Document:

Exhibit 4.1

 

 

 

 

LOAN AGREEMENT

 

 

between

 

 

OHIO WATER
DEVELOPMENT AUTHORITY

 

 

and

 

 

THE DAYTON POWER
AND LIGHT COMPANY

 

 

 

$41,300,000

State of Ohio

Collateralized
Pollution Control

Revenue Refunding
Bonds, 2005 Series A

(The Dayton Power
and Light Company Project)

 

 

 

Dated

 

 

as of

 

 

August 1, 2005

 

 

 

 

INDEX

 

(This Index is not
a part of the Agreement

but rather is for
convenience of reference only.)

 

	
   

  	
   

  	
   

  	
  Page

  
	
  Preambles

  	
   

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE I

  	
   

  
	
  DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section

  	
  1.1

  	
  Use of Defined Terms

  	
  2

  
	
  Section

  	
  1.2

  	
  Definitions

  	
  2

  
	
  Section

  	
  1.3

  	
  Interpretation

  	
  6

  
	
  Section

  	
  1.4

  	
  Captions and Headings

  	
  6

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
   

  
	
  REPRESENTATIONS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section

  	
  2.1

  	
  Representations of the Authority

  	
  7

  
	
  Section

  	
  2.2

  	
  No Warranty by Authority of Condition or Suitability of the Project

  	
  7

  
	
  Section

  	
  2.3

  	
  Representations and Covenants of the Company

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
   

  
	
  COMPLETION
  OF THE PROJECT;

  ISSUANCE OF THE BONDS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section

  	
  3.1

  	
  Acquisition, Construction and Installation

  	
  10

  
	
  Section

  	
  3.2

  	
  Project Description

  	
  10

  
	
  Section

  	
  3.3

  	
  Issuance of the Bonds; Application of Proceeds

  	
  10

  
	
  Section

  	
  3.4

  	
  Investment of Fund Moneys

  	
  11

  
	
  Section

  	
  3.5

  	
  Rebate Fund

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
   

  
	
  LOAN BY AUTHORITY; LOAN PAYMENTS;

  ADDITIONAL PAYMENTS; AND FIRST MORTGAGE BONDS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section

  	
  4.1

  	
  Loan Repayment; Delivery of First Mortgage Bonds

  	
  12

  
	
  Section

  	
  4.2

  	
  Additional Payments

  	
  12

  
	
  Section

  	
  4.3

  	
  Place of Payments

  	
  12

  
	
  Section

  	
  4.4

  	
  Obligations Unconditional

  	
  12

  
	
  Section

  	
  4.5

  	
  Assignment of Revenues, Agreement and First Mortgage Bonds

  	
  13

  
	
  Section

  	
  4.6

  	
  First Mortgage Bonds

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
   

  
	
  ADDITIONAL AGREEMENTS AND COVENANTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section

  	
  5.1

  	
  Right of Access

  	
  14

  
	
  Section

  	
  5.2

  	
  Maintenance

  	
  14

  
	
  Section

  	
  5.3

  	
  Removal of Portions of the Project Facilities

  	
  14

  
	
  Section

  	
  5.4

  	
  Operation of Project Facilities

  	
  14

  
	
  Section

  	
  5.5

  	
  Insurance

  	
  14

  

 

i

 

	
   

  	
   

  	
   

  	
  Page

  
	
  Section

  	
  5.6

  	
  Workers’ Compensation Coverage

  	
  14

  
	
  Section

  	
  5.7

  	
  Damage; Destruction and Eminent Domain

  	
  15

  
	
  Section

  	
  5.8

  	
  Company to Maintain its Corporate Existence; Conditions Under Which
  Exceptions Permitted

  	
  15

  
	
  Section

  	
  5.9

  	
  Indemnification

  	
  15

  
	
  Section

  	
  5.10

  	
  Company Not to Adversely Affect Exclusion of Interest on Bonds From
  Gross Income For Federal Income Tax Purposes

  	
  16

  
	
  Section

  	
  5.11

  	
  Use of Project Facilities

  	
  16

  
	
  Section

  	
  5.12

  	
  Assignment by Company

  	
  16

  
	
  Section

  	
  5.13

  	
  Bond Insurance Policy

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
   

  
	
  REDEMPTION

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section

  	
  6.1

  	
  Optional Redemption

  	
  18

  
	
  Section

  	
  6.2

  	
  Extraordinary Optional Redemption

  	
  18

  
	
  Section

  	
  6.3

  	
  Mandatory Redemption

  	
  19

  
	
  Section

  	
  6.4

  	
  Notice of Redemption

  	
  19

  
	
  Section

  	
  6.5

  	
  Actions by Authority

  	
  19

  
	
  Section

  	
  6.6

  	
  Concurrent Discharging of First Mortgage Bonds

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
   

  
	
  EVENTS OF DEFAULT AND REMEDIES

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section

  	
  7.1

  	
  Events of Default

  	
  21

  
	
  Section

  	
  7.2

  	
  Remedies on Default

  	
  22

  
	
  Section

  	
  7.3

  	
  No Remedy Exclusive

  	
  22

  
	
  Section

  	
  7.4

  	
  Agreement to Pay Attorneys’ Fees and Expenses

  	
  22

  
	
  Section

  	
  7.5

  	
  No Waiver

  	
  22

  
	
  Section

  	
  7.6

  	
  Notice of Default

  	
  22

  
	
  Section

  	
  7.7

  	
  Survival

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  VIII

  	
   

  
	
  MISCELLANEOUS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section

  	
  8.1

  	
  Term of Agreement

  	
  24

  
	
  Section

  	
  8.2

  	
  Amounts Remaining in Funds

  	
  24

  
	
  Section

  	
  8.3

  	
  Notices

  	
  24

  
	
  Section

  	
  8.4

  	
  Extent of Covenants of the Authority; No Personal Liability

  	
  24

  
	
  Section

  	
  8.5

  	
  Binding Effect

  	
  24

  
	
  Section

  	
  8.6

  	
  Amendments and Supplements

  	
  24

  
	
  Section

  	
  8.7

  	
  Execution Counterparts

  	
  25

  
	
  Section

  	
  8.8

  	
  Severability

  	
  25

  
	
  Section

  	
  8.9

  	
  Governing Law

  	
  25

  
	
  Section

  	
  8.10

  	
  Continuing Disclosure

  	
  25

  
	
  Section

  	
  8.11

  	
  Third Party Beneficiary

  	
  25

  
	
   

  	
   

  	
   

  	
   

  
	
  Signatures

  	
   

  	
   

  	
  26

  
	
   

  	
   

  	
   

  	
   

  
	
  Exhibit A –
  WASTE WATER FACILITIES AT THE SERIES 1977 PROJECT

  	
   

  
	
  Exhibit B –
  WASTE WATER AND SOLID WASTE FACILITIES AT THE SERIES 1982 PROJECT

  	
   

  

 

ii

 

LOAN AGREEMENT

 

THIS LOAN AGREEMENT is
made and entered into as of August 1, 2005 between the OHIO WATER DEVELOPMENT AUTHORITY
(the “Authority”), a body politic and corporate organized and existing under
the laws of the State of Ohio, and THE DAYTON POWER AND LIGHT COMPANY (the “Company”),
a public utility and corporation duly organized and validly existing under the
laws of the State of Ohio.  Capitalized
terms used in the following recitals are used as defined in Article I of this
Agreement.

 

Pursuant to Section 13 of
Article VIII of the Ohio Constitution and the Act, the Authority has determined
to issue, sell and deliver the Bonds and to lend the proceeds derived from the
sale thereof to the Company to assist in the refunding of the Series 1977 Bonds
and the Series 1992 Bonds as defined below. 
The Series 1977 Bonds were originally issued to provide funds to make a
loan to the Company to assist in the financing of its portion of the costs of
the Series 1977 Project as defined below. 
The Series 1992 Bonds were originally issued to provide funds to make a
loan to the Company to assist in the refunding of the Series 1982 Bonds as
defined below which were originally issued to provide funds to make a loan to
the Company to assist in the financing of its portion of the costs of the
Series 1982 Project as defined below.

 

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

 

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

 

 

ARTICLE I

 

DEFINITIONS

 

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

 

Section 1.2.                                   Definitions.  As used herein:

 

“Act” means Chapters 6121
and 6123, Ohio Revised Code, as enacted and amended from time to time pursuant
to Section 13 of Article VIII of the Ohio Constitution.

 

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

 

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

 

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

 

“Authenticating Agent”
means the Authenticating Agent as defined in the Indenture.

 

“Authority Fee” means the
amount of $92,950.

 

“Bond Fund” means the
Bond Fund created in the Indenture.

 

“Bond Insurance Agreement”
means the Insurance Agreement entered into between the Company and the Bond
Insurer in connection with the issuance of the Bond Insurance Policy.

 

“Bond Insurance Policy”
or “Policy” means the municipal bond insurance
policy issued by the Bond Insurer that guarantees payment of principal of and
interest on the Bonds.

 

“Bond Insurer” means
Financial Guaranty Insurance Company, a New York stock insurance company, or
any successor thereto.

 

“Bond Resolution” means
the resolution of the Authority providing for the issuance of the Bonds and
approving this Agreement, the Indenture and related matters, as amended or
supplemented from time to time.

 

“Bond Service Charges”
means, for any period or time, the principal of and interest due on the Bonds
for that period or payable at that time whether due at maturity or upon
acceleration or redemption or otherwise.

 

“Bonds” means the
$41,300,000 Collateralized Pollution Control Revenue Refunding Bonds, 2005
Series A (The Dayton Power and Light Company Project), issued by the Authority
pursuant to the Bond Resolution and the Indenture.

 

2

 

“Bonds Outstanding” or “Outstanding
Bonds” means Outstanding Bonds as defined in the Indenture.

 

“Code” means the Internal
Revenue Code of 1986, as amended from time to time.  References to the Code and Sections of the
Code include relevant applicable regulations and proposed regulations
thereunder and under the 1954 Code and any successor provisions to those
Sections, regulations or proposed regulations and, in addition, all applicable
official rulings and judicial determinations under the foregoing applicable to
the Bonds.

 

“Company Mortgage” means
the First and Refunding Mortgage, dated as of October 1, 1935, between the
Company and the Company Mortgage Trustee, as amended, modified or supplemented
from time to time.

 

“Company Mortgage Trustee”
means The Bank of New York (formerly Irving Trust Company) as trustee under the
Company Mortgage, and its successors and assigns.

 

“Continuing Disclosure
Agreement” means that certain Continuing Disclosure Agreement between the
Company and the Trustee dated as of August 1, 2005, as the same may be amended
from time to time in accordance with the terms thereof.

 

“Eligible Investments”
means Eligible Investments as defined in the Indenture.

 

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

 

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

 

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

 

“First Mortgage Bonds”
means the $41,300,000 aggregate principal amount of First Mortgage Bonds, 4.80%
Pollution Control Series 2005-A Due 2034, issued under the Supplemental
Mortgage Indenture.

 

“Force Majeure” means any
of the causes, circumstances or events described as constituting Force Majeure
in Section 7.1 hereof.

 

“Government Obligations”
means Government Obligations as defined in the Indenture.

 

“Holder” or “Holder of a
Bond” means the Person in whose name a Bond is registered on the Register.

 

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

 

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

 

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

 

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

 

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

 

“1954 Code” means the
Internal Revenue Code of 1954 as amended from time to time through the date of
enactment of the Code.  References to the
1954 Code and Sections of the 1954 Code include relevant

 

3

 

applicable regulations (including temporary regulations) and proposed
regulations thereunder and any successor provisions to those Sections,
regulations or proposed regulations.

 

“Notice Address” means:

 

(a)  As to the Authority:                                                               Ohio
Water Development Authority

480 South High Street

Columbus, Ohio  43215

Attention:  Executive Director

 

(b)  As to the Company:                                                                The
Dayton Power and Light Company

1065 Woodman Drive

Dayton, Ohio  45432

Attention:  Treasurer

 

(c)  As to the Trustee:                                                                           The
Bank of New York

385 Rifle Camp Road, 3rd
Floor

West Paterson, New Jersey
07424

Attention:  Corporate Trust Administration

 

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

 

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

 

“Original Bonds” means
collectively, the Series 1977 Bonds and the Series 1982 Bonds.

 

“Original Bonds Indenture”
means collectively, the Series 1977 Indenture and the Series 1982 Indenture.

