impoundment pond for further settling before discharge to the lake.
The phosphate sludge which settles to the bottom of the chemical cleaning waste
lagoon will be removed and disposed of by a contractor.

Oily Waste:

Oily wastes are collected from the turbine lubricating - oil area and
diesel-generator area. These wastes are transferred to the sludge lagoon for
storage and disposal.

Other oily wastes originate from the main transformer, auxiliary transformer,
interbus transformer and startup transformer. All are provided with special
curbs and drains to collect waste oil and transfer it to oil
interceptor-separator tanks. After treatment for removal of waste oil, the waste
water is discharged to the yard drainage system. None of the waste oil collected
by this system is recovered for use or sold by the Company.

A-3

--------------------------------------------------------------------------------

Equipment and components in the scope of exempt facilities used for the chemical
and oil waste system include:

Water Treatment Waste
 
waste neutralizing sump
 
acid feed tank and pump
 
caustic feed tank and pump
 
sludge lagoons
 
pipes and valves
 
controls and instrumentation
 
water treatment building portion
   
System Flush Waste
 
chemical cleaning waste lagoon
 
550 feet temporary waste pipe
 
related support equipment
   
Oily Waste
 
oil interceptor-separator
 
curbs and drains
 
pipe and valves
 
related support equipment

4.  
      Sanitary Waste System

Sanitary waste is collected and disposed of by the sanitary waste system.
Sanitary drains collect waste from throughout the plant building and transfer it
to yard piping which leads to the sanitary waste collection and holding
facility. The sanitary waste collection and holding facility includes storage
basins, sumps and transfer pumps. Sanitary waste is collected and transferred to
a sanitary sewer pipe leading offsite to the municipal sewage system.

Equipment and components in the scope of this exempt facility include:

 
sanitary drains
 
sumps and pumps
 
holdup basins
 
pump station
 
control building

5.  
      Condensate Demineralizer Resin Regeneration System

The condensate demineralizer resin regeneration system collects, processes and
recycles spent radioactive resin from the condensate demineralizers. The
condensate demineralizers use resin to filter and demineralize condensate. As
the resin accumulates impurities, it becomes ineffective and is removed from the
demineralizer vessels. The ineffective resin filled with impurities is called
spent resin because it is unusable as a filter-demineralizer. Spent resin from
the condensate demineralizers is radioactive and consequently it must be treated
as solid radwaste if it is to be disposed. Spent condensate demineralizer resin
is useless and has no value. The Company does not expect to sell, or to be able
to sell, spent radioactive resin at any price.

A-4

--------------------------------------------------------------------------------

To minimize the amount of solid radwaste produced by the plant, a condensate
demineralizer resin regeneration system has been installed. This will permit
recycling of the spent resin by a chemical regeneration process. The
regeneration process involves flushing the spent resin with acid and caustic
chemicals in a rinse water solution. This flushes trapped particles from the
spent resin and restores its ion exchange properties.

To regenerate spent resin, it is first transferred from the condensate
demineralizer vessels (not part of the exempt facilities) to the resin
separation and anion regeneration tank. Cation resin is separated and
transferred to the cation regeneration tank. Dilute solutions of acid and
caustic are prepared and pumped into the regeneration vessels. Strong acid and
caustic are supplied by the acid and caustic tanks. Regenerated anion and cation
resins are transferred to the resin mix and storage tank for final preparation
and treatment prior to being transferred back to the condensate demineralizer.
The turbine subbasement is an area located under the turbine that is used
exclusively in connection with the resin regeneration process and is not used to
store regenerated resins.

Radioactive chemical wastes are produced by the condensate demineralizer resin
regeneration process. These liquid wastes are collected and transferred to the
liquid radwaste system for processing and treatment.

Equipment and components in the scope of this exempt facility include:

acid tank
caustic tank
caustic dilution water heater
resin separation and anion regeneration vessel
cation regeneration vessel
control panel with controls
allocated portion of enclosure building, including
 
turbine subbasement
related pumps, piping, valves, electrical and
 
mechanical support equipment

 
6.        Liquid Radwaste System

6.1  
Overview

The liquid radwaste (LRW) system collects, processes, treats, recycles and
disposes of low level radioactive liquid-waste streams from normal operation of
the Perry Nuclear Power Plant Unit 1. The LRW system is designed to limit the
annual release of radioactivity in liquid effluents to ALARA levels in
accordance with 10 CFR 50, Appendix I.

