Document:

<PAGE>

Exhibit 10.1

                              ACQUISITION AGREEMENT

THIS AGREEMENT made effective on the 14th day of March, 2005.

BETWEEN:

                  SHIMOCO LLC;

                  (the "Vendor")

AND:

                  SAGAX, INC., a Delaware corporation, with an address at 57
                  Hapoel Street, Herzlyia Pituach, Israel, 46600 (the "Company")

AND:

                  MIV THERAPEUTICS, INC., a Nevada corporation, with an address
                  at Unit 1, 8765 Ash Street, Vancouver, BC, V6P 6T3;

                  (the "Purchaser")

WHEREAS:

A. The Company carries on the business of developing endovascular devices.

B. The Vendor has agreed to sell, and the Purchaser has agreed to purchase, 100%
of the issued and outstanding shares of the Company and all assets and
undertakings of the Company, as a going concern, on the terms and subject to the
conditions provided in this Agreement.

     THIS AGREEMENT WITNESSES that in consideration of the premises and the
     covenants, agreements, representations, warranties and payments contained
     in this Agreement, the parties agree as follows:

1.       PURCHASE AND SALE OF ASSETS

1.1      Description of Assets

Upon the terms and subject to the conditions of this Agreement, the Vendor
agrees to sell, assign and transfer to the Purchaser, and the Purchaser agrees
to purchase from the Vendor 100 common shares of the Company which constitutes
100% of the issued and outstanding shares of the Company. The purchase by the
Purchaser includes all the assets of the Company's business of every kind and
description wherever situate including the following:

                                       1
<PAGE>

         (a)      all right and interest of the Vendor to all patents and patent
                  applications, registered and unregistered trademarks, trade or
                  brand names, copyrights, designs, restrictive covenants and
                  other industrial or intellectual property used in connection
                  with the Company (the "Intangible Property"), including the
                  Intangible Property described in the Schedule of Intangible
                  Property;

         (b)      all inventories (the "Inventories") of the Company;

         (c)      the accounts receivable, trade accounts noted receivable and
                  other debts owing to the Company, and the full benefit of all
                  securities for cash accounts, notes or debts (the
                  "Receivables");

         (d)      the benefit of all unfilled orders received by the Company or
                  in connection with the Company, and all other contracts,
                  engagements or commitments, whether written or oral, to which
                  the Vendor is entitled in connection with the Company, and in
                  particular all right, title and interest of the Vendor in, to
                  and under the material agreements and contracts (the "Material
                  Contracts") described in the Schedule of Material Contracts;

         (e)      the prepaid expenses (the "Prepaid Expenses") of the Company;
                  and,

         (f)      the goodwill of the Company and the right of the Purchaser to
                  represent itself as carrying on the Company's business in
                  continuation of and in succession to the Vendor and the right
                  to use the name "SagaX Inc." or any variation thereof as part
                  of or in connection with the Company's business (the
                  "Goodwill"),

all of which are collectively called the "Assets".

2.       PURCHASE PRICE AND ALLOCATION

2.1 The purchase price payable by the Purchaser to the Vendor for the common
shares of the Company and all of the Company's assets will be a total of
4,200,000 restricted common shares in the capital stock of the Purchaser,
subject to Rule 144 of the SECURITIES ACT OF 1933, to be issued subject to the
terms in paragraph 2.2.

2.2 The Purchaser agrees to issue 2,000,000 restricted common shares of the
Purchaser to the Vendor within thirty (30) days of the effective date of this
Agreement, an additional 1,100,000 restricted common shares of the Purchaser to
the Vendor on successful completion of large animal trials, and a final
1,100,000 restricted common shares of the Purchaser to the Vendor on CE Mark
approval relating to the Company's products, for an aggregate of 4,200,000
restricted common shares.

2.3 If the Purchaser's management decides to abandon the Company's
neuro-vascular embolic stent filter medical device project; or if the Purchaser
is placed into receivership; or if the Purchaser fails to fund the Company with
at least $150,000 worth of cash or S-8 stock, in any six month period, then the
Vendor, or its nominee, may repurchase the Company, including all of its
intellectual property, in exchange for the return of all of the Purchaser's
common shares issued for the purchase of the Company up until such time and a
cash payment equal to 125% of all cash advanced to the Company by the Purchaser.

2.4 The Purchaser will finance the Company using commercially best efforts up to
the amount of US$730,290 for the period of January - December 2005.

                                       2
<PAGE>

2.5 In additional to the financing described in paragraph 2.4, the Purchaser
will pay US$145,000 to the Vendor for debt reduction, of which US$80,000 will be
paid in cash with the balance to be paid in common stock at US$0.25 per share.

2.7 The right to repurchase the Company, subject to the conditions in paragraph
2.3, expires one year after the effective date of this Agreement.

2.8 The Company will provide the Purchaser with a detailed budget acceptable to
the CFO of the Purchaser and the Company will adhere to the use of proceeds
contained in said budget, unless amended in writing with the agreement of the
Purchaser.

3.       REPRESENTATIONS AND WARRANTIES OF THE VENDOR

The Vendor represents and warrants to the Purchaser as follows, with the intent
that the Purchaser will rely on the representations and warranties in entering
into this Agreement, and in concluding the purchase and sale contemplated by
this Agreement.

3.1      Capacity to Sell

The Vendor is an individual who owns 100% of the issued and outstanding shares
of the Company. The Vendor has the power and capacity to own and dispose of the
Assets and to carry on the Company's business as now being conducted by it, and
to enter into this Agreement and carry out its terms to the full extent.

3.2      Authority to Sell

The execution and delivery of this Agreement and the completion of the
transaction contemplated by this Agreement have been duly and validly authorized
by all necessary action on the part of the Vendor, and this Agreement
constitutes a legal, valid and binding obligation of the Vendor enforceable
against the Vendor in accordance with its terms except as may be limited by laws
of general application affecting the rights of creditors.

3.3      Sale Will Not Cause Default

Neither the execution and delivery of this Agreement, nor the completion of the
purchase and sale contemplated by this Agreement will:

         (a)      violate any of the terms and provisions of any order, decree,
                  statute, bylaw, regulation, covenant or restriction applicable
                  to the Vendor, the Company or any of the Assets;

         (b)      give any person the right to terminate, cancel or remove any
                  of the Assets; or

         (c)      result in any fees, duties, taxes, assessments or other
                  amounts relating to any of the Assets becoming due or payable
                  by the Purchaser in connection with the purchase and sale,
                  except as otherwise provided in this Agreement or any Schedule
                  to this Agreement.

                                       3
<PAGE>

3.4      Assets

The Vendor owns and possesses and has a good marketable title to the Assets free
and clear of all mortgages, liens, charges, pledges, security interest,
encumbrances or other claims.

3.5      Books and Records

The books and records of the Vendor and the Company fairly and correctly set out
and disclose in all material respects, in accordance with generally accepted
accounting principles, the financial position of the Vendor and the Company and
all material financial transactions of the Vendor and the Company relating to
the Company's business have been accurately recorded in those books and records.

3.6      Material Change

Since the date of the balance sheet included in the Statements there has not
been:

         (a)      any material change in the financial condition of the
                  Company's business, its liabilities or the Assets other than
                  changes in the ordinary course of business, none of which has
                  been materially adverse;

         (b)      any damage, destruction, loss or other event (whether or not
                  covered by insurance) materially and adversely affecting the
                  Assets or the Company's business;

3.7      Litigation

There is no litigation or administrative or governmental proceeding or inquiry
pending, or to the knowledge of the Vendor, threatened against or relating to
the Vendor, the Company's business, or any of the Assets, nor does the Vendor
know of or have reasonable grounds to believe that there is any basis for any
such action, proceeding or inquiry.

3.8      Conformity With Laws

All governmental licenses and permits required for the conduct in the ordinary
course of the operations of the Company's business and the uses to which the
Assets have been put, have been obtained and are in good standing and such
conduct and uses are not in breach of any statute, bylaw, regulation, covenant,
restriction, plan or permit, including those regulating the discharge of
materials into the environment and the storage, treatment and disposal of waste
or otherwise relating to the protection of the environment and the health and
safety of persons. For greater certainty, the Assets have not been used in a
manner that does or will give rise to any obligation of restoration or removal
or any liability for the costs of restoration or removal or for the payment of
damages to any third party.

                                       4
<PAGE>

3.9      Forward Commitments

All outstanding forward commitments by or on behalf of the Vendor or the Company
for the purchase or sale of the Inventories have been made in accordance with
established price lists of the Company or its suppliers, or if otherwise, then
in accordance with the Company's normal business custom in varying those
established price lists.

3.10     Employees

The Company has no employees.

3.11     Material Contracts

The Schedule of Material Contracts contains a true and correct listing of each
written or oral contract of the following types to be acquired or assumed by the
Purchaser:

         (a)      contracts or commitments out of the ordinary course of
                  business;

         (b)      contracts or commitments involving an obligation to pay in the
                  aggregate $1,000 or more or of a duration greater than one
                  year;

         (c)      contracts or commitments affecting ownership of, or title to,
                  or any interest in real estate or in personal property;

         (d)      contracts or commitments in respect of the Intangible
                  Property;

         (e)      except as prohibited by statute or regulation, contracts or
                  commitments in respect of bonuses, incentive compensation,
                  pensions, group insurance or employee welfare plans, all of
                  which are fully funded as determined by an independent and
                  reputable firm of actuaries employed by the Vendor; and

         (f)      employment contracts, consultant contracts or commitments
                  other than unwritten employment contracts of indefinite
                  duration entered into in the ordinary course of the Company's
                  business.

3.12     No Defaults

Except as otherwise expressly disclosed in this Agreement or in any Schedule to
this Agreement, there has not been any default in any obligation to be performed
under any Material Contract, each of which is in good standing and in full force
and effect, unaltered, except as set forth in the Schedule of Material
Contracts.

3.13     Accuracy of Representations

No certificate furnished by or on behalf of the Vendor or the Company to the
Purchaser at closing in respect of the representations, warranties or covenants
of the Vendor will contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements contained in the
certificate not misleading.

4.       COVENANTS OF THE VENDOR

4.1      Determination of Net Book Values

The Vendor will cause his auditors, certified public accountants, to determine
as of the day immediately preceding closing, the net book value of the
Receivables, Inventories and Prepaid Expenses, in accordance with generally
accepted accounting principles, and furnish to each of the Vendor and Purchaser
a certificate of such determination.

                                       5
<PAGE>

4.2      Conduct of Business

Until closing, the Vendor will conduct the Company's business diligently and
only in the ordinary course and will use his best efforts to preserve the Assets
intact and to preserve, for the Purchaser, the Company's relationship with its
suppliers, customers and others having business relations with it.

4.3      Access by Purchaser

The Vendor will give to the Purchaser and Purchaser's counsel, accountants and
other representatives full access, during normal business hours throughout the
period prior to closing, to all of the properties, books, contracts, commitments
and records of the Vendor and the Company relating to the Company's business and
the Assets, and will furnish to the Purchaser during that period all such
information as the Purchaser may reasonably request.

4.4      Covenant of Indemnity

The Vendor will indemnify and hold harmless the Purchaser from and against:

         (a)      any and all liabilities, whether accrued, absolute, contingent
                  or otherwise, existing at closing and which are not agreed to
                  be assumed by the Purchaser under this Agreement;

         (b)      any and all damage or deficiencies resulting from any
                  misrepresentation, breach of warranty or non-fulfillment of
                  any covenant on the part of the Vendor under this Agreement or
                  from any misrepresentation in or omission from any certificate
                  or other instrument furnished or to be furnished to the
                  Purchaser under this Agreement; and

         (c)      any and all actions, suits, proceedings, demands, assessments,
                  judgments, costs and legal and other expenses incident to any
                  of the foregoing.

5.        REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

The Purchaser represents and warrants to the Vendor as follows; with the intent
that the Vendor will rely on these representations and warranties in entering
into this Agreement, and in concluding the purchase and sale contemplated by
this Agreement.

5.1      Status of Purchaser

The Purchaser is a corporation duly incorporated, validly existing and in good
standing under the laws of Nevada, has the power and capacity to enter into this
Agreement and carry out its terms.

5.2      Authority to Purchase

The execution and delivery of this Agreement and the completion of the
transaction contemplated by this Agreement has been duly and validly authorized
by all necessary corporate action on the part of the Purchaser, and this
Agreement constitutes a legal, valid and binding obligation of the Purchaser
enforceable against the Purchaser in accordance with its terms except as limited
by laws of general application affecting the rights of creditors.

                                       6
<PAGE>

6.       SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS

6.1      Vendor's Representations, Warranties and Covenants

All statements contained in any certificate or other instrument delivered by or
on behalf of the Vendor under this Agreement or in connection with the
transaction contemplated by this Agreement will be deemed to be representations
and warranties by the Vendor. All representations, warranties, covenants and
agreements made by the Vendor in this Agreement or under this Agreement will,
unless otherwise expressly stated, survive closing and any investigation at any
time made by or on behalf of the Vendor or the Purchaser subject to the
provisions of this Agreement and will continue in full force and effect for the
benefit of the Purchaser.

6.2      Limitation on Vendor's Indemnity

No claim by the Purchaser under the covenant of indemnity contained in this
Agreement or for damages or other relief in respect of breach of warranty or
breach of covenant by the Vendor under this Agreement will be valid unless
written notice of the claim is given by the Purchaser to the Vendor before the
expiration of 30 months after closing.

6.3      Purchaser's Representations, Warranties and Covenants

All representation, warranties, covenants and agreements made by the Purchaser
in this Agreement or under this Agreement will, unless otherwise expressly
stated, survive closing and any investigation at any time made by or on behalf
of the Vendor or the Purchaser and will continue in full force and effect for
the benefit of the Vendor.

7.       CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PURCHASER

All obligations of the Purchaser under this Agreement are subject to the
fulfillment at or before closing of the following conditions:

7.1      Vendor's Representations and Warranties

The Vendor's representations and warranties contained in this Agreement and in
any certificate or document delivered under this Agreement or in connection with
the transactions contemplated by this Agreement will be true at and as of
closing as if such representations and warranties were made at and as of such
time.

7.2      Vendor's Covenants

The Vendor will have performed and complied with all agreements, covenants and
conditions required by this Agreement to be performed or complied with by it
before or at closing.

The foregoing conditions are for the exclusive benefit of the Purchaser and any
such condition may be waived in whole or in part by the Purchaser at or before
closing by delivering to the Vendor a written waiver to that effect signed by
the Purchaser.

8.       CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE VENDOR

All obligations of the Vendor under this Agreement are subject to the
fulfillment, before or at closing, of the following conditions:

                                       7
<PAGE>

8.1      Purchaser's Representations and Warranties

The Purchaser's representations and warranties contained in this Agreement will
be true at and as of closing as though such representations and warranties were
made as of such time.

8.2      Purchaser's Covenants

The Purchaser will have performed and complied with all covenants, agreements
and conditions required by this Agreement to be performed or complied with by it
at or before closing.

8.3      Consents of Third Parties

All consents or approvals required to be obtained by the Vendor for the purpose
of selling, assigning or transferring the Assets have been obtained, provided
that this condition may only be relied upon by the Vendor if the Vendor has
diligently exercised its best efforts to procure all such consents or approvals
and the Purchaser has not waived the need for all such consents or approvals.

Each of the foregoing conditions is for the exclusive benefit of the Vendor and
any such condition may be waived in whole or part by the Vendor at or before
closing by delivering to the Purchaser a written waiver to that effect signed by
the Vendor.

9.       CLOSING

9.1      Time of Closing

Subject to the terms and conditions of this Agreement, the purchase and sale of
the Assets will be completed at a closing to be held at such time and date as
agreed upon in writing between the parties.

9.2      Place of Closing

The closing will take place at the offices of the Purchaser's solicitors,
702-777 Hornby Street, Vancouver, British Columbia.

9.3      Documents to be Delivered by the Vendor

At the closing the Vendor will deliver or cause to be delivered to the
Purchaser:

         (a)      all deeds of conveyance, bills of sale, transfer and
                  assignments in form and content satisfactory to the
                  Purchaser's counsel, appropriate to effectively vest a good
                  and marketable title to the Assets in the Purchaser to the
                  extent contemplated by this Agreement, and immediately able to
                  be registered in all places where registration of such
                  instruments is required;

         (b)      all consents or approvals required to be obtained by the
                  Vendor or the Company for the purpose of validly assigning the
                  Material contracts;

         (c)      possession of the Assets;

         (d)      duly executed releases of, or evidence to the reasonable
                  satisfaction of the Purchaser as to the discharge of any and
                  all liabilities which the Purchaser has not agreed to assume
                  and which may be enforceable against any of the Assets being
                  purchased under this Agreement;

                                       8
<PAGE>

         (e)      certified copies of those resolutions of the shareholders and
                  directors of the Company required to be passed to authorize
                  the execution, delivery and implementation of this Agreement
                  and of all documents to be delivered by the Vendor under this
                  Agreement;

         (f)      the certificate of the Vendor's auditors prepared under
                  section 4.1 of this Agreement; and,

         (g)      a statement of the Assumed Liabilities signed by the Vendor.

9.4      Documents to be Delivered by the Purchaser

At the closing the Purchaser will deliver or cause to be delivered:

         (a)      a share certificate payable to the Vendor or its nominees.

         (b)      a legal opinion from the Vendor's legal counsel that this
                  agreement is binding and that the Vendor is duly authorized to
                  transfer ownership of 100% of the Assets, and that Saga X owns
                  the legal title to the patents listed in the Schedule of
                  Intangible Property.

10.       RISK OF LOSS

From the date of this Agreement to closing, the Assets will be and remain at the
risk of the Vendor. If any of the assets are lost, damaged or destroyed before
closing, the Purchaser may, in lieu of terminating this Agreement, elect by
notice in writing to the Vendor to complete the purchase to the extent possible
without reduction of the purchase price, in which event all proceeds of any
insurance or compensation in respect of such loss, damage or destruction will be
payable to the Purchaser and all right and claim of the Vendor to any such
amounts not paid by closing will be assigned to the Purchaser.