 

“Original Bonds Loan
Agreement” means collectively, the Series 1977 Loan Agreement and the Series
1982 Loan Agreement.

 

“Original Purchaser”
means the Original Purchaser as defined in the Indenture.

 

“Paying Agent” means the
Paying Agent as defined in the Indenture.

 

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

 

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

 

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

 

“Project Description”
means collectively, the description of the Project Facilities attached hereto
as Exhibit A (with respect to the Series 1977 Project) and Exhibit B (with
respect to the Series 1982 Project), as the same may be amended in accordance
with this Agreement.

 

“Project Purposes” means
the purposes of Water Facilities and Solid Waste Facilities as described in the
Act and as particularly described in Exhibits A and B hereto.

 

4

 

“Project Site” means,
with respect to the Series 1977 Bonds, the F.M. Tait Electric Generating
Station and the O.H. Hutchings Electric Generating Station in Montgomery
County, Ohio, and the J. M. Stuart Electric Generating Plant in Adams and Brown
Counties, Ohio, and with respect to the Series 1992 Bonds, the Killen Electric
Generating Station in Adams County, Ohio.

 

“Rebate Fund” means the
Rebate Fund created in the Indenture.

 

“Refunded Bonds” means
collectively, the Series 1977 Bonds and the Series 1992 Bonds.

 

“Refunding Fund” means
the Refunding Fund created in the Indenture.

 

“Register” means the
books kept and maintained for the registration and transfer of Bonds pursuant
to Section 3.05 of the Indenture.

 

“Registrar” means the
Registrar as defined in the Indenture.

 

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

 

“Series 1977 Bonds” means
the $14,200,000 State of Ohio Collateralized Pollution Control Revenue Bonds,
1977 Series A (The Dayton Power and Light Company Project) dated as of April 15,
1977, now outstanding in the aggregate principal amount of $9,000,000.

 

“Series 1982 Bonds” means
the $32,300,000 State of Ohio Collateralized Water Development Revenue Bonds,
1982 Series (The Dayton Power and Light Company Project) dated as of November
1, 1982.

 

“Series 1992 Bonds” means
the $32,300,000 State of Ohio Collateralized Water Development Revenue
Refunding Bonds, 1992 Series A (The Dayton Power and Light Company Project)
dated as of August 15, 1992, now outstanding in the aggregate principal amount
of $32,300,000.

 

“Series 1977 Indenture”
means the Trust Indenture between the Authority and the Series 1977 Trustee
dated as of April 15, 1977.

 

“Series 1982 Indenture”
means the Trust Indenture between the Authority and The Bank of New York (formerly
Irving Trust Company), as trustee, dated as of November 1, 1982.

 

“Series 1992 Indenture”
means the Trust Indenture between the Authority and the Series 1992 Trustee
dated as of August 15, 1992.

 

“Series 1977 Loan
Agreement” means the Loan Agreement between the Authority and the Company dated
as of April 15, 1977, as amended.

 

“Series 1982 Loan
Agreement” means the Loan Agreement between the Authority and the Company dated
as of November 1, 1982.

 

 “Series 1977 Project” means the real, personal
or real and personal property, including undivided or other interests therein
financed with the proceeds of the Series 1977 Bonds and identified as Exhibit A
hereto.

 

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

 

“Series 1977 Trustee”
means The Bank of New York (formerly Irving Trust Company), as trustee under
the Series 1977 Indenture.

 

5

 

“Series 1992 Trustee”
means The Bank of New York, as trustee under the Series 1992 Indenture.

 

“Solid Waste Facility” or
“Solid Waste Facilities” means those facilities which are solid waste
facilities as defined in Section 6123.01 Ohio Revised Code.

 

“State” means the State
of Ohio.

 

“Station Unit” means the
Tait Project Unit, the Hutchings Project Unit, the Stuart Project Unit and the
Killen Electric Generating Station Unit 2.

 

“Supplemental Mortgage
Indenture” means the Forty-Third Supplemental Indenture, dated as of August 1,
2005, between the Company and the Company Mortgage Trustee, as amended or
supplemented from time to time.

 

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

 

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

 

“Waste Water Facility” or
“Waste Water Facilities” means those facilities which are waste water
facilities as defined in Section 6121.01, Ohio Revised Code.

 

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

 

Any reference to a
section or provision of the Constitution of the State or the Act, or to a
section, provision or chapter of the Ohio Revised Code, or to any statute of
the United States of America, includes that section, provision or chapter as
amended, modified, revised, supplemented or superseded from time to time;
provided, that no amendment, modification, revision, supplement or superseding
section, provision or chapter shall be applicable solely by reason of this
provision, if it constitutes in any way an impairment of the rights or
obligations of the Authority, the State, the Holders, the Trustee, the
Registrar, an Authenticating Agent, a Paying Agent or the Company under this
Agreement, the Indenture, the Bonds, the Company Mortgage, the Supplemental
Mortgage Indenture or the First Mortgage Bonds.

 

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

 

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

 

(End of Article I)

 

6

 

ARTICLE II

 

REPRESENTATIONS

 

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

 

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

 

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

 

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

 

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

 

(c)                                  The
execution, delivery and performance by the Company of this Agreement, the
Supplemental Mortgage Indenture and the Continuing Disclosure Agreement and the
consummation of the transactions contemplated hereby and thereby will not
violate any provision of law or regulation applicable to the Company, or of any
writ or decree of any court or governmental instrumentality, or of the Articles
of Incorporation, as amended, or Code of Regulations, as amended, of the
Company, or of any mortgage, indenture, contract, agreement or other
undertaking to which the Company is a party or which purports to be binding
upon the Company or upon any of its assets.

 

(d)                                 Substantially
all (at least 90%) of the proceeds of the Original Bonds were used to provide “water
pollution control facilities” and “solid waste disposal facilities” within the
meaning of Sections 103(b)(4)(E) and (F) of the

 

7

 

1954 Code, the original
use of which facilities commenced with the Company and all of the proceeds of
the Original Bonds have been spent for the Project or to pay costs of issuance
of the Original Bonds.  The proceeds of
the Bonds (other than any accrued interest thereon) will be used exclusively to
refund the Refunded Bonds and none of the proceeds of the Bonds will be used to
pay for any costs of issuance of the Bonds. 
The principal amount of the Bonds does not exceed the outstanding
principal amount of the Refunded Bonds. 
All of the proceeds of the Bonds will be used to retire the Refunded
Bonds not later than 90 days after the date of issuance of the Bonds.  The proceeds of the Series 1992 Bonds (other
than any accrued interest thereon) were used exclusively to refund the 1982
Bonds and none of the proceeds of the Series 1992 Bonds was used to pay for any
costs of issuance of the Series 1992 Bonds. 
The principal amount of the Series 1992 Bonds did not exceed the
outstanding principal amount of the Series 1982 Bonds.  All of the proceeds of the Series 1992 Bonds
were used to retire the Series 1982 Bonds not later than 90 days after the date
of issuance of the Series 1992 Bonds. 
The Original Bonds were issued prior to August 16, 1986.

 

(e)                                  Either
the acquisition and construction of the Series 1977 Project and the Series 1982
Project financed, respectively, with the Series 1977 Bonds and the Series 1982
Bonds, was not commenced (within the meaning of Treasury Regulations §1.103-8(a)(5))
prior to the adoption of the respective resolutions of the Authority evidencing
the intent of the Authority to issue those Original Bonds (being December 9,
1976 with respect to the Series 1977 Bonds and March 11, 1976 with respect to
the Series 1982 Bonds), or, any proceeds of the corresponding Refunded Bonds
used to pay costs incurred prior to the adoption of such corresponding
resolution have been treated for purposes of this Agreement as having been used
to provide working capital (not land or depreciable property) to the Company.

 

(f)                                    It
has caused the Project to be substantially completed.  The Project constitutes Waste Water
Facilities and Solid Waste Facilities under the Act and is consistent with the
purposes of Section 13 of Article VIII of the Ohio Constitution and of the
Act.  The Project is being, and the
Company will cause the Project to be, operated and maintained in such manner to
conform with all applicable zoning, planning, building, environmental and other
applicable governmental regulations and all permits, variances and orders
issued or granted pursuant thereto, including the permit-to-install
for the Project, which permits, variances and orders have not been withdrawn or
otherwise suspended, and to be consistent with the Act.

 

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

 

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

 

8

 

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

 

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

 

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

 

(l)                                     The
Prior Bonds were not, and the Bonds will not be, “federally guaranteed” within
the meaning of Section 149(b) of the Code.

 

(m)                               It
is not anticipated that as of the date hereof, there will be created any “sinking
fund”, within the meaning of Section 1.148-1(c)(2) of the Treasury
Regulations, with respect to the Bonds; however, in the event that any such
sinking fund is deemed to have been created, moneys therein will be invested in
compliance with Section 148 of the Code.

 

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

 

(o)                                 The
respective average maturities of the Prior Bonds and the issue including the
Bonds do not exceed 120% of the respective average reasonably expected economic
life of the facilities financed by the proceeds thereof, and the issue
including the Bonds (determined under Section 147(b) of the Code).

 

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

 

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

 

(End of Article
II)

 

9

 

ARTICLE III

 

COMPLETION OF THE
PROJECT;

ISSUANCE OF THE
BONDS

 

Section 3.1.                                   Acquisition,
Construction and Installation.  The
Company represents that it and any other public utility companies which own any
undivided interests in the Project Facilities with the Company as tenants-in-common
have caused the Project Facilities to be acquired, constructed and installed on
the applicable Project Sites, substantially in accordance with the Project
Description and in conformance with all applicable zoning, planning, building
and other similar regulations of all governmental authorities having
jurisdiction over the Project and all permits, variances and orders issued in
respect of the Project by EPA, and that the proceeds derived from the Original
Bonds, including any investment thereof, were expended in accordance with the
Original Bonds Indenture and the Original Bonds Loan Agreement.

 

Section 3.2.                                   Project
Description.  The Project Description
may be changed from time to time by, or with the consent of, the Company
provided that any such change shall also be filed with the Authority and
provided further that no change in the Project Description shall materially
change the function of the Project Facilities unless the Trustee shall have
received (i) an Engineer’s certificate that such changes will not impair the
significance or character of the Project Facilities as Waste Water Facilities
or Solid Waste Facilities and (ii) an Opinion of Bond Counsel or ruling of the
Internal Revenue Service to the effect that such amendment will not adversely
affect the exclusion of interest on the Bonds from gross income for federal
income tax purposes.

 

Section 3.3.                                   Issuance
of the Bonds; Application of Proceeds. 
To provide funds to make the Loan to the Company to assist the Company
in the refunding of the Refunded Bonds, concurrently with the delivery to the
Trustee of the First Mortgage Bonds as provided in Section 4.1 hereof, the
Authority will issue, sell and deliver the Bonds to the Original
Purchaser.  The Bonds will be issued
pursuant to the Indenture in the aggregate principal amount, will bear
interest, will mature and will be subject to redemption as set forth
therein.  The Company hereby approves the
terms and conditions of the Indenture and the Bonds, and the terms and
conditions under which the Bonds will be issued, sold and delivered.

 

The proceeds from the
sale of the Bonds (other than any accrued interest) shall be loaned to the
Company to assist the Company in refunding the Refunded Bonds in order to
reduce the interest cost payable by the Company and shall be deposited in the
Refunding Fund as follows:

 

(a)                                  $9,000,000
of the proceeds of the Bonds will be deposited in the Series 1977 Account
of the Refunding Fund (as created and defined in the Indenture) and on August
31, 2005 all moneys on deposit in the Series 1977 Account shall be deposited in
the Bond Fund created in the Series 1977 Indenture and applied by the Series
1977 Trustee to the payment of principal of and interest on the Series 1977
Bonds on September 19, 2005.

 

(b)                                 $32,300,000
of the proceeds of the Bonds will be deposited in the Series 1992 Account
of the Refunding Fund (as created and defined in the Indenture), and on August
31, 2005 all moneys on deposit in the Series 1992 Account shall be
deposited in the Bond Fund created in the Series 1992 Indenture and applied by
the Series 1992 Trustee to the payment of principal of and interest on the
Series 1992 Bonds on September 19, 2005.

 

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

 

The Company hereby
requests that the Authority notify the Series 1977 Trustee (unless the Series
1977 Trustee has already received such notice) that the entire outstanding
principal amount of the Series 1977 Bonds is to be redeemed on September 19,
2005 at a redemption price of 100% of the principal amount thereof plus accrued
interest to the redemption date.

