POLLUTION
      CONTROL FACILITIES LOAN AGREEMENT









Dated
      as
      of May 1, 2005









Between









LEHIGH
      COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY









and









PPL
      ELECTRIC UTILITIES CORPORATION











**TABLE
        OF CONTENTS**


**Page**ARTICLE
                1.
            Background,
                Representations and Findings
            1SECTION
                1.1
            Background
            1SECTION
                1.2
            Company
                Representations.
            1SECTION
                1.3
            Issuer
                Findings and Representations
            3ARTICLE
                2.
            Refunding
                the Prior Bonds
            4SECTION
                2.1
            Issuance
                of Bonds
            4SECTION
                2.2
            Investment
                of Fund Moneys
            4ARTICLE
                3.
            Loan
                and Repayment
            4SECTION
                3.1
            Amount
                and Source of Loan.
            4SECTION
                3.2
            Repayment
                of Loan
            5SECTION
                3.3
            The
                Note
            5SECTION
                3.4
            Acceleration
                of Payment to Redeem Bonds
            5SECTION
                3.5
            No
                Defense or Set-Off.
            6SECTION
                3.6
            Assignment
                of Issuer's Rights.
            6ARTICLE
                4.
            Covenants
                of the Company; Certain Limitations
            6SECTION
                4.1
            Corporate
                Existence
            6SECTION
                4.2
            Payment
                of Trustee's Compensation and Expenses
            7SECTION
                4.3
            Payment
                of Issuer's Expenses
            7SECTION
                4.4
            Indemnity
                Against Claims
            7SECTION
                4.5
            Limitation
                of Liability of the Issuer
            8SECTION
                4.6
            Nondiscrimination/Sexual
                Harassment Clause
            8SECTION
                4.7
            Default,
                etc
            8SECTION
                4.8
            Deficiencies
                in Revenues
            8SECTION
                4.9
            Tax-Exempt
                Status
            9ARTICLE
                5.
            Miscellaneous
            9SECTION
                5.1
            Notices
            9SECTION
                5.2
            Assignment
            10SECTION
                5.3
            Illegal,
                Etc. Provisions Disregarded
            10SECTION
                5.4
            Applicable
                Law
            10SECTION
                5.5
            Amendments
            10SECTION
                5.6
            Continuing
                Disclosure.
            10SECTION
                5.7
            Term
                of Agreement
            10SECTION
                5.8
            Financing
                Statements, etc
            10SECTION
                5.9
            Counterparts
            11EXHIBIT
                A - FORM OF COMPANY NOTE
            A-1EXHIBIT
                B - NONDISCRIMINATION/SEXUAL HARASSMENT CLAUSE
            B-1







POLLUTION
      CONTROL FACILITIES LOAN AGREEMENT, dated as of May 1, 2005 (the “Agreement”),
      between the LEHIGH COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY (the “Issuer”) and
      PPL ELECTRIC UTILITIES CORPORATION (the “Company”):




ARTICLE
      1.


Background,
      Representations and Findings




SECTION
      1.1  Background.






(a)  The
      Issuer is a public instrumentality of the Commonwealth of Pennsylvania (the
      “Commonwealth”) and a body corporate and politic organized and existing pursuant
      to the Economic Development Financing Law (the “Act”). Under the Act, the Issuer
      is authorized, among other things, to make loans to any “project applicant” or
“project user” (each as defined in the Act) in order to pay or provide for the
      financing or refinancing of costs of pollution control facilities. The Company
      (formerly known as Pennsylvania Power & Light Company) has heretofore
      requested the Issuer to undertake the financing of certain air or water
      pollution control facilities or certain sewage or solid waste disposal
      facilities located at the Brunner Island Station in York Haven, York County,
      the
      Holtwood Station in Holtwood, Lancaster County, the Martins Creek Station in
      Martins Creek, Northampton County, the Montour Station in Washingtonville,
      Montour County, the Sunbury Station in Shamokin Dam, Snyder County and the
      Susquehanna Steam Generating Station in Salem Township, Luzerne County in the
      Commonwealth of Pennsylvania (collectively, the “Project Facilities”), and, for
      such purpose, the Issuer has previously issued $53,250,000 aggregate principal
      amount of its Pollution Control Revenue Refunding Bonds, 1994 Series A
      (Pennsylvania Power & Light Company Project) (the “1994 Bonds”), and
      $55,000,000 aggregate principal amount of its Pollution Control Revenue
      Refunding Bonds, 1995 Series A (Pennsylvania Power & Light Company Project)
      (the “1995 Bonds”, and, together with the 1994 Bonds, the “Prior Bonds”).






(b)  The
      Company has transferred its interest in the Project Facilities associated with
      the Sunbury Station to a third party, and its interests in the remaining Project
      Facilities to affiliates of the Company.