11.      UNCOLLECTED RECEIVABLES

If any part of the Receivables sold under this Agreement are not collected by
the Purchaser in full within 180 days after closing, the Vendor will pay to the
Purchaser an amount equal to the excess of the uncollected amounts over the
provision for doubtful accounts reflected in the auditors' determination of the
net book value thereof, upon receipt of a reassignment by the Purchaser of the
uncollected part of those accounts. Payment on account not appropriated by the
Vendor will be applied to the oldest account owing by the Payor.

12.      FURTHER ASSURANCES

The parties will execute such further and other documents and do such further
and other things as may be necessary to carry out and give effect to the intent
of this Agreement.

13.      NOTICE

All notices required or permitted to be given under this Agreement will be in
writing and personally delivered to the address of the intended recipient set
forth on the first page of this Agreement or at such other address as may from
time to time be notified by any of the parties in the manner provided in this
Agreement.

                                       9
<PAGE>

14.      ENTIRE AGREEMENT

This Agreement constitutes the entire agreement between the parties and there
are no representations or warranties, express or implied, statutory or otherwise
and no collateral agreements other than as expressly set forth or referred to in
this Agreement.

15.      TIME OF THE ESSENCE

Time will be the essence of this Agreement.

16.      APPLICABLE LAW

This Agreement will be governed by and interpreted in accordance with the laws
of British Columbia, Canada, and the parties agree to attorn to the jurisdiction
of the Supreme Court of British Columbia.

17.      SUCCESSORS AND ASSIGNS

This Agreement will enure to the benefit of and be binding upon the parties and
their respective successors and assigns.

18.      HEADINGS

The headings appearing in this Agreement are inserted for convenience of
reference only and will not affect the interpretation of this Agreement.

IN WITNESS WHEREOF the parties have executed this Agreement at New York, New
York, USA, as of the day and year first above written.

M.I.V. Therapeutics, Inc.
(the "Purchaser")                                  (the "Vendor")

/s/ Alan Lindsay                                   /s/ D. Shimon
----------------                                   -------------
per: Alan Lindsay                                  per: Dr. Dov Shimon
Chairman, President & CEO                          title: President

SagaX Inc.
(the "Company")

/s/ D. Shimon
-------------
Dr. Dov Shimon
President

                                       10
<PAGE>

                                   SCHEDULE I

                         SCHEDULE OF INTANGIBLE PROPERTY

                                       11
<PAGE>

                                   SCHEDULE II

                         SCHEDULE OF MATERIAL CONTRACTS

                                       12Unassociated Document

EXHIBIT
10.1

$100,000,000

TERM LOAN
AGREEMENT

among

PENNSYLVANIA
ELECTRIC COMPANY

and

THE LENDERS
REFERRED TO HEREIN

and

UNION BANK OF
CALIFORNIA, N.A.,

as Administrative
Agent

UNION BANK OF
CALIFORNIA, N.A.,

Lead
Arranger

and

NATIONAL CITY
BANK,

Arranger and
Syndication Agent

March 15,
2005

 

	 	
      TABLE
      OF CONTENTS
	 
	
      Section
	 	
      Page

	 	 	 
	
      ARTICLE 1
      DEFINITIONS AND INTERPRETATION
	
      1

	
      Section
      1.1
	
      Definitions
	
      1

	
      Section
      1.2
	
      Accounting
      Terms
	
      7

	
      Section
      1.3
	
      Interpretation
	
      7

	
      Section
      1.4
	
      Computation
      of Time Periods
	
      8

	
      ARTICLE 2
      AMOUNTS AND TERMS OF ADVANCES
	
      8

	
      Section
      2.1
	
      Commitments
	
      8

	
      Section
      2.2
	
      Making
      Advances
	
      8

	
      Section
      2.3
	
      Repayment
	
      9

	
      Section
      2.4
	
      Interest
	
      9

	
      Section
      2.5
	
      Prepayments
	
      9

	
      Section
      2.6
	
      Conversion of
      Advances
	
      9

	
      Section 2.7
      
	
      Payments
	
      10

	
      Section
      2.8
	
      Sharing of
      Payments, Etc
	
      11

	
      Section
      2.9
	
      Evidence of
      Debt
	
      11

	
      ARTICLE 3
      YIELD PROTECTION
	
      11

	
      Section
      3.1
	
      Change in
      Circumstances
	
      11

	
      Section
      3.2
	
      Eurodollar
      Reserves
	
      12

	
      Section
      3.3
	
      Breakage
      Indemnity
	
      12

	
      Section
      3.4
	
      Taxes
	
      12

	
      Section
      3.5
	
      Notices
	
      12

	
      Section
      3.6
	
      Participants
	
      12

	
      Section
      3.7
	
      Basis for
      Claims for Compensation
	
      12

	
      Section
      3.8
	
      Change in
      Legality
	
      13

	
      Section
      3.9
	
      Market Rate
      Disruptions
	
      13

	
      ARTICLE 4
      CONDITIONS PRECEDENT TO ADVANCES
	
      13

	
      Section
      4.1
	
      Conditions
      Precedent to Advances on Closing Date
	
      13

	
      Section
      4.2
	
      Reliance on
      Certificates
	
      14

	
      ARTICLE 5
      REPRESENTATIONS AND WARRANTIES
	
      14

	
      Section
      5.1
	
      Corporate
      Existence and Power
	
      14

	
      Section
      5.2
	
      Corporate
      Authorization
	
      15

	
      Section
      5.3
	
      No Violation,
      Etc
	
      15

	
      Section
      5.4
	
      Governmental
      Action
	
      15

	
      Section
      5.5
	
      Execution and
      Delivery
	
      15

	
      Section
      5.6
	
      Other
      Information
	
      15

	
      Section
      5.7
	
      Litigation
	
      15

	
      Section
      5.8
	
      Fire,
      Etc
	
      15

	
      Section
      5.9
	
      Financial
      Statements
	
      15

	
      Section
      5.10
	
      ERISA
	
      16

	
      Section
      5.11
	
      Taxes
	
      16

	
      Section
      5.12
	
      Title to
      Properties
	
      16

	
      Section
      5.13
	
      Hazardous
      Materials
	
      16

	
      ARTICLE 6
      AFFIRMATIVE COVENANTS
	
      16

	
      Section
      6.1
	
      Preservation
      of Existence, Etc
	
      16

	
      Section
      6.2
	
      Maintenance
      of Properties, Etc
	
      16

	
      Section
      6.3
	
      Compliance
      with Material Contractual Obligtions, Laws, Etc
	
      17

	
      Section
      6.4
	
      Insurance
	
      17

	
      Section
      6.5
	
      Visitation
      Rights
	
      17

	
      Section
      6.6
	
      Keeping of
      Books
	
      17

	
      Section
      6.7
	
      Transactions
      with Affiliates
	
      17

	
      Section
      6.8
	
      Reporting
      Requirements
	
      18

	
      Section
      6.9
	
      Use of
      Proceeds
	
      18

	
      Section
      6.10
	
      Indebtedness
      to Total Capitalization
	
      18

	
      Section
      6.11
	
      Fixed Charge
      Ratio
	
      18

	
      Section
      6.12
	
      Further
      Assurances
	
      19

	
      ARTICLE 7
      NEGATIVE COVENANTS
	
      19

	
      Section
      7.1
	
      Liens,
      Etc
	
      19

	
      Section
      7.2
	
      Cash
      Collateral
	
      19

(i)

	
      Section
      7.3
	
      Mergers,
      Etc
	
      20

	
      Section
      7.4
	
      Sales of
      Assets, Etc
	
      20

	
      Section
      7.5
	
      Compliance
      with ERISA
	
      20

	
      Section
      7.6
	
      Constituent
      Documents, Etc
	
      20

	
      ARTICLE 8
      EVENTS OF DEFAULT
	
      20

	
      Section
      8.1
	
      Events of
      Default
	
      20

	
      ARTICLE 9
      ADMINISTRATIVE AGENT
	
      22

	
      Section
      9.1
	
      Appointment
      and Authority
	
      22

	
      Section
      9.2
	
      Rights as
      Lender
	
      22

	
      Section
      9.3
	
      Exculpatory
      Provisions
	
      22

	
      Section
      9.4
	
      Reliance by
      Administrative Agent
	
      23

	
      Section
      9.5
	
      Delegation of
      Duties
	
      23

	
      Section
      9.6
	
      Resignation
      of Administrative Agent
	
      23

	
      Section
      9.7
	
      Non-Reliance
      on Administrative Agent and Other Lenders
	
      24

	
      Section
      9.8
	
      No Duties,
      Etc
	
      24

	
      ARTICLE 10
      MISCELLANEOUS
	
      24

	
      Section
      10.1
	
      Amendments
      and Waivers
	
      24

	
      Section
      10.2
	
      Notices
	
      24

	
      Section
      10.3
	
      No Waiver;
      Remedies
	
      24

	
      Section
      10.4
	
      Right of
      Setoff
	
      25

	
      Section
      10.5
	
      Continuing
      Obligation
	
      25

	
      Section
      10.6
	
      Costs,
      Expenses and Taxes
	
      25

	
      Section
      10.7
	
      Indemnification
	
      25

	
      Section
      10.8
	
      Assignments
      and Participations
	
      26

	
      Section
      10.9
	
      Severability
	
      27

	
      Section
      10.10
	
      Governing
      Law
	
      27

	
      Section
      10.11
	
      Execution in
      Counterparts
	
      27

	
      Section
      10.12
	
      Headings
	
      27

	
      Section
      10.13
	
      Patriot Act
      Notice
	
      27

	
      Section
      10.14
	
      WAIVER OF
      JURY TRIAL
	
      S-1

	
      Exhibit
      A
	
      Promissory
      Note
	 
	
      Exhibit
      B
	
      Notice of
      Borrowing
	 
	
      Exhibit
      C
	
      Notice of
      Conversion
	 
	
      Exhibit
      D
	
      Assignment
      and Assumption
	 

 

(ii)

TERM LOAN
AGREEMENT

This Agreement,
dated as of March 15, 2005, is entered into by and among (1) PENNSYLVANIA
ELECTRIC COMPANY, a Pennsylvania corporation (the "Borrower"), (2) the
financial institutions listed on the signature pages hereof and each other
financial institution that becomes a party hereto pursuant to Section 10.8 (the
"Lenders") and (3) UNION
BANK OF CALIFORNIA, N.A., a national banking association ("UBOC"), as
administrative agent (the "Administrative
Agent") for the
Lenders.

Recital

The Borrower has
requested that the Lenders make available to the Borrower a term loan in the
aggregate amount of $100,000,000, and the Lenders are willing to do so on the
terms and conditions contained in this Agreement. Accordingly, the Borrower, the
Lenders and the Administrative Agent hereby agree as set forth
below.

ARTICLE
1

DEFINITIONS AND
INTERPRETATION

Section
1.1 Definitions. The terms set
forth below, as used herein, have the respective meanings set forth below (such
meanings to be applicable to both the singular and plural forms of the terms
defined).

        "Advance" means a loan made
by a Lender to the Borrower pursuant to this Agreement (or a portion of such a
loan thereafter Converted) and refers to a Base Rate Advance or a Eurodollar
Rate Advance, each of which shall be a "Type" of
Advance.

        "Administrative
Agent" has the meaning
specified in the first sentence of this Agreement.

        "Affiliate" means, with
respect to any Person, any other Person directly or indirectly controlling
(including all directors and officers of such Person), controlled by, or under
direct or indirect common control with, such Person. A Person shall be deemed to
control another entity if such Person possesses, directly or indirectly, the
power to direct or cause the direction of the management and policies of such
entity, whether through the ownership of voting securities, by contract or
otherwise.

        "Agreement" means this Term
Loan Agreement, as the same may from time to time be amended, restated or
otherwise modified in accordance with its terms.

        "Applicable
Law" means all
applicable laws, statutes, treaties, rules, codes, ordinances, regulations,
certifications, orders, interpretations, licenses, permits, judgments, decrees,
injunctions, writs, orders, directives, guidelines, policies and similar forms
of decision of any Governmental Authority.

        "Applicable Lending
Office" means, for each
Lender, (a) in the case of a Base Rate Advance, such Lender’s Domestic Lending
Office or, in the case of a Eurodollar Rate Advance, such Lender’s Eurodollar
Lending Office or (b) such other office or Affiliate of such Lender as it
may from time to time specify to the Borrower.

        "Assignment and
Assumption" means an
Assignment and Assumption substantially in the form of Exhibit D.

        "Authorized
Officer" means, with
respect to any action, an officer of the Borrower authorized to take such action
pursuant to resolutions of the Borrower delivered to the Lenders from time to
time.

        "Base
Rate" means, for any
period, a fluctuating interest rate per
annum (rounded upward to
the nearest whole multiple of 1/16 of 1% per
annum, if such rate is
not such a multiple) equal for each day during such period to the greater of (a)
the Reference Rate in effect for such day and (b) the sum of 0.50% per
annum plus the Federal
Funds Rate in effect for such day. If the Administrative Agent determines (which
determination shall be conclusive absent manifest error) that it is unable to
ascertain the Federal Funds Rate for any reason, including the inability or
failure of the Administrative Agent to obtain sufficient quotations in
accordance with the terms of this Agreement, the Base Rate shall be determined
without regard to clause (b) of the first sentence of this definition until the
circumstances giving rise to such inability no longer exist. Any change in the
Base Rate due to a change in the Reference Rate or the Federal Funds Rate shall
be effective on the effective date of such change in the Reference Rate or the
Federal Funds Rate, respectively.

        "Base Rate
Advance" means an Advance
that bears interest by reference to the Base Rate.

        "Borrower" has the meaning
specified in the first sentence of this Agreement.

        "Borrowing" means Advances of
the same Type made or Converted on the same date and, in the case of Eurodollar
Rate Advances, as to which a single Interest Period is in effect.

        "Business
Day" means a day of the
year on which banks are not required or authorized to close in Akron, Ohio or
Los Angeles, California and, if the applicable Business Day relates to a
Eurodollar Rate Advance, on which dealings in Dollar deposits are carried on in
the London interbank market.

        "Calculation
Period" means, for
purposes of calculating any financial measure with respect to the Borrower and
its Subsidiaries, any period of four successive fiscal quarters of the Borrower
ending on the last day of a fiscal quarter of the Borrower.

        "Capital
Leases" means leases of
the type described in clause (d) of the definition of åIndebtednessæ in this
Section 1.1.

        "Cash and Cash
Equivalents" means
(a) cash on hand, (b) demand deposits maintained in the United States
or any other country with any commercial bank, trust company, savings and loan
association, savings bank or other financial institution, (c) time deposits
maintained in the United States or any other country with, or certificates of
deposit having a maturity of one year or less issued by, any commercial bank,
securities dealer, trust company, savings and loan association, savings bank or
other financial institution, (d) direct obligations of, or obligations
unconditionally guaranteed by, the United States or any agency thereof and
having a maturity of one year or less and (e) commercial paper rated (on
the date of acquisition thereof) A-1 or P-1 or better by S&P or Moody’s,
respectively (or an equivalent rating by another nationally recognized
credit-rating agency of similar standing if neither S&P nor Moody’s is then
in the business of rating commercial paper) and having a maturity of one year or
less.

        "Change in
Control" means the
occurrence of either of the following: (a) any entity, person (within the
meaning of Section 14(d) of the Securities Exchange Act of 1934 (the
"Exchange
Act")) or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) that
theretofore was a beneficial owner (as defined in Rule 13d-3 under the Exchange
Act) of less than 20% of the Borrower’s then outstanding common stock either (i)
acquires shares of common stock of the Borrower in a transaction or series of
transactions that results in such entity, person or group directly or indirectly
owning beneficially 20% or more of the outstanding common stock of the Borrower
or (ii) acquires, by proxy or otherwise, the right to vote for the election of
directors, for any merger, combination or consolidation of the Borrower or any
of its direct or indirect Subsidiaries, or for any other matter or question,
more than 20% of the then outstanding voting securities of the Borrower; or (b)
the election or appointment, at any time prior to the Maturity Date when
FirstEnergy Corp., an Ohio corporation, is not the sole legal and beneficial
owner of the outstanding capital stock of the Borrower, of persons to the
Borrower’s board of directors (i) who were not directors of the Borrower on the
date hereof and (ii) whose election or appointment was not approved by a
majority of those persons who were directors on the date hereof, where such
newly elected or appointed directors constitute 20% or more of the directors of
the board of directors of the Borrower.

        "Closing
Date" means the day, not
later than March 31, 2005, on which each of the conditions precedent specified
in Section 4.1 is fulfilled to the satisfaction of, or waived with the consent
of, the Lenders and the initial Advances are made hereunder.

        "Code" means the Internal
Revenue Code of 1986 and the regulations promulgated and rulings issued
thereunder.

- 2-

        "Commitment" means, for each
Lender, $50,000,000.

        "Consolidated
Debt" means, with
respect to the Borrower at any date of determination, the aggregate Indebtedness
of the Borrower and its Consolidated Subsidiaries determined on a consolidated
basis in accordance with generally accepted accounting principles but shall not
include (a) Nonrecourse Indebtedness of the Borrower or any of its Consolidated
Subsidiaries and (b) obligations under leases that have been or should be, in
accordance with generally accepted accounting principles, recorded as operating
leases in respect of which the Borrower or any of its Consolidated Subsidiaries
is liable as a lessee.

        "Consolidated
Subsidiary" means, as to any
Person, any Subsidiary of such Person the accounts of which are or are required
to be consolidated with the accounts of such Person in accordance with generally
accepted accounting principles.