 

10

 

The Company further
requests that the Authority notify the Series 1992 Trustee (unless the Series
1992 Trustee has already received such notice) that the entire outstanding
principal amount of the Series 1992 Bonds is to be redeemed on September 19,
2005 at a redemption price of 100% of the principal amount thereof plus accrued
interest to the redemption date.

 

Section 3.4.                                   Investment
of Fund Moneys.  At the oral
(confirmed promptly in writing) or written request of the Company, any moneys
held as part of the Bond Fund, the Refunding Fund or the Rebate Fund shall be
invested or reinvested by the Trustee in Eligible Investments; provided, that
such moneys shall be invested or reinvested by the Trustee only in Eligible
Investments which shall mature, or which shall be subject to redemption by the
holder thereof at the option of such holder, not later than the date upon which
the moneys so invested are needed to make payments from those Funds.  The Authority (to the extent it retained or
retains direction or control) and the Company each hereby represents that the
investment and reinvestment and the use of the proceeds of the Refunded Bonds
were restricted in such manner and to such extent as was necessary so that the
Refunded Bonds would not constitute arbitrage bonds under the statutory
predecessor of the Code and each hereby covenants that it will restrict that
investment and reinvestment and the use of the proceeds of the Bonds in such
manner and to such extent, if any, as may be necessary so that the Bonds will
not constitute arbitrage bonds under Section 148 of the Code.

 

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

 

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

 

(End of Article
III)

 

11

 

ARTICLE IV

 

LOAN BY AUTHORITY;
LOAN PAYMENTS;

ADDITIONAL
PAYMENTS; AND FIRST MORTGAGE BONDS

 

Section 4.1.                                   Loan
Repayment; Delivery of First Mortgage Bonds.  Upon the terms and conditions of this
Agreement, the Authority agrees to make the Loan to the Company.  The proceeds of the Loan shall be deposited
with the Trustee pursuant to Section 3.3 hereof.  As evidence of its obligation hereunder to
repay the Loan, the Company agrees to execute and deliver the First Mortgage
Bonds to the Authority, in the manner provided in Section 4.6 hereof.  In consideration of and in repayment of the
Loan, the Company shall make, as Loan Payments, to the Trustee for the account
of the Authority, payments on the First Mortgage Bonds which correspond, as to
time, and are equal in amount, to the Bond Service Charges payable on the
Bonds.  All Loan Payments received by the
Trustee shall be held and disbursed in accordance with the provisions of the
Indenture and this Agreement for application to the payment of Bond Service
Charges.

 

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

 

Except for such interest
of the Company as may hereafter arise pursuant to Section 8.2 hereof or
Sections 5.07 or 5.08 of the Indenture, the Company and the Authority each
acknowledge that neither the Company, the State nor the Authority has any
interest in the Bond Fund, and any moneys deposited therein shall be in the
custody of and held by the Trustee in trust for the benefit of the Holders.

 

Section 4.2.                                   Additional
Payments.  The Company shall pay to
the Authority, the Authority Fee and, as Additional Payments hereunder, any and
all costs 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.

 

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

 

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

 

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

 

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

 

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

 

12

 

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

 

Section 4.6.                                   First
Mortgage Bonds.  To evidence and
secure the obligations of the Company to make the Loan Payments and repay the
Loan, the Company will, concurrently with the issuance of the Bonds, execute
and deliver First Mortgage Bonds to the Authority in an aggregate principal
amount equal to the aggregate principal amount of the Bonds.  The Company agrees that First Mortgage Bonds
authorized pursuant to the Company Mortgage, will be issued containing the
terms and conditions and in substantially the form set forth in the
Supplemental Mortgage Indenture.  The
First Mortgage Bonds shall:

 

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

 

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

 

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

 

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

 

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

 

(End of Article
IV)

 

13

 

ARTICLE V

 

ADDITIONAL
AGREEMENTS AND COVENANTS

 

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

 

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

 

So long as such shall not
be in violation of the Act or impair the character of the Project Facilities as
Waste Water Facilities or Solid Waste Facilities, and provided there is
continued compliance with applicable laws and regulations of governmental
entities having jurisdiction thereof, the Company shall have the right to
remodel the Project Facilities or make additions, modifications and
improvements thereto, from time to time as it, in its discretion, may deem to
be desirable for its uses and purposes, the cost of which remodeling,
additions, modifications and improvements shall be paid by the Company and the
same shall, when made, become a part of the Project Facilities.

 

Section 5.3.                                   Removal
of Portions of the Project Facilities. 
The Company shall not be under any obligation to renew, repair or
replace any inadequate, obsolete, worn out, unsuitable, undesirable or
unnecessary portions of the Project Facilities, except that, subject to Section
5.4 hereof, it will use its best efforts to ensure the continued character of
the Project Facilities as Waste Water Facilities or Solid Waste Facilities.  The Company shall have the right from time to
time to substitute personal property or fixtures for any portions of the
Project Facilities, provided that the personal property or fixtures so
substituted shall not impair the character of the Project Facilities as Waste
Water Facilities or Solid Waste Facilities. 
Any such substituted property or fixtures shall, when so substituted,
become a part of the Project Facilities. 
The Company shall also have the right to remove any portion of the
Project Facilities, without substitution therefor; provided, that the Company
shall deliver to the Trustee a certificate signed by an Engineer describing
said portion of the Project Facilities and stating that the removal of such
property or fixtures will not impair the character of the Project Facilities as
Waste Water Facilities or Solid Waste Facilities.

 

Section 5.4.                                   Operation
of Project Facilities.  The Company
will, subject to its obligations and rights to maintain, repair or remove
portions of the Project Facilities, as provided in Sections 5.2 and 5.3 hereof,
use its best efforts to continue operation of the Project Facilities so long as
and to the extent that operation thereof is required to comply with laws or
regulations of governmental entities having jurisdiction thereof or unless the
Authority shall have approved the discontinuance of such operation (which
approval shall not be unreasonably withheld). 
The Company agrees that it will, within the design capacities thereof, use
its best efforts to operate and maintain the Project Facilities in accordance
with all applicable, valid and enforceable rules and regulations of
governmental entities having jurisdiction thereof; provided, that the Company
reserves the right to contest in good faith any such laws or regulations.  The Company agrees that sufficient qualified
operating personnel will be retained and operational tests and measurements
necessary to determine compliance with the preceding sentence will be performed
to insure proper and efficient operation and maintenance of the Project
Facilities.

 

Nothing in this Agreement
shall prevent or restrict the Company, in its sole discretion, at any time,
from discontinuing or suspending either permanently or temporarily its use of
any facility of the Company served by the Project Facilities and in the event
such discontinuance or suspension shall render unnecessary the continued
operation of the Project Facilities, the Company shall have the right to
discontinue the operation of the Project Facilities during the period of any
such discontinuance or suspension.

 

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

 

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

 

14

 

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

 

Section 5.8.                                   Company
to Maintain its Corporate Existence; Conditions Under Which Exceptions
Permitted.  The Company agrees that
during the term of this Agreement it will maintain its corporate existence and,
will not sell its electric properties as an entirety or substantially as an
entirety or consolidate with or merge into another corporation or permit one or
more other corporations to consolidate with or merge into it, except to the
extent permitted under the provisions of the Company Mortgage, provided that
any successor corporation resulting from any such sale, consolidation or merger
shall assume all obligations of the Company arising under or contemplated by
the provisions of this Agreement.

 

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

 

Section 5.9.                                   Indemnification.  The Company releases the Authority from,
agrees that the Authority shall not be liable for, and indemnifies the
Authority against, all liabilities, claims, costs and expenses imposed upon or
asserted against the Authority on account of: 
(a) any loss or damage to property or injury to or death of or loss by
any person that may be occasioned by any cause whatsoever pertaining to the
construction, maintenance, operation and use of the Project Facilities; (b) any
breach or default on the part of the Company in the performance of any covenant
or agreement of the Company under this Agreement or any related document, or
arising from any act or failure to act by the Company, or any of its agents,
contractors, servants, employees or licensees; (c) the authorization, issuance
and sale of the Bonds, and the provision of any information furnished in
connection therewith concerning the Project Facilities or the Company
(including, without limitation, any information furnished by the Company for
inclusion in any certifications made by the Authority under Section 3.4 hereof
or for inclusion in, or as a basis for preparation of, the information
statements filed by the Authority pursuant to Section 8(a)(ii) of the Bond
Resolution); and (d) any claim or action or proceeding with respect to the
matters set forth in (a), (b) and (c) above brought thereon.

 

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

 

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

 

15

 

action or proceeding to the Company, and the Company upon receipt of
that notice shall have the obligation and the right to assume the defense of
the action or proceeding; provided, that failure of a party to give that notice
shall not relieve the Company from any of its obligations under this Section
unless that failure prejudices the defense of the action or proceeding by the
Company.  At its own expense, an
indemnified party may employ separate counsel and participate in the defense;
provided however, where it is ethically inappropriate for one firm to represent
the interests of the Authority and any other indemnified party or parties, the
Company shall pay the Authority’s legal expenses in connection with the Authority’s
retention of separate counsel.  The
Company shall not be liable for any settlement made without its consent.

 

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

 

Section 5.10.                             Company
Not to Adversely Affect Exclusion of Interest on Bonds From Gross Income For
Federal Income Tax Purposes.  The
Company hereby covenants and represents that it has taken and caused to be
taken and shall take and cause to be taken all actions that may be required of
it for the interest on the Bonds to be and remain excluded from the gross
income of the Holders for federal income tax purposes, and that it has not
taken or permitted to be taken on its behalf, and covenants that it will not
take, or permit to be taken on its behalf, any action which, if taken, would
adversely affect that exclusion under the provisions of the Code.

 

Section 5.11.                             Use
of Project Facilities.  The Authority
agrees that it will not take any action, or cause any action to be taken on its
behalf, to interfere with the Company’s ownership interest in the Project or to
prevent the Company from having possession, custody, use and enjoyment of the
Project other than pursuant to Article VII of this Agreement or Article VII of
the Indenture.

 

Section 5.12.                             Assignment
by Company.  This Agreement may be
assigned in whole or in part by the Company without the necessity of obtaining
the consent of either the Authority or the Trustee, but only with the prior
written consent of the Bond Insurer, subject, however, to each of the following
conditions:

 

(a)                                  No
assignment (other than pursuant to Section 5.8 hereof) shall relieve the
Company from primary liability for any of its obligations hereunder, and in the
event of any such assignment the Company shall continue to remain primarily
liable for the payment of the Loan Payments and Additional Payments and for
performance and observance of the agreements on its part herein provided to be
performed and observed by it.

 

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

 

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

 

(d)                                 Any
assignment from the Company shall not materially impair fulfillment of the
Project Purposes to be accomplished by operation of the Project as herein
provided.

 

Section 5.13.                             Bond
Insurance Policy.  In consideration
of the issuance by the Bond Insurer of the Bond Insurance Policy, the Company
hereby covenants that:

 

(a)                                  The
Company shall pay or reimburse the Bond Insurer for any and all charges, fees,
costs, and expenses that the Bond Insurer may reasonably pay or incur in
connection with the following: 
(i) the administration, enforcement, defense, or preservation of
any rights or security hereunder or under any other transaction document;
(ii) the pursuit of any remedies hereunder, under any other transaction
document, or otherwise afforded by law or equity, (iii) any amendment,
waiver, or other action with respect to or related

 

16

 

to this Agreement or any
other transaction document whether or not executed or completed; (iv) the
violation by the Company of any law, rule, or regulation or any judgment, order
or decree applicable to it; (v) any advances or payments made by the Bond
Insurer to cure defaults of the Company under the transaction documents; or
(vi) any litigation or other dispute in connection with the Agreement, any
other transaction document, or the transactions contemplated hereby or thereby,
other than amounts resulting from the failure of the Bond Insurer to honor its
payment obligations under the Bond Insurance Policy.  The Bond Insurer reserves the right to charge
a reasonable fee as a condition to executing any amendment, waiver, or consent
proposed in respect of this Agreement or any other transaction document.  The obligations of the Company to the Bond
Insurer hereunder shall survive discharge and termination of the Agreement.

 

(b)                                 The
Company shall promptly provide written notice to the Bond Insurer of the
downgrading by any rating agency of the Company’s underlying rating, or the
underlying rating on the Bonds or any parity obligations of the Company.