(c)  The
      Company has requested that the Issuer refund the Prior Bonds. In order to pay
      a
      portion of the costs of refunding the Prior Bonds, the Issuer has agreed to
      issue $108,250,000 aggregate principal amount of its Pollution Control Revenue
      Refunding Bonds, 2005 Series B (PPL Electric Utilities Corporation Project)
      (the
“Bonds”) on the terms and conditions set forth in the subsequent sections of
      this Agreement.






SECTION
      1.2  Company
      Representations.




The
      Company represents that:






(a)  It
      is a
      corporation duly organized and existing under the laws of the Commonwealth
      of
      Pennsylvania, with full power and legal right to enter into this Agreement
      and
      the Note and perform its obligations hereunder and thereunder. The making and
      performance of this Agreement and the Note on the part of the Company have
      been
      duly authorized by all necessary action. This Agreement and the Note have been
      duly executed and delivered by the Company and constitute the valid and binding
      obligations of the Company enforceable in accordance with their respective
      terms
      except as the enforcement thereof may be limited by bankruptcy, insolvency,
      fraudulent transfer, reorganization, moratorium and other similar laws relating
      to or affecting the enforcement of creditors’ rights generally, to general
      equitable principles (whether considered in a proceeding in equity or at law)
      and to an implied covenant of good faith and fair dealing.






(b)  The
      Project Facilities constitute pollution control facilities as defined in the
      Act
      and are consistent with the purposes of the Act.






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






(d)  All
      of
      the proceeds of the 1994 Bonds were used to refund $15,500,000 aggregate
      principal amount of the Issuer’s Pollution Control Revenue Bonds, 1973 Series A
      (Pennsylvania Power & Light Company Project), (the “1973 Bonds”) and
      $37,750,000 aggregate principal amount of its Issuer’s Pollution Control Revenue
      Bonds, 1984 Series A (Pennsylvania Power & Light Company Project) (the “1984
      Bonds”), and all of the proceeds of the 1995 Bonds were used to refund
      $55,000,000 aggregate principal amount of the Issuer’s Pollution Control Revenue
      Bonds, 1985 Series A (Pennsylvania Power & Light Company Project)
      (collectively, the “1985 Bonds”, and together with the 1973 Bonds and 1984
      Bonds, the “Project Bonds”), and at least 90% of the proceeds of the Project
      Bonds were issued to provide “pollution control facilities” and “solid waste
      disposal facilities” within the meaning of Sections 103(b)(4)(E) and (F) of the
      Internal Revenue Code of 1954, as amended, and in effect prior to the passage
      of
      the Tax Reform Act of 1986 (the “1954 Code”), and the applicable regulations
      thereunder.






(e)  None
      of
      the proceeds of the Bonds will be used to provide working capital.






(f)  None
      of
      the proceeds of the Project and 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, or 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.






(g)  The
      1994
      Bonds were issued on February 28, 1994, and the 1995 Bonds were issued on August
      9, 1995.






(h)  Acquisition,
      construction and installation of the Project Facilities has been
      accomplished.






(i)  The
      Company and its affiliates have used or operated the Project Facilities in
      a
      manner consistent with the purposes of the Project Facilities and the Act and
      the Company knows of no reason why the Project Facilities will not be so
      operated. With respect to the Project Facilities related to the Sunbury Station
      that the Company sold to an unrelated third party, the Company used or operated
      such Project Facilities when it owned them in a manner consistent with the
      purposes of the Project Facilities and the Act and, after due inquiry, the
      Company knows of no reason why such Project Facilities will not be so operated
      by any owner of the Sunbury Station.






(j)  Neither
      the Prior Bonds nor the Bonds are or will be “federally guaranteed,” as defined
      in Section 149(b) of the Internal Revenue Code of 1986, as amended (the “Code”);
      references to the Code and Sections of the Code (or, as applicable, to the
      1954
      Code and Sections thereof) include Sections 1312 and 1313 of the Tax Reform
      Act
      of 1986, relevant applicable regulations and proposed regulations thereunder
      and
      under the 1954 Code and any successor provisions to those Sections, regulations
      or proposed regulations and, in addition, all applicable official rulings and
      judicial determinations under the foregoing applicable to the Prior Bonds or
      the
      Bonds, as applicable.






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






(m)  The
      proceeds derived from the sale of the Bonds (other than any accrued interest
      thereon) will be used exclusively to refund the outstanding principal amount
      of
      the Prior Bonds. The principal amount of the Bonds does not exceed the
      outstanding principal amount of the Prior Bonds. The redemption of the
      outstanding principal amount of the Prior Bonds with such proceeds of the Bonds
      will occur not later than 90 days after the date of issuance of the Bonds.
      All
      earnings derived from the investment of such proceeds of the Bonds will be
      fully
      needed and used on such redemption date to pay a portion of the redemption
      premium and interest accrued and payable on the Prior Bonds on such
      date.