        "Controlled
Group" means all members
of a controlled group of corporations and all trades or businesses (whether or
not incorporated) under common control that, together with the Borrower, are
treated as a single employer under Section 414(b) or 414(c) of the
Code.

        "Conversion," "Convert" and "Converted" each refer to a
conversion of Advances of one Type into Advances of the other Type pursuant to
Section 2.6, 3.8 or 3.9 or the selection of a new, or the renewal of the same,
Interest Period for Eurodollar Rate Advances pursuant to Section
2.6(a).

        "Default" means any Event of
Default or any event or condition that, with the giving of notice or the lapse
of time, or both, would constitute an Event of Default.

        "Dollars" and "$" each mean lawful
money of the United States of America.

        "Domestic Lending
Office" means, for each
Lender, the office of such Lender specified as such on the signature pages
hereof or such other office of such Lender as it may from time to time specify
to the Borrower.

        "ERISA" means the Employee
Retirement Income Security Act of 1974 and the regulations promulgated and
rulings issued thereunder.

        "ERISA
Affiliate" means any Person
that for purposes of Title IV of ERISA is a member of the Borrower’s controlled
group, or under common control with the Borrower, within the meaning of Section
414 of the Code and the regulations promulgated and rulings issued
thereunder.

        "ERISA
Event" means (a) the
occurrence of a reportable event, within the meaning of Section 4043 of ERISA,
unless the 30-day notice requirement with respect thereto has been waived by the
PBGC, (b) the provision by the administrator of any Plan of a notice of intent
to terminate such Plan, pursuant to Section 4041(a)(2) of ERISA (including any
such notice with respect to a plan amendment referred to in Section 4041(e) of
ERISA), (c) the cessation of operations at a facility in the circumstances
described in Section 4062(e) of ERISA, (d) the withdrawal by the Borrower or an
ERISA Affiliate from a Multiple Employer Plan during a plan year for which it
was a åsubstantial employeræ as defined in Section 4001(a)(2) of ERISA, (e) the
failure by the Borrower or any ERISA Affiliate to make a payment to a Plan
required under Section 302 of ERISA, which results in a Lien pursuant to Section
302(f) of ERISA, (f) the adoption of an amendment to a Plan requiring the
provision of security to such Plan, pursuant to Section 307 of ERISA, or (g) the
institution by the PBGC of proceedings to terminate a Plan, pursuant to Section
4042 of ERISA, or the occurrence of any event or condition that might reasonably
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, a Plan.

        "Eurocurrency
Liabilities" has the meaning
specified in Regulation D of the Board of Governors of the Federal Reserve
System.

        "Eurodollar Lending
Office" means, for each
Lender, the office of such Lender specified as such on the signature pages
hereof (or, if no such office is specified, such Lender’s Domestic Lending
Office) or such other office of such Lender as it may from time to time specify
to the Borrower.

        "Eurodollar
Rate" means, for each
Interest Period for each Eurodollar Rate Advance that is part of the same
Borrowing, the interest rate per
annum (rounded upward to
the nearest whole multiple of 1/16 of 1% per
annum, if such average
is not such a multiple) at which deposits in Dollars would be offered to the
Administrative Agent in the London interbank market two Business Days before the
first day of such Interest Period in an amount substantially equal to such
Eurodollar Rate Advance and for a period equal to such Interest
Period.

- 3-

        "Eurodollar Rate
Advance" means an Advance
that bears interest by reference to the Eurodollar Rate.

        "Eurodollar Reserve
Percentage" means, for each
Interest Period for each Eurodollar Rate Advance made by each Lender, the
reserve percentage applicable to such Lender during such Interest Period (or, if
more than one such percentage is so applicable, the daily average of such
percentages for those days in such Interest Period during which any such
percentage is so applicable) under Regulation D or other regulations issued
from time to time by the Board of Governors of the Federal Reserve System for
determining the maximum reserve requirement (including any emergency,
supplemental or other marginal reserve requirement) then applicable to such
Lender with respect to liabilities or assets consisting of or including
Eurocurrency Liabilities having a term equal to such Interest
Period.

        "Event of
Default" has the meaning
specified in Section 8.1.

        "Federal Funds
Rate" means, for any
period, a fluctuating interest rate per
annum equal for each day
during such period to (a) the weighted average (rounded upward to the nearest
whole multiple of 1/16 of 1% per
annum, if such average
is not such a multiple) of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York or (b) if such
average is not so published for any day that is a Business Day, the average
(rounded upward to the nearest whole multiple of 1/16 of 1% per
annum, if such average
is not such a multiple) of the quotations for such day for such transactions
received by the Administrative Agent from three Federal funds brokers of
recognized standing selected by it.

        "First Mortgage
Bonds" means the bonds
issued pursuant to the Mortgage and Deed of Trust dated as of January 1, 1942
between the Borrower and The Bank of New York, as successor trustee, as
heretofore and from time to time hereafter amended and
supplemented.

        "Fixed Charge
Ratio" means, with
respect to the Borrower for any fiscal quarter thereof, the ratio of (a) the sum
of (i) consolidated net income, before extraordinary items, of the Borrower and
its Subsidiaries for the twelve-month period ended on the last day of such
fiscal quarter, plus (ii) depreciation, amortization, Federal income taxes
deducted in determining such net income, interest expense, and preferred stock
dividends of its Subsidiaries, plus (iii) the interest element of rental
payments deducted in determining such net income under operating-lease
obligations of the Borrower and its Subsidiaries during such twelve-month
period, plus (iv) all other noncash charges constituting operating expenses
deducted in determining such net income to (b) the sum of (i) all interest
expense (excluding the amount of any allowance for funds used during
construction) in respect of Indebtedness of the Borrower and its Subsidiaries
during such twelve-month period, plus (ii) the interest element of rental
payments deducted in determining net income under operating-lease obligations of
the Borrower and its Subsidiaries during such twelve-month period.

        "Governmental
Action" means any
authorization, consent, approval, waiver, exception, variance, order, license,
exemption, publication, filing, notice, declaration or other requirement of any
Governmental Authority (other than routine reporting requirements the failure to
comply with which will not affect the validity or enforceability of any Loan
Document or have a material and adverse effect on the transactions contemplated
by any Loan Document or any material right, power or remedy of any Person
thereunder).

        "Governmental
Authority" means, whether
domestic or foreign, any national, federal, state or local government, any
political subdivision thereof, or any governmental, quasi-governmental,
judicial, public or statutory instrumentality, authority, body or entity,
including any central bank or comparable authority and any referee or
arbitrator.

        "Hazardous
Materials" means any
petrochemical or petroleum products, any flammable materials, explosives,
radioactive materials, hazardous materials, hazardous wastes, hazardous or toxic
substances or related or similar materials, asbestos or any material containing
asbestos, or any other substance or material as so defined and regulated by any
Applicable Law, including the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 (42 U.S.C. Sections 9601, et
seq.), the Hazardous
Materials Transportation Act (49 U.S.C. Sections 1801, et
seq.) and the Resource
Conservation and Recovery Act (42 U.S.C. Sections 6901, et
seq.), and the
regulations adopted and publications promulgated pursuant thereto.

- 4-

        "Indebtedness" means, for any
Person, all obligations of such Person that in accordance with generally
accepted accounting principles should be classified on a balance sheet of such
Person as liabilities of such Person, and in any event shall include, without
duplication, all (a) indebtedness for borrowed money, (b) obligations evidenced
by bonds, debentures, notes or other similar instruments, (c) obligations to pay
the deferred purchase price of property or services, (d) obligations as lessee
under leases that have been or should be, in accordance with generally accepted
accounting principles, recorded as capital leases, (e) reimbursement obligations
(contingent or otherwise) in respect of outstanding letters of credit, (f)
indebtedness of the type referred to in clauses (a) through (e) above that is
secured by (or for which the holder of such indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien on property (including
accounts and contract rights) owned by such Person, even though such Person has
not assumed or become liable for the payment of such indebtedness, and (g)
obligations under direct or indirect guaranties in respect of, and obligations
(contingent or otherwise) to purchase or otherwise acquire, or otherwise to
assure a creditor against loss in respect of, indebtedness or obligations of
others of the kinds referred to in clauses (a) through (e) above.

        "Interest
Period" means, for each
Eurodollar Rate Advance that is part of the same Borrowing, the period
commencing on the date of such Advance or the date of the Conversion of any
Advance into such an Advance and ending on the last day of the period selected
by the Borrower pursuant to the provisions below and, thereafter, each
subsequent period commencing on the last day of the immediately preceding
Interest Period and ending on the last day of the period selected by the
Borrower pursuant to the provisions below. The duration of each such Interest
Period shall be 1, 2 or 3 weeks or 1, 2, 3 or 6 months, as the Borrower may
select upon notice (by means of the Notice of Borrowing or a Notice of
Conversion) received by the Administrative Agent not later than 11:00 a.m.,
California time, on the third Business Day before the first day of such Interest
Period; provided, however, that

(a) Interest Periods
commencing on the same date for Advances composing the same Borrowing shall be
of the same duration;

(b) the Borrower may
not select any Interest Period that ends after the Maturity Date;

(c) not more than 5
different Interest Periods may be in effect at any one time under this
Agreement;

(d) for any Interest
Period of a duration of less than one month, the Eurodollar Rate applicable to
such Interest Period shall be equal to the higher of the Eurodollar Rate then
applicable to an Interest Period of such duration and the Eurodollar Rate then
applicable to an Interest Period of one month;

(e) whenever the last
day of an Interest Period would otherwise occur on a day other than a Business
Day, the last day of such Interest Period shall be extended to occur on the next
succeeding Business Day; provided, however, that, if such
extension would cause the last day of any Interest Period specified in months to
occur in the next succeeding calendar month, then the last day of such Interest
Period shall occur on the next preceding Business Day; and

(f) if any Interest
Period specified in months begins on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period, such
Interest Period shall end on the last Business Day of such calendar
month.

        "Lenders" has the meaning
specified in the first sentence of this Agreement.

        "Lien" means, with
respect to any asset, (a) any lien, charge, option, claim, mortgage, security
interest, pledge or other encumbrance or any other type of preferential
arrangement of any kind in respect of such asset or (b) the interest of a vendor
or lessor under any conditional-sale agreement, Capital Lease or other
title-retention agreement relating to such asset.

        "Loan
Documents" means this
Agreement and the Notes.

        "Maturity
Date" means December 30,
2005.

        "Moody’s" means Moody’s
Investors Service, Inc.

        "Multiemployer
Plan" means a
multiemployer plan, as defined in Section 4001(a)(3) of ERISA, that is subject
to Title IV of ERISA and to which the Borrower or any ERISA Affiliate is making
or accruing an obligation to make contributions, or has within any of the
preceding five plan years made or accrued an obligation to make contributions,
such plan being maintained pursuant to one or more collective-bargaining
agreements.

- 5-

        "Multiple Employer
Plan" means a single
employer plan, as defined in Section 4001(a)(15) of ERISA, that is subject to
Title IV of ERISA and that (a) is maintained for employees of the Borrower or an
ERISA Affiliate and at least one Person other than the Borrower and an ERISA
Affiliate or (ii) was so maintained and in respect of which the Borrower or an
ERISA Affiliate could have liability under Section 4064 or 4069 of ERISA in the
event such plan has been or were to be terminated.

        "Nonrecourse
Indebtedness" means, in respect
of an obligor (the "Debtor"), any Indebtedness
that finances the acquisition, development, ownership or operation of an asset
in respect of which the Person to which such Indebtedness is owed has no
recourse whatsoever to the Debtor or any of its Affiliates other
than:

(a) recourse to the
Debtor with respect to such Indebtedness for amounts limited to the cash flow or
net cash flow (other than historic cash flow) from the asset;

(b) recourse to the
Debtor for the purpose only of enabling amounts to be claimed in respect to such
Indebtedness in an enforcement of any Lien given by the Debtor over the asset or
the income, cash flow or other proceeds deriving from the asset (or given by any
equityholder in the Debtor over its shares or like interest in the capital of
the Debtor) to secure the Indebtedness, but only if the extent of the recourse
to the Debtor is limited solely to the amount of any recoveries made on any such
enforcement; and

(c) recourse to the
Debtor generally, or indirectly to any Affiliate of the Debtor under any form of
assurance, undertaking or support, which recourse is limited to a claim for
damages (other than liquidated damages and damages required to be calculated in
a specified way) for a breach of an obligation (other than a payment obligation
or an obligation to comply or to procure compliance by another with any
financial ratios or other tests of financial condition) by the Person against
which such recourse is available.

        "Note" means a Promissory
Note of the Borrower payable to the order of a Lender, substantially in the form
of Exhibit A, evidencing the aggregate indebtedness of the Borrower to such
Lender resulting from the Advances made by such Lender to the
Borrower.

        "Notice of
Borrowing" has the meaning
specified in Section 2.2(a).

        "Notice of
Conversion" has the meaning
specified in Section 2.6(a).

        "Participant" has the meaning
specified in Section 10.8(e).

        "PBGC" means the Pension
Benefit Guaranty Corporation established under ERISA.

        "Person" means an
individual, a corporation (including a business trust), a joint stock company, a
limited liability company, a partnership, a trust, an unincorporated
association, a joint venture or any other entity or organization, including any
Governmental Authority.

        "Plan" means a Single
Employer Plan or a Multiple Employer Plan.

        "Reference
Rate" means the variable
rate of interest per
annum established by
UBOC from time to time as its åreference rate.æ Such åreference rateæ is set by
UBOC as a general reference rate of interest, taking into account such factors
as UBOC may deem appropriate, it being understood that many of UBOC’s commercial
or other loans are priced in relation to such rate, that it is not necessarily
the lowest or best rate actually charged to any customer and that UBOC may make
various commercial or other loans at rates of interest having no relationship to
such rate. For purposes of this Agreement, each change in the Reference Rate
shall be effective as of the opening of business on the date announced as the
effective date of any change in such åreference rate.æ

        "Register" has the meaning
specified in Section 10.8(c).

        "Required
Lenders" means, at any
time, Lenders owed at least 51% of the Advances then outstanding or, if no
Advances are then outstanding, Lenders having at least 51% of the
Commitments.

        "S&P" means Standard
& Poor’s Ratings Group, a division of The McGraw-Hill Companies,
Inc.

- 6-

        "Single Employer
Plan" means a single
employer plan, as defined is Section 4401(a)(15) of ERISA, that is subject to
Title IV of ERISA and that (a) is maintained for employees of the Borrower or an
ERISA Affiliate and no Person other than the Borrower and its ERISA Affiliates
or (b) was so maintained and in respect of which the Borrower or an ERISA
Affiliate could have liability under Section 4069 of ERISA in the event such
plan has been or were to be terminated.

        "Subsidiary" means, with
respect to any Person, any corporation or other legal entity of which more than
50% of the outstanding capital stock (or any comparable interest) having
ordinary voting power (irrespective of whether at the time capital stock (or any
comparable interest) of any other class or classes of such corporation or entity
has or might have voting power upon the occurrence of any contingency) is at the
time directly or indirectly owned by said Person (whether directly or through
one of more other Subsidiaries). In the case of a legal entity other than a
corporation, a Person shall be deemed to have more than 50% of interests having
ordinary voting power only if such Person’s vote in respect of such interests
comprises more than 50% of the total voting power of all such interests in such
entity.

        "Taxes" has the meaning
specified in Section 3.4.

        "Termination
Event" means (a) a
"reportable event" as described in Section 4043 of ERISA and the
regulations issued thereunder (other than a åreportable eventæ not subject to
the provision for 30-day notice to the PBGC under such regulations),
(b) the withdrawal of either the Borrower or any member of the Controlled
Group from a Plan during a plan year in which it was a åsubstantial employeræ as
defined in Section 4001(a)(2) of ERISA, (c) the filing of a notice of
intent to terminate a Plan or the treatment of a Plan amendment as a termination
under Section 4041 of ERISA, (d) the institution of proceedings to
terminate a Plan by the PBGC or (e) any other event or condition that might
constitute grounds under Section 4042 of ERISA for the termination of, or
the appointment of a trustee to administer, any Plan.

        "Total
Capitalization" means the sum of
Consolidated Debt of the Borrower and its Consolidated Subsidiaries,
consolidated equity of the common stockholders of the Borrower and its
Consolidated Subsidiaries and consolidated equity of the preferred stockholders
of the Borrower and its Consolidated Subsidiaries.

        "2004 Form
10-K" means the
Borrower’s Annual Report on Form 10-K for the year ended on December 31, 2004
filed with the Securities and Exchange Commission.

        "Type" has the meaning
specified for that term in the definition of "Advance."

        "UBOC" has the meaning
specified in the first sentence of this Agreement.

        "Unfunded Vested
Liabilities" means, with
respect to any Plan at any time, the amount (if any) by which (a) the
present value of all vested nonforfeitable benefits under such Plan exceeds
(ii) the fair-market value of all Plan assets allocable to such benefits,
all determined as of the then most recent valuation date for such Plan, but only
to the extent that such excess represents a potential liability of a member of
the Controlled Group to the PBGC or the Plan under Title IV of
ERISA.

Section
1.2     Accounting
Terms. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations with respect to any Person required to be made
hereunder shall be made, and all financial statements of any Person required to
be delivered hereunder shall be prepared, in accordance with generally accepted
accounting principles as in effect from time to time, applied on a basis
consistent (except for changes concurred in by such Person’s independent public
accountants) with the most recent audited consolidated financial statements of
such Person and its Subsidiaries delivered to the Lenders.

Section
1.3     Interpretation. In this
Agreement, the singular includes the plural and the plural the singular; words
importing any gender include the other genders; references to statutes are to be
construed as including all statutory provisions consolidating, amending or
replacing the statute referred to; references to "writing" include printing,
typing, lithography and other means of reproducing words in a tangible, visible
form; the words "including," "includes" and "include" are deemed to be followed
by the words "without limitation"; references to sections (or subdivisions of
sections), recitals, exhibits, annexes or schedules are to those of this
Agreement unless otherwise specified; references to agreements and other
contractual instruments are deemed to include all subsequent amendments and
other modifications to such instruments, but only to the extent such amendments
and other modifications are not prohibited by the terms of this Agreement; and
references to Persons include their respective permitted successors and
assigns.

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Section
1.4     Computation of
Time Periods. In the
computation of periods of time under this Agreement, any period of a specified
number of days shall be computed by including the first day occurring during
such period and excluding the last such day. In the case of a period of time
"from" a specified date "to" or "until" a later specified date, the word "from"
means "from and including," and the words "to" and "until" each mean "to but
excluding."

ARTICLE
2

AMOUNTS AND
TERMS OF ADVANCES

Section
2.1     Commitments. Each Lender agrees
severally, on the terms and conditions contained in this Agreement, to make an
Advance to the Borrower on the Closing Date in the amount of such Lender’s
Commitment. Any amounts that are borrowed hereunder and are subsequently repaid
or prepaid may not be reborrowed.

Section
2.2     Making
Advances.

(a)     The Borrowing to be
made on the Closing Date shall be made on notice given by the Borrower to the
Administrative Agent (i) if such Borrowing is to be composed of Base Rate
Advances, not later than 11:00 a.m., California time, on the Business Day
immediately preceding the date of the proposed Borrowing or (ii) if such
Borrowing is to be composed of Eurodollar Rate Advances, not later than 3:00
p.m., California time, on the third Business Day before the date of the proposed
Borrowing. The Administrative Agent will give each Lender prompt notice by
telecopier of such Borrowing. The Borrower’s notice of such Borrowing to the
Administrative Agent shall be given by an Authorized Officer in the form of
Exhibit B (the "Notice
of Borrowing"), specifying (A)
the requested date of such Borrowing (which shall be a Business Day), (B) the
requested Type of the Advances to compose such Borrowing, (C) that the amount of
such Borrowing is $100,000,000, (D) if such Borrowing is to be composed of
Eurodollar Rate Advances, the requested initial Interest Period for such
Advances and (E) the fact that the statements set forth in Section 4.1(b) are
true as of the date of such Borrowing. Each Lender shall, before 11:00 a.m.,
California time, on the day of such Borrowing, make available to the
Administrative Agent at its address referred to in Section 10.2, in immediately
available funds, such Lender’s ratable portion of such Borrowing. After the
Administrative Agent’s receipt of such funds and upon fulfillment of the
applicable conditions specified in Article 4, the Administrative Agent will make
such funds available to the Borrower by crediting the following account:
FirstEnergy Service Company account number 323396496 at JPMorgan Chase Bank, ABA
number 021000021, reference Penelec Term Loan. The Notice of Borrowing shall be
irrevocable and binding on the Borrower.

(b)     Anything in Section
2.2(a) to the contrary notwithstanding, the Borrower may not request Eurodollar
Rate Advances for the Borrowing to be made on the Closing Date if the obligation
of the Lenders to make, or to Convert Advances into, Eurodollar Rate Advances is
then suspended pursuant to Section 2.6(c), 3.8 or 3.9.

(c)     The Notice of
Borrowing shall be irrevocable and binding on the Borrower. The Borrower will
indemnify each Lender against any loss, cost or expense incurred by such Lender
as a result of any failure to fulfill, on or before the date specified for a
Borrowing in the Notice of Borrowing, the applicable conditions set forth in
Article 4, including any loss (including loss of anticipated profits), cost or
expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by such Lender to fund the Advance to be made by such
Lender as part of such Borrowing when such Advance, as a result of such failure,
is not made on such date.

(d)     Unless the
Administrative Agent receives notice from a Lender before the Closing Date that
such Lender will not make available to the Administrative Agent such Lender’s
ratable portion of the Borrowing to be made on the Closing Date, the
Administrative Agent may assume that such Lender has made such portion available
to the Administrative Agent on the Closing Date in accordance with Section
2.2(a), and the Administrative Agent may, in reliance upon such assumption, make
available to the Borrower on such date a corresponding amount. If and to the
extent that such Lender has not made such ratable portion available to the
Administrative Agent, such Lender and the Borrower severally agree to repay to
the Administrative Agent forthwith on demand such corresponding amount, together
with interest thereon, for each day from the date on which such amount is made
available to the Borrower until the date on which such amount is repaid to the
Administrative Agent, at (i) in the case of the Borrower, the interest rate
applicable at the time to the Advances making up such Borrowing and (ii) in the
case of such Lender, the Federal Funds Rate. If such Lender repays to the
Administrative Agent such corresponding amount, such amount so repaid shall
constitute such Lender’s Advance as part of such Borrowing for purposes of this
Agreement.

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(e)     The failure of any
Lender to make the Advance to be made by it as part of the Borrowing to be made
on the Closing Date shall not relieve any other Lender of its obligation, if
any, hereunder to make its Advance on the Closing Date, but no Lender shall be
responsible for the failure of any other Lender to make the Advance to be made
by such other Lender on the Closing Date.

Section
2.3     Repayment. On the Maturity
Date, the Borrower will repay to the Administrative Agent, for the account of
the Lenders, the outstanding principal amount of the Advances.

Section
2.4     Interest.

(a)     The Borrower will
pay interest on the unpaid principal amount of each Advance, from the date of
such Advance until such principal amount is paid in full, (i) during such
periods as such Advance is a Base Rate Advance, at a rate per
annum equal at all times
to the Base Rate in effect from time to time, payable monthly in arrears on the
last Business Day of each calendar month during such periods and on the Maturity
Date, and (ii) during such periods as such Advance is a Eurodollar Rate Advance,
at a rate per
annum equal at all times
during each Interest Period for such Advance to the sum of the Eurodollar Rate
for such Interest Period plus 1% per
annum, payable on the
last day of such Interest Period and, if such Interest Period is 6 months, on
the day that is 3 months after the first day of such Interest
Period.

(b)     Upon the occurrence
and during the continuation of any Event of Default, interest on the unpaid
principal amount of each Advance shall instead accrue at a rate per
annum equal at all times
to the sum of (i) the rate per
annum required to be
paid on such Advance pursuant to Section 2.4(a) plus (ii) 2.00% per
annum, and such interest
shall be payable on demand.

(c)     The Administrative
Agent will give prompt notice to the Borrower and the Lenders of each applicable
interest rate determined by the Administrative Agent for purposes of Section
2.4(a).

(d)     If the Borrower
fails to select the duration of any Interest Period for any Eurodollar Rate
Advances in accordance with the provisions contained in the definition of
"Interest Period" in Section 1.1, such Advances shall automatically, on the last
day of the then effective Interest Period therefor, Convert into Base Rate
Advances.

Section 2.5     Prepayments. The Borrower may
on any Business Day, in the case of Base Rate Advances upon prior written notice
to the Administrative Agent not later than 11:00 a.m., California time, on the
day of any prepayment of such Advances, and in the case of Eurodollar Rate
Advances upon at least 3 Business Days’ prior written notice to the
Administrative Agent, in each case stating the proposed date of prepayment and
the aggregate principal amount of such prepayment and identifying the Borrowing
to be prepaid, and if such notice is given the Borrower will, prepay the
outstanding principal amounts of the Advances composing such Borrowing, in whole
or ratably in part, together, in the case of Eurodollar Rate Advances, with
accrued interest to the date of such prepayment on the principal amount prepaid;
provided, however, that each partial
prepayment of a Borrowing shall be in the aggregate principal amount of
$5,000,000 or an integral multiple of $1,000,000 in excess thereof.

Section
2.6     Conversion of
Advances.

(a)     The Borrower may on
any Business Day, upon written notice in the form of Exhibit C (a "Notice
of Conversion") signed by an
Authorized Officer and given to the Administrative Agent, (i) with respect to
any Conversion to Base Rate Advances, not later than 11:00 a.m., California
time, on the Business Day immediately preceding the date of the proposed
Conversion and (ii) with respect to any Conversion to Eurodollar Rate Advances,
not later than 11:00 a.m., California time, on the third Business Day before the
date of the proposed Conversion, subject to the provisions of Sections 2.6(c),
3.8 and 3.9, Convert all or any portion of the Advances of one Type composing
the same Borrowing into Advances of the other Type or Convert all or any portion
of the Eurodollar Rate Advances composing a Borrowing into Eurodollar Rate
Advances with a new or renewed Interest Period; provided, however, that any
Conversion of Advances into Eurodollar Rate Advances shall be in the aggregate
principal amount of $5,000,000 or an integral multiple of $1,000,000 in excess
thereof, and no Conversion of Advances shall result in more than 5 different
Interest Periods for outstanding Eurodollar Rate Advances (provided that
Interest Periods of the same duration but commencing on different dates shall be
treated as different Interest Periods). Each Notice of Conversion shall, within
the restrictions specified above, specify (A) the date of such Conversion, (B)
the Advances to be Converted and (C) if such Conversion is into Eurodollar Rate
Advances, the duration of the Interest Period for such Advances. Each Notice of
Conversion shall be irrevocable and binding on the Borrower. The Administrative
Agent shall give each Lender prompt notice by telecopier of each Notice of
Conversion.

- 9-

(b)     On any day on which
the aggregate unpaid principal amount of Eurodollar Rate Advances composing any
Borrowing is reduced, by payment or prepayment or otherwise, to less than
$5,000,000, such Advances shall automatically Convert into Base Rate
Advances.

(c)     Upon the occurrence
and during the continuation of any Default, (i) each Eurodollar Rate Advance
shall automatically, on the last day of the then effective Interest Period
therefor, Convert into a Base Rate Advance, and (ii) the obligation of the
Lenders to make, or to Convert Advances into, Eurodollar Rate Advances shall be
suspended.

Section
2.7     Payments.

          

             
(a)     The Borrower will
make each payment hereunder and under the Notes not later than 11:00 a.m.,
California time, on the day when due, in Dollars and immediately available
funds, to such account of the Administrative Agent as to which the
Administrative Agent notifies the Borrower in writing from time to time. The
Administrative Agent will promptly thereafter cause to be distributed like funds
relating to the payment of principal, interest or fees ratably (other than
amounts payable pursuant to Section 2.2(c) or Article 3) to the Lenders and like
funds relating to the payment of any other amount payable to any Lender to such
Lender, in each case to be applied in accordance with the terms of this
Agreement. Upon its acceptance of an Assignment and Assumption and recording of
the information contained therein in the Register pursuant to Section 10.8(c),
from and after the effective date of such Assignment and Assumption the
Administrative Agent will make all payments hereunder in respect of the interest
assigned thereby to the Lender assignee thereunder, and the parties to such
Assignment and Assumption will make all appropriate adjustments in such payments
for periods before such effective date directly between themselves.

(b)     The Borrower hereby
authorizes each Lender, if and to the extent that any payment owed to such
Lender is not made when due hereunder or under any other Loan Document, to
charge from time to time against any or all of the Borrower’s accounts with such
Lender any amount so due.

(c)     Unless the
Administrative Agent receives notice from the Borrower before the date on which
any payment is due to the Lenders hereunder that the Borrower will not make such
payment in full, the Administrative Agent may assume that the Borrower has made
such payment in full to the Administrative Agent on such date, and the
Administrative Agent may, in reliance upon such assumption, cause to be
distributed to each Lender on such due date an amount equal to the amount then
due to such Lender. If and to the extent that the Borrower has not so made such
payment in full to the Administrative Agent, each Lender will repay to the
Administrative Agent forthwith upon demand such amount distributed to such
Lender, together with interest thereon, for each day from the date on which such
amount was distributed to such Lender until the date on which such Lender repays
such amount to the Administrative Agent, at the Federal Funds Rate.

(d)     All computations of
interest and fees hereunder shall be made on the basis of a year of 360 days for
the actual number of days occurring in the period for which such interest or
fees are payable; provided, however, that computations of interest
on Base Rate Advances shall be made on the basis of a year of 365 or 366 days,
as applicable. Each determination by the Administrative Agent of an interest
rate or fee hereunder shall be conclusive and binding for all purposes, absent
manifest error.

(e)     Whenever any
payment to be made hereunder or under any other Loan Document is stated to be
due on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest or fees, as the case may be;
provided, however, that, if such extension would cause payment of interest on or
principal of any Eurodollar Rate Advances with an Interest Period specified in
months to be made in the next succeeding calendar month, such payment shall be
made on the next preceding Business Day.

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Section
2.8     Sharing of
Payments, Etc. If any Lender
obtains any payment (whether voluntary, involuntary, through the exercise of any
right of setoff, or otherwise) on account of the Advances made by it (other than
pursuant to Section 2.2(c) or Article 3) in excess of its ratable share of
payments on account of the Advances obtained by all of the Lenders, then such
Lender will forthwith purchase from the other Lenders such participations in the
Advances made by them as necessary to cause such purchasing Lender to share the
excess payment ratably with each of them; provided, however, that,
if all or any portion of such excess payment is thereafter recovered from such
purchasing Lender, such purchase from each other Lender shall be rescinded to
the extent of such recovery, and each such other Lender shall repay to the
purchasing Lender the purchase price to the extent of such recovery, together
with an amount equal to such Lender’s ratable share (according to the proportion
of (a) the amount of such Lender’s required repayment to (b) the total amount so
recovered from the purchasing Lender) of any interest or other amount paid or
payable by the purchasing Lender in respect of the total amount so recovered.
The Borrower agrees that any Lender so purchasing a participation from another
Lender pursuant to this section may, to the fullest extent permitted by
Applicable Law, exercise all of its rights of payment (including the right of
setoff) with respect to such participation as fully as if such Lender were the
direct creditor of the Borrower in the amount of such
participation.

      Section 2.9     Evidence of
Debt.

       

              
(a)    The indebtedness of
the Borrower resulting from the Advances made by the Lenders from time to time
shall be evidenced by the Notes.

       
(b)     The Administrative
Agent shall maintain, in accordance with its usual practice, an account or
accounts evidencing the indebtedness of the Borrower resulting from each Advance
made from time to time hereunder and the amounts of principal and interest
payable and paid from time to time hereunder; provided, however, that the
failure of the Administrative Agent to maintain any such account or accounts
shall not affect the payment obligations of the Borrower hereunder.

ARTICLE
3

YIELD
PROTECTION

       Section
3.1     Change in
Circumstances. If, after the
date hereof, any Lender determines that the adoption of any Applicable Law, any
change therein or any change in the interpretation or administration thereof by
any Governmental Authority charged with the interpretation or administration
thereof, or compliance by such Lender with any request or directive (whether or
not having the force of law) of any Governmental Authority, (a) imposes,
modifies or deems applicable any reserve, special deposit, insurance assessment,
capital adequacy or similar requirement (including any such requirement imposed
by the Board of Governors of the Federal Reserve System) against assets held by,
Advances made by, or deposits in or for the account of, such Lender or any
holding company thereof, (b) imposes on such Lender any other condition
regarding this Agreement or the Advances or (c) changes the basis of
taxation of payments to such Lender of the principal of or interest on any
Eurodollar Rate Advance made by such Lender or any fees or other amounts payable
hereunder (other than changes in respect of taxes imposed on the overall net
income of such Lender, or its Applicable Lending Office, by any jurisdiction in
which such Lender has an office or by any political subdivision or taxing
authority therein), and the result of any event referred to in clause (a),
(b) or (c) above is (i) to increase the cost to such Lender and/or any
holding company thereof of issuing or maintaining any commitment or agreeing to
make, making or maintaining Advances or (ii) to reduce the return on
capital of such Lender and/or any holding company thereof with respect thereto
to a level below that which such Person could have achieved but for such
adoption, change or compliance (taking into consideration such Person’s policies
with respect to capital adequacy) by an amount deemed by such Lender to be
material, then, within 15 days after demand by such Lender through the
Administrative Agent, the Borrower will pay to such Lender through the
Administrative Agent all additional amounts that are necessary to compensate
such Lender and/or any holding company thereof for such increase in cost or
reduction of return incurred thereby. Each Lender agrees that it will designate
a different Applicable Lending Office if such designation would avoid the need
for, or reduce the amount of, such increased costs or reduction of return and
would not, in the reasonable judgment of such Lender, cause such Lender and/or
any holding company thereof to suffer any economic loss or legal or regulatory
disadvantage.

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       Section
3.2     Eurodollar
Reserves. The Borrower will
pay to each Lender upon demand through the Administrative Agent, so long as such
Lender is required under regulations of the Board of Governors of the Federal
Reserve System to maintain reserves with respect to liabilities or assets
consisting of or including Eurocurrency Liabilities, additional interest on the
unpaid principal amount of each Eurodollar Rate Advance made by such Lender, for
each Interest Period for each such Advance so long as such requirement remains
in effect, at an interest rate per
annum equal at all times
to the remainder obtained by subtracting (a) the Eurodollar Rate for such
Interest Period from (b) the rate obtained by dividing such rate by a
percentage equal to 100% minus the Eurodollar Reserve Percentage of such Lender
for such Interest Period. Such additional interest shall be determined by each
Lender and notified to the Borrower through the Administrative
Agent.

      Section
3.3     Breakage
Indemnity. The Borrower will
indemnify each Lender against any loss, cost or reasonable expense that such
Lender may sustain or incur as a consequence of (a) any failure by the
Borrower to Convert an Advance after a Notice of Conversion has been given with
respect to such Advance, (b) any payment, prepayment or Conversion of a
Eurodollar Rate Advance required or permitted to be made by any other provision
of this Agreement, or otherwise made or deemed made, on a day other than the
last day of an Interest Period applicable thereto, (c) any default in
payment or prepayment of the principal amount of any Advance or any part thereof
or interest accrued thereon, as and when due and payable (at the due date
thereof, by notice of prepayment or otherwise), or (d) any failure by the
Borrower to satisfy the applicable conditions specified in Article 4 after the
delivery of the Notice of Borrowing pursuant to Section 2.2(a). Such loss,
cost or reasonable expense shall include an amount equal to the excess, if any,
as reasonably determined by such Lender, of (i) its cost of obtaining the
funds for the Advance being paid, prepaid or Converted (based on the Eurodollar
Rate) for the period from the date of such payment, prepayment or Conversion to
the last day of the Interest Period for such Advance over (ii) the amount
of interest (as reasonably determined by such Lender) that would be realized by
such Lender in re-employing the funds so paid, prepaid or Converted for such
period or Interest Period, as the case may be. For purposes of this section, it
shall be presumed that each Lender has funded each Eurodollar Rate Advance with
a fixed-rate instrument bearing the rate and maturity designated in the
determination of the applicable interest rate for such Advance.

