Document:

Exhibit 4.1

         

        

        

        
            	
                        1.

                    	
                        PREAMBLE AND DEFINITIONS

                    

        

        
            	
                         

                    	
                        1.1

                    	
                        Title.

                    

        

        The Plan described in this document shall be called the “Corporate Strategy Implementation Recognition Program”.

        
            	
                         

                    	
                        1.2

                    	
                        Purposes of the Plan.

                    

        

        The purposes of the Plan are:

        
            	
                         

                    	
                        a.

                    	
                        to promote a further alignment of interests between employees and the shareholders of the Corporation with respect to the implementation of the Corporate Strategy; and

                    

        

        
            	
                         

                    	
                        b.

                    	
                        to retain employees with the knowledge, experience and expertise required by the Corporation.

                    

        

        
            	
                         

                    	
                        1.3

                    	
                        Definitions.

                    

        

        
            	
                         

                    	
                        1.3.1

                    	
                        “Affiliate” means any corporation, partnership or other entity in which the Corporation, directly or indirectly, has majority ownership interest.

                    

        

        
            	
                         

                    	
                        1.3.2

                    	
                        “Agent” has the meaning as meaning set out in Section 7.4.

                    

        

        
            	
                         

                    	
                        1.3.3

                    	
                        “Applicable Law” means any applicable provision of law, domestic or foreign, including, without limitation, applicable securities legislation, together with all regulations, rules, policy statements, rulings, notices, orders or other instruments promulgated thereunder, and Stock Exchange Rules.

                    

        

        
            	
                         

                    	
                        1.3.4

                    	
                        “Beneficiary” means, subject to Applicable Law, an individual who has been designated by an Eligible Employee, in such form and manner as the Committee may determine, to receive benefits payable under the Plan upon the death of the Eligible Employee, or, where no such designation is validly in effect at the time
                        of death, the Eligible Employee’s legal representative.

                    

        

        
            	
                         

                    	
                        1.3.5

                    	
                        “Board” means the Board of Directors of the Corporation.

                    

        

        
            	
                         

                    	
                        1.3.6

                    	
                        “Cause” in respect of an Eligible Employee means just cause or cause under Applicable Law and, in addition, includes the Eligible Employee’s:

                    

        

        
            	
                         

                    	
                        (a)

                    	
                        willful breach or neglect of the duties of his employment or willful breach or neglect of obligations to the Corporation or an Affiliate under the term of his employment (whether written or unwritten), including being absent from his place of work for four or more days in succession without consent, except where such absence is

                    

        

         

        
            

        

        
            

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        permitted by Applicable Law or the terms of the Eligible Employee’s employment;

        
            	
                         

                    	
                        (b)

                    	
                        failure or refusal to perform such duties or obligations after demand for performance or to comply with the rules, policies or practices of the Corporation or an Affiliate, as applicable;

                    

        

        
            	
                         

                    	
                        (c)

                    	
                        dishonesty;

                    

        

        
            	
                         

                    	
                        (d)

                    	
                        insubordination;

                    

        

        
            	
                         

                    	
                        (e)

                    	
                        gross, serious or repeated misconduct;

                    

        

        
            	
                         

                    	
                        (f)

                    	
                        conduct where such conduct endangers, or is likely to endanger, the health or safety of others;

                    

        

        
            	
                         

                    	
                        (g)

                    	
                        conviction of a crime constituting a felony or indictable offence;

                    

        

        
            	
                         

                    	
                        (h)

                    	
                        serious breach of his or her contract of employment;

                    

        

        
            	
                         

                    	
                        (i)

                    	
                        gross incompetence; or

                    

        

        
            	
                         

                    	
                        (j)

                    	
                        action or failure to act which has the effect of bringing the Corporation and/or any Affiliate into disrepute.

                    

        

        
            	
                         

                    	
                        1.3.7

                    	
                        “Change in Control” means the occurrence of any of the following events:

                    

        

        
            	
                         

                    	
                        (a)

                    	
                        any person, partnership, entity or group, howsoever composed hereafter acquires direct or indirect, actual or de facto control of the Corporation. For the purposes of this Section 1.3.7, “control” means the ability to elect a majority of the members of the Board and “group” refers to a combination of persons, partnerships, or
                        entities, or any of the foregoing that act in concert;

                    

        

        
            	
                         

                    	
                        (b)

                    	
                        there is any acquisition of 50% or more of the shares of the Corporation having entitlement to vote in the election of the directors of the Corporation;

                    

        

        
            	
                         

                    	
                        (c)

                    	
                        the Corporation enters into an amalgamation, arrangement, restructuring, reorganization, merger or consolidation arrangement whereby, or the ultimate effect of which is that, any person, partnership, entity or group, howsoever composed, acquires direct or indirect, actual or de facto control of the Corporation;

                    

        

        
            	
                         

                    	
                        (d)

                    	
                        the shareholders of the Corporation approve the liquidation, winding up or other dissolution of the Corporation; or

                    

        

        

        

        

        

        
             

            
                

            

            
                

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                            (e)

                        	
                            the shareholders of the Corporation approve the sale of all or substantially all of the assets of the Corporation.

                        

            

            
                	
                             

                        	
                            1.3.8

                        	
                            “Committee” means the Management Succession and Compensation Committee of the Board or such other committee of the Board which may be appointed by the Board to, among other things, interpret, administer and implement the Plan and includes any delegate of the Committee under Section 10.3 with respect to such
                            duties and powers as have been delegated to him or her thereunder.

                        

            

            
                	
                             

                        	
                            1.3.9

                        	
                            “Corporate Strategy” means the global business strategy of Talisman as approved by the Board on April 9, 2008, as modified by the Corporation from time to time.

                        

            

            
                	
                             

                        	
                            1.3.10

                        	
                            “Corporation” means Talisman Energy Inc. and any successor corporation whether by amalgamation, merger or otherwise.

                        

            

            
                	
                             

                        	
                            1.3.11

                        	
                            “Disability” means the Eligible Employee’s physical or mental incapacity that prevents him from substantially fulfilling his duties and obligations on behalf of the Corporation or, if applicable, an Affiliate, and in respect of which the Eligible Employee commences receiving, or is eligible to receive,
                            disability benefits under the Corporation’s or an Affiliate’s short-term or long-term disability plan.

                        

            

            
                	
                             

                        	
                            1.3.12

                        	
                            “Dividend Equivalent PSU” has the meaning set out in Section 5.2.

                        

            

            
                	
                             

                        	
                            1.3.13

                        	
                            “Effective Date” has the meaning set out in Section 3.1.

                        

            

            
                	
                             

                        	
                            1.3.14

                        	
                            “Eligible Employee” means any permanent non-unionized employee of the Corporation or an Affiliate who is classified by the Corporation or Affiliate for payroll purposes as being in any pay band below M2/T2.

                        

            

            
                	
                             

                        	
                            1.3.15

                        	
                            “Employed” means, with respect to an Eligible Employee, that:

                        

            

            
                	
                             

                        	
                            (a)

                        	
                            he is performing work at a workplace of the Corporation or an Affiliate; or

                        

            

            
                	
                             

                        	
                            (b)

                        	
                            he is not actively at work at a workplace of the Corporation or an Affiliate due to an approved leave of absence, maternity or parental leave or Disability.

                        

            

            For greater certainty, except as expressly provided herein, an individual whose employment has been terminated without Cause by the Corporation or an Affiliate shall not be considered to be “Employed” for purposes of the Plan during any statutory, contractual or common law notice period.

            
                	
                             

                        	
                            1.3.16

                        	
                            “Grant” means a grant of PSUs made to an individual pursuant to Section 4.1.

                        

            

             

            
                

                 

                 

                
                    

                

                
                    

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                                1.3.17

                            	
                                “Grant Agreement” means an agreement between the Corporation or an Affiliate and an Eligible Employee under which a PSU is granted, as contemplated by Section 4.2, together with such schedules, amendments, deletions or changes thereto as are permitted under the Plan.

                            

                

                
                    
                        	
                                     

                                	
                                    1.3.18

                                	
                                    “Grant Date” means the effective date of a Grant.

                                

                    

                    
                        	
                                     

                                	
                                    1.3.19

                                	
                                    “Market Value” means, with respect to any particular date, the average closing price per Share on the Stock Exchange over the immediately preceding 10 Trading Days.

                                

                    

                    
                        	
                                     

                                	
                                    1.3.20

                                	
                                    “Minimum Award” means fifty per cent (50%) of the PSUs included in a Grant, together with any Dividend Equivalent PSUs related thereto, provided that where the number of PSUs included in a Grant to an Eligible Employee is adjusted pursuant to Section 6.6 or Section 6.9, the Eligible Employee’s
                                    Minimum Award and related Dividend Equivalent PSUs shall be adjusted accordingly so as to represent 50% of the PSUs credited to the Eligible Employee’s PSU Account immediately following such adjustment.

                                

                    

                    
                        	
                                     

                                	
                                    1.3.21

                                	
                                    “Performance Condition” means such measure of Talisman’s performance in implementing the Corporate Strategy as may be determined by the Committee with respect to a Grant pursuant to Section 4.4.

                                

                    

                    
                        	
                                     

                                	
                                    1.3.22

                                	
                                    "Plan" means this Corporate Strategy Implementation Recognition Program, including any schedules or appendices hereto, as amended from time to time.

                                

                    

                    
                        	
                                     

                                	
                                    1.3.23

                                	
                                    “Pro Rated PSUs” has the meaning ascribed thereto in Sections 6.4, 6.5, 6.6, 6.7 or 6.8, as applicable.

                                

                    

                    
                        	
                                     

                                	
                                    1.3.24

                                	
                                    “PSU” means a unit granted to an Eligible Employee that is represented by a bookkeeping entry on the books of the Corporation, the value of which on any particular date shall be equal to the Market Value.

                                

                    

                    
                        	
                                     

                                	
                                    1.3.25

                                	
                                    “PSU Account” has the meaning set out in Section 5.1.

                                

                    

                    
                        	
                                     

                                	
                                    1.3.26

                                	
                                    “Retirement” means the Eligible Employee’s retirement from the Corporation or an Affiliate, as applicable, provided that such retirement is accepted by the Corporation or Affiliate pursuant to a letter from the Corporation or Affiliate granting the Eligible Employee retirement status and
                                    confirming the Eligible Employee’s date of retirement.

                                

                    

                    
                        	
                                     

                                	
                                    1.3.27

                                	
                                    “Settlement Value” means, with respect to a Vested PSU, the closing price per Share on the Stock Exchange on the Vesting Date of such Vested PSU.

                                

                    

                     

                    
                        

                         

                         

                         

                        
                            

                        

                        
                            

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                                        1.3.28

                                    	
                                        “Share” means a common share of the Corporation and such other share as may be substituted for it as a result of amendments to the articles of the Corporation, arrangement, reorganization or otherwise, including any rights that form a part of the common share or substituted share.

                                    

                        

                        
                            	
                                         

                                    	
                                        1.3.29

                                    	
                                        “Share Purchase Trust” means a trust established pursuant to Section 7.1 hereof with a bank or trust company that is independent of and unaffiliated with the Corporation as Trustee, to acquire and hold Shares for delivery from time to time to Eligible Employees upon settlement of Vested
                                        PSUs.

                                    

                        

                        
                            	
                                         

                                    	
                                        1.3.30

                                    	
                                        “Stock Exchange” means The Toronto Stock Exchange, or if the Shares are not listed on The Toronto Stock Exchange, such other stock exchange on which the Shares are listed, or if the Shares are not listed on any stock exchange, then on the over-the-counter market.

                                    

                        

                        
                            	
                                         

                                    	
                                        1.3.31

                                    	
                                        “Stock Exchange Rules” means the applicable rules of any stock exchange upon which shares of the Corporation are listed.

                                    

                        

                        
                            	
                                         

                                    	
                                        1.3.32

                                    	
                                        “Talisman” means the Corporation and its Affiliates, collectively.

                                    

                        

                        
                            	
                                         

                                    	
                                        1.3.33

                                    	
                                        “Trading Day” means any date on which the Stock Exchange is open for the trading of Shares and on which Shares are actually traded.

                                    

                        

                        
                            	
                                         

                                    	
                                        1.3.34

                                    	
                                        “Trustee” means such person or persons as may from time to time be appointed by the Committee as trustee of a Share Purchase Trust.

                                    

                        

                        
                            	
                                         

                                    	
                                        1.3.35

                                    	
                                        “Vested PSUs” has the meaning set out in Section 6.1.

                                    

                        

                        
                            	
                                         

                                    	
                                        1.3.36

                                    	
                                        “Vesting Date” means the date on which a PSU becomes a Vested PSU in accordance with Section 6.2, Section 6.4, Section 6.5, Section 6.7, Section 6.8 or the terms of a Grant Agreement.

                                    

                        

                        
                            	
                                         

                                    	
                                        1.3.37

                                    	
                                        “Vesting Period” means, with respect to a Grant, the period commencing on the Grant Date and ending on January 31, 2010.

                                    

                        

                        
                            	
                                        2.

                                    	
                                        CONSTRUCTION AND INTERPRETATION

                                    

                        

                        
                            	
                                         

                                    	
                                        2.1

                                    	
                                        Gender, Singular, Plural. In the Plan, references to the masculine include the feminine; and references to the singular shall include the plural and vice versa, as the context shall require.

                                    

                        

                        
                            	
                                         

                                    	
                                        2.2

                                    	
                                        Governing Law. The Plan shall be governed and interpreted in accordance with the laws of the Province of Alberta and any actions, proceedings or claims in any way pertaining to the Plan shall be commenced in the courts of the Province of Alberta.

                                    

                        

                         

                        
                            

                             

                             

                             

                            
                                

                            

                            
                                

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                                            2.3

                                        	
                                            Severability. If any provision or part of the Plan is determined to be void or unenforceable in whole or in part, such determination shall not affect the validity or enforcement of any other provision or part thereof.

                                        

                            

                            
                                	
                                             

                                        	
                                            2.4

                                        	
                                            Headings, Sections. Headings wherever used herein are for reference purposes only and do not limit or extend the meaning of the provisions herein contained. A reference to a section or schedule shall, except where expressly stated otherwise, mean a section or schedule of
                                            the Plan, as applicable.

                                        

                            

                            
                                	
                                            3.

                                        	
                                            EFFECTIVE DATE AND EMPLOYMENT RIGHTS

                                        

                            

                            
                                	
                                             

                                        	
                                            3.1

                                        	
                                            Effective Date. The Corporation is establishing the Plan effective on August 1, 2008.

                                        

                            

                            
                                	
                                             

                                        	
                                            3.2

                                        	
                                            No Employment Rights. Nothing contained in the Plan shall be deemed to give any person the right to be retained as an employee of the Corporation or of an Affiliate.

                                        

                            

                            
                                	
                                            4.

                                        	
                                            PSU GRANTS AND VESTING PERIODS

                                        

                            

                            
                                	
                                             

                                        	
                                            4.1

                                        	
                                            Grant of PSUs. Each individual who:

                                        

                            

                            
                                	
                                             

                                        	
                                            a.

                                        	
                                            is an Eligible Employee on the Effective Date; or

                                        

                            

                            
                                	
                                             

                                        	
                                            b.

                                        	
                                            becomes an Eligible Employee after the Effective Date and before August 1, 2009

                                        

                            

                            shall receive a grant of PSUs in such number as may be specified by the Committee with effect, in the case of an Eligible Employee described in Section 4.1a., from the Effective Date and, in the case of an Eligible Employee described in Section 4.1b., from the effective date on which the individual becomes an Eligible Employee.

                            
                                	
                                             

                                        	
                                            4.2

                                        	
                                            Grant Agreement. Each Grant and the participation of an Eligible Employee in the Plan shall be evidenced by a written Grant Agreement issued by the Corporation or an Affiliate containing such terms and in such form as may be prescribed by the Committee.

                                        

                            

                            The Committee may prescribe terms for Grant Agreements in respect of Eligible Employees who are subject to the laws of a jurisdiction other than Canada in connection with their participation in the Plan that are different than the terms of the Grant Agreements for Eligible Employees who are subject to the laws of Canada in connection with their participation in the
                            Plan, and/or deviate from the terms of the Plan set out herein, for purposes of compliance with Applicable Law in such other jurisdiction or where in the Committee’s opinion such terms or deviations are necessary or desirable to obtain more advantageous treatment for the Corporation, an Affiliate or the Eligible Employees in respect of the Plan under the Applicable Law of the other jurisdiction.

                             

                            
                                

                                 

                                 

                                 

                                
                                    

                                

                                
                                    

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                                Notwithstanding the foregoing, the terms of any Grant Agreement shall be consistent with the Plan to the extent practicable having regard to the Applicable Law of the jurisdiction in which such Grant Agreement is applicable.

                                
                                    	
                                                 

                                            	
                                                4.3

                                            	
                                                PSUs. Each PSU will give an Eligible Employee the right to receive one Share from a Share Purchase Trust, or where the Committee so specifies in the Grant Agreement applicable to the PSU, a cash payment in an amount determined in accordance with the Plan and such
                                                Grant Agreement, provided such PSU becomes a Vested PSU in accordance with the terms of the Plan and the applicable Grant Agreement. For greater certainty, an Eligible Employee or Beneficiary shall have no right to receive any Shares or payment, and no payment shall be made as compensation, damages, or otherwise, with respect to any PSUs that are forfeited or otherwise do not become Vested PSUs.

                                            

                                

                                
                                    	
                                                 

                                            	
                                                4.4

                                            	
                                                Performance Conditions and Minimum Award. For purposes of each Grant to an Eligible Employee the Committee shall establish the Performance Conditions applicable to such Grant, other than the Minimum Award, which Performance Conditions shall be set out in the Grant Agreement relating to such
                                                Grant. No Performance Conditions shall apply to a Minimum Award.

                                            

                                

                                
                                    	
                                                 

                                            	
                                                4.5

                                            	
                                                Waiver or Change of Performance Conditions. The Committee may, without the consent of any Eligible Employee, subsequent to the making of a Grant:

                                            

                                

                                
                                    	
                                                 

                                            	
                                                a.

                                            	
                                                waive any Performance Condition applicable to the such Grant, or determine that it has been satisfied;

                                            

                                

                                
                                    	
                                                 

                                            	
                                                b.

                                            	
                                                change or replace any Performance Condition or modify the weighting as between difference Performance Conditions applicable to a particular Grant as the Committee sees fit in the event of a material change affecting Talisman including a material acquisition, disposition, change in Applicable Law or change in accounting standards
                                                applicable to Talisman provided that the Committee reasonably determines that (i) the change or replacement is required to preserve the rights of the Eligible Employees under the Plan on a basis substantially proportionate to that which existed prior to the event giving rise to the change or replacement, or (ii) that the change or replacement will not materially adversely affect the likelihood of vesting or amount of any Grant.

                                            

                                

                                 

                                
                                    

                                     

                                     

                                     

                                    
                                        

                                    

                                    
                                        

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                                                    4.6

                                                	
                                                    Other Terms and Conditions. Subject to the terms of the Plan, the Committee may, in its sole discretion, determine other terms or conditions of any PSUs, including any additional conditions with respect to the vesting of PSUs, in whole or in part, which other
                                                    terms or conditions shall be set out in the applicable Grant Agreement. In addition, the Committee may, in its sole discretion, authorize the vesting of PSUs granted or credited to an Eligible Employee hereunder that would, in the absence of such authorization, be forfeited pursuant to Section 6.1.

                                                

                                    

                                    For greater certainty, no term or condition imposed under a Grant Agreement may have the effect of causing payment of the value of a PSU to an Eligible Employee, or his or her Beneficiary, to occur after December 31 of the third calendar year following the calendar year in respect of which such PSU was granted.

                                    
                                        	
                                                    5.

                                                	
                                                    ACCOUNTS, DIVIDEND EQUIVALENTS AND REORGANIZATION

                                                

                                    

                                    
                                        	
                                                     

                                                	
                                                    5.1

                                                	
                                                    PSU Account. An account, called as an “PSU Account”, shall be maintained by the Corporation, or an Affiliate, as specified by the Committee, for each Eligible Employee and will be credited with the Grants received by an Eligible Employee pursuant to
                                                    Section 4.1 and Dividend Equivalent PSUs in respect of the PSUs included in such Grant. Where Section 6.4, Section 6.5, Section 6.6, Section 6.7 or Section 6.8 applies with respect to an Eligible Employee’s PSUs, effective at the time the calculation of Pro Rated PSUs is made under any such Section, the number of PSUs recorded in the Eligible Employee’s PSU Account will be increased or decreased accordingly to equal the Eligible
                                                    Employee’s Pro Rated PSUs. An Eligible Employee’s PSU Account shall separately identify those PSUs, including related Dividend Equivalent PSUs, that comprise his or her Minimum Award and those PSUs, including related Dividend Equivalent PSUs, that are subject to Performance Conditions. PSUs that fail to vest in an Eligible Employee pursuant to Section 6, or that are paid out to the Eligible Employee or his or her Beneficiary, shall
                                                    be cancelled and shall cease to be recorded in the Eligible Employee’s PSU Account as of the date on which such PSUs are forfeited or cancelled under the Plan or are paid out, as the case may be.

                                                

                                    

                                    
                                        	
                                                     

                                                	
                                                    5.2

                                                	
                                                    Dividend Equivalent PSUs. Whenever during the Vesting Period applicable to an Eligible Employee’s PSUs cash dividends are paid on the Shares, additional PSUs will be credited to the Eligible Employee’s PSU Account in accordance with this Section 5.2
                                                    (“Dividend Equivalent PSUs”). The number of Dividend Equivalent PSUs will be calculated by dividing the cash dividends that would have been paid to the Eligible Employee if the PSUs recorded in the Eligible Employee’s PSU Account as at the record date for the cash dividend had been Shares by the Market Value on the date on which the dividends are paid on the
                                                    Shares.

                                                

                                    

                                     

                                    
                                        

                                         

                                         

                                         

                                        
                                            

                                        

                                        
                                            

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                                                        5.3

                                                    	
                                                        Adjustments. In the event of any stock dividend, stock split, combination or exchange of shares, capital reorganization, consolidation, spin-off or other distribution (other than normal cash dividends) of the Corporation’s assets to shareholders, or any
                                                        other similar changes affecting the Shares, a proportionate adjustment to reflect such change or changes shall be made with respect to the number of PSUs outstanding under the Plan, or securities into which the Shares are changed or are convertible or exchangeable may be substituted for Shares under this Plan, on a basis proportionate to the number of PSUs in the Eligible Employee’s PSU Account or some other appropriate basis, all as
                                                        determined by the Committee in its sole discretion.

                                                    

                                        

                                        
                                            	
                                                         

                                                    	
                                                        5.4

                                                    	
                                                        No Certificates. No certificates shall be issued with respect to any PSUs.

                                                    

                                        

                                        
                                            	
                                                        6.

                                                    	
                                                        VESTING OF PSUs

                                                    

                                        

                                        
                                            	
                                                         

                                                    	
                                                        6.1

                                                    	
                                                        Vested PSUs. PSUs granted to an Eligible Employee shall vest in accordance with Section 6.2, Section 6.4, Section 6.5, Section 6.7, or Section 6.8, as applicable. PSUs which vest shall be redeemable for Shares or a cash payment in accordance with Section 7.3
                                                        or Section 7.4, as applicable, and are referred to herein as “Vested PSUs”. PSUs which have been granted to an Eligible Employee and which do not become Vested PSUs shall be forfeited by the Eligible Employee and the Eligible Employee will have no further right, title or interest in such PSUs.

                                                    

                                        

                                        
                                            	
                                                         

                                                    	
                                                        6.2

                                                    	
                                                        Continued Employment. Subject to Section 6.3, Section 6.4, Section 6.5, Section 6.6, Section 6.7 and Section 6.8:

                                                    

                                        

                                        
                                            	
                                                         

                                                    	
                                                        a.

                                                    	
                                                        PSUs that are the subject of a Grant to an Eligible Employee and Dividend Equivalent PSUs credited to the Eligible Employee’s PSU Account in respect of such PSUs, other than the PSUs and Dividend Equivalent PSUs comprising the Eligible Employee’s Minimum Award, shall vest on January 31, 2010 in such number as
                                                        may be determined in accordance with the Grant Agreement applicable to such Grant and having regard to the extent to which applicable Performance Conditions have been satisfied, and

                                                    

                                        

                                        
                                            	
                                                         

                                                    	
                                                        b.

                                                    	
                                                        the PSUs comprising an Eligible Employee’s Minimum Award in respect of a Grant referred to in clause (a) above shall vest on January 31, 2010 irrespective of the extent to which any Performance Conditions have been satisfied, provided that the Eligible Employee remains employed throughout such Vesting
                                                        Period.

                                                    

                                        

                                        For greater certainty, an Eligible Employee shall not be considered to have ceased being Employed for purposes of this Section 6.2 where, during a Vesting Period, he or she ceases employment with the Corporation and immediately commences employment with an Affiliate or ceases employment with an Affiliate and immediately commences employment with the
                                        Corporation or another Affiliate.

                                         

                                        
                                            

                                             

                                             

                                             

                                            
                                                

                                            

                                            
                                                

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                                                            6.3

                                                        	
                                                            Termination of Employment for Cause or Resignation. In the event an Eligible Employee’s employment is terminated for Cause by the Corporation, or an Affiliate, as applicable, or the Eligible Employee resigns from his or her employment with the Corporation or an Affiliate, as
                                                            applicable, prior to the end of the Vesting Period relating to a Grant received by such Eligible Employee, none of the PSUs relating to such Grant, nor any Dividend Equivalent PSUs in respect of such PSUs, shall vest, and all such PSUs shall be forfeited in accordance with Section 6.1.

                                                        

                                            

                                            
                                                	
                                                             

                                                        	
                                                            6.4

                                                        	
                                                            Termination without Cause. In the event an Eligible Employee’s employment is terminated without Cause by the Corporation or an Affiliate, as applicable, prior to the end of the Vesting Period relating to a Grant of PSUs received by the Eligible Employee, the number of PSUs
                                                            determined by the formula A x B/C (the “Pro Rated PSUs”), where

                                                        

                                            

                                            
                                                	
                                                             

                                                        	
                                                            A

                                                        	
                                                            equals the total number of PSUs that comprise his or her Minimum Award as recorded in his or her PSU Account as at the date on which he or she receives notice of termination of employment,

                                                        

                                            

                                            
                                                	
                                                             

                                                        	
                                                            B

                                                        	
                                                            equals the total number of days between the Grant Date for such Grant and the date on which the Eligible Employee receives notice of termination of employment (rounded up to the nearest whole number of days), and

                                                        

                                            

                                            
                                                	
                                                             

                                                        	
                                                            C

                                                        	
                                                            equals total number of days (rounded up to the nearest whole number of days) between the Grant Date for such Grant and the end of the Vesting Period relating to such Grant,

                                                        

                                            

                                            shall, subject to any adjustment pursuant to Section 6.9, Pro Rated PSUs under this section 6.4 become Vested PSUs on the earlier of January 31, 2010 and the effective date of a Change in Control. For greater certainty, unless otherwise determined by the Committee in its sole discretion, no PSUs that are not Pro Rated PSUs and, in particular, no PSUs
                                            that are subject to Performance Conditions, may vest with respect to an Eligible Employee after such Eligible Employee has been given notice of termination of his or her employment by the Corporation or an Affiliate.

                                            
                                                	
                                                             

                                                        	
                                                            6.5

                                                        	
                                                            Death or Retirement

                                                        

                                            

                                            In the event an Eligible Employee ceases to be Employed by reason of death or Retirement prior to the end of the Vesting Period applicable to a Grant received by the Eligible Employee, the number of PSUs relating to such Grant (including any applicable Dividend Equivalent PSUs) eligible to become Vested PSUs shall be the number of PSUs determined by
                                            the formula A x B/C (the “Pro Rated PSUs”), where

                                             

                                            
                                                

                                                 

                                                 

                                                 

                                                
                                                    

                                                

                                                
                                                    

                                                    - 12 -

                                                     

                                                    

                                                

                                                 

                                                
                                                    	
                                                                 

                                                            	
                                                                A

                                                            	
                                                                equals the total number of PSUs recorded in the Eligible Employee’s PSU Account as at the date on which he or she ceases to be Employed by reason of death or Retirement,

                                                            

                                                

                                                
                                                    	
                                                                 

                                                            	
                                                                B

                                                            	
                                                                equals the total number of days between the Grant Date for such Grant and the Eligible Employee’s date of death or Retirement (rounded up to the nearest whole number of days), and

                                                            

                                                

                                                
                                                    	
                                                                 

                                                            	
                                                                C

                                                            	
                                                                equals total number of days between the Grant Date for such Grant and the end of the Vesting Period relating to such Grant (rounded up to the nearest whole number of days).

                                                            

                                                

                                                Subject to any adjustment pursuant Section 6.8 or Section 6.9, Pro Rated PSUs under this Section 6.5 shall become Vested PSUs on the earlier of January 31, 2010 and the effective date of a Change in Control in such number as may be determined in accordance with the Grant Agreement applicable to such Grant and having regard to the extent to which
                                                applicable Performance Conditions have been satisfied.

                                                
                                                    	
                                                                 

                                                            	
                                                                6.6

                                                            	
                                                                Leave of Absence.

                                                            

                                                

                                                In the event an Eligible Employee ceases to be actively at work at a workplace of the Corporation or an Affiliate due to an approved leave of absence, maternity or parental leave or Disability prior to the end of the Vesting Period applicable to a Grant received by the Eligible Employee, the number of PSUs relating to such Grant (including any
                                                applicable Dividend Equivalent PSUs) eligible to become Vested PSUs shall be the number of PSUs determined by the formula A x B/C (the “Pro Rated PSUs”), where

                                                
                                                    	
                                                                 

                                                            	
                                                                A

                                                            	
                                                                equals the total number of PSUs recorded in the Eligible Employee’s PSU Account as at the date on which he or she ceases to be actively at work as contemplated above in this Section 6.6,

                                                            

                                                

                                                
                                                    	
                                                                 

                                                            	
                                                                B

                                                            	
                                                                equals the total number of days between the Grant Date for such Grant and the Eligible Employee’s date of death, Retirement or cessation of active employment, as applicable (rounded up to the nearest whole number of days), and

                                                            

                                                

                                                
                                                    	
                                                                 

                                                            	
                                                                C

                                                            	
                                                                equals total number of days between the Grant Date for such Grant and the end of the Vesting Period relating to such Grant.

                                                            

                                                

                                                Subject to any adjustment pursuant to Section 6.4, Section 6.5, Section 6.7, Section 6.8 or Section 6.9, and subject to Section 6.3, Pro Rated PSUs under this Section 6.6 shall become Vested PSUs on the earlier of January 31, 2010 and the effective date of a Change in Control in such number as may be determined in accordance with the Grant
                                                Agreement applicable to such Grant and having regard to the extent to which applicable Performance Conditions have been satisfied provided the Eligible Employee remains Employed throughout such Vesting Period.

                                                 

                                                
                                                    

                                                     

                                                     

                                                     

                                                    
                                                        

                                                    

                                                    
                                                        

                                                        - 13 -

                                                         

                                                        

                                                    

                                                     

                                                    
                                                        	
                                                                     

                                                                	
                                                                    6.7

                                                                	
                                                                    Business Sales. In the event that the Corporation disposes of all or substantially all of its ownership interest in an Affiliate or the Corporation or an Affiliate disposes of all or substantially all of the assets of a business unit of the Corporation or the Affiliate, as
                                                                    applicable, and, in connection with any such disposition, an Eligible Employee who has received a Grant ceases to be Employed prior to the end of the Vesting Period relating to such Grant (other than in circumstances in which Section 6.3 applies), the number of PSUs determined by the formula A x B/C (the “Pro Rated PSUs”), where

                                                                

                                                    

                                                    
                                                        	
                                                                     

                                                                	
                                                                    A

                                                                	
                                                                    equals the total number of PSUs that comprise the Eligible Employee’s Minimum Award as recorded in his or her PSU Account as at the date on which he or she receives notice of termination of employment,

                                                                

                                                    

                                                    
                                                        	
                                                                     

                                                                	
                                                                    B

                                                                	
                                                                    equals the total number of days between the Grant Date for such Grant and the date on which the Eligible Employee ceases to be Employed (rounded up to the nearest whole number of days), and

                                                                

                                                    

                                                    
                                                        	
                                                                     

                                                                	
                                                                    C

                                                                	
                                                                    equals total number of days (rounded up to the nearest whole number of days) between the Grant Date for such Grant and the end of the Vesting Period relating to such Grant,

                                                                

                                                    

                                                    shall, subject to any adjustment pursuant to Section 6.9, become Vested PSUs on the earlier of January 31, 2010 and the effective date of a Change in Control. For greater certainty, unless otherwise determined by the Committee in its sole discretion, no PSUs that are not Pro Rated PSUs and, in particular, no PSUs that are subject to
                                                    Performance Conditions, may vest with respect to an Eligible Employee after such Eligible Employee has ceased to be Employed in connection with a transaction described above in this Section 6.7.

                                                    
                                                        	
                                                                     

                                                                	
                                                                    6.8

                                                                	
                                                                    Change in Control. In the event of a Change in Control prior to the end of the Vesting Period for a Grant to an Eligible Employee (including an Eligible Employee who has retired or died prior to the date of the Change in Control), the number of PSUs determined by the formula
                                                                    A x B/C (the “Pro Rated PSUs”), where

                                                                

                                                    

                                                     

                                                    
                                                        

                                                         

                                                         

                                                         

                                                        
                                                            

                                                        

                                                        
                                                            

                                                            - 14 -

                                                             

                                                            

                                                        

                                                         

                                                        
                                                            	
                                                                         

                                                                    	
                                                                        A

                                                                    	
                                                                        equals the total number of PSUs that comprise the Eligible Employee’s Minimum Award as recorded in his or her PSU Account as at the effective date of the Change in Control,

                                                                    

                                                        

                                                        
                                                            	
                                                                         

                                                                    	
                                                                        B

                                                                    	
                                                                        equals the total number of days between the Grant Date for such Grant and the effective date of the Change in Control (rounded up to the nearest whole number of days), and

                                                                    

                                                        

                                                        
                                                            	
                                                                         

                                                                    	
                                                                        C

                                                                    	
                                                                        equals total number of days (rounded up to the nearest whole number of days) between the Grant Date for such Grant and the end of the Vesting Period relating to such Grant,

                                                                    

                                                        

                                                        shall, subject to any adjustment pursuant to Section 6.9, become Vested PSUs on the effective date of the Change in Control. Pro Rated PSUs which vest pursuant to this Section 6.8 shall be settled as soon as practicable after the effective date of the Change in Control. For greater certainty, unless otherwise determined by the Committee in
                                                        its sole discretion, no PSUs that are not Pro Rated PSUs and, in particular, no PSUs that are subject to Performance Conditions, may vest with respect to an Eligible Employee in connection with a Change of Control.

                                                        
                                                            	
                                                                         

                                                                    	
                                                                        6.9

                                                                    	
                                                                        Adjustments to PSUs in respect of Hours Worked.

                                                                    

                                                        

                                                        In the event an Eligible Employee’s regular hours of work with the Corporation or an Affiliate increase or decrease during the Vesting Period applicable to the PSUs granted to the Eligible Employee hereunder, subject to Applicable Law and the terms of Eligible Employee’s Grant Agreement, the PSUs or Pro Rated PSUs, as
                                                        applicable, of the Eligible Employee that will be eligible on the earlier of January 31, 2010 and the effective date of a Change in Control (in this Section 6.9, the “Relevant Date”) to become Vested PSUs pursuant to any of Sections 6.2, 6.4, 6.5, 6.6, 6.7 or 6.8 shall be the number of PSUs determined by the formula A x B/C, where

                                                        
                                                            	
                                                                         

                                                                    	
                                                                        A

                                                                    	
                                                                        equals the number of PSUs recorded in the Eligible Employee’s PSU Account as at the Relevant Date prior to any adjustment under this Section 6.9,

                                                                    

                                                        

                                                        
                                                            	
                                                                         

                                                                    	
                                                                        B

                                                                    	
                                                                        equals the total number of regularly scheduled hours of work of the Eligible Employee with the Corporation or an Affiliate during the Vesting Period, and

                                                                    

                                                        

                                                        
                                                            	
                                                                         

                                                                    	
                                                                        C

                                                                    	
                                                                        equals the total number of hours that would have been the Eligible Employee’s regularly scheduled hours of work with the Corporation or an Affiliate during the Vesting Period (excluding hours in respect of any period during that Vesting Period when the Eligible Employee was on an approved leave of
                                                                        absence, maternity or parental leave or on leave due to Disability) had the Eligible Employee’s regularly scheduled hours of work for the payroll period that includes the Grant Date of the Eligible Employee’s PSUs remained constant throughout the Vesting Period.

                                                                    

                                                        

                                                        

                                                        

                                                        

                                                        

                                                        
                                                             

                                                            
                                                                

                                                            

                                                            
                                                                

                                                                - 15 -

                                                                 

                                                                

                                                            

                                                             

                                                            
                                                                	
                                                                            7.

                                                                        	
                                                                            PURCHASE OF SHARES AND SETTLEMENT OF VESTED PSUs

                                                                        

                                                            

                                                            
                                                                	
                                                                             

                                                                        	
                                                                            7.1

                                                                        	
                                                                            Establishment of Share Purchase Trusts. The Corporation or, on the direction of the Committee, an Affiliate, shall establish and maintain, in accordance with Applicable Law, one or more Share Purchase Trusts, on such terms and conditions as the Committee shall
                                                                            determine, and shall contribute cash for the purchase of Shares thereto, in such amounts as the Committee shall determine, on behalf of the Corporation and/or on behalf of such other Affiliate(s) as the Committee may direct.

                                                                        

                                                            

                                                            
                                                                	
                                                                             

                                                                        	
                                                                            7.2

                                                                        	
                                                                            Purchase of Shares by Trustee. Shares delivered to Eligible Employees who are beneficiaries of a Share Purchase Trust in connection with the settlement of Vested PSUs shall be purchased on the open market by the Trustee acting through a broker designated by the
                                                                            Trustee who is independent of the Corporation in accordance with Stock Exchange Rules and who is a member of the Stock Exchange. Subject to the foregoing part of this Section 7.2, any such designation of a broker may be changed from time to time.

                                                                        

                                                            

                                                            
                                                                	
                                                                             

                                                                        	
                                                                            7.3

                                                                        	
                                                                            Distribution of Shares from Share Purchase Trust. Subject to Section 7.4, Section 7.5 and Section 10.4, as soon as practicable after the earlier of the date of a Change in Control resulting in the vesting of PSUs pursuant to Section 6.8 and January 31, 2010 (and in
                                                                            any event no later than December 31, 2010), the Eligible Employee, or following the death of the Eligible Employee his Beneficiary, shall receive from a Share Purchase Trust one Share in respect of each Vested PSU in the Eligible Employee’s PSU Account.