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






(o)  Neither
      the average maturity of the Prior Bonds nor the average maturity of the Bonds
      exceeds 120% of the average reasonably expected economic lives of the facilities
      financed or refinanced by the proceeds of the Bonds (determined under Section
      147(b) of the Code).






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






(q)  The
      information furnished by the Company and used by the Issuer in preparing the
      certification pursuant to Section 148 and in preparing the Form 8038 information
      statement pursuant to Section 149(e) of the Code was accurate and complete
      as of
      the date of issuance of the Prior Bonds, and the information furnished by the
      Company and used by the Issuer in preparing the certification pursuant to
      Section 148 of the Code and in preparing the Form 8038 information statement
      pursuant to Section 149(e) of the Code will be accurate and complete as of
      the
      date of issuance of the Bonds.






(r)  The
      Company does not own or operate any of the Project Facilities. Each affiliate
      of
      the Company that owns the Project Facilities has agreed with the Company that,
      for so long as it owns any of the Project Facilities, it will operate such
      Project Facilities in a manner consistent with the Company’s tax covenants in
      this Agreement and the other transaction documents relating to the issuance
      of
      the Bonds. Notwithstanding the foregoing, nothing in any such agreement with
      such affiliate requires, and nothing in this Agreement shall require, the
      Company or any such affiliate to operate any portion of the Project Facilities,
      or prevents any such affiliate from selling all or any portion of the Project
      Facilities, or from merging or consolidating with another entity. Nothing in
      this Agreement shall bind any affiliate of the Company that owns the Project
      Facilities or any portion thereof, or any purchasers of any portions of the
      Project Facilities or portions thereof sold.






SECTION
      1.3  Issuer
      Findings and Representations.




The
      Issuer hereby confirms its findings and represents that:






(a)  The
      Project Facilities qualify as “pollution control facilities” for purposes of the
      Act and promote the public purposes of the Act by maintaining employment and
      alleviating unemployment in the Commonwealth.






(b)  The
      Project Facilities promote the health, safety and general welfare of the people
      of the Commonwealth by reducing air, water and other pollution and contamination
      and permitting additional generation of electric energy.






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




ARTICLE
      2.


Refunding
      the Prior Bonds




SECTION
      2.1  Issuance
      of Bonds.




In
      order
      to assist the Company in the refunding of the Prior Bonds, the Issuer,
      concurrently with the execution hereof, will issue, sell and deliver the Bonds.
      The proceeds of the Bonds shall be loaned to the Company in accordance with
      Section 3.1. The Bonds will be issued under and pursuant to the Trust Indenture
      (the “Indenture”) dated as of May 1, 2005 between the Issuer and JPMorgan Chase
      Bank, N.A., as trustee (the “Trustee”), and will be issued in the aggregate
      principal amount, will bear interest, will mature and will be subject to
      redemption as set forth therein. The Company hereby approves the Indenture
      and
      the Bonds and the terms and conditions under which the Bonds have been issued,
      sold and delivered. Each capitalized term not otherwise defined herein shall
      have the meaning given to such term in the Indenture.




The
      proceeds from the sale of the Bonds shall be loaned to the Company to assist
      the
      Company in refunding the Prior Bonds. Those proceeds shall be delivered to
      the
      Escrow Agent to be held, together with any interest earnings thereon, in trust,
      as provided in the Escrow Agreements for the purpose of paying, together with
      moneys provided by the Company, all of the remaining principal, redemption
      premium and interest due on the Prior Bonds to their redemption
      date.






SECTION
      2.2  Investment
      of Fund Moneys.




Any
      moneys held as part of the Bond Fund shall be invested or reinvested by the
      Trustee as provided in the Indenture. The Issuer (to the extent it retained
      or
      retains direction or control) and the Company each hereby represent that the
      investment and reinvestment and the use of the proceeds of the Prior Bonds
      were
      restricted in such manner and to such extent as was necessary so that the Prior
      Bonds would not constitute arbitrage bonds under Section 148 of the Code and
      each hereby covenants that it will restrict that investment and reinvestment
      and
      the use of the proceeds of the Bonds in such manner and to such extent, if
      any,
      as may be necessary so that the Bonds will not constitute arbitrage bonds under
      Section 148 of the Code.




The
      Company shall provide the Issuer with, and the Issuer may base its certificate
      and statement 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.




ARTICLE
      3.


Loan
      and Repayment




SECTION
      3.1  Amount
      and Source of Loan.




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






SECTION
      3.2  Repayment
      of Loan.