      Section
3.4     Taxes. All payments made
by the Borrower to the Administrative Agent or any Lender under this Agreement
shall be made free and clear of, and without reduction for or on account of, any
stamp or other taxes, levies, imposts, duties, charges, fees, deductions,
withholdings, restrictions or conditions of any nature whatsoever hereafter
imposed, levied, collected, withheld or assessed by any country (or by any
political subdivision or taxing authority thereof or therein), except for
franchise taxes and taxes on the overall net income of the Administrative Agent
or such Lender (such nonexcluded taxes being herein called åTaxesæ). If any Taxes
are required to be withheld from any amounts payable by the Borrower to the
Administrative Agent or any Lender, the amounts so payable shall be increased to
the extent necessary to yield to the Administrative Agent or such Lender, as the
case may be (after payment of all such Taxes), interest or any such other
amounts payable hereunder at the rates or in the amounts specified in this
Agreement; provided, however, that the Borrower
shall not be obligated to pay such amounts for the benefit of the Administrative
Agent or any Lender with respect to any period in which such Lender has failed
(a) to file any form or certificate that it was entitled to file that would
have exempted the Administrative Agent or such Lender, as applicable, from such
Taxes or (b) to take other action that would have entitled the
Administrative Agent or such Lender, as applicable, to an exemption from such
Taxes, if such action would not, in the reasonable judgment of the
Administrative Agent or such Lender, as applicable, be otherwise disadvantageous
to it. Whenever any Tax is paid by the Borrower, the Borrower will send to the
affected Lender through the Administrative Agent, as promptly as possible
thereafter, a receipt or other evidence of payment thereof.

     Section
3.5     Notices. A certificate as
to the nature of the occurrence giving rise to, and the calculation of,
compensation to the Administrative Agent or any Lender pursuant to Section 3.1,
3.2, 3.3 or 3.4 shall be submitted by the Administrative Agent or such Lender,
as applicable, to the Borrower through the Administrative Agent and shall be
conclusive evidence (absent demonstrable error) as to the amount thereof. Upon
the reasonable request of the Borrower, the Administrative Agent or such Lender,
as applicable, will provide the Borrower an estimate of the total additional
compensation that would be payable to the Administrative Agent or such Lender,
as applicable, on an annual basis.

     Section
3.6     Participants. The Borrower
agrees that each Participant shall have the same rights and obligations under
this Article 3 with respect to its participation as if such Participant
were a Lender.

     Section
3.7     Basis for Claims
for Compensation. No law, rule or
regulation in the form in which it is in effect on the date hereof (but
excluding changes in the interpretation or administration thereof after the date
hereof) or Tax to which the Administrative Agent, any Lender or any Participant
is subject on the date hereof shall be used as the basis of a claim for
compensation pursuant to Section 3.1 or 3.4 by the Administrative Agent, such
Lender or such Participant, as the case may be.

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      Section
3.8     Change in
Legality.

                

                       (a)     Notwithstanding any
other provision of this Agreement, if the adoption of or any change in any law
or regulation or in the interpretation or administration thereof by any
Governmental Authority charged with the administration or interpretation thereof
makes it unlawful for any Lender to make or maintain any Eurodollar Rate Advance
or to give effect to its obligations as contemplated hereby with respect to any
Eurodollar Rate Advance, then, by written notice to the Borrower through the
Administrative Agent, such Lender may (i) declare that it will not thereafter
make Eurodollar Rate Advances, whereupon the right of the Borrower to request
that a Eurodollar Rate Advance be made or maintained by such Lender pursuant to
any Borrowing or Conversion shall be forthwith suspended until such Lender
withdraws such notice as provided below, and (ii) require that all outstanding
Eurodollar Rate Advances of such Lender be Converted to Base Rate Advances, in
which event all such Eurodollar Rate Advances shall be automatically Converted
to Base Rate Advances as of the effective date of such notice as provided
below.

     (b)     Promptly upon
becoming aware that the circumstances that caused any Lender to deliver a notice
to the Borrower pursuant to Section 3.8(a) no longer exist, such Lender will
deliver notice thereof to the Borrower through the Administrative Agent
withdrawing such prior notice (but the failure to do so shall impose no
liability upon such Lender). Promptly upon the Borrower’s receipt of such
withdrawing notice from such Lender, the suspension pursuant to Section 3.8(a)
shall terminate. Prior to any Lender’s giving notice to the Borrower through the
Administrative Agent under this Section 3.8(b), such Lender will use
commercially reasonable efforts to change the jurisdiction of its Applicable
Lending Office if such change would avoid such suspension and would not, in the
reasonable judgment of such Lender, be otherwise disadvantageous to such Lender.
Any suspension notice to the Borrower by any Lender through the Administrative
Agent shall be effective as to each Eurodollar Rate Advance of such Lender on
the last day of the Interest Period currently applicable to such Eurodollar Rate
Advance; provided, however, that, if such
notice states that the maintenance of such Advance until such last day would be
unlawful, such notice shall be effective as to each Eurodollar Rate Advance on
the date of its receipt by the Borrower.

      Section
3.9     Market Rate
Disruptions. If (a) the
Administrative Agent determines, in its reasonable judgment, that an adequate
basis does not exist for the determination of the Eurodollar Rate for one or
more Eurodollar Rate Advances or (b) the Administrative Agent determines, in its
reasonable judgment, that the Eurodollar Rate does not adequately reflect the
cost to one or more Lenders of making, funding or maintaining one or more
Eurodollar Rate Advances, then the right of the Borrower to request that
Eurodollar Rate Advances be made or maintained by the affected Lender or Lenders
pursuant to any Borrowing or Conversion shall be forthwith suspended until the
Administrative Agent notifies the Borrower that the circumstances causing such
suspension no longer exist.

ARTICLE
4

CONDITIONS
PRECEDENT TO ADVANCES

     Section
4.1     Conditions
Precedent to Advances on Closing Date. The obligation of
each of the Lenders to make its Advance to the Borrower on the Closing Date is
subject to the conditions precedent set forth below.

    (a)     The Borrower has
paid all amounts payable thereby to the Administrative Agent as provided in
Section 10.6 or otherwise, including the accrued fees and disbursements of legal
counsel to the Administrative Agent, to the extent one or more statements for
such amounts have been presented for payment.

    (b)     The representations
and warranties of the Borrower contained in Article 5 are correct in all
material respects on and as of the Closing Date, before and after giving effect
to the Advances to be made on such date and to the application of the proceeds
of such Advances, as though made on and as of such date (other than any such
representations or warranties that, by their terms, refer to a specific date, in
which case as of such specific date); and no event has occurred and is
continuing, or would result from such Advances or from the application of the
proceeds thereof, that constitutes a Default;

    (c)     The Administrative
Agent has received the following, each dated the Closing Date unless otherwise
specified below, in form and substance satisfactory to the Lenders and in the
number of originals requested by the Administrative Agent:

        (i)     
this
Agreement (which may be dated before the Closing Date), duly executed by the
Borrower and the Lenders;

- 13-

        
(ii)      the Notice of
Borrowing (which may be dated before the Closing Date) and the Notes in favor of
the respective Lenders, duly executed by the Borrower;

        (iii)  a certificate of
the Secretary or an Assistant Secretary of the Borrower as to (A) the
resolutions of the Board of Directors of the Borrower approving the Loan
Documents and (B) all documents evidencing other necessary corporate action and
Governmental Action, if any, with respect to the Loan Documents, attaching such
documents and certifying that they are correct and complete and in full force
and effect as of the date of execution of each such document and as of the
Closing Date;

        (iv)  certificate of the
Secretary or an Assistant Secretary of the Borrower as to the incumbency, and
setting forth a specimen signature, of each of the persons (A) who has signed or
will sign any Loan Document on behalf of the Borrower and (B) who will, until
replaced by other persons duly authorized for that purpose, act as the
representatives of the Borrower for the purpose of signing documents in
connection with this Agreement and the transactions contemplated
hereby;

        (v)  a certificate of
the Borrower, signed on behalf of the Borrower by its Assistant Treasurer and
its Secretary or Assistant Secretary, certifying as to the following: (A) the
correctness and completeness of the copies of the Borrower’s Restated Articles
of Incorporation and By-Laws attached to such certificate and that such
documents are in full force and effect; (B) the due incorporation and good
standing of the Borrower as a corporation organized under the laws of the
Commonwealth of Pennsylvania, the due qualification and good standing of the
Borrower to do business in the State of New York and the absence of any
proceeding for the dissolution or liquidation of the Borrower; (C) the
truthfulness in all material respects of the representations and warranties of
the Borrower contained in the Loan Documents, as though made on and as of the
Closing Date; and (D) the absence of any event occurring and continuing, or
resulting from the effectiveness of the Loan Documents, that constitutes a
Default;

        (vi)  certificates of the
appropriate Governmental Authorities, dated reasonably near the Closing Date,
certifying that the Borrower is in good standing under the laws of the
Commonwealth of Pennsylvania and the State of New York;

        (vii)  one or more
favorable opinions of legal counsel for the Borrower, as to such matters as any
Lender through the Administrative Agent may reasonably request; and

        (viii)  such other
approvals, opinions, evidence and documents (including such funds-transfer
documents) as the Administrative Agent or any Lender through the Administrative
Agent may reasonably request.

    Section
4.2     Reliance on
Certificates. The Lenders and
the Administrative Agent shall be entitled to rely conclusively upon the
certificates delivered from time to time by officers of the Borrower as to the
names, incumbency, authority and signatures of the respective persons named
therein until such time as the Lenders receive a replacement certificate, in
form acceptable to the Lenders, from an officer of the Borrower identified to
the Lenders as having the authority to deliver such certificate, setting forth
the names and true signatures of the officers and other representatives of the
Borrower thereafter authorized to act on behalf of the Borrower.

ARTICLE
5

REPRESENTATIONS
AND WARRANTIES

The Borrower
represents and warrants to the Lenders and the Administrative Agent as set forth
below.

Section
5.1     Corporate
Existence and Power. The Borrower (a)
is a corporation duly incorporated, validly existing and in good standing under
the laws of the Commonwealth of Pennsylvania, (b) is duly qualified to do
business as a foreign corporation in, and is in good standing under the laws of,
the State of New York and each other state in which the ownership of its
properties or the conduct of its business makes such qualification necessary,
except where the failure to be so qualified could not reasonably be expected to
have a material and adverse effect on the financial condition, results of
operations, operations or prospects of the Borrower or on the ability of the
Borrower to perform its obligations under the Loan Documents, and (c) has all
corporate powers and all material governmental licenses, authorizations,
consents and approvals required to carry on its business as now
conducted.

- 14-

Section
5.2     Corporate
Authorization. The execution,
delivery and performance by the Borrower of the Loan Documents have been duly
authorized by all necessary corporate action on the part of the Borrower and do
not and will not require the consent or approval of its shareholders or of any
trustee or holder of any Indebtedness or other obligation of the
Borrower.

Section
5.3     No Violation,
Etc. Neither the
execution, delivery or performance by the Borrower of the Loan Documents, nor
the consummation by the Borrower of the transactions contemplated thereby, nor
the compliance by the Borrower with the provisions thereof (a) conflicts or will
conflict with, or results or will result in a breach or contravention of any of
the provisions of, the Borrower’s Restated Articles of Incorporation or By-Laws,
any Applicable Law or any indenture, mortgage, lease or other agreement or
instrument to which the Borrower or any of its Affiliates is a party or by which
the property of the Borrower or any of its Affiliates is bound or (b) results or
will result in the creation or imposition of any Lien upon any of the property
of the Borrower or of any of its Affiliates. No provision of the Borrower’s
Restated Articles of Incorporation or By-Laws, of any Applicable Law or of any
such indenture, mortgage, lease or other agreement or instrument could
reasonably be expected to have a material and adverse effect on the financial
condition, results of operations, operations or prospects of the Borrower or on
the ability of the Borrower to perform its obligations under the Loan
Documents.

Section
5.4     Governmental
Action. No Governmental
Action is required in connection with the execution, delivery or performance by
the Borrower of, or the consummation by the Borrower of the transactions
contemplated by, the Loan Documents, other than such Governmental Action as has
been duly obtained, taken, given or made.

Section
5.5     Execution and
Delivery. The Loan
Documents have been duly executed and delivered by the Borrower and are legal,
valid and binding obligations of the Borrower enforceable against it in
accordance with their respective terms, subject, however, to the application by
a court of general principles of equity and to the effect of any applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors’ rights generally.

Section
5.6     Other
Information. The reports,
financial statements and other written information furnished by the Borrower to
the Lenders or the Administrative Agent in connection with the negotiation of
the Loan Documents or pursuant to the terms of any of the Loan Documents do not
contain, when taken as a whole, any untrue statement of a material fact and do
not omit to state, when taken as a whole, any material fact or any fact
necessary to make the statements contained therein, in light of the
circumstances in which made, not misleading.

Section
5.7     Litigation. Except as
disclosed in the Borrower’s 2004 Form 10-K (a copy of which has been furnished
to the Lenders) or as otherwise disclosed to the Lenders by the Borrower in
writing prior to the date hereof, there is no pending or threatened action or
proceeding affecting the Borrower or any of its Subsidiaries before any
Governmental Authority that could reasonably be expected to have a material and
adverse effect on the financial condition, results of operations, operations or
prospects of the Borrower and its Subsidiaries taken as a whole or on the
ability of the Borrower to perform its obligations under the Loan
Documents.

Section
5.8     Fire,
Etc. Neither the
business nor the properties of the Borrower or any Subsidiary thereof are
affected by any fire, explosion, accident, strike, lockout or other labor
dispute, or other casualty (whether or not covered by insurance) that could
reasonably be expected to have a material and adverse effect on the financial
condition, results of operations, operations or prospects of the Borrower and
its Subsidiaries taken as a whole or on the ability of the Borrower to perform
its obligations under the Loan Documents.

Section 5.9    Financial
Statements. The consolidated
balance sheet of the Borrower and its Subsidiaries as at December 31, 2004
and the related consolidated statements of income, retained earnings and cash
flows of the Borrower and its Subsidiaries for the fiscal year then ended,
certified by PricewaterhouseCoopers LLP, independent public accountants, copies
of all of which have been furnished to the Lenders, present fairly the
consolidated financial position of the Borrower and its Subsidiaries as at such
date and the consolidated results of the operations of the Borrower and its
Subsidiaries for the fiscal year ended on such date, all in accordance with
generally accepted accounting principles consistently applied. Since December
31, 2004 there has been no material and adverse change in the financial
condition, results of operations, operations or prospects of the Borrower and
its Subsidiaries taken as a whole, except as disclosed in the 2004 Form 10-K or
otherwise in writing to the Lenders prior to the date hereof.

- 15-

Section
5.10     ERISA.

(a)     No Termination
Event has occurred or is reasonably expected to occur with respect to any
Plan.

(b)     Schedule B
(Actuarial Information) to the most recent annual report (Form 5500 Series) with
respect to each Plan, copies of which have been filed with the Internal Revenue
Service and furnished to the Lenders, is complete and accurate and fairly
presents the funding status of such Plan, and since the date of such
Schedule B there has been no material and adverse change in such funding
status.

(c)     Neither the
Borrower nor any member of the Controlled Group has incurred or reasonably
expects to incur any withdrawal liability under ERISA to any Multiemployer
Plan.

Section
5.11     Taxes. Each of the
Borrower and its Subsidiaries has filed all tax returns (Federal, state and
local) required to be filed thereby and has paid all taxes shown thereon to be
due, including interest and penalties, or has provided adequate reserves for
payment thereof, other than such taxes that the Borrower or such Subsidiary is
contesting in good faith by appropriate legal proceedings.

Section
5.12     Title to
Properties. Each of the
Borrower and its Subsidiaries has good and marketable title to all properties,
real or personal, purported to be owned by it (subject to the Lien of any and
all first mortgage indentures thereof), except where the failure to have such
title could not reasonably be expect to have a material and adverse effect on
the financial condition, results of operations, operations or prospects of the
Borrower and its Subsidiaries taken as a whole.

Section
5.13     Hazardous
Materials. Each of the
Borrower and its Subsidiaries is in compliance in all material respects with
Applicable Law relating to Hazardous Materials, air emissions, water discharge,
noise emission, liquid disposal and other environmental, health and safety
matters, other than those the noncompliance with which could not reasonably be
expected to have a material and adverse effect (taking into consideration all
fines, penalties and sanctions that may be imposed because of such
noncompliance) on the financial condition, results of operations, operations or
prospects of the Borrower and its Subsidiaries taken as a whole or on the
ability of the Borrower to perform its obligations under the Loan Documents.
Except as disclosed in the 2004 Form 10-K, neither the Borrower nor any of its
Subsidiaries has received from any Governmental Authority any notice of a
material violation of any such Applicable Law.

ARTICLE
6

AFFIRMATIVE
COVENANTS

So long as any
Lender has any Commitment hereunder or any amount remains unpaid under any Loan
Document, the Borrower will, unless the Required Lenders otherwise consent in
writing, comply with the covenants set forth below.

Section
6.1     Preservation of
Existence, Etc. The Borrower will
preserve and maintain, and cause each of its Subsidiaries to preserve and
maintain, its corporate existence, material rights (statutory and otherwise) and
franchises and to take such other action as may be necessary or advisable to
preserve and maintain its right to conduct its business in the states where it
is conducting its business.

