Document:

Exhibit 10.1

 

	
   Yucheng
  Technologies Limited September
  2006 Corporate Presentation

  

 

 

	
  Yucheng
  Highlights Disclosure Statement
  Forward Looking Statements This release may contain
  forward-looking statements within the meaning of the Private securities Litigation
  Reform Act of 1995. Forward looking statements are statements that are not
  historical facts. Such forward-looking statements, based upon the current
  beliefs and expectations of management, are subject to risks and
  uncertainties, which could cause actual results to differ from the
  forward-looking statements. The following factors, among others, could cause
  actual results to differ from those set forth in the forward-looking
  statements: business conditions in China, changing interpretations of generally
  accepted accounting principles; outcomes of government reviews; inquiries and
  investigations and related litigation; legislation or regulatory
  environments, requirements or changes adversely affecting the businesses in
  which Yucheng Technologies is engaged fluctuations in customer demand;
  management of rapid growth; intensity of competition from other IT providers;
  market acceptance of new products; general economic conditions; geopolitical
  events and regulatory changes; as well as other relevant risks detailed in
  filings with the Securities and Exchange Commission. The information set
  forth herein should be read in light of such risks. The company does not
  assume any obligation to update the information contained in this press
  release or filings.

  

 

 

	
  CONTENTS
  Yucheng Highlights
  Corporate Overview Appendix I: Deal Structure Appendix II: Industry Trends
  and Strategic Initiatives

  

 

 

	
  Yucheng
  Technologies is a combination of: Sihitech:
  founded in 1999, a leading IT service & system integration company in
  China’s banking industry. e-Channels:
  founded in 2001, a leading web banking and multi-channel software and
  solution provider in China’s banking industry. China Unistone Acquisition Corp is an OTCBB listed blank check
  company formed with the sole intention of consummating a business combination
  with an operating business in the People’s Republic of China. As of June 30,
  2006, China Unistone held approximately $18.5 million in a trust account
  maintained by an independent trustee ($5.36 per share in liquidation value). Yucheng is a leading provider of IT solutions to
  China’s growing financial services industry, with a proven local management
  team, prospects of sustainable and profitable growth, and sufficient capital
  to implement strategic initiatives and industry consolidationYucheng Highlights

  

 

 

	
  Yucheng
  Highlights Leadership in Key
  Segments Fragmented Industry Landscape A
  leading local IT services and solutions provider focused on China’s banking
  industry Local management team with strong track record
  Established brand name and recognition in the industry - Market leadership in
  IT solutions and 70% market share in internet banking software Yucheng has the potential to emerge as the leading
  technology and outsourced services provider to China’s financial industry.Attractive Returns Highly
  attractive acquisition valuation at 9x P/E for 2005 and less than 5x P/E for
  2006 (projected) provides a significant margin of safety China growth stories
  AND IT solutions and services companies for financial services are BOTH
  highly valued by Wall Street Minimum closing risk – liquidation value is at
  US$5.36. No dominant player in the industry Larger players like Digital China
  are not exclusively FSI focused Many 50-150 employee software shops in the
  industry. Management has access to attractive, highly accretive roll-up
  opportunities in higher margin outsourced and infrastructure service
  providers

  

 

 

	
  Minimum
  integration risk – Synergies have begun to be realized On an
  operational level, Sihitech and e-Channels have effectively merged through
  integration of all key operations including sales, marketing and
  administrative support in one premise since July 2006. Following the
  successful win of CCB web banking project on a joint efforts basis in 2005,
  Yucheng expects to win a large follow-on web banking project this year.
  Combined R&D lab in partnership with Tsinghua University, the “MIT” and
  “Caltech” of China, to develop new banking solutions and platform, began
  operations in July 2006. Combined entity has achieved significant wins in web
  banking business consulting projects including ICBC, Hua Xia Commercial Bank,
  and CITIC Commercial Bank, and will likely get one from China Construction
  Bank. Yucheng Highlights

  

 

 

	
  CONTENTS
  Yucheng Highlights
  Corporate Overview Appendix I: Deal Structure Appendix II: Industry Trends
  and Strategic Initiatives

  

 

 

	
  Corporate
  Overview Corporate Snapshot All the leading domestic banks in China 550
  employees Nationwide presence - 5 offices in China IT Solutions and Services
  US$25mn in sales; US$3.1mn in net profits - 2005 Customers Employees
  Operations Offerings Financials

  

 

 

	
  Mission
  Enhancing the competitiveness of local financial institutions in
  China through information technology Corporate
  Overview

  

 

 

	
  Delivery
  Platform Corporate Overview Yucheng offers localized one-stop total solutions
  for its clients through effective account management Account Management IT Consulting Systems Integration Software / Outsourced
  Operations Total Solution Systems Integration Strategic
  and technical review Infrastructure architecture Technology implementation - IT Consulting Targeted
  solutions for specific business functions IT Improvements existing business
  processes Software and Outsourced
  Operations Proprietary software platform On-going maintenance
  Service Application Tools

  

 

 

	
  Multi-Channel Integration Platform Service Offerings System Service •Mainframe system services •Network
  services •System and network management services •Specific system services
  Software Service •Infrastructure & system development standard •Implementation of platform technologies •Customized implementation of 3rd application
  solutions •Business
  consulting and planning •Operational maintenance of applications Corporate Overview Product Technologies One-Stop Total Solution Internet bank Call center Counter business Loan
  business Human resource Operation CRM Analysis CRM Applications Network &
  System Supervision Management Risk & Security Management System
  Integrated Dev. Environ. Transaction Container Business Services Business
  Core Components E-ATM System Teller System HR System Other Systems Security
  Alliance Main Industry Vendor Debit Card System Auditing System Tech. Core
  Components Channel process Components

  

 

 

	
  Corporate Overview Senior management has extensive experience in serving the financial
  services industry in multiple disciplines: core banking know-how;
  capabilities in software development; and systems integration consulting Proven Management Team Co-founder of Sihitech
  Chairman and CEO, Sihitech VP of PC Department, Secom China Ltd. General
  Manager, GIT Holds a B.E and EMBA degree from Tsinghua University Mr. Weidong Hong Co-founder of e-Channels Chairman and CEO,
  e-Channels General Manager of Info Product Dept, Finance Project & System
  Integration Dept., Nantian Group Holds B.E of Automation from Beijing
  Polytechnic University Mr.
  Shuo Zeng CEO COO CFO of Sihitech Controller of Lenovo Group
  Financial Controller of Delano Technologies (NASDAQ: DTEC) Certified General
  Accountant (C.G.A.) of Canada Holds B.A. from Beijing Foreign Studies
  University and Master of Education from University of Toronto Mr. Peter Li CFO

  

 

 

