Exhibit 4.2


 


 


 


 





LOAN AGREEMENT


 


between


 


OHIO AIR QUALITY DEVELOPMENT AUTHORITY


 


and


 


THE DAYTON POWER AND LIGHT COMPANY


 


 


 


______________________________


 


$100,000,000 


State of Ohio 


Collateralized
Air Quality Development Revenue Refunding Bonds 


2015 Series B 


(The Dayton Power and Light Company
Project)


 


_______________________________


 


 


 


Dated


 


as of


 


August 1, 2015


 


 




    	 



    	 



    

INDEX


 


(This Index is not a part of the Agreement





but rather is for convenience of reference
only.)


 








	 	 	 	 	Page
	 	 	 	 	 
	Preambles	 		 	1
	 	 	 	 	 
	ARTICLE I
	DEFINITIONS
	 	 	 	 	 
	Section	1.1	Use of Defined Terms	 	2
	Section	1.2	Definitions	 	2
	Section	1.3	Interpretation	 	6
	Section	1.4	Captions and Headings	 	6
	 	 	 	 	 
	ARTICLE II
	REPRESENTATIONS
	 	 	 	 	 
	Section	2.1	Representations of the Issuer	 	7
	Section	2.2	No Warranty by Issuer of Condition or Suitability of the Projects	 	7
	Section	2.3	Representations and Covenants of the Company	 	7
	 	 	 	 	 
	ARTICLE III
	COMPLETION OF THE PROJECTS;
	ISSUANCE OF THE BONDS
	 	 	 	 	 
	Section	3.1	Acquisition, Construction and Installation	 	11
	Section	3.2	Project Descriptions	 	11
	Section	3.3	Issuance of the Bonds; Application of Proceeds	 	11
	Section	3.4	Investment of Fund Moneys	 	12
	Section	3.5	Rebate Fund	 	12
	 	 	 	 	 
	ARTICLE IV
	LOAN BY ISSUER; LOAN PAYMENTS;
	ADDITIONAL PAYMENTS; CREDIT FACILITY
	AND FIRST MORTGAGE BONDS
	 	 	 	 	 
	Section	4.1	Loan Repayment; Delivery of First Mortgage Bonds	 	13
	Section	4.2	Additional Payments	 	13
	Section	4.3	Place of Payments	 	14
	Section	4.4	Obligations Unconditional	 	14
	Section	4.5	Assignment of Revenues, Agreement and First Mortgage Bonds	 	14
	Section	4.6	Credit Facility; Cancellation; Notices	 	14
	Section	4.7	Company's Option to Elect Rate Period; Changes in Auction Date and Length of Auction Periods	 	14
	Section	4.8	Company's Obligation to Purchase Bonds 	 	14
	Section	4.9	First Mortgage Bonds 	 	15
	 	 	 	 	 
	ARTICLE V
	ADDITIONAL AGREEMENTS AND COVENANTS
	 	 	 	 	 
	Section	5.1	Right of Inspection		16
	Section	5.2	Maintenance	 	16
	Section	5.3	Removal of Portions of the Project Facilities	 	16
	Section	5.4	Operation of Project Facilities	 	16
	Section	5.5	Insurance	 	17
	Section	5.6	Workers' Compensation Coverage	 	17
	Section	5.7	Damage; Destruction and Eminent Domain	 	17



 


 






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	Section	5.8	Company to Maintain its Corporate Existence; Conditions Under Which Exceptions Permitted	 	17
	Section	5.9	Indemnification	 	18
	Section	5.10	Issuer and Company Not to Adversely Affect Exclusion of Interest on Bonds From Gross Income For Federal Income Tax Purposes	 	19
	Section	5.11	Ownership of Projects; Use of Projects	 	19
	Section	5.12	Assignment of Agreement in Whole or in Part by Company	 	19
	Section	5.13	Assignment of Agreement in Whole by Company (Novation)	 	20
	 	 	 	 	 
	ARTICLE VI
	REDEMPTION
	 	 	 	 	 
	Section	6.1	Optional Redemption	 	22
	Section	6.2	Extraordinary Optional Redemption	 	22
	Section	6.3	Mandatory Redemption	 	24
	Section	6.4	Notice of Redemption	 	24
	Section	6.5	Actions by Issuer	 	24
	Section	6.6	Concurrent Discharging of First Mortgage Bonds	 	24
	 	 	 	 	 
	ARTICLE VII
	EVENTS OF DEFAULT AND REMEDIES
	 	 	 	 	 
	Section	7.1	Events of Default	 	25
	Section	7.2	Remedies on Default	 	25
	Section	7.3	No Remedy Exclusive	 	26
	Section	7.4	Agreement to Pay Attorneys' Fees and Expenses	 	26
	Section	7.5	No Waiver	 	26
	Section	7.6	Notice of Default	 	26
	 	 	 	 	 
	ARTICLE VIII
	MISCELLANEOUS
	 	 	 	 	 
	Section	8.1	Term of Agreement	 	27
	Section	8.2	Amounts Remaining in Funds	 	27
	Section	8.3	Notices	 	27
	Section	8.4	Extent of Covenants of the Issuer; No Personal Liability	 	27
	Section	8.5	Binding Effect	 	27
	Section	8.6	Amendments and Supplements	 	28
	Section	8.7	Execution Counterparts	 	28
	Section	8.8	Severability	 	28
	Section	8.9	Governing Law	 	28
	Section	8.10	References to Credit Facility	 	28







 








	Signatures	 	 	S-1







 








	Exhibit A -- AIR QUALITY FACILITIES AT THE SERIES 1980 PROJECT 	 	A-1
	Exhibit B -- AIR QUALITY FACILITIES AT THE SERIES 1982 PROJECT 	 	B-1
	Exhibit C -- AIR QUALITY FACILITIES AT THE SERIES 1985 PROJECT 	 	C-1







 


 



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LOAN AGREEMENT


 


THIS LOAN AGREEMENT is
made and entered into as of August 1, 2015 between the OHIO AIR QUALITY DEVELOPMENT AUTHORITY (the "Issuer"), a body
politic and corporate organized and existing under the laws of the State of Ohio, and THE DAYTON POWER AND LIGHT COMPANY (the "Company"),
a public utility and corporation organized and existing under the laws of the State of Ohio. Capitalized terms used in the following
recitals are used as defined in Article I of this Agreement.


 


Pursuant to Section 13
of Article VIII of the Ohio Constitution and the Act, the Issuer has determined to issue, sell and deliver the Bonds as provided
in the Indenture and to lend the proceeds derived from the sale thereof to the Company to assist in the refunding of the Refunded
Bonds. The Refunded Bonds were issued to assist the Company in the refinancing of its portion of the costs of the Projects.


 


The Company and the Issuer
each have full right and lawful authority to enter into this Agreement and to perform and observe the provisions hereof on their
respective parts to be performed and observed.


 


NOW THEREFORE, in consideration
of the premises and the mutual representations and agreements hereinafter contained, the Issuer and the Company agree as follows
(provided that any obligation of the Issuer or the State created by or arising out of this Agreement shall never constitute a general
debt of the Issuer or the State or give rise to any pecuniary liability of the Issuer or the State but shall be payable solely
out of Revenues, including the Loan Payments made pursuant hereto):


 




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ARTICLE I


 


DEFINITIONS


 


Section
1.1.Use of Defined Terms. In addition to the words and terms defined elsewhere in this Agreement, the Indenture or
by reference to another document, the words and terms set forth in Section 1.2 hereof shall have the meanings set forth therein
unless the context or use clearly indicates another meaning or intent. Such definitions shall be equally applicable to both the
singular and plural forms of any of the words and terms defined therein.


 


Section
1.2.Definitions. As used herein:


 


“Additional Payments”
means the amounts required to be paid by the Company pursuant to the provisions of Section 4.2 hereof.


 


“Administration
Expenses” means the compensation (which compensation shall not be greater than that typically charged in similar circumstances;
and which shall not be limited by any provision of law in regard to the compensation of a trustee of any express trust) and reimbursement
of reasonable expenses, disbursements and advances incurred or made by or on behalf of the Trustee, the Registrar, the Remarketing
Agent, any Auction Agent, any Paying Agent and any Authenticating Agent (including the reasonable compensation and the expenses
and disbursements of its counsel and of all other persons not regularly in its employ), and shall also include all fees, charges,
expenses, advances, compensation and reimbursements and all other amounts due the Trustee, the Registrar and any Paying Agent or
Authenticating Agent under or pursuant to Section 6.03 of the Indenture.


 


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


 


“Air Quality Facility”
or "Air Quality Facilities" means those facilities which are air quality facilities as defined in Section 3706.01, Ohio
Revised Code.


 


“Engineer”
means an engineer (who may be an employee of the Company) or engineering firm qualified to practice the profession of engineering
under the laws of the State and who or which is acceptable to the Trustee.


 


“EPA” means
the Environmental Protection Agency of the State and any successor body, agency, commission or department.


 


“Event of Default”
means any of the events described as an Event of Default in Section 7.1 hereof.


 


“Force Majeure”
means any of the following:


 


(i)acts
of God; strikes, lockouts or other industrial disturbances; acts of public enemies; orders or restraints of any kind of the government
of the United States of America or of the State or any of their departments, agencies, political subdivisions or officials, or
any civil or military authority; insurrections; civil disturbances; riots; epidemics; landslides; lightning; earthquakes; fires;
hurricanes; tornados; storms; droughts; floods; arrests; restraint of government and people; explosions; breakage, nuclear accidents
or other malfunction or accident to facilities, machinery, transmission pipes or canals; partial or entire failure of a utility
serving the Projects; shortages of labor, materials, supplies or transportation; or


 


(ii)any
cause, circumstance or event not reasonably within the control of the Company.


 




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“Generating Stations”
means, respectively, the Killen Electric Generating Station Unit 2, the Walter C. Beckjord Generating Station Unit 6 and the William
H. Zimmer Electric Generating Station.