The LRW is divided into four subsystems for processing the following categories
of liquid waste: high-purity/low conductivity wastewater, medium-to-low
purity/medium conductivity wastewater, high conductivity chemical wastes and
detergent drains. The LRW system also provides for collection of the spent
demineralizer resins, filter/demineralizer and filter sludges, and evaporator
bottoms, before treatment in the solid radwaste disposal system. All waste
streams are either processed and recycled or processed and discharged to the
lake. Processing includes removal of radioactive contamination and other
pollutants.

A-5

--------------------------------------------------------------------------------

All LRW processing equipment is located in the Radwaste Building. This building
is fully dedicated to exempt facilities including liquid radwaste, gaseous
radwaste and solid radwaste. The LRW system also includes dedicated space in the
auxiliary building and intermediate building. The qualifying portion of each
building is calculated by dividing the space used for LRW equipment by the total
equipment space in the building excluding common areas such as hallways. This
space is functionally related and subordinate to the LRW system, it is an
integral part of the LRW system, and the character, size and cost of such
building space are dictated by the LRW system through federal government
construction criteria.

6.2  
System Description

High-Purity/Low-Conductivity Wastewater Subsystem:

This subsystem collects drainage from equipment, rinse water from the condensate
mixed-bed demineralizers, and residual heat removal system flush/test water. The
system includes the drains from these sources as well as processing and
treatment equipment. These wastes are collected in one of two waste-collector
tanks (on an alternating basis) each sized to hold the normal daily input; they
are processed as a batch by being passed through a traveling belt filter to
remove suspended solids and a mixed-bed demineralizer to remove dissolved
solids. Two waste sample tanks, each sized to hold one batch of waste, are
provided for sampling, mixing and temporarily storing the treated effluent.
After sampling, the batch may either be recycled to the waste-collector tank for
further treatment, sent to the condensate-storage system, or discharged. For
greater reliability, this subsystem is cross-connected with identical equipment
in the medium-to-low purity subsystem.

Medium-to-Low-Purity/High-Conductivity Wastewater Subsystem:

This subsystem collects radioactive floor drainage, decantate from all the
sludge-settling tanks, backwash from the radwaste demineralizers, and the
decantate from the solid radwaste disposal system. Collection drain piping for
these wastes is not included in the exempt facility. With the exception of the
floor drainage, the wash streams can be diverted to the high purity subsystem,
if water quality or flow conditions warrant. The waste is collected in the two
collector tanks which are not included in the exempt facilities. Waste is
processed as a batch by a filter and demineralizer identical with those
described above for the high-purity wastes. Two floor-drain sample tanks, each
sized to hold one batch of waste, are provided for sampling, mixing, and
temporarily storing treated effluent. After sampling, the batch may be recycled
to the floor-drain collector tank for further treatment, sent to the
condensate-storage system, or discharged. This subsystem is cross-connected with
identical equipment in the high-purity subsystem.

Chemical Waste Subsystem:

This subsystem treats laboratory drains and regeneration solutions from the
mixed-bed condensate-polishing demineralizers. The wastes are collected in one
of two chemical waste tanks, each sized to hold the regeneration solutions from
one mixed-bed demineralizer. They are processed in a 30-gallon-per-minute
horizontal waste evaporator, sized to handle a batch in 10.5 hours. Before
entering the evaporator, the wastes are sampled and the pH level monitored. The
pH will be maintained at a level of 7 to 10 for optimum evaporator performance.
Bottoms from the evaporator are pumped to one of two concentrated-waste tanks
and then transferred from these tanks to the solid-waste treatment system.
Distillate from the evaporators is temporarily stored in one of two chemical
waste distillate tanks. After sampling, the distillate can be further processed
through the floor drainage demineralizer, pumped to the condensate-storage
system, or discharged.

A-6

--------------------------------------------------------------------------------

Detergent-Drains Subsystem:

This subsystem handles miscellaneous nonradioactive floor drains from the
control complex, and personnel decontamination station drains. The floor drains
are not included in the exempt facility. The waste is collected in one of two
detergent drainage tanks. After sampling, the waste is filtered and discharged
via the sanitary waste treatment system.

Collection of Spent Resins, Filter/Demineralizer Sludge, and Filter Sludge:

Spent resins from the mixed-bed condensate demineralizers, the suppression pool
clean up demineralizers, the radwaste demineralizer, and the floor drains
demineralizer is collected in one of two spent-resin tanks. Each tank is sized
to hold the spent resins from six condensate demineralizer vessels. The spent
resins are transferred as a water slurry to the solid-waste treatment system.