The
      Company agrees to repay the loan made by the Issuer under Section 3.1 in
      installments which, as to amount, shall correspond to the payments of principal
      on the Bonds and, if applicable, any redemption price and shall bear interest
      at
      the interest rate set forth in the Bonds, such principal, redemption price
      and
      interest to be payable when such principal, redemption price, if applicable,
      or
      interest is due in accordance with the terms of the Indenture, provided that
      such amount shall be reduced to the extent that other moneys on deposit with
      the
      Trustee are available for such purpose, and a credit in respect thereof has
      been
      granted pursuant to the Indenture. All such repayments made by the Company
      pursuant to this Agreement shall be made in funds that will be available to
      the
      Trustee no later than (a) the corresponding principal or interest payment date
      on the Bonds or (b) if a Bond Insurance Policy is in effect and Section 14.01
      of
      the Indenture requires the Trustee to notify the Bond Insurer of deficiencies
      prior to payment dates, one Business Day prior to the date the Trustee is
      required to make such payments. To evidence its obligation to pay such amounts,
      the Company will deliver the Note, as described under Section 3.3.






SECTION
      3.3  The
      Note.




Concurrently
      with the issuance by the Issuer of the Bonds, the Company will execute and
      deliver to the Trustee a debt instrument of the Company, which debt instrument
      shall be in the form of a non-negotiable promissory note substantially in the
      form attached hereto as Exhibit A (the “Note”). The Note shall:




(i)  be
      payable to the Trustee as assignee of the Issuer’s rights
      hereunder;




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




(iii)  provide
      for payments of interest at least equal to the payments of interest on the
      Bonds;




(iv)  require
      payments of principal equal to the corresponding payments on the
      Bonds;




(v)  contain
      provisions in respect of the prepayment of principal corresponding to the
      redemption provisions of the Bonds; and




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






SECTION
      3.4  Acceleration
      of Payment to Redeem Bonds.




The
      Issuer will redeem any of the Bonds or portions thereof upon the occurrence
      of
      an event which gives rise to any special mandatory redemption specified in
      the
      Indenture and in accordance with the provisions thereof. Upon any such special
      mandatory redemption, the Company shall prepay the Note in full (or in part,
      if
      in the opinion of Bond Counsel such partial redemption will preserve the
      exclusion from gross income for federal income tax purposes of interest on
      the
      Bonds remaining outstanding after such redemption). Whenever the Bonds are
      subject to optional redemption or extraordinary optional redemption, the Issuer
      will, but only upon direction or request of the Company, redeem the same in
      accordance with such direction or request and the Indenture. In either event,
      the Company will pay an amount equal to the applicable redemption price as
      a
      prepayment of the Note, together with interest accrued to the date of
      redemption, as provided in the Note.




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






SECTION
      3.5  No
      Defense or Set-Off.




The
      obligations of the Company to make payments on the Note shall be absolute and
      unconditional without defense or setoff by reason of any default by the Issuer
      under this Agreement or under any other agreement between the Company and the
      Issuer or for any other reason, including without limitation, loss or impairment
      of investments in the Bond Fund, any acts or circumstances that may constitute
      failure of consideration, destruction of or damage to the Project Facilities,
      commercial frustration of purpose, or failure of the Issuer to perform and
      observe any agreement, whether express or implied, or any duty, liability or
      obligation arising out of or connected with this Agreement, it being the
      intention of the parties that the payments required hereunder will be paid
      in
      full when due without any delay or diminution whatsoever.






SECTION
      3.6  Assignment
      of Issuer’s Rights.




As
      the
      source of payment for the Bonds, the Issuer will assign to the Trustee all
      the
      Issuer’s rights under this Agreement with respect to the Bonds (except rights to
      receive payments under Sections 4.3 and 4.4) including all of its right, title
      and interest in the Note and the moneys payable thereunder. The Company consents
      to such assignment and agrees to make payments on the Note and interest thereon
      directly to the Trustee without defense or setoff by reason of any dispute
      between the Company and the Issuer or the Trustee.




ARTICLE
      4.


Covenants
      of the Company; Certain Limitations




SECTION
      4.1  Corporate
      Existence.




So
      long
      as the Bonds are outstanding, the Company agrees to maintain its corporate
      existence and, to the extent required by Pennsylvania law, its qualification
      to
      do business in Pennsylvania, except that it may dispose of all or substantially
      all of its assets and may consolidate with or merge into another corporation
      or
      entity or permit one or more corporations or entities to consolidate with or
      merge into it, if the surviving, resulting or transferee corporation or entity,
      if other than the Company, is solvent, and assumes in writing all of the
      obligations of the Company hereunder and under the Note and is a corporation
      or
      other entity duly organized under the laws of one of the states of the United
      States of America and, to the extent required by Pennsylvania law, is duly
      qualified to do business in the Commonwealth of Pennsylvania provided that
      the
      Company shall have delivered to the Trustee a certificate from an officer of
      the
      Company to the effect that such disposition, consolidation, merger and
      assumption complies with the provisions of this Agreement.






SECTION
      4.2  Payment
      of Trustee’s Compensation and Expenses.




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






SECTION
      4.3  Payment
      of Issuer’s Expenses.