 


“Indenture”
means the Trust Indenture related to the Bonds, dated as of the same date as this Agreement, between the Issuer and the Trustee,
as amended or supplemented from time to time.


 


“Interest Rate
for Advances” means the interest rate per year payable on the Bonds.


 


“Investment Grade
Rating” means a long-term debt rating by a Rating Agency that is included in one of the four highest debt rating categories
of the Rating Agency, provided that such rating categories shall mean generic categories and without regard to or other qualifications
of ratings within each such generic rating category such as “+”, “-”, “1”, “2”
or “3”.


 


“Issuance Costs”
means those costs relating to the issuance of the Bonds as that term is used in Section 147(g) of the Code, including financial,
legal, accounting and printing fees, charges and expenses, underwriting fees, the Issuer Fee, initial acceptance fees of the Trustee,
any Authenticating Agent, the Registrar and any Paying Agent, and all other such fees, charges and expenses incurred in connection
with the authorization, sale, issuance and delivery of the Bonds.


 


“Issuer Fee”
means the aggregate fee of $213,750 due to the Issuer from the Company in connection with the issuance of the Bonds hereunder.


 


“Loan” means
the loan by the Issuer to the Company of the proceeds received from the sale of the Bonds.


 


“Loan Payment Date”
means any date on which any Bond Service Charges are due and payable.


 


“Loan Payments”
means the amounts required to be paid by the Company on the First Mortgage Bonds in repayment of the Loan pursuant to Section 4.1
hereof.


 


“Notice Address”
means:


  





	 	(a)	As to the Issuer:	Ohio Air Quality Development Authority
	 	 	 	1718 LeVeque Tower
	 	 	 	50 West Broad Street
	 	 	 	Columbus, Ohio  43215
	 	 	 	Attention:  Executive Director
	 	 	 	 
	 	(b)	As to the Company:	The Dayton Power & Light Company
	                               	 	 	1 Monument Circle 
	                                	 	 	Indianapolis, IN 46204
	 	 	 	Attention; Treasurer
	 	 	 	 
	 	 	With a copy to:	The Dayton Power & Light Company                    
	           	 	 	1 Monument Circle                                
	 	 	 	Indianapolis, IN 46204
	 	 	 	Attention; Assistant Treasurer




 


 




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	 	(c)	As to the Trustee:	The Bank of New York Mellon
	 	 	 	385 Rifle Camp Road, 3rd Floor
	 	 	 	Woodland Park, New Jersey 07424
	 	 	 	Attention:  Corporate Trust Administration







  


or such additional or different address,
notice of which is given under Section 8.3 hereof.


 


“1954 Code”
means the Internal Revenue Code of 1954 as amended from time to time through the date of enactment of the Code. References to the
1954 Code and Sections of the 1954 Code include relevant applicable regulations (including temporary regulations) and proposed
regulations thereunder and any successor provisions to those Sections, regulations or proposed regulations.


 


“Opinion of Bond
Counsel” means a written opinion of nationally recognized bond counsel selected by the Company and acceptable to the Trustee
who is experienced in matters relating to the exclusion from gross income for federal income tax purposes of interest on obligations
issued by states and their political subdivisions. Bond Counsel may be counsel to the Trustee or the Company.


 


“Original Bonds”
means the Series 1980 Bonds, the Series 1982 Bonds and the Series 1985 Bonds.


 


“Person”
or words importing persons mean firms, associations, partnerships (including without limitation, general and limited partnerships),
limited liability entities, joint ventures, societies, estates, trusts, corporations, public or governmental bodies, other legal
entities and natural persons.


 


“Prior Bonds”
means the Original Bonds, the Series 1992 Bonds, the Series 1995 Bonds and the Series 2005 Bonds.


 


“Projects”
or “Project Facilities” means the real, personal or real and personal property, including undivided or other interests
therein, identified in the Project Descriptions.


 


“Project Descriptions”
means the descriptions of the Project Facilities attached hereto as Exhibit A (with respect to the Series 1980 Project), Exhibit
B (with respect to the Series 1982 Project) and Exhibit C (with respect to the Series 1985 Project), as the same may be amended
in accordance with this Agreement.


 


“Project Purposes”
means the purposes of Air Quality Facilities as described in the Act and as particularly described in Exhibits A, B and C hereto.


 


“Project Sites”
means, with respect to the Series 1980 Bonds and the Series 1982 Bonds, the Walter C. Beckjord Electric Generating Station in Clermont
County, Ohio and the Killen Electric Generating Station in Adams County, Ohio, and with respect to the Series 1985 Bonds, the William
H. Zimmer Electric Generating Station in Clermont County, Ohio.


 


“Purchasers”
means STI Institutional & Government Inc., PNC Bank, National Association, U.S. Bank National Association, Fifth Third Commercial
Funding, Inc., Huntington Public Capital Corporation, Regions Capital Advantage, Inc., and BMO Harris Bank, N.A.


 


“Redemption Date”
means August 3, 2015 being the date on which all of the Refunded Bonds are to be redeemed under the Refunded Bonds Indenture in
accordance with Section 3.3 hereof.


 




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“Refunded Bonds”
means the $100,000,000 portion of the currently outstanding principal amount of the Series 2005 Bonds being refunded by the Bonds.


 


“Restructuring
Transaction” means the restructuring of the Company’s operations in accordance with an order by PUCO, including the
separation of the Company’s generation assets from its transmission and distribution assets (the “GenCo”), in
compliance with the laws of the state of Ohio and any rules and regulations thereunder.


 


“Revenues”
means (a) the Loan Payments, (b) all other moneys received or to be received by the Issuer (excluding the Issuer Fee) or the Trustee
in respect of repayment of the Loan, including without limitation, all moneys and investments in the Bond Fund, (c) any moneys
and investments in the Refunding Fund, and (d) all income and profit from the investment of the foregoing moneys. The term "Revenues"
does not include any moneys or investments in the Rebate Fund or the Bond Purchase Fund.


 


“Series 1980 Bonds”
means the $6,700,000 State of Ohio Air Quality Development Revenue Bonds, 1980 Series (The Dayton Power and Light Company Project)
dated as of May 1, 1980.


 


“Series 1982 Bonds”
means the $21,100,000 State of Ohio Collateralized Air Quality Development Revenue Bonds, 1982 Series (The Dayton Power and Light
Company Project) dated as of November 1, 1982.


 


“Series 1985 Bonds”
means the $110,000,000 State of Ohio Pollution Control Revenue Bonds, 1985 Series (The Dayton Power and Light Company Project)
dated as of December 1, 1985.


 


“Series 1992 Bonds”
means the $27,800,000 State of Ohio Collateralized Air Quality Development Revenue Refunding Bonds, 1992 Series B (The Dayton Power
and Light Company Project) dated as of August 15, 1992, now outstanding in the aggregate principal amount of $27,800,000.


 


“Series 1995 Bonds”
means the $110,000,000 State of Ohio Air Quality Development Revenue Refunding Bonds, 1995 Series (The Dayton Power and Light Company
Project) dated as of September 1, 1995, now outstanding in the aggregate principal amount of $110,000,000.


 


“Series 1980 Project”
means the real, personal or real and personal property, including undivided or other interests therein financed with the proceeds
of the Series 1980 Bonds and identified as Exhibit A hereto.


 


“Series 1982 Project”
means the real, personal or real and personal property, including undivided or other interests therein financed with the proceeds
of the Series 1982 Bonds and identified in Exhibit B hereto.


 


“Series 1985 Project”
means the real, personal or real and personal property, including undivided or other interests therein financed with the proceeds
of the Series 1985 Bonds and identified in Exhibit C hereto.


 


“Series 2005 Bonds”
means the $137,800,000 State of Ohio Collateralized Pollution Control Revenue Refunding Bonds, 2005 Series B (The Dayton Power
and Light Company Project) dated as of August 17, 2005, now outstanding in the aggregate principal amount of $137,800,000.


 




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“State” means
the State of Ohio.


 


“Trustee”
means The Bank of New York Mellon, a corporation organized and existing under the laws of the State of New York, as trustee under
the Indenture, unless and until a successor Trustee shall have become such pursuant to the applicable provisions of the Indenture,
and thereafter "Trustee" shall mean the successor Trustee. "Principal Office" of the Trustee shall mean the
principal corporate trust office of the Trustee for municipal securities, which office at the date of issuance of the Bonds is
located at its Notice Address.


 


“Unassigned Issuer
Rights” means all of the rights of the Issuer to receive Additional Payments under Section 4.2 hereof, to perform inspections
pursuant to Section 5.1 hereof, to be held harmless and indemnified under Section 5.9 hereof, to be reimbursed for attorney's fees
and expenses under Section 7.4 hereof and to give or withhold consent to amendments, changes, modifications, alterations and termination
of this Agreement under Section 8.6 hereof and its right to enforce such rights.


 


Section 1.3.Interpretation.
Any reference herein to the State, to the Issuer or to any member or officer of either includes entities or officials succeeding
to their respective functions, duties or responsibilities pursuant to or by operation of law or lawfully performing their functions.


 


Any reference to a section
or provision of the Constitution of the State or the Act, or to a section, provision or chapter of the Ohio Revised Code, or to
any statute of the United States of America, includes that section, provision or chapter as amended, modified, revised, supplemented
or superseded from time to time; provided, that no amendment, modification, revision, supplement or superseding section, provision
or chapter shall be applicable solely by reason of this provision, if it constitutes in any way an impairment of the rights or
obligations of the Issuer, the State, the Holders, the Trustee, the Registrar, the Auction Agent, an Authenticating Agent, a Paying
Agent, the Credit Facility Issuer, the Remarketing Agent, or the Company under this Agreement, the Bond Legislation, the Bonds,
the Indenture, the Company Mortgage, the Supplemental Mortgage Indenture or the First Mortgage Bonds or any other instrument or
document entered into in connection with any of the foregoing, including without limitation, any alteration of the obligation to
pay Bond Service Charges in the amount and manner, at the times, and from the sources provided in the Bond Legislation and the
Indenture, except as permitted in the Indenture.