Backwash from the condensate filter backwash receiving tanks and the reactor
water clean up (RWCU) filter/demineralizer backwash receiving tanks are pumped
to settling tanks in the radwaste building. The sludge will be allowed to settle
to the bottom of these tanks, while relatively clean water will be drawn off the
top and pumped to the floor-drain collector tank for further processing. After
10.5 days for the condensate filter backwash and 60 days for the RWCU F/D
backwash system, the sludge is transferred to the solid-waste treatment system
as a concentrated water slurry.

Backwash from the fuel pool filter/demineralizers is pumped to one of two
fuel-pool filter/demineralizer backwash settling tanks. The sludge is allowed to
settle to the bottom of these tanks while relatively clean water is drawn off
the top and pumped to the floor-drains collector tank for further processing.
Periodically, the sludge is transferred to the solid-waste treatment system as a
concentrated water slurry.

6.3  
Equipment Listing

The following equipment is included in the scope of exempt facilities:

 
waste collector tanks
 
waste collector filter
 
radwaste demineralizer
 
waste sample tanks
 
floor drain filter
 
floor drain demineralizer
 
floor drain sample tanks
 
chemical waste tanks
 
evaporators
 
chemical waste distillate tanks
 
concentrated waste tank
 
detergent drain tanks
 
detergent drain filters
 
condensate filter backwash receiving tanks

A-7

--------------------------------------------------------------------------------

 
condensate backwash settling tanks
 
RWCU filter demineralizer backwash receiving tanks
 
RWCU filter demineralizer backwash settling tanks
 
spent resin tanks
 
fuel pool filter demineralizer backwash settling tanks
 
equipment drains
 
chemical drains
 
detergent drains
 
radiation monitors
 
controls and instrumentation
 
radwaste building portion (51.8% based on volume) for
      LRW including all support services  
intermediate building portion for LRW
 
auxiliary building portion for LRW
 
related electrical, mechanical and structural auxiliaries

7.       Solid Radwaste System

7.l Overview

The solid radwaste system (SRW) collects, stores, packages and prepares solid
radioactive wastes for disposal. Radioactive solid wastes processed by this
system include spent resins, filter sludges, evaporator concentrates as well as
dry active waste consisting of rags, clothing, paper and other trash. These
radioactive solid wastes have no use and no value. The company does not expect
to sell, or to be able to sell, these solid radioactive wastes at any price.

The SRW has two subsystems. The waste solidification subsystem is used to
solidify “wet” solid wastes from plant equipment and from the LRW system. The
Dry Active Waste (DAW) Subsystem compacts dry trash type waste into standard
55-gallon drums.

The SRW system also includes dedicated space in the intermediate building. The
qualifying portion of such building is calculated by dividing the space used for
SRW equipment by the total equipment space in the building excluding common
areas such as hallways. This space is functionally related and subordinate to
the SRW system, it is an integral part of the SRW system, and the character,
size and cost of such building space are dictated by the SRW system through
federal government construction criteria.

7.2  
System Description

Waste Solidification: Waste solidification subsystem is a packaged system; it
uses portland cement and sodium silicate to solidify liquid and slurry wastes.
The system consists of waste mixing and dewatering tanks, waste feed pumps,
decanting pumps, waste/cement mixing pumps, container fillports, cement and
sodium silicate storage tanks and feed equipment, drum capper, drum swipe-test
station, drum decontamination station, drum transfer cart, and overhead bridge
crane.

A-8

--------------------------------------------------------------------------------

All operations are performed remotely and manually or semiautomatically from a
centralized SRW system control panel. All drum handling, capping, and
decontamination activities are also done remotely from this panel. The system is
designed to handle containers ranging in size from 55-gallon drums to
200-cubic-foot liners. Waste to be solidified is first pumped to the
mixing/dewatering tank. In the case of radwaste filter cake, the cake falls by
gravity through a chute connecting the tank to the filters. Excess free water is
then decanted and returned to the liquid-radwaste system for further processing.
The remaining liquid or slurry waste is then pumped to a mixing pump, where it
is mixed with cement. This mixture is pumped from there to a retractable
fillport located above the container to be filled. As the waste/cement mixture
enters the container, sodium silicate is sprayed into the mixture. This patented
cement/sodium silicate process ensures against any free water by chemical
reaction between the water and both the cement and sodium silicate. The
solidification process results in forming a monolithic, free-standing,
water-free solid consisting of waste, cement and sodium silicate.