	
  Corporate Overview The Board understands
  the overall industry trends and can offer strategic guidance in organic
  growth and acquisition plan
  Board of Directors Managing General Partner – Staples Asia
  Investment; Former Senior Advisor to Chinatrust Commercial Bank; Board member
  of several companies, including MDS, a leading IT banking solution provider
  in Taiwan; Former co-founder and CEO of two venture companies; Former
  investment banker with Goldman Sachs NY & HK; Holds AB and AM, MBA and JD
  - Harvard UniversityMr. Chih Cheung General Manager and President of the Credit Card
  Division of China Merchants Bank Former Executive Vice President of the
  Retail Banking Division of Chinatrust Commercial Bank; Former Financial
  Director of AIG Credit Card Company; Member of the Advisory Board of Visa
  International; Graduated from Keynes University and New York University. Mr. Chi Wei Joong Chairman Board Director Associate Dean & Professor of Finance,
  Tsinghua University; Director of School of Economics and Management, Tsinghua
  University; Assistant to Chairman of Esquel Group; Holds MBA, MIT Sloan
  School of Management; PhD. in Engineering Economics, Tsinghua University; BE
  in Electrical Engineering, Tsinghua University. Mr. Liao Li Board Director

  

 

 

	
  Corporate
  Overview • Headquarters • Regional Centers  Offices Beijing •ShanghaiXian • Fuzhou •GuangzhouExtensive Footprint Yucheng has an extensive
  footprint to serve its clients nationwide

  

 

 

	
  Top
  Tier Nationwide Banks Other Commercial Banks Yucheng has served all leading financial
  institutions in China and is well positioned to win future businesses Leading
  Customers Corporate Overview

  

 

 

	
  Corporate Overview Market Leadership 1 The Top local IT services and solutions provider focused in China
  banking industry Leading provider of web banking solutions to PRC Tier I banks (Market Share: 70% - measured by
  number of users) Ranked one of the top 5 largest IT foreign and local solution providers
  in China’s banking industry by IDC in 2006 1 1

  

 

 

	
  Competitive
  Advantages Exclusive focus on banking and financial services
  industry Extensive account management relationships
  Proven, reliable and quality execution High-value, cost-effective product
  offerings Comprehensive product and service offerings
  uniquely tailored for the China Market Localized
  one-stop total solution for our clients “Right of First Call” - Opportunity
  to participate in new IT spending Experienced and recognized
  local management team Industry leadership and
  reputation Ability to identify, acquire and integrate complementary IT
  vendors Corporate Overview

  

 

 

	
  Audited
  Financials Revenues (Mn USD) Net profits (Mn USD) 2005 was a transitional
  year as Yucheng shifts its focus from hardware sales to solutions and
  outsourced services Corporate
  Overview 25.230.524.62003200420053.143.181.12200320042005

  

 

 

	
  2004
  & 2005 - Sales & Gross Profit Distribution Analysis Systems Integration was no longer the largest
  contributor to revenue in 2005 High value-added non-SI businesses
  contribution to the gross margin greatly exceeded system integration Segment Analysis Highly profitable IT Solutions
  contributes more and more to total profit Corporate Overview System Integration, 79%System Integration, 48%System Integration, 19%IT Consulting, 14%IT Consulting, 23%IT Consulting, 34%IT Consulting, 38%System Integration, 58%SW & Outsource., 7%SW & Outsource., 19%SW & Outsource., 18%SW & Outsource., 43%04 Sales05 Sales04 Gross Profit05 Gross Profit

  

 

 

	
  Revenue
  (Mn USD) Net profit (Mn USD) Un-audited first half 2006 financials
  demonstrate significant growth over first half 2005 in both revenues and net
  profits CAGR=50% CAGR=20% Corporate Overview Growth Trends 14.111.72005
  half year2006
  half year1.52.22005
  half year2006
  half year

  

 

 

	
  CONTENTS
  Yucheng Highlights
  Corporate Overview Appendix I: Deal Structure Appendix II: Industry Trends
  and Strategic Initiatives

  

 

 

	
  Deal
  Terms Overall Structure The
  valuation for the transaction is highly attractive to China Unistone
  shareholdersExisting Yucheng Cash
  China Unistone Shares China Unistone will pay US$4
  million in cash as part of the transaction The combined net working capital
  for Sihitech and e-Channels MUST exceed US$4 million at Closing China
  Unistone will issue about 3.9 million shares, representing less than 7x 2005
  P/E China Unistone will issue an additional 1.4 million shares tied to 2005
  and 2006 performances, combined representing 9.1x 2005 P/E and 4.8x 2006 P/E
  (projected) 12 month Lock-up All
  shares issued to Yucheng will be subjected to a 12-month lockup from the date
  of Closing

  

 

 

	
  Highly
  Incentivized Management Cash
  Bonus for Share Price Increase Share Bonus for Earning Growth US$5
  million bonus if CUAQ receives an aggregate of US$34.5 million in gross
  proceeds in additional financings (i.e. successful warrant exercising after
  share price is maintained at US$8.50) US$1 million bonus if share price (at
  least 60 consecutive trading days) is above is US$10.00 in 2006 US$2.0
  million if Share Price Average is above $12.00 in 2007 US$3.0 million if
  Share Price Average is above $14.40 in 2008 Total cash bonus will not exceed
  US$10 million 952,832 shares each year from 2007-2010 for meeting or
  exceeding 40% annual growth in net profits: Year ending December 31 Net Profit 2007 US$8.5
  million 2008 US$11.9 million 2009 US$16.7 million 2010 US$23.3 million
  All-or-nothing share bonus plan Deal
  Terms

  

 

 

	
  Deal Terms Number of shares immediately
  post transaction: 9.5mm shares (includes 5.3 mm shares to targets, of which
  1.4mm tied to 05-06 performances) 6.9mm warrants outstanding Cash per share
  post transaction ($1.78 immediately upon close - assumes $17mm cash and 9.5mm
  shares) 2005 Earnings per share based on 8.8 mm shares (excluding 773,000
  shares tied to performance in 2006) is $0.36 2006 Estimated Earnings per
  share if management hits the net profits target ($0.63, assumes $6mm earnings
  and 9.5 million shares) EPS growth if management hits 40% growth is about 30%
  for common shareholders (before CUAQ warrant conversion) Post-Transaction Overview

  

 

 

	
  CONTENTS
  Yucheng Highlights
  Corporate Overview Appendix I: Deal Structure Appendix II: Industry Trends
  and Strategic Initiatives

  

 

 

	
  People's
  Bank of China(PBC)China Banking Regulatory Commission(CBRC)Industrial
  and Commercial Bank of China(ICBC)Agricultural
  Bank of China(ABC)Bank
  of China(BOC)China
  Construction Bank(CCB)State-owned Commercial Bank4Bank
  of CommunicationsChina
  Merchants BankChina Minsheng Banking Corp.
  LtdChina Everbright BankGuangdong
  Development BankShanghai
  Pudong Development BankCITIC
  Industrial BankShenzhen Development BankHuaxia
  BankFujian Industrial BankJoint Stock Commercial Bank11The
  State Development Bank of ChinaThe
  Agricultural Development Bank of ChinaThe
  Export-Import Bank of ChinaPolicy Bank3City Commercial Bank112Rural Credit Cooperative34,57765% Beijing
  City Commercial BankShanghai
  Commercial Bank Guangzhou Commercial Bank Others......Evergrowing
  Bank Co., LtdIndustry
  Trends Focus on Banking The four state-owned
  commercial banks account for 65% of total IT spending in banking today but
  the other 34,000+ will need to improve IT infrastructure to stay competitive

  

 

 

	
  Opportunities Banks Willing to Engage Third Parties Too
  many priority projects to achieve or maintain competitiveness Lack of
  internal expertise on latest approaches in key operating areas such as
  internet service platforms, consumer data consolidation; and loan processing Local Banks Face Increased Competition Foreign
  competition (post WTO ) Local competition from private banks Privatization of
  state-owned banks Need for IT
  Solutions About 35,000 banks Most lack basic infrastructure Need to
  leverage IT to deliver better customer services and increase margins to
  SURVIVE Trends toward OutsourcingLack of strong internal IT
  resources, experiences, systems and processes Need to outsource non-core
  functions China’s desire to support native companies. Growth Drivers Industry Trends

  

 

 

	
  Market
  Forecast Banking Solution Market Size & Forecast, 2004-2009 Source:
  2005 IDC Report - PRC Banking Industry IT Solution Market Research CAGR=21.7%
  IDC forecasts robust 21% CAGR for
  banking solutions for the next 5 years... ...Furthermore, total IT
  spending for banks alone will reach US$6.6 Billion by 2009 Revenue
  (Mn USD) Industry Trends 1,2991,096905744606487200420052006200720082009

  

 

 

	
  Few
  bigger players like Digital China or Vanda are not focused in financial
  services Many smaller IT service
  providers, concentrating in either a segment/application or geographic area
  or a certain bank Dominant in high-end IT
  consulting... Local IT service industry is highly fragmented with many smaller
  IT service providers with only 50-150 employees Digital China Vanda Global Info Tech Local IT
  service providers But, uncompetitive in pricing IBM- Global Services Bearing Point Accenture
  Global IT service providers Competitive Landscape2 major groups of competitors Industry Trends

  

 

 

	
  “one-stop”
  total solution, leading technology in electronic channel application compete Local IT service providers focus
  in financial services industry compete & acquire scale of economy
  dominate compete & collaborate strong account management capability
  competitive pricing collaborate & compete In-depth knowledge of Chinese
  banks business practice collaborate Global
  IT service providers Yucheng’s Competitive Edge Yucheng’s Competitive
  Strategy Competitive LandscapeYucheng’s Competitive Strategy Industry Trends

  

 

 

	
  Strategic Initiatives Step-by-Step Plan Yucheng has rapidly moved from
  Systems Integration to IT Consulting, Software and Outsourced Operations 2006 Building Market Share in IT Platform
  2007-2008 Winning Outsourced Mandates 2009 and Beyond Consolidating Market
  Share Product Value Chain
  Migration Expansion of the
  e-Banking Software Platform Development of core offerings related to the
  e-Banking platform We will leverage our existing knowledge of core banking
  and our extensive relationships with leading banks to move up the value chain
  in IT consulting, software and outsourced solutions Focus on Transaction and
  Data Service Management and Business Process Outsourcing

  

 

 

	
  Strategic
  Initiatives Acquisition Strategy Post closing, Yucheng will
  aggressively pursue acquisitions to accelerate value chain migrationIT Solutions Application
  Solutions highly complementary to current solution suite IT Solutions in
  insurance and security industry Transaction processing solutions Outsourced
  Operations Maintenance operations Multi-channel operations
  ATM and POS maintenance and operations Transaction processing operations

  

 

 

	
  Yucheng will expand vertically into smaller banks
  and horizontally into other segments of the financial services industry Banking System - Nationwide banks - Cross-regional
  commercial banks - Regional commercial banks - Rural credit cooperatives Securities Companies Assets Management Companies
  Insurance Companies Leading IT services provider to China’s financial
  services industry Deeper Penetration of Banks Broad Move into New Segments
  Investment Banks Strategic
  Initiatives Customer Base ExpansionExhibit 4.1

 

LOAN AGREEMENT

between

OHIO AIR QUALITY DEVELOPMENT AUTHORITY

and

THE DAYTON POWER AND LIGHT COMPANY

 

$100,000,000

State of Ohio

Collateralized Air Quality Development Revenue Bonds,

2006 Series A

(The Dayton Power and Light Company Project)

 

Dated

as of

September 1, 2006

 

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

  	
   

  	
  11

  
	
  Section

  	
  3.3

  	
  Issuance of the Bonds; Application of Proceeds

  	
   

  	
  11

  
	
  Section

  	
  3.4

  	
  Disbursements from the Project Fund

  	
   

  	
  11

  
	
  Section

  	
  3.5

  	
  Company Required to Pay Costs in Event Project Fund
  Insufficient

  	
   

  	
  13

  
	
  Section

  	
  3.6

  	
  Completion Date

  	
   

  	
  13

  
	
  Section

  	
  3.7

  	
  Investment of Fund Moneys

  	
   

  	
  13

  
	
  Section

  	
  3.8

  	
  Rebate Fund

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  ARTICLE IV

  	
   

  
	
   

  	
  LOAN BY
  AUTHORITY; LOAN PAYMENTS;

  	
   

  
	
   

  	
  ADDITIONAL
  PAYMENTS; AND FIRST MORTGAGE BONDS

  	
   

  
	
   

  	
   

  	
   

  
	
  Section

  	
  4.1

  	
  Loan Repayment; Delivery of First Mortgage Bonds

  	
   

  	
  15

  
	
  Section

  	
  4.2

  	
  Additional Payments

  	
   

  	
  15

  
	
  Section

  	
  4.3

  	
  Place of Payments

  	
   

  	
  15

  
	
  Section

  	
  4.4

  	
  Obligations Unconditional

  	
   

  	
  15

  
	
  Section

  	
  4.5

  	
  Assignment of Revenues, Agreement and First Mortgage
  Bonds

  	
   

  	
  16

  
	
  Section

  	
  4.6

  	
  First Mortgage Bonds

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  ARTICLE V

  	
   

  
	
   

  	
  ADDITIONAL
  AGREEMENTS AND COVENANTS

  	
   

  
	
   

  	
   

  	
   

  
	
  Section

  	
  5.1

  	
  Right of Access

  	
   

  	
  17

  
	
  Section

  	
  5.2

  	
  Maintenance

  	
   

  	
  17

  
	
  Section

  	
  5.3

  	
  Removal of Portions of the Project Facilities

  	
   

  	
  17

  
	
  Section

  	
  5.4

  	
  Operation of Project Facilities

  	
   

  	
  17

  
						

 i
 

 

	
  Section

  	
  5.5

  	
  Insurance

  	
   

  	
  18

  
	
  Section

  	
  5.6

  	
  Workers’ Compensation Coverage

  	
   

  	
  18

  
	
  Section

  	
  5.7

  	
  Damage; Destruction and Eminent Domain

  	
   

  	
  18

  
	
  Section

  	
  5.8

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

  	
   

  	
  18

  
	
  Section

  	
  5.9

  	
  Indemnification

  	
   

  	
  18

  
	
  Section

  	
  5.10

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

  	
   

  	
  19

  
	