 


Unless the context indicates
otherwise, words importing the singular number include the plural number, and vice versa; the terms "hereof", "hereby",
"herein", "hereto", "hereunder" and similar terms refer to this Agreement; and the term "hereafter"
means after, and the term "heretofore" means before, the date of delivery of the Bonds. Words of any gender include the
correlative words of the other genders, unless the sense indicates otherwise.


 


Section
1.4.Captions and Headings. The captions and headings in this Agreement are used solely for convenience of reference
and in no way define, limit or describe the scope or intent of any Articles, Sections, subsections, paragraphs or subparagraphs
or clauses hereof.


 


(End of Article I)


 




    	6



    	 



    

ARTICLE II


 


REPRESENTATIONS


 


Section
2.1.Representations of the Issuer. The Issuer represents that: (a) it is a body politic and corporate duly organized
and validly existing under the laws of the State; (b) it has duly accomplished all conditions necessary to be accomplished by
it prior to the issuance and delivery of the Bonds and the execution and delivery of this Agreement and the Indenture; (c) it
is not in violation of or in conflict with any provisions of the laws of the State which would impair its ability to carry out
its obligations contained in this Agreement or the Indenture; (d) it is empowered to enter into the transactions contemplated
by this Agreement and the Indenture; (e) it has duly authorized the execution, delivery and performance of this Agreement and
the Indenture; and (f) it will do all things in its power in order to maintain its existence or assure the assumption of its obligations
under this Agreement and the Indenture by any successor public body.


 


Section
2.2.No Warranty by Issuer of Condition or Suitability of the Projects. The Issuer makes no warranty, either express
or implied, as to the suitability or utilization of the Projects for the Project Purposes, or as to the condition of the Project
Facilities or that the Project Facilities are or will be suitable for the Company's purposes or needs.


 


Section
2.3.Representations and Covenants of the Company. The Company represents that:


 


(a)The Company
has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State, with power and
authority (corporate and other) to own its properties and conduct its business, to execute and deliver this Agreement, the Supplemental
Mortgage Indenture, the First Mortgage Bonds, and to perform its obligations under this Agreement, the Company Mortgage, the Supplemental
Mortgage Indenture and the First Mortgage Bonds;


 


(b)This Agreement,
the Supplemental Mortgage Indenture and the Company Mortgage have been duly authorized, executed and delivered by the Company;
the First Mortgage Bonds have been duly authorized, executed, issued and delivered; and this Agreement, the Supplemental Mortgage
Indenture, the Company Mortgage and the First Mortgage Bonds constitute valid and legally binding obligations of the Company, enforceable
in accordance with their respective terms, subject to bankruptcy, insolvency, reorganization and other laws of general applicability
relating to or affecting creditors’ rights, to laws relating to or affecting the enforcement of the security provided by
the Company Mortgage and to general equity principles;


 


(c)The execution,
delivery and performance by the Company of this Agreement, the Supplemental Mortgage Indenture, the Company Mortgage and the First
Mortgage Bonds and the consummation of the transactions contemplated hereby and thereby will not violate any provision of law or
regulation applicable to the Company, or of any writ or decree of any court or governmental instrumentality, or of the Articles
of Incorporation, as amended, or the Regulations, as amended, of the Company, or of any mortgage, indenture, contract, agreement
or other undertaking to which the


 




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Company is a party
or which purports to be binding upon the Company or upon any of its assets;


 


(d)Substantially
all (at least 90%) of the proceeds of the Original Bonds were used to provide “solid waste disposal facilities” and
“pollution control facilities” within the meaning of Sections 103(b)(4)(E) and (F) of the 1954 Code, respectively,
the original use of which facilities commenced with the Company and all of the proceeds of the Original Bonds have been spent for
the Projects or to pay costs of issuance of the Original Bonds. All of such Projects consist of land or property of a character
subject to the allowance for depreciation provided in Section 167 of the Code. The proceeds of the Bonds (other than any accrued
interest thereon) will be used exclusively to refund the Refunded Bonds and none of the proceeds of the Bonds will be used to pay
for any costs of issuance of the Bonds. The principal amount of the Bonds does not exceed the outstanding principal amount of the
Refunded Bonds. All of the proceeds of the Bonds will be used to retire the Refunded Bonds not later than 90 days after the date
of issuance of the Bonds. The proceeds of the Series 2005 Bonds (other than any accrued interest thereon) were used exclusively
to refund the Series 1992 Bonds and the Series 1995 Bonds and none of the proceeds of the Series 2005 Bonds was used to pay for
any costs of issuance of the Series 2005 Bonds. The proceeds of the Series 1992 Bonds (other than any accrued interest thereon)
were used exclusively to refund the Series 1980 Bonds and the Series 1982 Bonds and none of the proceeds of the Series 1992 Bonds
was used to pay for any costs of issuance of the Series 1992 Bonds. The principal amount of the Series 1992 Bonds did not exceed
the outstanding aggregate principal amount of the Series 1980 Bonds and the Series 1982 Bonds. All of the proceeds of the Series
1992 Bonds were used to retire the Series 1980 Bonds and the Series 1982 Bonds not later than 90 days after the date of issuance
of the Series 1992 Bonds. The proceeds of the Series 1995 Bonds (other than any accrued interest thereon) were used exclusively
to refund the Series 1985 Bonds and none of the proceeds of the Series 1995 Bonds was used to pay for any costs of issuance of
the Series 1995 Bonds. The principal amount of the Series 1995 Bonds did not exceed the outstanding principal amount of the Series
1985 Bonds. All of the proceeds of the Series 1995 Bonds were used to retire the Series 1985 Bonds not later than 90 days after
the date of issuance of the Series 1995 Bonds. The respective issue date of each of the issues of which the Original Bonds were
a part is prior to August 16, 1986;


 


(e)Either (1)
the acquisition and construction of the Series 1980 Project, the Series 1982 Project and the Series 1985 Project financed, respectively,
with the Series 1980 Bonds, the Series 1982 Bonds and the Series 1985 Bonds, was not commenced (within the meaning of Treasury
Regulations §1.103-8(a)(5)) prior to the adoption of the respective resolutions of the Issuer constituting official actions
of the Issuer and evidencing the intent of the Issuer to issue those Original Bonds (being March 8, 1977 with respect to the Series
1980 Bonds, November 19, 1975 with respect to the Series 1982 Bonds and November 15, 1984 with


 




    	8



    	 



    

respect to the
Series 1985 Bonds), or (2) any proceeds of the corresponding Refunded Bonds used to pay costs incurred prior to the adoption of
such corresponding resolution have been treated for purposes of this Agreement as having been used to provide working capital (not
land or depreciable property) to the Company;


 


(f)The Projects
have been substantially completed. The Projects constitute Air Quality Facilities under the Act and are consistent with and will
further the purposes of the Act and Section 13 of Article VIII of the Ohio Constitution and are located entirely within the State.
The Company will cause the Projects to be operated and maintained in such manner as to conform with all applicable zoning, planning,
building, environmental and other applicable governmental regulations and all permits, variances and orders issued or granted pursuant
thereto, including the permit-to-install for each portion of the Projects, which permits, variances and orders have not been withdrawn
or otherwise suspended, and to be consistent with the Act;


 


(g)It has used
or operated or has caused to be used or operated, and presently intends to use or operate or cause to be used or operated the Projects
in a manner consistent with the Project Purposes until the date on which the Bonds have been fully paid and knows of no reason
why the Projects will not be so operated. The Company does not, as of the date hereof, intend to sell or otherwise dispose of the
Projects or any portion thereof, other than in connection with a Restructuring Transaction;


 


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


 


(i)None of
the proceeds of the Prior Bonds have been used and none of the proceeds of the Bonds will be used, directly or indirectly to acquire
land or any interest therein;


 


(j)No portion
of the proceeds of the Prior Bonds has been used and no portion of the proceeds of the Bonds will be used to acquire existing property
or any interest therein unless the first use of such property or interest therein is pursuant to such acquisition;


 


(k)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;


 


(l)It is not
anticipated that as of the date hereof, 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;


 




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(m) The Prior Bonds
were not, and the Bonds are not, “federally guaranteed” within the meaning of Section 149(b) of the Code;


 


(n)On the respective
dates of issuance and delivery of the Prior Bonds, the Company reasonably expected that all of the proceeds thereof would be used
to carry out the governmental purposes of each such issue within the 3-year period beginning on the date each such issue was issued
and none of the proceeds of each such issue, if any, were invested in nonpurpose investments having a substantially guaranteed
yield for 3 years or more;


 


(o)In accordance
with Section 147(b) of the Code or its statutory predecessor, the respective weighted average maturity of the issue of which each
of the Prior Bonds was a part did not and the weighted average maturity of the Bonds does not exceed 120% of the weighted average
reasonably expected economic life of the facilities being financed by the proceeds thereof;


 


(p)The information
furnished by the Company and used by the Issuer in preparing the certifications and statements pursuant to Sections 148 and 149(e)
of the Code or their statutory predecessors with respect to the Prior Bonds was accurate and complete as of the respective date
of issuance thereof, 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 any necessary information statement pursuant to Section 149(e) of the Code, both referred
to in the Bond Legislation, will be accurate and complete as of the date of issuance of the Bonds;


 


(q)The Project
Facilities do not include any office except for offices (i) located on the Project Sites 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 Facilities; and


 


(r)Except
as disclosed in the Company’s filings with the U.S. Securities and Exchange Commission, the Company believes that, as of
the date hereof, it is in material compliance with all terms and provisions of all material permits, variances and orders heretofore
issued or granted by the EPA with respect to the Generating Stations and its other facilities within the State, including any permits-to-install
and permits-to-operate issued with respect thereto.


