EXHIBIT 10.11

Execution Version

PHASE-IN-RECOVERY PROPERTY PURCHASE AND SALE AGREEMENT

between

TE FUNDING LLC

as Bond Issuer

and

THE TOLEDO EDISON COMPANY

as Seller

Dated as of June 20, 2013

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TABLE OF CONTENTS

 

          Page  

ARTICLE I. DEFINITIONS

     1   

Section 1.01.

   Definitions      1   

Section 1.02.

   Other Definitional Provisions      4   

ARTICLE II. CONVEYANCE OF PHASE-IN-RECOVERY PROPERTY

     4   

Section 2.01.

   Conveyance of Phase-In-Recovery Property      4   

ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SELLER

     4   

Section 3.01.

   Organization and Good Standing      4   

Section 3.02.

   Due Qualification      4   

Section 3.03.

   Power and Authority      5   

Section 3.04.

   Binding Obligation      5   

Section 3.05.

   No Violation      5   

Section 3.06.

   No Proceedings      5   

Section 3.07.

   Approvals      5   

Section 3.08.

   The Phase-In-Recovery Property      5   

Section 3.09.

   Limitations on Representations and Warranties      7   

ARTICLE IV. COVENANTS OF THE SELLER

     7   

Section 4.01.

   Corporate Existence      7   

Section 4.02.

   No Liens      7   

Section 4.03.

   Delivery of Collections      7   

Section 4.04.

   Notice of Liens      7   

Section 4.05.

   Compliance with Law      7   

Section 4.06.

   Covenants Related to Bonds and Phase-In-Recovery Property      7   

Section 4.07.

   Protection of Title      8   

Section 4.08.

   Nonpetition Covenant      8   

Section 4.09.

   Taxes      9   

Section 4.10.

   Additional Sales of Phase-In-Recovery Property      9   

Section 4.11.

   Issuance Advice Letter      9   

ARTICLE V. THE SELLER

     9   

Section 5.01.

   Liability of Seller; Indemnities      9   

Section 5.02.

   Merger or Consolidation of, or Assumption of the Obligations of, Seller     
11   

Section 5.03.

   Limitation on Liability of Seller and Others      11   

ARTICLE VI. MISCELLANEOUS PROVISIONS

     11   

Section 6.01.

   Amendment      11   

Section 6.02.

   Notices      11   

Section 6.03.

   Assignment      13   

Section 6.04.

   Limitations on Rights of Third Parties      13   

Section 6.05.

   Severability      13   

Section 6.06.

   Separate Counterparts      13   

Section 6.07.

   Headings      14   

Section 6.08.

   Governing Law      14   

Section 6.09.

   Collateral Assignment to Bond Trustee      14   

Section 6.10.

   Rule 17g-5 Compliance      14   

 

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This PHASE-IN-RECOVERY PROPERTY PURCHASE AND SALE AGREEMENT, dated as of June
20, 2013 is between TE Funding LLC, a Delaware limited liability company (the
“Bond Issuer”), and The Toledo Edison Company, an Ohio corporation (together
with its successors in interest to the extent permitted hereunder, the
“Seller”).

RECITALS

WHEREAS, the Bond Issuer desires to purchase the Phase-In-Recovery Property (as
defined herein) created pursuant to the Statute and the Financing Order (each as
defined herein); and

WHEREAS, the Seller is willing to sell the Phase-In-Recovery Property to the
Bond Issuer.

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein
contained, the parties hereto agree as follows:

ARTICLE I. DEFINITIONS

Section 1.01. Definitions. Whenever used in this Agreement, the following words
and phrases shall have the following meanings:

“Administration Agreement” means the Administration Agreement dated as of June
20, 2013 between The Toledo Edison Company, as Administrator, and the Bond
Issuer, as amended and supplemented from time to time.

“Agreement” means this Phase-In-Recovery Property Purchase and Sale Agreement,
as amended and supplemented from time to time.

“Back-Up Security Interest” has the meaning specified in Section 2.01.

“Basic Documents” means, collectively, this Agreement, the Bond Indenture, the
Declaration of Trust, the Certificate Indenture, the Servicing Agreement, the
Administration Agreement, the Bond Purchase Agreement, the Underwriting
Agreement, the Fee and Indemnity Agreement and the Cross-Indemnity Agreement.

“Bonds” means the TE Funding LLC Bonds issued under the Bond Indenture.

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

“Bond Indenture” means the Bond Indenture dated as of June 20, 2013, between the
Bond Issuer and the Bond Trustee, as amended and supplemented from time to time.

“Bond Issuer” has the meaning set forth in the preamble of this Agreement.

“Bond Purchase Agreement” means the Bond Purchase Agreement dated as of June 20,
2013 between the Bond Issuer and the Trust, as amended and supplemented from
time to time.

“Bond Register” has the meaning specified in Section 2.05 of the Bond Indenture.

“Bond Trustee” means the Person acting as trustee under the Bond Indenture.

“Business Day” means any day other than a Saturday, a Sunday or a day on which
banking institutions or trust companies in New York, New York, Akron, Ohio or
Wilmington, Delaware are authorized or obligated by law, regulation or executive
order to remain closed.

“Certificates” means the FirstEnergy Ohio PIRB Special Purpose Trust 2013
Pass-Through Certificates issued under the Certificate Indenture.

 

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“Certificateholders” has the meaning specified in Section 1.01(a) of the
Certificate Indenture.

“Certificate Indenture” means the Certificate Indenture dated as of June 20,
2013, between the Certificate Issuer and the Certificate Trustee, as amended and
supplemented from time to time.

“Certificate Trustee” means the Person acting as trustee under the Certificate
Indenture.

“Closing Date” means June 20, 2013.

“Collateral” has the meaning specified in the Granting Clause of the Bond
Indenture.

“Collection Account” has the meaning specified in Section 8.02(a) of the Bond
Indenture.

“Corporate Trust Office” has the meaning specified in Section 1.01(a) of the
Bond Indenture.

“Cross-Indemnity Agreement” means the Cross Indemnity Agreement dated as of June
20, 2013 between the Bond Issuer, CEI Funding LLC and OE Funding LLC, as amended
and supplemented from time to time.

“Customers” means all classes of retail users of the Seller’s distribution
system within its geographic service territory as in effect on June 20, 2013.

“Declaration of Trust” means the Amended and Restated Declaration of Trust dated
as of June 20, 2013, among CEI Funding LLC, OE Funding LLC, TE Funding LLC and
the Delaware Trustee, as may be further amended and supplemented from time to
time.

“Delaware Trustee” means the Person acting as trustee under the Declaration of
Trust.