                                                                        

                                                            

                                                            
                                                                	
                                                                             

                                                                        	
                                                                            7.4

                                                                        	
                                                                            Purchase of Shares by Agent. The Corporation, or an Affiliate may enter into an arrangement with a financial institution or broker who is independent of the Corporation (the “Agent”) pursuant to which the Agent will purchase Shares on the open market on
                                                                            behalf of and for the account of Eligible Employees whose Grant Agreements provide that they will not be beneficiaries of a Share Purchase Trust. Pursuant to such arrangement, the Corporation or the Affiliate shall notify the Agent as to the number of Common Shares to be purchased by the Agent on behalf of the Eligible Employee using the Settlement Value of the Eligible Employee’s Vested PSUs after deduction of
                                                                            applicable taxes and other source deductions in accordance with Section 10.4. As soon as practicable thereafter, the Agent shall purchase on the open market the number of Shares specified in the notice from the Corporation or Affiliate and shall advise the Eligible Employee, or the Eligible Employee’s Beneficiary, as applicable, and the Corporation or the Affiliate, as applicable of: (i) the aggregate purchase
                                                                            price of the Shares; (ii) the purchase price per share or, if the Shares were purchased at different prices, the average purchase price (computed on a weighted average basis) per share); (iii) the amount of any related brokerage commission; and (iv) the settlement date for the purchase of the Shares. On the settlement date in respect of the Shares purchased hereunder, upon payment of the aggregate purchase price and
                                                                            related brokerage commission by the Corporation or the Affiliate on behalf of the Eligible Employee or the Eligible Employee’s Beneficiary, as applicable, the Agent shall, in accordance with the instructions of the Eligible Employee or the

                                                                        

                                                            

                                                            

                                                            

                                                            

                                                            

                                                            
                                                                 

                                                                
                                                                    

                                                                

                                                                
                                                                    

                                                                    - 16 -

                                                                     

                                                                    

                                                                

                                                                 

                                                                Eligible Employee’s Beneficiary, as applicable, deliver to the Eligible Employee or to his Beneficiary, as applicable, or to his or her representative, a certificate representing such Shares, or credit such Shares to an account with the Agent in the name of the Eligible Employee or the Eligible Employee’s Beneficiary, as
                                                                applicable.

                                                                
                                                                    	
                                                                                 

                                                                            	
                                                                                7.5

                                                                            	
                                                                                Settlement in Cash. Subject to Section 10.4, in the event that at the time contemplated for the purchase of Shares under Section 7.4 there is no public market for the Shares, or at the time contemplated for the delivery of Shares under either Section 7.3 or
                                                                                Section 7.4, the Committee determines, in its sole discretion, that having regard to Applicable Law, it would be impractical or result in a breach of such Applicable Law to provide Shares to an Eligible Employee or a group of Eligible Employees pursuant to Section 7.3 or Section 7.4, as applicable, the the obligations of the Corporation or any Affiliate with respect to such Eligible Employee(s)’ Vested PSUs
                                                                                shall be met by a payment in cash in such amount as is reasonably determined by the Committee to be equitable in the circumstances based on the value of the Shares at the time of payment, such determination to be final and binding for all purposes.

                                                                            

                                                                

                                                                
                                                                    	
                                                                                8.

                                                                            	
                                                                                CURRENCY

                                                                            

                                                                

                                                                
                                                                    	
                                                                                 

                                                                            	
                                                                                8.1

                                                                            	
                                                                                Currency. Except where expressly provided otherwise, all references in the Plan to currency refer to lawful Canadian currency.

                                                                            

                                                                

                                                                
                                                                    	
                                                                                9.

                                                                            	
                                                                                SHAREHOLDER RIGHTS

                                                                            

                                                                

                                                                
                                                                    	
                                                                                 

                                                                            	
                                                                                9.1

                                                                            	
                                                                                No Rights to Shares. PSUs are not Shares and the grant of PSUs will not entitle an Eligible Employee to any shareholder rights, including, without limitation, voting rights, dividend entitlement or rights on liquidation.

                                                                            

                                                                

                                                                
                                                                    	
                                                                                10.

                                                                            	
                                                                                ADMINISTRATION

                                                                            

                                                                

                                                                
                                                                    	
                                                                                 

                                                                            	
                                                                                10.1

                                                                            	
                                                                                Committee. Unless otherwise determined by the Board or as specified herein, the Plan shall be administered by the Committee in its sole discretion.

                                                                            

                                                                

                                                                
                                                                    	
                                                                                 

                                                                            	
                                                                                10.2

                                                                            	
                                                                                Compliance with Laws and Policies. The Corporation’s issuance of any PSUs and its obligation to deliver (or cause the delivery of) any Shares make any payments is subject to compliance with Applicable Law. Each Eligible Employee
                                                                                shall acknowledge and agree (and shall be conclusively deemed to have so acknowledged and agreed by participating in the Plan) that the Eligible Employee will, at all times, act in strict compliance with Applicable Law and all other laws and any policies of the Corporation applicable to the Eligible Employee in connection with the Plan including, without limitation, furnishing to the Corporation all information and
                                                                                undertakings as may be required to permit compliance with Applicable Law. The Shares have not been registered under the United States Securities Act of 1933, as amended, and may not be offered or sold in the United States unless registered or an exemption from registration is available. The Corporation intends to file a registration statement with respect to shares offered or sold in the United States.

                                                                            

                                                                

                                                                

                                                                

                                                                

                                                                

                                                                
                                                                     

                                                                    
                                                                        

                                                                    

                                                                    
                                                                        

                                                                        - 17 -

                                                                         

                                                                        

                                                                    

                                                                     

                                                                    
                                                                        	
                                                                                     

                                                                                	
                                                                                    10.3

                                                                                	
                                                                                    Delegation. The Committee may also delegate to any officer or employee of the Corporation such duties and powers relating to the Plan as it may see fit.

                                                                                

                                                                    

                                                                    
                                                                        	
                                                                                     

                                                                                	
                                                                                    10.4

                                                                                	
                                                                                    Withholdings. So as to ensure that the Corporation, an Affiliate or the Trustee, as applicable, will be able to comply with the applicable provisions of any federal, provincial, state or local law relating to the withholding of tax
                                                                                    or other required deductions, including on the amount, if any, includable in the income of an Eligible Employee, the Corporation, an Affiliate or the Trustee, as applicable, may withhold or cause to be withheld from any amount payable to an Eligible Employee, either under this Plan, or otherwise, such amount as may be necessary to permit the Corporation, the Affiliate or the Trustee, as applicable, to so comply.
                                                                                    The Corporation, an Affiliate and the Trustee shall also have the right in its discretion to satisfy any such liability for withholding or other required deduction amounts by selling or requiring an Eligible Employee to sell Shares which would otherwise be delivered or provided to the Eligible Employee hereunder. The Committee may require an Eligible Employee, as a condition to the settlement of a PSU, to pay or
                                                                                    reimburse the Corporation, an Affiliate or the Trustee for any such withholding or other required deduction of amounts related to the settlement of such PSU.

                                                                                

                                                                    

                                                                    
                                                                        	
                                                                                     

                                                                                	
                                                                                    10.5

                                                                                	
                                                                                    No Additional Rights. Neither the designation of an employee as an Eligible Employee nor the grant of any PSUs to any Eligible Employee entitles any person to the grant, or any additional grant, as the case may be, of any PSUs under
                                                                                    the Plan.

                                                                                

                                                                    

                                                                    
                                                                        	
                                                                                     

                                                                                	
                                                                                    10.6

                                                                                	
                                                                                    Amendment, Termination. The Plan may be amended or terminated at any time by the Board in whole or in part. No amendment of the Plan shall, without the consent of the Eligible Employees affected by the amendment, or unless required
                                                                                    by Applicable Law, adversely affect the rights accrued to such Eligible Employees with respect to PSUs granted prior to the date of the amendment. Upon termination of the Plan, all unvested PSUs shall continue to vest and be settled in accordance with the terms of the Plan and the applicable Grant Agreement.

                                                                                

                                                                    

                                                                    
                                                                        	
                                                                                     

                                                                                	
                                                                                    10.7

                                                                                	
                                                                                    Administration Costs. The Corporation will be responsible for all costs relating to the administration of the Plan.

                                                                                

                                                                    

                                                                    
                                                                        	
                                                                                     

                                                                                	
                                                                                    10.8

                                                                                	
                                                                                    Unfunded Obligation. The obligation to make payments that may be required to be made under the Plan will be an unfunded and unsecured obligation of the Corporation or an Affiliate, as applicable. The Plan, or any provision thereunder,
                                                                                    shall not create (or be construed to create) any trust or other obligation to fund or secure amounts payable under the Plan in whole or in part.

                                                                                

                                                                    

                                                                    
                                                                        	
                                                                                    11.

                                                                                	
                                                                                    ASSIGNMENT

                                                                                

                                                                    

                                                                    
                                                                        	
                                                                                     

                                                                                	
                                                                                    11.1

                                                                                	
                                                                                    Assignment. The assignment or transfer of the PSUs, or any other benefits under this Plan, shall not be permitted other than by operation of law.

                                                                                

                                                                    

                                                                     

                                                                    
                                                                        

                                                                    

                                                                     

                                                                     

                                                                     

                                                                    CORPORATE STRATEGY IMPLEMENTATION RECOGNITION PROGRAM

                                                                     

                                                                     

                                                                    Adopted with effect from August 1, 2008

                                                                     

                                                                    

                                                                    

                                                                    

                                                                    

                                                                     

                                                                     

                                                                

                                                            

                                                        

                                                    

                                                

                                            

                                        

                                    

                                

                            

                        

                    

                

            

        

        

        
            

        

        Fortuna Energy Inc.

        Corporate Strategy Implementation Recognition Program

        Grant Agreement for U.S. Citizens and U.S. Residents

         

        Pursuant to Talisman Energy Inc.’s (“Talisman”) Corporate Strategy Implementation Recognition Program (the “Plan”) dated August 1, 2008 you have been granted performance share units in such number and as at such Grant Date1 as is set out in the letter you received, dated September 8, 2008 notifying you of your Grant of PSUs (the
        “Notice”).

         

        
            	
                        1.

                    	
                        Grant of PSUs

                    

        

        
            	
                        1.1

                    	
                        Pursuant to the Plan and in respect of services to be provided to Fortuna Energy Inc. (“FEI”), Talisman or an Affiliate by you, you have been granted the performance share units set out in the Notice (the “PSUs”) to you.

                    

        

        
            	
                        1.2

                    	
                        The granting and vesting of the PSUs (as defined in Section 2.1 of this Grant Agreement) are subject to the terms and conditions of this Grant Agreement including, without limitation, the Notice, any schedule to this Grant Agreement, and the terms and conditions of the Plan, all of which are incorporated into and form an
                        integral part of this Grant Agreement. In the event of a conflict between the terms and conditions of the Plan and this Grant Agreement, the terms of this Grant Agreement will prevail.

                    

        

        
            	
                        1.3

                    	
                        The granting of PSUs does not entitle you to any benefits until the PSUs become Vested PSUs.

                    

        

        
            	
                        2.

                    	
                        Vesting of PSUs  

                    

        

        
            	
                        2.1

                    	
                        Subject to the provisions of the Plan and the provisions of Section 4 of this Grant Agreement, provided you remain Employed throughout the Vesting Period, the PSUs, other than those PSUs comprising the Minimum Award, will become Vested PSUs on January 31, 2010 in such proportion as may be specified in this Grant
                        Agreement and in Schedule A attached hereto and subject to satisfaction of the conditions set out in Schedule A (the “Performance Conditions”) as provided therein. Subject to the provisions of the Plan and the provisions of Section 4 of this Grant Agreement, provided you remain Employed throughout the Vesting Period, the PSUs comprising the Minimum Award shall become Vested PSUs on January 31, 2010.

                    

        

        
            	
                        3.

                    	
                        Settlement of Awards

                    

        

        
            	
                        3.1

                    	
                        Vested PSUs shall be settled as follows. FEI or Talisman may enter into an arrangement with a financial institution or broker who is independent of FEI and Talisman (the “Agent”) pursuant to which the Agent will purchase Shares on the open market on your behalf. FEI or Talisman will notify the Agent as to the
                        number of Shares to be purchased by the Agent on your behalf using the Settlement Value of your Vested PSUs after deduction of applicable taxes and other source deductions in accordance with Section 10.4 of the Plan. As soon as practicable thereafter, the Agent shall purchase on the open market the number of Shares specified in the notice from FEI or Talisman and shall advise you, or your Beneficiary, as applicable, and FEI or Talisman of:

                    

        

        (i) the aggregate purchase price of the Shares;

        (ii) the purchase price per share or, if the Shares were purchased at different prices, the average purchase price (computed on a weighted average basis) per share);

        _________________________

        1  Capitalized terms not defined herein shall have the meanings given to those terms in the Plan.

         

         

        
            

             

            
                	
                             

                        	
                            1 of 5

                        

            

             

            

        

         

        
            

        

        (iii) the amount of any related brokerage commission; and

        (iv) the settlement date for the purchase of the Shares.

        On the settlement date in respect of the Shares purchased, the Agent will, pursuant to instructions from you or your Beneficiary, as applicable, deliver to you or your Beneficiary or to your representative, a certificate representing such Shares, or credit such Shares to an account with the Agent in your name or the name of your Beneficiary, as
        applicable. For greater clarity, and not withstanding Section 4.3 of the Plan, in no event will you be a beneficiary of, nor will your right to payment with respect to your PSUs be funded out of, any Share Purchase Trust as contemplated by Section 7.1 of the Plan unless such trust is a U.S. situs trust meeting the requirements of a “rabbi trust” (as generally understood under U.S. federal income tax principles).