 

(c)                                  The
Company shall promptly provide written notice to the Bond Insurer of any
material events related to the Bonds pursuant to Rule 15c2-12 under the
Securities Exchange Act of 1934, as amended; and the downgrading by any rating
agency of the Company’s underlying rating, or the underlying rating on the
Bonds or any parity obligations of the Company.

 

(d)                                 The
Company shall provide such additional information to the Bond Insurer as the
Bond Insurer may reasonably request from time to time.

 

(End of Article V)

 

17

 

ARTICLE VI

 

REDEMPTION

 

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

 

Section 6.2.                                   Extraordinary
Optional Redemption.  The Company
shall have, subject to the conditions hereinafter imposed, the option to direct
the redemption of the Bonds in whole or in part in accordance with the
applicable provisions of the Indenture upon the occurrence of any of the
following events:

 

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

 

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

 

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

 

(d)                                 Unreasonable
burdens or excessive liabilities shall have been imposed upon the Authority or
the Company with respect to the Project or a Station Unit or the operation
thereof, including, without limitation, the imposition of federal, state or
other ad valorem, property, income or other taxes other than ad valorem taxes
at the rates presently levied upon privately owned property used for the same
general purpose as the Project or a Station Unit.

 

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

 

18

 

judgment render the Project
or a Station Unit uneconomic or obsolete for the Project Purposes.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Section 6.5.                                   Actions
by 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.

 

19

 

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

 

(End of Article
VI)

 

20

 

ARTICLE VII

 

EVENTS OF DEFAULT
AND REMEDIES

 

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

 

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

 

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

 

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

 

(d)                                 Written
notice from the Bond Insurer to the Trustee that an event of default has
occurred and is continuing under the Bond Insurance Agreement.

 

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

 

The term Force Majeure
shall mean the following:

 

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

 

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

 

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

 

21

 

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

 

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

 

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

 

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

 

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

 

Section 7.3.                                   No
Remedy Exclusive.  No remedy
conferred upon or reserved to the Authority or the Trustee by this Agreement is
intended to be exclusive of any other available remedy or remedies, but each
and every such remedy shall be cumulative and shall be in addition to every
other remedy given under this Agreement, or now or hereafter existing at law,
in equity or by statute.  No delay or
omission to exercise any right or power accruing upon any default shall impair
that right or power or shall be construed to be a waiver thereof, but any such
right or power may be exercised from time to time and as often as may be deemed
expedient.  In order to entitle the
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 7.4.                                   Agreement
to Pay Attorneys’ Fees and Expenses. 
If an Event of Default should occur and the Authority or the Trustee
should incur expenses, including attorneys’ fees and expenses, in connection
with the enforcement of this Agreement or the collection of sums due hereunder,
the Company shall be required, to the extent permitted by law, to reimburse the
Authority and the Trustee, as applicable, for the fees and expenses so incurred
upon demand.

 

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

 

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

 

Section 7.7.                                   Survival.  The provisions of Sections 4.2, 5.9 and 7.4
of this Agreement shall survive the payment in full of the Bonds, the
satisfaction, discharge and termination of this Agreement or the

 

22

 

Indenture, and the resignation or removal of the Trustee, any Paying
Agent, the Registrar and any Authenticating Agent as the case may be.

 

(End of Article
VII)

 

23

 

ARTICLE VIII

 

MISCELLANEOUS

 

Section 8.1.                                   Term
of Agreement.  This Agreement shall
be and remain in full force and effect from the date of delivery of the Bonds
to or to the order of the Original Purchaser until such time as all of the
Bonds shall have been fully paid (or provision made for such payment) pursuant
to the Indenture and all other sums payable by the Company under this Agreement
shall have been paid.

 

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

 

Section 8.3.                                   Notices.  All notices, certificates, requests or other
communications hereunder shall be in writing, except as provided in Section 3.4
hereof, and shall be deemed to be sufficiently given when mailed by registered
or certified mail, postage prepaid, and addressed to the appropriate Notice
Address.  A duplicate copy of each
notice, certificate, request or other communication given hereunder to the Authority,
the Company or the Trustee shall also be given to the others.  The Company, the Authority and the Trustee,
by notice given hereunder, may designate any further or different addresses to
which subsequent notices, certificates, requests or other communications shall
be sent.

 

Section 8.4.                                   Extent
of Covenants of the Authority; No Personal Liability.  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, officer, agent or employee of the Authority in other than his
official capacity, and neither the members of the Authority nor any official
executing the Bonds shall be liable personally on the Bonds or be subject to
any personal liability or accountability by reason of the issuance thereof or
by reason of the covenants, obligations or agreements of the Authority
contained in this Agreement or in the Indenture.

 

Section 8.5.                                   Binding
Effect.  This Agreement shall inure
to the benefit of and shall be binding in accordance with its terms upon the
Authority, the Company and their respective permitted successors and assigns
provided that this Agreement may not be assigned by the Company (except as
permitted under Sections 5.8 or 5.12 hereof) and may not be assigned by the
Authority except to (i) the Trustee pursuant to the Indenture or as otherwise
may be necessary to enforce or secure payment of Bond Service Charges or (ii)
any successor public body to the Authority. 
Sections 4.2, 5.9, 7.4 and 7.7 of this Agreement shall inure to the
benefit of the Trustee, the Registrar, any Paying Agent and any Authenticating
Agent and their respective successors and assigns.

 

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

 

24

 

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

 

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

 

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

 

Section 8.10.                             Continuing
Disclosure.  The Issuer hereby
acknowledges the entry by the Company into the Continuing Disclosure Agreement
under which the Company has assumed certain obligations for the benefit of the
holders and beneficial owners of the Bonds. 
The Company agrees to perform its obligations under the Continuing Disclosure
Agreement.  The Company acknowledges and
agrees that the Issuer is not an “obligated person” (as defined in the
Continuing Disclosure Agreement) with respect to the Bonds and represents that
the Company is the only obligated person with respect to the Bonds.  Notwithstanding any other provision of this
Agreement, any failure by the Company to comply with any provision of the
Continuing Disclosure Agreement shall not be a failure or a default, or an
Event of Default, under this Agreement or the Indenture.

 

Section 8.11.                             Third-Party
Beneficiary.  To the extent that this
Agreement confers upon or gives or grants to the Bond Insurer any right, remedy
or claim under or by reason of this Agreement, the Bond Insurer is hereby
explicitly recognized as being a third-party beneficiary hereunder and may
enforce any such right, remedy or claim conferred, given or granted hereunder.

 

(End of Article
VIII)

 

25

 

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

 

 

	
   

  	
  OHIO WATER DEVELOPMENT
  AUTHORITY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Steven J. Grossman

  	
   

  
	
   

  	
   

  	
  Executive
  Director

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  THE DAYTON POWER AND
  LIGHT COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John J.
  Gillen

  	
   

  
	
   

  	
   

  	
  Senior Vice President
  and

  	
   

  
	
   

  	
   

  	
  Chief Financial
  Officer

  	
   

  

 

26

 

Exhibit A

 

WASTE WATER
FACILITIES AT THE SERIES 1977 PROJECT

 

I.                                         TAIT
PROJECT UNIT

 

That portion of the
Project to be constructed and installed at the F. M. Tait Electric Generating
Station will consist of new Waste Water Facilities for the treatment of all
plant waste water, including that water containing oily wastes and suspended
solids, in order to satisfy the chemical discharge limitations of NPDES Permit
No. B103*AD.

 

Waste Water Facilities
for the treatment of oily wastes will treat water from the following
sources:  plant sumps, the peaking units,
the fuel oil unloading station, softener blowdown and Units 4 and 5 flash tank
and will include the construction and installation of:  an oily waste basin to receive waste water
from the various sources of collection and function as a surge basin; an
oil-water separator; a waste oil sump to pump oily waste from various plant
locations to the oily waste basin; and all necessary piping, pumps, valves,
controls, filters, monitoring devices and electrical supply systems in
connection therewith.

 

Waste Water Facilities
for the treatment of suspended solids will treat water from the following plant
sources:  coal yard runoff, plant ash
sumps, deep well bleaching backwash and the reverse osmosis system
backwash.  Such facilities will include
the construction and installation of the following:  a coal yard runoff pond to provide temporary
runoff storage from the coal yard and coal handling area and to function as a
surge pond; a pumping station at the coal yard runoff pond to pump waste water
to the ash pits; a waste water collection system for the coal storage area; a
pressure filter system to reduce the concentration of suspended solids; and all
necessary sumps, pumps, piping, storage tanks, overflow outlets, valves,
filters, weirs, controls, monitoring devices and electrical supply systems in
connection therewith.

 

Waste Water Facilities
will also include the construction of a water treatment building to house the
oil-water separator, pressure filters and various pumps and controls.

 

II.                                     STUART
PROJECT UNIT

 

That portion of the
Project to be constructed and installed at the J. M. Stuart Electric Generating
Plant will consist of new Waste Water Facilities for the treatment of all plant
waste water, including that water containing suspended solids, floating solids
and oily wastes, in order to satisfy the chemical discharge limitations of
NPDES Permit No. B049*AD.

 

Waste Water Facilities
will consist of seven systems:  an oily
waste system, coal pile runoff system, sanitary waste system, ph adjustment
system, boiler cleaning waste system, a suspended solids disposal system and
filtration system, including monitoring requirements.

 

The oily waste system
will include the construction and installation of an oily waste collection
pond, an oil-water separator, a waste oil tank and all necessary sumps, drains,
piping, valves and controls in connection therewith.

 

The coal pile runoff system
will include the construction and installation of a drainage ditch, a coal yard
runoff pond and all necessary sumps, pumps and controls in connection
therewith.

 

The sanitary waste system
will consist of modifications to the existing sewage treatment facilities,
including the installation of a separate surge tank equipped with a blower and
duplex submersible metering pump unit and piping system to the existing 9,000
gallons per day system, improvements which will supplement or replace the
existing 2,000 gallons per day unit and the construction and installation of a
new sewage treatment plant.

 

The ph adjustment system
will consist of the installation of a chemical mixing system to consist of
tanks, pumps, piping, valves and sensing and metering equipment to control the
ph of the waters leaving the fly ash pond.

 

A-1

 

The boiler cleaning waste
system will consist of the construction and installation of a boiler cleaning
waste collection pond, clarifiers, caustic tanks, polymer tanks, a thickener,
filters and all necessary piping, pumps, valves and controls in connection
therewith.

 

The suspended solids
disposal system will include construction and installation of modifications to
the existing ash pond system to provide for adequate retention time to settle
out suspended solids prior to discharge and for the removal of floating solids
(cenospheres) including the construction and installation of outlets, weirs,
drains, pumps, sumps, a pumping station, pipes, dikes and discharge structures;
the installation of cenosphere removal equipment and the installation of a
cleaning system to remove fly ash from the south building wall up to and
including the area under the precipitator.

 

The filtration system
will include the installation of pumps, piping, valves, filters and all
necessary controls to remove suspended solids.

 

Stations will be
installed to monitor effluents being released into the river.

 

Electrical service will
be provided by installing underground and overhead feeders from the existing
distribution system.  Certain additional
installations will be necessary, including cables and new transformers.

 

III.                                 HUTCHINGS
PROJECT UNIT

 

That portion of the
Project to be constructed and installed at the O. H. Hutchings Electric
Generating Station will consist of new Waste Water Facilities for the treatment
of all plant waste water, including that water containing suspended solids,
floating solids (cenospheres) and oily wastes, in order to satisfy the chemical
discharge limitations of NPDES Permit No. B104*AD.

 

Waste Water Facilities
for the treatment of oily wastes will treat water from the six plant sumps, the
fuel unloading and gas turbine area and will include construction and
installation of:  an oily waste basin to
receive water from the various sources of collection and function as a surge
basin; a secondary settling basin; an oily waste forwarding sump to pump oily
waste from the sump system header to the oily waste basin; a sump to pump
runoff water from the fuel unloading and gas turbine area to the oily waste
basin; an oil-water separator and related sumps; and all necessary piping,
pumps, valves, controls, filters, monitoring devices and electrical supply
systems in connection therewith.

 

Waste Water Facilities
for the treatment of floating and suspended solids will treat water from the
following sources:  coal yard runoff,
reverse osmosis waste, deep well bleaching waste, boiler blowdown and softener
blowdown.  Such Waste Water Facilities
will include construction and installation of the following:  rerouting of the softener blowdown from the
discharge canal to the ash sump; a coal yard runoff pond drainage system; a
pumping station at the coal yard runoff pond to pump waste water to the ash
pits; an ash line drain tank; an ash pit overflow structure; a filter building;
a pressure filter system between the secondary drainage settling basin and the
river; modifications to the sanitary waste system; three filter feed pumps; and
all necessary pumps, sumps, pipes, valves, controls, filters, weirs and
monitoring supply systems in connection therewith.