  Section

  	
  5.11

  	
  Use of Project Facilities

  	
   

  	
  19

  
	
  Section

  	
  5.12

  	
  Assignment by Company

  	
   

  	
  19

  
	
  Section

  	
  5.13

  	
  Bond Insurance Policy

  	
   

  	
  20

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  ARTICLE VI

  	
   

  
	
   

  	
  REDEMPTION

  	
   

  
	
   

  	
   

  	
   

  
	
  Section

  	
  6.1

  	
  Optional Redemption

  	
   

  	
  21

  
	
  Section

  	
  6.2

  	
  Extraordinary Optional Redemption

  	
   

  	
  21

  
	
  Section

  	
  6.3

  	
  Mandatory Redemption

  	
   

  	
  22

  
	
  Section

  	
  6.4

  	
  Notice of Redemption

  	
   

  	
  23

  
	
  Section

  	
  6.5

  	
  Actions by Authority

  	
   

  	
  23

  
	
  Section

  	
  6.6

  	
  Concurrent Discharging of First Mortgage Bonds

  	
   

  	
  23

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  ARTICLE VII

  	
   

  
	
   

  	
  EVENTS OF
  DEFAULT AND REMEDIES

  	
   

  
	
   

  	
   

  	
   

  
	
  Section

  	
  7.1

  	
  Events of Default

  	
   

  	
  24

  
	
  Section

  	
  7.2

  	
  Remedies on Default

  	
   

  	
  25

  
	
  Section

  	
  7.3

  	
  No Remedy Exclusive

  	
   

  	
  25

  
	
  Section

  	
  7.4

  	
  Agreement to Pay Attorneys’ Fees and Expenses

  	
   

  	
  25

  
	
  Section

  	
  7.5

  	
  No Waiver

  	
   

  	
  26

  
	
  Section

  	
  7.6

  	
  Notice of Default

  	
   

  	
  26

  
	
  Section

  	
  7.7

  	
  Survival

  	
   

  	
  26

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  ARTICLE VIII

  	
   

  
	
   

  	
  MISCELLANEOUS

  	
   

  
	
   

  	
   

  	
   

  
	
  Section

  	
  8.1

  	
  Term of Agreement

  	
   

  	
  27

  
	
  Section

  	
  8.2

  	
  Amounts Remaining in Funds

  	
   

  	
  27

  
	
  Section

  	
  8.3

  	
  Notices

  	
   

  	
  27

  
	
  Section

  	
  8.4

  	
  Extent of Covenants of the Authority; No Personal

  	
   

  	
   

  
	
   

  	
   

  	
  Liability

  	
   

  	
  27

  
	
  Section

  	
  8.5

  	
  Binding Effect

  	
   

  	
  27

  
	
  Section

  	
  8.6

  	
  Amendments and Supplements

  	
   

  	
  28

  
	
  Section

  	
  8.7

  	
  Execution Counterparts

  	
   

  	
  28

  
	
  Section

  	
  8.8

  	
  Severability

  	
   

  	
  28

  
	
  Section

  	
  8.9

  	
  Governing Law

  	
   

  	
  28

  
	
  Section

  	
  8.10

  	
  Continuing Disclosure

  	
   

  	
  28

  
	
  Section

  	
  8.11

  	
  Third-Party Beneficiary

  	
   

  	
  28

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Signatures

  	
   

  	
   

  	
   

  	
  29

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Exhibit A - DESCRIPTION OF AIR QUALITY FACILITIES

  	
   

  	
  A-1

  
	
   

  	
   

  	
   

  
	
  Exhibit B – FORM OF DISBURSEMENT REQUEST

  	
   

  	
  B-1

  
						

 

 ii

LOAN AGREEMENT

THIS LOAN AGREEMENT is made and entered into as of
September 1, 2006 between the OHIO AIR QUALITY DEVELOPMENT AUTHORITY (the “Authority”),
a body politic and corporate duly organized and validly 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 in the aggregate principal amount of $100,000,000 and to lend
the proceeds derived from the sale thereof to the Company to assist in the
financing of its portion of the costs of the 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 $302,500.

“Authorized Company Representative” means the
Treasurer of the Company or any other officer or employee of the Company so
designated for purposes hereof in a written communication from the Treasurer of
the Company to the Trustee.

“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.

 2
 

 

“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 stated maturity, by redemption, upon acceleration or
otherwise.

“Bonds” means the State of Ohio $100,000,000
Collateralized Air Quality Development
Revenue Bonds, 2006 Series A (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 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.

“Completion Date” means the date
of completion of the Project as set forth in the certificate to be furnished by
the Company pursuant to Section 3.6 hereof.

 “Continuing
Disclosure Agreement” means that certain Continuing Disclosure Agreement
between the Company and the Trustee dated as of September 1, 2006, as the same
may be amended from time to time in accordance with the terms thereof.

“Construction Period” means the
period between the beginning of the acquisition, construction, installation,
equipping and improvement of the Project and the Completion Date.

“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 Company’s
$100,000,000 aggregate principal amount of First Mortgage Bonds, 4.80%
Pollution Control Series Due 2036, 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.

 3
 

 

“Generating Stations” means,
respectively, the Miami Fort Generating Station, the Killen Generating Station,
the Stuart Generating Station and the Conesville Generating Station, all as
defined and described in Exhibit A hereto.

“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.

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

 “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.

“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.

 4
 

 

“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), joint ventures, societies, estates, trusts, corporations, public
or governmental bodies, other legal entities and natural persons.

 “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 Costs” means the costs
of the Project specified in Section 3.4 hereof.

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

“Project Description” means the description of the
Project Facilities attached hereto as Exhibit A, 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 Exhibit A
hereto.

“Project Site” means the respective sites of the
Generating Stations.

“Rebate Fund” means the Rebate 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 Project 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.

“State” means the State of Ohio.

“Station Unit” means, respectively,  Units 7 and 8 at the Miami Fort Generating
Station, Unit 2 at the Killen Electric Generating Station, Units 1-4 at the
J.M. Stuart Generating Station and Unit 4 at the Conesville Generating Station.

“Supplemental Mortgage Indenture” means the
Forty-Fourth Supplemental Indenture, dated as of September 1, 2006, 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 for municipal securities,
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 

 5
 

 

hereof,
to be held harmless and indemnified under Section 5.9 hereof, to be reimbursed
for attorney’s fees and expenses under Section 7.4 hereof and to give or
withhold consent to amendments, changes, modifications, alterations and
termination of this Agreement under Section 8.6 hereof and its right to enforce
such rights.

Section 1.3.            Interpretation.  Any reference herein to the State, to the
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, a Paying Agent, an Authenticating
Agent or the Company under this Agreement, the Bond Resolution, the Bonds, the
Indenture, the Company Mortgage, the Supplemental Mortgage Indenture or the
First Mortgage Bonds or any other instrument or document entered into in connection
with any of the foregoing, including without limitation, any alteration of the
obligation to pay Bond Service Charges in the amount and manner, at the times,
and from the sources provided in the Bond Resolution and the Indenture, except
as permitted in the Indenture.