 


(End of Article II)


 




    	10



    	 



    

ARTICLE III


 


COMPLETION OF THE PROJECTS;





ISSUANCE OF THE BONDS


 


Section
3.1.Acquisition, Construction and Installation. The Company represents and agrees that it and any other public utility
company which owns any undivided interest in the Project Facilities with the Company as tenants-in-common have caused the Projects
to be acquired, constructed and installed on the Project Sites in accordance with the Project Descriptions and in conformance
with all applicable, valid and enforceable (i) zoning, planning, building, environmental and other similar regulations of all
governmental authorities having jurisdiction over the Projects and (ii) permits, variances and orders issued in respect of the
Projects by EPA, noncompliance with which would have a material adverse effect on the Company’s ability to operate and maintain
the Projects or to perform its obligations hereunder, provided that the Company reserves the right to contest in good faith any
such regulations, permits, variances or orders. The proceeds derived from the Original Bonds, including any investment thereof,
were expended in accordance with the trust indentures and the loan agreements relating to the Original Bonds.


 


Section
3.2.Project Descriptions. The Project Descriptions 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 and the Trustee and provided further that no change
in the Project Descriptions shall materially change the function of the Project Facilities unless the Trustee shall have received
(i) an Engineer's certificate that such changes will not impair the significance or character of the Project Facilities as Air
Quality Facilities and (ii) an Opinion of Bond Counsel or ruling of the Internal Revenue Service to the effect that such amendment
will not adversely affect the exclusion of interest on the Bonds from gross income for federal income tax purposes.


 


Section
3.3.Issuance of the Bonds; Application of Proceeds. To provide funds to make the Loan to the Company to assist the
Company in the refunding of the Refunded Bonds, the Issuer will issue, sell and deliver the Bonds to the Purchasers. The Bonds
will be issued pursuant to the Indenture 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 will be issued, sold and delivered. The Company, for the benefit of the Issuer, the
Trustee and each Bondholder, shall do and perform all acts and things required or contemplated in the Indenture to be done or
performed by the Company.


 


The proceeds from the
sale of the Bonds shall be loaned to the Company to assist the Company in the refunding of the Refunded Bonds. Those proceeds shall
be deposited in the Refunding Fund with all investment earnings thereon being credited to the Refunding Fund and applied in accordance
with Section 5.02 of the Indenture.


 


Pursuant to Section 5.02
of the Indenture, on the Redemption Date, all moneys in the Refunding Fund shall be transferred by the Trustee to the Refunded
Bonds Trustee for deposit in the  bond fund created in the Refunded Bonds Indenture.
In addition, the Company shall deposit with the Refunded Bonds Trustee on or prior to the Redemption Date funds which, together
with the proceeds of the Bonds, will be sufficient to redeem the Refunded Bonds on the Redemption Date.


 


Pending disbursement
pursuant to this Section, the proceeds so deposited in the Refunding Fund, together with any investment earnings thereon, shall
constitute a part of the Revenues assigned by the Issuer to the Trustee for the payment of Bond Service Charges.


 




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The Company acknowledges
that the proceeds of the Bonds (including any interest income thereon) may 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 is (and will remain after the issuance of the Bonds) obligated to, and hereby confirms that it will,
pay all costs of the redemption of the Refunded Bonds on the Redemption Date.


 


The Company and the Issuer
hereby confirm that the Refunded Bonds Trustee has been notified that the entire outstanding principal amount of the Refunded Bonds
is to be redeemed on the Redemption Date, at the redemption price of 100% of the principal amount thereof, plus interest accrued
to that date.


 


Section
3.4.Investment of Fund Moneys. Moneys held as part of the Bond Fund, the Refunding Fund or the Rebate Fund shall be
invested or reinvested by the Trustee in Eligible Investments at the written direction of the Company pursuant to Section 5.05
of the Indenture. The Issuer (to the extent it retained or retains direction or control) and the Company each hereby covenants
that it will restrict that investment and reinvestment and the use of the proceeds of the Bonds in such manner and to such extent,
if any, as may be necessary so that the Bonds will not constitute arbitrage bonds under Section 148 of the Code.


 


The Company shall provide
the Issuer with, and the Issuer may base its certificate and statement, each as authorized by the Bond Legislation, 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.


 


Section 3.5.Rebate Fund.
To the extent required by Section 5.09 of the Indenture, within five days after the end of the fifth Bond Year and every fifth
Bond Year thereafter, and within five days after payment in full of all outstanding Bonds, the Company shall calculate the amount
of Excess Earnings as of the end of that Bond Year or the date of such payment and shall notify the Trustee of that amount. If
the amount then on deposit in the Rebate Fund created under the Indenture is less than the amount of Excess Earnings (computed
by taking into account the amount or amounts, if any, previously paid to the United States pursuant to Section 5.09 of the Indenture
and this Section), 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 shall remain in effect and be binding upon the Company notwithstanding the release and discharge
of the Indenture. The Company shall obtain and keep such records of the computations made pursuant to this Section as are required
under Section 148(f) of the Code.


 


(End of Article III)


 




    	12



    	 



    

ARTICLE IV


 


LOAN BY ISSUER; LOAN PAYMENTS;





ADDITIONAL PAYMENTS; CREDIT FACILITY





AND FIRST MORTGAGE BONDS


 


Section
4.1.Loan Repayment; Delivery of First Mortgage Bonds. Upon the terms and conditions of this Agreement, the Issuer agrees
to make the Loan to the Company. The proceeds of the Loan shall be deposited with the Trustee pursuant to Section 3.3 hereof.
As evidence of its obligation hereunder to repay the Loan, the Company agrees to execute and deliver the First Mortgage Bonds
to the Issuer, in the manner provided in Section 4.9 hereof. In consideration of and in repayment of the Loan, the Company shall
under all circumstances and without reduction for any reason (other than any credits to which the Company is entitled to under
this Agreement or the Indenture) make, as Loan Payments, to the Trustee for the account of the Issuer, payments on the First Mortgage
Bonds which correspond, as to time, and are equal in amount as of the Loan Payment Date, to the corresponding Bond Service Charges
payable on the Bonds. All Loan Payments received by the Trustee shall be held and disbursed in accordance with the provisions
of the Indenture for application to the payment of Bond Service Charges.


 


The Company shall be
entitled to a credit against the Loan Payments required to be made on any Loan Payment Date to the extent that the balance of the
Bond Fund is then in excess of amounts required (a) for the payment of Bonds theretofore matured or theretofore called for redemption,
or to be called for redemption pursuant to Section 6.1 hereof (b) for the payment of interest for which checks or drafts have been
drawn and mailed by the Trustee or Paying Agent, and (c) to be deposited in the Bond Fund by the Indenture for use other than for
the payment of Bond Service Charges due on that Loan Payment Date.


 


The Company’s obligation
to make Loan Payments shall be reduced to the extent of (a) any payments made by the Credit Facility Issuer to the Trustee in respect
of the principal of, premium, if any, or interest on the Bonds when due pursuant to the Credit Facility, provided, that the Credit
Facility Issuer has been reimbursed for such payments in accordance with the terms of the Reimbursement Agreement, or (b) the availability
of remarketing proceeds to pay the purchase price pursuant to Section 4.08 of the Indenture.


 


Except for such interest
of the Company as may hereafter arise pursuant to Section 8.2 hereof or Sections 5.07 or 5.08 of the Indenture, the Company acknowledges
that the Company has no interest in the Bond Fund or the Bond Purchase Fund and the Issuer acknowledges that neither the State
nor the Issuer has any interest in the Bond Fund or the Bond Purchase Fund, and the Company and the Issuer acknowledge that any
moneys deposited therein shall be in the custody of and held by the Trustee in trust for the benefit of the Holders.


 


Section 4.2.Additional Payments.
The Company shall pay to the Issuer, promptly after the filing of any necessary Form 8038 information statement, the Issuer Fee
and, as Additional Payments hereunder, any and all reasonable costs and expenses incurred or to be paid by the Issuer in connection
with the issuance and delivery of the Bonds or otherwise related to actions taken by the Issuer under this Agreement or the Indenture.


 


The Company shall pay
the Administration Expenses to the Trustee, the Registrar, the Remarketing Agent, the Auction Agent, and any Paying Agent or Authenticating
Agent, as appropriate, as Additional Payments hereunder.


 


The Company may, without
creating a default hereunder, contest in good faith the reasonableness of any such cost or expense incurred or to be paid by the
Issuer and any Administration Expenses claimed to be due to the Trustee, the Registrar, the Auction Agent, the Remarketing Agent,
any Paying Agent or any Authenticating Agent.


 




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In the event the Company
should fail to pay any Loan Payments, Additional Payments or Administration Expenses as provided herein when due, the payment in
default shall continue as an obligation of the Company until the amount in default shall have been fully paid together with interest
thereon during the default period at the Interest Rate for Advances.


 


Section
4.3.Place of Payments. The Company shall make all Loan Payments directly to the Trustee at its Principal Office. Additional
Payments shall be made directly to the person or entity to whom or to which they are due.


 


Section
4.4.Obligations Unconditional. The obligations of the Company to make Loan Payments, Additional Payments and any payments
required of the Company under Section 5.09 of the Indenture shall be absolute and unconditional, and the Company shall make such
payments without abatement, diminution or deduction regardless of any cause or circumstances whatsoever including, without limitation,
any defense, set-off, recoupment or counterclaim which the Company may have or assert against the Issuer, the Trustee, the Registrar,
the Remarketing Agent, the Auction Agent, the Paying Agent or any other Person.