        
            	
                        3.2

                    	
                        Awards will be settled pursuant to Section 3.1 hereof and 7.4 of the Plan as soon as reasonably practicable following the last day of the Vesting Period, being January 31, 2010, and in any event no later than December 31, 2010, provided that with respect to any PSUs that become payable upon a “change in
                        control” as defined in Section 3.3 below, such awards will be settled within ninety (90) days of the effective date of such change in control.

                    

        

        
            	
                        3.3

                    	
                        For purposes of this grant of PSUs, and not withstanding anything to the contrary in the Plan (including but not limited to Sections 1.3.6 and 6.8 of the Plan), a “change in control” is an event that meets the definition of Change in Control under Section 1.3.6 of the Plan, and also qualifies as a
                        “change in the ownership,” a “change in effective control,” and/or a “change in the ownership of a substantial portion of the assets” as defined under U.S. Treasury Regulation § 1.409A-3(i)(5).

                    

        

        
            	
                        3.4

                    	
                        Payments with respect to vested PSUs are subject to payment or other satisfaction of all related withholding obligations in accordance with Section 5.1 of this Grant Agreement.

                    

        

        
            	
                        3.5

                    	
                        The obligation of FEI or Talisman to make payments under the Plan pursuant to this grant of PSUs constitutes only the unsecured (but legally enforceable) promise of FEI or Talisman to make such payments.

                    

        

        
            	
                        3.6

                    	
                        For greater certainty, PSUs which do not become Vested PSUs shall be forfeited by you, you will have no further right, title or interest in such PSUs and neither you nor your Beneficiary shall have any right to receive any Shares or payment, and no payment shall be made as compensation, damages, or otherwise, with
                        respect to any PSUs that are forfeited or otherwise do not become Vested PSUs in accordance with the Plan and this Grant Agreement.

                    

        

        
            	
                        4.

                    	
                        Adjustment  

                    

        

        
            	
                        4.1

                    	
                        In the event your regular hours of work with FEI, Talisman or an Affiliate increase or decrease during the Vesting Period, your PSUs or Pro Rated PSUs, as applicable, that will be eligible on the earlier of January 31, 2010 and the effective date of a Change in Control (in this Section 4.1, the “Relevant
                        Date”) to become Vested PSUs shall be the number of PSUs determined by the formula A x B/C, where

                    

        

        
            	
                         

                    	
                        A

                    	
                        equals the number of PSUs recorded in your PSU Account on the Relevant Date prior to any adjustment under this Section 4.1,

                    

        

        
            	
                         

                    	
                        B

                    	
                        equals your total number of regularly scheduled hours of work with FEI, Talisman or an Affiliate during the Vesting Period, and

                    

        

        
            	
                         

                    	
                        C

                    	
                        equals the total number of hours that would have been your regularly scheduled hours of work with FEI, Talisman or an Affiliate during the Vesting Period (excluding hours in respect of any period during that Vesting Period when you were on an approved leave of absence, maternity or parental leave or on leave due to
                        Disability) had your regularly scheduled hours of work for the payroll period that includes the Grant Date remained constant throughout the Vesting Period.

                    

        

         

        
            

             

            
                	
                             

                        	
                            2 of 5

                        

            

             

            

        

         

        
            

        

        
            	
                        5.

                    	
                        Termination of Employment or Change in Control

                    

        

        
            	
                        5.1

                    	
                        Unless otherwise determined by the FEI or Talisman:

                    

        

        
            	
                        5.1.1

                    	
                        In the event your employment is terminated for Cause by FEI, Talisman or an Affiliate, as applicable, or you resign from your employment with FEI, Talisman or an Affiliate, as applicable, prior to the end of the Vesting Period, none of the PSUs set out above, nor any Dividend Equivalent PSUs in respect of such PSUs,
                        shall vest, and all such PSUs shall be forfeited in accordance with Section 3.2 of this Grant Agreement.

                    

        

        
            	
                        5.1.2

                    	
                        In the event your employment is terminated without Cause by FEI, Talisman or an Affiliate, as applicable, prior to the end of the Vesting Period, the number of PSUs determined by the formula A x B/C (the “Pro Rated PSUs”), where

                    

        

        
            	
                         

                    	
                        A

                    	
                        equals the total number of PSUs that comprise your Minimum Award as recorded in your PSU Account as at the date on which you receive notice of termination of employment,

                    

        

        
            	
                         

                    	
                        B

                    	
                        equals the total number of days between the Grant Date and the date on which you receive notice of termination of employment (rounded up to the nearest whole number of days), and

                    

        

        
            	
                         

                    	
                        C

                    	
                        equals total number of days (rounded up to the nearest whole number of days) between the Grant Date and the end of the Vesting Period,

                    

        

        shall, subject to any adjustment pursuant to Section 4.1 shall become Vested PSUs on the earlier of January 31, 2010 and the effective date of a Change in Control. For greater certainty, unless otherwise determined by the Committee in its sole discretion, no PSUs that are subject to Performance Conditions will vest after you have been given notice of
        termination of your employment.

        
            	
                        5.1.3

                    	
                        In the event you cease to be Employed by reason of death or Retirement prior to the end of the Vesting Period, the number of PSUs (including any applicable Dividend Equivalent PSUs) eligible to become Vested PSUs shall be the number of PSUs determined by the formula A x B/C (the “Pro Rated PSUs”),
                        where

                    

        

        
            	
                         

                    	
                        A

                    	
                        equals the total number of PSUs recorded in your PSU Account as at the date on which you cease to be Employed by reason of death or Retirement,

                    

        

        
            	
                         

                    	
                        B

                    	
                        equals the total number of days between the Grant Date and your date of death or Retirement, as applicable (rounded up to the nearest whole number of days), and

                    

        

        
            	
                         

                    	
                        C

                    	
                        equals total number of days between the Grant Date and the end of the Vesting Period (rounded up to the nearest whole number of days).

                    

        

        Subject to any adjustment pursuant to Section 4.1 or Section 5.1.6, Pro Rated PSUs under this Section 5.1.3 shall become Vested PSUs on the earlier of January 31, 2010 and the effective date of a Change in Control in such number as may be determined in accordance with this Grant Agreement and having regard to the extent to which applicable Performance
        Conditions have been satisfied.

        
             
        

        
            
                	
                             

                        	
                            3 of 5

                        

            

             

            

        

         

        
            

        

        
            	
                        5.1.4

                    	
                        In the event you cease to be actively at work at a workplace of FEI, Talisman or an Affiliate due to an approved leave of absence, maternity or parental leave or Disability prior to the end of the Vesting Period, the number of PSUs (including any applicable Dividend Equivalent PSUs) eligible to become Vested PSUs shall be the number of PSUs determined by the formula A x B/C (the “Pro
                        Rated PSUs”), where

                    

        

        

        
            

             

        

        
            	
                         

                    	
                        A

                    	
                        equals the total number of PSUs recorded in your PSU Account as at the date on which you cease to be actively at work as contemplated above in this Section 5.1.4,

                    

        

        
            	
                         

                    	
                        B

                    	
                        equals the total number of days between the Grant Date and your date of cessation of active employment, and

                    

        

        
            	
                         

                    	
                        C

                    	
                        equals total number of days between the Grant Date and the end of the Vesting Period.

                    

        

        Subject to any adjustment pursuant to Section 4.1, Section 5.1.2, Section 5.1.3, Section 5.1.5 or Section 5.1.6, and subject to Section 5.1.1, Pro Rated PSUs under this Section 5.1.4 shall become Vested PSUs on the earlier of January 31, 2010 and the effective date of a Change in Control in such number as may be determined in accordance with this
        Grant Agreement and having regard to the extent to which applicable Performance Conditions have been satisfied provided you remain Employed throughout the Vesting Period.

        
            	
                        5.1.5

                    	
                        In the event that Talisman disposes of all or substantially all of its ownership interest in an FEI or an Affiliate or Talisman, FEI or an Affiliate disposes of all or substantially all of the assets of a business unit of Talisman, FEI or the Affiliate, as applicable, and, in connection with any such disposition, you
                        cease to be Employed prior to the end of the Vesting Period relating to such Grant (other than in circumstances in which Section 5.1.1 applies), the number of PSUs determined by the formula A x B/C (the “Pro Rated PSUs”), where

                    

        

        
            	
                         

                    	
                        A

                    	
                        equals the total number of PSUs that comprise your Minimum Award as recorded in your PSU Account at the date on which you receive notice of termination of employment,

                    

        

        
            	
                         

                    	
                        B

                    	
                        equals the total number of days between the Grant Date for such Grant and the date on which you cease to be Employed (rounded up to the nearest whole number of days), and

                    

        

        
            	
                         

                    	
                        C

                    	
                        equals total number of days (rounded up to the nearest whole number of days) between the Grant Date for such Grant and the end of the Vesting Period relating to such Grant,

                    

        

        shall, subject to any adjustment pursuant to Section 4.1, become Vested PSUs on the earlier of January 31, 2010 and the effective date of a Change in Control. For greater certainty, unless otherwise determined by the Committee in its sole discretion, no PSUs that are subject to Performance Conditions may vest after you have ceased to be Employed in
        connection with a transaction described above in this Section 5.1.5.

        
             
        

        
            
                	
                             

                        	
                            4 of 5

                        

            

             

            

        

         

        
            

        

        
            	
                        5.1.6

                    	
                        In the event of a Change in Controlprior to the end of the Vesting Period, the number of PSUs determined by the formula A x B/C (the “Pro Rated PSUs”), where

                    

        

        
            	
                         

                    	
                        A

                    	
                        equals the total number of PSUs that comprise your Minimum Award as recorded in your PSU Account as at the effective date of the Change in Control,

                    

        

        
            	
                         

                    	
                        B

                    	
                        equals the total number of days between the Grant Date and the effective date of the Change in Control (rounded up to the nearest whole number of days), and

                    

        

        
            	
                         

                    	
                        C

                    	
                        equals total number of days (rounded up to the nearest whole number of days) between the Grant Date and the end of the Vesting Period,

                    

        

        shall, subject to any adjustment pursuant to Section 4.1, become Vested PSUs on the effective date of the Change in Control. For greater certainty, unless otherwise determined by the Committee in its sole discretion, none of your PSUs that are subject to Performance Conditions may vest in connection with a Change of Control.

         

        
            	
                        6.

                    	
                        Tax

                    

        

        
            	
                        6.1

                    	
                        FEI, Talisman, an Affiliate or the administrator of the Plan may withhold from any amount payable to you, either under this Grant Agreement or otherwise, such amount as may be necessary so as to ensure that FEI, Talisman, and Affiliate or the administrator of the Plan, as the case may be, will be able to comply with the
                        applicable provisions of Applicable Law relating to the withholding of tax or that any other required deductions are paid or otherwise satisfied, including withholding of the amount, if any, includable in your income. The Committee may require you, as a condition to the settlement of any Vested PSUs, to pay or reimburse, or to indemnify, FEI, Talisman or an Affiliate for any such withholding or other required deduction of amounts related to the settlement of your Vested
                        PSUs.

                    

        

         

        
            

             

            
                	
                             

                        	
                            5 of 5exhibit4a.htm

    
      Exhibit
4(a)

       

      

       

      

       

      

       

      

       

      POLLUTION
CONTROL FACILITIES LOAN AGREEMENT

       

      

       

      Between

       

      

       

      PENNSYLVANIA
ECONOMIC DEVELOPMENT FINANCING AUTHORITY

       

      and

       

      

       

      PPL
ELECTRIC UTILITIES CORPORATION

       

      

       

      Dated as
of October 1, 2008

      
        
          
          

        

        
          
          

          
            

          

        

      

      Table of Contents

      Page

       

      
        
          	
                  I.

                	
                  Background,
      Definitions, Representations and Findings.

                	
                  1

                
	 
      	
                  Section
      1.1

                	
                  Background

                	
                  1

                
	 
      	
                  Section
      1.2

                	
                  Definitions

                	
                  2

                
	 
      	
                  Section
      1.3

                	
                  Company
      Representations

                	
                  3

                
	 
      	
                  Section
      1.4

                	
                  Authority
      Findings and Representations

                	
                  6

                
	
                  II.

                	
                  Refunding
      the Prior Bonds.

                	
                  6

                
	 
      	
                  Section
      2.1

                	
                  Issuance
      of Bonds; Application of Proceeds

                	
                  6

                
	 
      	
                  Section
      2.2

                	
                  Investment
      and Use of Fund Moneys

                	
                  7

                
	 
      	
                  Section
      2.3

                	
                  Rebate
      Fund

                	
                  7

                
	
                  III.

                	
                  Loan
      By Authority; Loan Payments; Other Payments

                	
                  8

                
	 
      	
                  Section
      3.1

                	
                  Loan
      by Authority

                	
                  8

                
	 
      	
                  Section
      3.2

                	
                  Loan
      Payments

                	
                  8

                
	 
      	
                  Section
      3.3

                	
                  Purchase
      Payments

                	
                  9

                
	 
      	
                  Section
      3.4

                	
                  Additional
      Payments

                	
                  9

                
	 
      	
                  Section
      3.5

                	
                  Obligations
      Unconditional

                	
                  10

                
	 
      	
                  Section
      3.6

                	
                  Assignment
      of Authority's Rights

                	
                  10

                
	
                  IV.