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

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

(End of Article I)

 6
 

 

ARTICLE II

REPRESENTATIONS

Section 2.1.            Representations
of the 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; (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; and (g) following
reasonable notice, a public hearing was held on August 8, 2006 with respect to
the issuance of the Bonds as required by Section 147(f) of the Code.

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 the Code of 

 7
 

 

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)         The acquisition,
construction, installation, equipping and improvement of the Project was not
commenced prior to the adoption of Resolution No. 04-61 of the Authority on
September 14, 2004, with respect to the portion of the Project located at the
Miami Fort Generating Station, and the adoption of Resolution No. 04-72 of the
Authority on October 12, 2004, with respect to the portion of the Project
located at the other Generating Stations, in each case evidencing the intent of
the Authority to issue the Bonds with the exception of “preliminary
expenditures” within the meaning of Treas. Reg. §1.150-2(f)(2); provided
further, however, with respect to certain costs of the Project that were paid
or incurred on and prior to such date, such costs will not be financed with the
net proceeds of the Bonds except to the extent that they (i) consist of costs
paid on or after 60 days prior to September 14, 2004 with respect to the
portion of the Project located at the Miami Fort Generating Station, (ii)
consist of costs paid on or after 60 days prior to October 12, 2004 with
respect to the portion of the Project located at the other Generating Stations,
or (iii) consist, in an amount not in excess of 20% of the aggregate issue
price of the Bonds, of “preliminary expenditures” within the meaning of Treas.
Reg. §1.150-2(f)(2), which include architectural, engineering, surveying, soil
testing and similar costs that were incurred prior to commencement of
acquisition or construction of the Project, other than land acquisition, site
preparation and similar costs incident to commencement of acquisition or
construction.  Moreover, no costs of the
Project to be financed with the net proceeds of the Bonds were originally
expended more than 3 years prior to the issuance date of the Bonds;

(e)          The Project to be
acquired, constructed, equipped, installed and improved at the Project Site, as
provided under this Agreement, constitutes Air Quality Facilities under the Act
and is consistent with and will further the purposes of the Act and Section 13
of Article VIII of the Ohio Constitution and will be located entirely within
the State.  The Company will cause the
Project to be operated and maintained in such manner as to conform to all
applicable zoning, planning, building, environmental and other applicable
governmental regulations and all permits, variances and orders issued or
granted pursuant thereto, including the permit-to-install for each portion of
the Project, which permits, variances and orders have not been withdrawn or
otherwise suspended, and to be consistent with the Act;

(f)          It is expected that
the Project will be utilized as Air Quality Facilities under the Act commencing
promptly as portions thereof become available for utilization, but in any event
on or before the Completion Date;

(g)         It presently intends
to use or operate or cause to be used or operated the Project 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 will not be so
operated.  The Company does not presently
intend to sell or otherwise dispose of the Project or any portion thereof;

 8
 

 

(h)         At least 95% of the
net proceeds (as defined in Section 150 of the Code) of the Bonds will be used
to provide land or property of a character subject to the allowance for
depreciation for purposes of Section 167 of the Code.  The Company will not request or authorize any
disbursement pursuant to Section 3.4 hereof, which, if paid, would result in
less than 95% of such net proceeds being so used.  The Issuance Costs of the Bonds financed with
the proceeds of the Bonds will not exceed 2% of the proceeds of the Bonds
(within the meaning of Section 147(g) of the Code).  None of the proceeds of the Bonds will be used
to provide working capital;

(i)           In accordance with
Section 147(b) of the Code, the weighted average maturity of the Bonds does not
exceed 120% of the weighted average reasonably expected economic life of the
facilities being financed by the Bonds;

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

(k)          Less than 25% of the
net proceeds of the Bonds will be used directly or indirectly to acquire land
or any interest therein, and none of such land is being or will be used for
farming purposes; no portion of the net proceeds of the Bonds will be used to
acquire existing property or any interest therein unless the first use of such
property or interest therein is pursuant to such acquisition;

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

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

(n)         The Bonds are not “federally
guaranteed” within the meaning of Section 149(b) of the Code;

(o)         At least 95% of the
proceeds of the Bonds will be used to provide “solid waste disposal facilities”
within the meaning of Section 142(a)(6) of the Code;

(p)         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; and

(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 and agrees that it (a) has
caused or will cause the Project to be acquired, constructed and installed on
the Project Site in accordance with the Project Description and in conformance
with all applicable, valid and enforceable (i) zoning, planning, building,
environmental and other similar regulations of all governmental authorities
having jurisdiction over the Project and (ii) permits, variances and orders
issued in respect of the Project by EPA, noncompliance with which would have a
material adverse effect on the Company’s ability to operate and maintain the
Project or to perform its obligations hereunder, provided that the Company
reserves the right to contest in good faith any such regulations, permits,
variances or orders, (b) will use its reasonable efforts to cause the
acquisition, construction and installation of other facilities and real and
personal property deemed necessary in connection with the Project to the end
that the Project will fulfill the Project Purposes, (c) will pay all fees,
costs and expenses incurred in such acquisition, construction and installation
and (d) will use its reasonable efforts to ask, demand, sue for, levy, recover
and receive all such sums of money, debts and other demands whatsoever which
may be due, owing and payable under the terms of any contract, order, receipt,
writing and instruction in connection with the acquisition, construction and
installation of the Project, and to enforce the provisions of any contract,
agreement, obligation, bond or other performance security with respect thereto;
provided that in all instances the Company shall retain the option of
settlement of any dispute.  Any amounts
received in connection with actions taken under clause (d) of the preceding
sentence, after deduction of expenses incurred in such recovery, prior to the
Completion Date and full disposition of the Project Fund in accordance with
this Agreement and the Indenture, shall be paid into the Project Fund.

With knowledge of the provisions
of the January 27, 1972 Executive Order of the Governor of Ohio, relating to
equal employment opportunity, the Company hereby makes the pledges and
commitments enumerated in said order with respect to the construction and
installation of the Project and to the extent that said Executive Order is
applicable, agrees that the same requirement and commitment shall be included in
all contracts and subcontracts awarded for the construction and installation of
the Project.

All laborers and mechanics
employed on the respective portions of the Project have been or will be paid
not less than the applicable prevailing rates of wages of laborers and
mechanics for the class of work called for by those respective portions of the
Project, which wages were or will be determined in accordance with the
requirements of Chapter 4115, Ohio Revised Code, for determination of
prevailing wage rates; provided, that should the Company or other nonpublic
user of the Project undertake, as part of the Project, construction to be
performed by its regular bargaining unit employees who are covered under a
collective bargaining agreement which was in existence prior to the date of the
commitment instrument undertaking to issue the Bonds, then, in that event, the
rate of pay provided under the collective bargaining agreement may be paid to
those employees.

In making the foregoing representations, it is understood and agreed
that the Company has delegated to the operators of the Miami Fort Generating
Station and the Conesville Generating Station, respectively, responsibilities
relating to the physical acquisition, construction and installation of the
portion of the Project at those Generating Stations and compliance with this
Section 3.1.  It is further understood
and agreed that the Project is that of the Company and any contracts made by
the Company or  those operators with
respect thereto, whether acquisition contracts, installation contracts or
otherwise, or any work to be done by the Company or those operators on the
Project are made or done by the Company or those operators on their own behalf
and not as agent or contractor for the Authority.