The
      Company will pay the Issuer’s administrative fees and expenses, including legal
      and accounting fees, incurred by the Issuer in connection with the issuance
      of
      the Bonds and the performance by the Issuer of any and all of its functions
      and
      duties under this Agreement or the Indenture, including, but not limited to,
      all
      duties which may be required of the Issuer by the Trustee and the Bondholders.
      The Issuer’s fee is $216,500.






SECTION
      4.4  Indemnity
      Against Claims.




The
      Company releases the Issuer from, agrees that the Issuer shall not be liable
      for, and indemnifies the Issuer against, all liabilities, claims (including
      claims for any injury, bodily harm or death of any person), costs and expenses
      imposed upon or asserted against the Issuer on account of: (a) the 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, the Note or the Continuing Disclosure Undertaking
      (as defined in the Indenture) or arising from any act or failure to act by
      the
      Company under such documents; (c) the refunding of the Prior Bonds, and the
      provision of any information furnished by the Company 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 2.2 or for inclusion in, or as a basis for
      preparation of, the information statements filed by the Issuer pursuant to
      the
      Code); (d) any audit of the tax status of the interest on the Bonds; and (e)
      any
      claim, action or proceeding with respect to the matters set forth in (a), (b)
      and (c) above brought thereon, except to the extent that any liability, claim,
      cost or loss was due to the Issuer’s willful misconduct.




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




In
      case
      any action or proceeding is brought against the Issuer, the Trustee or any
      predecessor Trustee, in respect of which indemnity may be sought hereunder,
      the
      party seeking indemnity shall promptly give notice of that action or proceeding
      to the Company, and the Company upon receipt of that notice shall have the
      obligation and the right to assume the defense of the action or proceeding.
      At
      its own expense, an indemnified party may employ separate counsel and
      participate in the defense; provided however, where it is ethically
      inappropriate for one firm to represent the interests of the Issuer and any
      other indemnified party or parties, the Company shall pay the Issuer’s, the
      Trustee’s or the predecessor Trustee’s legal expenses, respectively, in
      connection with the Issuer’s, the Trustee’s or the predecessor Trustee’s
      retention of separate counsel. The Company shall not be liable for any
      settlement made without its consent.




The
      indemnification set forth above is intended to and shall include the
      indemnification of all affected officials, directors, officers, agents and
      employees, past, present and future, of the Issuer, the Trustee and any
      predecessor Trustee; and, to the extent relating to the Trustee or any
      predecessor Trustee, shall be for the benefit of the Trustee or such predecessor
      Trustee in each of its respective capacities under the Indenture. That
      indemnification is intended to and shall be enforceable by the Issuer, the
      Trustee and any predecessor Trustee, respectively, to the full extent permitted
      by law.






SECTION
      4.5  Limitation
      of Liability of the Issuer.




All
      covenants, stipulations, obligations and agreements of the Issuer contained
      in
      this Agreement or the Indenture shall be effective to the extent authorized
      and
      permitted by applicable law. No such covenant, stipulation, obligation or
      agreement shall be deemed to be a covenant, stipulation, obligation or agreement
      of any past, present or future member, officer, agent or employee of the Issuer
      in other than his official capacity, and neither the members, officers, agents
      or employees, past, present or future, of the Issuer nor any official executing
      the Bonds shall be liable personally on the Bonds or be subject to any personal
      liability or accountability by reason of the issuance thereof or by reason
      of
      the covenants, stipulations, obligations or agreements of the Issuer contained
      in this Agreement or in the Indenture. Furthermore, no obligation of the Issuer
      hereunder or under the Bonds shall be deemed to constitute a pledge of the
      faith
      and credit of the Issuer, or the faith and credit or taxing power of the
      Commonwealth of Pennsylvania, the County of Lehigh, or of any other political
      subdivision thereof, but shall be payable solely out of revenues pledged
      therefor.






SECTION
      4.6  Nondiscrimination/Sexual
      Harassment Clause.




The
      Company shall use all reasonable efforts consistent with its existing procedures
      to comply with the provisions of the Nondiscrimination/Sexual Harassment Clause
      set forth in Exhibit B hereto. For purposes of such Nondiscrimination/Sexual
      Harassment Clause, the parties hereto understand that (i) this Agreement is
      the
“contract” and (ii) there is no subcontractor for the performance of the
      Company’s obligations under this Agreement.






SECTION
      4.7  Default,
      etc.




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




(b)  The
      Company and the Issuer acknowledge that the rights of the Issuer under this
      Agreement (except the Issuer’s rights under Sections 4.3, 4.4, and 4.5 hereof),
      including the rights of the Issuer to the enforcement of this Agreement and
      the
      exercise of remedies upon the occurrence of any Event of Default, have been
      assigned by the Issuer to the Trustee in accordance with the Indenture. The
      rights of the Trustee are further subject to any rights of the Bond Insurer
      as
      provided in the Indenture.