“Fee and Indemnity Agreement” means the fee and indemnity agreement dated as of
June 20, 2013 between the Bond Issuer, the Delaware Trustee, the Certificate
Trustee, the Trust, CEI Funding LLC and OE Funding LLC.

“Financing Costs” has the meaning specified in Section 1.01(a) of the Bond
Indenture.

“Financing Order” means the order of PUCO in Case No. 12-1465-EL-ATS issued on
October 10, 2012, as amended by the Entry on Rehearing issued on December 19,
2012, and the Entry Nunc Pro Tunc issued on January 9, 2013.

“Fitch” means Fitch Ratings or its successor.

“Grant” means mortgage, pledge, collaterally assign and grant a lien upon and a
security interest in. A Grant of any agreement or instrument shall include all
rights, powers and options (but none of the obligations) of the Granting Person
thereunder, the immediate and continuing right to claim for, collect, receive
and give receipts for payments in respect of and all other monies payable
thereunder, to give and receive notices and other communications, to make
waivers or other agreements, to exercise all rights and options, to bring
proceedings in the name of the Granting Person or otherwise, and generally to do
and receive anything that the Granting Person is or may be entitled to do or
receive thereunder with respect thereto.

“Indemnified Person” has the meaning specified in Section 5.01(h).

“Issuance Advice Letter” means the initial Issuance Advice Letter, dated June
13, 2013, filed with PUCO by the Seller pursuant to the Financing Order.

“Lien” means a security interest, lien, mortgage, charge, pledge, claim or
encumbrance of any kind.

“Losses” has the meaning specified in Section 5.01(e).

“Moody’s” means Moody’s Investors Service, Inc. or its successor.

 

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“Officer’s Certificate” means a certificate signed by the chairman of the board,
the chief executive officer, the president, the chief financial officer, any
vice president, the treasurer, any assistant treasurer, the clerk, any assistant
clerk, the controller or the director of corporate finance and cash management
of the Seller.

“Operating Expense” has the meaning specified in Section 1.01(a) of the Bond
Indenture.

“Opinion of Counsel” means one or more written opinions of counsel who may be an
employee of or counsel to the party providing such opinion of counsel, which
counsel shall be reasonably acceptable to the party receiving such opinion of
counsel.

“Outstanding Amount” has the meaning specified in Section 1.01(a) of the Bond
Indenture.

“Person” means any individual, corporation, limited liability company, estate,
partnership, joint venture, association, joint stock company, trust (including
any beneficiary thereof), unincorporated organization or government or any
agency or political subdivision thereof.

“Phase-In-Costs” has the meaning specified in Section 4928.23(J) of the Statute
and the final Financing Order.

“Phase-In-Recovery Charge” means the Seller’s Phase-In-Recovery Charge
designated pursuant to the Financing Order, as the same may be adjusted from
time to time as provided in the Financing Order.

“Phase-In-Recovery Charge Collections” has the meaning specified in Section 1.01
of the Servicing Agreement.

“Phase-In-Recovery Property” means the phase-in-recovery property that is
created simultaneous with the sale of such property by the Seller to the Bond
Issuer and continues to exist pursuant to and in accordance with paragraph
VI.A(6) of the Financing Order and Sections 4928.232, 4928.234 and 4928.2312 of
the Statute.

“PUCO” means the Public Utilities Commission of Ohio and any successor thereto.

“PUCO Regulations” has the meaning specified in Section 1.01 of the Servicing
Agreement.

“Rating Agencies” means, collectively, S&P, Moody’s and Fitch.

“Seller” has the meaning set forth in the preamble of this Agreement.

“Servicer Default” means an event specified in Section 7.01 of the Servicing
Agreement.

“Servicing Agreement” means the Phase-In-Recovery Property Servicing Agreement
dated as of June 20, 2013 between The Toledo Edison Company, as Servicer, and
the Bond Issuer, as amended and supplemented from time to time.

“S&P” means Standard & Poor’s Ratings Services, a division of The McGraw Hill
Companies, Inc. or its successor.

“Statute” means O.R.C. Sections 4928.23 through 4928.2318.

“Statutory Lien” means the lien on the Phase-In-Recovery Property created by
Section 4928.2312 of the Statute and the final Financing Order.

“Trust” or “Certificate Issuer” means FirstEnergy Ohio PIRB Special Purpose
Trust 2013, a Delaware statutory trust.

“UCC” means, unless the context otherwise requires, the Uniform Commercial Code,
as in effect in the relevant jurisdiction, as amended from time to time.

 

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“Underwriting Agreement” means the Underwriting Agreement dated as of June 12,
2013 among the Trust, the Bond Issuer, The Cleveland Electric Illuminating
Company, Ohio Edison Company, The Toledo Edison Company, CEI Funding LLC, OE
Funding LLC and the underwriters named therein.

Section 1.02. Other Definitional Provisions.

(a) All terms defined in this Agreement shall have the defined meanings when
used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein.

(b) The words “hereof,” “herein,” “hereunder” and words of similar import, when
used in this Agreement, shall refer to this Agreement as a whole and not to any
particular provision of this Agreement; Section, Schedule and Exhibit references
contained in this Agreement are references to Sections, Schedules and Exhibits
in or to this Agreement unless otherwise specified; and the term “including”
shall mean “including without limitation”.

(c) The definitions contained in this Agreement are applicable to the singular
as well as the plural forms of such terms.