After the container is filled, the radiation level at the surface of the
container is measured remotely, and the reading is logged in a record book,
along with the quantity and type of waste in the container. The fillport is then
retracted and the container moved by a self-powered, remote controlled transfer
cart to a swipe-test and capper station, where it is capped using a remote
controlled capper; a swipe test is taken remotely and manually. If the swipe
test proves negative (no contamination), the container is picked up by a
remote-control overhead bridge crane and placed in an in-plant, shielded storage
vault. If the container has been contaminated during the filling operation, it
is moved by the transfer cart to a decontamination station, where it is washed
down remotely, dried by a remote controlled heater/blower, swipe-tested again,
and then transferred by the bridge crane to the storage area. When it become
permissible to ship containers offsite and when there are enough filled
containers to make a shipment, the bridge crane will remotely transfer the
containers from the storage vault to a trailer in an adjacent in-plant truck
bay. Until such time, the filled containers will be transferred to an interim
disposal facility.

Dry Active Waste: The dry active waste subsystem uses a hydraulic compactor to
compact trash such as paper, cloth, glass, floor sweepings and other low level
dry waste into 55-gallon drums.

The drum filling/compacting space is vented by a fan to prevent escape of
radioactive dust. The air is filtered to trap radioactive dust. An operators’
station is provided with controls and instrumentation. The decontamination
facility is located in the intermediate building and is used for decontamination
of solid waste (i.e., low-level radioactive contaminated items such as tools).
It includes special equipment for cleaning and removing low-level radioactive
contamination. The facility also includes a room with a filtered exhaust.

7.3  
Equipment Listing

The following equipment is included in the scope of the exempt facility:

 
cement handling equipment
 
sodium silicate handling equipment
 
waste/cement mixing pumps
 
waste mixing/dewatering tanks
 
waste dewatering pumps
 
waste feed pumps
 
fill ports
 
drum capper

A-9

--------------------------------------------------------------------------------

 
hot air dryer
 
decontamination station
 
decontamination facility
 
overhead bridge crane
 
transfer cart
 
hydraulic compactor
 
solidified waste storage vault
 
interim disposal and storage facility and related equipment
 
low level compacted waste storage area
 
radiation monitors
 
controls and instrumentation
 
intermediate building portion for SRW
 
radwaste building portion (48.2% based on volume) for
     SRW, including services and support equipment   related electrical,
mechanical and civil support
 

8.       Spent Fuel Handling Facility

8.1  
Design Basis

The Perry Nuclear Power Plant has a common spent fuel handling and storage
facility located between the reactor buildings. This facility has storage
capacity for approximately 4020 spent fuel assemblies. This constitutes spent
fuel storage capacity for over 15 years of operation. In addition the facility
has additional storage capacity for other high level solid wastes including
discarded reactor internals, control rods and fuel channels. The extended
storage capacity of the Perry spent fuel facility is needed in accordance with
current practice to treat and dispose of spent nuclear fuel and fuel assemblies
as solid waste. Spent fuel is unusable and has no value. The Company does not
expect to sell or to be able to sell spent nuclear fuel or fuel assemblies at
any price.

The Perry spent fuel facility is located in the fuel handling building and the
intermediate building. It includes two connected spent fuel storage pools with a
related cooling system, fuel handling and transfer equipment, and spent fuel
cask handling equipment. Spent fuel may be transferred between the fuel storage
pools. The spent fuel handling facility also includes dedicated space in the
intermediate building. The qualifying portion of such building is calculated by
dividing the space used for the spent fuel handling facility equipment by the
total equipment space in the building excluding common areas such as hallways.
This space is functionally related and subordinate to the spent fuel handling
facility, it is an integral part of the spent fuel handling facility, and the
character, size and cost of such building space are dictated by the spent fuel
handling facility through federal government construction criteria.

Also located in the fuel handling building are production-related fuel handling
equipment including 2 sets of new fuel racks, 2 fuel transfer tubes, 1 fuel
transfer canal, a truck bay for new fuel delivery and non fuel related
equipment. These items and the space they occupy in the fuel handling building
are excluded from the scope of the qualifying portion of exempt facilities
because they are not dedicated to spent fuel storage.

In the absence of current spent fuel storage requirements, the spent fuel
storage facility would not be necessary. The reactor building and fuel handling
equipment is adequate to provide production related fuel handling functions
which include new fuel loading and 1 core offload for maintenance. None of this
production-related equipment is included in the scope of the qualifying portion
of exempt facilities.