 


Section
4.5.Assignment of Revenues, Agreement and First Mortgage Bonds. To secure the payment of Bond Service Charges, the
Issuer shall absolutely assign to the Trustee, its successors in trust and its and their assigns forever, by the Indenture, all
right, title and interest of the Issuer in and to (a) the Revenues, including, without limitation, all Loan Payments and other
amounts receivable by or on behalf of the Issuer under the Agreement in respect of repayment of the Loan, (b) the Agreement except
for the Unassigned Issuer’s Rights, and (c) the First Mortgage Bonds. The Company hereby agrees and consents to those assignments.


 


Section
4.6.Credit Facility; Cancellation; Notices.


 


(a)The
Company may, but shall not be required to, provide for the delivery of a Credit Facility with respect to the Bonds.


 


(b)Upon
satisfaction of the requirements contained in Section 14.03 of the Indenture, the Company may provide for the delivery of an Alternate
Credit Facility.


 


(c)Upon
satisfaction of the conditions contained in Section 14.02 of the Indenture, the Company may cancel any Credit Facility then in
effect at such time and direct the Trustee in writing to surrender such Credit Facility to the Credit Facility Issuer by which
it was issued in accordance with the Indenture; provided, that no such cancellation shall become effective and no such surrender
shall take place until all Bonds subject to purchase pursuant to Section 4.07(e) of the Indenture have been so purchased or redeemed
with the proceeds of such Credit Facility.


 


Section
4.7.Company's Option to Elect Rate Period; Changes in Auction Date and Length of Auction Periods. The Company shall
have, and is hereby granted, the option to elect to convert on any Conversion Date the interest rate borne by the Bonds to Variable
Rate or an Auction Rate to be effective for a Rate Period pursuant to the provisions of Article II of the Indenture and subject
to the terms and conditions set forth therein. In addition, the Company at its option, with prior written consent of the Holders,
may determine to establish a new Index Rate Period in accordance with the provisions of Section 2.03(f)(iv) of the Indenture.
Prior to conversion to an Auction Rate, the Company shall designate an Auction Agent and at least one Broker-Dealer; until any
such conversion is made any references herein to the Auction Agent and the Broker-Dealer shall be ineffective. When the Bonds
bear interest at an Auction Rate, the Company also shall have the option to direct the change of Auction Dates and/or the length
of Auction Periods in accordance with the Indenture. To exercise such options, the Company shall give the written notice required
by the Indenture.


 


Section
4.8.Company's Obligation to Purchase Bonds. The Company hereby agrees to pay or cause to be paid to the Trustee or
the Paying Agent, on each day on which Bonds may be or are required to be tendered for purchase, amounts equal to the amounts
to be paid by the Trustee or the Paying Agent with respect to the Bonds tendered for purchase on such dates pursuant to Article


 




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IV of the Indenture; provided, however,
that the obligation of the Company to make any such payment under this Section shall be reduced by the amount of (A) moneys paid
by the Remarketing Agent as proceeds of the remarketing of such Bonds by the Remarketing Agent, (B) moneys drawn under a Credit
Facility, if any, for the purpose of paying such purchase price and (C) other moneys made available by the Company, as set forth
in Section 4.08(b)(ii) of the Indenture.


 


Section 4.9.First
Mortgage Bonds. To evidence and secure the obligations of the Company to make the Loan Payments and repay the Loan, the Company
will, concurrently with the issuance of the Bonds, execute and deliver First Mortgage Bonds to the Issuer in an aggregate principal
amount equal to the aggregate principal amount of the Bonds. The Company agrees that First Mortgage Bonds authorized pursuant to
the Company Mortgage, will be issued containing the terms and conditions and in substantially the form set forth in the Supplemental
Mortgage Indenture. The First Mortgage Bonds shall:


 


(a)provide
for payments of interest equal to the payments of interest on the Bonds;


 


(b)provide
for payments of principal and any premium equal to the payments of principal (whether at maturity or by call for mandatory or optional
redemption or tender for purchase or pursuant to acceleration or otherwise) and any premium on the Bonds;


 


(c)require
all such payments on such First Mortgage Bonds to be made on or prior to the due date for the corresponding payments to be made
on the Bonds; and


 


(d)contain
redemption provisions corresponding with such provisions of the Bonds.


 


Unless the Company is entitled to a credit
under this Agreement or the Indenture, all payments on the First Mortgage Bonds shall be in the full amount required thereunder.
The First Mortgage Bonds shall be registered in the name of the Trustee (as assignee of the Issuer under the Indenture) and shall
not be transferred by the Trustee, except to effect transfers to any successor trustee under the Indenture.


 


(End of Article IV)


 




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ARTICLE V


 


ADDITIONAL AGREEMENTS AND COVENANTS


 


Section
5.1.Right of Inspection. The Company agrees that, subject to reasonable security and safety regulations and to reasonable
requirements as to notice, the Issuer and the Trustee and their or any of their respective duly authorized agents shall have the
right at all reasonable times to enter upon the Project Sites to examine and inspect the Projects.


 


Section
5.2.Maintenance. The Company shall use its best efforts to keep and maintain the Project Facilities, including all
appurtenances thereto and any personal property therein or thereon, in good repair and good operating condition so that the Project
Facilities will continue to constitute Air Quality Facilities for the purposes of the operation thereof as required by Section
5.4 hereof.


 


So
long as such shall not be in violation of the Act or impair the character of the Project Facilities as Air Quality Facilities,
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 Facilities 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
Facilities.


 


Section
5.3.Removal of Portions of the Project Facilities. 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 Facilities, except
that, subject to Section 5.4 hereof, it will use its best efforts to ensure the continued character of the Project Facilities
as Air Quality Facilities. The Company shall have the right from time to time to substitute personal property or fixtures for
any portions of the Project Facilities, provided that the personal property or fixtures so substituted shall not impair the character
of the Project Facilities as Air Quality Facilities. Any such substituted property or fixtures shall, when so substituted, become
a part of the Project Facilities. The Company shall also have the right to remove any portion of the Project Facilities, without
substitution therefor; provided, that the Company shall deliver to the Trustee a certificate signed by an Engineer describing
said portion of the Project Facilities and stating that the removal of such property or fixtures will not impair the character
of the Project Facilities as Air Quality Facilities.


 


Section
5.4.Operation of Project Facilities. The Company will, subject to its obligations and rights to maintain, repair or
remove portions of the Project Facilities, as provided in Sections 5.2 and 5.3 hereof, use its best efforts to continue operation
of the Project Facilities 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, use
its best efforts to operate and maintain the Project Facilities in accordance with all applicable, valid and enforceable rules
and regulations of governmental entities having jurisdiction thereof; provided, that the Company reserves the right to contest
in good faith any such laws or regulations.


 


Nothing in this Agreement
shall 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 Facilities and in the event such discontinuance or
suspension shall render unnecessary the continued operation of the Project Facilities, the Company shall have the right to discontinue
the operation of the Project Facilities during the period of any such discontinuance or suspension.


 




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Section
5.5.Insurance. The Company agrees to insure its interest in the Project Facilities in the amount and with the coverage
required by the Company Mortgage.


 


Section
5.6.Workers' Compensation Coverage. Throughout the term of this Agreement, the Company shall comply, or cause compliance,
with applicable workers' compensation laws of the State.


 


Section
5.7.Damage; Destruction and Eminent Domain. If, during the term of this Agreement, the Project Facilities or any portion
thereof is destroyed or damaged in whole or in part by fire or other casualty, or title to, or the temporary use of, the Project
Facilities or any portion thereof shall have been taken by the exercise of the power of eminent domain, and the Company or the
Company Mortgage Trustee receives net proceeds from insurance or any condemnation award in connection therewith, the Company (unless
it shall have exercised its option to prepay the Loan Payments pursuant to Section 6.2 hereof), to the extent required to comply
with applicable laws and regulations with respect to the operations of facilities of the Company served by the Projects, shall
promptly cause such net proceeds or an amount equal thereto to be used to repair, rebuild or restore the portion of the Project
Facilities so damaged, destroyed or taken with such changes, alterations and modifications (including the substitution and addition
of other property) as may be necessary or desirable for the administration and operation of the Project Facilities as Air Quality
Facilities and as shall not impair the character or significance of the Project Facilities as furthering the purposes of the Act.
It is hereby acknowledged and agreed that any net proceeds from insurance or any condemnation award relating to the Project Facilities
are subject to the lien of the Company Mortgage and shall be disposed of in accordance with the terms and provisions of the Company
Mortgage and that any obligations of the Company under this Section 5.7 not satisfied by application of such net proceeds shall
be limited to the general credit of the Company and does not require disposition of such net proceeds contrary to the requirements
of the Company Mortgage.


 


Section 5.8.Company
to Maintain its Corporate Existence; Conditions Under Which Exceptions Permitted. The Company agrees that during the term of
this Agreement it will maintain its corporate existence and, will not sell, merge or consolidate with or into any other Person
or sell, lease or transfer all or substantially all of its property to any Person, except that the following shall be permitted:


 


(a)the Company
may transfer property, including the Project Facilities, as part of a Restructuring Transaction;


 


(b)the Company
may consolidate with or merge with or into any other Person or sell, lease or transfer all or substantially all of its properties
to any Person so long as either (A) the Company shall be the surviving corporation or (B) the Person (if other than the Company)
formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance, transfer or lease
the properties of the Company substantially as an entirety shall be organized and validly existing under the laws of the United
States or any state thereof or the District of Columbia and shall expressly assume all of the obligations of the Company under
this Agreement;


 


(c)a subsidiary
of the Company shall be permitted to merge or consolidate with or into or sell, lease or transfer all or substantially all of its
property to the Company (provided, with


 




    	17



    	 



    

respect to a merger,
the Company is the surviving entity) or another subsidiary of the Company;


 


(d)the Company
may wind up, voluntarily liquidate or dissolve any subsidiary if (A) such subsidiary is not a Significant Subsidiary (as defined
in Rule 1-02 of Regulation S-X promulgated under the Securities Act of 1933, as amended) and (B) the winding up, voluntary liquidation
or dissolution of such subsidiary will not result in an Event of Default hereunder or otherwise have a material adverse effect
on the business, property, financial condition or results of operations of the Company and its subsidiaries, taken as a whole,
which materially and adversely affects the ability of the Company to perform its obligations under this Agreement.