                	
                  Additional
      Covenants of Company

                	
                  11

                
	 
      	
                  Section
      4.1

                	
                  Corporate
      Existence

                	
                  11

                
	 
      	
                  Section
      4.2

                	
                  No
      Misuse of Bond Proceeds; No Assignment; Maintenance of
      Employment

                	
                  11

                
	 
      	
                  Section
      4.3

                	
                  Reserved

                	
                  11

                
	 
      	
                  Section
      4.4

                	
                  Reserved

                	
                  11

                
	 
      	
                  Section
      4.5

                	
                  Financial
      Statements; Books and Records

                	
                  11

                
	 
      	
                  Section
      4.6

                	
                  Taxes,
      Other Governmental Charges and Utility Charges

                	
                  12

                
	 
      	
                  Section
      4.7

                	
                  Reserved

                	 
      
	 
      	
                  Section
      4.8

                	
                  Reserved

                	
                  12

                
	 
      	
                  Section
      4.9

                	
                  Misuse
      of Bond Proceeds; Litigation Notice

                	
                  12

                
	 
      	
                  Section
      4.10

                	
                  Indemnification

                	
                  12

                
	 
      	
                  Section
      4.11

                	
                  Tax
      Covenants of Company and Authority

                	
                  14

                
	 
      	
                  Section
      4.12

                	
                  Action
      to Maintain Tax Exempt Status

                	
                  14

                
	 
      	
                  Section
      4.13

                	
                  Nondiscrimination/Sexual
      Harassment Clause

                	
                  14

                
	
                  V.

                	
                  Redemption
      of Bonds

                	
                  14

                
	 
      	
                  Section
      5.1

                	
                  Optional
      Redemption

                	
                  14

                
	 
      	
                  Section
      5.2

                	
                  Mandatory
      Redemption

                	
                  15

                
	 
      	
                  Section
      5.3

                	
                  Actions
      by Authority

                	
                  15

                
	
                  VI.

                	
                  Events
      Of Default And Remedies

                	
                  15

                
	 
      	
                  Section
      6.1

                	
                  Events
      of Default

                	
                  15

                
	 
      	
                  Section
      6.2

                	
                  Remedies
      on Default.

                	
                  16

                
	 
      	
                  Section
      6.3

                	
                  Remedies
      Not Exclusive

                	
                  18

                
	 
      	
                  Section
      6.4

                	
                  Payment
      of Legal Fees and Expenses

                	
                  18

                
	 
      	
                  Section
      6.5

                	
                  No
      Waiver

                	
                  18

                
	 
      	
                  Section
      6.6

                	
                  Notice
      of Default

                	
                  18

                
	
                  VII.

                	
                  Miscellaneous

                	 
      	
                  18

                
	 
      	
                  Section
      7.1

                	
                  Term
      of Agreement

                	
                  18

                
	 
      	
                  Section
      7.2

                	
                  Notices

                	
                  19

                
	 
      	
                  Section
      7.3

                	
                  Limitation
      of Liability; No Personal Liability

                	
                  19

                
	 
      	
                  Section
      7.4

                	
                  Binding
      Effect

                	
                  20

                
	 
      	
                  Section
      7.5

                	
                  Amendments

                	
                  20

                
	 
      	
                  Section
      7.6

                	
                  Counterparts

                	
                  20

                
	 
      	
                  Section
      7.7

                	
                  Severability

                	
                  20

                
	 
      	
                  Section
      7.8

                	
                  Governing
      Law

                	
                  21

                
	 
      	
                  Section
      7.9

                	
                  Assignment

                	
                  21

                
	 
      	
                  Section
      7.10

                	
                  Receipt
      of Indenture

                	
                      21

                
	 	 	 	 
	 EXHIBIT
      A – Description of
      Project Facilities 	A-1 
	 EXHIBIT
      B – Form of Exempt
      Facilities Note 	B-1 
	 EXHIBIT
      C – Nondiscrimination /Sexual Harassment Clause 	C-1 

        

        
          
            
            

          

          
            
              

            

          

          
            
            

          

        

      

      POLLUTION
CONTROL FACILITIES LOAN AGREEMENT dated as of October 1, 2008 (the “Agreement”)
between PENNSYLVANIA ECONOMIC DEVELOPMENT FINANCING AUTHORITY (the “Authority”)
and PPL ELECTRIC UTILITIES CORPORATION, a Pennsylvania corporation (together
with permitted successors and assigns, the “Company”).

       

       

      I.           Background,
Definitions, Representations and Findings.

       

      Section
1.1     Background.  Pursuant
to the Pennsylvania Economic Development Financing Law (Act No. 102, approved
August 23, 1967, P.L. 251, as amended) (the “Act”), the Montour County
Industrial Development Authority has authorized and approved the refunding of
bonds previously issued to provide financing for certain costs of Project
Facilities as described below through the issuance of the Issuer’s Pollution
Control Revenue Refunding Bonds, Series 2008 (PPL Electric Utilities Corporation
Project), in an aggregate principal amount of $90,000,000 (the
“Bonds”).  The proceeds of the Bonds will be applied to currently
refund a like principal amount of Pollution Control Revenue Refunding Bonds,
Series 2003 (PPL Electric Utilities Corporation Project) (the “Prior Bonds”),
issued by the Lehigh County Industrial Development Authority for the purpose of
refunding certain prior bonds issued to finance the cost of certain air or water
pollution control facilities or sewage or solid waste disposal facilities
(collectively, the “Project Facilities”), as more particularly described on
Exhibit A attached to this Agreement (defined below), on behalf of the Company,
which was formerly known as Pennsylvania Power & Light Company.

       

      In order to pay a portion of the costs
of refunding the Prior Bonds, the Authority has agreed to issue $90,000,000
aggregate principal amount of Pennsylvania Economic Development Financing
Authority Pollution Control Revenue Refunding Bonds, Series 2008 (PPL Electric
Utilities Corporation Project) (the “Bonds”) on the terms and conditions set
forth in the Trust Indenture (the “Indenture”) dated as of the date hereof made
between the Authority and The Bank of New York Mellon Trust Company, N.A., as
trustee (the “Trustee”), as amended or supplemented from time to
time.  The Company and the Authority are entering into this Agreement
in order to provide for the issuance of the Bonds and the loan of the proceeds
of the Bonds to the Company.

       

      The
obligation of the Company to repay the loan of the proceeds of the Bonds made
pursuant hereto will be evidenced by the Company’s Pollution Control Facilities
Note (Pennsylvania Economic Development Financing Authority) Series 2008 in the
principal amount of $90,000,000 (the “Note”) issued to the Trustee as the
assignee of the Authority under the Indenture.

       

      The
proceeds of the Prior Bonds were loaned to the Company pursuant to the terms of
a Pollution Control Facilities Loan Agreement dated as of February 1, 2003 (the
“Existing Agreement”) between the Lehigh County Industrial Development Authority
and the Company.

       

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

       

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

       

      “Additional
Payments” means the amounts required to be paid by the Company pursuant to
Section 3.4.

       

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

       

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

       

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

       

      “Company’s
Tax Certificate” means the Certificate Regarding Federal Tax Matters of the
Company executed on the Issue date with respect to matters necessary to
establish and maintain the exclusion from gross income for Federal income tax
purposes of the interest on the Bonds.

       

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

       

      “Issue
Date” means October 28, 2008.

       

      “Loan”
means the loan by the Authority to the Company of the proceeds of the Bonds
pursuant to Section 3.1 in the original principal amount of
$90,000,000.

       

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

       

      “Local
Entity” means the Montour County Industrial Development Authority.

       

      “Misuse
of Bond Proceeds” means the use of the proceeds of the Bonds for any purpose
materially different from the purpose described to and approved by the Authority
and to not be a “project” as defined in the Act.

       

      “Project
Approval” means the initial official action of the Local Entity declaring its
intent with respect to the financing of the Project Facilities.  The
date of the Project Approval is September 5, 2008.

       

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

       

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

       

      “Remarketing
Agreement” means the Remarketing Agreement between the Company and the
Remarketing Agent relating to the Bonds, as the same may be amended,
supplemented or replaced from time to time.

       

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

       

      “Unassigned
Authority’s Rights” means all of the rights of the Authority to receive
Additional Payments under Section 3.4, to be held harmless and indemnified under
Section 4.10, to be reimbursed for attorney’s fees and expenses under Section
6.4, to exercise remedies under Section 6.2 and to give or withhold consent to
or approval of amendments, modifications, termination or assignment of this
Agreement, or sale, transfer, assignment, lease (or assignment of lease) or
other disposal of the Project Facilities, or other matters requiring consent or
approval under Sections 4.1, 4.2, 4.4, 7.5 and 7.9.

       

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

       

      (a) It is a
corporation duly organized and existing under the laws of the Commonwealth of
Pennsylvania, with full power and legal right to enter into this Agreement and
the Note and the Senior Secured Bonds (as defined below) and perform its
obligations hereunder and thereunder.  The making and performance of
this Agreement, the Note and the Senior Secured Bonds on the part of the Company
have been duly authorized by all necessary action.

       

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

       

      (c) Neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will conflict in any material respect with or
constitute a material violation or breach of, or a material default under, the
Company’s articles of incorporation or by-laws, or any indenture or other
material agreement or instrument to which the Company is a party or by which it
or any of its property is bound.

       

      (d) This
Agreement, the Note and the Senior Secured Bonds have been duly executed and
delivered by the Company and constitute the valid and binding obligations of the
Company enforceable in accordance with their terms, except as the enforcement
thereof may be limited by bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other similar laws relating to or affecting the
enforcement of creditors’ rights generally, to general equitable principles
(whether considered in a proceeding in equity or at law) and by an implied
covenant of good faith, fair dealing and reasonableness.

       

      (e) The
Company is not a Disqualified Contractor.

       

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

       

      (g) (i) All
of the proceeds of the Prior Bonds were used to refund $90,000,000 aggregate
principal amount of Pollution Control Revenue Refunding Bonds, 1992 Series A
(Pennsylvania Power & Light Company Project) (the “1992A Bonds”), the
proceeds of which were used to refund $20,000,000 aggregate principal amount of
Pollution Control Revenue Bonds, 1980 Series B (Pennsylvania Power & Light
Company Project) (the “1980B Bonds”) and $70,000,000 aggregate principal amount
of Pollution Control Revenue Refunding Bonds, 1982 Series A (Pennsylvania Power
& Light Company Project) (the “1982A Bonds”, and together with the 1980B
Bonds, the “Project Bonds”), and (ii) at least 90% of the proceeds of the Prior
Bonds (as allocated to original expenditures through the refunding of prior
bonds) were issued to provide “pollution control facilities” and “solid waste
disposal facilities” within the meaning of Sections 103(b)(4)(E) and (F) of the
Internal Revenue Code of 1954, as amended, and in effect prior to the passage of
the Tax Reform Act of 1986 (the “1954 Code”), and the applicable regulations
thereunder.

       

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

       

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

       

      (j) The
information furnished by the Company and used by the Issuer in preparing the
certification pursuant to Section 148 of the Code and in preparing the Form 8038
information statement pursuant to Section 149(e) of the Code will be accurate
and complete as of the Issue Date.

       

      (k) Neither
the Prior Bonds nor the Bonds are or will be “federally guaranteed,” as defined
in Section 149(b) of the Code; references to the Code and Sections of the Code
(or, as applicable, to the 1954 Code and Sections thereof) include Sections 1312
and 1313 of the Tax Reform Act of 1986, relevant applicable regulations and
proposed regulations thereunder and under the 1954 Code and any successor
provisions to those Sections, regulations or proposed regulations and, in
addition, all applicable official rulings and judicial determinations under the
foregoing applicable to the Prior Bonds or the Bonds, as
applicable.  No costs of the Project Facilities to be financed with
the proceeds of the Bonds, except for certain preliminary costs such as
architectural, engineering, surveying, soil testing and similar costs incurred
before the start of construction of the Project Facilities,  have been
paid by or on behalf of the Company, the Affiliates or any Related Person more
than 60 days prior to April 15, 2005.

       

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

       

      (m) The
proceeds derived from the sale of the Bonds (other than any accrued interest
thereon) will be used exclusively to refund the outstanding principal amount of
the Prior Bonds.  The principal amount of the Bonds does not exceed
the outstanding principal amount of the Prior Bonds.  None of the
proceeds (within the meaning of Section 147(g) of the Code) of the Bonds will be
used to pay for any costs of issuance of the Bonds.

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

      (d) Based on
representations and information furnished to the Authority by or on behalf of
the Company, the Authority has found that the Project Facilities (i) will
promote the public purposes of the Act, (ii) are located within the boundaries
of the Commonwealth of Pennsylvania, and (iii) will constitute a project within
the meaning of the Act.