 

A-2

 

Exhibit B

 

WASTE WATER AND
SOLID WASTE FACILITIES

AT THE SERIES 1982
PROJECT

 

General

 

Killen Electric Generating
Station (“Killen”) has a steam turbine-generator with a 612,574 KW nameplate
rating and coal fired boiler rated at 4,545,000 lbs. of steam per hour at 2620
psig and 1005° F.  The ownership is
shared between The Dayton Power and Light Company and The Cincinnati Gas &
Electric Company with individual interest of 67% and 33% respectively.

 

(1)                                  Circulating
Water System

 

The circulating water
system at Killen is a closed cycle system utilizing one mechanical draft
cooling tower.  The round mechanical
draft cooling tower is approximately sixty-six (66) feet high with a base
diameter of approximately two hundred twenty-seven (227) feet.  Engineering, material, labor and supervision
were provided for the installation of the following components for the
circulating water system:

 

Cooling tower including
materials and hardware such as casing, structural framework, fill, air inlet
louvers, drift eliminators, ferrous hardware and non-ferrous hardware

 

Water distribution system
including riser pipes, distribution piping, valving, fittings, tower deicing,
etc.

 

Electrical supply
to:  fan motors, lighting, pump motors
and any other electrical work associated with the cooling tower

 

Access stairs, ladders,
platforms and walkways

 

Lightning protection and
grounding

 

Water circulation system
including intake and discharge piping, valves, circulating water pumps and
motor

 

Substructure consisting
of piling, footer and any other construction technology necessary to support
the cooling tower

 

(2)                                  Wastewater
Treatment System

 

The wastewater treatment
system at Killen represents a maximum facility required for the treatment of
various plant wastewaters.  The treatment
philosophy that was recommended for the various waste streams generated at
Killen was and is based on waste flows, characteristics and final effluent
limitations.

 

Sanitary wastes are
treated in an extended aeration package unit which provides secondary
treatment.  Effluent from this treatment
facility is subjected to disinfection by chlorination and discharged to the
collection basin.  The sludge produced
has been and will be hauled periodically for disposal in an approved
manner.  Demineralizer and condensate
polisher regenerate wastes, laboratory and seal trough drains, coal pile area
(active and dead storage) and precipitator area runoff, bottom ash and fly ash
sluicing pipe drainage and bottom ash system overflow and seal water are all
nonconcurrent and vary in flow rates. 
These waste streams are all directed to the collection basin for
equalization, neutralization, retention and removal of particulates or solids
by sedimentation.

 

Boiler blowdown does not
exceed the limitations set forth for iron and copper and has been and will be
directed to the collection basin, however, facilities will be provided to
divert this flow to the cleaning waste retention basin, if it is found that the
blowdown contains iron and copper at levels higher than the effluent
limitation.  The waste is then treated in
a treatment facility either alone or combined with other cleaning wastes which
are directed to the cleaning waste retention basin.  The effluent from the treatment system is
sent to the collection basin.

 

A-1

 

Boiler cleaning,
reheater, superheater and air preheater cleaning wastes which are occasional
and may contain iron and copper in excess of effluent limitations are directed
to the cleaning waste retention basin and treated to remove iron and
copper.  The effluent is directed to the
collection basin.  Any sludge that is
produced in the treatment facility is disposed of in an approved manner.

 

Equipment drain, floor
drain and other miscellaneous low volume equipment cleaning wastes contaminated
with oil are treated in an oil-water separator system for separation of oil and
the effluent sent to the collection basin. 
The separated oil is collected in a waste oil storage tank for reuse or
disposal in an approved manner.

 

Storm water wastes from
transformer and oil storage tank areas are collected locally in a system of
drains and directed to local oil-storm water separator systems.  The separated oil is collected in waste oil
storage tanks for reuse or disposal in an approved manner.  The effluent water is directed to the
collection basin.

 

All waste streams
directed to the collection basin are retained in the basin for a minimum of 24
hours to permit sedimentation to occur. 
The overflow or supernatant from the collection basin is directed to the
bottom ash pond.

 

Cooling tower cleaning
wastes, cooling tower blowdown and bottom ash transport water are all directed
to the bottom ash pond.  Bottom ash pond
water will be used for bottom ash and fly ash sluicing.  Overflow from the bottom ash pond is sent to the
fly ash pond.

 

The fly ash pond, in
addition to receiving the overflow from the bottom ash pond, also receives the
fly ash transport water.  The final
discharge from the fly ash pond is to the river.  An automatic liquid Carbon Dioxide
Recarbonation System neutralizes the high pH effluent to acceptable limits.

 

(3)                                  Ash
Handling and Disposal System

 

The ash handling system
at Killen consists of a dry vacuum collection system and a wet sluicing removal
system designed to remove ash from the electrostatic precipitator and bottom
ash hoppers and to transport the collected ash to on-site storage ponds.  Engineering, material, labor and supervision
was provided for the installation of the following components for the ash
handling and disposal system:

 

Hoppers, valves,
controls, pumps, manifold pipe connection system, vacuum producing equipment,
discharge conveying pipes to the wet ash disposal area

 

On-site ash disposal
ponds

 

Supporting structural
steel, pipe hangers and foundations

 

Necessary stairways,
galleries and enclosures

 

Electrical work
associated with the ash disposal system

 

A-2Exhibit 4.2

 

 

 

 

LOAN AGREEMENT

 

 

between

 

 

OHIO AIR QUALITY DEVELOPMENT AUTHORITY

 

 

and

 

 

THE DAYTON POWER AND LIGHT COMPANY

 

 

 

$137,800,000

State of Ohio

Collateralized Pollution Control

Revenue Refunding Bonds, 2005 Series B

(The Dayton Power and Light Company Project)

 

 

 

Dated

 

 

as of

 

 

August 1, 2005

 

 

 

 

INDEX

 

(This Index is not a part of the Agreement

but rather is for convenience of reference only.)

 

	
   

  	
  Page

  
	
  Preambles

  	
  1

  
	
   

  	
   

  
	
  ARTICLE I

  	
   

  
	
  DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section

  	
  1.1

  	
  Use of Defined Terms

  	
  2

  
	
  Section

  	
  1.2

  	
  Definitions

  	
  2

  
	
  Section

  	
  1.3

  	
  Interpretation

  	
  7

  
	
  Section

  	
  1.4

  	
  Captions and Headings

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
   

  
	
  REPRESENTATIONS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section

  	
  2.1

  	
  Representations of the Authority

  	
  8

  
	
  Section

  	
  2.2

  	
  No Warranty by Authority of Condition or Suitability of the Project

  	
  8

  
	
  Section

  	
  2.3

  	
  Representations and Covenants of the Company

  	
  8

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
   

  
	
  COMPLETION OF THE PROJECT;

  	
   

  
	
  ISSUANCE OF THE BONDS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section

  	
  3.1

  	
  Acquisition, Construction and Installation

  	
  11

  
	
  Section

  	
  3.2

  	
  Project Description

  	
  11

  
	
  Section

  	
  3.3

  	
  Issuance of the Bonds; Application of Proceeds

  	
  11

  
	
  Section

  	
  3.4

  	
  Investment of Fund Moneys

  	
  12

  
	
  Section

  	
  3.5

  	
  Rebate Fund

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
   

  
	
  LOAN BY AUTHORITY; LOAN PAYMENTS;

  	
   

  
	
  ADDITIONAL PAYMENTS; AND FIRST MORTGAGE BONDS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section

  	
  4.1

  	
  Loan Repayment; Delivery of First Mortgage Bonds

  	
  13

  
	
  Section

  	
  4.2

  	
  Additional Payments

  	
  13

  
	
  Section

  	
  4.3

  	
  Place of Payments

  	
  13

  
	
  Section

  	
  4.4

  	
  Obligations Unconditional

  	
  13

  
	
  Section

  	
  4.5

  	
  Assignment of Revenues, Agreement and First Mortgage Bonds

  	
  14

  
	
  Section

  	
  4.6

  	
  First Mortgage Bonds

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
   

  
	
  ADDITIONAL AGREEMENTS AND COVENANTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section

  	
  5.1

  	
  Right of Access

  	
  15

  
	
  Section

  	
  5.2

  	
  Maintenance

  	
  15

  
	
  Section

  	
  5.3

  	
  Removal of Portions of the Project Facilities

  	
  15

  
	
  Section

  	
  5.4

  	
  Operation of Project Facilities

  	
  15

  
	
  Section

  	
  5.5

  	
  Insurance

  	
  15

  

 

i

 

	
   

  	
   

  	
   

  	
  Page

  
	
  Section

  	
  5.6

  	
  Workers’ Compensation Coverage

  	
  15

  
	
  Section

  	
  5.7

  	
  Damage; Destruction and Eminent Domain

  	
  15

  
	
  Section

  	
  5.8

  	
  Company to Maintain its Corporate Existence; Conditions Under Which
  Exceptions Permitted

  	
  16

  
	
  Section

  	
  5.9

  	
  Indemnification

  	
  16

  
	
  Section

  	
  5.10

  	
  Company Not to Adversely Affect Exclusion of Interest on Bonds From
  Gross Income For Federal Income Tax Purposes

  	
  17

  
	
  Section

  	
  5.11

  	
  Use of Project Facilities

  	
  17

  
	
  Section

  	
  5.12

  	
  Assignment by Company

  	
  17

  
	
  Section

  	
  5.13

  	
  Bond Insurance Policy

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
   

  
	
  REDEMPTION

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section

  	
  6.1

  	
  Optional Redemption

  	
  19

  
	
  Section

  	
  6.2

  	
  Extraordinary Optional Redemption

  	
  19

  
	
  Section

  	
  6.3

  	
  Mandatory Redemption

  	
  20

  
	
  Section

  	
  6.4

  	
  Notice of Redemption

  	
  20

  
	
  Section

  	
  6.5

  	
  Actions by Authority

  	
  20

  
	
  Section

  	
  6.6

  	
  Concurrent Discharging of First Mortgage Bonds

  	
  21

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
   

  
	
  EVENTS OF DEFAULT AND REMEDIES

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section

  	
  7.1

  	
  Events of Default

  	
  22

  
	
  Section

  	
  7.2

  	
  Remedies on Default

  	
  23

  
	
  Section

  	
  7.3

  	
  No Remedy Exclusive

  	
  23

  
	
  Section

  	
  7.4

  	
  Agreement to Pay Attorneys’ Fees and Expenses

  	
  23

  
	
  Section

  	
  7.5

  	
  No Waiver

  	
  23

  
	
  Section

  	
  7.6

  	
  Notice of Default

  	
  23

  
	
  Section

  	
  7.7

  	
  Survival

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
   

  
	
  MISCELLANEOUS

  	
  25

  
	
   

  	
   

  	
   

  	
   

  
	
  Section

  	
  8.1

  	
  Term of Agreement

  	
  25

  
	
  Section

  	
  8.2

  	
  Amounts Remaining in Funds

  	
  25

  
	
  Section

  	
  8.3

  	
  Notices

  	
  25

  
	
  Section

  	
  8.4

  	
  Extent of Covenants of the Authority; No Personal Liability

  	
  25

  
	
  Section

  	
  8.5

  	
  Binding Effect

  	
  25

  
	
  Section

  	
  8.6

  	
  Amendments and Supplements

  	
  25

  
	
  Section

  	
  8.7

  	
  Execution Counterparts

  	
  26

  
	
  Section

  	
  8.8

  	
  Severability

  	
  26

  
	
  Section

  	
  8.9

  	
  Governing Law

  	
  26

  
	
  Section

  	
  8.10

  	
  Continuing Disclosure

  	
  26

  
	
  Section

  	
  8.11

  	
  Third-Party Beneficiary

  	
  26

  
	
   

  	
   

  	
   

  	
   

  
	
  Signatures

  	
  27

  
	
   

  	
   

  
	
  Exhibit A
  – AIR QUALITY FACILITIES AT THE SERIES 1980 PROJECT

  	
   

  
	
  Exhibit B
  – AIR QUALITY FACILITIES AT THE SERIES 1982 PROJECT

  	
   

  
	
  Exhibit C
  – AIR QUALITY FACILITIES AT THE SERIES 1985 PROJECT

  	
   

  

 

ii

 

LOAN AGREEMENT

 

THIS
LOAN AGREEMENT is made and entered into as of August 1, 2005 between the
OHIO AIR QUALITY DEVELOPMENT AUTHORITY (the “Authority”), a body politic and
corporate organized and existing under the laws of the State of Ohio, and THE
DAYTON POWER AND LIGHT COMPANY (the “Company”), a public utility and
corporation duly organized and validly existing under the laws of the State of
Ohio.  Capitalized terms used in the
following recitals are used as defined in Article I of this Agreement.

 

Pursuant
to Section 13 of Article VIII of the Ohio Constitution and the Act,
the Authority has determined to issue, sell and deliver the Bonds and to lend
the proceeds derived from the sale thereof to the Company to assist in the
refunding of the Series 1992 Bonds and the Series 1995 Bonds as
defined below.  The Series 1992
Bonds were originally issued to provide funds to make a loan to the Company to
assist in the refunding of the Series 1980 Bonds and the Series 1982
Bonds, each as defined below, which were each originally issued to provide
funds to make a loan to the Company to assist in the financing of its portion
of the costs of the Series 1980 Project and the Series 1982 Project,
respectively, each as defined below.  The
Series 1995 Bonds were originally issued to provide funds to make a loan
to the Company to assist in the refunding of the Series 1985 Bonds as
defined below which were originally issued to provide funds to make a loan to
the Company to assist in the financing of its portion of the costs of the Series 1985
Project as defined below.

 

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

 

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

 

 

ARTICLE I

DEFINITIONS

 

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

 

Section 1.2.                                   Definitions.  As used herein:

 

“Act”
means Chapter 3706, Ohio Revised Code, as enacted and amended from time to time
pursuant to Section 13 of Article VIII of the Ohio Constitution.

 

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

 

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

 

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

 

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

 

“Authenticating
Agent” means the Authenticating Agent as defined in the Indenture.

 

“Authority
Fee” means the amount of $349,750.

 

“Bond
Fund” means the Bond Fund created in the Indenture.

 

“Bond
Insurance Agreement” means the Insurance Agreement entered into between the
Company and the Bond Insurer in connection with the issuance of the Bond
Insurance Policy.

 

“Bond
Insurance Policy” or “Policy” means the municipal bond insurance policy issued by the Bond
Insurer that guarantees payment of principal of and interest on the Bonds.

 

“Bond
Insurer” means Financial Guaranty Insurance Company, a New York stock insurance
company, or any successor thereto.

 

“Bond
Resolution” means the resolution of the Authority providing for the issuance of
the Bonds and approving this Agreement, the Indenture and related matters, as
amended or supplemented from time to time.

 

“Bond
Service Charges” means, for any period or time, the principal of and interest
due on the Bonds for that period or payable at that time whether due at
maturity or upon acceleration or redemption or otherwise.

 

2

 

“Bonds”
means the $137,800,000 Collateralized Pollution Control Revenue Refunding
Bonds, 2005 Series B (The Dayton Power and Light Company Project), issued
by the Authority pursuant to the Bond Resolution and the Indenture.

 

“Bonds
Outstanding” or “Outstanding Bonds” means Outstanding Bonds as defined in the
Indenture.

 

“Code”
means the Internal Revenue Code of 1986, as amended from time to time.  References to the Code and Sections of the
Code include relevant applicable regulations and proposed regulations
thereunder and under the 1954 Code and any successor provisions to those
Sections, regulations or proposed regulations and, in addition, all applicable
official rulings and judicial determinations under the foregoing applicable to
the Bonds.

 

“Company
Mortgage” means the First and Refunding Mortgage, dated as of October 1,
1935, between the Company and the Company Mortgage Trustee, as amended,
modified or supplemented from time to time.

 

“Company
Mortgage Trustee” means The Bank of New York (formerly Irving Trust Company) as
trustee under the Company Mortgage, and its successors and assigns.

 

“Continuing
Disclosure Agreement” means that certain Continuing Disclosure Agreement
between the Company and the Trustee dated as of August 1, 2005, as the
same may be amended from time to time in accordance with the terms thereof.

 

“Eligible
Investments” means Eligible Investments as defined in the Indenture.

 

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

 

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

 

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

 

“First
Mortgage Bonds” means the $137,800,000 aggregate principal amount of First
Mortgage Bonds, 4.80% Pollution Control Series 2005-B Due 2034, issued
under the Supplemental Mortgage Indenture.

 

“Force
Majeure” means any of the causes, circumstances or events described as
constituting Force Majeure in Section 7.1 hereof.

 

“Government
Obligations” means Government Obligations as defined in the Indenture.

 

“Holder”
or “Holder of a Bond” means the Person in whose name a Bond is registered on
the Register.

 

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

 

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

 

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

 

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

 

3

 

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

 

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

 

“Notice
Address” means:

 

	
  (a)  As to
  the Authority:

  	
  Ohio Air Quality
  Development Authority

  
	
   

  	
  LeVeque Tower, Suite 1718

  
	
   

  	
  50 West Broad
  Street

  
	
   

  	
  Columbus, Ohio
  43215

  
	
   

  	
  Attention:
  Executive Director

  
	
   

  	
   

  
	
  (b)  As to
  the Company:

  	
  The Dayton Power
  and Light Company

  
	
   

  	
  1065 Woodman
  Drive

  
	
   

  	
  Dayton, Ohio
  45432

  
	
   

  	
  Attention:
  Treasurer

  
	
   

  	
   

  
	
  (c)  As to
  the Trustee:

  	
  The Bank of New
  York

  
	
   

  	
  385 Rifle Camp
  Road, 3rd Floor

  
	
   

  	
  West Paterson,
  New Jersey 07424

  
	
   

  	
  Attention:
  Corporate Trust Administration

  

 

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

 

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

 

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

 

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

 

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

 

“Original
Purchaser” means the Original Purchaser as defined in the Indenture.

 

“Paying
Agent” means the Paying Agent as defined in the Indenture.

 

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

 

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

 

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

 

4

 

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

 

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

 

“Project
Site” means, with respect to the Series 1992 Bonds, the Walter C. Beckjord
Electric Generating Station in Clermont County, Ohio and the Killen Electric
Generating Station in Adams County, Ohio, and with respect to the Series 1995
Bonds, the William H. Zimmer Generating Station in Clermont County, Ohio.

 

“Rebate
Fund” means the Rebate Fund created in the Indenture.

 

“Refunded
Bonds” means collectively, the Series 1992 Bonds and the Series 1995
Bonds.

 

“Refunding
Fund” means the Refunding Fund created in the Indenture.

 

“Register”
means the books kept and maintained for the registration and transfer of Bonds
pursuant to Section 3.05 of the Indenture.

 

“Registrar”
means the Registrar as defined in the Indenture.

 

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

 

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

 

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

 

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

 

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

 

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

 

“Series 1980
Indenture” means the Trust Indenture between the Authority and The Central
Trust Company dated as of May 1, 1980.

 

“Series 1982
Indenture” means the Trust Indenture between the Authority and The Bank of New
York (formerly Irving Trust Company), as trustee, dated as of November 1,
1982.

 

“Series 1985
Indenture” means the Trust Indenture between the Authority and The Bank of New
York, dated as of December 1, 1985.

 

5

 

“Series 1992
Indenture” means the Trust Indenture between the Authority and the Series 1992
Trustee dated as of August 15, 1992.

 

“Series 1995
Indenture” means the Trust Indenture between the Authority and the Series 1995
Trustee dated as of September 1, 1995.

 

“Series 1980
Loan Agreement” means the Loan Agreement between the Authority and the Company
dated as of May 1, 1980.

 

“Series 1982
Loan Agreement” means the Loan Agreement between the Authority and the Company
dated as of November 1, 1982.

 

“Series 1985
Loan Agreement” means the Loan Agreement between the Authority and the Company
dated as of December 1, 1985.

 

 “Series 1992 Loan Agreement” means the
Loan Agreement between the Authority and the Company dated as of August 15,
1992

 

“Series 1995
Loan Agreement” means the Loan Agreement between the Authority and the Company
dated as of September 1, 1995.

 

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

 

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

 

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

 

“Series 1992
Trustee” means The Bank of New York, as trustee under the Series 1992
Indenture.

 

“Series 1995
Trustee” means The Bank of New York, as Trustee under the Series 1995
Indenture.

 

 “State” means the State of Ohio.

 

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

 

“Supplemental
Mortgage Indenture” means the Forty-Third Supplemental Indenture, dated as of August 1,
2005, between the Company and the Company Mortgage Trustee, as amended or
supplemented from time to time.

 

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

 

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

 

6

 

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

 

Any
reference to a section or provision of the Constitution of the State or
the Act, or to a section, provision or chapter of the Ohio Revised Code, or to
any statute of the United States of America, includes that section, provision
or chapter as amended, modified, revised, supplemented or superseded from time
to time; provided, that no amendment, modification, revision, supplement or
superseding section, provision or chapter shall be applicable solely by reason
of this provision, if it constitutes in any way an impairment of the rights or
obligations of the Authority, the State, the Holders, the Trustee, the
Registrar, an Authenticating Agent, a Paying Agent or the Company under this
Agreement, the Indenture, the Bonds, the Company Mortgage, the Supplemental
Mortgage Indenture or the First Mortgage Bonds.

 

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

 

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

 

(End of Article I)

 

7

 

ARTICLE II

 

REPRESENTATIONS

 

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

 

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

 

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

 

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

 

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

 

(c)                                  The
execution, delivery and performance by the Company of this Agreement, the
Supplemental Mortgage Indenture and the Continuing Disclosure Agreement and the
consummation of the transactions contemplated hereby and thereby will not
violate any provision of law or regulation applicable to the Company, or of any
writ or decree of any court or governmental instrumentality, or of the Articles
of Incorporation, as amended, or Code of Regulations, as amended, of the
Company, or of any mortgage, indenture, contract, agreement or other
undertaking to which the Company is a party or which purports to be binding
upon the Company or upon any of its assets.

 

(d)                                 Substantially
all (at least 90%) of the proceeds of the Original Bonds were used to provide “pollution
control facilities” within the meaning of Sections 103(b)(4)(F) of the
1954 Code, the original use of which facilities 

 

8

 

commenced
with the Company and all of the proceeds of the Original Bonds have been spent
for the Project or to pay costs of issuance of the Original Bonds.  The proceeds of the Bonds (other than any
accrued interest thereon) will be used exclusively to refund the Refunded Bonds
and none of the proceeds of the Bonds will be used to pay for any costs of
issuance of the Bonds.  The principal
amount of the Bonds does not exceed the outstanding principal amount of the
Refunded Bonds.  All of the proceeds of
the Bonds will be used to retire the Refunded Bonds not later than 90 days
after the date of issuance of the Bonds. 
The proceeds of the Series 1992 Bonds (other than any accrued
interest thereon) were used exclusively to refund the Series 1980 Bonds
and the Series 1982 Bonds and none of the proceeds of the Series 1992
Bonds was used to pay for any costs of issuance of the Series 1992
Bonds.  The principal amount of the Series 1992
Bonds did not exceed the outstanding aggregate principal amount of the Series 1980
Bonds and the Series 1982 Bonds. 
All of the proceeds of the Series 1992 Bonds were used to retire
the Series 1980 Bonds and the Series 1982 Bonds not later than 90
days after the date of issuance of the Series 1992 Bonds.  The proceeds of the Series 1995 Bonds
(other than any accrued interest thereon) were used exclusively to refund the Series 1985
Bonds and none of the proceeds of the Series 1995 Bonds was used to pay
for any costs of issuance of the Series 1995 Bonds.  The principal amount of the Series 1995
Bonds did not exceed the outstanding principal amount of the Series 1985
Bonds.  All of the proceeds of the Series 1995
Bonds were used to retire the Series 1985 Bonds not later than 90 days
after the date of issuance of the Series 1995 Bonds.  The Original Bonds were issued prior to August 16,
1986.

 

(e)                                  Either
the acquisition and construction of the Series 1980 Project, the Series 1982
Project and the Series 1985 Project financed, respectively, with the Series 1980
Bonds, the Series 1982 Bonds and the Series 1985 Bonds, was not
commenced (within the meaning of Treasury Regulations §1.103-8(a)(5)) prior to
the adoption of the respective resolutions of the Authority evidencing the
intent of the Authority to issue those Original Bonds (being March 8, 1977
with respect to the Series 1980 Bonds, November 19, 1975 with respect
to the Series 1982 Bonds and November 15, 1984 with respect to the Series 1985
Bonds), or, any proceeds of the corresponding Refunded Bonds used to pay costs
incurred prior to the adoption of such corresponding resolution have been
treated for purposes of this Agreement as having been used to provide working
capital (not land or depreciable property) to the Company.