ARTICLE II. CONVEYANCE OF PHASE-IN-RECOVERY PROPERTY

Section 2.01. Conveyance of Phase-In-Recovery Property. In consideration of the
Bond Issuer’s delivery to or upon the order of the Seller of $43,154,207.67
(such amount net of underwriting discounts), the Seller does hereby irrevocably
sell, transfer, assign, set over and otherwise convey to the Bond Issuer,
WITHOUT RECOURSE OR WARRANTY, except as specifically set forth herein, all
right, title and interest of the Seller in and to the Phase-In-Recovery Property
(such sale, transfer, assignment, setting over and conveyance of the
Phase-In-Recovery Property includes, to the fullest extent permitted by the
Statute, the assignment of all revenues, collections, claims, payments, money or
proceeds of or arising from the Phase-In-Recovery Charge pursuant to the
Financing Order) and copies of all books and records related thereto. Such sale,
transfer, assignment, setting over and conveyance is hereby expressly stated to
be a sale and, pursuant to Section 4928.2313 of the Statute, shall be treated as
an absolute transfer and true sale of all of the Seller’s right, title and
interest in (as in a true sale), and not as a pledge or secured transaction
relating to, or other financing of, the Phase-In-Recovery Property. If such
sale, transfer, assignment, setting over and conveyance is held by any court of
competent jurisdiction not to be a true sale as provided in Section 4928.2313 of
the Statute, then such sale, transfer, assignment, setting over and conveyance
shall be treated as the creation of a security interest in the Phase-In-Recovery
Property and, without prejudice to its position that it has absolutely
transferred all of its right, title and interest in and to the Phase-In-Recovery
Property to the Bond Issuer, the Seller hereby Grants to the Bond Issuer a
security interest in the Phase-In-Recovery Property (including, to the fullest
extent permitted by the Statute, the assignment of all revenues, collections,
claims, payments, money or proceeds of or arising from the Phase-In-Recovery
Charge pursuant to the Financing Order) to secure a payment obligation incurred
by the Seller in respect of the amount paid by the Bond Issuer to the Seller
pursuant to this Agreement (the “Back-Up Security Interest”). A UCC-1 financing
statement will be filed in order to perfect the Back-Up Security Interest. Such
sale, transfer, assignment, setting over and conveyance of the Phase-In-Recovery
Property includes the right to use the Seller’s computer software system to
access and create copies of all books and records related to the
Phase-In-Recovery Property.

ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SELLER

Subject to Section 3.09 hereof, the Seller makes the following representations
and warranties, as of the Closing Date, on which the Bond Issuer has relied in
acquiring the Phase-In-Recovery Property.

Section 3.01. Organization and Good Standing. The Seller is duly organized and
validly existing as a corporation in good standing under the laws of the State
of Ohio, with the requisite corporate power and authority to own its properties
as such properties are currently owned and to conduct its business as such
business is now conducted by it, and has the requisite corporate power and
authority to own the Phase-In-Recovery Property.

Section 3.02. Due Qualification. The Seller is duly qualified to do business as
a foreign corporation in good standing, and has obtained all necessary licenses
and approvals, in all jurisdictions in which the ownership or lease of property
or the conduct of its business shall require such qualifications, licenses or
approvals (except where the failure to so qualify or obtain such licenses and
approvals would not be reasonably likely to have a material adverse effect on
the Seller’s business, operations, assets, revenues or properties).

 

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Section 3.03. Power and Authority. The Seller has the requisite corporate power
and authority to execute and deliver this Agreement and to carry out its terms;
and the execution, delivery and performance of this Agreement have been duly
authorized by all necessary corporate action on the part of the Seller.

Section 3.04. Binding Obligation. This Agreement constitutes a legal, valid and
binding obligation of the Seller enforceable against it in accordance with its
terms, subject to applicable insolvency, reorganization, moratorium, fraudulent
transfer and other laws relating to or affecting creditors’ or secured parties’
rights generally from time to time in effect and to general principles of equity
(including concepts of materiality, reasonableness, good faith and fair
dealing), regardless of whether considered in a proceeding in equity or at law.

Section 3.05. No Violation. The consummation of the transactions contemplated by
this Agreement and the fulfillment of the terms hereof do not: (i) conflict with
or result in any breach of any of the terms and provisions of, nor constitute
(with or without notice or lapse of time) a default under, the articles of
incorporation or code of regulations of the Seller, or any material indenture,
agreement or other instrument to which the Seller is a party or by which it is
bound; (ii) result in the creation or imposition of any Lien upon any of the
Seller’s properties pursuant to the terms of any such indenture, agreement or
other instrument (other than any Lien that may be Granted under the Basic
Documents or the Statutory Lien); or (iii) violate any existing law or any
existing order, rule or regulation applicable to the Seller of any federal or
state court or regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Seller or its properties.

Section 3.06. No Proceedings. There are no proceedings or investigations pending
and, to the Seller’s knowledge, there are no proceedings or investigations
threatened, before any federal or state court, regulatory body, administrative
agency or other governmental instrumentality having jurisdiction over the Seller
or its properties involving or relating to the Seller or the Bond Issuer or, to
the Seller’s knowledge, any other Person: (i) asserting the invalidity of this
Agreement, the Statute or the Financing Order, (ii) seeking to prevent the
consummation of the transactions contemplated by this Agreement or the other
Basic Documents, (iii) seeking any determination or ruling that might materially
and adversely affect the performance by the Seller of its obligations under, or
the validity or enforceability of, this Agreement, any of the other Basic
Documents, the Bonds or the Certificates, or the validity of the Statute or the
Financing Order or (iv) seeking to adversely affect the federal or state income
tax classification of the Bonds [or the Certificates] as debt.

Section 3.07. Approvals. No approval, authorization, consent, order or other
action of, or filing with, any federal or state court, regulatory body,
administrative agency or other governmental instrumentality is required in
connection with the execution and delivery by the Seller of this Agreement, the
performance by the Seller of the transactions contemplated hereby or the
fulfillment by the Seller of the terms hereof, except those that have been
obtained or made and those that the Seller, in its capacity as Servicer under
the Servicing Agreement, is required to make in the future pursuant to the
Servicing Agreement.

Section 3.08. The Phase-In-Recovery Property.

(a) Title. It is the intention of the parties hereto that the transfer and
assignment herein contemplated constitute a sale of the Phase-In-Recovery
Property from the Seller to the Bond Issuer and that no interest in, or title
to, the Phase-In-Recovery Property shall be part of the Seller’s estate in the
event of the filing of a bankruptcy petition by or against the Seller under any
bankruptcy law. No portion of the Phase-In-Recovery Property has been sold,
transferred, assigned or pledged by the Seller to any Person other than the Bond
Issuer. On the Closing Date, immediately upon the sale hereunder, the Seller has
transferred, sold and conveyed the Phase-In-Recovery Property to the Bond
Issuer, free and clear of all Liens, except for the Statutory Lien and any Lien
that may be Granted under the Basic Documents, and pursuant to Section 4928.2313
of the Statute such transfer shall be treated as an absolute transfer of all of
the Seller’s right, title and interest (as in a true sale), and not as a pledge
or other financing of, the Phase-In-Recovery Property.