A-10

--------------------------------------------------------------------------------

8.2  
Components and Equipment

The Perry fuel handling system includes the following 3 types of equipment:

 
spent fuel handling and storage equipment
 
production-related equipment for new fuel loading and
   
1 core offload
 
dual function equipment for spent fuel and production-
   
related functions

8.3  
Spent Fuel Handling and Storage Equipment

spent fuel pools: located in the fuel handling building and constructed of
reinforced concrete with stainless steel liner plate attached to the interior
walls and floor; pool dimensions are 36 ft. x 20 ft. x 44 ft. deep and 36 ft. x
25 ft. x 44 ft. deep

spent fuel racks: located in each spent fuel pool with total storage capacity of
4020 fuel assemblies (5.4 reactor cores) plus 30 additional spaces for
multipurpose storage of other high level solid waste including discarded reactor
internals, control rods and fuel channels

spent fuel cask pool: located in the fuel handling building and constructed of
reinforced concrete with overall dimensions of 14 ft. x 23 ft. x 44 ft. deep

spent fuel cask decontamination: located in the fuel handling building and
consisting of a concrete enclosure and pad with washdown and drain piping

3 spent fuel transfer canals: located in the fuel handling building and
constructed of reinforced concrete with stainless steel liner and gates; these
canals provide underwater transfer pathway for spent fuel between each pool and
to the spent fuel cask pool

spent fuel cask loading bay: located in the fuel handling building for loading
spent fuel casks onto a railroad car or truck

spent fuel cask building crane and hoist: located in the fuel handling building;
this is a 125-ton capacity bridge crane and hoist for handling the spent fuel
cask

8.4  
Production Related Fuel Handling Equipment:

reactor building fuel pool: located in the reactor building and constructed of
reinforced concrete with stainless steel liner plate on the interior walls and
floor; this pool has sufficient capacity for 1 core and is connected to the
reactor cavity by a fuel transfer canal

reactor building fuel handling equipment: located in the reactor building and
used to load new fuel into the reactor or remove fuel from the reactor

A-11

--------------------------------------------------------------------------------

2 new fuel storage pits and racks: located in the fuel handling building and
used to store new fuel before transfer into the reactor building

new fuel truck bay: located in the fuel handling building and used to unload new
fuel from trucks

residual heat removal system: used to remove 1 core decay heat from either the
reactor or fuel pools

control rod drives decontamination equipment

8.5  
Dual Function Equipment

fuel transfer pool: located in the fuel handling building and constructed of
reinforced concrete with stainless steel liner plate on the interior walls and
floor; this pool is used for the transfer of new fuel into the reactor building
and for transfer of spent fuel out of the reactor building

2 fuel transfer tubes: connecting the fuel transfer pool to the reactor building
pools; each tube allows transfer of new fuel into and spent fuel out of the
reactor building

2 fuel transfer carriages: transfers new or spent fuel assemblies through the
fuel transfer tubes

fuel pool cooling and cleanup system: provides cooling to the spent fuel pools,
cask pool, transfer pool and reactor building pool; the heat exchangers are
located in the intermediate building

closed cooling system components and piping for waste heat removal from the
spent fuel pool heat exchangers

fuel handling building: located between the reactor building and constructed of
reinforced concrete; this building encloses the spent fuel pools, fuel transfer
pool, cask pool, new fuel pits, truck bay, cask loading bay as well as related
equipment

fuel handling equipment in fuel handling building: transfers fuel assemblies and
includes cranes, platforms, tools and other equipment

8.6  
Cost Allocation Methodology

The cost of the Perry fuel handling system allocable to the qualifying portion
of spent fuel storage is determined by analyzing the function, usage and
capacity of individual components.

A-12

--------------------------------------------------------------------------------

All equipment which is fully dedicated to spent fuel storage and disposal is
included in the scope of the qualifying portion of exempt facilities.
Accordingly, the entire cost of the following is included in the qualifying
portion:

2 spent fuel storage pools
spent fuel storage racks
spent fuel transfer canals
spent fuel cask pool
spent fuel cask decontamination equipment
spent fuel cask loading bay
spent fuel cask bridge crane and hoist
related electrical, mechanical and structural auxiliaries

None of the cost of production related components are included in the scope of
the qualifying portion of exempt facilities because this equipment would have
been necessary for plant operation in the absence of spent fuel storage.
Accordingly, none of the cost of the following is included in the scope of the
qualifying portion of exempt facilities:

 
reactor building fuel pool and attached piping
 
reactor building fuel handling equipment
 
2 new fuel storage pits and racks
 
new fuel truck bay
 
residual heat removal system
 
control rod drives decontamination equipment

Dual function equipment is analyzed to determine if any portion of its cost may
be allocated to spent fuel storage. Based on this analysis, the following
allocations are applied.