 10

 

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 financing of
its portion of the costs of the Project, 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 Company, for the
benefit of the Authority, the Trustee and each Bondholder, shall do and perform
all acts and things required or contemplated in the Indenture to be done or
performed by the Company.

The proceeds from the sale of
the Bonds (other than any accrued interest) shall be loaned to the Company to
assist the Company in the financing of its portion of the costs of the
Project.  Those proceeds shall be deposited
in the Project Fund.  Any accrued
interest shall be deposited in the Bond Fund. 
Pending disbursement pursuant to Section 3.4 hereof, the proceeds so
deposited in the Project 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 as provided in the Indenture.

Section 3.4.            Disbursements from the Project
Fund.  Disbursements from the Project
Fund shall be made only to reimburse or pay the Company, or any Person designated by the Company, for the following
Project Costs:

(a)           Costs incurred
directly or indirectly for or in connection with the acquisition, construction,
equipping, installation or improvement of the Project, including but not
limited to those costs incurred for preliminary planning and studies,
architectural, legal, engineering and supervisory services, labor, services,
materials, acquisition, construction and installation, recording of documents
and title work relating to the Project Site.

(b)           Premiums attributable to all insurance required to be
taken out and maintained during the Construction Period with respect to the
Project and the premium on each surety bond, if any, required with respect to
work on the Project.

(c)           Taxes, assessments, interest on the Bonds and other
charges in respect of the Project that may become due and payable during the
Construction Period for the Project.

(d)           Costs incurred directly or indirectly in seeking to
enforce any remedy against any contractor or subcontractor in respect of any
default under any contract relating to the Project.

(e)           Financial, underwriting, legal, accounting, appraisal,
rating agency, printing and engraving fees, charges and expenses, title
insurance premiums, if any, the Authority Fee, the premium for the Bond
Insurance Policy, and all other such fees, charges and expenses incurred in
connection with the authorization, sale, issuance and delivery of the Bonds and
the preparation and delivery of the Agreement, the Indenture and other related
documents.

 11
 

 

(f)            Fees and expenses of the Trustee, Authenticating Agent,
Paying Agent and Registrar (as such terms are defined in the Indenture),
including reasonable counsel fees and expenses, properly incurred under the
Indenture that may become due and payable during the Construction Period,
including the initial or acceptance fee of the Trustee.

(g)           Any other incidental and necessary costs including without
limitation any expenses, fees and charges relating to the acquisition,
construction or installation of the Project.

(h)           Payments made to the Rebate Fund.

(i)            Any other expense permissible, in the opinion of Bond
Counsel, under the Act.

Any disbursements from the
Project Fund for the payment of Project Costs shall be made by the Trustee only
upon the written order of the Authorized Company Representative.  Each such written order shall be in the form
of the disbursement request attached hereto as Exhibit B and shall be
consecutively numbered.  In the case of
any contract providing for the retention of a portion of the contract price,
there shall be paid initially from the Project Fund only the net amount
remaining after deduction of any such portion, and when the amount of any such
retention is due and payable, then such retention may be paid from the Project
Fund.

In addition, the Company shall
not request or authorize any disbursements from the Project Fund prior to the
Completion Date for a purpose or function other than to provide solid waste
disposal facilities within the meaning of Section 142(a)(6) of the Code, unless
such disbursement would not result in more than 5% of the net proceeds of the
Bonds (including those amounts disbursed pursuant to this Section 3.4) being
used other than to provide solid waste disposal facilities (treating Issuance
Costs so paid as being used other
than to provide solid waste disposal facilities), unless in connection with any
such disbursement request the Company provides the Trustee with an opinion of
Bond Counsel or ruling of the Internal Revenue Service to the effect that such
disbursement will not cause the interest on the Bonds to be included in the
gross income of the Holders for federal income tax purposes.

Receipt of a disbursement
request, in the form of the disbursement request attached hereto as Exhibit B,
shall be full authorization for the
Trustee to make the disbursements requested thereby, and the Trustee shall be
entitled to rely without further inquiry on, and shall have no duty to check,
verify or investigate, the statements and certifications made therein or
included therewith.

Any moneys in the Project Fund
remaining after the Completion Date and payment, or provision for payment, in
full of the Project Costs at the direction of the Authorized Company
Representative promptly shall be (a) used to acquire, construct or install such
additional real and personal property comprising Air Quality Facilities as
defined in the Act for use in connection with the Project as is designated by
the Authorized Company Representative and the acquisition, construction,
equipment, installation and improvement of which will be such as is permitted
under the Act, (b) used for the purchase of Bonds in the open market for the
purpose of cancellation at prices not exceeding the fair market value thereof
plus accrued interest to the date of payment therefor, (c) paid into the Bond
Fund to be applied to the payment of Bond Service Charges on the Bonds or the
redemption of the Bonds pursuant to the applicable provisions of the Indenture,
or (d) used for a combination of the foregoing as is provided in that direction
or for any other purposes as are or may be permitted under the Act; provided
that, in all such cases, (A) those moneys shall be so used or applied only to
the extent that such use or application will not, in the Opinion of Bond
Counsel or under a ruling of the Internal Revenue Service, adversely affect the
exclusion of the interest on the Bonds from the gross income of the Holders
thereof for federal income tax purposes and (B) any money remaining in the
Project Fund following completion of the Project shall be invested in 

 12
 

 

accordance with the Code in such manner as not to
adversely affect the exclusion of the interest on the Bonds from the gross
income of the Holders thereof for
federal income tax purposes.

Section 3.5.            Company Required to Pay Costs in
Event Project Fund Insufficient.  If
moneys in the Project Fund are not sufficient to pay all Project Costs, the
Company, nonetheless, will complete the Project or cause the Project to be
completed, in order to fulfill the Project Purposes and shall pay all such
additional Project Costs from its own funds. 
The Company shall not be entitled to any reimbursement for any such
additional Project Costs from the Authority, the Trustee or the Holders of any
of the Bonds, nor shall it be entitled to any abatement, diminution or
postponement of the Loan Payments.   The
Authority does not make any representation that the moneys which will be paid
into the Project Fund and which under the provisions of this Agreement will be
available for payment of Project Costs, will be sufficient to pay all the costs
which will be incurred in that connection. 
The Company agrees that if after exhaustion of the moneys in the Project
Fund, the Company should pay pursuant hereto any portion of the costs listed in
Section 3.4 hereof, it shall not be entitled to any reimbursement therefor from
the State, the Authority, the Trustee or the Holders of any of the Bonds.  Nothing herein however shall be deemed
to prohibit the Authority, of its own volition, from issuing any additional
series of revenue bonds and lending the proceeds derived from the sale thereof
to the Company to assist in the financing of such additional Project Costs, or
to prohibit the Company from paying, or being reimbursed for its payment of,
such additional Project Costs from any such proceeds.