(b) Transfer Filings. On the Closing Date, immediately upon the sale hereunder,
the Phase-In-Recovery Property has been validly transferred and sold to the Bond
Issuer, the Bond Issuer shall own all such Phase-In-Recovery Property free and
clear of all Liens (except for the Statutory Lien and any Lien that may be
Granted under

 

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the Basic Documents) and all filings to be made by the Seller (including filings
with the PUCO under the Statute) necessary in any jurisdiction to give the Bond
Issuer a valid, perfected ownership interest (subject to the Statutory Lien and
any Lien that may be Granted under the Basic Documents) in, and for the Grant by
the Bond Issuer to the Bond Trustee of a valid, first priority perfected
security interest (except for the Statutory Lien and any Lien that may be
Granted under the Basic Documents) in, the Phase-In-Recovery Property have been
made. No further action is required to maintain such ownership interest or the
Bond Trustee’s perfected security interest (in each case, subject to the
Statutory Lien and any Lien that may be Granted under the Basic Documents).
Filings have also been made to the extent required in any jurisdiction to
perfect the Back-Up Security Interest Granted by the Seller to the Bond Issuer
(subject to the Statutory Lien and any Lien that may be Granted under the Basic
Documents).

(c) Financing Order and Issuance Advice Letter; Other Approvals. On the Closing
Date, under the laws of the State of Ohio and the United States in effect on the
Closing Date, (i) the Financing Order pursuant to which the Phase-In-Recovery
Property has been created is in full force and effect; (ii) the Bondholders are
entitled to the protections of the Statute, and the Financing Order is not
revocable by the PUCO; (iii) the State of Ohio may not take or permit any action
that impairs the value of the Phase-In-Recovery Property or revise the
Phase-In-Costs for which recovery is authorized under the Financing Order or,
except for periodic adjustments allowed in accordance with the adjustment
mechanism in Section 4928.238 of the Statute, reduce, alter or impair
Phase-In-Recovery Charges that are imposed, charged, collected or remitted for
the benefit of the Bondholders in a manner that would substantially impair the
rights of the Bondholders, absent a demonstration by the State of Ohio that an
impairment is a reasonable exercise of its sovereign power and of a character
reasonable and appropriate to the public purpose justifying such action, until
the Bonds, together with interest thereon, and all other approved Financing
Costs are paid and performed in full; (iv) the PUCO may not, either by
rescinding, altering or amending the Financing Order, in any way reduce, impair,
postpone or terminate the Phase-In-Recovery Charge or impair the
Phase-In-Recovery Property or the collection or recovery of the Phase-In-Costs,
absent a demonstration by the State of Ohio that an impairment is a reasonable
exercise of its sovereign power and of a character reasonable and appropriate to
the public purpose justifying such action, until the Bonds, together with
interest thereon, and all other approved Financing Costs are paid and performed
in full; (v) the process by which the Financing Order was adopted and approved,
and the Financing Order and Issuance Advice Letter themselves, comply with all
applicable laws, rules and regulations; (vi) the Issuance Advice Letter has been
filed in accordance with the Financing Order; and (vii) no other approval,
authorization, consent, order or other action of, or filing with, any court,
Federal or state regulatory body, administrative agency or other governmental
instrumentality is required in connection with the creation or sale of the
Phase-In-Recovery Property, except those that have been obtained or made and are
in full force and effect.

(d) Assumptions. On the Closing Date, based upon the information available to
the Seller on the Closing Date, the assumptions used in calculating the initial
Phase-In-Recovery Charge are reasonable and are made in good faith.
Notwithstanding the foregoing, the Seller makes no representation or warranty
that the assumptions used in calculating such Phase-In-Recovery Charge will in
fact be realized.

(e) Creation of Phase-In-Recovery Property. Upon the sale by the Seller to the
Bond Issuer of all of its right, title and interest in the Phase-In-Recovery
Property (i) there will arise and constitute an existing present property right
and interest in such Phase-In-Recovery Property which shall continue to exist
until such time as the Bonds, together with interest thereon, and all other
approved Financing Costs are paid in full; (ii) the creation of the Seller’s
Phase-In-Recovery Property is confirmed and is simultaneous with the sale by the
Seller to the Bond Issuer of such Phase-In-Recovery Property; (iii) the
Phase-In-Recovery Property includes the right, title and interest in and to all
revenues, collections, claims, payments, money, or proceeds of or arising from
the Phase-In-Recovery Charge, as adjusted from time to time pursuant to the
Financing Order, and all rights to obtain adjustments to the Phase-In-Recovery
Charge pursuant to the Financing Order; and (iv) the owner of the
Phase-In-Recovery Property is legally entitled to collect payments in respect of
the Phase-In-Recovery Charge in the aggregate sufficient, subject to the Cap to
the extent applicable, to pay the interest on and principal of the Bonds, to pay
the fees and expenses incurred by or allocable to the Bond Issuer in connection
with servicing the Bonds and an allocable portion of the Certificates, and to
replenish the Capital Subaccount to the Required Capital Level until the Bonds,
together with interest thereon, and all other approved Financing Costs are paid
in full. Notwithstanding the foregoing, the Seller makes no representation or
warranty that any amounts actually collected in respect of the Phase-In-Recovery
Charge will in fact be sufficient to meet payment obligations with respect to
the Bonds and, hence, the Bond Issuer’s allocable portion of the Certificates.

 

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(f) Prospectus. As of the date hereof, the information describing the Seller in
“The Sponsors, Sellers, Initial Servicers and Depositors” section of the
prospectus dated June 12, 2013 offering the Bonds, the bonds issued by CEI
Funding LLC and OE Funding LLC and the Certificates is correct in all material
respects.

Section 3.09. Limitations on Representations and Warranties. Without prejudice
to any of the other rights of the parties, the Seller will not be in breach of
any representation or warranty as a result of a change in law by means of a
legislative enactment, constitutional amendment or voter initiative or
referendum. Notwithstanding anything to the contrary in this Agreement, the
Seller makes no representation or warranty that any amounts actually collected
in respect of the Phase-In-Recovery Charge will in fact be sufficient to meet
payment obligations with respect to the Bonds and, hence, the Bond Issuer’s
allocable portion of the Certificates or that the assumptions used in
calculating the Phase-In-Recovery Charge will in fact be realized nor shall the
Seller be obligated to reduce, or accept a reduction of, any rates or charges to
which it would otherwise be entitled in respect of services rendered or to be
rendered to Customers in order to permit the payment of the Phase-In-Recovery
Charge.

ARTICLE IV. COVENANTS OF THE SELLER

Section 4.01. Corporate Existence. So long as any of the Bonds are outstanding,
except as provided under Section 5.02, the Seller (a) will keep in full force
and effect its existence, rights and franchises as a corporation under the laws
of the jurisdiction of its organization and (b) will obtain and preserve its
qualification to do business, in each case to the extent that in each such
jurisdiction such existence or qualification is or shall be necessary to protect
the validity and enforceability of this Agreement, the other Basic Documents to
which the Seller is a party and each other instrument or agreement to which the
Seller is a party necessary or appropriate to the proper administration of this
Agreement and the transactions contemplated hereby.