 


If a consolidation, merger,
sale, lease or other transfer is made as provided in this Section, the provisions of this Section shall continue in full force
and effect and no further consolidation, merger, sale, lease or other transfer shall be made except in compliance with the provisions
of this Section.


 


Section
5.9.Indemnification. 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)
any loss or damage to property or injury to or death of or loss by any person that may be occasioned by any cause whatsoever pertaining
to the construction, maintenance, operation and use of the Project Facilities; (b) any breach or default on the part of the Company
in the performance of any covenant or agreement of the Company under this Agreement or any related document, or arising from any
act or failure to act by the Company, or any of its agents, contractors, servants, employees or licensees; (c) the authorization,
issuance and sale of the Bonds, or the subsequent remarketing or determination of the interest rate or rates on the Bonds, and
the provision of any information furnished in connection therewith concerning the Project Facilities or the Company (including,
without limitation, any information furnished by the Company for inclusion in any certifications made by the Issuer under Section
3.7 hereof or for inclusion in, or as a basis for preparation of, the Form 8038 information statement to be filed by the Issuer;
and (d) any claim or action or proceeding with respect to the matters set forth in (a), (b) and (c) above brought thereon.


 


The Company agrees to
indemnify the Trustee (including any predecessor Trustee), the Paying Agent, the Remarketing Agent, the Auction Agent and the Registrar
(each hereinafter referred to in this section as an "indemnified party") for and to hold each of them harmless from and
against all losses, liabilities, obligations, damages, claims, costs and expenses of any kind or nature whatsoever (including the
compensation and expenses of their counsel) incurred without negligence or willful misconduct on the part of the indemnified party
arising out of, relating to or connected with the Indenture or the Auction Agreement, including, but not limited to, on account
of the Trustee’s acceptance or administration of the trusts created by, or the performance of its powers or duties under
the Indenture, or of any action taken or omitted to be taken by the indemnified party in accordance with the terms of this Agreement,
the Bonds or the Indenture or any action taken at the request of or with the consent of the Company, including the costs and expenses
of the indemnified party in defending itself against or investigating any claim, loss, or liability, action, suits or proceeding
brought in connection with the exercise or performance of any of its powers or duties under this Agreement, the Bonds or the Indenture.


 


In case any action or
proceeding is brought against the Issuer or an indemnified party in respect of which indemnity may be sought hereunder, the party
seeking indemnity promptly shall give notice of that action or proceeding to the Company, and the Company upon receipt of that
notice


 




    	18



    	 



    

shall have the obligation and the right
to assume the defense of the action or proceeding; provided, that failure of a party to give that notice shall not relieve the
Company from any of its obligations under this Section unless that failure prejudices the defense of the action or proceeding by
the Company. At its own expense, an indemnified party may employ separate counsel and participate in the defense; provided, however,
where it is reasonably determined by Issuer or indemnified parties to be ethically inappropriate or that it would create an actual
or potential conflict of interest for one firm to represent the interests of the Issuer and any other indemnified party or parties,
the Company shall, to the extent applicable, pay the Issuer's and the indemnified parties’ legal expenses in connection with
the Issuer's and the indemnified parties’ 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 and
agents of the Issuer, the Trustee, the Paying Agent, the Remarketing Agent, the Auction Agent and the Registrar, respectively.
That indemnification is intended to and shall be enforceable by the Issuer, the Trustee, the Paying Agent, the Remarketing Agent
and the Registrar, respectively, to the full extent permitted by law. Each of the Trustee and each indemnified Person not a party
to this Agreement is an express third party beneficiary of this Section 5.9 and shall have the right to enforce or pursue remedies
under the provisions hereof as fully as though an original party hereto.


 


Section
5.10.Issuer and Company Not to Adversely Affect Exclusion of Interest on Bonds From Gross Income For Federal Income Tax
Purposes. The Issuer, solely to the extent within its control, and the Company each hereby 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 remain excluded from the gross income of the Holders 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. Neither the Issuer nor the Company shall
cause any proceeds of the Bonds to be expended, except pursuant to the Indenture and this Agreement.


 


Section
5.11.Ownership of Projects; Use of Projects. The Issuer agrees that it does not have and shall not have any interest
in, title to or ownership of the Projects or the Project Sites. The Issuer does hereby covenant and agree that it will not take
any action, or cause any action to be taken on its behalf, during the term of this Agreement, other than pursuant to Article VII
of this Agreement or Article VII of the Indenture, to interfere with the Company’s ownership interest in the Projects or
to prevent the Company from having possession, custody, use and enjoyment of the Projects, except such action as is requested
by the Trustee in enforcing any remedies available to it under this Agreement or the Indenture.


 


Section
5.12.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:


 


(a)No assignment
(other than pursuant to Section 5.8 or Section 5.13 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 payment of the
Loan Payments and Additional Payments 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 obligations under this Agreement,
and any assignee from the


 




    	19



    	 



    

Company shall assume
the obligations of the Company hereunder to the extent of the interest assigned.


 


(c)The Company
shall furnish to the Issuer and the Trustee an Opinion of Bond Counsel addressed to the Issuer and the Trustee to the effect 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 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 Project Purposes to be accomplished by operation of the Projects
as herein provided.


 


5.13Assignment
of Agreement in Whole by Company (Novation). In addition to an assignment contemplated by Sections 5.8 and 5.12 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
either (i) as of a date the Bonds are subject to mandatory purchase under Section 4.07 of the Indenture or (ii) as of a date specified
by the Company in connection with a Restructuring Transaction but, in such case, only if the assignee is the GenCo and the Company
has delivered to the Issuer and the Trustee written evidence of an Investment Grade Rating (taking into account such assignment
to, and assumption in full by, the GenCo) with respect to the Bonds from each Rating Agency.


 


(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, 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 further that if there is more than one assignee, such assignment and assumption agreement shall be on a joint
and several basis among all assignees.


 


(c)The Company
shall furnish to the Issuer and the Trustee (i) an Opinion of Bond Counsel to the effect 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, (ii) an opinion of
counsel to the assignee to the effect that such assignment and assumption agreement has been duly authorized by the assignee and
constitutes the legal, valid and binding obligation of the assignee, enforceable against the assignee


 




    	20



    	 



    

in accordance with
its terms, subject to laws relating to or affecting generally the enforcement of creditors’ rights, including, without limitation,
bankruptcy and insolvency laws and to general principles of equity (regardless of whether considered in a proceeding in equity
or at law) and (iii) a certificate of an Authorized Company Representative and an opinion of counsel to the Company, each stating
to the effect that such assignment complies with this Section 5.13 and that all conditions precedent herein relating to such assignment
have been complied with.


 


(d)The Company
shall, within 30 days after execution thereof, furnish or cause to be furnished to the 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 Projects as herein provided.


 


(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.


 


(End of Article V)


 




    	21



    	 



    

ARTICLE VI


 


REDEMPTION


 


Section 6.1.Optional Redemption.
Provided no Event of Default shall have occurred and be subsisting, at any time and from time to time, the Company may deliver
moneys to the Trustee in addition to Loan Payments or Additional Payments required to be made and direct the Trustee to use the
moneys so delivered for the purpose of redeeming Bonds called for optional redemption in accordance with the applicable provisions
of the Indenture providing for optional redemption at the redemption price stated in the Indenture. Pending application for those
purposes, any moneys so delivered shall be held by the Trustee in a special account in the Bond Fund and delivery of those moneys
shall not, except as set forth in Section 4.1 hereof, operate to abate or postpone Loan Payments or Additional Payments otherwise
becoming due or to alter or suspend any other obligations of the Company under this Agreement.


 


Section 6.2.Extraordinary Optional
Redemption. The Company shall have, subject to the conditions hereinafter imposed, the option during a Term Rate Period to
direct the redemption of the Bonds in whole or in part in accordance with Section 4.01(a) of the Indenture upon the occurrence
of any of the following events:


 


(a)A Project
or a Generating Station shall have been damaged or destroyed to such an extent that (1) it cannot reasonably be expected to be
restored, within a period of six consecutive months, to the condition thereof immediately preceding such damage or destruction
or (2) the Company is reasonably expected to be prevented from carrying on its normal operations in connection therewith for a
period of six consecutive months.


 


(b)Title to,
or the temporary use of, all or a significant part of a Project or a Generating Station shall have been taken under the exercise
of the power of eminent domain (1) to such extent that it cannot reasonably be expected to be restored within a period of six consecutive
months to a condition of usefulness comparable to that existing prior to the taking or (2) to such an extent that the Company is
reasonably expected to be prevented from carrying on its normal operations in connection therewith for a period of six consecutive
months.


 


(c)As a result
of any changes in the Constitution of the State, the Constitution of the United States of America or any state or federal laws
or as a result of legislative or administrative action (whether state or federal) or by final decree, judgment or order of any
court or administrative body (whether state or federal) entered after any contest thereof by the Issuer or the Company in good
faith, this Agreement shall have become void or unenforceable or impossible of performance in accordance with the intent and purpose
of the parties as expressed in this Agreement.


 


(d)Unreasonable
burdens or excessive liabilities shall have been imposed upon the Issuer or the Company with respect to a Project or a Generating
Station or the operation thereof, including, without limitation, the imposition of federal, state or other ad valorem, property,
income or other taxes other than ad valorem


 




    	22



    	 



    

taxes at the rates
presently levied upon privately owned property used for the same general purpose as a Project or a Generating Station.