 

(f)                                    It
has caused the Project to be substantially completed.  The Project constitutes Air Quality
Facilities under the Act and is consistent with the purposes of Section 13
of Article VIII of the Ohio Constitution and of the Act.  The Project is being, and the Company will
cause the Project to be, operated and maintained in such manner to conform with
all applicable zoning, planning, building, 
environmental and other applicable governmental regulations and all
permits, variances and orders issued or granted pursuant thereto, including the
permit-to-install for the Project, which permits, variances and orders have not
been withdrawn or otherwise suspended, and to be consistent with the Act.

 

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

 

9

 

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

 

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

 

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

 

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

 

(l)                                     The
Prior Bonds were not, and the Bonds will not be, “federally guaranteed” within
the meaning of Section 149(b) of the Code.

 

(m)                               It
is not anticipated that as of the date hereof, there will be created any “sinking
fund”, within the meaning of Section 1.148-1(c)(2) of the Treasury
Regulations, with respect to the Bonds; however, in the event that any such
sinking fund is deemed to have been created, moneys therein will be invested in
compliance with Section 148 of the Code.

 

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

 

(o)                                 The
respective average maturities of the Prior Bonds and the issue including the
Bonds do not exceed 120% of the respective average reasonably expected economic
life of the facilities financed by the proceeds thereof, and the issue
including the Bonds (determined under Section 147(b) of the Code).

 

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

 

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

 

(End of Article II)

 

10

 

ARTICLE III

 

COMPLETION OF THE PROJECT;

ISSUANCE OF THE BONDS

 

Section 3.1.                                   Acquisition,
Construction and Installation.  The
Company represents that it and any other public utility companies which own any
undivided interests in the Project Facilities with the Company as tenants-in-common
have caused the Project Facilities to be acquired, constructed and installed on
the applicable Project Sites, substantially in accordance with the Project
Description and in conformance with all applicable zoning, planning, building
and other similar regulations of all governmental authorities having
jurisdiction over the Project and all permits, variances and orders issued in respect
of the Project by EPA, and that the proceeds derived from the Original Bonds,
including any investment thereof, were expended in accordance with the Original
Bonds Indenture and the Original Bonds Loan Agreement.

 

Section 3.2.                                   Project
Description.  The Project Description
may be changed from time to time by, or with the consent of, the Company
provided that any such change shall also be filed with the Authority and
provided further that no change in the Project Description shall materially
change the function of the Project Facilities unless the Trustee shall have
received (i) an Engineer’s certificate that such changes will not impair
the significance or character of the Project Facilities as Air Quality
Facilities and (ii) an Opinion of Bond Counsel or ruling of the Internal
Revenue Service to the effect that such amendment will not adversely affect the
exclusion of interest on the Bonds from gross income for federal income tax
purposes.

 

Section 3.3.                                   Issuance
of the Bonds; Application of Proceeds. 
To provide funds to make the Loan to the Company to assist the Company
in the refunding of the Refunded Bonds, concurrently with the delivery to the
Trustee of the First Mortgage Bonds as provided in Section 4.1 hereof, the
Authority will issue, sell and deliver the Bonds to the Original
Purchaser.  The Bonds will be issued
pursuant to the Indenture in the aggregate principal amount, will bear
interest, will mature and will be subject to redemption as set forth therein.  The Company hereby approves the terms and
conditions of the Indenture and the Bonds, and the terms and conditions under
which the Bonds will be issued, sold and delivered.

 

The
proceeds from the sale of the Bonds (other than any accrued interest) shall be
loaned to the Company to assist the Company in refunding the Refunded Bonds in
order to reduce the interest cost payable by the Company and shall be deposited
in the Refunding Fund as follows:

 

(a)                                  $27,800,000
of the proceeds of the Bonds will be deposited in the Series 1992 Account
of the Refunding Fund (as created and defined in the Indenture) and on August 31,
2005 all moneys on deposit in the Series 1992 Account shall be deposited
in the Bond Fund created in the Series 1992 Indenture and applied by the Series 1992
Trustee to the payment of principal of and interest on the Series 1992
Bonds on September 19, 2005.

 

(b)                                 $110,000,000
of the proceeds of the Bonds will be deposited in the Series 1995 Account
of the Refunding Fund (as created and defined in the Indenture), and on August 31,
2005 all moneys on deposit in the Series 1995 Account shall be deposited
in the Bond Fund created in the Series 1995 Indenture and applied by the Series 1995
Trustee to the payment of principal of and interest on the Series 1995
Bonds on September 19, 2005.

 

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

 

The
Company hereby requests that the Authority notify the Series 1992 Trustee
(unless the Series 1992 Trustee has already received such notice) that the
entire outstanding principal amount of the Series 1992 Bonds is to be
redeemed on September 19, 2005 at a redemption price of 100% of the
principal amount thereof plus accrued interest to the redemption date.

 

11

 

The
Company further requests that the Authority notify the Series 1995 Trustee
(unless the Series 1995 Trustee has already received such notice) that the
entire outstanding principal amount of the Series 1995 Bonds is to be
redeemed on September 19, 2005 at a redemption price of 102% of the
principal amount thereof plus accrued interest to the redemption date.

 

Section 3.4.                                   Investment
of Fund Moneys.  At the oral
(confirmed promptly in writing) or written request of the Company, any moneys
held as part of the Bond Fund, the Refunding Fund or the Rebate Fund shall be
invested or reinvested by the Trustee in Eligible Investments; provided, that
such moneys shall be invested or reinvested by the Trustee only in Eligible
Investments which shall mature, or which shall be subject to redemption by the
holder thereof at the option of such holder, not later than the date upon which
the moneys so invested are needed to make payments from those Funds.  The Authority (to the extent it retained or
retains direction or control) and the Company each hereby represents that the
investment and reinvestment and the use of the proceeds of the Refunded Bonds
were restricted in such manner and to such extent as was necessary so that the
Refunded Bonds would not constitute arbitrage bonds under the statutory predecessor
of the Code and each hereby covenants that it will restrict that investment and
reinvestment and the use of the proceeds of the Bonds in such manner and to
such extent, if any, as may be necessary so that the Bonds will not constitute
arbitrage bonds under Section 148 of the Code.

 

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

 

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

 

(End of Article III)

 

12

 

ARTICLE IV

 

LOAN BY AUTHORITY; LOAN PAYMENTS;

ADDITIONAL PAYMENTS; AND FIRST MORTGAGE BONDS

 

Section 4.1.                                   Loan
Repayment; Delivery of First Mortgage Bonds.  Upon the terms and conditions of this
Agreement, the Authority agrees to make the Loan to the Company.  The proceeds of the Loan shall be deposited
with the Trustee pursuant to Section 3.3 hereof.  As evidence of its obligation hereunder to
repay the Loan, the Company agrees to execute and deliver the First Mortgage
Bonds to the Authority, in the manner provided in Section 4.6 hereof.  In consideration of and in repayment of the
Loan, the Company shall make, as Loan Payments, to the Trustee for the account
of the Authority, payments on the First Mortgage Bonds which correspond, as to
time, and are equal in amount, to the Bond Service Charges payable on the
Bonds.  All Loan Payments received by the
Trustee shall be held and disbursed in accordance with the provisions of the
Indenture and this Agreement for application to the payment of Bond Service
Charges.

 

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

 

Except
for such interest of the Company as may hereafter arise pursuant to Section 8.2
hereof or Sections 5.07 or 5.08 of the Indenture, the Company and the Authority
each acknowledge that neither the Company, the State nor the Authority has any
interest in the Bond Fund, and any moneys deposited therein shall be in the
custody of and held by the Trustee in trust for the benefit of the Holders.

 

Section 4.2.                                   Additional
Payments.  The Company shall pay to
the Authority, the Authority Fee and, as Additional Payments hereunder, any and
all costs 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.

 

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

 

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

 

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

 

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

 

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

 

13

 

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

 

Section 4.6.                                   First
Mortgage Bonds.  To evidence and
secure the obligations of the Company to make the Loan Payments and repay the
Loan, the Company will, concurrently with the issuance of the Bonds, execute
and deliver First Mortgage Bonds to the Authority in an aggregate principal
amount equal to the aggregate principal amount of the Bonds.  The Company agrees that First Mortgage Bonds
authorized pursuant to the Company Mortgage, will be issued containing the
terms and conditions and in substantially the form set forth in the
Supplemental Mortgage Indenture.  The
First Mortgage Bonds shall:

 

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

 

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

 

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

 

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

 

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

 

(End of Article IV)

 

14

 

ARTICLE V

 

ADDITIONAL AGREEMENTS AND COVENANTS

 

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

 

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

 

So
long as such shall not be in violation of the Act or impair the character of
the Project Facilities as Air Quality Facilities, and provided there is
continued compliance with applicable laws and regulations of governmental
entities having jurisdiction thereof, the Company shall have the right to
remodel the Project Facilities or make additions, modifications and
improvements thereto, from time to time as it, in its discretion, may deem to be
desirable for its uses and purposes, the cost of which remodeling, additions,
modifications and improvements shall be paid by the Company and the same shall,
when made, become a part of the Project Facilities.

 

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

 

Section 5.4.                                   Operation
of Project Facilities.  The Company
will, subject to its obligations and rights to maintain, repair or remove
portions of the Project Facilities, as provided in Sections 5.2 and 5.3 hereof,
use its best efforts to continue operation of the Project Facilities so long as
and to the extent that operation thereof is required to comply with laws or regulations
of governmental entities having jurisdiction thereof or unless the Authority
shall have approved the discontinuance of such operation (which  approval shall not be unreasonably withheld).  The Company agrees that it will, within the
design capacities thereof, use its best efforts to operate and maintain the
Project Facilities in accordance with all applicable, valid and enforceable rules and
regulations of governmental entities having jurisdiction thereof; provided,
that the Company reserves the right to contest in good faith any such laws or
regulations.  The Company agrees that
sufficient qualified operating personnel will be retained and operational tests
and measurements necessary to determine compliance with the preceding sentence
will be performed to insure proper and efficient operation and maintenance of
the Project Facilities.

 

Nothing
in this Agreement shall prevent or restrict the Company, in its sole
discretion, at any time, from discontinuing or suspending either permanently or
temporarily its use of any facility of the Company served by the Project
Facilities and in the event such discontinuance or suspension shall render
unnecessary the continued operation of the Project Facilities, the Company
shall have the right to discontinue the operation of the Project Facilities
during the period of any such discontinuance or suspension.

 

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

 

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

 

Section 5.7.                                   Damage;
Destruction and Eminent Domain.  If,
during the term of this Agreement, the Project Facilities or any portion
thereof is destroyed or damaged in whole or in part by fire or other casualty,
or title to, or the temporary use of, the Project Facilities or any portion
thereof shall have been taken by the 

 

15

 

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

 

Section 5.8.                                   Company
to Maintain its Corporate Existence; Conditions Under Which Exceptions
Permitted.  The Company agrees that
during the term of this Agreement it will maintain its corporate existence and,
will not sell its electric properties as an entirety or substantially as an
entirety or consolidate with or merge into another corporation or permit one or
more other corporations to consolidate with or merge into it, except to the
extent permitted under the provisions of the Company Mortgage, provided that
any successor corporation resulting from any such sale, consolidation or merger
shall assume all obligations of the Company arising under or contemplated by
the provisions of this Agreement.

 

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

 

Section 5.9.                                   Indemnification.  The Company releases the Authority from,
agrees that the Authority shall not be liable for, and indemnifies the
Authority against, all liabilities, claims, costs and expenses imposed upon or
asserted against the Authority on account of: 
(a) any loss or damage to property or injury to or death of or loss
by any person that may be occasioned by any cause whatsoever pertaining to the
construction, maintenance, operation and use of the Project Facilities; (b) any
breach or default on the part of the Company in the performance of any covenant
or agreement of the Company under this Agreement or any related document, or
arising from any act or failure to act by the Company, or any of its agents,
contractors, servants, employees or licensees; (c) the authorization,
issuance and sale of the Bonds, and the provision of any information furnished
in connection therewith concerning the Project Facilities or the Company
(including, without limitation, any information furnished by the Company for
inclusion in any certifications made by the Authority under Section 3.4
hereof or for inclusion in, or as a basis for preparation of, the information
statements filed by the Authority pursuant to Section 8(a)(ii) of the
Bond Resolution); and (d) any claim or action or proceeding with respect
to the matters set forth in (a), (b) and (c) above brought thereon.