Section 3.6.            Completion Date.  The Company shall notify the Authority and the Trustee of the Completion Date by a
certificate signed by the Authorized Company Representative stating:

(a)           the date on which the Project was substantially completed
and all other facilities necessary in connection with the Project have been
acquired, constructed and installed;

(b)           that the acquisition, construction and installation of the
Project and such other facilities have been accomplished in such a manner as to
conform with all applicable, legal and valid zoning, planning, building,
environmental and other similar governmental regulations, so as not to have a
material adverse effect on the Company’s ability to operate the Project for the
Project Purposes and perform its obligations hereunder;

(c)           that, except as provided in clause (d) of this Section
3.6, all costs of that acquisition and installation then and theretofore due
and payable have been paid; and

(d)           the amount which the Trustee shall retain in the Project
Fund for the payment of Project Costs not yet due or for liabilities which the
Company is contesting or which otherwise should be retained and the reasons
such amount should be retained.

That certificate may state that
it is given without prejudice to any rights against third parties which then
exist or subsequently may come into being. 
The Authorized Company Representative shall include with that certificate
a statement describing the items of personal property comprising a part of the
Project.  The certificate shall be
delivered as promptly as practicable
after the occurrence of the events and conditions referred to in clauses (a)
through (d) of this Section, and the Trustee shall be entitled to rely without
further inquiry on, and shall have no duty to check, verify or investigate, the
statements and certifications made therein or included therewith.

Section 3.7.            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 Project Fund or the Rebate Fund shall be
invested or reinvested by the Trustee in Eligible Investments; 

 13
 

 

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
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 3.8.            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)

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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 

 15
 

 

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.

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 (as assignee of the Authority
under the Indenture) and shall not be transferred by the Trustee, except to
effect transfers to any successor trustee under the Indenture.

(End of Article IV)

 16
 

 

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 Project.

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.

 17
 

 

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

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

Section 5.7.            Damage;
Destruction and Eminent Domain.  If,
during the term of this Agreement, the Project Facilities or any portion
thereof is destroyed or damaged in whole or in part by fire or other casualty,
or title to, or the temporary use of, the Project Facilities or any portion
thereof shall have been taken by the exercise of the power of eminent domain,
and the Company or the Company Mortgage Trustee receives net proceeds from
insurance or any condemnation award in connection therewith, the Company
(unless it shall have exercised its option to prepay the Loan Payments pursuant
to Section 6.2 hereof), to the extent required to comply with applicable laws
and regulations with respect to the operations of facilities of the Company
served by the 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 3.7 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.

 18
 

 

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 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.

 19
 

 

(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 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.

(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)

 20

 

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 Section 4.01(c) of the Indenture at the
redemption price stated therein.  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 Section
4.01(a) of the Indenture upon the occurrence of any of the following events:

(a)           A 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 a 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 a 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 a Project or a Station Unit.

 21
 

 

(e)           Changes in the economic availability
of raw materials, operating supplies, energy sources or supplies or facilities
(including, but not limited to, facilities in connection with the disposal of
industrial wastes) necessary for the operation of a Project or a 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 judgment render a 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 a Project or a Station Unit to such extent that the Company is or
will be prevented from carrying on its normal operations at a Project or a
Station Unit for a period of six consecutive months.

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

As used in this Section 6.2, the term “a Project”
means the portion of the Project Facilities at a particular 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 a redemption
price of 100% of the principal amount redeemed plus accrued and unpaid interest
to the redemption date, and discharge, the Outstanding Bonds then being
redeemed on the earliest applicable redemption date, that amount to be paid to
the Trustee, plus

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

The
requirement of (ii) above with respect to Additional Payments to accrue may be
met if provisions satisfactory to the Trustee and the 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
the mandatory redemption provisions set forth in Section 4.01(b) of the
Indenture.

 22
 

 

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.

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)

 23
 

 

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 such failure shall not constitute an Event of
Default so long as the Company institutes curative action within the applicable
period and diligently pursues that action to completion;

(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

 24
 

 

(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.

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 this
Agreement.

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.

 25
 

 

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 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)

 26
 

 

ARTICLE VIII

MISCELLANEOUS

Section 8.1.            Term
of Agreement.  This Agreement shall
be and remain in full force and effect from the date of delivery of the Bonds
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; provided, however, that no notice shall be deemed sufficiently given
to the Trustee unless and until actually received by the Trustee at the
Principal Office of the Trustee.  A
duplicate copy of each notice, certificate, request or other communication
given hereunder to the 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.

 27
 

 

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

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

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

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

Section 8.10.          Continuing Disclosure.  The
Authority 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 Authority 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)

 28
 

 

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.
  Shanahan

  	
   

  
	
   

  	
   

  	
  Executive Director

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  THE DAYTON POWER
  AND LIGHT COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Joseph R. Boni III

  	
   

  
	
   

  	
   

  	
  Treasurer

  	
   

  

 

 29

 

EXHIBIT A

DESCRIPTION OF AIR QUALITY
FACILITIES

The Project being financed under this Agreement is
described below and consists of any property or portion thereof used for the
collection, storage, treatment, utilization, processing, or final disposal of
solid waste resulting from the supply, installation and construction of Flue
Gas Desulfurization Systems (FGDS) for the Units at the Generating Stations
described below for the purpose of the removal and disposal of flue gas
particulates, sulfur dioxide (SO2)
and nitrogen oxides (NOx).  Removal of SO2 from the flue gas exhaust is to
be accomplished using a wet limestone FGDS scrubber technology.  In that scrubber process, calcium carbonate
(reagent) neutralizes and absorbs the SO2 which produces a solid waste of primarily
gypsum (waste reagent).  The waste
reagent must be processed and disposed of as a solid waste.  Use of the FGDS to remove sulfur dioxide from
the flue gas stream creates a solid waste that is collected, transported,
processed and stored in a waste disposal or recycling facility.

1.  PROJECT AT
MIAMI FORT GENERATING STATION:

The Miami Fort Units 7 & 8 scrubber projects
(collectively, the “Miami Fort Project”) are located at the Miami Fort
Generating Station, which is a coal-fired, steam powered electric generating
station located in the southwest area of Hamilton County, Ohio (the “Miami Fort
Generating Station”).  The Miami Fort
Generating Station consists of five coal-fired boilers of various ages and
ratings.  Units 7 & 8 are of similar
size and rating, each being 525 MW. 
Units 7 and 8 are co-owned by the Company (36% ownership interest) and
The Cincinnati Gas & Electric Company (“CG&E”; 64% ownership interest)(1).  CG&E is responsible for operation of the
Miami Fort Generating Station.  Air emission
control regulations require removal and disposal of combustion byproducts from
the Miami Fort Generating Station, including from Units 7 & 8.  These byproducts include flue gas
particulates and SO2.

The design of the Miami Fort Project is based on two
principal requirements.  First, the Miami
Fort Project must achieve the required level of the applicable emission
control.   Second, the Miami Fort Project
must produce a waste by-product that is suitable for solid waste disposal.  The Miami Fort Project includes the
construction, expansion of and improvements to solid waste collection,
transport, processing and disposal facilities for the Miami Fort Generating
Station as a result of removing SO2 from
the flue gas stream of Units 7 & 8 by means of the installation and use of
the FGDS.

2.  PROJECT AT KILLEN GENERATING STATION:

The Killen Unit 2 scrubber project (the “Killen
Project”) is located at the Killen Generating Station, which is a coal-fired,
steam powered electric generating station located near Manchester, Ohio in
Adams County, Ohio (the “Killen Generating Station”).  The Killen Generating Station consists of one
unit, Unit 2, which is rated at 600 MW. 
This unit is co-owned by the Company (67% ownership interest) and
CG&E (33% ownership interest).  The
Company is responsible for operation of the Killen Generating Station.   Air emission control regulations require
removal and disposal of combustion byproducts from the Killen Generating
Station, including from Unit 2.  These
byproducts include flue gas particulates, SO2 and NOx.

The design of the Killen Project is based on two
principal requirements.  First, the
Killen Project must achieve the required level of the applicable emission
control.   Second, the Killen Project
must produce a waste by-product that is suitable for solid waste disposal.  The Killen Project includes the construction,
expansion of, and improvements to solid waste collection, transport, processing
and disposal facilities for the Killen Generating Station as a result of removing
SO2 from the flue gas stream of Unit 2 by means
of the installation and use of the FGDS.

(1) The ownership
percentages are different with respect to certain common facilities.

 A-1
 

 

3.  PROJECT AT J.M. STUART GENERATING STATION:

The J.M. Stuart Station Units 1-4 scrubber projects
(collectively, the “Stuart Project”) are located at the J.M. Stuart Generating
Station, which is a coal-fired, steam powered electric generating station
located near Aberdeen, Ohio in Brown and Adams Counties, Ohio (the “Stuart Generating
Station”).  The Stuart Generating Station
consists of four (4) coal-fired boilers each rated at 585MW.  This Stuart Generating Station is co-owned by
the Company (35% ownership interest), CG&E (39% ownership interest) and
Columbus & Southern Company (“CSP”; 26% ownership interest).  The Company is responsible for operation of
the Stuart Generating Station.   Air
emission control regulations require removal and disposal of combustion
byproducts from all four (4) units at the Stuart Generating Station.  These byproducts include flue gas
particulates, SO2 and
NOx.

The design of the Stuart Project is based on two
principal requirements.  First, the
Stuart Project must achieve the required level of the applicable emission
control.   Second, the Stuart Project
must produce a waste by-product that is suitable for solid waste disposal. The
Stuart Project includes the construction, expansion of, and improvements to
solid waste collection, transport, processing and disposal facilities for the
Stuart Generating Station as a result of removing SO2 from
the flue gas stream of Units 1-4 by means of the installation and use of the
FGDS.

4.  PROJECT AT CONESVILLE GENERATING STATION:

The Conesville Unit 4 scrubber project (the “Conesville
Project”) is located at the Conesville Generating Station, which is a
coal-fired, steam powered electric generating station located near Conesville,
Ohio in Coshocton County, Ohio (the “Conesville Generating Station”).  The Conesville Generating Station consists of
four (4) coal-fired boilers of various ages and ratings.  Unit 4 is rated at 780 MW.  This unit is co-owned by the Company (16.5%
ownership interest), CG&E (40% ownership interest) and CSP (43.5% ownership
interest).  CSP is responsible for
operation of the Conesville Generating Station.   Air emission control regulations require
removal and disposal of combustion byproducts from the Conesville Generating
Station, including from Unit 4.  These
byproducts include flue gas particulates, SO2 and NOx.

The design of the Conesville Project is based on two
principal requirements.  First, the
Conesville Project must achieve the required level of the applicable emission
control.   Second, the Conesville Project
must produce a waste by-product that is suitable for solid waste disposal.  The Conesville Project includes the
construction, expansion of, and improvements to solid waste collection,
transport, processing and disposal facilities for the Conesville Generating
Station as a result of removing SO2 from
the flue gas stream of Unit 4 by means of the installation and use of the FGDS.

 A-2

 

EXHIBIT B

FORM OF DISBURSEMENT REQUEST

STATEMENT NO.      
REQUESTING DISBURSEMENT

OF FUNDS FROM PROJECT FUND PURSUANT TO

SECTION 3.4 OF THE LOAN AGREEMENT DATED AS

OF SEPTEMBER 1, 2006 BETWEEN THE OHIO

AIR QUALITY DEVELOPMENT AUTHORITY AND

THE DAYTON POWER AND LIGHT COMPANY

Pursuant
to Section 3.4 of the Loan Agreement (the “Agreement”) between the Ohio Air
Quality Development Authority (the “Authority”) and The Dayton Power and Light
Company (the “Company”) dated as of September 1, 2006, the undersigned Authorized
Company Representative hereby authorizes The Bank of New York, as trustee (the “Trustee”)
and as depository of the Project Fund created by the Indenture (the “Indenture”)
by and between the Authority and said Trustee, to pay to the Company out of the
moneys deposited in said Project Fund the aggregate sum of $                      
to pay the person(s) listed on Schedule I which may include reimbursements to
the Company, for the advances, payments and expenditures made by it in
connection with the items listed in Schedule I, which is incorporated herein by
reference.

The
undersigned in connection with the foregoing request for disbursements from
said Project Fund hereby certifies that:

(a)          Each item is properly payable out of the Project Fund in accordance
with the terms and conditions of the Agreement and none of such items for which
payment is requested has formed the basis for any payment heretofore made from
said Project Fund.

(b)         Each item for which payment is requested hereunder is or was necessary
or appropriate in connection with the acquisition, construction, equipping,
installation or improvement of the Project, as defined in the Indenture and
Agreement, or costs related thereto as permitted by the Agreement.

(c)          This document evidences the approval of the undersigned Authorized
Company Representative of each payment hereby authorized.

(d)         Each item for which disbursement is requested hereunder, and the cost
for each item, is as described in the information statement filed by the
Authority in connection with the issuance of the Bonds (as defined in the
Agreement), as required by Section 149(e) of the Code (as defined in the
Agreement); provided that if the foregoing statement is not true, the average
reasonably expected economic life of the facilities which have been and will be
paid for with moneys in the Project Fund is not less than 5/6ths of the average
maturity of the Bonds.

This
        day of                        ,
      .

	
   

  	
   

  	
   

  
	
  

  	
  Authorized
  Company Representative

  

 B-1
 

 

Schedule I

TO STATEMENT NO.                         
REQUESTING DISBURSEMENT OF FUNDS FROM PROJECT FUND PURSUANT TO SECTION 3.4 OF
LOAN AGREEMENT DATED AS OF SEPTEMBER 1, 2006, BETWEEN THE OHIO AIR QUALITY
DEVELOPMENT AUTHORITY AND THE DAYTON POWER AND LIGHT COMPANY.

	
  PAYEE

  	
   

  	
  AMOUNT

  	
   

  	
  PURPOSE

  	
   

  
	
    

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
    

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
    

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 B-2

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00110-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00110-of-00352.parquet"}]]