Section
6.2     Maintenance of
Properties, Etc. The Borrower will
preserve, maintain, develop and operate, and cause each of its Subsidiaries to
preserve, maintain, develop and operate, in substantial conformity with
Applicable Law and all material contractual obligations, all of its properties
that are used or useful in the conduct of its business in good working order and
condition, ordinary wear and tear excepted, it being understood that this
covenant relates only to the good working order and condition of such properties
and is not to be construed as a covenant of the Borrower or any of its
Subsidiaries not to dispose of such properties by sale, lease, transfer or
otherwise.

- 16-

Section
6.3     Compliance with
Material Contractual Obligations, Laws, Etc. The Borrower will
comply, and cause each of its Subsidiaries to comply, with the requirements of
all material contractual obligations and all Applicable Law, the failure to
comply with which could reasonably be expected to materially and adversely
affect the financial condition, results of operations, operations or prospects
of the Borrower and its Subsidiaries taken as a whole or the ability of the
Borrower to perform its obligations under the Loan Documents, such compliance to
include (a) paying before the same become delinquent all taxes, assessments and
governmental charges imposed upon it or upon its property, except to the extent
that the same are being diligently contested in good faith and by appropriate
proceedings and that adequate reserves for the payment thereof have been
established, and (b) complying with the requirements of Applicable Law relating
to Hazardous Materials, air emissions, water discharge, noise emission, liquid
disposal and other environmental, health and safety matters.

Section
6.4     Insurance. The Borrower will
maintain, and cause each of its Subsidiaries to maintain, insurance with
financially sound and reputable insurance companies or associations in such
amounts and covering such risks as is usually carried by companies engaged in
the same or similar businesses, owning similar properties and similarly
situated.

Section
6.5     Visitation
Rights. At any reasonable
time and from time to time, upon reasonable advance notice, the Borrower will
permit each of the Lenders or any agents or representatives thereof to (a)
examine and make copies of and abstracts from the records and books of account
of, and visit the properties of, the Borrower and any of its Subsidiaries and
(b) discuss the affairs, finances and accounts of the Borrower and any of its
Subsidiaries with any of their officers or directors; provided, however, that
the Borrower reserves the right to restrict access to its or any of its
Subsidiaries’ facilities in accordance with reasonable procedures relating to
safety and security. The Administrative Agent and each Lender agree to use
reasonable efforts to ensure that any information concerning the Borrower or any
of its Subsidiaries obtained by the Administrative Agent or such Lender pursuant
to this section or Section 6.6 or 6.8 that is not contained in a report or other
document filed with the Securities and Exchange Commission, distributed by the
Borrower to its security holders or otherwise generally available to the public,
will, to the extent permitted by law and except as may be required by valid
subpoena or in the normal course of the Administrative Agent’s or such Lender’s
business operations, be treated confidentially by the Administrative Agent or
such Lender, as the case may be, and will not be distributed or otherwise made
available by the Administrative Agent or such Lender, as the case may be, to any
Person other than the Administrative Agent’s or such Lender’s employees,
authorized agents or representatives (including attorneys and
accountants).

Section
6.6     Keeping of
Books. The Borrower will
keep, and cause each of its Subsidiaries to keep, proper books of record and
account in which full and correct entries shall be made of all financial
transactions and the assets and liabilities of such Persons, in accordance with
generally accepted accounting principles consistent with those applied in the
preparation of the financial statements referred to in Section 6.8.

Section
6.7     Transactions
with Affiliates. The Borrower will
conduct, and cause each of its Subsidiaries to conduct, all transactions
otherwise permitted under this Agreement with any of its Affiliates on terms
that are fair and reasonable and no less favorable to the Borrower or such
Subsidiary than it would obtain in a comparable arm’s-length transaction with a
Person not an Affiliate, other than such transactions, in the aggregate, with
respect to which the aggregate difference between the consideration paid for or
by the Borrower and/or any such Subsidiary and the amount the Borrower and/or
any such Subsidiary would have received or paid had such transaction been
conducted on an arm’s-length basis as described in this section is immaterial in
the context of the Borrower’s consolidated operations; provided, however, that
any transaction with an Affiliate of the Borrower, which transaction, or a plan
of which such transaction is a part, has been approved by the Pennsylvania
Public Utility Commission or the Securities and Exchange Commission, shall not
be subject to this section.

- 17-

Section
6.8     Reporting
Requirements. The Borrower will
furnish the following to the Lenders:

(a)     as soon as
available and in any event within 50 days after the end of each of the first
three quarters of each fiscal year of the Borrower, a consolidated balance sheet
of the Borrower and its Subsidiaries as at the end of such quarter and
consolidated statements of income, retained earnings and cash flows of the
Borrower and its Subsidiaries for the period commencing at the end of the
previous fiscal year and ending with the end of such quarter, all in reasonable
detail and duly certified by the chief financial officer, the treasurer or an
assistant treasurer of the Borrower as fairly presenting the financial condition
of the Borrower and its Subsidiaries as at such date and the results of
operations of the Borrower and its Subsidiaries for the period ended on such
date, all in accordance with generally accepted accounting principles
consistently applied (provided that for purposes hereof delivery of the
Borrower’s appropriately completed Form 10-Q shall be sufficient in lieu of
delivery of such consolidated balance sheet and consolidated statements of
income, retained earnings and cash flows), together with a certificate of the
chief financial officer, the treasurer or an assistant treasurer of the Borrower
(i) demonstrating and certifying compliance by the Borrower with the covenants
set forth in Sections 6.10 and 6.11 and (ii) stating that no Default has
occurred and is continuing or, if a Default has occurred and is continuing,
stating the nature thereof and the action that the Borrower has taken and
proposes to take with respect thereto;

(b)     as soon as
available and in any event within 105 days after the end of each fiscal year of
the Borrower, a copy of the annual report for such year for the Borrower and its
Subsidiaries, containing financial statements for such year certified by
PricewaterhouseCoopers LLP or other independent public accountants acceptable to
the Required Lenders (provided that for purposes hereof delivery of the
Borrower’s appropriately completed Form 10-K will be sufficient in lieu of
delivery of such financial statements), together with a certificate of the chief
financial officer, the treasurer or an assistant treasurer of the Borrower (i)
demonstrating and certifying compliance by the Borrower with the covenants set
forth in Sections 6.10 and 6.11 and (ii) stating that no Default has occurred
and is continuing or, if a Default has occurred and is continuing, stating the
nature thereof and the action that the Borrower has taken and proposes to take
with respect thereto;

(c)     as soon as possible
and in any event within five days after the occurrence of each ERISA Event and
each Default, but only if the same is continuing on the date of such statement,
a statement of the chief financial officer of the Borrower setting forth the
details of such ERISA Event or Default and the action that the Borrower has
taken and proposes to take with respect thereto;

(d)     promptly after
receipt thereof by the Borrower or any of its ERISA Affiliates from the PBGC,
copies of each notice received by the Borrower or such ERISA Affiliate of the
PBGC’s intention to terminate any Plan of the Borrower or such ERISA Affiliate
or to have a trustee appointed to administer any such Plan;

(e)     promptly after
receipt thereof by the Borrower or any ERISA Affiliate from a Multiemployer Plan
sponsor, a copy of each notice received by the Borrower or such ERISA Affiliate
concerning the imposition of withdrawal liability in the amount of at least
$250,000 pursuant to Section 4202 of ERISA in respect of which the Borrower or
such ERISA Affiliate is reasonably expected to be liable;

(f)     promptly after the
Borrower becomes aware of the occurrence thereof, notice of all actions, suits,
proceedings or other events for which the Lenders will be entitled to indemnity
under Section 10.7;

(g)     promptly after the
sending or filing thereof, copies of all reports that the Borrower sends to any
of its security holders and copies of all reports and registration statements
that the Borrower or any of its Subsidiaries files with the Securities and
Exchange Commission or any national securities exchange; and

(h)     promptly after
requested, such other information respecting the business, properties, results
of operations, prospects, condition or operations, financial or otherwise, of
the Borrower or any of its Subsidiaries as any Lender may from time to time
reasonably request.

Section
6.9     Use of
Proceeds. The Borrower will
use the proceeds of each Advance solely for its general corporate purposes but
not, directly or indirectly, for any purpose that would entail a violation of
Regulation T, U or X of the Board of Governors of the Federal Reserve
System.

Section 6.10   Indebtedness to
Total Capitalization. The Borrower will
maintain at all times a ratio of Consolidated Debt to Total Capitalization of
the Borrower and its Subsidiaries of not more than 0.65 to 1.0.

Section
6.11    Fixed Charge
Ratio. The Borrower will
maintain a Fixed Charge Ratio of at least 2.0 to 1.0.

- 18-

Section
6.12    Further
Assurances. The Borrower will
promptly, at its expense, execute and deliver, or cause to be executed and
delivered, all further instruments and documents, and take and cause to be taken
all further actions, that may be necessary or that any Lender through the
Administrative Agent may reasonably request to enable the Lenders to enforce the
terms and provisions of this Agreement and to exercise their rights and remedies
hereunder.

ARTICLE
7

NEGATIVE
COVENANTS

So long as any
Lender has any Commitment hereunder or any amount remains unpaid under any Loan
Document, the Borrower will, unless the Required Lenders otherwise consent in
writing, comply with the covenants set forth below.

Section
7.1     Liens,
Etc. Except as
permitted under Section 7.2, the Borrower will not create, incur, assume, or
suffer to exist, or permit any of its Subsidiaries to create, incur, assume, or
suffer to exist, any Lien upon or with respect to any of its properties, whether
now owned or hereafter acquired, or assign, or permit any of its Subsidiaries to
assign, any right to receive income, in each case to secure or provide for the
payment of any Indebtedness of any Person, other than the following: (a)
purchase-money Liens upon or in any property acquired or held by the Borrower or
any of its Subsidiaries in the ordinary course of business to secure the
purchase price of such property or to secure Indebtedness incurred solely for
the purpose of financing the acquisition of such property; (b) Liens for taxes,
assessments or other governmental charges or levies not yet due or the
imposition or amount of which the Borrower or any of its Subsidiaries is
diligently
contesting in good faith by appropriate proceedings and for which adequate
reserves for payment thereof have been established; (c) pledges or deposits to
secure performance in connection with bids, tenders, contracts (other than
contracts for the payment of money) or leases to which the Borrower or any of
its Subsidiaries is a party, in each case made in the ordinary course of
business; (d) materialmen’s, mechanics’, carriers’, workmen’s, repairmen’s or
other similar Liens arising in the ordinary course of business, or deposits to
obtain the release of such Liens; (e) Liens existing on property, acquired by
the Borrower or any of its Subsidiaries in the ordinary course of business, at
the time of acquisition of such property (other than any such Lien created in
contemplation of such acquisition); (f) Liens created to secure Indebtedness in
respect of First Mortgage Bonds issued after the date hereof, all of the
proceeds of which are used to repay the Advances; (g) Liens in existence on the
date of this Agreement; and (h) Liens created for the sole purpose of extending,
renewing or replacing in whole or in part Indebtedness secured by any Lien
referred to in the foregoing clauses (a) through (g) (provided, however, that
the principal amount of Indebtedness secured thereby does not exceed the
principal amount of Indebtedness so secured at the time of such extension,
renewal or replacement and that such extension, renewal or replacement, as the
case may be, is limited to all or a part of the property that secured the Lien
so extended, renewed or replaced and any improvements on such
property).

Section
7.2     Cash
Collateral. The Borrower will
not create or suffer to exist, or permit any of its Subsidiaries to create or
suffer to exist, any Lien upon or with respect to any of its Cash and Cash
Equivalents or marketable securities, in each case to secure or provide for the
payment of Indebtedness, other than the following: (a) with respect to the First
Mortgage Bonds, any posting of Cash and Cash Equivalents with the trustee for
the First Mortgage Bonds for the purpose of procuring the release of property
from the Lien of the indenture relating to the First Mortgage Bonds, such
posting to be limited to a period of not more than 5 Business Days unless, on or
prior to the date of such posting, the Borrower has (i) pursuant to
documentation satisfactory to the Administrative Agent, equally and ratably
secured the obligations of the Borrower under this Agreement by a Lien on Cash
and Cash Equivalents of a similar type acceptable to the Required Lenders in
their sole discretion and (ii) caused the trustee for the First Mortgage Bonds
to have entered into an intercreditor agreement in form, scope and substance
satisfactory to the Required Lenders; (b) any Lien on Cash and Cash Equivalents
granted by Penelec Funding LLC, a Delaware limited liability company (åPenelec
Fundingæ), to Bank One, NA, as Agent, under the Receivables Purchase Agreement
dated as of March 30, 2004 among Penelec Funding, as Seller, the Borrower, as
Servicer, Jupiter Securitization Corporation, as Conduit, Bank One, NA, as
Agent, and the financial institutions from time to time parties thereto,
provided that the principal amount of Indebtedness secured by such Lien does not
exceed $75,000,000; and (c) Liens created for the sole purpose of extending,
renewing or replacing in whole or in part Indebtedness secured by any Lien
referred to in the foregoing clause (b) (provided, however, that the principal
amount of Indebtedness secured thereby does not exceed the principal amount of
Indebtedness so secured at the time of such extension, renewal or replacement
and that such extension, renewal or replacement, as the case may be, is limited
to all or a part of the property or type of property (such as, for example, cash
received in payment of accounts receivable) that secured the Lien so extended,
renewed or replaced).

- 19-

Section
7.3     Mergers,
Etc. The Borrower will
not merge or consolidate with or into any Person, or permit any of its
Subsidiaries to do so, unless (a) the merger or consolidation would not
materially and adversely affect the ability of the Borrower (or its successor by
merger or consolidation as contemplated by clause (b) below) to perform its
obligations hereunder or under any other Loan Document and (b) in the case of a
merger or consolidation to which the Borrower is a party, the corporation formed
by such consolidation or into which the Borrower would be merged assumes the
Borrower’s obligations under this Agreement and the other Loan Documents in a
writing satisfactory in form and substance to the Required Lenders; provided, however, that, in any
case, (i) any Subsidiary of the Borrower may merge or consolidate with or into
any other Subsidiary of the Borrower and (ii) any Subsidiary of the Borrower may
merge or consolidate with or into the Borrower provided that the Borrower is the
surviving corporation; further provided, however, that, in each
case of a merger or consolidation otherwise permitted above in this section, no
Default would exist immediately after giving effect to such merger or
consolidation.

Section
7.4     Sales of Assets,
Etc. From December 31,
2004 until the Maturity Date, the Borrower will not sell, transfer, lease,
assign or otherwise convey or dispose of more than 20% of its assets (whether
now owned or hereafter acquired) in any single transaction or series of
transactions, whether or not related, except for (a) dispositions of current
assets in the ordinary course of business as currently conducted and (b)
dispositions of assets not exceeding 5% of the Borrower’s assets in connection
with sale-leaseback transactions relating to such assets.

Section
7.5     Compliance with
ERISA. The Borrower will
not (a) permit to exist any åaccumulated funding deficiencyæ (as defined in
Section 412(a) of the Code) unless such deficiency exists with respect to a
Multiple Employer Plan or Multiemployer Plan and the Borrower has no control
over the reduction or elimination of such deficiency, (b) terminate, or permit
any ERISA Affiliate to terminate, any Plan of the Borrower or such ERISA
Affiliate so as to result in any material (in the opinion of the Required
Lenders) liability of the Borrower to the PBGC or (c) permit to exist any
occurrence of any reportable event (within the meaning of Section 4043 of
ERISA), or any other event or condition, that presents a material (in the
opinion of the Required Lenders) risk of a termination by the PBGC of any Plan
of the Borrower or any ERISA Affiliate and such a material liability of the
Borrower to the PBGC.

Section 7.6     Constituent
Documents, Etc. The Borrower will
not change in any material respect (a) its Restated Articles of Incorporation,
By-Laws or other similar documents, (b) its accounting policies or accounting
practices (except as required or permitted by the Financial Accounting Standards
Board or generally accepted accounting principles) or (c) its business
(including ceasing to engage in the business of the same general type as
conducted by the Borrower on December 31, 2004).