The fuel pool cooling system will function to remove decay heat from all spent
fuel and decay heat from a l/3 core offload of production related fuel. Based on
the total heat removal capacity of this system it is determined that 74.2% of
its capacity is for spent fuel related heat removal and 25.8% is for production
related heat removal. Accordingly, 74.2% of the cost of the fuel pool cooling
system is included in the qualifying portion of exempt facilities.

Allocation of the fuel handling building cost is based on a volumetric analysis.
By eliminating the space for non spent fuel usage, it is determined that 93.6%
of the fuel handling building volume is dedicated to spent fuel. This is
computed by eliminating the space for the new fuel pit and truck bay as well as
the fuel transfer pool and tubes. Accordingly 93.6% of the fuel handling
building cost is included in the qualifying portion of exempt facilities.

Likewise, for the intermediate building, 1.8% of its space is dedicated to spent
fuel related equipment including the spent fuel heat exchangers and piping.
Accordingly, 1.8% of the intermediate building cost is included in the
qualifying portion of exempt facilities.

Piping in the fuel handling system also serves qualified and nonqualified
functions. Based on an analysis by linear feet of pipe, 93.l% of the piping is
determined to serve spent fuel functions. Accordingly 93.l% of the fuel handling
system piping cost is included in the qualifying portion of exempt facilities.

A-13

--------------------------------------------------------------------------------

The heating, ventilating and air conditioning (HVAC) system in the fuel handling
building serves qualified and nonqualified areas of the building. All of the
cost of the HVAC exhaust system has been separately identified as an air
pollution control facility and consequently is not included here. However, the
HVAC supply air system in the fuel handling building is included to the extent
that it serves qualified building space for spent fuel. Since 93.6% of the fuel
handling building is dedicated to spent fuel, 93.6% of the HVAC supply system is
included in the qualifying portion of exempt facilities.

Some of the dual function equipment equally serves qualified and nonqualified
functions. This includes equipment for which half of its usage is new fuel
loading and half is for spent fuel handling. This includes the fuel handling
platform, fuel carriage and other fuel handling or transfer equipment in the
fuel handling building. None of the cost of this equipment has been included in
the qualifying portion of exempt facilities.

 

 
A-14

--------------------------------------------------------------------------------

EXHIBIT B
FORM OF COMPANY NOTE
FIRSTENERGY NUCLEAR GENERATION CORP.
WASTE WATER FACILITIES AND SOLID WASTE FACILITIES NOTE
SERIES 2006-B

 
FIRSTENERGY NUCLEAR GENERATION CORP. (the “Company”), an Ohio corporation, for
value received, promises to pay to The Bank of New York Trust Company, N.A. (the
“Trustee”), as Trustee under the Trust Indenture dated as of December 1, 2006
(the “Indenture”) of the Ohio Water Development Authority (the “Issuer”), the
principal sum of $135,550,000 on December 1, 2033 and to pay (i) interest
thereon from the date hereof until the payment of said 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 State of Ohio Pollution Control
Revenue Refunding Bonds, Series 2006-B (FirstEnergy Nuclear Generation Corp.
Project) (the “Bonds”) and payable on each date that interest is payable on the
Bonds, and (ii) interest on overdue principal, and to the extent permitted by
law, on overdue interest, at the rate or rates borne by the Bonds.

 
In addition to its obligations hereunder to pay the principal of and interest on
this Note, the Company also agrees to pay to The Bank of New York Trust Company,
N. A., as Tender Agent (the “Tender Agent”), the amounts necessary to purchase
Bonds pursuant to Section 5.01 of the Indenture to the extent that moneys are
not otherwise available therefor pursuant to Section 5.03 of the Indenture.

This Note is issued pursuant to a certain Waste Water Facilities and Solid Waste
Facilities Loan Agreement (the “Agreement”) dated as of December 1, 2006 between
the Issuer and the Company relating to the refunding of certain obligations of
the Issuer previously issued to assist certain affiliates of the Company in the
financing of a portion of the cost of acquiring, constructing and installing
certain waste water facilities and solid waste facilities described in Exhibit A
to the Agreement (the “Project”). The obligations of the Company to make the
payments required hereunder shall be absolute and unconditional without defense
or set-off by reason of any default by the Issuer under the Agreement or under
any other agreement between the Company and the Issuer or by a Credit Facility
Issuer, if any, under a Credit Facility, if any, or for any other reason,
including without limitation, loss or impairment of investments in the Bond
Fund, any acts or circumstances that may constitute failure of consideration,
destruction of or damage to the Project, 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 due without any delay or diminution
whatsoever.