 


(e)Changes
in the economic availability of raw materials, operating supplies, energy sources or supplies or facilities (including, but not
limited to, facilities in connection with the disposal of industrial wastes) necessary for the operation of a Project or a Generating
Station for the Project Purposes occur or technological or other changes occur which the Company cannot reasonably overcome or
control and which in the Company’s reasonable judgment render a Project or a Generating Station uneconomic or obsolete for
the Project Purposes.


 


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


 


(g)The termination
by the Company of operations at a Generating Station.


 


As used in this Section
6.2, the term “a Project” means the portion of the Project Facilities at a particular Generating Station.


 


The amount payable by
the Company in the event of its exercise of the option granted in this Section shall be the sum of the following:


 


(i)An amount
of money which, when added to the moneys and investments held to the credit of the Bond Fund, will be sufficient pursuant to the
provisions of the Indenture to pay, at a redemption price of 100% of the principal amount redeemed plus accrued and unpaid interest
to the redemption date, and discharge, the Outstanding Bonds then being redeemed on the earliest applicable redemption date, that
amount to be paid to the Trustee, plus


 


(ii)An amount
of money equal to the Additional Payments relating to those Bonds accrued and to accrue until actual final payment and redemption
of those Bonds, that amount or applicable portions thereof to be paid to the Trustee or to the Persons to whom those Additional
Payments are or will be due.


 


The requirement of (ii) above with respect
to Additional Payments to accrue may be met if provisions satisfactory to the Trustee and the Issuer are made for paying those
amounts as they accrue.


 


The rights and options
granted to the Company in this Section may be exercised whether or not the Company is in default hereunder; provided, that such
default will not relieve the Company from performing those actions which are necessary to exercise any such right or option granted
hereunder.


 




    	23



    	 



    

Section
6.3.Mandatory Redemption. The Company shall deliver to the Trustee the moneys needed to redeem the Bonds in accordance
with any mandatory redemption provisions relating thereto as may be set forth in Section 4.01(b) of the Indenture.


 


Section
6.4.Notice of Redemption. In order to exercise an option granted in, or to consummate a redemption required by, this
Article VI, the Company shall, within 180 days following the event authorizing the exercise of such option, or at any time during
the continuation of the condition referred to in paragraphs (c), (d) or (e) of Section 6.2 hereof, or at any time that optional
redemption of the Bonds is permitted under the Indenture as provided in Section 6.1 hereof, or promptly upon the occurrence of
a Determination of Taxability, give written notice to the Issuer, the Trustee and the Company Mortgage Trustee that it is exercising
its option to direct the redemption of Bonds, or that the redemption thereof is required by Section 4.01(b) of the Indenture due
to the occurrence of a Determination of Taxability, as the case may be, in accordance with the Agreement and the Indenture, and
shall specify therein the date on which such redemption is to be made, which date shall not be more than 180 days from the date
such notice is mailed. The Company shall make arrangements satisfactory to the Trustee for the giving of the required notice of
redemption to the Holders of the Bonds, in which arrangements the Issuer shall cooperate. The Company shall make arrangements
satisfactory to the Company Mortgage Trustee to effect a concurrent redemption of an equivalent principal amount of corresponding
First Mortgage Bonds under the Supplemental Mortgage Indenture.


 


Section
6.5.Actions by Issuer. Subject to Section 4.2 hereof, at the request of the Company or the Trustee, the Issuer shall
take all steps required of it under the applicable provisions of the Indenture or the Bonds to effect the redemption of all or
a portion of the Bonds pursuant to this Article VI.


 


Section 6.6.Concurrent
Discharging of First Mortgage Bonds. In the event any of the Bonds or portion thereof shall be paid and discharged, or deemed
to be paid and discharged, pursuant to any provisions of this Agreement and the Indenture, so that such Bonds or such portion thereof
are not thereafter outstanding within the meaning of the Indenture, a like principal amount of corresponding First Mortgage Bonds
shall be deemed fully paid for purposes of this Agreement and to such extent the obligations of the Company hereunder shall be
deemed terminated.


 


(End of Article VI)


 




    	24



    	 



    

ARTICLE VII


 


EVENTS OF DEFAULT AND REMEDIES


 


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


 


(a)The occurrence
of an event of default as defined in Section 7.01 (a), (b), (c), (d) or (g) of the Indenture;


 


(b)The Company
shall fail to observe and perform any other agreement, term or condition contained in this Agreement, other than such failure as
will have resulted in an event of default described in (a) above and the continuation of that failure for a period of 90 days after
notice thereof shall have been given to the Company by the Issuer or the Trustee, or for such longer period as the Issuer may agree
to in writing; provided, that such failure shall not constitute an Event of Default so long as the Company institutes curative
action within the applicable period and diligently pursues that action to completion within 150 days after the expiration of initial
cure period as determined above, or within such longer period as the Issuer may agree to in writing; and


 


(c)The occurrence
of a “completed default” as defined in Section 1 of Article Twelve of the Company Mortgage.


 


Notwithstanding the foregoing,
if, by reason of Force Majeure, the Company is unable to perform or observe any agreement, term or condition hereof which would
give rise to an Event of Default under subsection (b) hereof, the Company shall not be deemed in default during the continuance
of such inability. However, the Company shall promptly give written notice to the Trustee and the Issuer of the existence of an
event of Force Majeure and shall use its best efforts to remove the effects thereof; provided that the settlement of strikes or
other industrial disturbances shall be entirely within its discretion.


 


The exercise of remedies
hereunder shall be subject to any applicable limitations of federal bankruptcy law affecting or precluding that declaration or
exercise during the pendency of or immediately following any bankruptcy, liquidation or reorganization proceedings.


 


Section
7.2.Remedies on Default. Whenever an Event of Default shall have happened and be subsisting, either or both of the
following remedial steps may be taken:


 


(a)The Issuer
or the Trustee may have access to, inspect, examine and make copies of the books, records, accounts and financial data of the Company,
only, however, insofar as they pertain to the Projects; or


 


(b)The Issuer
or the Trustee may pursue all remedies now or hereafter existing at law or in equity to recover all amounts, including all Loan
Payments and Additional Payments, then due and thereafter to become due under this Agreement (including Loan Payments due upon
tender for purchase or pursuant to acceleration), or to enforce the performance and observance of any other obligation or agreement
of the Company under this Agreement.


 




    	25



    	 



    

Notwithstanding the foregoing, the Issuer
shall not be obligated to take any step which in its opinion will or might cause it to expend time or money or otherwise incur
liability unless and until a satisfactory indemnity bond has been furnished to the Issuer at no cost or expense to the Issuer.
Any amounts collected as Loan Payments or applicable to Loan Payments and any other amounts which would be applicable to payment
of Bond Service Charges collected pursuant to action taken under this Section shall be paid into the Bond Fund and applied in accordance
with the provisions of the Indenture or, if the outstanding Bonds have been paid and discharged in accordance with the provisions
of the Indenture, shall be paid as provided in Section 5.08 of the Indenture for transfers of remaining amounts in the Bond Fund.


 


The provisions of this
Section are subject to the further limitation that the rescission and annulment by the Trustee of its declaration that all of the
Bonds are immediately due and payable also shall constitute a rescission and annulment of any corresponding declaration made pursuant
to this Section and a rescission and annulment of the consequences of that declaration and of the Event of Default with respect
to which that declaration has been made, provided that no such rescission and annulment shall extend to or affect any subsequent
or other default or impair any right consequent thereon.


 


Section
7.3.No Remedy Exclusive. No remedy conferred upon or reserved to the Issuer or the Trustee by this Agreement is intended
to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in
addition to every other remedy given under this Agreement, or now or hereafter existing at law, in equity or by statute. No delay
or omission to exercise any right or power accruing upon any default shall impair that right or power or shall be construed to
be a waiver thereof, but any such right or power may be exercised from time to time and as often as may be deemed expedient. In
order to entitle the Issuer or the Trustee to exercise any remedy reserved to it in this Article, it shall not be necessary to
give any notice, other than any notice required by law or for which express provision is made herein.


 


Section
7.4.Agreement to Pay Attorneys' Fees and Expenses. If an Event of Default should occur and the Issuer or the Trustee
should incur expenses, including attorneys' fees and expenses, in connection with the enforcement of this Agreement or the collection
of sums due hereunder, the Company shall be required, to the extent permitted by law, to reimburse the Issuer and the Trustee,
as applicable, for the fees and expenses so incurred upon demand.


 


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


 


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


 


(End of Article VII)


 




    	26



    	 



    

ARTICLE VIII


 


MISCELLANEOUS


 


Section
8.1.Term of Agreement. This Agreement shall be and remain in full force and effect from the date of delivery of the
Bonds until such time as (i) all of the Bonds shall have been fully paid (or provision made for such payment) pursuant to the
Indenture and the Indenture has been released pursuant to Section 9.01 thereof and (ii) all other sums payable by the Company
under this Agreement shall have been paid; provided, however, the provisions of Sections 4.2, 5.9 and 7.4 of this Agreement shall
survive the payment in full of the Bonds, the satisfaction, discharge and termination of this Agreement or the Indenture, and
the resignation or removal of the Trustee, any Paying Agent, any Auction Agent, any Remarketing Agent, the Registrar and any Authenticating
Agent as the case may be.


 


Section
8.2.Amounts Remaining in Funds. Any amounts in the Bond Fund remaining unclaimed by the Holders of Bonds for four years
after the due date thereof (whether at stated maturity, by redemption, upon acceleration or otherwise), at the option of the Company,
shall be deemed to belong to and shall be paid, subject to Section 5.07 of the Indenture, at the written request of the Company,
to the Company by the Trustee. With respect to that principal of and any premium and interest on the Bonds to be paid from moneys
paid to the Company pursuant to the preceding sentence, the Holders of the Bonds entitled to those moneys shall look solely to
the Company for the payment of those moneys. Further, any amounts remaining in the Bond Fund and any other special funds or accounts
created under this Agreement or the Indenture, except the Rebate Fund, after all of the Bonds shall be deemed to have been paid
and discharged under the provisions of the Indenture and all other amounts required to be paid under this Agreement and the Indenture
have been paid, shall be paid to the Company to the extent that those moneys are in excess of the amounts necessary to effect
the payment and discharge of the Outstanding Bonds.