SECTION
      4.8  Deficiencies
      in Revenues.




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






SECTION
      4.9  Tax-Exempt
      Status.






(a)  The
      Company covenants and represents that it has taken and caused to be taken and
      shall take and cause to be taken all actions that may be required of it for
      the
      interest on the Bonds to be and to remain excluded from gross income for federal
      income tax purposes, and that it has not taken or permitted to be taken on
      its
      behalf, and covenants that it will not take, or permit to be taken on its
      behalf, any action which, if taken, would adversely affect that exclusion under
      the provisions of the Code.






(b)  To
      the
      extent an exemption is not available from the requirements of Section 148(f)
      of
      the Code, the Company will retain a qualified consultant to calculate, and
      shall
      pay to or for the account of the Issuer, all amounts needed to comply with
      the
      requirements of Section 148 of the Code, with respect to the Bonds, including
      Section 148(f) which requires generally a rebate payment to the United States
      of
      arbitrage profit from investment of the proceeds of the Bonds in obligations
      other than tax-exempt obligations. The obligation of the Company to make such
      payments is unconditional and is not limited to funds representing the proceeds
      of the Bonds or income from the investment thereof or any other particular
      source.




ARTICLE
      5.


Miscellaneous




SECTION
      5.1  Notices.




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




The
                Issuer:
            
            Lehigh
                County Industrial Development Authority2158
                Avenue C, Suite 200Bethlehem,
                PA 18107Attention:
                Janet R. SmithPhone:
                (610) 266-0887Fax:
                (610) 266-7623The
                Company
            
            PPL
                Electric Utilities CorporationTwo
                North Ninth StreetAllentown,
                Pennsylvania 18101Attention:
                Treasury DepartmentPhone:
                610-774-2636Fax:
                610-774-5235The
                Trustee
            
            JPMorgan
                Chase Bank, N.A.4
                New York Plaza - 15th FloorNew
                York, New York 10004Attention:
                Institutional Trust ServicesPhone:
                (212) 623-5782Fax:
                (212) 623-6205





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




SECTION
      5.2  Assignment.




This
      Agreement may not be assigned by either party without the prior written consent
      of the other party hereto, which consent shall not be unreasonably withheld,
      except that the Issuer may assign rights with respect to the Bonds to the
      Trustee pursuant to Section 3.6 hereof, and the Company may assign its rights
      and obligations under this Agreement at any time in connection with a
      disposition of all or substantially all of its assets permitted under Section
      4.1. Notwithstanding the foregoing, no merger or consolidation permitted under
      Section 4.1 shall be deemed to be an assignment for purposes of this Section
      5.2.






SECTION
      5.3  Illegal,
      etc. Provisions Disregarded.




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






SECTION
      5.4  Applicable
      Law.




This
      Agreement has been delivered in the Commonwealth of Pennsylvania and shall
      be
      deemed to be governed by, and interpreted under, the laws of that
      Commonwealth.






SECTION
      5.5  Amendments.




This
      Agreement may not be amended except by an instrument in writing signed by the
      parties hereto and, if such amendment occurs after the issuance of the Bonds,
      in
      accordance with the terms of the Indenture.






SECTION
      5.6  Continuing
      Disclosure.




The
      Issuer hereby acknowledges the entry by the Company into the Continuing
      Disclosure Undertaking under which the Company has assumed certain obligations
      for the benefit of the holders and beneficial owners of the Bonds. The Company
      agrees to perform its obligations under the Continuing Disclosure Undertaking.
      Notwithstanding any other provision of this Agreement, any failure by the
      Company to comply with any provision of the Continuing Disclosure Undertaking
      shall not be a failure or a default, or an Event of Default, under this
      Agreement or the Indenture.






SECTION
      5.7  Term
      of Agreement.




This
      Agreement shall become effective upon its delivery and shall continue in effect
      until all Bonds have been paid or provision for such payment has been made
      in
      accordance with the Indenture, except that the provisions hereof contained
      in
      Sections 4.2, 4.3, 4.4, 4.5, 4.9 and this Section 5.7 shall continue in effect
      thereafter.




SECTION
      5.8  Financing
      Statements, etc.




The
      Company agrees to file or record or to re-file or re-record all financing
      statements and continuation statements and all other documents, notices and
      instruments required under applicable law to perfect or maintain the perfection
      of or to otherwise preserve the validity of the liens and security interests
      granted to the Trustee under the Indenture.






SECTION
      5.9  Counterparts.




This
      Agreement may be executed in several counterparts, all or any of which shall
      be
      regarded for all purposes as one original and shall constitute and be but one
      and the same instrument.