This Note is subject to prepayment, at the option of the Company, upon written
notice to the Trustee given not less than 15 days prior to the day on which the
Trustee is required to give notice of optional redemption to the Bondholders
pursuant to Section 9.04 of Indenture, to the extent that the Bonds are subject
to optional redemption pursuant to Section 9.01(a) of the Indenture at a
prepayment price equal to the corresponding redemption price of the Bonds.
Notice of any optional prepayment of this Note shall be conditional if the
corresponding notice of optional redemption of the Bonds under Section 9.04 of
the Indenture is conditional and if the optional redemption of the Bonds does
not occur as a result of a failure of such condition, the notice of optional
prepayment of this Note shall be of no effect.

B-1

--------------------------------------------------------------------------------

If the Bonds are being called for mandatory redemption as provided in Section
9.01(b) of the Indenture, the Company shall, on or before the proposed
redemption date for the Bonds, pay to the Trustee the whole or portion of the
unpaid principal amount of this Note equal to the principal amount of the Bonds
being called for mandatory redemption.

In the event that the Company receives notice from the Trustee pursuant to
Section 9.01(b) of the Indenture that a proceeding has been instituted against a
Bondholder which could lead to a final determination that interest on the Bonds
is taxable and to Special Mandatory Redemption of the Bonds as contemplated by
such Section, the Company shall promptly notify the Trustee and the Issuer
whether or not it intends to contest such proceeding. In the event that the
Company chooses to so contest, it will use its best efforts to obtain a prompt
final determination or decision in such proceeding or litigation and will keep
the Trustee and the Issuer informed of the progress of any such proceeding or
litigation.

Upon receipt by the Trustee of notice of optional prepayment in accordance with
Section 9.01(a) of the Indenture and at the time of the giving of notice by the
Trustee to the Company of a mandatory prepayment, the Trustee shall take all
action necessary under and in accordance with the Indenture to redeem Bonds in
an amount corresponding to that specified in the particular notice.

The Company is entitled to a credit against its obligations under this Note and
this Note shall not be subject to required payment or prepayment to the extent
that amounts which would otherwise be payable by the Company hereunder are paid
from drawings under or payments made pursuant to the Credit Facility, if any,
then held by the Trustee or from other funds held by the Trustee under the
Indenture and available for such payment.

Whenever payment or provision therefor has been made in respect of the principal
or redemption price of all or any portion of the Bonds and interest on all or
any portion of the Bonds, together with all other sums payable by the Issuer
under the Indenture, in accordance with Article XVI of the Indenture, this Note
shall be deemed paid to the extent such payment or provision therefor has been
made, and if thereby deemed paid in full, this Note shall be canceled and
returned to the Company. Notwithstanding the foregoing, if, for any reason, the
amounts specified above are not sufficient to make corresponding payments of
principal or redemption price of the Bonds and interest on 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.

All payments of principal, prepayment price, if any, and interest shall be made
to the Trustee at its designated corporate trust office or as otherwise directed
by the Trustee, and all payments pursuant to the second paragraph of this Note
shall be made to the Tender Agent at its designated corporate trust office or as
otherwise directed by the Trustee, in each case, 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 in the full amount
required hereunder unless the Trustee notifies the Company that it is entitled
to a credit under the Agreement, this Note or the Indenture.

Each of the following events is hereby defined as, and is declared to be and to
constitute, an “Event of Default”:

(a) failure by the Company to pay the principal or prepayment price of this Note
in the amounts and at the times necessary to enable the Trustee to pay the
principal or redemption price of the Bonds at maturity or upon unconditional
proceedings for redemption when due; or

B-2

--------------------------------------------------------------------------------

(b) failure by the Company to pay interest on this Note in amounts and at these
times necessary to enable the Trustee to pay interest on the Bonds, (i) if such
Bonds bear interest at a Commercial Paper Rate, Dutch Auction Rate, Daily Rate,
Weekly Rate or Semi-Annual Rate, when due, and (ii) if such Bonds bear interest
in any other Interest Rate Mode then within one Business Day of when such
interest becomes due and payable; or