       

      (e) The
refunding of the Prior Bonds has been approved (1) by the Local Entity, as
required by the Act, (2) by the Governor or Lieutenant Governor of the
Commonwealth of Pennsylvania as the “applicable elected representative”, as that
term is defined under the Code, after a public hearing held upon reasonable
notice, as required by the Code, and (3) by the Authority by adoption of the
Resolutions, as required by the Act.

       

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

       

       

      II.           Refunding
the Prior Bonds.

       

      Section
2.1     Issuance of Bonds;
Application of Proceeds.   To
provide funds to make the Loan for purposes of refunding the Prior Bonds, the
Authority will issue the Bonds in the aggregate principal amount of
$90,000,000.  The Bonds will be issued pursuant to the Indenture and
will bear interest, mature and be subject to redemption all as set forth
therein.  The Company hereby approves the terms and conditions of the
Indenture and the Bonds, and the terms and conditions under which the Bonds will
be issued, sold and delivered.

       

      The
proceeds from the sale of the Bonds (including any underwriting discount) shall
be loaned to the Company pursuant to Section 3.1, and such proceeds (net of any
underwriting discount) shall be paid over to the Trustee for the purpose of
refunding the Prior Bonds as provided in the Indenture.

       

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

       

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

       

      Section
2.3     Rebate
Fund.   The
Company agrees to make such payments to the Trustee as are required of the
Company under Section 6.04 of the Indenture.  The obligation of the
Company to make such payments shall remain in effect and be binding upon the
Company notwithstanding the release and discharge of the Indenture.

       

       

      III.           Loan
By Authority; Loan Payments; Other Payments

       

      Section
3.1     Loan by
Authority.   Upon
the terms and conditions of this Agreement, the Authority will make the Loan to
the Company on the Issue Date in a principal amount equal to the aggregate
principal amount of the Bonds.  The Loan shall be deemed fully
advanced upon disbursement of the Bond proceeds in accordance with Section 4.02
of the Indenture.

       

      Section
3.2     Loan
Payments.

       

      (a)           In
consideration of the issuance, sale and delivery of the Bonds by the Authority,
the Company hereby agrees to pay to the Trustee for the account of the Authority
Loan Payments in such amounts and manner so as to enable the Trustee to make
payment of the principal of, and premium, if any, and accrued interest on the
Bonds as the same shall become due and payable whether at stated maturity or by
acceleration, redemption or otherwise in accordance with the terms of the
Indenture; provided, however, that the obligation of the Company to make any
Loan Payment hereunder shall be reduced by the amount of any reduction under the
Indenture of the amount of the corresponding payment required to be made by the
Authority of the principal of or premium, if any, or interest on the
Bonds.  Pursuant to the Indenture, the Authority directs the Trustee
to apply such Loan Payments in the manner provided in the
Indenture.  Whenever payment or provision for payment has been made in
respect of the principal of, or premium, if any, and interest on all of the
Bonds, the Loan Payments shall be deemed paid in full.

       

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

       

      (c)           Notwithstanding
the foregoing, while any Credit Facility is in effect with respect to the Bonds,
the Company’s obligation to make Loan Payments hereunder in respect of the
principal of, and premium, if any, and accrued interest on the Bonds shall be
deemed to have been satisfied to the extent that moneys shall have been paid by
a Credit Facility Issuer to the Trustee for such payment in respect of the
Bonds, which amounts may be reimbursed by the Company directly to such Credit
Facility Issuer, and no Event of Default shall occur hereunder by reason of any
failure of the Company to make any such Loan Payment to the Trustee under
subsection (a) above unless the Trustee is notified by the Credit Facility
Issuer of the Company’s failure to have reimbursed the Credit Facility Issuer
(if any) in accordance with the terms of the Credit Facility.

       

      To secure
its obligations under the Note, concurrently with the issuance by the Issuer of
the Bonds, the Company will execute and deliver to the Trustee the Company’s
Senior Secured Bonds, Variable Rate Pollution Control Series 2008, which will
contain principal, interest and redemption provisions corresponding to the
principal, interest and redemption provisions of the Bonds (the “Senior Secured
Bonds”).  The Senior Secured Bonds will be issued pursuant to
Supplemental Indenture No. 9 dated as of October 1, 2008 which supplements the
Company’s Indenture dated as of August 1, 2001, as supplemented (as so
supplemented, the “Company Indenture”) to JPMorgan Chase Bank, as trustee (the
“Company Indenture Trustee”).  Anything herein to the contrary
notwithstanding, the obligation of the Company to make any payment of the
principal of, or interest on, the Senior Secured Bonds shall be deemed to be
satisfied and discharged to the extent of the corresponding payment (i) made by
the Company to the Trustee pursuant to Section 3.2 of this Agreement and/or on
the Note and/or (ii) made with moneys on deposit in any fund or account
maintained under the Indenture for the payment of the principal or redemption
price of, or interest on, the Bonds.

       

      At the
time any Bonds cease to be Outstanding (other than in connection with the
cancellation thereof following an exchange or transfer or the authentication of
other Bonds in lieu thereof pursuant to Section 2.09 of the Indenture), the
Issuer shall cause the Trustee to surrender to the Company Indenture Trustee a
corresponding principal amount of Senior Secured Bonds.

       

      The
Issuer shall not sell, assign or otherwise transfer the Senior Secured Bonds,
except to the extent provided in Section 12.16 of the Indenture.  In
view of the assignment referred to in Section 3.6 hereof, the Issuer agrees that
(i) the Senior Secured Bonds shall be issued and delivered to, registered in the
name of and owned and held by the Trustee for the benefit of the holders from
time to time of the Bonds; (ii) the Indenture shall provide that the Trustee
shall not sell, assign or transfer the Senior Secured Bonds except to a
successor trustee under the Indenture, and shall surrender Senior Secured Bonds
to the Company Indenture Trustee in accordance with the provisions of this
Section 3.2 and Section 12.17(b) of the Indenture; and (iii) the Company may
take such actions as it shall deem to be desirable to effect compliance with
such restrictions on transfer, including the placing of any appropriate legend
on each Senior Secured Bond and the issuance of stop-transfer instructions to
the Company Indenture Trustee or any other transfer agent under the Company
Indenture.  Any action taken by the Trustee in accordance with the
provisions of Section 12.16 of the Indenture shall be binding upon the
Company.

       

      Section
3.3     Purchase
Payments.   To
the extent that moneys on deposit in the Remarketing Proceeds Account of the
Purchase Fund established under the Indenture are insufficient to pay the full
purchase price of Bonds payable pursuant to Section 5.03 of the Indenture on the
applicable Purchase Date, the Company shall promptly pay to the Trustee as
Purchase Payments for deposit in the Company Fund established under Section 5.07
of the Indenture amounts sufficient to cover such shortfalls in sufficient time
to enable the Trustee to deliver to the Tender Agent the purchase price of Bonds
payable pursuant to Section 5.03 of the Indenture; provided, however, that the
obligation of the Company to make any Purchase Payment hereunder shall be deemed
to have been satisfied to the extent that moneys shall have been paid by a
Credit Facility Issuer to the Trustee for such payment in respect of the
Bonds.

       

      Section
3.4     Additional
Payments.   The
Company shall pay as Additional Payments hereunder:  (a) to the
Authority, the Authority’s Fee on the Issue Date and any and all costs and
expenses (including reasonable legal fees and expenses) incurred or to be paid
by the Authority in connection with the issuance and delivery of the Bonds or
otherwise related to actions taken by the Authority under this Agreement or the
Indenture or any amendment thereof, supplement thereto or consent or waiver
thereunder, including without limitation any annual charge made by a rating
agency to maintain a rating on the Bonds; (b) to the Local Entity, the Local
Entity’s fee on the Issue Date and any and all costs and expenses incurred or to
be paid by the Local Entity in connection with the Project Facilities; and (c)
to the Trustee, the Tender Agent, the Bond Registrar, the Paying Agent and their
agents, their reasonable fees, charges and expenses for acting as such under the
Indenture.  The obligations of the Company under clause (c) shall
survive the termination of this Agreement and the Indenture, payment or
defeasance of the Bonds and the removal or resignation of the Trustee, the
Tender Agent, the Bond Registrar or the Paying Agent in accordance with the
Indenture for any reason.

       

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

       

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

       

       

      IV.           Additional
Covenants of Company

       

      Section
4.1     Corporate
Existence.   So
long as the Bonds are outstanding, the Company agrees to maintain its corporate
existence and, to the extent required by Pennsylvania law, its qualification to
do business in Pennsylvania, except that it may dispose of all or substantially
all of its assets and may consolidate with or merge into another corporation or
entity or permit one or more corporations or entities to consolidate with or
merge into it so long as (i) (A) the surviving, resulting or transferee
corporation or entity, if other than the Company, is solvent, and assumes in
writing all of the obligations of the Company hereunder and under the Note and
is a corporation or other entity duly organized under the laws of one of the
states of the United States of America and, to the extent required by
Pennsylvania law, is duly qualified to do business in the Commonwealth of
Pennsylvania provided that the Company shall have delivered to the Trustee a
certificate from an officer of the Company to the effect that such disposition,
consolidation, merger and assumption complies with the provisions of this
Agreement and is not a Disqualified Contractor, and (B) if the surviving,
resulting or transferee corporation or entity is not the Company or an affiliate
of the Company, with the consent of the Authority, which consent shall not be
unreasonably withheld, (ii) immediately thereafter neither the Company nor its
successor will be in default under the Agreement or the Note and (iii) the
provisions of Section 7.9 hereof are satisfied.

       

      Section
4.2     No Misuse of Bond Proceeds;
No Assignment; Maintenance of Employment.

       

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

       

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

       

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

       

      Section
4.3     Reserved.

       

      Section
4.4     Reserved.

       

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

       

      Section
4.6     Taxes, Other Governmental
Charges and Utility Charges.   The
Company shall pay, or cause to be paid before the same become delinquent, all
taxes, assessments, whether general or special, and governmental charges of any
kind whatsoever that may at any time be lawfully assessed or levied against it;
provided that with respect to special assessments or other governmental charges
that lawfully may be paid in installments over a period of years, the Company
shall be obligated to pay only such installments as are required to be paid
during the term hereof; and provided further that the Company may, at its
expense, in good faith contest any such taxes, assessments and other charges
and, in the event of any such contest, may permit the taxes, assessments or
other charges so contested to remain unpaid during the period of such contest
and any appeal therefrom.

       

      Section
4.7     Reserved.

       

      Section
4.8     Reserved.

       

      Section
4.9     Misuse of Bond Proceeds;
Litigation Notice.   The
Company shall give the Authority, the Trustee and the Remarketing Agent prompt
written notice of any Misuse of Bond Proceeds.

       

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

       

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

       

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

       

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

       

      The
provisions of this Section 4.10 shall survive the termination of this Agreement
and the Indenture, payment or defeasance of the Bonds and the removal or
resignation of the Trustee in accordance with the Indenture for any
reason.

       

      Section
4.11     Tax Covenants of Company and
Authority.   The
Company covenants and represents that it will at all times do and perform all
acts and things necessary or desirable and within its reasonable control in
order to assure that interest paid on the Bonds shall not be includable in the
gross income of any holder thereof for federal income tax purposes, unless such
holder is a “substantial user” of the Project Facilities or a “related person”
of such a user within the meaning of Section 147(a) of the Code and Section
103(b)(13) of the 1954 Code.  The Company also covenants and
represents that it shall not take or omit to take, or permit to be taken on its
behalf, any actions which, if taken or omitted, would adversely affect the
excludability from the gross income of the holder of interest paid on the Bonds
for federal income tax purposes.  The Authority and the Company
mutually covenant for the benefit of the Bondholders that they will not use the
proceeds of the Bonds, any moneys derived, directly or indirectly, from the use
or investment thereof or any other moneys on deposit in any fund or account
maintained in respect of the Bonds (whether such moneys were derived from the
proceeds of the sale of the Bonds or from other sources) in a manner which would
cause the Bonds to be treated as “arbitrage bonds” within the meaning of Section
148 of the Code.

       

      Section
4.12     Action to Maintain
Tax-Exempt Status.   The
Company will take such actions as shall be necessary or desirable, from time to
time and within its reasonable control, to cause all of the representations and
warranties in this Section to remain true and correct during such periods as
shall be necessary to maintain the exclusion of interest paid on the Bonds from
the gross income of the holders thereof for federal income tax purposes (other
than a holder who is a “substantial user” of the Project Facilities or a
“related person” as those terms are used in Section 147(a) of the Code and
Section 103(b)(13) of the 1954 Code), pursuant to the requirements of the
Code.  The Company shall further comply in all respects with any
undertakings made by it with respect to the Bonds set forth in the Company’s Tax
Certificate.

       

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

       

       

      V.           Redemption
of Bonds

       

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

       

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

       

      Section
5.3 
Actions by
Authority.   At
the request of the Company or the Trustee, the Authority shall take all steps
required of it under the applicable provisions of the Indenture or the Bonds to
effect the redemption of all or a portion of the Bonds pursuant to this
Article.