Section 4.02. No Liens. Except for the conveyances hereunder or the Statutory
Lien or the Back-Up Security Interest, the Seller will not sell, pledge, assign
or transfer, or Grant, create, or incur any Lien on, any of the
Phase-In-Recovery Property, or any interest therein, and the Seller shall defend
the right, title and interest of the Bond Issuer and the Bond Trustee in, to and
under the Phase-In-Recovery Property against all claims of third parties
claiming through or under the Seller. The Toledo Edison Company, in its capacity
as Seller, will not at any time assert any Lien against, or with respect to, any
of the Phase-In-Recovery Property.

Section 4.03. Delivery of Collections. If the Seller receives any payments in
respect of the Phase-In-Recovery Charge or the proceeds thereof when it is not
acting as the Servicer, the Seller agrees to pay to the Servicer all payments
received by it in respect thereof as soon as practicable after receipt thereof
by it.

Section 4.04. Notice of Liens. The Seller shall notify the Bond Issuer and the
Bond Trustee promptly after becoming aware of any Lien Granted on any of the
Phase-In-Recovery Property, other than the conveyances hereunder, any Lien under
the Basic Documents or the Statutory Lien or for the benefit of the Bond Issuer.

Section 4.05. Compliance with Law. The Seller hereby agrees to comply with its
organizational and governing documents and all laws, treaties, rules,
regulations and determinations of any governmental instrumentality applicable to
it, except to the extent that failure to so comply would not adversely affect
the Bond Issuer’s or the Bond Trustee’s interests in the Phase-In-Recovery
Property or under any of the other Basic Documents to which the Seller is party
or the Seller’s performance of its obligations hereunder or under any of the
other Basic Documents to which it is party.

Section 4.06. Covenants Related to Bonds and Phase-In-Recovery Property.

(a) So long as any of the Bonds are outstanding, the Seller shall treat the
Bonds as debt of the Bond Issuer and not of the Seller, except for financial
accounting or tax reporting purposes.

(b) So long as any of the Bonds are outstanding, the Seller shall indicate in
its financial statements that it is not the owner of the Phase-In-Recovery
Property and shall disclose the effects of all transactions between the Seller
and the Bond Issuer in accordance with generally accepted accounting principles.

 

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(c) So long as any of the Bonds or Certificates are outstanding, the Seller
shall not own or purchase any Bonds or Certificates.

(d) The Seller agrees that, upon the transfer and sale by the Seller of the
Phase-In-Recovery Property to the Bond Issuer pursuant to this Agreement, (i) to
the fullest extent permitted by law, including applicable PUCO Regulations, the
Bond Issuer shall have all of the rights originally held by the Seller with
respect to the Phase-In-Recovery Property, including the right (subject to the
terms of the Servicing Agreement) to exercise any and all rights and remedies to
collect any amounts payable by any Customer in respect of the Phase-In-Recovery
Property, notwithstanding any objection or direction to the contrary by the
Seller and (ii) any payment by any Customer to the Bond Issuer shall discharge
such Customer’s obligations in respect of the Phase-In-Recovery Property to the
extent of such payment, notwithstanding any objection or direction to the
contrary by the Seller.

(e) So long as any of the Bonds are outstanding, (i) the Seller shall not make
any statement or reference in respect of the Phase-In-Recovery Property that is
inconsistent with the ownership thereof by the Bond Issuer (other than for
financial accounting or tax reporting purposes), and (ii) the Seller shall not
take any action in respect of the Phase-In-Recovery Property except solely in
its capacity as the Servicer thereof pursuant to the Servicing Agreement or as
otherwise contemplated by the Basic Documents.

Section 4.07. Protection of Title. The Seller shall execute and file such
filings, including filings with the PUCO pursuant to the Statute and UCC
filings, and cause to be executed and filed such filings, all in such manner and
in such places as may be required by law fully to preserve, maintain and protect
the ownership interest of the Bond Issuer, and the security interest of the Bond
Trustee, in the Phase-In-Recovery Property and the Back-Up Security Interest,
including all filings required under the Statute and the applicable UCC relating
to the transfer of the ownership interest in the Phase-In-Recovery Property by
the Seller to the Bond Issuer, the Granting of a security interest in the
Phase-In-Recovery Property by the Bond Issuer to the Bond Trustee, and the
Back-Up Security Interest, and the continued perfection of such ownership
interest, security interest and the Back-Up Security Interest. The Seller shall
deliver (or cause to be delivered) to the Bond Trustee (with copies to the Bond
Issuer) file-stamped copies of, or filing receipts for, any document filed as
provided above, as soon as available following such filing. The Seller shall
institute any action or proceeding necessary to compel performance by the PUCO
or the State of Ohio of any of their obligations or duties under the Statute or
the Financing Order, and the Seller agrees to take such legal or administrative
actions, including defending against or instituting and pursuing legal actions
and appearing or testifying at hearings or similar proceedings, as may be
reasonably necessary (i) to protect the Bond Issuer, the Bond Trustee, the
Bondholders, and any of their respective affiliates, officials, directors,
employees, and agents from claims, state actions or other actions or proceedings
of third parties which, if successfully pursued, would result in a breach of any
representation set forth in Article III or (ii) to block or overturn any
attempts to cause a repeal of, modification of or supplement to the Statute, the
Financing Order, the Issuance Advice Letter, any other Adjustment Request (as
defined in the Servicing Agreement), or the rights of Bondholders by executive
action, legislative enactment or constitutional amendment that would be adverse
to the Bond Issuer, the Bond Trustee or the Bondholders. If the Servicer
performs its obligations under Section 5.02(d) of the Servicing Agreement in all
respects, such performance shall be deemed to constitute performance of the
Seller’s obligations pursuant to clause (ii) of the immediately preceding
sentence. In such event, the Seller agrees to assist the Servicer as reasonably
necessary to perform its obligations under Section 5.02(d) of the Servicing
Agreement in all respects. The costs of any such actions or proceedings shall be
payable from Phase-In-Recovery Charge Collections as an Operating Expense in
accordance with the priorities and subject to the Cap set forth in
Section 8.02(e) of the Bond Indenture. The Seller’s obligations pursuant to this
Section 4.07 shall survive and continue notwithstanding the fact that the
payment of Operating Expenses pursuant to Section 8.02(e) of the Bond Indenture
may be delayed (it being understood that the Seller may be required to advance
its own funds to satisfy its obligations hereunder).