 


Section
8.3.Notices. All notices, certificates, requests or other communications hereunder shall be in writing, except as provided
in Section 3.7 hereof, and shall be deemed to be sufficiently given when mailed by registered or certified mail, postage prepaid,
and addressed to the appropriate Notice Address; provided, however, that no notice shall be deemed sufficiently given to the Trustee
unless and until actually received by the Trustee at the Principal Office of the Trustee. A duplicate copy of each notice, certificate,
request or other communication given hereunder to the Issuer, the Company, the Credit Facility Issuer or the Trustee shall also
be given to the others. The Company, the Issuer, the Credit Facility Issuer and the Trustee, by notice given hereunder, may designate
any further or different addresses to which subsequent notices, certificates, requests or other communications shall be sent.


 


Section
8.4.Extent of Covenants of the Issuer; No Personal Liability. All covenants, obligations and agreements of the Issuer
contained in this Agreement or the Indenture shall be effective to the extent authorized and permitted by applicable law. No such
covenant, obligation or agreement shall be deemed to be a covenant, obligation or agreement of any present or future member, 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, obligations or agreements of the Issuer contained in this Agreement or in the Indenture.


 


Section
8.5.Binding Effect. This Agreement shall inure to the benefit of and shall be binding in accordance with its terms
upon the Issuer, the Company and their respective permitted successors and assigns provided that this Agreement may not be assigned
by the Company (except as permitted under Sections 5.8, 5.12 or 5.13 hereof) and may not be assigned by the Issuer except to (i)


 




    	27



    	 



    

the Trustee pursuant to the Indenture or
as otherwise may be necessary to enforce or secure payment of Bond Service Charges or (ii) any successor public body to the Issuer.
Sections 4.2, 5.9, 7.4 and 7.7 of this Agreement shall inure to the benefit of the Trustee, the Registrar, any Paying Agent and
any Authenticating Agent and their respective successors and assigns.


 


Section
8.6.Amendments and Supplements. Except as otherwise expressly provided in this Agreement or the Indenture, subsequent
to the issuance of the Bonds and prior to all conditions provided for in the Indenture for release of the Indenture having been
met, this Agreement may not be amended, changed, modified, altered or terminated by the parties hereto except with the consents
required by, and in accordance with, the provisions of Article XI of the Indenture, as applicable. In no event may the Agreement
be amended so as to affect the rights, privileges, duties or immunities of the Trustee, the Registrar, any Paying Agent or any
Authenticating Agent without its consent.


 


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


 


Section
8.8.Severability. If any provision of this Agreement, or any covenant, obligation or agreement contained herein is
determined by a judicial or administrative authority to be invalid or unenforceable, that determination shall not affect any other
provision, covenant, obligation or agreement, each of which shall be construed and enforced as if the invalid or unenforceable
portion were not contained herein. That invalidity or unenforceability shall not affect any valid and enforceable application
thereof, and each such provision, covenant, obligation or agreement shall be deemed to be effective, operative, made, entered
into or taken in the manner and to the full extent permitted by law.


 


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


 


Section 8.10.References
to Credit Facility. During such time or times as no Credit Facility is in effect and all of the payment obligations of the
Company under any Reimbursement Agreement shall have been well and truly paid, references herein to the Credit Facility Issuer
shall be ineffective. If an Event of Default shall have occurred hereunder or under the Indenture due to failure by the Credit
Facility Issuer to honor a properly presented and conforming drawing by the Trustee under the Credit Facility then in effect in
accordance with the terms thereof, references herein to the Credit Facility Issuer shall be ineffective until the earlier of the
cure of such failure or such time as all of the Bonds have been paid in full.


 


(End of Article VIII)


 




    	28



    	 



    

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


 


OHIO AIR QUALITY DEVELOPMENT





AUTHORITY


 


By: /s/ Chadwick Smith





Executive Director


 


 


THE DAYTON POWER AND LIGHT COMPANY


 





 


By: /s/ Jeffrey K. MacKay





Treasurer


 


 


Loan Agreement


2015 Series B


 




    	S-1



    	 



    

EXHIBIT A


 


AIR QUALITY FACILITIES
AT THE SERIES 1980 PROJECT


 


There were installed at the Walter C. Beckjord Electric Generating
Station, Clermont County, Ohio the following Air Quality Facilities for Unit 6.


 


Electrostatic Precipitator. The one existing coal-fired
boiler is equipped with a new electrostatic precipitator, together with necessary controls, stairways, galleries, enclosures, ductwork
and ash removal system. The precipitator is located south of the existing Unit 6 boiler and turbine room at grade. The precipitator
is approximately 160’ wide, 47’ long and 36’ high and has an operating weight of 2,387,000 pounds. The Unit 6
boiler was equipped with an electrostatic precipitator (designed for 98% efficiency). The new precipitator was installed in series
with the existing electrostatic precipitator. The design combined collection efficiency of the new and existing precipitators is
99.6%.


 


Fly Ash Handling and Disposal System. Unit 6 was equipped
with a new fly ash removal system consisting of 16 fly ash collecting hoppers with outlet control valves, manifold pipe conveyor,
vacuum producing equipment, discharge piping, control panel and pipeline to the existing ash sluice piping.


 


Electrical Equipment. The new precipitator and fly ash
handling and disposal system required new electrical equipment to provide and transmit power to the precipitator and the fly ash
disposal system.


 


Ductwork and Structural Support Costs


 


Ductwork. Flue gases from Unit 6 are drawn from the boiler
through existing and new ductwork, through the new precipitator, through new ductwork and through the existing precipitator by
the existing induced draft fans, and then exhausted through the existing flue gas stack.


 




    	A-1



    	 



    

Exhibit
B


 


AIR QUALITY FACILITIES AT THE SERIES 1982
PROJECT


 


General


 


Killen Electric Generating Station (“Killen”)
has a steam turbine-generator with a 612,574 KW nameplate rating and coal fired boiler rated at 4,545,000 lbs. of steam per hour
at 2620 psig and 10005 ̊/1005 ̊ F. Two electrostatic precipitators are installed on the unit to collect particulate matter
from the flue gas with a design collection efficiency of 99.5%. The precipitator will be hot with an operating temperature between
600o - 700o F. The ownership is shared between The Dayton Power and Light Company and The Cincinnati Gas & Electric
Company with individual interest of 67% and 33% respectively.


 


Flue Gas Particulate Abatement Project


 


Scope:


 


Engineering, material, labor and supervision
was provided for the dust collection system consisting of:


 


Two hot electrostatic precipitators and controls





Connecting ductwork





Supporting structural steel and foundations





Insulation and lagging





Necessary stairways, galleries and enclosure





Electrical work associated with the precipitators





Collection hoppers with outlet controls





Air quality monitoring


 


 




    	B-1



    	 



    

Exhibit
C


 


AIR QUALITY FACILITIES AT THE SERIES 1985
PROJECT


 


William H. Zimmer Electric Generating Station


 


The Project consists of:


 


		(A)	a high efficiency electrostatic precipitator system designed to remove particulates from the flue
gas,



 


		(B)	a flue gas desulfurization (“scrubber”) system designed to remove sulfur dioxide from
the flue gas,



 


		(C)	a stack,



 


		(D)	a coal dust control system,



 


		(E)	a nitrous oxide control system, and



 


		(F)	a cooling tower and circulating water system.



 


The precipitator system includes electrostatic
precipitators and a fly ash handling system, as well as all other necessary earthwork, piling, foundations, structural and miscellaneous
steel, supports, siding, enclosures, electrical equipment, instrumentation and controls, mechanical equipment, related pumps and
tanks, hoppers and storage silos, and associated equipment required for the foregoing and used exclusively in connection therewith.
The precipitator system includes related drains, sumps and piping necessary to transmit collected waste waters to the waste water
pond. The Project also includes precipitator inlet and outlet ductwork.


 


The scrubber system includes an inlet plenum,
six induced draft fans, ductwork to and including six absorber modules, ductwork to the stack, FGD reagent and lime unloading and
handling system including required river cells, FGD reagent and lime silos, an FGD reagent and lime preparation facility, slurry
tanks, scrubber sludge handling facilities which include thickener tanks, a sludge pond underflow and overflow tanks, a sludge
handling building, stockpile facilities and auxiliary facilities. The scrubber system includes all earthwork including stream relocation,
piling, foundations, structural and miscellaneous steel, siding, painting, electrical and mechanical components and associated
equipment required for the scrubber system and used exclusively in connection therewith. The scrubber system includes related drains,
sumps and piping necessary to transmit collected waste waters to the waste water pond, and also includes all pipes, pumps and associated
mechanical and electrical components to supply and recycle water for the scrubber system operation. The scrubber system also includes
a disposal area and the roads and bridges used exclusively for the transportation of scrubber sludge, bottom ash and other solid
waste along with truck wash facilities and truck scales.


 


The stack includes the stack shell and brick
liner, as well as earthwork, piling, foundation and associated components.


 


The coal dust control systems include a
coal dust collection system, a coal dust suppression system and a coal wetting system.


 




    	C-1



    	 



    

The cooling tower and circulating water
system includes a natural draft cooling tower, a cooling tower basin, a cooling water flume, three circulating water pumps, circulating
water pipes and valves, the make-up water subsystem, the blowdown subsystem, the cooling water chemical conditioning subsystem,
mechanical and electrical auxiliaries, and related controls and instrumentation. The cooling water system also includes all related
site development and earthwork, piling, foundations, structural and miscellaneous steel, siding, painting, electrical and mechanical
components and associated equipment required for the cooling tower and circulating water system and used exclusively in connection
therewith.


 




 





 


 


 



    	C-2