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




(SEAL)
              
              Attest:
              
              By:_______________________________________
              Joanne
                D. Kuchera, Assistant Secretary
            LEHIGH
                COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY
              
              
              By:_______________________________________
              W.
                Cordes Snyder, III, ChairmanPPL
                ELECTRIC UTILITIES CORPORATION
              
              
              By:_______________________________________
              James
                E. Abel, Treasurer










EXHIBIT
      A - FORM OF COMPANY NOTE




POLLUTION
      CONTROL FACILITIES NOTE


(LEHIGH
      COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY)


2005
      SERIES B




PPL
      ELECTRIC UTILITIES CORPORATION (the “Company”), a Pennsylvania corporation, for
      value received, promises to pay to JPMorgan Chase Bank, N.A. (the “Trustee”), as
      Trustee under the Trust Indenture dated as of May 1, 2005 (the “Indenture”) of
      the Lehigh County Industrial Development Authority (the “Issuer”), the principal
      sum of $108,250,000 on February 15, 2027, and to pay (i) interest thereon from
      the date hereof until the payment of said principal sum has been made or
      provided for at the rate equal to the interest rate borne by the Issuer’s
      Pollution Control Revenue Refunding Bonds, 2005 Series B (PPL Electric Utilities
      Corporation Project) (the “Bonds”) and payable on each date that interest is
      payable on the Bonds, and (ii) interest on overdue principal, and to the extent
      permitted by law, on overdue interest, at the rate borne by the
      Bonds.




This
      Note
      is issued pursuant to a certain Pollution Control Facilities Loan Agreement
      (the
“Agreement”) dated as of May 1, 2005 between the Issuer and the Company relating
      to the refunding of certain obligations of the Issuer previously issued to
      provide funds for the refunding of bonds issued to assist the Company (formerly
      known as Pennsylvania Power & Light Company) in the financing of a portion
      of the cost of acquiring, constructing and installing certain pollution control
      facilities and sewage or solid waste disposal facilities at the Brunner Island
      Station in York Haven, York County, the Holtwood Station in Holtwood, Lancaster
      County, the Martins Creek Station in Martins Creek, Northampton County, the
      Montour Station in Washingtonville, Montour County, the Sunbury Station in
      Shamokin Dam, Snyder County and the Susquehanna Steam Generating Station in
      Salem Township, Luzerne County in the Commonwealth of Pennsylvania (the “Project
      Facilities”). The obligation of the Company to make the payments required
      hereunder shall be absolute and unconditional without defense or set-off by
      reason of any default by the Issuer under the Agreement or under any other
      agreement between the Company and the Issuer or for any other reason, including
      without limitation, loss or impairment of investments in the Bond Fund, any
      acts
      or circumstances that may constitute failure of consideration, destruction
      of or
      damage to the Project Facilities, commercial frustration of purpose, or failure
      of the Issuer to perform and observe any agreement, whether express or implied,
      or any duty, liability or obligation arising out of or connected with the
      Agreement, it being the intention of the Company and the Issuer that the
      payments hereunder will be paid in full when due without any delay or diminution
      whatsoever.




This
      Note
      is subject to prepayment, at the option of the Company, upon written notice
      to
      the Trustee given not less than 15 days prior to the day on which the Bond
      Registrar is required to give notice of optional redemption or extraordinary
      optional redemption to the Bondholders pursuant to Section 7.04 of Indenture,
      to
      the extent that the Bonds are subject to optional redemption or extraordinary
      optional redemption pursuant to Section 7.01(a) or (b) of the Indenture at
      a
      prepayment price equal to the corresponding redemption price of the Bonds.
      Notice of any optional prepayment of this Note shall be conditional if the
      corresponding notice of optional redemption or extraordinary optional redemption
      of the Bonds under Section 7.04 of the Indenture is conditional and if the
      optional redemption or extraordinary optional redemption of the Bonds does
      not
      occur as a result of a failure of such condition, the notice of optional
      prepayment of this Note shall be of no effect.




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




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




Upon
      receipt by the Trustee of notice of prepayment hereof in connection with the
      optional or extraordinary optional redemption of the Bonds, the Trustee shall
      take all action necessary under and in accordance with the Indenture to redeem
      Bonds in an amount corresponding to that specified in the particular
      notice.




The
      Company is entitled to a credit against its obligations under this Note and
      this
      Note shall not be subject to required payment or prepayment to the extent that
      amounts which would otherwise be payable by the Company hereunder are paid
      from
      funds held by the Trustee under the Indenture and available for such
      payment.




Whenever
      payment or provision therefor has been made in respect of the principal or
      redemption price of all or any portion of the Bonds and interest on all or
      any
      portion of the Bonds, together with all other sums payable by the Issuer under
      the Indenture, in accordance with Article 13 of the Indenture, this Note shall
      be deemed paid to the extent such payment or provision therefor has been made,
      and if thereby deemed paid in full, this Note shall be canceled and returned
      to
      the Company. Notwithstanding the foregoing, if, for any reason, the amounts
      specified above are not sufficient to make corresponding payments of principal
      or redemption price of the Bonds and interest on the Bonds, when such payments
      are due, the Company shall pay as additional amounts due hereunder, the amounts
      required from time to time to make up any such deficiency.