Section 4.08. Nonpetition Covenant. Notwithstanding any prior termination of
this Agreement or the Bond Indenture, but subject to the right of a court of
competent jurisdiction to order the sequestration and payment of revenues
arising with respect to the Phase-In-Recovery Property notwithstanding any
bankruptcy, reorganization or other insolvency proceedings with respect to the
Seller pursuant to Section 4928.2310 of the Statute, the Seller solely in its
capacity as a creditor of the Bond Issuer shall not, prior to the date which is
one year and one day after the termination of the Bond Indenture, petition or
otherwise invoke or cause the Bond Issuer to invoke the process of any court or
government authority for the purpose of commencing or sustaining an involuntary
case against the Bond Issuer under any Federal or state bankruptcy, insolvency
or similar law, appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Bond Issuer or any substantial
part of the property of the Bond Issuer, or, to the fullest extent permitted by
law, ordering the winding up or liquidation of the affairs of the Bond Issuer.

 

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Section 4.09. Taxes. So long as any of the Bonds are outstanding, the Seller
shall, and shall cause each of its subsidiaries to, pay all material taxes,
assessments and governmental charges imposed upon it or any of its properties or
assets or with respect to any of its franchises, business, income or property
before any penalty accrues thereon if the failure to pay any such taxes,
assessments and governmental charges would, after any applicable grace periods,
notices or other similar requirements, result in a Lien on the Phase-In-Recovery
Property; provided that no such tax need be paid if the Seller or one of its
subsidiaries is contesting the same in good faith by appropriate proceedings
promptly instituted and diligently conducted and if the Seller or such
subsidiary has established appropriate reserves as shall be required in
conformity with generally accepted accounting principles.

Section 4.10. Additional Sales of Phase-In-Recovery Property. So long as any of
the Bonds are outstanding, the Seller shall not sell any “phase-in-recovery
property” (as defined in the Statute) to secure another issuance of
phase-in-recovery bonds (as defined in the Statute) if it would cause the then
existing ratings on the Certificates from the Rating Agencies to be downgraded.

Section 4.11. Issuance Advice Letter. The Seller hereby agrees not to withdraw
the filing of the Issuance Advice Letter with the PUCO.

ARTICLE V. THE SELLER

Section 5.01. Liability of Seller; Indemnities.

(a) The Seller shall be liable in accordance herewith only to the extent of the
obligations specifically undertaken by the Seller under this Agreement.

(b) Intentionally Omitted.

(c) The Seller shall indemnify the Bond Issuer, the Bond Trustee, the
Certificate Trustee, the Delaware Trustee, the Certificate Issuer and, the
Bondholders for, and defend and hold harmless each such Person from and against,
any and all taxes (other than taxes imposed on Bondholders solely as a result of
their ownership of Bonds) that may at any time be imposed on or asserted against
any such Person under existing law as of the Closing Date as a result of the
sale of the Phase-In-Recovery Property to the Bond Issuer, including any sales,
gross receipts, general corporation, tangible personal property, privilege or
license taxes; provided, however, that the Bondholders shall be entitled to
enforce their rights against the Seller under this Section 5.01(c) solely
through a cause of action brought for their benefit by the Bond Trustee.

(d) The Seller shall indemnify the Bond Issuer, the Bond Trustee, the
Certificate Trustee, the Delaware Trustee, the Certificate Issuer, and the
Bondholders for, and defend and hold harmless each such Person from and against,
any and all taxes that may be imposed on or asserted against any such Person
under existing law as of the Closing Date as a result of the issuance and sale
by the Bond Issuer of the Bonds, the issuance and sale by the Trust of the Bond
Issuer’s allocable portion of the Certificates or the other transactions
contemplated herein, including any sales, gross receipts, general corporation,
tangible personal property, privilege or license taxes; provided, however, that
the Bondholders shall be entitled to enforce their rights against the Seller
under this Section 5.01(d) solely through a cause of action brought for their
benefit by the Bond Trustee. The Seller shall be reimbursed for any payments
under this Section 5.01(d) from Phase-In-Recovery Charge Collections as an
Operating Expense in accordance with the priorities and subject to the Cap set
forth in Section 8.02(e) of the Bond Indenture.

(e) The Seller shall indemnify the Bond Issuer and the Bondholders for, and
defend and hold harmless each such Person from and against, any and all
liabilities, obligations, losses, actions, suits, claims, damages, payments,
costs or expenses of any kind whatsoever (collectively, “Losses”) that may be
imposed on, incurred by or asserted against each such Person as a result of
(i) the Seller’s willful misconduct or gross negligence in the performance of
its duties or observance of its covenants under this Agreement, or (ii) the
Seller’s breach in any material respect of any of its representations and
warranties contained in this Agreement, except in the case of both clauses
(i) and (ii) to the extent of Losses either resulting from the willful
misconduct or gross negligence of such indemnified person or resulting from a
breach of a representation and warranty made by such indemnified person in any
of the Basic Documents that gives rise to the Seller’s breach; provided,
however, that the Bondholders shall be entitled to enforce their rights against
the Seller under this indemnification solely through a cause of action brought
for their benefit by the Bond Trustee;

 

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(f) Indemnification under Sections 5.01(c), 5.01(d), 5.01(e) and 5.01(h) shall
include reasonable fees and out-of-pocket expenses of investigation and
litigation (including reasonable attorneys’ fees and expenses), except as
otherwise provided in this Agreement.

(g) Without prejudice to any of the other rights of the parties, the Seller will
not be in breach of any representation or warranty as a result of a change in
law by means of a legislative enactment, constitutional amendment or voter
initiative. Notwithstanding anything to the contrary in this Agreement, the
Seller makes no representation or warranty that any amounts actually collected
in respect of the Phase-In-Recovery Charge will in fact be sufficient to meet
payment obligations with respect to the Bonds and, hence, the Bond Issuer’s
allocable portion of the Certificates or that the assumptions used in
calculating the Phase-In-Recovery Charge will in fact be realized nor shall the
Seller be obligated to reduce, or accept a reduction of, any rates or charges to
which it would otherwise be entitled in respect of services rendered or to be
rendered to customers in order to permit the payment of the Phase-In-Recovery
Charge.