       

       

      VI.           Events
Of Default And Remedies

       

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

       

      (a) Failure
by the Company to make or cause to be made any Loan Payment or Purchase
Payment which shall
have resulted in an Event of Default described in clause (a), (b) or (d) of
Section 11.01 of the Indenture;

       

      (b) Failure
by the Company to observe and perform any covenant, condition or agreement on
its part to be observed or performed under this Agreement or the Note (other
than payment obligations on the Note) for a period of sixty (60) days after
written notice, specifying such failure and requesting that it be remedied,
given to the Company by the Trustee; provided, that if such failure is of such
nature that it can be corrected (as agreed to by the Trustee) but not within
such period, the same shall not constitute an Event of Default so long as the
Company institutes prompt corrective action and is diligently pursuing the same
and provided further, that if the Company is unable to institute corrective
action or to pursue the same because of circumstances beyond its control, the
same shall not constitute an Event of Default until such circumstances no longer
exist and then only after the Company has had an opportunity to remedy the same
as provided above;

       

      (c) The
Company shall (i) apply for or consent to the appointment of a receiver,
trustee, liquidator or custodian or the like of itself or of its property, or
(ii) admit in writing its inability to pay its debts generally as they become
due, or (iii) make a general assignment for the benefit of creditors, or (iv) be
adjudicated a bankrupt or insolvent, or (v) commence a voluntary case under the
United States Bankruptcy Code, or file a voluntary petition or answer seeking
reorganization, an arrangement with creditors or an order for relief, or seeking
to take advantage of any insolvency law or file an answer admitting the material
allegations of a petition filed against it in any bankruptcy, reorganization, or
insolvency proceeding, or corporate action shall be taken by it for the purpose
of effecting any of the foregoing, or (vi) have instituted against it,
without the application, approval or consent of the Company, a proceeding in any
court of competent jurisdiction, under any law relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking in respect of the
Company an order for relief or an adjudication in bankruptcy, reorganization,
dissolution, winding up, liquidation, a composition or arrangement with
creditors, a readjustment of debts, the appointment of a trustee, receiver,
liquidator or custodian or the like of the Company or of all or any substantial
part of their assets, or other like relief in respect thereof under any
bankruptcy or insolvency law, and the same shall (A) result in the entry of
an order for relief or any such adjudication or appointment or (B) remain
unvacated, undismissed and undischarged for a period of 90 days;

       

      (d) For any
reason the Bonds are declared due and payable by acceleration in accordance with
Section 11.02 of the Indenture and such acceleration shall not have been
annulled; and

       

      (e) The
acceleration of the maturity of the Senior Secured Bonds upon an occurrence of
an “Event of Default” (as defined under the Company Indenture).

       

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

       

      Section
6.2     Remedies on
Default.

       

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

       

      (1)           If
acceleration of the principal amount of the Bonds has been declared pursuant to
Section 11.02 of the Indenture, the Trustee, by notice in writing to the
Company, shall declare all Loan Payments and amounts due on the Note to be
immediately due and payable, whereupon the same shall become immediately due and
payable; and

      

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

      

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

       

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

       

      (d) Notwithstanding
the foregoing, the Trustee shall not be obligated to take any step which in its
opinion will or might cause it to expend money or otherwise incur liability
unless and until a satisfactory indemnity bond has been furnished to the Trustee
at no cost or expense to the Trustee.  Any amounts collected as Loan
Payments or applicable to Loan Payments and any other amounts which would be
applicable to payment of Debt Service collected pursuant to action taken under
this Section shall, after the deduction of the Trustee’s charges and expenses,
be paid into the Bond Fund and applied in accordance with the provisions of the
Indenture or, if the Outstanding Bonds have been paid and discharged in
accordance with the provisions of the Indenture, shall be paid as provided in
Section 6.02(e) of the Indenture for transfers of remaining amounts in the Bond
Fund.

       

      (e) The
provisions of this Section are subject to the further limitation that the
annulment by the Trustee of its declaration pursuant to Section 11.02 of the
Indenture that all of the Bonds are immediately due and payable also shall
constitute an annulment of any corresponding declaration made pursuant to
Subsection 6.2(a)(1); provided that no such waiver or rescission shall extend to
or affect any subsequent or other default or impair any right consequent
thereon.

       

      (f)           If
a waiver of any event of default under the Senior Secured Bonds or any annulment
or rescission of any acceleration of Senior Secured Bonds occurs in accordance
with the provisions of the Company Indenture, such waiver, annulment or
rescission shall constitute an automatic waiver, annulment or rescission of the
Event of Default described in Section 6.1(d) hereof and an automatic annulment
and rescission of any resulting acceleration of the Note.

       

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

       

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

       

      Section
6.5     No
Waiver.   No
failure by the Authority or the Trustee to insist upon the strict performance by
the Company of any provision hereof or of the Note shall constitute a waiver of
their right to strict performance and no express waiver shall be deemed to apply
to any other existing or subsequent right to remedy the failure by the Company
to observe or comply with any provision hereof.  No failure by the
Company to observe and perform any of the covenants set forth in Section 4.2
hereof shall be waived by the Trustee without the written consent of the
Authority.

       

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

       

       

      VII.           Miscellaneous

       

      Section
7.1     Term of
Agreement.   This
Agreement shall be and remain in full force and effect from the Issue Date until
such time as all of the Bonds shall have been fully paid (or provision made for
such payment) pursuant to the Indenture, the Indenture shall have been released
pursuant to Section 16.01 thereof, and all other sums payable by the
Company under this Agreement shall have been paid, except for obligations of the
Company under Section 3.4(c) and Section 4.10, which shall survive any
termination of this Agreement.

       

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

       

      
        	
                If
      to the Company:

              	
                PPL
      Electric Utilities Corporation

              
	 
      	
                Two
      North Ninth Street

              
	 
      	
                Allentown,
      PA  18101

              
	 
      	
                Telecopier
      No.:  610-774-5235

              
	 
      	
                Attention:  Timothy
      D. Stephens

              
	 
      	 
      
	
                If
      to the Authority:

              	
                Pennsylvania
      Economic Development Financing Authority

              
	 
      	
                Pa.
      Department of Community and Economic Development

              
	 
      	
                Commonwealth
      Keystone Building

              
	 
      	
                400
      North Street, 4th Floor

              
	 
      	
                Harrisburg,
      PA  17120

              
	 
      	
                Telecopier
      No.:  717-787-0879

              
	 
      	 
      
	
                If
      to the Trustee:

              	
                The
      Bank of New York Mellon Trust Company, N.A.

              
	 
      	
                1600
      Market Street, 15th Floor

              
	 
      	
                Philadelphia,
      PA 19103

              
	 
      	
                Telecopier
      No.:  215-981-0352

              
	 
      	
                Attention:  Global
      Corporate Trust

              
	 
      	 
      
	 
      	
                If
      to the Remarketing Agent:

              
	 
      	
                1221
      Avenue of the Americas, 30th
      Floor

              
	 
      	
                New
      York, NY  10020

              
	 
      	
                Telecopier
      No.:  212-507-1937

              
	 
      	
                Attention:  Mary
      Lou Coriasco

              

      

      

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

       

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

       

      Section
7.4 
Binding
Effect.   This
Agreement shall inure to the benefit of and shall be binding in accordance with
its terms upon the Authority, the Company and their respective successors and
assigns; provided that this Agreement may not be assigned by the Company (except
in connection with a sale or transfer of assets pursuant to Section 4.1 or in
compliance with Section 7.9) and may not be assigned by the Authority except to
the Trustee pursuant to the Indenture or by the Trustee to a successor Trustee,
or as otherwise may be necessary to enforce or secure payment of Debt
Service.  This Agreement may be enforced only by the parties, their
assignees and others who may, by law, stand in their respective
places.

       

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

       

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

       

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

       

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

       

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

       

      Section
7.10 
Receipt of
Indenture.   The
Company hereby acknowledges that it has received an executed copy of the
Indenture and is familiar with its provisions, and agrees that it is subject to
and bound by the terms thereof (including the terms thereof relating to
obligations of the Company) and it will take all such actions as are required or
contemplated of it under the Indenture to preserve and protect the rights of the
Trustee and of the Bondholders thereunder and that it will not take any action
which would cause a default or Event of Default thereunder.

      

       

      [Signatures
appear on following page]

      
        
          

        

      

       

       

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

       

      
        
          	
                  [SEAL]

                	
                  PENNSYLVANIA
      ECONOMIC

                  DEVELOPMENT
      FINANCING

                  AUTHORITY

                
	 
      	 
      
	
                  Attest:
      /s/ Craig S.
      Petrasic          

                  (Assistant
    Secretary)

                	 
      
	 
      	 
      
	 
      	
                  By         
      /s/ Stephen M.
      Drizos        

                  Name:  Stephen M.
      Drizos

                  Title:    Executive
      Director

                
	 
      	 
      
	 
      	
                  PPL
      ELECTRIC UTILITIES

                  CORPORATION

                
	 
      	 
      
	 
      	
                  By            /s/ James E.
      Abel      

                  Name:  James E.
      Abel

                  Title:    Treasurer

                

        

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

      

       

      EXHIBIT
A

      

      [DESCRIPTION
OF ORIGINAL PROJECT FACILITIES TO BE ATTACHED]

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      EXHIBIT
B

      

      PPL
ELECTRIC UTILITIES CORPORATION

       

      POLLUTION
CONTROL FACILITIES NOTE

       

      (PENNSYLVANIA
ECONOMIC DEVELOPMENT FINANCING AUTHORITY)

       

      SERIES
2008

       

      

       

      This Note
is issued pursuant to an Pollution Control Facilities Loan Agreement dated as of
October 1, 2008 (the “Agreement”) by and between the Pennsylvania Economic
Development Financing Authority (the “Authority”) and the Company (as
hereinafter defined) relating to the refunding of $90,000,000 principal amount
of Pollution Control Revenue Refunding Bonds, Series 2003 (PPL Electric
Utilities Corporation Project) (the “Prior Bonds”), issued by the Lehigh County
Industrial Development Authority for the purpose of refunding certain prior
bonds issued to finance the cost of certain air or water pollution control
facilities or sewage or solid waste disposal facilities (collectively, the
“Project Facilities”), on behalf of the Company, which was formerly known as
Pennsylvania Power & Light Company.

       

      PPL
Electric Utilities Corporation (the “Company”), a Pennsylvania corporation, for
value received, unconditionally promises to pay to The Bank of New York Mellon
Trust Company, N.A., as Trustee (including its successors in such capacity, the
“Trustee”) under the Trust Indenture dated as of October 1, 2008 (as the same
may be amended and supplemented from time to time, the “Indenture”) between the
Trustee and the Authority, the principal sum of NINETY MILLION DOLLARS
($90,000,000) on October 1, 2023, and to pay (i) interest thereon from the date
hereof until the payment of such principal sum has been made or provided for at
a rate or rates at all times equal to the interest rate or rates from time to
time borne by the Authority’s Pollution Control Facilities Revenue Bonds, Series
2008 (PPL Electric Utilities Corporation Project) (the “Bonds”) and payable on
each date that interest is payable on the Bonds, and (ii) to the extent provided
by law, on overdue interest at the rate or rates borne by the Bonds; provided,
however, that the obligation of the Company to make any payment hereunder (a)
shall be reduced by the amount of any reduction under the Indenture of the
amount of the corresponding payment required to be made by the Authority of the
principal of or premium or interest on the Bonds and (b) if a Credit Facility is
in effect with respect to the Bonds, shall be deemed to have been satisfied to
the extent that moneys shall have been paid by a Credit Facility Issuer to the
Trustee for such payment in respect of the Bonds.

       

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

       

      In order
to secure its obligations with respect to the payment of principal of and
interest on this Note, the Company has delivered to the Trustee its Senior
Secured Bonds, Variable Rate Pollution Control Series 2008 (the “Senior Secured
Bonds”).  The Senior Secured Bonds are issued pursuant to Supplemental
Indenture No. 9 of the Company dated as of October 1, 2008, which supplements
the Indenture dated as of August 1, 2001 of the Company to JPMorgan Chase Bank,
as trustee (the “Company Indenture Trustee”), as supplemented (the “Company
Indenture”).  As provided in the Company Indenture, under certain
circumstances, the lien of the Company Indenture may be released.

       

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

       

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

       

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

       

      In case
one or more of the Events of Default specified in Section 6.1 of the Agreement
shall have occurred and be continuing, then and in each and every such case, the
Trustee, by notice in writing to the Company, may declare the unpaid balance of
this Note to be due and payable immediately, if concurrently with or prior to
such notice the unpaid principal amount of the Bonds has been declared to be due
and payable, and upon any such declaration the same shall become and shall be
immediately due and payable, anything in this Note or in the Agreement to the
contrary notwithstanding.  Notwithstanding the foregoing, if after any
declaration of acceleration hereunder there is an annulment of any declaration
of acceleration with respect to the Bonds, such annulment shall also
automatically constitute an annulment of any corresponding declaration under
this Note and a waiver and rescission of the consequences of such
declaration.

       

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

       

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

       

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

       

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

       

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

       

      

      
        	
                 
      Dated:  as of ________________

              	
                PPL
      ELECTRIC UTILITIES CORPORATION

              
	 	 
	 	
                By:
      ________________________________

                Name:

                Title:

              

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      EXHIBIT
C

       

      NONDISCRIMINATION/SEXUAL
HARASSMENT CLAUSE

      

      

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

       

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

       

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

       

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

       

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

       

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

       

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

       

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

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00148-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00148-of-00352.parquet"}]]