ARTICLE
8

EVENTS OF
DEFAULT

Section
8.1     Events of
Default. If any one or
more of the following events (each an "Event of Default") occurs and is
continuing:

(a)     the Borrower fails
to pay (i) any principal of any Advance when the same becomes due and payable or
(ii) any interest on any Advance, or any other amount payable under any Loan
Document, within five Business Days of when the same becomes due and
payable;

(b)     any representation
or warranty made by or on behalf of the Borrower in any Loan Document or by or
on behalf of the Borrower (or any of its officers) in connection with any Loan
Document proves to have been incorrect in any material respect when made or
deemed made;

(c)     the Borrower fails
to perform or observe (i) any term, covenant or agreement contained in Section
6.10 or 6.11 or in Article 7 or (ii) any other term, covenant or agreement
contained in this Agreement (other than obligations specifically set forth
elsewhere in this Section 8.1) on its part to be performed or observed if the
failure to perform or observe such other term, covenant or agreement remains
unremedied for 30 days after written notice thereof has been given to the
Borrower by the Administrative Agent;

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(d)     the Borrower and/or
any Subsidiary thereof fails to pay any principal of, or premium or interest on,
any Indebtedness (other than Indebtedness evidenced by the Notes) thereof
outstanding in the aggregate (for all such Persons) in excess of $20,000,000
when the same becomes due and payable (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise), and such failure continues after
the applicable grace period, if any, specified in the agreement or instrument
relating to such Indebtedness; any other event occurs or condition exists under
any agreement or instrument relating to any such Indebtedness and continues
after the applicable grace period, if any, specified in such agreement or
instrument, if the effect of such event or condition is to accelerate, or permit
the acceleration of, the maturity of such Indebtedness; or any such Indebtedness
is declared to be due and payable, or is required to be prepaid (other than by a
regularly scheduled required prepayment), prior to the stated maturity
thereof;

(e)    the Borrower or any
Subsidiary thereof (i) applies for or consents to the appointment of a
receiver, trustee, liquidator or custodian or the like for itself or for its
property, (ii) admits in writing its inability to pay its debts generally
as they become due, (iii) makes a general assignment for the benefit of
creditors, (iv) is adjudicated a bankrupt or insolvent, (v) commences
a voluntary case under the Federal bankruptcy laws of the United States of
America or files a voluntary petition or answer seeking reorganization, an
arrangement with creditors or any order for relief or seeking to take advantage
of any insolvency law or (vi) files an answer admitting the material allegations
of a petition filed against it in any bankruptcy, reorganization or insolvency
proceeding; corporate action is taken by the Borrower or any such Subsidiary for
the purpose of effecting any of the foregoing; or, without the application,
approval or consent of the Borrower or any Subsidiary thereof, a proceeding is
instituted in any court of competent jurisdiction seeking in respect of it an
adjudication in bankruptcy, reorganization, dissolution, winding up,
liquidation, composition or arrangement with creditors, readjustment of debts,
appointment of a trustee, receiver, liquidator or custodian or the like with
respect to all or any substantial part of its assets, or other like relief in
respect thereof under any bankruptcy or insolvency law, and, if such proceeding
is being contested by the Borrower or such Subsidiary in good faith, the same
(A) results in the entry of an order for relief of any such adjudication or
appointment or (B) continues undismissed, or pending and unstayed, for any
period of 60 consecutive days;

(f)     one or more
judgments or orders for the payment of money exceeding any applicable insurance
coverage by more than $15,000,000 in the aggregate are rendered against the
Borrower and/or any Subsidiary thereof, and either (i) enforcement
proceedings are commenced by any creditor upon such judgment(s) or order(s) or
(ii) there is any period of 30 consecutive days during which a stay of
enforcement of such judgment(s) or order(s), by reason of a pending appeal or
otherwise, is not in effect;

(g)     any Termination
Event with respect to a Plan occurs, and, 30 days after notice thereof is given
to the Borrower by the Administrative Agent, (i) such Termination Event (if
correctable) has not been corrected and (ii) the then Unfunded Vested
Liabilities of such Plan exceed $10,000,000 (or, in the case of a Termination
Event involving the withdrawal of a åsubstantial employeræ (as defined in
Section 4001(a)(2) of ERISA), the withdrawing employer’s proportionate
share of such excess exceeds such amount); or the Borrower or any member of the
Controlled Group as employer under a Multiemployer Plan makes a complete or
partial withdrawal from such Multiemployer Plan, and the Plan sponsor of such
Multiemployer Plan notifies such withdrawing employer that such employer has
incurred withdrawal liability in an amount exceeding $10,000,000;

(h)     any change in
Applicable Law or any Governmental Action occurs that has the effect of making
the transactions contemplated by this Agreement unauthorized, illegal or
otherwise contrary to Applicable Law;

(i)     any material
provision of this Agreement (except pursuant to the terms hereof) ceases to be
valid and binding on the Borrower or is declared to be null and void, at any
time for any reason, or the validity or enforceability thereof is contested by
the Borrower or any Governmental Authority; or the Borrower denies that it has
any or further liability or obligation under this Agreement; or

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(j)     a Change in Control
occurs;

then, and in any
such event, the Administrative Agent (i) shall at the request, or may with the
consent, of the Required Lenders, by notice to the Borrower, declare the
obligation of the Lenders to make Advances (if any such obligation is then
outstanding) to be terminated, whereupon the same shall forthwith terminate, and
(ii) shall at the request, or may with the consent, of the Required Lenders, by
notice to the Borrower, declare the Advances, all interest thereon and all other
amounts payable hereunder and under the other Loan Documents to be due and
payable within two Business Days after demand therefor by the Administrative
Agent to the Borrower, whereupon the Advances, all such interest and all such
other amounts shall become and be forthwith due and payable at such time,
without presentment, demand, protest or further notice of any kind, all of which
are hereby expressly waived by the Borrower; provided, however, that, in the
event of the occurrence of any Event of Default described in Section 8.1(e)
with respect to the Borrower, (A) the obligation of the Lenders to make
Advances (if any such obligation is then outstanding) shall automatically be
terminated, and (B) the Advances, all interest accrued and unpaid thereon
and all other amounts payable hereunder shall automatically become due and
payable, without presentment, demand, protest or any notice of any kind, all of
which are hereby expressly waived by the Borrower.

ARTICLE
9

ADMINISTRATIVE
AGENT

Section
9.1     Appointment and
Authority. Each of the
Lenders hereby irrevocably appoints UBOC to act on its behalf as the
Administrative Agent hereunder and under the other Loan Documents and authorizes
the Administrative Agent to take such actions on such Lender’s behalf and to
exercise such powers as are delegated to the Administrative Agent by the terms
hereof or thereof, together with such actions and powers as are reasonably
incidental thereto. The provisions of this Article 9 are solely for the benefit
of the Administrative Agent and the Lenders, and the Borrower shall not have
rights as a third-party beneficiary of any of such provisions.

Section 9.2     Rights as
Lender. The Person
serving as the Administrative Agent hereunder shall have the same rights and
powers in its capacity as a Lender as any other Lender and may exercise the same
as though it were not the Administrative Agent, and the term åLenderæ or
åLendersæ shall, unless otherwise expressly indicated or unless the context
otherwise requires, include the Person serving as the Administrative Agent
hereunder in its individual capacity. Such Person and its Affiliates may accept
deposits from, lend money to, act as the financial advisor or in any other
advisory capacity for and generally engage in any kind of business with the
Borrower or any Subsidiary or other Affiliate thereof as if such Person were not
the Administrative Agent hereunder and without any duty to account therefor to
the Lenders.

Section 9.3     Exculpatory
Provisions.

(a)     The Administrative
Agent shall not have any duties or obligations except those expressly set forth
herein and in the other Loan Documents. Without limiting the generality of the
foregoing, the Administrative Agent: (i) shall not be subject to any fiduciary
or other implied duties, regardless of whether a Default has occurred and is
continuing; (ii) shall not have any duty to take any discretionary action or
exercise any discretionary powers, except discretionary action and powers
expressly contemplated hereby or by the other Loan Documents that the
Administrative Agent is required to exercise as directed in writing by the
Required Lenders (or such other number or percentage of the Lenders as expressly
provided for herein or in the other Loan Documents), provided that the
Administrative Agent shall not be required to take any action that, in its
opinion or in the opinion of its counsel, may expose the Administrative Agent to
liability or that is contrary to any Loan Document or any Applicable Law; and
(iii) shall not, except as expressly set forth herein or in the other Loan
Documents, have any duty to disclose, and shall not be liable for the failure to
disclose, any information relating to the Borrower or any of its Affiliates that
is communicated to or obtained by the Person serving as the Administrative Agent
or any of its Affiliates in any capacity.

(b)     The Administrative
Agent shall not be liable for any action taken or not taken by it (i) with the
consent or at the request of the Required Lenders (or such other number or
percentage of the Lenders as is necessary, or as the Administrative Agent
believes in good faith to be necessary, under the circumstances as provided in
Sections 8.1 and 10.1) or (ii) in the absence of the Administrative Agent’s own
gross negligence or willful misconduct. The Administrative Agent shall be deemed
not to have knowledge of any Default unless and until notice describing such
Default is given to the Administrative Agent by the Borrower or a
Lender.

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(c)     The Administrative
Agent shall not be responsible for or have any duty to ascertain or inquire into
(i) any statement, warranty or representation made in or in connection with this
Agreement or any other Loan Document, (ii) the contents of any certificate,
report or other document delivered hereunder or thereunder or in connection
herewith or therewith, (iii) the performance or observance of any of the
covenants, agreements or other terms or conditions set forth herein or therein
or the occurrence of any Default, (iv) the validity, enforceability,
effectiveness or genuineness of this Agreement, any other Loan Document or any
other agreement, instrument or document or (v) the satisfaction of any condition
set forth in Article 4 or elsewhere herein, other than to confirm receipt of
items expressly required to be delivered to the Administrative
Agent.

Section
9.4     Reliance by
Administrative Agent. The
Administrative Agent shall be entitled to rely upon, and shall not incur any
liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing (including any electronic
message, internet or intranet website posting or other distribution) believed by
it to be genuine and to have been signed, sent or otherwise authenticated by the
proper Person. The Administrative Agent also may rely upon any statement made to
it orally (including by telephone) and believed by it to have been made by the
proper Person and shall not incur any liability for relying thereon. In
determining compliance with any condition hereunder to the making of an Advance
that by its terms must be fulfilled to the satisfaction of one or more Lenders,
the Administrative Agent may presume that such condition is satisfactory to each
such Lender unless the Administrative Agent receives notice to the contrary from
such Lender before the making of such Advance. The Administrative Agent may
consult with legal counsel (who may be counsel for the Borrower), independent
accountants and other experts selected by it, and shall not be liable for any
action taken or not taken by it in accordance with the advice of any such
counsel, accountants or experts.

Section
9.5     Delegation of
Duties. The
Administrative Agent may perform any and all of its duties and exercise any and
all of its rights and powers hereunder or under any other Loan Document by or
through any one or more subagents appointed by the Administrative Agent. The
Administrative Agent and any such subagent may perform any and all of its duties
and exercise any and all of its rights and powers by or through their respective
Affiliates. The exculpatory provisions of this Article 9 shall apply to any such
subagent and to the Affiliates of the Administrative Agent and any such subagent
and shall apply to their respective activities in connection with the
syndication of the credit facilities provided for herein as well as activities
as Administrative Agent.

Section
9.6     Resignation of
Administrative Agent. The
Administrative Agent may at any time give notice of its resignation to the
Lenders and the Borrower. Upon receipt of any such notice of resignation, the
Required Lenders shall have the right, in consultation with the Borrower, to
appoint a successor, which shall be a bank with an office in the United States
of America or an Affiliate of any such bank with an office in the United States
of America. If no such successor is so appointed by the Required Lenders and
accepts such appointment within 30 days after the retiring Administrative Agent
gives notice of its resignation, then the retiring Administrative Agent may, on
behalf of the Lenders, appoint a successor Administrative Agent meeting the
qualifications set forth above; provided, however, that, if the
Administrative Agent notifies the Borrower and the Lenders that no qualifying
Person has accepted such appointment, then (a) such resignation shall
nonetheless become effective in accordance with such notice, (b) the retiring
Administrative Agent shall be discharged from its duties and obligations
hereunder and under the other Loan Documents and (c) all payments,
communications and determinations provided to be made by, to or through the
Administrative Agent shall instead be made by or to each Lender directly, until
such time as the Required Lenders appoint a successor Administrative Agent as
provided for above in this section. Upon the acceptance of a successor’s
appointment as Administrative Agent hereunder, such successor shall succeed to
and become vested with all of the rights, powers, privileges and duties of the
retiring (or retired) Administrative Agent, and the retiring Administrative
Agent shall be discharged from all of its duties and obligations hereunder and
under the other Loan Documents (if not already discharged therefrom as provided
above in this section). The fees payable by the Borrower to a successor
Administrative Agent shall be the same as those payable to its predecessor
unless otherwise agreed between the Borrower and such successor. After the
retiring Administrative Agent’s resignation hereunder and under the other Loan
Documents, the provisions of this Article 9 and Sections 10.6 and 10.7 shall
continue in effect for the benefit of such retiring Administrative Agent, its
subagents and their respective Affiliates in respect of any actions taken or
omitted to be taken by any of them while the retiring Administrative Agent was
acting as Administrative Agent.

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Section
9.7     Non-Reliance on
Administrative Agent and Other Lenders. Each Lender
acknowledges that it has, independently and without reliance upon the
Administrative Agent or any other Lender or any of their Affiliates and based on
such documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the
Administrative Agent or any other Lender or any of their Affiliates and based on
such documents and information as it shall from time to time deem appropriate,
continue to make its own decisions in taking or not taking action under or based
upon this Agreement, any other Loan Document or any related agreement or any
document furnished hereunder or thereunder.

Section
9.8     No Duties,
Etc. Notwithstanding
anything in this Agreement to the contrary, no Person designated as lead
arranger, arranger or syndication agent on the cover page of this Agreement
shall have any powers, duties, liabilities or responsibilities under this
Agreement or any of the other Loan Documents in such capacity.

ARTICLE
10

MISCELLANEOUS

Section
10.1     Amendments and
Waivers. Neither this
Agreement nor any provision hereof may be amended, waived or otherwise modified
except pursuant to an agreement or agreements in writing entered into by the
Borrower and the Required Lenders or by the Borrower and the Administrative
Agent with the consent of the Required Lenders; provided, however, that no such
agreement shall (a) increase the Commitment of any Lender without the written
consent of such Lender, (b) reduce the principal amount of any Advance or the
rate of interest thereon, or reduce any fees payable hereunder, without the
written consent of each Lender affected thereby, (c) postpone the scheduled date
of payment of the principal amount of any Advance, or any interest thereon, or
any fees payable hereunder, or reduce the amount of, waive or excuse any such
payment, or postpone the scheduled date of expiration of any Commitment, without
the written consent of each Lender affected thereby, (d) change Section 2.8 in a
manner that would alter the pro
rata sharing of
payments required thereby, without the written consent of each Lender, or (e)
change any of the provisions of this section, the definition of åRequired
Lendersæ or any other provision hereof specifying the number or percentage of
Lenders required to amend, waive or otherwise modify any rights hereunder or
make any determination or grant any consent hereunder, without the written
consent of each Lender; further provided, however, that no such
agreement shall amend, modify or otherwise affect the rights or duties of the
Administrative Agent hereunder without the prior written consent of the
Administrative Agent.

Section
10.2     Notices. All notices,
requests and other communications to any party hereunder shall be in writing
(including by telecopier) and shall be given to such party, addressed to it, at
its address or telecopier number set forth below the name of such party on the
signature pages hereof or at such other address or telecopier number as such
party may hereafter specify for that purpose by notice to the other parties.
Each such notice, request or communication shall be effective (a) if given
by telecopier, on the Business Day following the sending thereof, (b) if
given by mail, upon receipt but not later than five days after such
communication is deposited into the mails with first-class postage prepaid,
addressed as aforesaid, or (c) if given by any other means, when delivered
at the address for notice referred to above; provided, however, that notices and
other communications to the Administrative Agent pursuant to Article 2 shall not
be effective until received by the Administrative Agent.

Section
10.3     No Waiver;
Remedies. No failure on the
part of any Lender or the Administrative Agent to exercise, and no delay in
exercising, any power or right hereunder for any period of time shall operate as
a waiver thereof, nor shall any single or partial exercise of any such power or
right preclude any other or further exercise thereof or the exercise of any
other power or right. The rights and remedies provided herein to the Lenders and
the Administrative Agent are cumulative and not exclusive of any other rights or
remedies that the Lenders or the Administrative Agent may otherwise have. No
waiver of any provision of this Agreement or consent to any departure by the
Borrower therefrom shall in any event be effective unless the same is authorized
as provided in Section 10.1, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice to or demand on the Borrower in any case shall entitle the Borrower to
any other or further notice or demand in similar or other
circumstances.

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Section
10.4     Right of
Setoff. Upon (a) the
occurrence and during the continuation of any Event of Default and (b) the
making of the request or the granting of the consent specified by Section 8.1 to
authorize the Administrative Agent to declare the Advances due and payable
pursuant to the provisions of Section 8.1, each Lender is hereby authorized at
any time and from time to time, to the fullest extent permitted by Applicable
Law, to set off and apply any or all deposits (general or special, time or
demand, provisional or final) at any time held and other indebtedness at any
time owing by such Lender to or for the credit or the account of the Borrower
against any or all of the obligations of the Borrower now or hereafter existing
under this Agreement and the other Loan Documents, irrespective of whether such
Lender has made any demand under this Agreement or any such other Loan Document
and although such obligations may be unmatured. Each Lender agrees to notify the
Borrower promptly after any such setoff and application made by such Lender;
provided, however, that the failure to give such notice shall not affect the
validity of such setoff and application. The rights of each Lender under this
section are in addition to other rights and remedies (including other rights of
setoff) that such Lender may have.

Section
10.5     Continuing
Obligation. Except with
respect to Sections 10.6 and 10.7, the obligations of the Borrower under
this Agreement (a) shall continue until the later of (i) the date on which the
Commitments terminate and (ii) the date on which all amounts due and owing to
the Lenders and the Administrative Agent hereunder and under the other Loan
Documents (including all Advances, interest thereon, fees and expenses) have
been paid in full, (b) shall be binding upon the Borrower and its successors and
assigns and (c) shall inure to the benefit of and be enforceable by the Lenders
and the Administrative Agent and their respective successors, transferees and
assigns; provided, however, that the Borrower may not assign all or any part of
its rights and obligations under this Agreement without the prior written
consent of the Required Lenders, and the Lenders shall have the right to assign
their respective rights and obligations hereunder only in accordance with
Section 10.8.

Section
10.6     Costs, Expenses
and Taxes. The Borrower
agrees to pay, promptly after demand therefor, (a) whether or not the
transactions contemplated herein are consummated, all reasonable costs and
expenses of the Administrative Agent in connection with the preparation,
execution, delivery, administration, waiver and other modification of this
Agreement, the other Loan Documents and any other documents that may be
delivered in connection herewith or therewith, including the reasonable fees and
out-of-pocket expenses of counsel for the Administrative Agent with respect
thereto and with respect to advising the Administrative Agent as to its rights
and responsibilities under the Loan Documents, and (b) all reasonable costs and
expenses of the Administrative Agent and the Lenders, including the reasonable
fees and out-of-pocket expenses of counsel for the Administrative Agent and the
Lenders, that may be incurred by the Administrative Agent and the Lenders in
connection with the enforcement (whether through negotiations, legal proceedings
or otherwise) of this Agreement, the other Loan Documents and any other
documents that may be delivered in connection herewith or therewith, whether in
any action, suit or litigation, any bankruptcy, insolvency or similar
proceeding, or otherwise. Without prejudice to the survival of any other
obligation of the Borrower hereunder, the obligations of the Borrower contained
in this section shall survive the payment in full of amounts payable by the
Borrower under this Agreement and the termination hereof.