 

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

 

In
case any action or proceeding is brought against the Authority or an
indemnified party in respect of which indemnity may be sought hereunder, the
party seeking indemnity promptly shall give notice of that action or proceeding
to the Company, and the Company upon receipt of that notice shall have  the obligation and the right to assume the
defense of the action or proceeding; provided, that failure of a party to give
that notice shall not relieve the Company from any of its obligations under
this Section unless that failure prejudices the defense of the 

 

16

 

action or proceeding by
the Company.  At its own expense, an
indemnified party may employ separate counsel and participate in the defense;
provided however, where it is ethically inappropriate for one firm to represent
the interests of the Authority and any other indemnified party or parties, the
Company shall pay the Authority’s legal expenses in connection with the
Authority’s retention of separate counsel. 
The Company shall not be liable for any settlement made without its
consent.

 

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

 

Section 5.10.                             Company
Not to Adversely Affect Exclusion of Interest on Bonds From Gross Income For
Federal Income Tax Purposes.  The
Company hereby covenants and represents that it has taken and caused to be
taken and shall take and cause to be taken all actions that may be required of
it for the interest on the Bonds to be and remain excluded from the gross
income of the Holders for federal income tax purposes, and that it has not
taken or permitted to be taken on its behalf, and covenants that it will not
take, or permit to be taken on its behalf, any action which, if taken, would
adversely affect that exclusion under the provisions of the Code.

 

Section 5.11.                             Use
of Project Facilities.  The Authority
agrees that it will not take any action, or cause any action to be taken on its
behalf, to interfere with the Company’s ownership interest in the Project or to
prevent the Company from having possession, custody, use and enjoyment of the
Project other than pursuant to Article VII of this Agreement or Article VII
of the Indenture.

 

Section 5.12.                             Assignment
by Company.  This Agreement may be
assigned in whole or in part by the Company without the necessity of obtaining
the consent of either the Authority or the Trustee, but only with the prior
written consent of the Bond Insurer, subject, however, to each of the following
conditions:

 

(a)                                  No
assignment (other than pursuant to Section 5.8 hereof) shall relieve the
Company from primary liability for any of its obligations hereunder, and in the
event of any such assignment the Company shall continue to remain primarily
liable for the payment of the Loan Payments and Additional Payments and for
performance and observance of the agreements on its part herein provided to be
performed and observed by it.

 

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

 

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

 

(d)                                 Any
assignment from the Company shall not materially impair fulfillment of the
Project Purposes to be accomplished by operation of the Project as herein
provided.

 

Section 5.13.                             Bond
Insurance Policy.  In consideration
of the issuance by the Bond Insurer of the Bond Insurance Policy, the Company
hereby covenants that:

 

(a)                                  The
Company shall pay or reimburse the Bond Insurer for any and all charges, fees,
costs, and expenses that the Bond Insurer may reasonably pay or incur in
connection with the following:  (i) the
administration, enforcement, defense, or preservation of any rights or security
hereunder or under any other transaction document; (ii) the pursuit of any
remedies hereunder, under any other transaction document, or otherwise afforded
by law or equity, (iii) any amendment, waiver, or other action with
respect to or related to this Agreement or any other transaction document
whether or not executed or completed; (iv) the violation by the Company of
any law, rule, or regulation or any judgment, order or decree applicable to it;
(v) any advances or payments 

 

17

 

made
by the Bond Insurer to cure defaults of the Company under the transaction
documents; or (vi) any litigation or other dispute in connection with the
Agreement, any other transaction document, or the transactions contemplated
hereby or thereby, other than amounts resulting from the failure of the Bond
Insurer to honor its payment obligations under the Bond Insurance Policy.  The Bond Insurer reserves the right to charge
a reasonable fee as a condition to executing any amendment, waiver, or consent
proposed in respect of this Agreement or any other transaction document.  The obligations of the Company to the Bond
Insurer hereunder shall survive discharge and termination of the Agreement.

 

(b)                                 The
Company shall promptly provide written notice to the Bond Insurer of the
downgrading by any rating agency of the Company’s underlying rating, or the
underlying rating on the Bonds or any parity obligations of the Company.

 

(c)                                  The
Company shall promptly provide written notice to the Bond Insurer of any
material events related to the Bonds pursuant to Rule 15c2-12 under the
Securities Exchange Act of 1934, as amended; and the downgrading by any rating
agency of the Company’s underlying rating, or the underlying rating on the
Bonds or any parity obligations of the Company.

 

(d)                                 The
Company shall provide such additional information to the Bond Insurer as the
Bond Insurer may reasonably request from time to time.

 

 (End of Article V)

 

18

 

ARTICLE VI

 

REDEMPTION

 

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

 

Section 6.2.                                   Extraordinary
Optional Redemption.  The Company
shall have, subject to the conditions hereinafter imposed, the option to direct
the redemption of the Bonds in whole or in part in accordance with the
applicable provisions of the Indenture upon the occurrence of any of the
following events:

 

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

 

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

 

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

 

(d)                                 Unreasonable
burdens or excessive liabilities shall have been imposed upon the Authority or
the Company with respect to the Project or a Station Unit or the operation thereof,
including, without limitation, the imposition of federal, state or other ad
valorem, property, income or other taxes other than ad valorem taxes at the
rates presently levied upon privately owned property used for the same general
purpose as the Project or a Station Unit.

 

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

 

19

 

judgment
render the Project or a Station Unit uneconomic or obsolete for the Project
Purposes.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Section 6.5.                                   Actions
by 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.

 

20

 

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

 

(End of Article VI)

 

21

 

ARTICLE VII

 

EVENTS OF DEFAULT AND REMEDIES

 

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

 

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

 

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

 

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

 

(d)                                 Written
notice from the Bond Insurer to the Trustee that an event of default has
occurred and is continuing under the Bond Insurance Agreement.

 

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

 

The
term Force Majeure shall mean the following:

 

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

 

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

 

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

 

22

 

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

 

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

 

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

 

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

 

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

 

Section 7.3.                                   No
Remedy Exclusive.  No remedy
conferred upon or reserved to the Authority or the Trustee by this Agreement is
intended to be exclusive of any other available remedy or remedies, but each
and every such remedy shall be cumulative and shall be in addition to every
other remedy given under this Agreement, or now or hereafter existing at law,
in equity or by statute.  No delay or
omission to exercise any right or power accruing upon any default shall impair
that right or power or shall be construed to be a waiver thereof, but any such
right or power may be exercised from time to time and as often as may be deemed
expedient.  In order to entitle the
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 7.4.                                   Agreement
to Pay Attorneys’ Fees and Expenses. 
If an Event of Default should occur and the Authority or the Trustee
should incur expenses, including attorneys’ fees and expenses, in connection
with the enforcement of this Agreement or the collection of sums due hereunder,
the Company shall be required, to the extent permitted by law, to reimburse the
Authority and the Trustee, as applicable, for the fees and expenses so incurred
upon demand.

 

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

 

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

 

Section 7.7.                                   Survival.  The provisions of Sections 4.2, 5.9 and 7.4
of this Agreement shall survive the payment in full of the Bonds, the
satisfaction, discharge and termination of this Agreement or the 

 

23

 

Indenture, and the
resignation or removal of the Trustee, any Paying Agent, the Registrar and any
Authenticating Agent as the case may be.

 

(End of Article VII)

 

24

 

ARTICLE VIII

 

MISCELLANEOUS

 

Section 8.1.                                   Term
of Agreement.  This Agreement shall
be and remain in full force and effect from the date of delivery of the Bonds
to or to the order of the Original Purchaser until such time as all of the
Bonds shall have been fully paid (or provision made for such payment) pursuant
to the Indenture and all other sums payable by the Company under this Agreement
shall have been paid.

 

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

 

Section 8.3.                                   Notices.  All notices, certificates, requests or other
communications hereunder shall be in writing, except as provided in Section 3.4
hereof, and shall be deemed to be sufficiently given when mailed by registered
or certified mail, postage prepaid, and addressed to the appropriate Notice
Address.  A duplicate copy of each
notice, certificate, request or other communication given hereunder to the
Authority, the Company or the Trustee shall also be given to the others.  The Company, the Authority and the Trustee,
by notice given hereunder, may designate any further or different addresses to
which subsequent notices, certificates, requests or other communications shall
be sent.

 

Section 8.4.                                   Extent
of Covenants of the Authority; No Personal Liability.  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, officer, agent or employee of the Authority in other than his
official capacity, and neither the members of the Authority nor any official
executing the Bonds shall be liable personally on the Bonds or be subject to
any personal liability or accountability by reason of the issuance thereof or
by reason of the covenants, obligations or agreements of the Authority
contained in this Agreement or in the Indenture.

 

Section 8.5.                                   Binding
Effect.  This Agreement shall inure
to the benefit of and shall be binding in accordance with its terms upon the
Authority, the Company and their respective permitted successors and assigns
provided that this Agreement may not be assigned by the Company (except as
permitted under Sections 5.8 or 5.12 hereof) and may not be assigned by the
Authority except to (i) the Trustee pursuant to the Indenture or as
otherwise may be necessary to enforce or secure payment of Bond Service Charges
or (ii) any successor public body to the Authority.  Sections 4.2, 5.9, 7.4 and 7.7 of this
Agreement shall inure to the benefit of the Trustee, the Registrar, any Paying
Agent and any Authenticating Agent and their respective successors and assigns.

 

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

 

25

 

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

 

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

 

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

 

Section 8.10.                             Continuing
Disclosure.  The Issuer hereby
acknowledges the entry by the Company into the Continuing Disclosure Agreement
under which the Company has assumed certain obligations for the benefit of the
holders and beneficial owners of the Bonds. 
The Company agrees to perform its obligations under the Continuing Disclosure
Agreement.  The Company acknowledges and
agrees that the Issuer is not an “obligated person” (as defined in the
Continuing Disclosure Agreement) with respect to the Bonds and represents that
the Company is the only obligated person with respect to the Bonds.  Notwithstanding any other provision of this
Agreement, any failure by the Company to comply with any provision of the
Continuing Disclosure Agreement shall not be a failure or a default, or an
Event of Default, under this Agreement or the Indenture.

 

Section 8.11.                             Third-Party
Beneficiary.  To the extent that this
Agreement confers upon or gives or grants to the Bond Insurer any right, remedy
or claim under or by reason of this Agreement, the Bond Insurer is hereby
explicitly recognized as being a third-party beneficiary hereunder and may
enforce any such right, remedy or claim conferred, given or granted hereunder.

 

(End of Article VIII)

 

26

 

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

 

 

	
   

  	
  OHIO AIR QUALITY
  DEVELOPMENT

  
	
   

  	
  AUTHORITY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mark R. Shananan

  
	
   

  	
   

  	
  Executive Director

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  THE DAYTON POWER
  AND LIGHT COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John J. Gillen

  
	
   

  	
   

  	
  Senior Vice President and

  
	
   

  	
   

  	
  Chief Financial Officer

  

 

27

 

Exhibit A

 

 

AIR QUALITY FACILITIES AT THE SERIES 1980 PROJECT

 

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

 

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

 

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

 

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

 

Ductwork and
Structural Support Costs

 

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

 

A-1

 

Exhibit B

 

AIR QUALITY FACILITIES AT THE SERIES 1982 PROJECT

 

General

 

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

 

Flue Gas
Particulate Abatement Project

 

Scope:

 

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

 

Two
hot electrostatic precipitators and controls

Connecting
ductwork

Supporting
structural steel and foundations

Insulation
and lagging

Necessary
stairways, galleries and enclosure

Electrical
work associated with the precipitators

Collection
hoppers with outlet controls

Air
quality monitoring

 

B-1

 

Exhibit C

 

AIR QUALITY FACILITIES AT THE SERIES 1985 PROJECT

 

William H. Zimmer Electric Generating Station

 

The
Project consists of:

 

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

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

(C)                                a
stack,

(D)                               a
coal dust control system,

(E)                                 a
nitrous oxide control system, and

(F)                                 a
cooling tower and circulating water system.

 

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

 

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

 

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

 

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

 

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

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