All
      payments of principal and interest shall be made to the Trustee at its corporate
      trust office in New York, New York or as otherwise directed by the Trustee
      in
      such coin or currency of the United States of America as at the time of payment
      shall be legal tender for the payment of public and private debts. All payments
      shall be in the full amount required hereunder unless the Trustee notifies
      the
      Company that it is entitled to a credit under the Agreement, this Note or the
      Indenture.




The
      occurrence and continuance of each of the following events is hereby defined
      as
      and shall constitute an “Event of Default”:






(a)  Failure
      by the Company to pay the principal or prepayment price of this Note at maturity
      or upon unconditional proceedings for prepayment within one Business Day of
      when
      such principal or prepayment price becomes due and payable; or






(b)  Failure
      by the Company to pay interest on this Note in amounts and at the times
      necessary to enable the Trustee to pay interest on the Bonds within ten Business
      Days of when such interest becomes due and payable; or






(c)  The
      entry
      by a court having jurisdiction in the premises of (1) a decree of order for
      relief in respect of the Company in an involuntary case or proceeding under
      any
      applicable Federal or State bankruptcy, insolvency or other similar law or
      (2) a
      decree or order adjudging the Company bankrupt or insolvent, or approving as
      properly filed a petition of one or more Persons other than the Company seeking
      reorganization, arrangement, adjustment or composition of or in respect of
      the
      Company under any applicable Federal or State bankruptcy, insolvency or other
      similar law, or appointing a custodian, receiver, liquidator, assignee, trustee,
      sequestrator or other similar official for the Company or for any substantial
      part of its property, or ordering the winding up or liquidation of its affairs,
      and any such decree or order for relief or any other decree or order shall
      have
      remained unstayed and in effect for a period of 90 consecutive days;
      or






(d)  The
      commencement by the Company of a voluntary case or proceeding under any
      applicable Federal or State bankruptcy, insolvency or other similar law or
      of
      any other case or proceeding to be adjudicated a bankrupt or insolvent, or
      the
      consent by the Company to the entry of a decree or order for relief in respect
      of the Company in a case or proceeding under any applicable Federal or State
      bankruptcy, insolvency or other similar law or to the commencement of any
      bankruptcy or insolvency case or proceeding against the Company, or the filing
      by the Company of a petition or answer or consent seeking reorganization or
      relief under any applicable Federal or State bankruptcy, insolvency or similar
      law, or the consent by the Company to the filing of such petition or to the
      appointment of or taking possession by a custodian, receiver, liquidator,
      assignee, trustee, sequestrator or other similar official of the Company or
      any
      substantial part of its property, or the making by the Company of an assignment
      for the benefit of creditors, or the admission by the Company in writing of
      its
      inability to pay its debts generally as they become due, or the authorization
      of
      such action by the Board of Directors of the Company.




In
      each
      and every such case and during the continuance thereof, the Trustee, by notice
      in writing to the Company may declare the unpaid balance of this Note to be
      due
      and payable immediately if, concurrently with or prior to such notice, the
      unpaid principal amount of the Bonds has been declared due and payable, and
      upon
      any such declaration the same shall become and shall be immediately due and
      payable, anything in this Note to the contrary notwithstanding. Notwithstanding
      the foregoing, if after any declaration of acceleration hereunder there is
      an
      annulment of any declaration of acceleration with respect to the Bonds, such
      annulment shall also automatically constitute an annulment of any corresponding
      declaration under this Note and a waiver and rescission of the consequences
      of
      such declaration.




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




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




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




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




No
      provision of this Note or of the Agreement or the Indenture shall be deemed
      to
      authorize the Trustee to authorize or consent to or accept or adopt on behalf
      of
      any Bondholder any plan of reorganization, arrangement, adjustment or
      composition affecting this Note or the rights of any Bondholder in respect
      thereof or to authorize the Trustee to vote in respect of the claim of any
      Bondholder in any such proceeding; provided, however, that the Trustee may,
      on
      behalf of the Bondholders, vote for the election of a trustee in bankruptcy
      or
      similar official and be a member of a creditors’ or other similar
      committee.




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




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




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




This
      Note
      has been delivered in the Commonwealth of Pennsylvania and shall be deemed
      to be
      governed by, and interpreted under, the laws of that Commonwealth.




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












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














Date:   May
                17, 2005
            PPL
                ELECTRIC UTILITIES CORPORATION
              
              
              
              By:_______________________________________
              James
                E. Abel, Treasurer











EXHIBIT
      B - NONDISCRIMINATION/SEXUAL HARASSMENT CLAUSE




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




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




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




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




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




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




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




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