(c) failure by the Company to pay the amounts due on this Note sufficient to
enable the Tender Agent to pay the purchase price of any Bonds in accordance
with Section 5.01 of the Indenture when such payment has become due and payable;
or

(d) (i) if the Company shall (1) apply for or consent to the appointment of a
receiver, trustee, liquidator or custodian or the like of itself or of its
property, (2) admit in writing its inability to pay its debts generally as they
become due, (3) make a general assignment for the benefit of creditors, (4) be
adjudicated a bankrupt or insolvent, (5) commence a voluntary case under Title
11 of the United States Code (the “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 (ii) if
without the application, approval or consent of the Company, a proceeding shall
be instituted 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 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 its assets, or other like relief in respect thereof
under any bankruptcy or insolvency law, and, if such proceeding is being
contested by the Company in good faith, the same shall (A) result in the entry
of an order for relief or any such adjudication or appointment or (B) continue
undismissed, or pending and unstayed, for any period of sixty (60) consecutive
days; or

(e)  acceleration of maturity of the Bonds under Section 11.02 of the Indenture.

Upon the occurrence of an Event of Default and during the continuance thereof,
the Trustee, by notice in writing to the Company, shall in the case of an Event
of Default under paragraph (e) above and may in the case of any other Event of
Default 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 due and payable, and upon any such
declaration the same shall become and shall be immediately due and payable,
anything in this Note to the contrary notwithstanding. Notwithstanding the
foregoing, if after any declaration of acceleration hereunder there is an
annulment of any declaration of acceleration with respect to the Bonds, such
annulment shall also automatically constitute an annulment of any corresponding
declaration under this Note and a waiver and rescission of the consequences of
such declaration.

B-3

--------------------------------------------------------------------------------

In case the Trustee shall have proceeded to enforce any right under this Note
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, but subject
to the limitations of any such adverse determination.

The Company covenants that, in case default shall be made in the payment of any
installment of principal, prepayment price or interest in respect of this Note,
whether at maturity or by declaration or otherwise, then, upon demand of the
Issuer or the Trustee, the Company will pay to the Trustee the whole amount that
then shall have become due and payable on this Note for principal, prepayment
price and interest with interest on the overdue principal and prepayment price
and (to the extent enforceable under applicable law) on the overdue installments
of interest at the rate or rates borne by this Note; and, in addition thereto,
such further amount as shall be sufficient to cover the reasonable costs and
expenses of collection, including a reasonable compensation to the Trustee, its
agents, attorneys and counsel, and any expenses or liabilities incurred by the
Trustee other than through its negligence or bad faith.

In case the Company shall fail forthwith to pay such amounts upon such demand,
the Trustee shall be entitled and empowered to take any actions permitted under
applicable law and to institute any actions or proceedings 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.

In case there shall be pending proceedings for the bankruptcy or for the
reorganization of the Company under the Bankruptcy Code or any other applicable
law, or in case a receiver or trustee shall have been appointed for the property
of the Company or in the case of any other similar judicial proceedings relative
to the Company, or to the creditors or 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 of this Note
and 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; and any receiver, assignee or trustee in bankruptcy
or reorganization is hereby authorized to make such payments to the Trustee, and
to pay to the Trustee any amount due it for compensation and expenses, including
counsel fees incurred by it up to the date of such distribution.

No remedy herein conferred is intended to be exclusive of any other remedy or
remedies.

No recourse shall be had for the payment of the principal or prepayment price of
or interest on this Note, or for any claim based hereon or on the Agreement,
against any officer, director or stockholder, past, present or future, of the
Company as such, either directly or through the Company, under any
constitutional provision, statute or rule of law, or by the enforcement of any
assessment or by any legal or equitable proceeding or otherwise.

This Note shall at all times be and remain part of the trust estate under the
Indenture, and no assignment or transfer by the Trustee of its rights hereunder,
other than (i) a transfer made after an Event of Default under the Indenture in
the course of the Trustee’s exercise of its rights and remedies consequent upon
such Event of Default, or (ii) a transfer required in the performance of the
Trustee’s duties under the Indenture, shall be effective.

B-4

--------------------------------------------------------------------------------

Capitalized terms used in this Note not defined herein shall have the meanings
ascribed to them in the Indenture.

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

Dated:  December 5, 2006
 
FIRSTENERGY NUCLEAR
GENERATION CORP.
       
By:
     
Assistant Treasurer

 

 
B-5

--------------------------------------------------------------------------------