Section
10.7     Indemnification. The Borrower
hereby agrees to indemnify and hold harmless the Administrative Agent and each
Lender and each of their respective officers, directors, employees, agents,
advisors and Affiliates (each an "Indemnified
Person") from and against
any and all claims, damages, losses, liabilities, costs or expenses whatsoever
that any of them may incur or that may be claimed against any of them by any
Person whatsoever (a) by reason of any inaccuracy in any material respect
in, or untrue statement or alleged untrue statement of any material fact
contained or incorporated by reference in, any offering document or information
memorandum distributed by or on behalf of the Borrower referring to this
Agreement and the transactions contemplated hereby, or in any supplement or
amendment to either thereof, or the omission or alleged omission to state
therein a material fact necessary to make such statements, in the light of the
circumstances under which they are or were made, not misleading, or (b) by
reason of or in connection with the execution, delivery and performance of this
Agreement or any other Loan Document, except to the extent that any such claim,
damage, loss, liability, cost or expense resulted from such Indemnified Person’s
gross negligence or willful misconduct. Nothing in this section is intended to
limit the Borrower’s repayment obligations under this Agreement. Without
prejudice to the survival of any other obligation of the Borrower hereunder, the
indemnities and obligations of the Borrower contained in this section shall
survive the payment in full of amounts payable by the Borrower under this
Agreement and the termination of this Agreement.

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Section
10.8     Assignments and
Participations.

(a)     Each Lender may
assign to one or more banks or other entities acceptable to the Administrative
Agent, in the exercise of its reasonable discretion, all or a portion of such
Lender’s rights and obligations under this Agreement (including all or a portion
of its Commitment or the Advances owing to it); provided, however, that (i) except
in the case of an assignment to a Person that, immediately before such
assignment, was a Lender, the amount of the Commitment or Advances of the
assigning Lender being assigned pursuant to each such assignment (determined as
of the date of the Assignment and Assumption with respect to such assignment)
shall in no event be less than the lesser of (A) the entire Commitment or all
Advances of such Lender at such time and (B) $10,000,000, and (ii) the parties
to each such assignment shall execute and deliver to the Administrative Agent,
for its acceptance and recording in the Register, an Assignment and Assumption,
together with a processing and recording fee of $3,500. Upon such execution,
delivery, acceptance and recording, from and after the effective date specified
in the applicable Assignment and Assumption, which effective date shall be at
least 5 Business Days after the date of delivery thereof to the Administrative
Agent or, if so specified in such Assignment and Assumption, the date of
acceptance thereof by the Administrative Agent, (i) the assignee thereunder
shall be a party hereto and, to the extent that rights and obligations hereunder
have been assigned to it pursuant to such Assignment and Assumption, shall have
the rights and obligations of a Lender hereunder and (ii) the Lender assignor
thereunder shall, to the extent that rights and obligations hereunder have been
assigned by it pursuant to such Assignment and Assumption, relinquish its rights
and be released from its obligations under this Agreement (and, in the case of
an Assignment and Assumption covering all or the remaining portion of an
assigning Lender’s rights and obligations under this Agreement, such Lender
shall cease to be a party hereto, except that such Lender shall continue to be
an åIndemnified Personæ under Section 10.7).

(b)     By executing and
delivering an Assignment and Assumption, the Lender assignor thereunder and the
assignee thereunder confirm to and agree with each other and the other parties
hereto as follows: (i) other than as provided in such Assignment and Assumption,
such assigning Lender makes no representation or warranty and assumes no
responsibility with respect to any statement, warranty or representation made in
or in connection with this Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any other
instrument or document furnished pursuant hereto; (ii) such assigning Lender
makes no representation or warranty and assumes no responsibility with respect
to the financial condition of the Borrower or any Subsidiary thereof or the
performance or observance by the Borrower of any of its obligations under any
Loan Document or any other instrument or document furnished pursuant hereto;
(iii) such assignee confirms that it has received a copy of this Agreement,
together with copies of the financial statements referred to in Sections 5.9 and
6.8 and such other documents and information as it has deemed appropriate to
make its own credit analysis and decision to enter into such Assignment and
Assumption; (iv) such assignee will, independently and without reliance upon the
Administrative Agent, such assigning Lender or any other Lender and based on
such documents and information as it may deem appropriate at the time, continue
to make its own credit decisions in taking or not taking action under this
Agreement; (v) such assignee appoints and authorizes the Administrative Agent to
take such action as agent on its behalf and to exercise such powers under the
Loan Documents as are delegated to the Administrative Agent by the terms
thereof, together with such powers as are reasonably incidental thereto; and
(vi) such assignee agrees that it will perform in accordance with their terms
all of the obligations that by the terms of the Loan Documents are required to
be performed by it as a Lender.

(c)     The Administrative
Agent will maintain at its address referred to in Section 10.2 a copy of each
Assignment and Assumption delivered to and accepted or consented to by it and a
register for the recordation of the names and addresses of the Lenders and the
Commitment of, or the principal amount of Advances owing to, each Lender from
time to time (the åRegisteræ). The entries in the Register shall be conclusive
and binding for all purposes, absent manifest error, and the Borrower, the
Administrative Agent and the Lenders may treat each Person whose name is
recorded in the Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Borrower or any
Lender at any reasonable time and from time to time upon reasonable prior
notice.

(d)     Upon its receipt of
an Assignment and Assumption that has been properly executed, accepted and
consented to, as applicable, as specified above, the Administrative Agent shall,
if such Assignment and Assumption has been properly completed and is in proper
form, (i) accept such Assignment and Assumption, (ii) record the information
contained therein in the Register and (iii) give prompt notice thereof to the
Borrower.

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(e)     Each Lender may
sell participations to one or more banks or other entities (each a
"Participant") in or to all or a portion of its rights and obligations under
this Agreement (including all or a portion of its Commitments or the Advances
owing to it); provided, however, that (i) such Lender’s obligations under this
Agreement (including its Commitment, if any) shall remain unchanged, (ii) such
Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations, (iii) the Borrower, the Administrative Agent
and the other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender’s rights and obligations under this
Agreement and (iv) no Participant under any such participation shall have any
right to approve any amendment or waiver of any provision of any Loan Document,
or any consent to any departure by the Borrower therefrom, except to the extent
that such amendment, waiver or consent would reduce the principal of, or
interest on, the Advances or any other amounts payable hereunder, in each case
to the extent subject to such participation, postpone any date fixed for any
payment of principal of, or interest on, the Advances or any other amounts
payable hereunder, in each case to the extent subject to such participation. If,
at the time of a grant of a participation pursuant to this section, the proposed
Participant is subject to Taxes that would result in a claim for compensation
pursuant to Section 3.4 materially greater than that to which the Lender
selling a participation is entitled, such grant shall be subject to the consent
of the Borrower (which consent shall not be unreasonably withheld).

(f)     Any Lender or the
Administrative Agent may, in connection with any assignment or participation or
proposed assignment or participation pursuant to this Section 10.8, disclose to
the assignee or Participant or proposed assignee or Participant any information
relating to the Borrower that was furnished to such Lender or the Administrative
Agent by or on behalf of the Borrower; provided, however, that such assignee or
Participant agrees to be bound by the obligations of such Lender to maintain the
confidentiality of such information.

(g)     Nothing herein
shall prohibit any Lender from pledging or assigning any Advance or any Note to
any Federal Reserve Bank in accordance with Applicable Law.

Section
10.9     Severability. Any provision of
this Agreement that is prohibited, unenforceable or not authorized in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition, unenforceability or nonauthorization without invalidating the
remaining provisions hereof or affecting the validity, enforceability or
legality of such provision in any other jurisdiction. The parties shall endeavor
in good-faith negotiations to replace any such invalid, illegal or unenforceable
provision with a valid provision, the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable
provision.

Section
10.10    Governing
Law. THIS AGREEMENT AND
THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF CALIFORNIA. EACH OF THE BORROWER, THE ADMINISTRATIVE
AGENT AND THE LENDERS (A) IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY STATE
OR FEDERAL COURT SITTING IN LOS ANGELES IN ANY ACTION ARISING OUT OF THIS
AGREEMENT, (B) AGREES THAT ALL CLAIMS IN ANY SUCH ACTION MAY BE DECIDED IN SUCH
COURT, (C) WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE DEFENSE
OF AN INCONVENIENT FORUM AND (D) CONSENTS TO THE SERVICE OF PROCESS BY MAIL. A
FINAL JUDGMENT IN ANY SUCH ACTION SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN
OTHER JURISDICTIONS. NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY PARTY TO SERVE
LEGAL PROCESS IN ANY MANNER PERMITTED BY APPLICABLE LAW OR AFFECT ITS RIGHT TO
BRING ANY ACTION IN ANY OTHER COURT.

Section
10.11     Execution in
Counterparts. This Agreement
may be executed in any number of counterparts and by the parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.

Section
10.12     Headings.
Section headings in this Agreement are included herein for convenience of
reference only and shall not constitute a part of this Agreement for any other
purpose.

Section
10.13     Patriot Act
Notice. Each Lender
subject to Title III of the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001
(Public Law 107-56) (the "Patriot
Act") hereby notifies
the Borrower that, pursuant to the requirements of the Patriot Act, such Lender
is required to obtain, verify and record information that identifies the
Borrower, which information includes the name and address of the Borrower and
other information that will allow such Lender to identify the Borrower in
accordance with the Patriot Act.

- 27-

Section
10.14     WAIVER OF JURY
TRIAL. TO THE EXTENT
PERMITTED BY APPLICABLE LAW, EACH OF THE BORROWER, THE LENDERS AND THE
ADMINISTRATIVE AGENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM, WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE, RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, ANY
NEGOTIATIONS OR COMMUNICATIONS RELATING TO THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS, OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY.

The parties hereto
have caused this Agreement to be executed by their respective duly authorized
representatives as of the date first written above.

        PENNSYLVANIA ELECTRIC
COMPANY

        By:  /s/Randy
Scilla  

        Name:  Randy
Scilla   

        Title:  Assistant
Treasurer  

                                          Address for
Notice

        Pennsylvania Electric
Company

        76 South Main
Street

        Akron, Ohio
44308

        Telecopier:
330-384-3772

        Attention: Randy
Scilla

      Assistant
Treasurer

        UNION BANK OF
CALIFORNIA, N.A.,

                             as Administrative
Agent and a Lender

        By:  /s/Kevin M.
Zitar  

        Name:  Kevin M.
Zitar  

        Title:  Vice
President   

        Address for
Notice

        Union Bank of
California, N.A.

        445 South Figueroa
Street

        Los Angeles,
California 90071

        Telecopier:
213-236-4096

        Attention: Power
& Utilities

        Domestic Lending
Office

        Union Bank of
California, N.A.

        445 South Figueroa
Street

      Los Angeles, California
90071

S-1

        NATIONAL CITY
BANK

        By:  /s/Kevin O.
Thompson 

        Name:  Kevin O.
Thompson  

        Title:  Senior Vice
President  

        Address for
Notice

        National City
Bank

        One Cascade
Plaza

        Akron, Ohio
44308

        Telecopier:
330-375-8029

        Attention: Kevin O.
Thompson

        Senior Vice
President

        Domestic Lending
Office

        National City
Bank

        One Cascade
Plaza

        Akron, Ohio
44308

 

S-2

 

 

EXHIBIT
A

PROMISSORY
NOTE

U.S.$________________                                                                         __________,
200_

For value received,
the undersigned, PENNSYLVANIA ELECTRIC COMPANY, a Pennsylvania corporation (the
"Borrower"), hereby promises
to pay to the order of _________________________ (the "Lender"), on the Maturity
Date, the principal amount of _________________________ Dollars
(U.S.$__________) lent by the Lender to the Borrower pursuant to the Loan
Agreement referred to below. Terms defined in the Loan Agreement and not
otherwise defined herein have the same respective meanings when used
herein.

The Borrower
promises to pay interest on the unpaid principal amount of each Advance from the
Lender, from the date of such Advance until such principal amount is paid in
full, at such interest rates, and payable at such times, as specified in the
Loan Agreement.

Both principal and
interest are payable in Dollars, in immediately available funds, to Union Bank
of California, N.A., a national banking association, as administrative agent
(the "Administrative
Agent"), at its office
located at 445 South Figueroa Street, Los Angeles, California 90071 or as
otherwise directed by the Administrative Agent. The Advances from the Lender and
all payments made on account of the principal thereof shall be recorded by the
Lender and, before any transfer hereof, endorsed on the schedule attached
hereto, which is part of this Note.

This Note is one of
the "Notes" referred to in, and is entitled to the benefits of, the Term Loan
Agreement dated as of March __, 2005 (as it may hereafter be amended, restated
or otherwise modified from time to time, the "Loan
Agreement") among the
Borrower, the Lender and the other financial institutions party thereto, and the
Administrative Agent. The Loan Agreement, among other things, (1) provides for
Advances from the Lender to the Borrower in the aggregate Dollar amount first
set forth above, the indebtedness of the Borrower resulting from such Advances
being evidenced by this Note, and (2) contains provisions for acceleration of
the maturity hereof upon the happening of certain stated events and also for
prepayments on account of principal hereof before the maturity hereof upon the
terms and conditions specified therein.

The Borrower hereby
waives presentment, demand, protest and notice of any kind. No failure to
exercise, and no delay in exercising, any rights hereunder on the part of the
holder hereof shall operate as a waiver of any such rights.

The Borrower has
caused this Note to be executed by its duly authorized representative as of the
date first written above.

        PENNSYLVANIA ELECTRIC
COMPANY

        By:      

        Name:      

        Title:      

-

A-1

SCHEDULE TO
PROMISSORY NOTE

	 	 	
      Amount
      of
	
      Unpaid
	 
	 	
      Amount
      of
	
      Principal
      Paid
	
      Principal
	
      Notation

	
      Date
	
      Advance
	
      or
      Prepaid
	
      Balance
	
      Made
      By

-

A-2

 

EXHIBIT
B

NOTICE OF
BORROWING

__________,
2005

Union Bank of
California, N.A.,

as Administrative
Agent

445 South Figueroa
Street

Los Angeles,
California 90071

Attention: Power
& Utilities

Ladies and
Gentlemen:

The undersigned,
Pennsylvania Electric Company, a Pennsylvania corporation, refers to the Term
Loan Agreement dated as of March __, 2005 (the "Loan
Agreement") among the
undersigned, the lenders referred to therein and Union Bank of California, N.A.,
a national banking association, as administrative agent. Terms defined in the
Loan Agreement and not otherwise defined herein have the same respective
meanings when used herein.

Pursuant to Section
2.2(a) of the Loan Agreement, the undersigned hereby requests a Borrowing and in
that connection sets forth below the information relating to such Borrowing (the
"Proposed
Borrowing"), as required by
Section 2.2(a) of the Loan Agreement.

1. The date of the
Proposed Borrowing is __________, 2005.

2. The Proposed
Borrowing will be composed of [Base] [Eurodollar] Rate Advances.

3. The amount of the
Proposed Borrowing is $100,000,000.

[4. The initial
Interest Period for the Eurodollar Rate Advances is _____ [week[s]]
[month[s]].]

The undersigned
hereby certifies that the following statements are true on the date hereof and
will be true on the date of the Proposed Borrowing:

(a)     the representations
and warranties contained in Article 5 of the Loan Agreement are true and correct
in all material respects, before and after giving effect to the Proposed
Borrowing and to the application of the proceeds thereof, as though made on and
as of each such date (other than any such representations or warranties that, by
their terms, refer to a specific date, in which case as of such specific date);
and

(b)     no event has
occurred and is continuing, or would result from the making of the Proposed
Borrowing or from the application of the proceeds thereof, that constitutes a
Default.

        Very truly
yours,

        PENNSYLVANIA ELECTRIC
COMPANY

        By:      

        Name:      

        Title:      

 

B-1

EXHIBIT
C

NOTICE OF
CONVERSION

__________,
200_

Union Bank of
California, N.A.,

as Administrative
Agent

445 South Figueroa
Street

Los Angeles,
California 90071

Attention: Power
& Utilities

Ladies and
Gentlemen:

The undersigned,
Pennsylvania Electric Company, a Pennsylvania corporation, refers to the Term
Loan Agreement dated as of March __, 2005 (the "Loan
Agreement") among the
undersigned, the lenders referred to therein and Union Bank of California, N.A.,
a national banking association, as administrative agent (the "Administrative
Agent"). Terms defined in
the Loan Agreement and not otherwise defined herein have the same respective
meanings when used herein.

Pursuant to Section
2.6(a) of the Loan Agreement, the undersigned hereby notifies the Administrative
Agent that the undersigned elects to [Convert Advances of one Type into Advances
of the other Type] [Convert Eurodollar Rate Advances into Eurodollar Rate
Advances with a new Interest Period] and in that connection sets forth below the
information relating to such Conversion, as required by the Loan
Agreement.

1. The date of such
Conversion is __________, 200_.

2. The Advances to be
Converted are [describe Type, principal amount, date made, last day of Interest
Period, etc. of Advances to be Converted].

[3. The duration of the
[initial] [new] Interest Period for the Eurodollar Rate Advances is _____
[week[s]] [month[s]].]

        Very truly
yours,

        PENNSYLVANIA ELECTRIC
COMPANY

        By:      

        Name:      

        Title: 

 

     

C-1

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