(h) The Seller shall indemnify and hold harmless the Bond Trustee, the Delaware
Trustee, the Certificate Trustee, the Certificate Issuer and any of their
respective affiliates, officials, officers, directors, employees and agents
(each an “Indemnified Person”) against any and all Losses incurred by any of
such Indemnified Persons as a result of (i) the Seller’s willful misconduct or
gross negligence in the performance of its duties or observance of its covenants
under this Agreement or (ii) the Seller’s breach in any material respect of any
of its representations and warranties contained in this Agreement, except in the
case of both clauses (i) and (ii) to the extent of Losses either resulting from
the willful misconduct or negligence of such Indemnified Person or resulting
from a breach of a representation or warranty made by such Indemnified Person in
any of the Basic Documents that gives rise to the Seller’s breach. The Seller
shall not be required to indemnify an Indemnified Person for any amount paid or
payable by such Indemnified Person in the settlement of any action, proceeding
or investigation without the written consent of the Seller, which consent shall
not be unreasonably withheld. The obligations of the Seller under this
Section 5.01(h) shall survive the resignation or removal of the foregoing
trustees and the termination of the Basic Documents. Promptly after receipt by
an Indemnified Person of notice of its involvement in any action, proceeding or
investigation, such Indemnified Person shall, if a claim for indemnification in
respect thereof is to be made against the Seller under this Section 5.01(h),
notify the Seller in writing of such involvement. Failure by an Indemnified
Person to so notify the Seller shall relieve the Seller from the obligation to
indemnify and hold harmless such Indemnified Person under this Section 5.01(h)
only to the extent that the Seller suffers actual prejudice as a result of such
failure. With respect to any action, proceeding or investigation brought by a
third party for which indemnification may be sought under this Section 5.01(h),
the Seller shall be entitled to assume the defense of any such action,
proceeding or investigation. Upon assumption by the Seller of the defense of any
such action, proceeding or investigation, the Indemnified Person shall have the
right to participate in such action or proceeding and to retain its own counsel.
The Seller shall be entitled to appoint counsel of the Seller’s choice at the
Seller’s expense to represent the Indemnified Person in any action, proceeding
or investigation for which a claim of indemnification is made against the Seller
under this Section 5.01(h) (in which case the Seller shall not thereafter be
responsible for the fees and expenses of any separate counsel retained by the
Indemnified Person except as set forth below); provided, however, that such
counsel shall be reasonably satisfactory to the Indemnified Person.
Notwithstanding the Seller’s election to appoint counsel to represent the
Indemnified Person in an action, proceeding or investigation, the Indemnified
Person shall have the right to employ separate counsel (including local
counsel), and the Seller shall bear the reasonable fees, costs and expenses of
such separate counsel if (i) the use of counsel chosen by the Seller to
represent the Indemnified Person would present such counsel with a conflict of
interest, (ii) the actual or potential defendants in, or targets of, any such
action include both the Indemnified Person and the Seller and the Indemnified
Person shall have reasonably concluded that there may be legal defenses
available to it that are different from or additional to those available to the
Seller, (iii) the Seller shall not have employed counsel reasonably satisfactory
to the Indemnified Person to represent the Indemnified Person within a
reasonable time after notice of the institution of such action or (iv) the
Seller shall authorize the Indemnified Person to employ separate counsel at the
expense of the Seller. Notwithstanding the foregoing, the Seller shall not be
obligated to pay for the fees, costs and expenses of more than one separate
counsel for the Indemnified Persons other than local counsel. The Seller will
not, without the prior written consent of the Indemnified Person, settle or
compromise or consent to the entry of any judgment with respect to any pending
or threatened claim, action, suit or

 

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proceeding in respect of which indemnification may be sought under this
Section 5.01(h) (whether or not the Indemnified Person is an actual or potential
party to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of the Indemnified Person from all liability
arising out of such claim, action, suit or proceeding.

(i) The remedies of the Bond Issuer and the Bondholders provided in this
Agreement are each such Person’s sole and exclusive remedies against the Seller
for breach of its representations and warranties in this Agreement.

Section 5.02. Merger or Consolidation of, or Assumption of the Obligations of,
Seller. Any Person (a) into which the Seller may be merged or consolidated,
(b) that may result from any merger or consolidation to which the Seller shall
be a party or (c) that may succeed to the properties and assets of the Seller
substantially as a whole, which Person in any of the foregoing cases executes an
agreement of assumption to perform every obligation of the Seller hereunder,
shall be the successor to the Seller under this Agreement without further act on
the part of any of the parties to this Agreement; provided, however, that (i) if
the Seller is the Servicer, no Servicer Default, and no event which, after
notice or lapse of time, or both, would become a Servicer Default shall have
occurred and be continuing, (ii) the Seller shall have delivered to the Bond
Issuer and the Bond Trustee an Officers’ Certificate stating that such
consolidation, merger or succession and such agreement of assumption comply with
this Section and that all conditions precedent, if any, provided for in this
Agreement relating to such transaction have been complied with, (iii) the Seller
shall have delivered to the Bond Issuer and the Bond Trustee an Opinion of
Counsel either (A) stating that, in the opinion of such counsel, such
consolidation, merger or succession and such agreement of assumption comply with
this Section and that all conditions precedent provided for in this Agreement
relating to such transaction have been complied with and (B) either (1) all
filings to be made by the Seller, including filings with the PUCO pursuant to
the Statute and under the applicable UCC, have been executed and filed that are
necessary to fully preserve and protect the interests of the Bond Issuer and the
Bond Trustee in the Phase-In-Recovery Property and reciting the details of such
filings, or (2) no such action shall be necessary to preserve and protect such
interests and (iv) the Rating Agencies shall have received prior written notice
of such transaction from the Seller. When any Person acquires the properties and
assets of the Seller substantially as a whole and becomes the successor to the
Seller in accordance with the terms of this Section 5.02, then upon satisfaction
of all of the other conditions of this Section 5.02, the Seller shall
automatically and without further notice be released from all of its obligations
hereunder.

Section 5.03. Limitation on Liability of Seller and Others. The Seller and any
director, officer, employee or agent of the Seller may rely in good faith on the
advice of counsel or on any document of any kind, prima facie properly executed
and submitted by any Person, respecting any matters arising hereunder.

ARTICLE VI. MISCELLANEOUS PROVISIONS

Section 6.01. Amendment. This Agreement may be amended by the Seller and the
Bond Issuer, with (a) ten Business Days’ prior written notice given to the
Rating Agencies, (b) the prior written consent of the Bond Trustee, and (c) if
any amendment would adversely affect in any material respect the interests of
any Bondholder, the prior written consent of a majority of the Outstanding
Amount of the Bonds affected thereby.

It shall not be necessary for the consent of Bondholders pursuant to this
Section to approve the particular form of any proposed amendment or consent, but
it shall be sufficient if such consent shall approve the substance thereof.

Prior to the execution of any amendment to this Agreement, the Bond Trustee
shall be entitled to receive and rely upon an Opinion of Counsel stating that
the execution of such amendment is authorized or permitted by this Agreement and
all conditions precedent have been satisfied. The Bond Trustee may, but shall
not be obligated to, enter into any such amendment which affects the Bond
Trustee’s own rights, duties or immunities under this Agreement or otherwise.

The Bond Issuer shall provide a copy of any amendment to this Agreement to the
Bond Trustee and the Rating Agencies promptly after the execution thereof.

Section 6.02. Notices. Unless otherwise specifically provided herein, all
notices, directions, consents and waivers required under the terms and
provisions of this Agreement shall be in English and in writing, and any

 

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such notice, direction, consent or waiver may be given by United States mail,
courier service, facsimile transmission or electronic mail (confirmed by
telephone, United States mail or courier service in the case of notice by
facsimile transmission or electronic mail) or any other customary means of
communication, and any such notice, direction, consent or waiver shall be
effective when delivered, or if mailed, three days after deposit in the United
States mail with proper postage for ordinary mail prepaid:

 

  (a) if to the Seller, to:

The Toledo Edison Company

76 South Main Street

Akron, Ohio 44308

  Attention: James W. Burk,

Counsel of Record

  Facsimile: (330) 384-3875

  Telephone: (330) 384-5861

 

  (b) if to the Bond Issuer, to:

TE Funding LLC

c/o FirstEnergy Corp.

76 South Main Street

Akron, Ohio 44308

Attention: James W. Burk,

Counsel of Record

Facsimile: (330) 384-3875

Telephone: (330) 384-5861

 

  (c) if to the Bond Trustee, to:

U.S. Bank National Association

190 S. LaSalle Street, 7th Floor

Mail Code: MK-IL-SL7R

Chicago, IL 60603

Attention: First Energy Ohio PIRB Special Purpose Trust 2013

Facsimile: 312-332-7996

Telephone: 312-332-7496

E-Mail: melissa.rosal@usbank.com

 

  (d) if to Moody’s, to:

Moody’s Investors Service, Inc.

25th Floor, 7 World Trade Center, 250 Greenwich

New York, NY 10007

  Attention: ABS/RMBS Monitoring Department

  Email: ServicerReports@moodys.com

  Facsimile: (212) 553-0573

  Telephone: (212) 553-3686

 

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  (e) if to S&P, to:

Standard & Poor’s Rating Services

55 Water Street

New York, NY 10041

  Attention: Structured Credit Surveillance

  Telephone: (212) 438-8991

  E-mail: servicer-reports@standardandpoors.com

 

  (f) if to Fitch, to:

Fitch Ratings

One State Street Plaza

New York, New York 10004

  Attention: ABS Surveillance

  Telephone: (212) 908-0500

  Facsimile: (212) 908-0355

 

  (g) if to the Certificate Issuer, to:

U.S. Bank Trust National Association, as Delaware Trustee

for the FirstEnergy Ohio PIRB Special Purpose Trust 2013

190 S. LaSalle Street, 7th Floor

Mail Code: MK-IL-SL7R

Chicago, IL 60603

  Attention: First Energy Ohio PIRB Special Purpose Trust 2013

  Facsimile: 312-332-7996

  Telephone: 312-332-7496

E-Mail: melissa.rosal@usbank.com

(h) as to each of the foregoing, at such other address as shall be designated by
written notice to the other parties.

Section 6.03. Assignment. Notwithstanding anything to the contrary contained
herein, except as provided in Section 5.02 and Section 6.09, this Agreement may
not be assigned by the Seller.

Section 6.04. Limitations on Rights of Third Parties. The provisions of this
Agreement are solely for the benefit of the Seller, the Bond Issuer, the
Bondholders, the Bond Trustee, the Certificate Trustee, the Delaware Trustee,
the Certificate Issuer and the other Persons expressly referred to herein, and
such Persons shall have the right to enforce the relevant provisions of this
Agreement, except that the Bondholders shall be entitled to enforce their rights
against the Seller under this Agreement solely through a cause of action brought
for their benefit by the Bond Trustee. Nothing in this Agreement, whether
express or implied, shall be construed to give to any other Person any legal or
equitable right, remedy or claim in the Phase-In-Recovery Property or under or
in respect of this Agreement or any covenants, conditions or provisions
contained herein.

Section 6.05. Severability. Any provision of this Agreement that is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

Section 6.06. Separate Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.

 

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Section 6.07. Headings. The headings of the various Articles and Sections herein
are for convenience of reference only and shall not define or limit any of the
terms or provisions hereof.

Section 6.08. Governing Law. This Agreement shall be construed in accordance
with the laws of the State of Ohio, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
shall be determined in accordance with such laws.

Section 6.09. Collateral Assignment to Bond Trustee. The Seller hereby
acknowledges and consents to the Grant of a security interest and collateral
assignment by the Bond Issuer to the Bond Trustee pursuant to the Bond Indenture
for the benefit of the Bondholders and the Bond Trustee of all right, title and
interest of the Bond Issuer in, to and under the Phase-In-Recovery Property and
the proceeds thereof and all other Collateral (including, without limitation all
of the Bond Issuer’s rights hereunder) and to the subsequent Grant of a security
interest and collateral assignment by the Bondholder to the Certificate Trustee
pursuant to the Certificate Indenture for the benefit of the Certificateholders
and the Certificate Trustee in all of the Bondholder’s right, title and interest
in the Bonds, and all rights of the Certificate Trustee or the Certificate
Issuer, as sole holder of the Bonds in and to the Collateral of the Bond Issuer
and any proceeds thereof, including, without limitation, all of the Bond
Issuer’s rights hereunder.

Section 6.10. Rule 17g-5 Compliance. The Seller and Bond Issuer agree that any
notice, report, document or other information provided by the Seller or Bond
Issuer to any Rating Agency under this Agreement or any other Basic Document to
which it is a party, for the purpose of determining the initial credit rating of
the Bonds and Certificates or undertaking credit rating surveillance of the
Bonds and Certificates with any Rating Agency, shall be provided, substantially
concurrently, to the Servicer for posting on the 17g-5 Website.

[SIGNATURE PAGE FOLLOWS.]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Phase-In-Recovery
Property Purchase and Sale Agreement to be duly executed by their respective
officers as of the day and year first above written.

 

TE FUNDING LLC, as Bond Issuer By:   /s/ Steven R. Staub Name:   Steven R. Staub
Title:   Vice President and Treasurer

THE TOLEDO EDISON COMPANY, as Seller

By:   /s/ Steven R. Staub Name:   Steven R. Staub Title:   Vice President and
Treasurer

Signature Page to Phase-In-Recovery Purchase and Sale Agreement