Craig L. Adams

SVP and Chief Operating Officer

PECO Energy

2301 Market Street

Philadelphia, PA 19103

Telephone 215.841.4800

Fax 215.841.5023

www.exeloncorp.com

craig.adams@peco-energy.com

Agreement Clause

Interpretation

Property Ownership and Encumbrance:

Based on the prior approval of the DOE contracting officer granted on March 30, 2010, PECO is permitted to encumber any property purchased in whole or in part with Federal funds under the Agreement for the Project (“Project Property”), including, without limitation, Project Property constituting real property and equipment (as defined in 10 C.F.R. § 600.302) in which DOE has a conditional ownership interest, and Project Property constituting supplies (as defined in 10 C.F.R. § 600.302) in which DOE has no conditional ownership interest. See “Property Issues,” FAQ dated January 29, 2010.

Property Tracking: DOE agrees that PECO is permitted to satisfy the property tracking requirements in 10 C.F.R. § 600.323 for Project Property (as defined above) by using an alternative method of property tracking consistent with the mass-asset convention of accounting (also called the group method) as described in the American Institute of Certified Public Accountants “Exposure Draft, Proposed Statement of Position, Accounting For Certain Costs and Activities Related to Property, Plant and Equipment, June 29, 2001”.

DOE agrees that PECO shall satisfy DOE property tracking requirements through the submission of documentation to DOE upon installation of Project Property, which identifies the Project Property, confirms that the Project Property has been installed and placed in service, traces the information to the supporting documentation, and demonstrates the application of the grant funds to the costs of the Project Property. See Property Issues FAQ dated January 29, 2010.

PECO commits to replacing Project Property funded through the Agreement that is damaged or destroyed after field installation and tracking such Project Property consistent with the mass-asset convention of accounting.

Clause 22: Required Use of American Iron, Steel and Manufactured Goods—Section 1605 of the American Recovery and Reinvestment Act

Clause 23: Required Use of American Iron, Steel and Manufactured Goods (Covered Under International Agreements)—Section 1605 of the American Recovery and Reinvestment Act

Three-Part Analysis: DOE agrees that the Buy American requirements of ARRA Section 1605 apply to items purchased by PECO for the Project only where the answer to all three of the following questions is “yes”:

Question 1. Are the materials at issue iron, steel or manufactured goods (as those terms are defined in 2 CFR § 1 76.140(a), and based on the guidance provided in the FAQ referenced below)?

Question 2. Does the work to be performed constitute “construction, alteration, maintenance and repair” (based on the guidance provided in the FAQ referenced below)?

Question 3. Is the building or structure where the work is to be performed a “public building” or “public work?” (as defined in 2 CFR § 176.140(a)), and based on the guidance provided in the FAQ referenced below)?

Smart Meters and Smart Thermostats: DOE agrees that, based on the examples in FAQ referenced below, the Buy American requirements of ARRA Section 1605 do not apply to smart meters and smart thermostats.

See “Applicability of Buy American Provision of Section 1605 of the Recovery Act to Projects Under the Smart Grid Investment Grant Program” FAQ dated February 5, 2010.

Clause 24: Wage Rate Requirements—Section 1606 of the American Recovery and Reinvestment Act

Clause 26: Davis Bacon Act and Contract Work Hours and Safety Standards Act

DOE agrees that the wage rate requirements of ARRA Section 1 606 and the requirements of the Davis Bacon Act and the Contract Work Hours and Safety Standards Act (collectively, “Davis-Bacon Act Requirements”) do not apply to the installations of Project Property where PECO is furnishing its own materials and is in effect extending its own utility system. The result is the same where PECO contracts out such work for extending its utility system and the equipment remains the property of PECO. See “Davis Bacon Act” FAQ dated January 12,2010.

DOE agrees that, based on guidance in the FAQ referenced below, the Davis Bacon Act Requirements do not apply to the installation of smart meters or in-home energy consumption monitoring equipment by PECO or by PECO contractors or subcontractors. See “Davis Bacon Act” FAQ dated January 12, 2010.

In addition to PECO’s right to unilaterally extend the award for up to one year, Clause 28 recognizes that PECO may request an extension to the Project period, provided that such extension request is coordinated with the DOE Contracting Officer. DOE agrees that the right of PECO to request an extension pursuant to Clause 28 includes an extension request as a result of (i) unforeseen circumstances adversely affecting the stability or reliability of PECO’s transmission or distribution system; or (ii) conditions beyond PECO’s reasonable control including, but not limited to, an Act of God (such as flood, drought, earthquake, storm, fire, pestilence, lightning and other natural catastrophes), or epidemic, quarantine restrictions, or embargo, accident, explosion, or act of war, terrorism, sabotage, insurrection, civil disturbance, or riot, or labor strike, work stoppage or slowdown, or inability or delay in obtaining necessary materials, supplies, services, transportation, power or equipment including from subrecipients, contractors, subcontractors, vendors, carriers, which in either case, prevent PECO from performing its obligations under the Agreement or from implementing the project.

PECO will: (a) promptly notify the DOE Contracting Officer and Technical Project Officer in writing of an event of force majeure, the expected duration of the event and its anticipated impact on the ability of PECO to perform its obligations under the Agreement; and (b) PECO shall make reasonable efforts to mitigate or remedy the event of force majeure.

In the event that PECO reasonably determines that it is unable to mitigate or remedy the event of force majeure, PECO shall have the option of terminating the Agreement and the award and proceeding to close-out activities with no liability or obligation to DOE to return any SGIG funds received and reimbursable through the date of such termination. This option shall be exercisable by PECO upon 30 days prior written notice to the DOE Contracting Officer and Technical Project Officer.

1.)         FAQ dated 1/29/2010:

2.)         FAQ dated 1/29/2010:

3.)         FAQ dated 2/5/2010:

4.)         FAQ date 1/12/2010: