##### 



Exhibit 10.1
 FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 THE MEMBERSHIP INTERESTS EVIDENCED BY THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933 OR UNDER THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR TRANSFERRED
WITHOUT COMPLIANCE WITH THIS AGREEMENT AND ALL APPLICABLE FEDERAL AND STATE SECURITIES LAWS
 LIMITED LIABILITY COMPANY AGREEMENT
 OF
 POTOMAC-APPALACHIAN TRANSMISSION HIGHLINE, LLC
 A Delaware Limited Liability Company
 September 1, 2007




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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 TABLE OF CONTENTS
 ARTICLE 1DEFINITIONS AND INTERPRETATION
    
    
    11.01
    
    
    Definitions
    
    
    11.02
    
    
    Interpretation
    
    
    21ARTICLE 2FORMATION; ORGANIZATION
    
    
    222.01
    
    
    Formation
    
    
    222.02
    
    
    Name
    
    
    222.03
    
    
    Members
    
    
    222.04
    
    
    Voting Members
    
    
    232.05
    
    
    Registered Office; Registered
Agent; Principal Office
    
    
    232.06
    
    
    Purposes
    
    
    232.07
    
    
    Powers
    
    
    232.08
    
    
    Creation of Series
    
    
    242.09
    
    
    No State Law Partnership
    
    
    252.10
    
    
    Foreign Qualification
    
    
    252.11
    
    
    Term
    
    
    252.12
    
    
    Liability to Third Parties
    
    
    252.13
    
    
    Series Interests
    
    
    262.14
    
    
    Formation of Operating Companies
    
    
    26ARTICLE 3THE PROJECT
    
    
    273.01
    
    
    RTEP Designation
    
    
    273.02
    
    
    Regulatory Matters
    
    
    273.03
    
    
    Maryland Transmission Line
    
    
    293.04
    
    
    Services Agreements
    
    
    313.05
    
    
    Administrative Services Agreements
    
    
    323.06
    
    
    Pennsylvania Facilities
    
    
    343.07
    
    
    Additional Facilities
    
    
    343.08
    
    
    Duty of Cooperation
    
    
    373.09
    
    
    Company Escrow Agreement
    
    
    373.10
    
    
    Series Expenses
    
    
    383.11
    
    
    Financing
    
    
    393.12
    
    
    Ohio Facilities
    
    
    393.13
    
    
    West Virginia Facilities
    
    
    403.14
    
    
    Interconnections
    
    
    413.15
    
    
    Abandonment of the Project
    
    
    413.16
    
    
    Compliance with Law
    
    
    41
 *** Confidential Treatment Requested
 - i -




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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 ARTICLE 4REPRESENTATIONS AND WARRANTIES; DISCLAIMERS
    
    
    424.01
    
    
    General Representations and Warranties
    
    
    424.02
    
    
    Disclaimer of Certain Duties
    
    
    424.03
    
    
    Release
    
    
    434.04
    
    
    Business Opportunities
    
    
    43ARTICLE 5DISPOSITIONS AND ENCUMBRANCES OF MEMBERSHIP INTERESTS
    
    
    455.01
    
    
    Restrictions on Dispositions
    
    
    455.02
    
    
    Permitted Dispositions
    
    
    455.03
    
    
    Right of First Offer
    
    
    465.04
    
    
    Requirements Applicable to All Dispositions and Admissions
    
    
    495.05
    
    
    Tax Partnership Transfer Limitations
    
    
    505.06
    
    
    Deemed Membership Disposition
    
    
    505.07
    
    
    Admission of Assignee as a Member
    
    
    515.08
    
    
    Special Dispositions
    
    
    515.09
    
    
    Issuance of Additional Series Interests
    
    
    515.10
    
    
    Specific Performance
    
    
    51ARTICLE 6CAPITAL CONTRIBUTIONS
    
    
    516.01
    
    
    Series Capital Contributions
    
    
    516.02
    
    
    No Other Contribution Obligations
    
    
    536.03
    
    
    Return of Contributions
    
    
    536.04
    
    
    Series Capital Accounts
    
    
    536.05
    
    
    Failure to Make a Series Capital Contribution
    
    
    546.06
    
    
    Priority Interest
    
    
    546.07
    
    
    Permanent Contribution
    
    
    566.08
    
    
    Further Assurance
    
    
    566.09
    
    
    Deficit Series Capital Accounts
    
    
    566.10
    
    
    Capital Contribution Escrow Agreement
    
    
    56ARTICLE 7DISTRIBUTIONS AND ALLOCATIONS
    
    
    577.01
    
    
    Distributions
    
    
    577.02
    
    
    Allocations of Series Profits and Series Losses
    
    
    577.03
    
    
    Special Allocations for Series Capital Account Purposes
    
    
    587.04
    
    
    Income Tax Allocations
    
    
    607.05
    
    
    Varying Interests
    
    
    61
 *** Confidential Treatment Requested - ii -




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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 ARTICLE 8MANAGEMENT
    
    
    
    
    618.01
    
    
    Management Generally
    
    
    618.02
    
    
    Board of Managers
    
    
    628.03
    
    
    Administrative Committees
    
    
    638.04
    
    
    Officers and Committees
    
    
    658.05
    
    
    Meetings
    
    
    668.06
    
    
    Limitation of Duties and Liabilities
    
    
    678.07
    
    
    Intentionally Omitted
    
    
    688.08
    
    
    Costs and Expenses
    
    
    688.09
    
    
    Resolution of Deadlocks
    
    
    688.10
    
    
    Conversion of [***]
    
    
    698.11
    
    
    Matters Requiring Unanimous Approval of Voting Members of the
Company
    
    
    728.12
    
    
    Matters Requiring Unanimous Approval of Series Members
    
    
    728.13
    
    
    Matters Requiring Super-Majority Approval of Series Members
    
    
    738.14
    
    
    Affiliate Contracts
    
    
    73ARTICLE 9TAXES
    
    
    739.01
    
    
    Tax Elections
    
    
    739.02
    
    
    Series Tax Matters Members
    
    
    74ARTICLE 10INTELLECTUAL PROPERTY
    
    
    7610.01
    
    
    No Grant of Trademark
    
    
    7610.02
    
    
    License Agreement
    
    
    7610.03
    
    
    Disclosure of Certain Know-How
    
    
    76ARTICLE 11ACCOUNTING; AUDIT RIGHTS
    
    
    7611.01
    
    
    Accounting
    
    
    7611.02
    
    
    Reports
    
    
    7711.03
    
    
    Records
    
    
    7711.04
    
    
    Audits
    
    
    77ARTICLE 12WITHDRAWAL
    
    
    7812.01
    
    
    Voluntary Withdrawal
    
    
    7812.02
    
    
    Deemed Withdrawal
    
    
    8112.03
    
    
    Effect of Withdrawal
    
    
    8112.04
    
    
    Destruction of Confidential Information
    
    
    82
 *** Confidential Treatment Requested - iii -




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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 ARTICLE 13DISPUTES
    
    
    8313.01
    
    
    Disputes
    
    
    8313.02
    
    
    Negotiation to Resolve Disputes
    
    
    8313.03
    
    
    Litigation
    
    
    8313.04
    
    
    Deadlock Arbitration
    
    
    83ARTICLE 14DEFAULT AND REMEDIES; LIMITATION OF LIABILITY
    
    
    8514.01
    
    
    Default
    
    
    8514.02
    
    
    General Remedies
    
    
    8614.03
    
    
    AET Default
    
    
    8614.04
    
    
    AEPTHC Default
    
    
    8714.05
    
    
    Exclusion of Consequential Damages
    
    
    87ARTICLE 15INDEMNIFICATION
    
    
    8715.01
    
    
    Indemnification Obligations
    
    
    8715.02
    
    
    Indemnification Procedures
    
    
    8915.03
    
    
    Subrogation
    
    
    90ARTICLE 16DISSOLUTION, WINDING-UPAND TERMINATION
    
    
    9016.01
    
    
    Dissolution
    
    
    9016.02
    
    
    Winding-Up and Termination
    
    
    9116.03
    
    
    Fair Market Value Appraisals
    
    
    9316.04
    
    
    Certificate of Cancellation
    
    
    94ARTICLE 17CONFIDENTIAL INFORMATION
    
    
    9417.01
    
    
    Confidentiality Obligation
    
    
    9417.02
    
    
    Permissible Disclosures
    
    
    9517.03
    
    
    Obligation with respect to Third Parties
    
    
    9617.04
    
    
    Remedy
    
    
    9617.05
    
    
    Duration
    
    
    96ARTICLE 18GENERAL PROVISIONS
    
    
    9618.01
    
    
    Setoff Rights
    
    
    9618.02
    
    
    Notices
    
    
    9718.03
    
    
    Entire Agreement; Superseding Effect
    
    
    9718.04
    
    
    Effect of Waiver or Consent
    
    
    97
 *** Confidential Treatment Requested - iv -




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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 18.05
    
    
    Amendment or Restatement
    
    
    9818.06
    
    
    Binding Effect
    
    
    9818.07
    
    
    Severability
    
    
    9818.08
    
    
    Governing Law, Jurisdiction and Venue.
    
    
    9818.09
    
    
    Waiver of Right to Jury Trial
    
    
    9918.10
    
    
    Further Assurances
    
    
    9918.11
    
    
    Waiver of Certain Rights
    
    
    9918.12
    
    
    Public Announcements
    
    
    9918.13
    
    
    Counterparts
    
    
    9918.14
    
    
    Construction
    
    
    99
 *** Confidential Treatment Requested - v -




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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 EXHIBITS AND SCHEDULES
 Exhibit A
    
    Form of Company Escrow AgreementExhibit B
    
    Form of License AgreementExhibit C
    
    Form of Administrative Services AgreementExhibit D-1
    
    Form of AEPTHC Services Agreement (West Virginia Operating Company)Exhibit D-2
    
    Form of AEPTHC Services Agreement (AYE Operating Company)Exhibit D-3
    
    Form of AEPTHC Services Agreement (Ohio Operating Company)Exhibit D-4
    
    Form of AET Services Agreement (West Virginia Operating Company)Exhibit D-5
    
    Form of AET Services Agreement (Ohio Operating Company)Exhibit E
    
    Form of Capital Contribution Escrow AgreementExhibit F
    
    Form of Regulatory Undertakings AgreementExhibit G
    
    Form of Environmental Indemnity AgreementsSchedule 2.08
    
    Series InformationSchedule 3.01
    
    Description of Project FacilitiesSchedule 3.02
    
    Regulatory PlanSchedule 3.09
    
    Company Revenue Allocation MethodologySchedule 8.02
    
    Initial RepresentativesSchedule 8.03
    
    Initial AdministratorsSchedule 9.02
    
    Series Tax Matter MembersSchedule 18.02
    
    Notice Information
 *** Confidential Treatment Requested - vi -




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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 LIMITED LIABILITY COMPANY AGREEMENT
OF
POTOMAC-APPALACHIAN TRANSMISSION HIGHLINE, LLC
 Agreement POTOMAC-APPALACHIAN TRANSMISSION
HIGHLINE, LLC Company Effective Date AET AEPTHC
 RECITALS
 Delaware Certificate
    ARTICLE 1
DEFINITIONS AND INTERPRETATION
 Definitions
 Act:
 Additional Contribution:
 Additional Contribution Member:
 Additional Facilities:
 *** Confidential Treatment Requested - 1 -




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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 Additional Facilities Disposition Date:
 Additional Facilities Extension Period: [***] [***]
 Additional Facilities Return Amount: Schedule 3.09
 Adjusted Series Capital Account:
 Administrative Committee:
 Administrative Services Agreement: Exhibit C Exhibit C Exhibit C Exhibit C
 Administrator :
 AEPTHC:
 AEPTHC Representatives:
 AEP Transmission Zone:
 *** Confidential Treatment Requested - 2 -




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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 AET:
 AET Representatives:
 Affiliate: provided, however
 Affiliate Arrangement:
 Affiliated Contractor:
 Affiliates Outside Activities:
 Agreement:
 Allegheny Assets:
 Allegheny Transmission Zone:
 Amos-Kemptown FERC 205 Application:
 Amos Upgrade: provided, however
 Amos Upgrade Cost:
 Appraiser:
 Assignee:
 [***] Notice:
 *** Confidential Treatment Requested - 3 -




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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 Available Cash: provided, however
 AYE Board:
 AYE Facilities: Schedule 3.01
 AYE Operating Company:
 AYE Operating Company Agreement:
 AYE Series:
 AYE Series Administrative Committee:
 AYE Series Member: Schedule 2.08
 Bankruptcy Bankrupt:
 *** Confidential Treatment Requested - 4 -




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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
  Bedington-Kemptown Facilities: Schedule 3.01
 Board of Managers:
 Book Value:
 (a)
    
    The initial Book Value of any property contributed by a Series
Member of such Series shall be the Fair Market Value of such property;(b)
    
    The Book Value of any such property shall be adjusted to equal
its Fair Market Value in connection with: (i) the acquisition of a Series
Interest of such Series by, or adjustment to the Series Percentage of, any new
or existing Series Member of such Series as a result of more than a de minimis
Series Capital Contribution to such Series; (ii) the distribution by such
Series to a Series Member of such Series of more than a de minimisamount of
property as consideration for a Series Interest of such Series or an adjustment
to the Series Percentage of such Series Member; (iii) the grant of a Series
Interest of such Series (other than a de minimisinterest) as consideration for
the provision of services to, or for the benefit of, such Series by an existing
Series Member of such Series acting in its capacity as a Series Member thereof,
or by a new Series Member of such Series acting in its capacity as a Series
Member thereof or in anticipation of becoming a Series Member of such Series;
(iv) the liquidation of such Series within the meaning of Section
1.704-1(b)(2)(ii)(g)(1) of the Treasury Regulation (other than pursuant to
Section 708(b)(1)(B) of the Code); or (v) any other event to the extent
determined by the Administrative Committee of such Series to be necessary to
properly reflect Book Values in accordance with the standards set forth in
Section 1.704-1(b)(2)(iv)(q) of the Treasury Regulations;(c)
    
    The Book Value of property distributed to a Series Member of
such Series shall be the Fair Market Value of such property; and(d)
    
    The Book Value of property of an Operating Company shall be
increased or decreased to reflect any adjustments to the adjusted basis of such
 *** Confidential Treatment Requested
 - 5 -




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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 property pursuant to Section 734(b) or Section 743(b) of the Code, but only
to the extent that such adjustments are taken into account in determining
Series Capital Accounts for the Series associated with such Operating
Company pursuant to Section 1.704-1(b)(2)(iv)(m) of the Treasury
Regulations; provided, however, that Book Value shall not be adjusted
pursuant to this clause (d) to the extent the Administrative Committee of
such Series determines that an adjustment pursuant to clause (b) of this
definition is necessary or appropriate in connection with the transaction
that would otherwise result in an adjustment pursuant to this clause (d).
  Business Day:
 Capital Contribution Escrow Agreement:
 Capital Contribution Escrow Account:
 Capital Contribution Escrow Agent:
 Certified Public Accountants:
 Charter Documents:
 Claim:
 Claiming Member:
 *** Confidential Treatment Requested
 - 6 -




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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 Class A Administrator:
 Class B Administrator:
 Class A Representative:
 Class B Representative:
 Code:
 Company:
 Company Dissolution Event:
 Company Escrow Agent:
 Company Escrow Agreement: Exhibit
A
 Company Regulatory Filings:
 Confidential Information:
 *** Confidential Treatment Requested
 - 7 -




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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 provided, however and provided further
 (a)
    
    was already known by (as established by dated documentation)
the Recipient at the time of receipt of the information by the Recipient from
the Disclosing Party;(b)
    
    is or becomes available to the industry without confidentiality
restrictions (e.g., in technical literature, databases or the like that are
available with or without subscription) or is in, or subsequently enters, the
public domain other than as a result of a disclosure by the Recipient in breach
of this Agreement;(c)
    
    was received by the Recipient from a third party if such third
party was not, or the Recipient reasonably believed such third party was not,
subject to any confidentiality obligation to the Disclosing Party or disclosing
information that the third party knew at the time of such disclosure was
obtained from the Disclosing Party by improper means;(d)
    
    was independently developed by a Person without access to
information provided by the Disclosing Party;(e)
    
    was or is furnished by the Disclosing Party to a third party
without confidentiality restrictions; or(f)
    
    is approved for release by written authorization of the Disclosing Party.
 Contributing Member:
 Control:
 (a)
    
    in the case of a corporation, the power or authority to vote or
dispose of more than fifty percent (50%) of the outstanding voting securities
entitled to elect directors or individuals who perform similar management
functions thereof;(b)
    
    in the case of a limited liability company, partnership,
limited partnership or other entity, the right to more than fifty percent (50%)
of the distributions therefrom or economic interests therein; or
 *** Confidential Treatment Requested
 - 8 -




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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 (c)
    
    in the case of any entity, the power or authority, through
ownership of voting securities, by contract or otherwise, to elect or appoint a
majority of general partners, directors, managers, managing members, trustees
or such other Persons that perform similar management functions, or otherwise
exercise predominant control over the management of the entity.
 Converted Member:
 Curative Allocations
 Day: provided, however
 Deadlock: provided,
however
 Deadlock Arbitration:
 Deadlock Arbitration Parties:
 Deadlock Arbitrator:
 Deadlock Notice:
 Deemed Membership Disposition:
 Deemed Tax Disposition:
 *** Confidential Treatment Requested
 - 9 -




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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
  Default:
 Default [***]: [***] [***]
 Default Rate: The Wall Street Journal
 Defaulting Member:
 Delaware Certificate:
 Deposit Account:
 Disclosing Party:
 Dispose Disposing Disposition: provided, however
 Dispute:
 Disputing Member:
 Dissolution Notice:
 Economic Risk of Loss:
 Effective Date:
 Election Period:
 *** Confidential Treatment Requested
 - 10 -




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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 Encumbrance:
 Environmental Indemnity Agreement: Exhibit G
 Fair Market Value:
 FERC:
 FMV Notice:
 FPA: et seq
 GAAP:
 Good Utility Practice:
 Governing Body:
 Governmental Approvals:
 Governmental Authority:
 *** Confidential Treatment Requested
 - 11 -




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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
  Indebtedness:
 Indemnified Party:
 Indemnifying Party:
 Initiating Party:
 Issues Statement:
 Joint Series:
 Joint Series Member:
 Joint Series Operating Companies:
 kV:
 Law:
 License Agreement: Exhibit B
 Manager:
 Maryland Regulatory Deadline
 *** Confidential Treatment Requested
 - 12 -




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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
  Maryland Transmission Line:
 Member: Schedule
2.08
 Member Nonrecourse Debt:
 Member Nonrecourse Debt Minimum Gain:
 Member Nonrecourse Deductions :
 Minimum Gain:
 MPSC:
 Net Book Value:
 NIETC:
 Non-Contributing Member:
 *** Confidential Treatment Requested
 - 13 -




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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 Non-Defaulting Member:
 Nonrecourse Deductions:
 Offer Notice:
 Offering Member:
 Ohio Board:
 Ohio Facilities: Schedule 3.01
 Ohio Operating Company:
 Ohio Regulatory Deadline
 Ohio Series:
 Ohio Series Administrative Committee:
 Ohio Series Members: Schedule 2.08
 ***
Confidential Treatment Requested
 - 14 -




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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 OpCo Agreements:
 OpCo Board:
 Operating Companies:
 Operational Deadlock:
 OPSB:
 Parent:
 Pennsylvania Facilities:
 Person:
 PJM:
 PJM Agreements:
 PJM Owner Agreement:
 PJM Tariff:
 Potomac Edison:
 ***
Confidential Treatment Requested
 - 15 -




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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 Pre-Operational Deadlock:
 Priority Interest:
 Project:
 Project Facilities:
 PSCWV:
 Qualified Person:
 Quarter:
 Recipient:
 Record Holder:
 Regular Series Capital Call:
 Regulatory Allocations:
 Regulatory Plan: Schedule 3.02
 Regulatory Undertakings Agreements: Exhibit F
 Representative:
 Responding Party:
 Response Notice:
 *** Confidential Treatment Requested
 - 16 -




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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 Revenue Allocation Deadlock: Schedule 3.09
 RTEP:
 Securities Act:
 Series:
 Series Capital Account:
 Series Capital Call:
 Series Capital Contribution:
 Series Dissolution Event:
 Series Interest:
 Series Member:
 Series Percentage: Schedule 2.08 provided, however
 *** Confidential Treatment Requested
 - 17 -




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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 Series Profits Series Losses:
 (a)
    
    any income that is exempt from federal income tax and not
otherwise taken into account in computing Series Profits or Series Losses
pursuant to this definition shall be added to such taxable income or loss;(b)
    
    any expenditures described in Section 705(a)(2)(B) of the Code
or treated as expenditures (under Section 705(a)(2)(B) of the Code) pursuant to
Section 1.704-1(b)(2)(iv)(i) of the Treasury Regulations and not otherwise
taken into account in computing Series Profits or Series Losses pursuant to
this definition shall be subtracted from such taxable income or loss;(c)
    
    in the event the Book Value of any Series asset is adjusted
pursuant to clause (b) or clause (c) of the definition of Book Value, the
amount of such adjustment shall be treated as an item of gain (if the
adjustment increases the Book Value of such asset) or an item of loss (if the
adjustment decreases the Book Value of such asset) from the Disposition of such
asset and shall be taken into account for purposes of computing Series Profits
or Series Losses;(d)
    
    gain or loss resulting from any Disposition of property with
respect to which gain or loss is recognized for federal income tax purposes
shall be computed by reference to the Book Value of the property Disposed of,
notwithstanding that the adjusted tax basis of such property differs from its
Book Value;(e)
    
    in lieu of the depreciation, amortization and other cost
recovery deductions taken into account in computing such taxable income or
loss, there shall be taken into account Tax Depreciation for such taxable year
or period;(f)
    
    to the extent an adjustment to the adjusted tax basis of any
Series asset pursuant to Section 734(b) of the Code is required, pursuant to
Section 1.704-1(b)(2)(iv)(m)(4) of the Treasury Regulations, to be taken into
account in determining Series Capital Account balances as a result of a
distribution other than in liquidation of a Series Interest, the amount of such
adjustment shall be treated as an item of gain (if the adjustment increases the
basis of such asset) or an item of loss (if the adjustment decreases the basis
of such asset) from the Disposition of such asset and shall be taken into
account for purposes of computing Series Profits and Series Losses; and
 *** Confidential Treatment Requested
 - 18 -




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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 (g)
    
    any items that are allocated pursuant to Section 7.03(a)(ix),
the Regulatory Allocations or Curative Allocations with respect to a Series
shall not be taken into account in computing Series Profits or Series Losses,
and the amounts of the items of income, gain, loss or deduction available to be
allocated pursuant to the Regulatory Allocations and Curative Allocations with
respect to such Series shall be determined by applying rules analogous to those
set forth in clauses (a) through (f) of this definition.
 Series Tax Matters Member:
 Services Agreement: Exhibit D-1 Exhibit D-2 Exhibit D-3 Exhibit D-4 Exhibit D-5
 Service Provider:
 Settlement Proposal:
 Stipulated Value: [ ]
 Tax Depreciation: provided, however
 *** Confidential Treatment Requested
 - 19 -




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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
  Term:
 Third Party Purchaser:
 Transferring Member:
 Transmission Zone:
 Treasury Regulations:
 Triggering Deadlock:
 Unanimous Interest:
 Venture Agreements:
 Voting Member:
 Voting Percentage:
 West Virginia Board:
 *** Confidential Treatment Requested
 - 20 -




---



##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 West Virginia Facilities: Schedule
3.01
 West Virginia Operating Company:
 West Virginia Operating Company Agreement:
 West Virginia Regulatory Deadline
 West Virginia Series:
 West Virginia Series Administrative Committee:
 West Virginia Series Members: Schedule 2.08
 Withdraw Withdrawing Withdrawal: provided, however
 Withdrawn Member:
 Interpretation
 (a)
    
    the gender of all words used in this Agreement includes the
masculine, feminine and neuter;
 *** Confidential Treatment Requested
 - 21 -




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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 (b)
    
    all pronouns used in this Agreement shall be deemed to refer to
the singular and plural;(c)
    
    references to Articles and Sections refer to Articles and
Sections of this Agreement;(d)
    
    the section headings of this Agreement are for convenience of
reference only, do not form a part of this Agreement, and do not in any manner
modify, interpret or construe the intent or agreement of the Members;(e)
    
    references to Exhibits and Schedules refer to the Exhibits and
Schedules attached to this Agreement, each of which is made a part hereof for
all purposes;(f)
    
    references to Laws refer to such Laws as they may be amended
from time to time, and references to particular provisions of a Law include any
corresponding provisions of any succeeding Law;(g)
    
    references to money are to the legal currency of the United
States of America;(h)
    
    the terms hereof, herein, hereto, hereunder and words
of similar or like import refer to this entire Agreement and not any particular
Section or other subdivision of this Agreement; and(i)
    
    the words include, includes and including shall be deemed
to be followed by without limitation or but not limited to.
 ARTICLE 2
FORMATION; ORGANIZATION
 Formation
 Name
 Members
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FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 Voting Members
 Registered Office; Registered Agent; Principal Office
 Purposes provided, however
 Powers
 (a)
    
    Subject to all of the terms, covenants, conditions and
limitations contained in this Agreement, the Company shall have the power and
authority to do any and all acts and things necessary, appropriate, proper,
advisable, desirable, incidental to or convenient for the furtherance and
accomplishment of the purposes described in Section 2.06 and for the protection
and benefit of the Company.(b)
    
    Except to the extent expressly authorized by the Board of
Managers, the Company shall not, and no Member shall cause the Company to: (i)
own
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FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 property other than interests in the Operating Companies; or (ii) enter into
any agreements other than the Venture Agreements.(c)
    
    All business related to the Project shall be conducted by the
Operating Companies, except:
 (i)
    
    the filing of Company Regulatory Filings,
including the retention of experts and consultants required in
connection with such filings and/or proceedings related thereto;(ii)
    
    execution and delivery of, and performance
under, the Venture Agreements; and(iii)
    
    any other matters expressly authorized by the
Board of Managers.
 Creation of Series
 (a)
    
    As permitted by, and in accordance with, Section 18-215 of the
Act, this Agreement and the Delaware Certificate, provide for the designation
and creation of separate Series Interests. Each Series shall be accounted for
separately and independently from each other Series and separate and distinct
records shall be kept for each Series. The Company shall not be operated or
treated as a single partnership or joint venture.(b)
    
    The Series Profits and Series Losses of each Series shall be
determined solely by reference to the operations and activities of such Series,
and no transaction, property or obligation of any other Series shall be taken
into account in determining such Series Profits and Series Losses.(c)
    
    Except as required by applicable Law: (i) with respect to each
Series with a single Series Member and for which no entity classification
election is made pursuant to Section 301.7701-3 of the Treasury Regulations,
such Series Member shall report the affairs and results of such Series for
federal income tax purposes as if the Series were disregarded as an entity
separate from its owner; (ii) with respect to each Series with multiple Series
Members, the Series Members shall report the affairs and results of such Series
as if such Series were a separate business entity treated as a partnership for
federal income tax purposes and as if each Operating Company associated with
such Series (if an eligible entity within the meaning of Section 301.7701-3 of
the Treasury Regulations) were disregarded as an entity separate from its owner
(the partnership constituted by such Series) for federal income tax purposes.(d)
    
    Schedule 2.08 identifies each Series and the following
information applicable to each such Series and the Series Members thereof:
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FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 (i)
    
    the Series Percentages of each Series Member in
each Series as of the Effective Date; and(ii)
    
    the Voting Members of each Series and the
Voting Percentages of each Voting Member with respect to the Company
and each Series.
 (e)
    
    The legal name, place of organization, mailing address and
Series Percentages of each Series Member shall be listed on the books and
records of the Series. An officer of the Series shall be required to update
the books and records from time to time as necessary to accurately reflect the
information therein.
 No State Law Partnership
 Foreign Qualification
 Term Term
 Liability to Third Parties
 (a)
    
    Except as otherwise provided by the Act: (i) the debts,
obligations and liabilities of the Company, whether arising in contract, tort
or otherwise, shall be solely the debts, obligations and liabilities of the
Company (which may be attributed or allocated to one or more of the Series, in
which case they shall be borne exclusively by such Series as contemplated in
this Agreement), and no Member shall be obligated personally for any such debt,
obligation or liability of the Company solely by reason of being a Member of
the Company; and (ii) the debts, obligations and liabilities of a Series,
whether arising in contract, tort or otherwise, shall be solely the
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FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 debts,
obligations and liabilities of such Series, and no Series Member of any other
Series shall be obligated personally for any such debt,
obligation or liability solely by reason of being a Member of the Company or
a Series Member of any other Series.(b)
    
    The debts, liabilities, obligations and expenses incurred,
contracted for or otherwise existing with respect to a Series shall be
enforceable only against the assets of such Series, and not against the assets
of the Company generally, any other Series or any Operating Company associated
with any such other Series.
 Series Interests
 (a)
    
    An officer of each Series shall keep a register of all
outstanding Series Interests and the Record Holders thereof.(b)
    
    An Assignee shall become the Record Holder of Series Interests
when a transfer of such Series Interests is reflected in the register of such
Series; provided, however, that no Assignee shall become a Record Holder of any
Series Interest(s) without obtaining any necessary Governmental Approvals
required in connection with such Assignees acquisition of such Series
Interest(s).(c)
    
    The Company and the Series Members shall be entitled to
recognize the Record Holder(s) as the owner(s) of Series Interests and, except
as otherwise required by applicable Law, shall not be bound to recognize any
equitable or other claim to, or interest in, any Series Interests on the part
of any other Person, whether or not the Company or any Member shall have actual
or other notice of any such claim. The Disposition of any Series Interests in
accordance with this Agreement and the admission of any new Member(s) shall not
constitute an amendment to this Agreement.
 Formation of Operating Companies.
 (a)
    
    The West Virginia Series Members shall cause the Company to
form the West Virginia Operating Company as a wholly-owned subsidiary of the
Company. For purposes of this Agreement, the West Virginia Operating Company
shall be deemed to be associated with the West Virginia Series.(b)
    
    The Ohio Series Members shall cause the Company to form the
Ohio Operating Company as a wholly-owned subsidiary of the Company. For
purposes of this Agreement, the Ohio Operating Company shall be deemed to be
associated with the Ohio Series.(c)
    
    The AYE Series Member shall cause the Company to form the AYE
Operating Company as a wholly-owned subsidiary of the Company. For
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FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 purposes of
this Agreement, the AYE Operating Company shall be deemed to be associated with
the AYE Series.
 ARTICLE 3
THE PROJECT
 RTEP Designation
 (a)
    
    The Members shall exercise commercially reasonable efforts to
cause PJM, in its 2007 RTEP, to designate an Operating Company or, with respect
to any Project Facilities to be located in the Transmission Zone of a Series
Member or any Affiliate of such Series Member, the Person determined in
accordance with Section 3.01(b), to construct:
 (i)
    
    the Bedington-Kemptown Facilities; and(ii)
    
    the West Virginia Facilities.
 (b)
    
    Notwithstanding any other provision of this Agreement, with
respect to any Project Facilities to be located in the Transmission Zone of a
Series Member or any Affiliate thereof, such Series Member shall have the
exclusive right to determine whether PJMs designation of such Project
Facilities shall be made to an Operating Company, to such Series Member or to
any Affiliate thereof; provided, however, that in the event PJM designates a
Series Member or any Affiliate thereof to construct any West Virginia
Facilities (including the Additional Facilities if such facilities are required
to be sold to the West Virginia Operating Company pursuant to Section 3.07) or
any Ohio Facilities, such Series Member shall, and shall cause its Affiliates
to, designate the West Virginia Operating Company or the Ohio Operating
Company, as applicable, to exercise such Persons rights and obligations with
respect to the development, construction and ownership of such Project
Facilities.
 Regulatory Matters
 (a)
    
    The Members acknowledge that each Operating Company will be a
public utility as defined in Section 201 of the FPA.(b)
    
    The Board of Managers shall cause the Company to: (i) prepare
and file applications seeking all Governmental Approvals required to be
obtained in the name of the Company in accordance with the Regulatory Plan;
(ii) diligently prosecute applications to obtain such approvals; and (iii)
exercise all commercially reasonable efforts to obtain such Governmental
Approvals.(c)
    
    Without limiting the generality of the foregoing, each Member
shall, and shall cause its Affiliate(s) to, as necessary or appropriate: (i)
respond as
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FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 promptly as practicable to any inquiries or requests issued by any
Governmental Authority in respect of the Project; and (ii) reasonably cooperate
with other Members in the regulatory review process; provided, however, that a
Member shall not be obligated pursuant to this Section
3.02(c) to disclose Confidential Information except to the extent that it is
otherwise required to disclose such Confidential Information: (A) by Law;
(B) by any Governmental Authority; or (C) pursuant to the express terms of
this Agreement, any Venture Agreement or any OpCo Agreement. Except to the
extent permitted by Section 3.02(f), no Member shall oppose (nor shall it
permit any of its Affiliates to oppose), obstruct or otherwise interfere
with the efforts of another Member to obtain any Governmental Approval
required in connection with the Project.(d)
    
    The Board of Managers shall prepare and file, or cause to be
prepared and filed, the Company Regulatory Filings; provided, however, that the
Amos-Kemptown FERC 205 Application shall include requests that FERC approve:
(i) a single return on equity and the same formula rate for the West Virginia
Facilities and the Bedington-Kemptown Facilities; and (ii) in advance, the
transfer from Potomac Edison (or any of its Affiliates that own any Allegheny
Assets) to the AYE Operating Company of the Allegheny Assets and all real
property interests on which any of the Allegheny Assets will be located.(e)
    
    Each Member agrees, on behalf of itself and its Affiliates,
that it shall not: (i) oppose the right of any other Member or any of its
Affiliates, any Series of which such Member is not a Series Member or any
Operating Company of such Series to participate in any regulatory proceedings
concerning the Project; (ii) file any pleading or other document in any such
proceedings without first giving the Voting Members of all Series a reasonable
opportunity to review and comment on such pleading or document; or (iii) engage
in any substantive communications with any Governmental Authorities or their
personnel concerning the Project (including any Operating Company) without
providing the other Members with reasonable advance notice of the proposed
communication and a reasonable opportunity to participate therein, except to
the extent providing such advance notice is prohibited by Law; provided,
however, that the covenants set forth in clauses (ii) and (iii) of this Section
3.02(e) shall not apply to the AYE Series Member or its Affiliates in
connection with any actions before the MPSC pertaining solely to the AYE
Series, the AYE Operating Company, any of the Bedington-Kemptown Facilities or
the acquisition of real property interests on which such facilities are to be
located; and provided further, that the AYE Series Member shall prepare and
deliver to the Series Members of the Joint Series a monthly status report on
actions before the MPSC pertaining to the AYE Series, the AYE Operating
Company, the Bedington-Kemptown Facilities and
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FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 the acquisition of real property
interests on which such facilities are to be located and shall promptly respond
to all reasonable inquires from the Series Members of the Joint Series
concerning such actions.(f)
    
    Nothing in this Agreement shall restrict any Member or any of
its Affiliates from appealing any Governmental Approval, or the denial of any
Governmental Approval.(g)
    
    The Members hereby acknowledge that the Company will seek, or
will cause the West Virginia Operating Company to seek, eminent domain
authority in the State of West Virginia; provided, however, that the Company
(or the West Virginia Operating Company) may, upon the approval of a Unanimous
Interest of the Voting Members of the West Virginia Series, seek siting
approval and federal eminent domain authority from FERC for the West Virginia
Facilities.(h)
    
    At AETs request, AEPTHC shall exercise commercially reasonable
efforts to support AET and its Affiliates in connection with their efforts to
obtain siting approval from state regulatory commissions of the
Bedington-Kemptown Facilities; provided, however, that AET shall reimburse
AEPTHC for its costs incurred in providing such support on the same cost basis
as such charges are determined from time to time for equivalent services that
AEPTHC provides to its utility Affiliates, including allocations for overhead
(but excluding any markup for profit).
 Maryland Transmission Line
 (a)
    
    The AYE Series Member shall cause Potomac Edison to file an
application with the MPSC on behalf of the AYE Operating Company (or
alternatively, on behalf of itself) seeking: (i) a certificate of public
convenience and necessity and authority to construct the Maryland Transmission
Line; and (ii) authority to exercise the right of eminent domain to acquire
real property interests necessary to construct the Maryland Transmission Line.
If, pursuant to such application, the MPSC grants a certificate of public
convenience and necessity to Potomac Edison and authorizes only Potomac Edison
to exercise the right of eminent domain to acquire real property interests
necessary to construct the Maryland Transmission Line, the AYE Series Member
shall cause Potomac Edison to: (A) exercise such rights to acquire all real
property interests on which the Maryland Transmission Line is to be located;
(B) construct the Maryland Transmission Line; and (C) exercise commercially
reasonable efforts to transfer such real property interests and the Maryland
Transmission Line to the AYE Operating Company before such date as the Maryland
Transmission Line is energized (other than for test purposes).
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FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 (b)
    
    If: (i) by the Maryland Regulatory Deadline, the MPSC fails to
grant either the AYE Operating Company or Potomac Edison a certificate of
public convenience and necessity and authority to exercise the right of eminent
domain to acquire real property interests necessary to construct the Maryland
Transmission Line; (ii) the Maryland Transmission Line is
within a NIETC; and (iii) the Company determines that it would be more
expeditious and/or more certain to obtain a certificate of public
convenience and necessity to construct the Maryland Transmission Line from
FERC under Section 216 of the FPA, the AYE Operating Company shall file an
application with FERC under Section 216 of the FPA seeking siting authority
(including the right to exercise federal eminent domain rights) to construct
the Maryland Transmission Line.(c)
    
    If the MPSC grants a certificate of public convenience and
necessity to Potomac Edison to construct the Maryland Transmission Line and,
despite the commercially reasonable efforts of the AYE Series Member, the MPSC
fails to permit Potomac Edison to transfer to the AYE Operating Company the
Maryland Transmission Line and the real property interests on which it is to be
located, the Maryland Transmission Line shall continue to be owned by Potomac
Edison.(d)
    
    The AYE Series Administrative Committee shall cause the AYE
Operating Company and the West Virginia Series Administrative Committee shall
cause the West Virginia Operating Company to execute and deliver the Regulatory
Undertakings Agreement.(e)
    
    In any filing that the AYE Operating Company may make under
Schedule 12 of the PJM Open Access Transmission Tariff or pursuant to Section
205 of the FPA with respect to any of the Bedington-Kemptown Facilities, the
AYE Operating Company shall request the same formula rate and return on equity
as those then being requested for the West Virginia Facilities or, if no such
formula rate or return on equity is then being requested for the West Virginia
Facilities, the same formula rate and return on equity as then allowed for the
West Virginia Facilities.(f)
    
    In any filing that the AYE Series Member or any of its
Affiliates (other than the AYE Operating Company) may make under Schedule 12 of
the PJM Open Access Transmission Tariff or pursuant to Section 205 of the FPA
with respect to any of the Allegheny Assets, the AYE Series Member shall
request, or shall cause its Affiliates to request, the same formula rate and
return on equity for the Allegheny Assets as those then being requested for the
Bedington-Kemptown Facilities owned by the AYE Operating Company or, if no such
formula rate or return on equity is then being requested for the
Bedington-Kemptown Facilities owned by the AYE Operating Company, the same
formula rate and return on equity as then allowed for the Bedington-Kemptown
Facilities owned by the AYE Operating Company.
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Confidential Treatment Requested
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FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 (g)
    
    The AYE Series Member shall, and shall cause the AYE Operating
Company and their respective Affiliates to: (i) make any filings for a change
in rates with respect to the Bedington-Kemptown Facilities solely in
conjunction with and at the same time as rate change filings for the
West Virginia Facilities; and (ii) request that FERC approve use of the same
formula rate and return on equity for all the West Virginia Facilities and
the Bedington-Kemptown Facilities.(h)
    
    Notwithstanding anything to the contrary in this Agreement, if
FERC requires the AYE Series Member or any or its Affiliates to make a single
rate filing under Section 205 of the FPA for all or any portion of the
Bedington-Kemptown Facilities and any other facilities owned by the AYE Series
Member or any of its Affiliates, the AYE Series Member and/or its Affiliates
may make such filing but shall request the same formula rate and return on
equity for the Bedington-Kemptown Facilities that are the subject of such
filing as are then in effect for the Bedington-Kemptown Facilities owned by AYE
Operating Company.(i)
    
    Nothing in this Section 3.03 shall obligate the AYE Operating
Company or any of its Affiliates to take any action or assert any position that
is contrary to any ruling previously issued by FERC with respect to rates for
the Bedington-Kemptown Facilities.(j)
    
    In the event a proceeding is initiated pursuant to Section 206
of the FPA with respect to the rates applicable to the Bedington-Kemptown
Facilities, the AYE Series Administrative Committee shall not permit the AYE
Operating Company to enter into a settlement agreement that would reduce the
return on equity then included in the formula rate applicable to such
Bedington-Kemptown Facilities if such reduction would result in a return on
equity that was lower than the return on equity then included in the formula
rate applicable to the West Virginia Facilities without the prior written
approval of the West Virginia Operating Company, such approval not to be
unreasonably withheld.
 Services Agreements
 (a)
    
    A Member or its Affiliates may perform services for any
Operating Company pursuant to one or more Services Agreements.(b)
    
    Upon: (i) a Withdrawal by a Joint Series Member, a sale by a
Joint Series Member of all of its Series Interests in a Joint Series or the
conversion of a Voting Member of a Joint Series to a Converted Member pursuant
to Section 8.10, any Services Agreements (or any service schedule(s) executed
pursuant to such Services Agreements) pursuant to which the Withdrawn Member,
selling Series Member, Converted Member or any Affiliate of such Withdrawn
Member, selling Series Member or Converted Member is a Service Provider to an
Operating Company
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FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 associated with a Series of which such Withdrawn Member,
selling Series Member or Converted Member is no longer a Voting Member may be
terminated by either party thereto; and (ii) the transfer by a Voting Member of
its right to appoint Representatives pursuant to Section 5.07,
any Services Agreements (or any service schedule(s) executed pursuant to
such Services Agreements) pursuant to which such transferring Voting Member
(or any Affiliate of such transferring Voting Member) is a Service Provider
to an Operating Company associated with such Series may be terminated by any
other Voting Member; and (iii) the transfer by a Voting Member of a Series
of its right to appoint Administrators for such Series pursuant to Section
5.07, any Services Agreements (or any service schedule(s) executed pursuant
to such Services Agreements) pursuant to which such transferring Voting
Member (or any Affiliate of such Voting Member) is a Service Provider to an
Operating Company associated with such Series may be terminated by any other
Voting Member of such Series, and in any such case neither party to any
terminated Services Agreement (or any terminated service schedule(s)) shall
have any liability thereunder except the liability to pay amounts owed
thereunder as of the date of termination (including amounts owed but not yet
due in respect of services performed prior to the date of termination) and
any additional amounts that may be owed in respect of transition services as
required hereunder or thereunder.(c)
    
    Upon a termination of a Services Agreement (or any service
schedule(s) executed pursuant to such Services Agreements) pursuant to this
Section 3.04: (i) the Withdrawn Member, selling Series Member, Converted
Member or transferring Member, as applicable, shall remain liable under such
terminated Services Agreement (and any terminated service schedule(s)) both as
a Service Provider (with respect to performance prior to such termination) and
as if it remained a Member, Series Member or Voting Member of the Company, as
applicable, with respect to the terminated Services Agreement and terminated
service schedule(s); and (ii) the Service Provider under any such terminated
Services Agreement (or terminated service schedules(s)) shall, upon the request
of an Operating Company, cooperate with such Operating Company in transitioning
any services to a replacement service provider.
 Administrative Services Agreements
 (a)
    
    The costs incurred by a Voting Member or its Affiliate(s) to
perform administrative, management, oversight and support functions for a Joint
Series Operating Company or for the Company on behalf of such Joint Series
Operating Company (including the costs of providing Representatives,
Administrators, Managers and other personnel and the costs of retaining third
party consultants and contractors) shall be subject to reimbursement by such
Joint Series Operating Company in accordance
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FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 with an Administrative Services
Agreement to be executed by each such Joint Series Operating Company.(b)
    
    Upon a Withdrawal by a Joint Series Member from the Company or
a Joint Series, a sale by a Joint Series Member of all of its Series Interests
in a Joint Series or the transfer by a Joint Series Member of its right to
appoint Representatives or Administrators for a Joint Series pursuant to
Section 5.07, all of the Administrative Services Agreements pursuant to
which such Joint Series Member, or any Affiliate of such Joint Series
Member, is a Service Provider to an Operating Company associated with the
Joint Series from which such Joint Series Member is Withdrawing, or the
Series Interests of which are being sold or transferred, shall terminate
without any liability thereunder except the liability of the parties thereto
to pay amounts owed thereunder as of the date of termination (including
amounts owed but not yet due in respect of services performed prior to the
date of termination) and any additional amounts that may be owed in respect
of transition services as required thereunder; provided, however, that the
Withdrawn, selling or transferring Joint Series Member, as applicable, shall
remain liable under any terminated Administrative Services Agreements both
as a Service Provider (with respect to performance prior to such
termination) and as if it remained a Joint Series Member with respect to the
terminated Administrative Services Agreement(s).(c)
    
    The Voting Member of the AYE Series shall enter into, or cause
one of its Affiliates to enter into, an Administrative Services Agreement with
the AYE Operating Company pursuant to which such Person or one or more of its
Affiliates shall be responsible for the administration, management and
oversight of the AYE Series and the AYE Operating Company. The Person(s)
performing administrative, management, oversight and support functions for the
AYE Operating Company or the Company on behalf of the AYE Operating Company
(including providing Representatives, Administrators, Managers and other
personnel and retaining third party consultants and contractors) shall be
entitled to charge the AYE Operating Company for such services, pursuant to
such Administrative Services Agreement; provided, however, that charges for
such services shall be determined on the same cost basis as such charges are
determined from time to time for equivalent services that such Person(s)
provide(s) to its utility Affiliates, including allocations for overhead, but
excluding any markup for profit.(d)
    
    To the extent that any costs incurred by a Voting Member or any
of its Affiliates pursuant to an Administrative Services Agreement cannot be
attributed to any Series or Operating Company, such costs shall be deemed to be
Company costs and shall be allocated as follows: (i) any such costs incurred
before the Ohio Operating Company is designated to
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FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 construct the Ohio Facilities shall be allocated sixteen percent (16%) to
the AYE Operating Company and eighty-four percent (84%) to the West
Virginia Operating Company; and (ii) any such costs incurred after such
date shall be allocated to the AYE Operating Company, the West Virginia
Operating Company and the Ohio Operating Company based on the
proportionate length of line miles (determined on a straight-line basis
from end-point to end-point) of transmission lines comprising the
Project Facilities owned by each Operating Company.
 Pennsylvania Facilities
 Additional Facilities
 (a)
    
    If: (i) AEPTHC, the Ohio Series or the Ohio Operating Company
is designated in any RTEP through and including the 2010 RTEP; and (ii) the
Ohio Operating Company subsequently receives a certificate of environmental
compatibility and public need from the OPSB to construct the Ohio Facilities,
the AYE Series Administrative Committee shall, subject to the conditions set
forth in this Section 3.07, cause the AYE Operating Company to offer to
transfer to the West Virginia Operating Company discrete equipment included in
the Bedington-Kemptown Facilities (the Additional Facilities) with a Net Book
Value approximately equal to the Amos Upgrade Cost. The Administrators of the
West Virginia Series appointed by AEPTHC shall have exclusive authority to
elect, on behalf of the West Virginia Operating Company, whether or not to
purchase the Additional Facilities.(b)
    
    The AYE Series Member shall cause the AYE Operating Company to
seek authority to Dispose of the Additional Facilities to the West Virginia
Operating Company promptly upon the later to occur of: (i) the substantial completion of the Amos Upgrade such that it is capable of being
placed in service; (ii) the substantial completion of the Additional
Facilities such that they are capable of being placed in service; and (iii)
issuance of a certificate of environmental compatibility and public need
from the OPSB to the Ohio Operating Company to construct the Ohio
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FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 Facilities. Any obligation to Dispose of the Additional Facilities to
the West Virginia Operating Company shall be subject to the receipt by the
AYE Series and the AYE Operating Company of any and all Governmental
Approvals required to Dispose of such Additional Facilities.(c)
    
    The Series Members of the West Virginia Series acknowledge and
agree that the AYE Operating Company shall have exclusive authority to identify
the Additional Facilities at its discretion; provided, however, that: (i) the
Additional Facilities shall be located in West Virginia; and (ii) the
Additional Facilities shall, to the extent practicable (as determined in the
reasonable judgment of the AYE Operating Company), be operationally proximate
to Bedington-Kemptown Facilities that operate at 765 kV.(d)
    
    Promptly upon completion of the Amos Upgrade, the West Virginia
Series Administrative Committee shall deliver to the AYE Series Administrative
Committee written certification (with reasonable supporting documentation), in
form and substance reasonably acceptable to the AYE Series Administrative
Committee, of the total capitalized cost incurred by the West Virginia
Operating Company to construct and install the Amos Upgrade (such cost, the
Amos Upgrade Cost). The West Virginia Series Administrative Committee shall
cause all capitalized costs incurred by the West Virginia Operating Company to
construct and install the Amos Upgrade to be accounted for separately from
other costs of the West Virginia Operating Company or the West Virginia Series.(e)
    
    In consideration of the Disposition of the Additional
Facilities, the West Virginia Operating Company shall be obligated to pay to
the AYE Operating Company an amount equal to: (i) the Net Book Value of the
Additional Facilities; less (ii) the Additional Facilities Return Amount, if
any. In order to facilitate the purchase of the Additional Facilities by the
West Virginia Operating Company, the West Virginia Series Administrative
Committee shall issue Series Capital Calls to the West Virginia Series Members
in an aggregate amount equal to such amount.(f)
    
    The Additional Facilities Disposition Date shall occur no
earlier than the latest to occur of: (i) the date of substantial completion of
the Amos Upgrade such that it is capable of being placed in service; (ii) the
date of substantial completion of the Additional Facilities such that they are
capable of being placed in service; and (iii) receipt of all Governmental
Approvals necessary for the Disposition of the Additional Facilities by the AYE
Operating Company. As of the Additional Facilities Disposition Date, if any,
the Additional Facilities shall be included in the West Virginia Facilities and
shall no longer be part of the Bedington-Kemptown Facilities.
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FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 (g)
    
    In connection with the Disposition of the Additional Facilities
pursuant to this Section 3.07, the AYE Operating Company shall: (i) represent
and warrant to the West Virginia Operating Company that (A) it has good title
to the Additional Facilities, (B) there are no Encumbrances for any
indebtedness or any other Encumbrances on such Additional Facilities other than
pursuant to this Agreement, (C) the AYE Operating Company has due authority to
Dispose of such Additional Facilities to the West Virginia Operating Company,
(D) the agreement transferring the Additional Facilities to the West Virginia
Operating Company is valid and enforceable against the AYE Operating Company,
and (E) the Disposition of the Additional Facilities to the West Virginia
Operating Company does not violate any applicable Law in any material respect
or cause a default under any material agreement to which the AYE Operating
Company is a party; (ii) disclose in writing the existence and nature of any
pending or, to the AYE Operating Companys actual knowledge without any
obligation of due inquiry, threatened litigation or arbitration or any audit or
investigation initiated by any Governmental Authority against the AYE Operating
Company related to the Additional Facilities; and (iii) sign such documents as
may reasonably be requested by the West Virginia Operating Company. The
representations and warranties described in clause (i) of this Section 3.07(g)
shall not survive the closing of the sale of the Additional Facilities, except
for the representations and warranties described in clauses (i)(A), (i)(C),
(i)(D) and (i)(E) of this Section 3.07(g), each of which shall survive such
closing on such Disposition for a period of one (1) year.(h)
    
    Notwithstanding any other provision of this Agreement to the
contrary, in the event the AYE Operating Company discloses the existence of any
pending or threatened litigation or other proceeding required to be disclosed
pursuant to Section 3.07(g), or the West Virginia Operating Company reasonably
determines that the representation and warranty required by clause (i)(B) of
Section 3.07(g) is inaccurate, the West Virginia Operating Company may, in its
sole discretion, and as its exclusive remedy based on such disclosure, elect
not to purchase the Additional Facilities.(i)
    
    Simultaneous with any Disposition of the Additional Facilities
to the West Virginia Operating Company: (i) the AYE Operating Company shall
grant the West Virginia Operating Company such access to the Additional
Facilities as may be reasonably necessary to own, operate and maintain the
Additional Facilities; and (ii) the AYE Series Administrative Committee shall
cause the AYE Operating Company to execute and deliver an Environmental
Indemnity Agreement to the West Virginia Operating Company. Upon the
Disposition of the Additional Facilities by the AYE Operating Company, such
Additional Facilities shall no longer be included in the Bedington-Kemptown
Facilities.
 *** Confidential Treatment Requested
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FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 Duty of Cooperation
 (a)
    
    No Series Member of a Joint Series, nor its Representatives,
Administrators, employees, officers, agents or consultants shall, without the
approval of the Administrative Committee of such Joint Series: (A) engage in
any negotiations of any agreements with respect to such Joint Series or the
Joint Series Operating Company associated with such Joint Series except as
permitted by the Services Agreements or the Administrative Services Agreements;
or (B) act with apparent authority of the Company, such Joint Series or the
Joint Series Operating Company associated with such Joint Series; provided,
however, that nothing in this Section 3.08 shall limit or restrict any rights
of AET acting in good faith in its capacity as a Series Member of the AYE
Series.(b)
    
    In the event the Voting Members or the Administrative Committee
of any Series elects to take any action that: (i) materially affects the
Operating Company associated with such Series; (ii) does not materially affect
any other Series or Operating Company; and (iii) requires the approval or
consent of the Board of Managers, each Member shall cause its Representatives
to (A) not withhold or condition their respective approvals or consents to such
action, and (B) cooperate in connection with such action.
 Company Escrow Agreement
 (a)
    
    The Board of Managers shall cause the Company to enter into the
Company Escrow Agreement and, together with the Operating Companies, to direct
that all monies paid by PJM to the Company, the West Virginia Operating Company
or the AYE Operating Company in respect of the West Virginia Facilities and/or
the Bedington-Kemptown Facilities be deposited into a single account (the
Deposit Account) administered pursuant to such Company Escrow Agreement. The
Deposit Account and any other account established pursuant to the Company
Escrow Agreement shall be administered by a bank, financial institution or
other depository (the Company Escrow Agent) as shall be designated from time
to time by the Board of Managers. No funds deposited into the Deposit Account
or any other account established pursuant to the Company Escrow Agreement shall
be commingled with funds of any other Person, including any Member.(b)
    
    The Deposit Account shall be maintained for the benefit of the
Operating Companies in accordance with the terms and conditions of the Company
Escrow Agreement.(c)
    
    The Board of Managers shall direct the Company Escrow Agent to
disburse funds from the Deposit Account to the West Virginia Operating Company
and the AYE Operating Company, or accounts established for
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FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 the benefit of such Operating Companies, based on the methodology set forth
in Schedule 3.09; provided, however, that in the event that the AYE
Series Member fails to comply in any material respect with the requirements
of Section 3.03, the Board of Managers shall direct the Company Escrow Agent
to disburse funds from the Deposit Account to each of the West Virginia
Operating Company and the AYE Operating Company, or accounts established for
the benefit of such Operating Companies, in accordance with the formula
rates then applicable to such Operating Companies and without reference to
the allocation methodology set forth in Schedule 3.09.(d)
    
    In the event the Company (though the AYE Series) ceases to own
any material interest in the AYE Operating Company, the Company Escrow
Agreement shall be terminated and each of the West Virginia Operating Company
and the AYE Operating Company shall be entitled to monies paid by PJM based on
their respective formula rates.
 Series Expenses
 (a)
    
    Subject to Section 8.10, each West Virginia Series Member
shall: (i) solely through its obligation under this Agreement to fund Series
Capital Contributions for the West Virginia Series, be responsible for that
portion of the aggregate costs and expenses incurred by the West Virginia
Operating Company on or after the Effective Date corresponding to such West
Virginia Series Members Series Percentage; and (ii) be obligated to contribute
such amounts to the West Virginia Series pursuant to Series Capital Calls. The
West Virginia Series Administrative Committee shall cause the West Virginia
Operating Company to reimburse certain costs and expenses related to the West
Virginia Facilities and/or the real property interests on which such facilities
are to be located incurred prior to the Effective Date pursuant to the terms
and conditions set forth in the Administrative Services Agreements executed by
the West Virginia Operating Company.(b)
    
    Subject to Section 8.10, each Ohio Series Member shall: (i)
solely through its obligation under this Agreement to fund Series Capital
Contributions for the Ohio Series, be responsible for that portion of the
aggregate costs and expenses incurred by the Ohio Operating Company on or after
the Effective Date corresponding to such Ohio Series Members Series
Percentage; and (ii) be obligated to contribute such amounts to the Ohio Series
pursuant to Series Capital Calls. The Ohio Series Administrative Committee
shall cause the Ohio Operating Company to reimburse certain costs and expenses
related to the Ohio Facilities and/or the real property interests on which such
facilities are to be located incurred prior to the Effective Date pursuant to
the terms and conditions set forth in the Administrative Services Agreements
executed by the Ohio Operating Company.
 *** Confidential Treatment Requested
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FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 (c)
    
    The AYE Series Member shall: (i) solely through its obligation
under this Agreement to fund Series Capital Contributions for the AYE Series,
be responsible for costs and expenses incurred by the AYE Operating Company;
and (ii) be obligated to contribute such amounts to the AYE Series pursuant to
Series Capital Calls.
 Financing provided, however
 Ohio Facilities
 (a)
    
    Subject to Good Utility Practice, applicable Laws and any
limitations set forth in the PJM Agreements the Ohio Series Members shall
exercise reasonable efforts to obtain designation by PJM of AEPTHC, the Ohio
Series or the Ohio Operating Company to construct the Ohio Facilities along a
path that connects to transmission lines running to a point at or near the
Prexy Substation in the Allegheny Transmission Zone until the earlier of: (i)
PJMs designation of a Person to construct the Ohio Facilities; or (ii) PJMs
issuance of the 2010 RTEP; provided, however, that in the event AEPTHC
Withdraws from the Company pursuant to Section 12.01(b), its sole
responsibility with respect to the Ohio Facilities after such Withdrawal shall
be those described in Section 12.01(f).(b)
    
    Subject to Good Utility Practice, applicable Laws and any
limitations set forth in the PJM Agreements neither AEPTHC nor AET nor any of
their respective Affiliates shall, without the written consent of the Voting
Members of the Company, advocate or support any alternative proposals for the
Ohio Facilities prior to such time as PJM issues the 2010 RTEP.(c)
    
    In the event the Ohio Operating Company is designated to
construct the Ohio Facilities pursuant to an RTEP, the Ohio Series Members
shall cause the Ohio Operating Company to file an application with the OPSB
seeking: (i) a certificate of environmental compatibility and public need and
authority to construct the Ohio Facilities; and (ii) authority to exercise the
right of eminent domain to acquire real property interests necessary to
construct the Ohio Facilities. If, pursuant to such application, the OPSB
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FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 grants a certificate of environmental compatibility and public need to the
Ohio Operating Company and authorizes the Ohio Operating Company to exercise
the right of eminent domain to acquire real property interests necessary to
construct the Ohio Facilities, the Ohio Series Members shall cause the Ohio
Operating Company to: (A) exercise such rights to acquire all real property
interests on which the Ohio Facilities are to be located; and (B) construct
the Ohio Facilities.(d)
    
    If: (i) by the Ohio Regulatory Deadline, the OPSB fails to
grant the Ohio Operating Company a certificate of environmental compatibility
and public need and authority to exercise the right of eminent domain to
acquire real property interests necessary to construct the Ohio Facilities;
(ii) the Ohio Facilities are within an NIETC; and (iii) the Ohio Series Members
determine that it would be more expeditious and/or more certain to obtain a
certificate of public convenience and necessity to construct the Ohio
Facilities from FERC under Section 216 of the FPA, the Ohio Series Members
shall cause the Ohio Operating Company to file an application with FERC under
Section 216 of the FPA seeking siting authority (including the right to
exercise federal eminent domain rights) to construct the Ohio Facilities.
 West Virginia Facilities
 (a)
    
    The West Virginia Series Members shall cause the West Virginia
Operating Company to file an application with the PSCWV seeking: (i) a
certificate of public convenience and necessity and authority to construct the
West Virginia Facilities; and (ii) authority to exercise the right of eminent
domain to acquire real property interests necessary to construct the West
Virginia Facilities. If, pursuant to such application, the PSCWV grants a
certificate of public convenience and necessity to the West Virginia Operating
Company and authorizes the West Virginia Operating Company to exercise the
right of eminent domain to acquire real property interests necessary to
construct the West Virginia Facilities, the West Virginia Series Members shall
cause the West Virginia Operating Company to: (A) exercise such rights to
acquire all real property interests on which the West Virginia Facilities are
to be located; and (B) construct the West Virginia Facilities.(b)
    
    If: (i) by the West Virginia Regulatory Deadline, the PSCWV
fails to grant the West Virginia Operating Company a certificate of public
convenience and necessity and authority to exercise the right of eminent domain
to acquire real property interests necessary to construct the West Virginia
Facilities; (ii) the West Virginia Facilities are within an NIETC; and (iii)
the West Virginia Series Members determine that it would be more expeditious
and/or more certain to obtain a certificate of public convenience and necessity
to construct the West Virginia Facilities from FERC under Section 216 of the
FPA, the West Virginia Series Members
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FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 shall cause the West Virginia Operating Company to file an application with
FERC under Section 216 of the FPA seeking siting authority (including the
right to exercise federal eminent domain rights) to construct the West
Virginia Facilities.(c)
    
    AEPTHC shall grant, or shall cause its Affiliates to grant, the
West Virginia Operating Company such access to the Amos Upgrade as may be
reasonably necessary to own, operate and maintain such facilities. AEPTHC
shall cause Appalachian Power Company to execute and deliver to the West
Virginia Operating Company an Environmental Indemnity Agreement.
 Interconnections
 (a)
    
    The AYE Series Administrative Committee shall cause the AYE
Operating Company to grant to the West Virginia Operating Company such access
to the Bedington-Kemptown Facilities as shall be reasonably necessary, in
accordance with Good Utility Practice, to interconnect the West Virginia
Facilities with the Bedington-Kemptown Facilities.(b)
    
    The West Virginia Series Administrative Committee shall cause
the West Virginia Operating Company to grant to the AYE Operating Company such
access to the West Virginia Facilities as shall be reasonably necessary, in
accordance with Good Utility Practice, to interconnect the Bedington-Kemptown
Facilities with the West Virginia Facilities.(c)
    
    In the event the Ohio Operating Company is designated to
construct the Ohio Facilities, the Ohio Series Administrative Committee shall
cause the Ohio Operating Company to grant to AET or an Affiliate of AET
designated to construct the Pennsylvania Facilities such access to the Ohio
Facilities as shall be reasonably necessary, in accordance with Good Utility
Practice, to interconnect the Pennsylvania Facilities with the Ohio Facilities.
 Abandonment of the Project
 Compliance with Law
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FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 ARTICLE 4
REPRESENTATIONS AND WARRANTIES; DISCLAIMERS
 General Representations and Warranties
 (a)
    
    it is duly incorporated, organized or formed (as applicable),
validly existing and in good standing under the Laws of the jurisdiction of its
incorporation, organization or formation;(b)
    
    if required by applicable Law, it is duly qualified and in good
standing in the jurisdiction of its principal place of business, if different
from its jurisdiction of incorporation, organization or formation;(c)
    
    it has full power and authority to execute and deliver this
Agreement and to perform its obligations hereunder; and all necessary actions
by the board of directors, shareholders, managers, members, partners, trustees,
beneficiaries or other applicable Persons necessary for the due authorization,
execution, delivery and performance of this Agreement by it have been duly
taken;(d)
    
    it has duly executed and delivered this Agreement and any other
documents contemplated herein to be executed as of the Effective Date, and they
constitute the legal, valid and binding obligation of it enforceable against it
in accordance with their terms (except as may be limited by bankruptcy,
insolvency or similar Laws pertaining to creditors rights or by general
principles of equity, regardless of whether considered at law or in equity);
and(e)
    
    its authorization, execution, delivery and performance of this
Agreement does not and will not: (i) conflict with, or result in a breach,
default or violation of (A) its organizational documents, (B) any agreement to
which it is a party or is otherwise bound, or (C) any Law, order, judgment,
decree, writ, injunction or arbitral award to which it is subject; or (ii)
require any consent, approval or authorization from, filing or registration
with, or notice to, any Governmental Authority or other Person, unless such
requirement has already been satisfied.
 Disclaimer of Certain Duties
 (a)
    
    other than the limited duty of loyalty which may arise pursuant
to Section 8.10(d)(iv), no Member shall owe any duty of loyalty, under this
Agreement, the Act or otherwise, to the Company, any Operating Company, any
other Member, the Representatives or Administrators appointed by any other
Member or any Managers in connection with the exercise of its voting, consent
or approval rights under this Agreement or
 *** Confidential Treatment Requested
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FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 any Charter Documents of an Operating Company or the granting or
withholding of any vote, consent or approval by any Representative,
Administrator or Manager appointed by such Member under this Agreement or
any Charter Documents of any Operating Company; and(b)
    
    the provisions of this Section 4.02 shall apply for the benefit
of each Member and no standard of care, duty or other legal restriction or
theory of liability shall limit or modify the right of each Member to act and
to direct the Representatives, Administrators and Managers appointed by such
Member to vote in the manner determined by such Member in its sole discretion
other than: (i) the duty of care and duty of fair dealing in a Members
discharge of its authority and responsibility as a Member; (ii) the limited
duty of loyalty which may arise pursuant to Section 8.10(d)(iv); and (iii)
those expressly set forth in this Agreement.
 Release
 Business Opportunities
 (a)
    
    During the Term, if any Member identifies any electric
transmission project (other than the Project) that it believes would be
suitable for the Company, any Series or any Operating Company to develop and/or
own, such Member shall have the right, but not the obligation, to present such
project to the Board of Managers for consideration. Notwithstanding the
foregoing, no Member, Representative, Administrator or officer of the Company
shall have any obligation to offer to the Company, any Series, any Member or
any Operating Company the opportunity to, or to cause the Company or any
Operating Company to, undertake any such other project.(b)
    
    Subject to the limitations set forth in this Agreement
(including those set forth in Sections 2.06 and 2.07), the Members and their
Affiliates may engage in and possess interests in other business ventures of
any and every type and description, independently or with others, including
ones in competition with the Company, a Series, an Operating Company or the
Project. No Member shall have any obligation to offer to the Company, a
 *** Confidential Treatment Requested
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FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 Series, an Operating Company or any other Member or any Affiliate of another
Member the right to participate therein.(c)
    
    Without limiting the generality of the provisions of this
Section 4.04, the Members recognize and agree that their respective Affiliates
currently engage in certain activities involving the generation, transmission
and distribution of electricity (herein referred to as Affiliates Outside
Activities) and that these and other activities by Members Affiliates may be
based on electricity that is transmitted through the Project Facilities. No
Affiliate of a Member shall be restricted by this Agreement in the conduct,
individually or jointly with others, for its own account, of any Affiliates
Outside Activities, and no Member or its Affiliates shall have any duty or
obligation under this Agreement, express or implied, fiduciary or otherwise, to
account to, or to share the results or profits of such Affiliates Outside
Activities with, the Company, any other Member or any Affiliate of any other
Member, by reason of such Affiliates Outside Activities.(d)
    
    Each Member:
 (i)
    
    renounces in advance each and every interest or
expectancy it or any of its Affiliates might be considered to have
under the Act, at common law or in equity, by reason of its membership
in the Company or any Series in any business opportunity, in any
opportunity to participate in any business opportunity, or in any
business or industry in which any other Member or its Affiliates now or
in the future engages, which is presented to the Company, any Series,
any Operating Company, any other Member, any Members Affiliates or to
any present or future partner, member, director, officer, manager,
supervisor, employee, agent or representative of the Company, any
Series, any Operating Company, any Member or any Members Affiliates;
and(ii)
    
    waives and consents to the elimination of any
fiduciary or other duty, including any duty of loyalty, which any other
Member or any of its Affiliates might be considered to owe to the
waiving Member under the Act, at common law or in equity by reason of
the waiving Members membership in the Company to offer to the Company
or the waiving Member or any of its Affiliates any business
opportunity, or in any opportunity to participate in any business
opportunity.
 (e)
    
    The Company:
 (i)
    
    renounces in advance each and every interest or
expectancy it might be considered to have under the Act, at common law
or in equity in any business opportunity, any opportunity to
participate
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FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 in any business opportunity, or any business or industry in which any
Member or any of its Affiliates now or in the future engages, which
is presented to such Member or any of its Affiliates or to any
present or future partner, member, director, officer, manager,
supervisor, employee, agent or representative of such Member or any
of its Affiliates; and(ii)
    
    waives and consents to the elimination of any
fiduciary or other duty, including any duty of loyalty, which any
Member or any of its Affiliates might be considered to owe to the
Company, any Series or any Operating Company under the Act, at common
law or in equity by reason of such Members membership in the Company,
any Series or any Operating Company to offer to the Company, any Series
or any Operating Company any business opportunity or any opportunity to
participate in any business opportunity.
 (f)
    
    THE PROVISIONS OF THIS SECTION 4.04 CONSTITUTE AN AGREEMENT TO
MODIFY OR ELIMINATE FIDUCIARY DUTIES PURSUANT TO THE PROVISIONS OF SECTION
18-1101 OF THE ACT.
 ARTICLE 5
DISPOSITIONS AND ENCUMBRANCES OF MEMBERSHIP INTERESTS
 Restrictions on Dispositions ab initio
 Permitted Dispositions
 (a)
    
    A Series Member of a Joint Series may, without the consent of
any other Member: (i) Dispose of all or any portion of its Series Interest in
such Joint Series to an Affiliate of such Series Member; and (ii) no earlier
than [***]from the Effective Date, but subject to the terms and conditions of
Section 5.03, Dispose of all or any portion of its Series Interest(s) in such
Joint Series to any Person, in either case so long as such Disposition (A) is
permitted under the existing terms and conditions of any Indebtedness of the
Joint Series Operating Company associated with such Joint Series and (B) will
not result in a change in any costs or other terms of, or any incremental
charges or fees under, any such Indebtedness.
 *** Confidential Treatment Requested
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FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 (b)
    
    Without the consent of any Member: (i) the AYE Series Member
may Dispose of all or any portion of its Series Interest in the AYE Series to
any Person; and (ii) the AYE Representatives may cause the Company to sell the
AYE Operating Company to any Person.(c)
    
    In the event AET Withdraws from the Ohio Series pursuant to
Section 12.01(c), then without the consent of AET: (i) the Ohio Series Member
would be entitled to Dispose of all or any portion of its Series Interest in
the Ohio Series to any Person; and (ii) the AEPTHC Representatives would be
entitled to cause the Company to Dispose of the Ohio Operating Company to any
Person.
 Right of First Offer
 (a)
    
    A Series Member of a Joint Series (a Transferring Member)
that desires to Dispose of all or any portion of its Series Interest in one or
more Joint Series to any Person other than an Affiliate thereof as permitted
pursuant to Section 5.02(a) shall deliver notice (an Offer Notice) to the
Company and to each other Voting Member of such Series. The Offer Notice shall
state the material terms and conditions governing the proposed Disposition,
including the proposed price. The Offer Notice shall constitute an offer to
Dispose of the subject Series Interest to any Voting Member of such Series
subject to the terms and conditions stated therein. An offer set forth in an
Offer Notice shall be deemed to remain open for a period of thirty (30) Days
from the date of the Offer Notice (the Election Period) or, with respect to
any Series Member, until any earlier date as of which such Series Member
rejects the offer contained in such Offer Notice.(b)
    
    Any Voting Member of a Series, any Series Interest of which is
being offered for Disposition (other than the Transferring Member and its
Affiliates) shall have the right, but not the obligation, to purchase all but
not less than all of the Series Interest described in the Offer Notice at the
price and on the terms and conditions specified therein by delivering written
notice of such election to the Transferring Member and the Company within the
Election Period (each such Voting Member that delivers such written notice, an
Offering Member); provided, however, that, irrespective of the terms and
conditions set forth in an Offer Notice, an Offering Member may condition its
election to purchase such Series Interest on: (i) receipt of approval or
consent from such Offering Members board of directors or other governing body;
and/or (iii) receipt of any necessary Governmental Approvals in form and
substance reasonably acceptable to such Offering Member; and provided further,
that if any such conditional election is conditioned on receipt of approval or
consent from an Offering Members board of directors or other governing body,
such conditional election shall be deemed withdrawn (as if it had never been
delivered) unless the Offering Member that delivered
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FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 such conditional election delivers written notice to the Transferring Member
on or before the tenth (10th) day after the expiration of the Election
Period that all necessary approvals and consents of such Offering Members
board of directors or other governing body have been obtained. The
Transferring Member shall reasonably cooperate with the purchasing Member(s)
in connection with obtaining any necessary Governmental Approvals.(c)
    
    In the event more than one Offering Member delivers notice of
its intent to purchase the Series Interest described in an Offer Notice in
accordance with Section 5.03(b), such Series Interest(s) shall be allotted
among the Offering Members exercising such right in proportion to their
respective Series Percentages determined prior to such Disposition.(d)
    
    Each Offering Member exercising its right to purchase a Series
Interest of a Joint Series pursuant to this Section 5.03, may choose to have an
Affiliate purchase such Series Interest so long as such Disposition: (i) is
permitted under the existing terms and conditions of any Indebtedness of the
Joint Series Operating Company associated with such Joint Series; and (ii) will
not result in a change in any costs or other terms of, or any incremental
charges or fees under, any such Indebtedness.(e)
    
    The Disposition of any Series Interest to one or more Offering
Members shall be consummated as soon as practical after the expiration of the
Election Period, but in no event later than fifteen (15) days after the receipt
of any necessary Governmental Approvals and the expiration of all applicable
waiting periods. At the closing of the Disposition of any Series Interest
pursuant to this Section 5.03, the Transferring Member shall: (i) represent
and warrant that (A) the Transferring Member has good title to such Series
Interest, (B) there are no Encumbrances on such Series Interest (other than
pursuant to this Agreement or any Indebtedness of the Joint Series Operating
Company associated with the Series whose Series Interest is being Disposed),
(C) the Transferring Member has due authority to Dispose of such Series
Interest to the Offering Member(s), (D) the agreement transferring such Series
Interest to the Offering Member(s) is valid and enforceable against the
Transferring Member, and (E) the Disposition of such Series Interest to the
Offering Member(s) does not violate any applicable Law in any material respect
or cause a default under any material agreement to which the Transferring
Member is a party; (ii) disclose in writing the existence and nature of any
pending or, to the Transferring Members actual knowledge without any
obligation of due inquiry, threatened litigation or arbitration or any audit or
investigation initiated by any Governmental Authority against the Transferring
Member or the Operating Company associated with the Series, the Series Interest
of which is being offered for Disposition, which litigation or other proceeding
is related to such Operating Company, the
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FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 Series associated with such Operating Company or the Project Facilities
owned by such Operating Company; and (iii) sign such documents as may
reasonably be requested by the Company or the purchasing Member(s).
Notwithstanding any other provision of this Agreement to the contrary, in
the event the Transferring Member discloses the existence of any pending or
threatened litigation or other proceeding required to be disclosed pursuant
to this Section 5.03(e), or an Offering Member reasonably determines that
the representation and warranty required by clause (i)(B) of this Section
5.03(e) is inaccurate, such Offering Member may, in its sole discretion, and
as its exclusive remedy based on such disclosure, withdraw its election to
purchase such Series Interest. The representations and warranties required
by clause (i) of this Section 5.03(e) shall not survive the closing of the
Disposition of the Series Interest, except for the representations and
warranties described in clauses (i)(A), (i)(C), (i)(D) and (i)(E) of this
Section 5.03(e), each of which shall survive such closing of such
Disposition for a period of one (1) year.(f)
    
    A purchasing Member (or its purchasing Affiliate) shall be
required to pay cash (and only cash) for any Series Interest acquired pursuant
to this Section 5.03.(g)
    
    If no Offering Member elects to purchase the Series Interest
described in an Offer Notice or if an Offering Member fails to purchase such
Series Interest pursuant to this Section 5.03, the Transferring Member may,
within one hundred and eighty (180) days after the later of the expiration of
the Election Period, the deemed withdrawal of a conditional election by an
Offering Member pursuant to Section 5.03(b), or a withdrawal of an election by
an Offering Member pursuant to Section 5.03(e), Dispose of such Series
Interests to any Person (a Third Party Purchaser) at a price no less than
[***]percent [***]of the purchase price specified in the Offer Notice;
provided, however, that any such Disposition shall be conditioned upon: (i)
such Third Party Purchaser satisfying the conditions described in Section
5.02(b); (ii) the submission of any filings to Governmental Authorities and the
receipt of any necessary Governmental Approvals; (iii) the determination by
counsel acceptable to the non-transferring Series Member(s) of the applicable
Series that such Disposition to such Third Party Purchaser would not cause (A)
a termination of the Company or any Series, or (B) a default, loss or payment
obligation under any security issued, or agreement entered into, by the Company
or any Joint Series Operating Company; (iv) such Third Party Purchaser
executing a counterpart of this Agreement; and (v) such Third Party Purchaser
and the Transferring Member executing such other documents as may be reasonably
requested by the other Series Members of the applicable Series (including an
assignment agreement in form and substance acceptable to such other Series
Members in their reasonable discretion containing the agreement by the
Transferring Member to
 *** Confidential Treatment Requested
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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 reimburse such other Series Members for any fees or expenses reasonably
incurred under any security issued, or agreement entered into, as a result
of such Disposition, including any consent fee or additional financing costs
under any Indebtedness.(h)
    
    In the event a Transferring Member, for any reason, has not
entered into a definitive agreement to Dispose of the Series Interests
described in an Offer Notice to a Third Party Purchaser in accordance with
Section 5.03(g) within one hundred and eighty (180) Days after the later of:
(i) the expiration of the Election Period; (ii) if applicable, the withdrawal
or deemed withdrawal of a conditional election by an Offering Member pursuant
to Section 5.03(b); or (iii) if applicable, the withdrawal of an election by an
Offering Member pursuant to Section 5.03(e), the Transferring Member shall not
Dispose of any Series Interests without again complying with the requirements
set forth in Section 5.03(b).
 Requirements Applicable to All Dispositions and Admissions provided, however
 (a)
    
    The following documents must be delivered to such
Administrative Committee and must be satisfactory, in form and substance, to
such Administrative Committee:
 (i)
    
    a copy of the instrument pursuant to which the
Disposition is effected.(ii)
    
    an instrument, executed by the Disposing Member
and its Assignee, containing the following information and agreements,
to the extent they are not contained in the instrument described in
clause (i) immediately above: (A) the notice address of the Assignee;
(B) if applicable, the Parent of the Assignee; (C) the Series
Percentages and Voting Percentages after the Disposition of the
Disposing Member and its Assignee (which together must total the Series
Percentage and Voting Percentages of the Disposing Member immediately
prior to the Disposition); (D) the Assignees ratification of this
Agreement and agreement to be bound by it, and its confirmation that
the representations and warranties in Section 4.01 are true and
correct; and (E) representations and warranties by the Disposing Member
and its Assignee that (1) the Disposition and admission are being made
in accordance with all applicable Laws, and (2) the Disposition and
admission do not violate any
 *** Confidential Treatment Requested
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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 agreement to which the Company, the applicable Series, the Operating
Company associated with such Series or the Assignee is a party.(iii)
    
    unless the Series Interests subject to the
Disposition are registered under the Securities Act and any applicable
state securities Laws, a favorable opinion of legal counsel acceptable
to the Administrative Committee of the Series whose Series Interests
are being Disposed, to the effect that the Disposition and admission
are being made pursuant to valid exemptions from registration under
those Laws and in accordance with those Laws; provided, however, that
no such opinion shall be required in the case of a Disposition by a
Member to an Affiliate thereof.
 (b)
    
    The Disposing Member or its Assignee shall pay, or reimburse
the Company and the other Members for, all reasonable costs and expenses
incurred by the Company or such other Members in connection with the
Disposition and admission, including the legal fees incurred in connection with
the legal opinion referred to in Section 5.04(a)(iii), no later than ten (10)
Days after the receipt by that Person of an invoice for such amount. If
payment is not made by the date due, the Person owing that amount shall pay
interest on the unpaid amount from the date due until paid at a rate per annum
equal to the Default Rate.(c)
    
    No Disposition of Series Interests shall release the Disposing
Member from any liabilities to the Company or the other Members arising from
events occurring prior to the Disposition.(d)
    
    Upon any Disposition of Series Interests, the Series
Percentages and Series Capital Accounts of the Members shall be deemed adjusted
to reflect the effect of the Disposition.
 Tax Partnership Transfer Limitations .
 Deemed Membership Disposition
 *** Confidential Treatment Requested
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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 Admission of Assignee as a Member
 Special Dispositions
 Issuance of Additional Series Interests provided however
 Specific Performance
 ARTICLE 6
CAPITAL CONTRIBUTIONS
 Series Capital Contributions
 (a)
    
    The Administrative Committee of each Series shall issue or
cause to be issued a written request to each Series Member of such Series to
make
 *** Confidential Treatment Requested
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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 Series Capital Contributions at such times and in such amounts as such
Administrative Committee shall approve (each such written request, including
any Regular Series Capital Call, a Series Capital Call). Series Capital
Contributions shall be made in cash, unless the Administrative Committee of
a Series elects to request non-cash Series Capital Contributions.(b)
    
    All Series Capital Contributions to each Series shall be
deposited into a segregated account established by the Administrative Committee
of such Series; provided, however, that Series Members of the Joint Series
shall deposit Capital Contributions to Capital Contribution Escrow Accounts in
accordance with the Capital Contribution Escrow Agreement. Series Capital
Contributions shall be credited to the Series Capital Account of the Series
Members that made such Series Capital Contributions as of the date of payment
to the respective Series, including, in the case of Series Capital
Contributions to the Joint Series, the date of contribution from a Capital
Contribution Escrow Account to the respective Joint Series.(c)
    
    Without limiting the authority of each Administrative Committee
as set forth in Section 6.01(a), the Administrative Committee(s) of each Series
shall use reasonable efforts to establish a regular schedule of Capital Calls
(each, a Regular Series Capital Call) based on expenditures anticipated to be
required based on the operating budget approved by the OpCo Board of the
Operating Company associated with such Series.(d)
    
    Each Series Capital Call shall contain the following
information:
 (i)
    
    the total Series Capital Contributions
requested from all Series Members;(ii)
    
    the Series Capital Contribution requested from
the Series Member to whom the request is addressed, such amount to be
in accordance with the Series Percentage of such Series Member;(iii)
    
    the purpose for which the Capital
Contributions are to be applied in such reasonable detail as the
applicable Administrative Committee shall direct;(iv)
    
    a copy of the most recent available annual and
monthly financial statements of the Series issuing the Series Capital
Call; and(v)
    
    the date on which payment of the Series Capital
Contributions is due (which date shall not be less than thirty (30)
Days following the date the Series Capital Call is issued, unless a
sooner date is approved by the applicable Administrative Committee) and
the method of payment; provided, however, that such date and method
shall be the same for all Series Members.
 *** Confidential Treatment Requested
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FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 (e)
    
    The Series Members shall pay Series Capital Contributions in
accordance with Series Capital Calls issued by their respective Series.
 No Other Contribution Obligations
 Return of Contributions
 Series Capital Accounts
 (a)
    
    A Series Capital Account shall be established and maintained
for each Series Member with respect to its interest in a Series.(b)
    
    Each Series Members Series Capital Account shall be: (i)
increased by (A) the amount of money contributed by that Series Member to the
Series (including any amounts paid in respect of a Priority Interest), (B) the
Book Value of property contributed by that Series Member to the Series (net of
liabilities secured by the contributed property that the Series is considered
to assume or take subject to under Section 752 of the Code) and (C) allocations
to that Series Member of Series Profits and any other items of Series income or
gain allocated to that Member; and (ii) decreased by (A) the amount of money
distributed to that Series Member by the Series (including any amounts
distributed in respect of a Priority Interest), (B) the Book Value of property
distributed to that Series Member by the Series (net of liabilities secured by
the distributed property that the Series Member is considered to assume or take
subject to under Section 752 of the Code), and (C) allocations to that Series
Member of Series Losses and any other items of Series loss or deduction
allocated to that Series Member. The Series Capital Accounts shall also be
increased or decreased to reflect a revaluation of Operating Company property
pursuant to paragraph (b) of the definition of Book Value. On the Disposition
of any Series Interests, the Series Capital Account of the transferor that is
attributable to the transferred Series Interests shall carry over to the
transferee Series Member in accordance with the provisions of Section
1.704-1(b)(2)(iv)(l) of the Treasury Regulations. A Series Member that owns
Series Interests of more than one Series shall have a separate Series Capital
Account with respect to each Series in which it owns Series Interests.
 *** Confidential Treatment Requested
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FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 (c)
    
    The Series Capital Accounts shall not be deemed to be or
correspond to, nor have the same meaning as, the amount(s) recorded by the
Company or any Operating Company in the Balance Sheet Accounts pursuant to
the Uniform System of Accounts administered by FERC.
 Failure to Make a Series Capital Contribution
 (a)
    
    If, with respect to any Series Member, there is a Default as
described in Section 14.01(a) (each such Member being a Non-Contributing
Member), each Voting Member of the applicable Series that has contributed its
Series Capital Contribution (each, a Contributing Member) may elect in
writing to:
 (i)
    
    treat the Non-Contributing Members failure to
satisfy such Series Capital Call as a Default by giving notice thereof
to the Non-Contributing Member, in which event the provisions of this
Agreement regarding a Default by such Series Member shall apply; or(ii)
    
    pay the portion of the Series Capital
Contribution owed and unpaid by the Non-Contributing Member (the
Additional Contribution) in which event any Contributing Member that
funds any Non-Contributing Members Series Capital Contribution (each,
an Additional Contribution Member) may, at its election (exercisable
by written notice to all Series Members of the applicable Series),
treat such Additional Contribution as: (A) a Priority Interest in
accordance with Section 6.06; or (B) a permanent Series Capital
Contribution resulting in an adjustment of Series Percentages pursuant
to Section 6.07; provided, however, that unless and until a Series
Member elects to treat an Additional Contribution as a permanent Series
Capital Contribution pursuant to Section 6.07, such Series Member shall
be deemed to have elected to treat its Additional Contribution as a
Priority Interest pursuant to Section 6.06.
 (b)
    
    No Series Member shall be obligated to make an Additional
Contribution. If any Additional Contribution Member makes an election (or is
deemed to have made an election) pursuant to Section 6.05(a)(ii) to treat an
Additional Contribution as a Priority Interest, such Additional Contribution
Member shall have the option, exercisable at any time thereafter upon thirty
(30) Days prior written notice to the other Series Member(s) of such Series, to
change its election such that its Additional Contribution shall be treated as a
permanent Series Capital Contribution pursuant to Section 6.07.
 *** Confidential Treatment Requested
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FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 Priority Interest
 (a)
    
    An Additional Contribution Member that has not elected to treat
its Additional Contribution as a permanent Series Capital Contribution pursuant
to Section 6.07 may elect (or be deemed to have elected) to receive a right to
distributions (as further defined in this Section 6.06, a Priority Interest).(b)
    
    All distributions that otherwise would be owed by a Series to a
Non-Contributing Member of such Series shall be paid instead to each Additional
Contribution Member that has a Priority Interest in respect of such
Non-Contributing Member. In the event there are multiple Additional
Contribution Members with Priority Interests in respect of the same
Non-Contributing Member, distributions that otherwise would be owed by a Series
to such Non-Contributing Member shall be paid to such Additional Contribution
Members in proportion to their then-unreturned Additional Contributions made
with respect to such Non-Contributing Member.(c)
    
    Once an Additional Contribution Member receives, either through
distributions in respect of its Priority Interest or payments made by the
Non-Contributing Member(s) in respect of such Priority Interest (which
payment(s) may be made by the Non-Contributing Member(s) at any time), an
amount equal to the Additional Contribution made by such Additional
Contribution Member, plus a return thereon at the Default Rate (compounded
monthly on the outstanding balance): (i) the Priority Interest with respect
thereto shall terminate; and (ii) the Non-Contributing Member shall no longer
be deemed a Non-Contributing Member. For purposes of making such
determination, all amounts received by an Additional Contribution Member in
respect of a Priority Interest shall be deemed to be applied first to a return
on, and then to the amount of, such Priority Interest.(d)
    
    For purposes of maintaining Series Capital Accounts, any amount
paid by a Non-Contributing Member to an Additional Contribution Member to
reduce and/or terminate a Priority Interest shall be treated as though such
amount were contributed by the Non-Contributing Member to the applicable Series
and thereafter distributed by such Series to such Additional Contribution
Member.(e)
    
    Priority Interests shall not alter Series Percentages or Voting
Percentages, nor shall any Priority Interest alter any distributions payable to
Contributing Members in their capacity as Contributing Members, as opposed to
Additional Contribution Members. Notwithstanding any provision in this
Agreement to the contrary, a Series Member may not Dispose of all or any
portion of its Priority Interest except to a Person to whom it Disposes of its
Series Interests after compliance with the requirements of this Agreement in
connection therewith.
 *** Confidential Treatment Requested
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FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 (f)
    
    Notwithstanding any other provision of this Agreement, a
Non-Contributing Member shall not have the right to vote under this Agreement
(nor shall any of its Representatives or Administrators have the right to vote
or be taken into account for purposes of determining a quorum on the Board of
Managers or any Administrative Committee) with respect to any decision
regarding distributions from the Series as to which is it a Non-Contributing
Member for so long as it remains a Non-Contributing Member of such Series.(g)
    
    All distributions to which a Non-Contributing Member is
entitled from a Series as to which it is a Non-Contributing Member shall be
paid directly to the Additional Contribution Member(s) of such Series in
respect of their Priority Interest(s).(h)
    
    No Non-Contributing Member of a Series may Dispose of any
Series Interest in such Series unless, at the closing of such Disposition,
either the Non-Contributing Member or the proposed Assignee pays the amount
necessary to terminate the Priority Interest(s) in such Series associated with
such Non-Contributing Member. No Assignee shall be admitted to a Series as a
Series Member until compliance with this Section 6.06(h) has occurred.
 Permanent Contribution
 Further Assurance
 Deficit Series Capital Accounts
 Capital Contribution Escrow Agreement.
 (a)
    
    Each Joint Series Member shall enter into an agreement (the
Capital Contribution Escrow Agreement) in the form of Exhibit E
requiring all Series Capital Contributions to any Joint Series (excluding any
Additional Contributions) to be deposited into a Capital Contribution Escrow
 *** Confidential Treatment Requested
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FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 Account in order that Series Capital Contributions to any Joint Series may,
subject to Section 6.10(b), be paid simultaneously.(b)
    
    In the event any Series Member of a Joint Series fails to
deposit a Series Capital Contribution pursuant to a Series Capital Call into
the Capital Contribution Escrow Account for such Joint Series by the date such
Series Capital Contribution was due:
 (i)
    
    the Capital Contribution Escrow Agent shall
notify all Series Members of such Joint Series of such failure no later
than the Business Day immediately following the date on which such
Series Capital Contributions were due;(ii)
    
    any Series Member of such Joint Series that
deposits the full amount of such Series Capital Contribution by the
date such Series Capital Contribution was due shall have complete
discretion to direct the Series Capital Contribution Escrow Agent
whether or not to deposit its Series Capital Contribution to such Joint
Series, regardless of whether any other Series Member has deposited its
Series Capital Contribution into the Capital Contribution Escrow
Account for such Joint Series by such date;(iii)
    
    the Series Capital Contribution Escrow Agent
shall deposit the Series Capital Contribution of a Series Member that
made such Series Capital Contribution only after the later of (A) three
(3) Business Days after the date such Series Capital Contribution was
due, or (B) receipt of written instructions from such Series Member
directing that such Series Capital Contribution be deposited to the
applicable Joint Series; and(iv)
    
    any Series Member that elects not to direct the
Series Capital Contribution Escrow Agent to deposit a Series Capital
Contribution that has been timely deposited in full by such Voting
Member shall not be in default of this Agreement pursuant to Section
14.01.
 ARTICLE 7
DISTRIBUTIONS AND ALLOCATIONS
 Distributions
 Allocations of Series Profits and Series Losses
 *** Confidential Treatment Requested
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FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
  Special Allocations for Series Capital Account Purposes
 (a)
    
    With respect to any Series that is treated as a partnership for
federal income tax purposes, the following special allocations determined with
respect to each Series shall be made in the following order:
 (i)
    
    First, Nonrecourse Deductions shall be
allocated among the Series Members in accordance with their Series
Percentages.(ii)
    
    Second, Member Nonrecourse Deductions
attributable to Member Nonrecourse Debt of a Series shall be allocated
to the Series Members bearing the Economic Risk of Loss for such Member
Nonrecourse Debt as determined under Section 1.704-2(b)(4) of the
Treasury Regulations. If more than one Series Member bears the
Economic Risk of Loss for such Member Nonrecourse Debt, the Member
Nonrecourse Deductions attributable to such Member Nonrecourse Debt
shall be allocated among the Series Members according to the ratio in
which they bear the Economic Risk of Loss. This Section 7.03(a)(ii) is
intended to comply with the provisions of Section 1.704-2(i) of the
Treasury Regulations and shall be interpreted consistently therewith.(iii)
    
    Third, notwithstanding any other provision of
this Agreement, if there is a net decrease in Minimum Gain with respect
to a Series for a taxable year (or if there was a net decrease in
Minimum Gain for a prior taxable year and the Series did not have
sufficient amounts of income and gain during prior years to allocate
among the Series Members under this Section 7.03(a)(iii)), items of
Series income and gain shall be allocated to each Series Member in an
amount equal to such Series Members share of the net decrease in such
Minimum Gain (as determined pursuant to Section 1.704-2(g)(2) of the
Treasury Regulations. This Section 7.03(a)(iii) is intended to
constitute a minimum gain chargeback under Section 1.704-2(f) of the
Treasury Regulations and shall be interpreted consistently therewith.(iv)
    
    Fourth, notwithstanding any other provision of
this Agreement except Section 7.03(a)(iii) (dealing with Minimum Gain),
if there is a net decrease in Member Nonrecourse Debt Minimum Gain with
respect to a Series for a taxable year (or if there was a net decrease
in Member Nonrecourse Debt Minimum Gain for a prior taxable year and
the Series did not have sufficient amounts of income and gain during
prior years to allocate among the Series Members under this Section
7.03(a)(iv)), items of income and gain
 *** Confidential Treatment Requested
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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 shall be allocated to each Series Member in an amount equal to such
Series Members share of the net decrease in Member Nonrecourse Debt
Minimum Gain (as determined pursuant to Section 1.704-2(i)(4) of the
Treasury Regulations). This Section 7.03(a)(iv) is intended to
constitute a partner nonrecourse debt minimum gain chargeback under
Section 1.704-2(i)(4) of the Treasury Regulations and shall be
interpreted consistently therewith.(v)
    
    Fifth, notwithstanding any other provision of
this Agreement except Sections 7.03(a)(iii) and 7.03(a)(iv) (dealing
with Minimum Gain and Member Nonrecourse Debt Minimum Gain), a Series
Member that unexpectedly receives an adjustment, allocation or
distribution described in Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6)
of the Treasury Regulations shall be allocated items of Series income
and gain (consisting of a pro rataportion of each item of income,
including gross income, and gain for the taxable year) in an amount and
manner sufficient to eliminate any deficit balance in such Series
Members Adjusted Series Capital Account as quickly as possible. This
Section 7.03(a)(v) is intended to constitute a qualified income offset
under Section 1.704-1(b)(2)(ii)(d) of the Treasury Regulations and
shall be interpreted consistently therewith.(vi)
    
    Sixth, in the event that any Member has a
negative Adjusted Series Capital Account at the end of any taxable
year, such Member shall be allocated items of Series income and gain in
the amount of such deficit as quickly as possible; provided, however,
that an allocation pursuant to this Section 7.03(a)(vi) shall be made
only if, and to the extent that, such Series Member would have a
negative Adjusted Series Capital Account after all other allocations
provided for in Article 7 have been tentatively made as if Section
7.03(a)(v) and this Section 7.03(a)(vi) were not in this Agreement.(vii)
    
    Seventh, to the extent an adjustment to the
adjusted tax basis of Operating Company property pursuant to Section
734(b) or 743(b) of the Code is required pursuant to Section
1.704-1(b)(2)(iv)(m)(2) or 1.704-1(b)(2)(iv)(m)(4) of the Treasury
Regulations to be taken into account in determining Series Capital
Accounts, the amount of such adjustment to the Series Capital Accounts
shall be treated as an item of gain (if the adjustment increases the
basis of the asset) or loss (if the adjustment decreases such basis)
and such gain or loss shall be allocated to the Series Members in
accordance with Section 1.704-1(b)(2)(iv)(m)(2) of the Treasury
Regulations if such section applies, or to the Series Member to whom such
 *** Confidential Treatment Requested
 
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FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 distribution was made if Section 1.704-1(b)(2)(iv)(m)(4) of the
Treasury Regulations applies.(viii)
    
    Eighth, notwithstanding the foregoing, in the event that the
allocation of any item would create or increase a deficit balance in a
Series Members Adjusted Series Capital Account, there shall be
allocated to such Series Member only that amount of such item as will
not create or increase such a deficit balance. The items that would,
absent the application of the preceding sentence, otherwise be
allocated to such Series Member shall, subject to the limitations of
such sentence, be allocated to the other Series Members of such Series
having positive balances in their Adjusted Series Capital Accounts, up
to the amount of such positive balances and in the ratios that each
such other Series Members positive balance bears to the sum of all
such other Series Members positive balances, and any excess shall be
allocated to all Series Members of such Series in accordance with their
Series Percentages.(ix)
    
    Ninth, in the event that any Series Member is
entitled to a return on an Additional Contribution pursuant to Section
6.06(c), a special allocation of income in the amount of such return
shall be allocated to such Series Member.
 (b)
    
    The allocations described in Section 7.03(a)(i) through
7.03(a)(viii) (the Regulatory Allocations) are intended to comply with
Sections 1.704-1(b) and 1.704-2 of the Treasury Regulation. The Regulatory
Allocations may be inconsistent with the manner in which the Series Members
intend to divide distributions with respect to such Series. Accordingly, the
Administrative Committee of each Series is authorized to divide other
allocations of Series Profits, Series Losses and other items of Series income,
gain, loss, deduction or credit among the Series Members of its Series, to the
extent that they exist, so that the net amount of the Regulatory Allocations
and such other allocations (the Curative Allocations) to each Series Member
of such Series is zero. The Administrative Committee of each Series shall have
discretion to accomplish this result in any reasonable manner that is
consistent with Section 704 of the Code and the related Treasury Regulations.
 Income Tax Allocations.
 (a)
    
    Except as provided in this Section 7.04, each item of income,
gain, loss and deduction of a Series for federal income tax purposes shall be
allocated among the Series Members of such Series in the same manner as such
items are allocated for book purposes under Section 7.02 or Section 7.03.
 *** Confidential Treatment Requested
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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 (b)
    
    With respect to any Series that is treated as a partnership for
federal income tax purposes, in accordance with Section 704(c) of the Code and
the applicable Treasury Regulations thereunder, income, gain, loss and
deduction with respect to any property contributed to a Series shall, solely
for tax purposes, be allocated among the Series Members so as to take
account of any variation between the adjusted basis of such property for
federal income tax purposes and its initial Book Value. In the event the
Book Value of any Operating Company property is adjusted pursuant to clause
(b) or (d) of the definition of Book Value, subsequent allocations of
income, gain, loss and deduction with respect to such property shall take
account of any variation between the adjusted basis of such property for
federal income tax purposes and its Book Value in the same manner as under
Section 704(c) of the Code and the applicable Treasury Regulations
thereunder. For purposes of such allocations, the Administrative Committee
of each Series shall determine the appropriate method for eliminating such
differences between the Book Value and tax basis of Operating Company
property.(c)
    
    Allocations pursuant to this Section 7.04 are solely for
purposes of federal, state and local taxes and shall not affect, or in any way
be taken into account in computing, any Series Members Series Capital Account
or share of Series Profits, Series Losses, other items or distributions
pursuant to any provision of this Agreement.
 Varying Interests
 ARTICLE 8
MANAGEMENT
 Management Generally
 (a)
    
    The management of the Company (excluding the management of each
Series) is fully reserved to the Voting Members of the Company. The Voting
Members of the Company shall be entitled to vote on Company matters (but not
Series matters) in accordance with their respective Voting Percentages in the
Company. Unless otherwise specified by the express terms of this Agreement,
when action or consent by the Voting Members of the Company is required or
permitted, such action or consent shall require the consent or approval of the
Voting Members of the Company holding, in the aggregate, more than a fifty
percent (50%) Voting
 *** Confidential Treatment Requested
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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 Percentage in the Company. The record date for
determining the Voting Members entitled to vote on Company matters shall be
established by the Board of Managers.(b)
    
    The management of each Series is fully reserved to the Voting
Members of such Series. The Voting Members of a Series shall be entitled to
vote on Series matters in accordance with their respective Voting Percentages.
Unless otherwise specified by the express terms of this Agreement, when action
or consent by the Voting Members of a Series is required or permitted, such
action or consent shall require the consent or approval of Voting Members of
such Series holding, in the aggregate, more than a fifty percent (50%) Voting
Percentage in such Series. The record date for determining the Voting Members
entitled to vote on Series matters shall be established by the Administrative
Committee of such Series.
 Board of Managers
 (a)
    
    The Company authorizes the formation of a board (the Board of
Managers) to manage and govern the Company. The Board of Managers initially
shall be comprised of four (4) individuals (each, a Representative). Except
as set forth in Section 8.11, decisions and actions of the Board of Managers
shall be taken upon the vote of the Representatives holding a majority of the
voting rights of the Board of Managers.(b)
    
    Unless and until AEPTHC becomes a Converted Member of the West
Virginia Series, the Representatives shall be appointed as follows: (i) two
(2) Representatives (each, a Class A Representative) shall be appointed by
AET or any Assignee of AET that acquires AETs right to appoint Representatives
pursuant to Section 5.07; and (ii) two (2) Representatives (each, a Class B
Representative) shall be appointed by AEPTHC or any Assignee of AEPTHC that
acquires AEPTHCs right to appoint Representatives pursuant to Section 5.07;
provided, however, that if at any time a Members Voting Percentage in the Company is less than thirty-five
percent (35%), the Board of Managers may vote to modify the number of
Representatives on the Board of Managers, so long as AET (or its Assignee)
remains entitled to appoint at least one (1) Class A Representative and
AEPTHC (or its Assignee) remains entitled to appoint at least one (1) Class
B Representative (any of which Representatives shall be non-voting if the
Member that appointed such Representative is a non-voting Member).(c)
    
    Each of AET and AEPTHC (and their respective Assignees), may
remove and replace, for any reason or no reason, a Representative appointed by
it upon written notice. Each of AET and AEPTHC (and their respective
Assignees) may designate a different Representative for any meeting of the
Board of Managers by notifying the other Representatives at least
 *** Confidential Treatment Requested
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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 three (3)
Business Days prior to the scheduled date for such meeting; provided, however,
that if giving such advance notice is not feasible, any new Representative (s)
shall present written evidence of authority at the commencement of such
meeting. Each Representative shall have full authority to act on behalf, and
in the name, of the Member that appointed such Representative on all matters on
which the Board of Managers takes action under this Agreement. Each Member may
rely on the actions of any duly appointed Representative without any inquiry or
investigation as to the actual authority, or lack thereof, of that
Representative to take that action.(d)
    
    Decisions or actions taken by the Board of Managers in
accordance with the provisions of this Agreement shall constitute decisions or
actions by the Company, unless and to the extent any such decision or action is
altered or reversed by the Voting Members of the Company. The participation by
the Representatives holding a majority of the voting rights with respect to a
matter shall be required for the Board of Managers to conduct business
pertaining to such matter.(e)
    
    The voting rights of the Representatives shall be determined as
of the time a vote of the Representatives is taken in the following manner:
(i) the Class A Representatives shall hold an aggregate percentage of votes
equal to the Voting Percentage in the Company held by AET and by Assignees of
AET of any Series Interest in the West Virginia Series or the Ohio Series
originally held by AET; and (ii) the Class B Representatives shall hold an
aggregate percentage of votes equal to the Voting Percentage in the Company
held by AEPTHC and by Assignees of any Series Interest in the West Virginia
Series or the Ohio Series originally held by AEPTHC [***].(f)
    
    No Representative shall be entitled to compensation from the
Company for his or her service as a Representative.(g)
    
    The initial Representatives and their respective notice
addresses are set forth in Schedule 8.02.
 Administrative Committees
 (a)
    
    The Voting Members of each Series authorize the formation of a
committee (each, an Administrative Committee and each Person duly appointed
to serve on an Administrative Committee, an Administrator) to manage and
govern such Series. Except as set forth in Section 8.12, decisions and actions
of each Administrative Committee shall be taken
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FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 upon the vote of the
Administrators holding a majority of the voting rights of the Administrative
Committee.(b)
    
    The number of Administrators on the Administrative Committee
for each Series shall be determined by the Voting Members of such Series;
provided, however, that unless and until the composition of an Administrative
Committee of a Joint Series is modified pursuant to Section 8.03(c): (i) the
West Virginia Series Administrative Committee shall be comprised of four (4)
Administrators, two (2) of whom shall be Class A Administrators and two (2) of
whom shall be Class B Administrators; and (ii) unless and until AET Withdraws
from the Ohio Series, the Ohio Series Administrative Committee shall be
comprised of four (4) Administrators, two (2) of whom shall be Class A
Administrators and two (2) of whom shall be Class B Administrators.(c)
    
    If at any time the Voting Percentage of any Series Member of a
Joint Series is less than thirty-five percent (35%), the Administrative
Committee of such Joint Series may vote to modify the number of Administrators
on the Administrative Committee of such Joint Series, so long as AET (or its
Assignee) remains entitled to appoint at least one (1) Class A Administrator to
each of the West Virginia Series Administrative Committee and the Ohio Series
Administrative Committee and AEPTHC (or its Assignee) remains entitled to
appoint at least one (1) Class B Administrator to each of the West Virginia
Series Administrative Committee and the Ohio Series Administrative Committee
(any of which Administrators shall be non-voting if the Joint Series Member
that appointed such Administrator is a non-voting Joint Series Member).(d)
    
    Each of AET and AEPTHC (and their respective Assignees), may
remove and replace, for any reason or no reason, an Administrator appointed by
it upon written notice. Each of AET and AEPTHC (and their respective
Assignees) may designate a different Administrator for any meeting of an
Administrative Committee by notifying the other Administrators at least three
(3) Business Days prior to the scheduled date for such meeting;
provided, however, that if giving such advance notice is not feasible, any
new Administrator(s) shall present written evidence of authority at the
commencement of such meeting. Each Administrator shall have full authority
to act on behalf, and in the name, of the Member that appointed such
Administrator on all matters on which the Administrative Committee takes
action under this Agreement. Each Member may rely on the actions of any
duly appointed Administrator without any inquiry or investigation as to the
actual authority, or lack thereof, of that Administrator to take that
action.(e)
    
    Decisions or actions taken by an Administrative Committee of a
Series in accordance with the provisions of this Agreement shall constitute
decisions or actions by such Series, unless and to the extent any such
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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 decision
or action is altered or reversed by the Voting Members of such Series. The
participation by the Administrators holding a majority of the voting rights
with respect to a matter shall be required for an Administrative Committee to
conduct business pertaining to such matter.(f)
    
    The voting rights of the Administrators on an Administrative
Committee of a Series shall be determined as of the time a vote of the
Administrators is taken in the following manner: (i) the Class A
Administrators shall hold an aggregate percentage of votes equal to the Voting
Percentage in the Series held by AET and by Assignees of AET of any Series
Interest in such Series originally held by AET; and (ii) the Class B
Administrators shall hold an aggregate percentage of votes equal to the Voting
Percentage in such Series held by AEPTHC and by Assignees of AEPTHC of any
Series Interest in such Series originally held by AEPTHC [***].(g)
    
    No Administrator shall be entitled to compensation from the
Company for his or her service as an Administrator.(h)
    
    Each Administrative Committee shall cause its respective Series
to maintain books and records pertaining to the business and operations of such
Series separate and apart from the books and records of any other Series.(i)
    
    The initial Administrators and their respective notice
addresses are set forth in Schedule 8.03.
 Officers and Committees
 (a)
    
    Each Governing Body shall be authorized to appoint such
officers or other designees as it deems necessary and appropriate, including,
in the case of the Board of Managers, delegates on behalf of each Voting Member
of the Joint Series to serve on the PJM Administrative Committee, as required
pursuant to Section 8.2 of the PJM Owner Agreement. Any officers so designated
shall serve for terms not to exceed one (1) year in length and shall have such
titles and, subject to the other provisions of this Agreement, have such
authority and perform such duties as its Governing Body may delegate to such
officers. Any officers so designated shall serve at the pleasure of the
Governing Body that appointed them and shall report to such Governing Body.
Any appointment of an officer by a Governing Body may be rescinded by such
Governing Body, in its sole and absolute discretion.
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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 (b)
    
    Each Governing Body shall have authority to create such
committees, and delegate to such committees such authority and responsibility,
and rescind any such delegations, as it deems appropriate.
 Meetings
 (a)
    
    Each Governing Body shall meet quarterly, subject to more or
less frequent meetings upon approval of such Governing Body or as provided
below. Special meetings of the Members of the Company, the Series Members of
any Series or the members of a Governing Body may be called at such times, and
in such manner, as such Members, Series Members or members of such Governing
Body deem necessary or appropriate.(b)
    
    Notice of, and an agenda for, all meetings of the Members or
any Governing Body (including special meetings of a Governing Body) shall be
circulated to the Members or members of the Governing Body, as applicable, at
least five (5) Days prior to the date of each meeting, together with proposed
minutes of the previous meeting of the Members or such Governing Body (if such
minutes have not been previously ratified); provided, however,that a failure
to provide proposed minutes shall not render such a notice ineffective; and
provided further, that the five (5) Day notice period may be waived (i) by
attendance in the manner described in Section 8.05(d) or (ii) in writing by all
of the Members or all of the members of a Governing Body, as applicable. Any
such notice of a meeting shall include the proposed date, location and agenda
for such meeting.(c)
    
    All meetings of a Governing Body shall be held at a mutually
agreeable location; provided, however, that if the Board of Managers or any
Administrative Committee is unable to agree on a mutually agreeable location
for a meeting, such meeting shall be held in the District of Columbia.(d)
    
    Attendance by a Member or a member of a Governing Body at a
meeting shall constitute a waiver of notice of such meeting, except where such
attendance is for the express purpose of objecting to the transaction of any
business on the ground that such meeting is not lawfully called or convened.(e)
    
    Each Voting Member shall use all reasonable efforts to cause
its Representatives and its Administrators to attend each meeting of such
Governing Body.(f)
    
    The Members and the members of each Governing Body may adopt
whatever rules and procedures relating to their activities as they may deem
appropriate; provided, however, that such rules and procedures shall
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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 not be
inconsistent with or violate the provisions of this Agreement or the Act.(g)
    
    Any action required or permitted to be taken at a meeting of
the Members or a Governing Body may be taken without a meeting and/or without a
vote, but with prior notice, if a consent or consents in writing, setting forth
the action so taken, is signed by the Voting Members (in the case of a Member
meeting) or the members of such Governing Body that could have taken the action
at such a meeting of such Governing Body.(h)
    
    Members, Representatives and Administrators may participate in
and hold meeting by means of conference telephone, videoconference or similar
communications equipment by means of which all participants in such meeting can
effectively communicate with each other. Participation in a meeting shall
constitute presence in person at such meeting, except where a Member,
Representative or Administrator participates in the meeting for the express
purpose of objecting to the transaction of any business on the ground that the
meeting is not lawfully called or convened.
 Limitation of Duties and Liabilities
 (a)
    
    the only fiduciary or other duties or obligations that any
Representative or Administrator owes in his/her capacity as a Representative or
Administrator shall be: (i) an implied covenant of good faith and fair
dealing; (ii) a duty of care; (iii) in the limited circumstance described in
Section 8.10(d)(iv), a duty of loyalty; and (iv) to the extent applicable, such
duties and obligations as the Member that appointed such Representative or
Administrator designated, the enforcement of which and the liabilities
resulting from any breach thereof shall constitute internal governance affairs
of such Member;(b)
    
    no Representative or Administrator shall, under this Agreement,
the Act or otherwise, owe, in his or her capacity as a Representative or
Administrator, or be personally liable for monetary damages for any breach of,
any fiduciary or other duties or obligations, other than any non-waivable
covenant of good faith and fair dealing imposed by applicable Law; and(c)
    
    with respect to any matter submitted to a Governing Body for a
vote, consent or approval, except as otherwise provided by Section 18-1101 of
the Act, the Representatives or Administrators then-entitled to vote, as
applicable, may, subject to Section 8.10(d), grant or withhold that vote,
consent or approval: (i) in their sole and absolute discretion; (ii) with or
without reasonable cause; (iii) subject to such conditions as they may deem
appropriate; and/or (iv) without taking into account the interests of,
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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 and
without incurring any liability to, the Company, any Operating Company or any
Member (other than the Member appointing such Representative or Administrator)
or any other Representative or Administrator.
 Intentionally Omitted
 Costs and Expenses provided, however
 Resolution of Deadlocks
 (a)
    
    If a Voting Member (or in the case of a Deadlock on a Joint
Series or Joint Series Operating Company matter, a Voting Member of such Joint
Series or the Joint Series associated with such Joint Series Operating Company)
reasonably determines that a Deadlock exists, such Voting Member may cause one
of its Representatives, by written notice (a Deadlock Notice) to the other
Voting Member (or in the case of a Deadlock on a Joint Series or Joint Series
Operating Company matter, the Voting Member of such Joint Series or the Joint
Series associated with such Joint Series Operating Company), to refer such
Deadlock to senior executives of the Parents of the Voting Members of the
Company (or in the case of a Deadlock on a Joint Series or Joint Series
Operating Company matter, senior executives of the Parents of the Voting
Members of such Joint Series or the Joint Series associated with such Joint
Series Operating Company) or their designees. Such Deadlock Notice shall
describe in reasonable detail the nature of the Deadlock. Each Voting Member
(or in the case of a Deadlock on a Joint Series or Joint Series Operating
Company matter, each Voting Member of such Joint Series or the Joint Series
associated with such Joint Series Operating Company)
shall cause the individual it designates to resolve the Deadlock promptly to
consult and negotiate in good faith with the individual designated by the
other Voting Member in an effort to resolve such Deadlock.(b)
    
    If: (i) the individuals designated to resolve a Deadlock
pursuant to Section 8.09(a) are unable to resolve such Deadlock within twenty
(20) Days of delivery of the Deadlock Notice and such Deadlock is (A) both a
Triggering Deadlock and a Pre-Operational Deadlock, or (B) both a Triggering
Deadlock and an Operational Deadlock on an Ohio Series matter or an Ohio
Operating Company matter; or (ii) there occurs a Revenue Allocation Deadlock, a
Voting Member (or in the case of a Deadlock on a Joint Series or Joint Series
Operating Company matter, a Voting Member of such Joint Series or the Joint
Series associated with such Joint Series Operating Company) may commence an
arbitration
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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 pursuant to Section 13.04 (a Deadlock Arbitration) by delivering
written notice to the other Voting Member (or in the case of a Deadlock on a
Joint Series or Joint Series Operating Company matter, the other Voting Member
of such Joint Series or the Joint Series associated with such Joint Series
Operating Company) stating its intent to commence such Deadlock Arbitration.(c)
    
    If the individuals designated to resolve a Deadlock on a West
Virginia Series matter or a West Virginia Operating Company matter pursuant to
Section 8.09(a) are unable to resolve such Deadlock within twenty (20) Days of
delivery of the Deadlock Notice and such Deadlock is a Triggering Deadlock and
an Operational Deadlock, the terms and conditions set forth in Section 8.10
shall apply.(d)
    
    If the individuals designated to resolve a Deadlock pursuant to
Section 8.09(a) are unable to resolve such Deadlock within twenty (20) Days of
delivery of the Deadlock Notice and such Deadlock is not a Triggering Deadlock
or a Revenue Allocation Deadlock, then the matter which is the subject of such
Deadlock shall be deemed not to be approved.(e)
    
    Without limiting any rights or remedies that may otherwise be
available to the Members pursuant to this Agreement or the Act, the procedures
set forth in this Section 8.09 shall constitute the exclusive remedy to resolve
a Deadlock.
 Conversion of [***]
 (a)
    
    Upon the occurrence of the circumstances set forth in Section
8.09(c) regarding the West Virginia Series or the West Virginia Operating
Company, AET may, in its sole and absolute discretion by written notice to
AEPTHC delivered within thirty (30) Days of the deadline for resolution of the
Deadlock set forth in Section 8.09(c), declare AEPTHC to be a Converted Member
of the West Virginia Series. [***].(b)
    
    A Converted Members Representatives and Administrators of the
West Virginia Series shall: (i) [***].(c)
    
    A Converted Member may elect, but shall not be obligated, to
satisfy Series Capital Calls issued by the West Virginia Series Administrative
Committee; provided, however, that: (i) such Converted Member shall, no later
than five (5) Days after a Regular Series Capital Call (or ten (10) Days after
any other Series Capital Call), by written notice to the then-voting
Administrators of the West Virginia Series, unequivocally elect whether or not
to satisfy such Series Capital Call; (ii) if a Converted Member fails to
deliver written notice of such election within such time period, it shall be
deemed to have elected not to make such Capital Contribution; and (iii) if a
Converted Member elects, or is deemed to have
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FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 elected, not to satisfy a Series
Capital Call pursuant to this Section 8.10(c) and any other Series Member of
the West Virginia Series satisfies such Series Capital Call, such Converted
Member shall no longer be permitted to elect to make Series Capital
Contributions to the West Virginia Series. If a Converted Member fails to make
a Series Capital Contribution to the West Virginia Series, the Series
Percentages of all Series Members of the West Virginia Series shall be adjusted
to correspond to the relative balances in their Series Capital Accounts, after
taking into account all Series Capital Contributions (including Additional
Contributions, if any) and any adjustments to such Series Capital Accounts
through the date of such election (including any adjustments resulting from the
events described in item (b) of the definition of Book Value) and after
increasing such Series Capital Account balances to take into account any
amounts that the Series Members are treated as obligated to restore under
Section 1.704-2(g)(1) or 1.704-2(i)(5) of the Treasury Regulations.(d)
    
    During any period in which AEPTHC is a Converted Member of the
West Virginia Series, then notwithstanding any other provision of this
Agreement to the contrary:
 (i)
    
    the West Virginia Series shall not permit the
West Virginia Operating Company to engage in any business other than
the ownership, operation and maintenance of the West Virginia
Facilities as described in Section 2.06 and neither the West Virginia
Series nor the West Virginia Operating Company shall
directly or indirectly undertake any material expansion or extension
of the West Virginia Facilities;(ii)
    
    upon the Disposition by AET of all or
substantially all of its Series Interest in the West Virginia Series,
AEPTHC shall cease to be a Converted Member of the West Virginia Series
and shall [***];(iii)
    
    if AET Disposes of all or substantially all of
its Series Interest in the West Virginia Series, AEPTHC shall [***];(iv)
    
    in the event, and only in the event, that an
application is filed under Section 206 of the FPA against both the West
Virginia Operating Company and either the AYE Operating Company, AET or
any Affiliate of AET seeking to change the rates or the terms and
conditions of service applicable to the West Virginia Facilities, AET
(solely in its capacity as a Voting Member of the West Virginia
Series), the Representatives appointed by AET, the Administrators of
the West Virginia Series appointed by AET and the Managers of the West
Virginia Operating Company appointed by AET, each in their respective
capacities as such, shall owe a duty of loyalty to the Converted Member
in its conduct of proceedings pertaining to such application; and
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FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 (v)
    
    AET shall not, and shall not cause or permit
the Company to, take any of the following actions without the written
consent of AEPTHC, which consent shall not be unreasonably withheld:
 (A)
    
    file a voluntary petition seeking
protection of the West Virginia Series or the West Virginia
Operating Company under any Bankruptcy Law or file an admission
of Bankruptcy of the West Virginia Series or the West Virginia
Operating Company before any Governmental Authority;(B)
    
    amend the terms of any
Indebtedness of the West Virginia Operating Company in a manner
that would (w) change the accounting or tax treatment of the
West Virginia Series or the West Virginia Operating Company, (x)
require such Converted Member to provide any parent guaranty or
additional credit support under any such Indebtedness, (y)
commit any membership interest in the West Virginia Series or
any property of the West Virginia Operating Company as
collateral for any Indebtedness of any other Operating Company,
or (z) result in a default under such Indebtedness based
entirely on non-performance by any other Person under any other
indebtedness;(C)
    
    create any new Series of the
Company or consolidate any Series with any other Series;(D)
    
    amend this Agreement, any Venture
Agreement or the Charter Documents of the West Virginia
Operating Company;(E)
    
    except to the extent required by
applicable Laws, file an application under Section 205 of the
FPA to change the rates, terms or conditions of service
applicable to the West Virginia Facilities or the West Virginia
Operating Company;(F)
    
    Dispose of any interest in the
West Virginia Operating Company or any assets of the West
Virginia Operating Company, directly or indirectly, to a Voting
Member of the West Virginia Series, the AYE Operating Company,
or any of their respective Affiliates;(G)
    
    Dispose of any interest in the
West Virginia Operating Company or any assets of the West
Virginia Operating Company as part of a transaction or series of
related transactions in which a Voting Member of the West
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FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 Virginia Series, the AYE Operating Company or any of their
respective Affiliates sells or transfers any other property; or(H)
    
    issue or amend any guaranty by
the Company.
 Matters Requiring Unanimous Approval of Voting Members of the Company
 (a)
    
    dissolution or liquidation of the Company;(b)
    
    filing a petition seeking protection under any Bankruptcy Law
or filing an admission of Bankruptcy before any Governmental Authority;(c)
    
    causing or permitting the Company to merge, consolidate or
convert into any other entity;(d)
    
    incurring any indebtedness of the Company or guaranteeing an
obligation of any Person, including an Operating Company;(e)
    
    creating of any new Series of the Company;(f)
    
    entering into a new business, changing the scope or nature of
the business of the Company or creating any subsidiaries;(g)
    
    amending the Delaware Certificate; or(h)
    
    amending the Company Escrow Agreement.
 Matters Requiring Unanimous Approval of Series Members
 (a)
    
    dissolution or liquidation of such Joint Series;(b)
    
    filing a petition seeking protection for such Joint Series
under any Bankruptcy Law or filing an admission by such Joint Series of
Bankruptcy before any Governmental Authority;(c)
    
    a Disposition of any interest in the Operating Company
associated with such Joint Series or substantially all of the assets of the
Operating Company associated with such Joint Series;(d)
    
    amending the Charter Documents of the Joint Series Operating
Company associated with such Joint Series;
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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 (e)
    
    guaranteeing an obligation of any Person, including an
Operating Company;(f)
    
    repurchasing or redeeming any Series Interests of such Series;
or(g)
    
    entering into a new business, changing the scope or nature of
the business of the Series or creating any subsidiaries.
 Matters Requiring Super-Majority Approval of Series Members
 (a)
    
    incurring any indebtedness of such Joint Series or any
Indebtedness of the Joint Series Operating Company associated with such Joint
Series; or(b)
    
    issuing any Series Interests of such Series.
 Affiliate Contracts Affiliate
Arrangement Affiliated Contractor
 ARTICLE 9
TAXES
 Tax Elections
 (a)
    
    Without the approval of the Board of Managers, neither the
Company nor any Series shall take any action that for federal income tax
purposes is inconsistent with Section 2.08(c).(b)
    
    Each Series shall make the following elections on the
appropriate tax returns:
 (i)
    
    to adopt as the Series fiscal year the
calendar year;(ii)
    
    to adopt the accrual method of accounting;(iii)
    
    for any Series that is treated as a
partnership for federal income tax purposes, if a distribution of
Operating Company property potentially subject to Section 734 of the
Code occurs or upon a transfer of any Series Interest as described in
Section 743 of the Code occurs, on request by notice from any Member,
to elect, pursuant to Section 754 of the Code, to adjust the basis of
the relevant Series Properties; and
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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 (iv)
    
    any other election the Board of Managers or the
Administrative Committee of such Series may deem appropriate,
including, if determined to be appropriate by the Administrative
Committee of a Series, an entity classification election pursuant to
Section 301.7701-3 of the Treasury Regulations to cause the Operating
Company associated with such Series to be treated as an association
taxable as a corporation for federal income tax purposes.
 Series Tax Matters Members
 (a)
    
    For any Series that is treated as a partnership for federal
income tax purposes, the Persons identified on Schedule 9.02 (each, a
Series Tax Matters Member) shall serve as the tax matters partner of each
Series pursuant to Section 6231(a)(7) of the Code. Each Series Tax Matters
Member of a Series shall take such action as may be necessary to cause to the
extent possible each other Series Member of such Series to become a notice
partner within the meaning of Section 6223 of the Code. Each Series Tax
Matters Member of a Series shall inform each other Series Member of such Series
of all significant matters that may come to its attention in its capacity as a
Series Tax Matters Member by giving notice thereof on or before the fifth
Business Day after becoming aware thereof and, within that time, shall forward
to each other Series Member of such Series copies of all significant written
communications it may receive in that capacity.(b)
    
    For any Series that is treated as a partnership for federal
income tax purposes, the Series Tax Matters Member (or, for any Series that is
not treated as a partnership for federal income tax purposes, the
Administrative Committee of such Series) shall cause to be prepared and timely
filed (on behalf of their respective Series) all federal, state and local tax
returns required to be filed by such Series. Each Series Member of a Joint
Series shall furnish to the Series Tax Matters Member of such Joint Series all
pertinent information in its possession relating to the Series operations that
is necessary to enable the Joint Series tax returns to be timely prepared and
filed. Each Series shall bear the costs of the preparation and filing of its
returns.(c)
    
    Each Series Tax Matters Member (or, in the case of the AYE
Series, the AYE Series Administrative Committee) shall: (i) provide any Series
Member of its Series, upon request, access to accounting and tax information
and schedules as shall be necessary for the preparation by such Series Member
of its income tax returns and such Series Members tax information reporting
requirements; and (ii) provide all such Series Members with a draft of the
Series federal income tax returns or income tax information returns, if any,
for their review and comment no later than
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FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 April 1 of the year following the calendar year with respect to which such
returns apply.(d)
    
    For any Series that is treated as a partnership for federal
income tax purposes, no Series Tax Matters Member shall take any action without
the authorization of the Administrative Committee of the Series for which it
serves as Series Tax Matters Member, other than such action as may be required
by Law.(e)
    
    For any Series that is treated as a partnership for federal
income tax purposes, no Series Tax Matters Member shall enter into any
extension of the period of limitations for making assessments against its
Series on behalf of the Series Members without first obtaining the consent of
the Administrative Committee of such Series. For any Series that is treated as
a partnership for federal income tax purposes, no Series Tax Matters Member of
such Series shall bind any Series Member of such Series to a settlement
agreement without obtaining the consent of such Series Member. For any Series
that is treated as a partnership for federal income tax purposes, any Series
Member that enters into a settlement agreement with respect to any partnership
item (as described in Section 6231(a)(3) of the Code) shall notify the other
Series Members of such Series of such settlement agreement and its terms within
ninety (90) Days from the date of the settlement.(f)
    
    For any Series that is treated as a partnership for federal
income tax purposes, no Series Member shall file a request pursuant to Section
6227 of the Code for an administrative adjustment of such Series items for any
taxable year without first notifying the other Series Members. If the
Administrative Committee of a Series consents to filing a request for an
administrative adjustment, the Series Tax Matters Member of such Series shall
file the request for the administrative adjustment on behalf of the Series
Members of such Series. If such consent is not obtained within thirty (30)
Days from the date of such notice, or within the period required to timely file
the request for administrative adjustment, if shorter, any Series Member,
including the Series Tax Matters Member of such Series, may file a request for
administrative adjustment on its own behalf. Any Series Member intending to
file a petition under Sections 6226 or 6228 or any other section(s) of the Code
with respect to any item involving a Series shall notify the other Series
Members of such Series of such intention and the nature of the contemplated
proceeding. In the case where a Series Tax Matters Member is the Series Member
intending to file such petition on behalf of a Series, such notice shall be
given within a reasonable period of time to allow the other Series Members of
such Series to participate in the choosing of the forum in which such petition
will be filed.
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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 (g)
    
    For any Series that is treated as a partnership for federal
income tax purposes, if any Series Member of such Series intends to file a
notice of inconsistent treatment under Section 6222(b) of the Code, such Series
Member shall give reasonable notice under the circumstances to the other Series
Member(s) of such Series of such intent and the manner in which the filing
Series Members intended treatment of an item is (or may be) inconsistent with
the treatment of that item by the other Series Members of such Series.
 ARTICLE 10
INTELLECTUAL PROPERTY
 No Grant of Trademark
 License Agreement
 Disclosure of Certain Know-How
 ARTICLE 11
ACCOUNTING; AUDIT RIGHTS
 Accounting
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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
  Reports
 Records
 Audits
 (a)
    
    The Series Members of each Joint Series shall have the right,
upon reasonable notice, and at all reasonable times during normal business
hours, to cause to be performed internal audits of such Joint Series, including
audits of such Joint Series books and records, financial information, systems,
policies and procedures. The Series Members of each Joint Series shall be
entitled to receive any information that they may request concerning such Joint
Series; provided, however, that this Section 11.04 shall not obligate any Joint
Series or any Governing Body of a Joint Series to create any information that
does not already exist at the time of such request, except as otherwise
required. The Series Members of each Joint Series shall also have the right,
upon reasonable notice, and at all reasonable times during normal business
hours to inspect the properties of such Joint Series and to audit, examine and
make copies of the books of account and other records of such Joint Series.(b)
    
    The rights described in this Section 11.04 may be exercised
through any agent, employee or consultant of a Series Member designated in
writing by it, including accountants, engineers and attorneys. A Series Member
making a request pursuant to this Section 11.04 shall bear all costs and
expenses incurred in any inspection, examination or audit made on such Series
Members behalf. Confidential Information obtained pursuant to this Section
11.04 shall be subject to the provisions of Article 17.
 *** Confidential Treatment Requested
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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 ARTICLE 12
WITHDRAWAL
 Voluntary Withdrawal
 (a)
    
    Except as permitted pursuant to Section 12.01(b) and 12.01(c),
no Series Member shall have the power or right to voluntarily Withdraw from a
Series or the Company.(b)
    
    AEPTHC shall have the right to voluntarily withdraw as a Member
of the Company in the event, and solely in the event, that:
 (i)
    
    the initial order issued by FERC (excluding any
deficiency letters) pursuant to the Amos-Kemptown FERC 205 Application,
fails to grant the Company all of the following rate treatments with
respect to the West Virginia Facilities and the Bedington-Kemptown
Facilities to the extent, and only to the extent, such rate treatments
are requested in the Amos-Kemptown FERC 205 Application:
 (A)
    
    a return on equity that includes
an investment incentive component;(B)
    
    recovery of a return on capital
for Construction Work in Progress;(C)
    
    recovery on a current basis of
pre-commercial costs related to the West Virginia Facilities
and/or the real property interests on which such facilities are
to be located; and(D)
    
    recovery of costs related to the
West Virginia Facilities and/or the real property interests on
which such facilities are to be located in the event of an
abandonment caused by circumstances beyond the control of the
Company; or
 (ii)
    
    the West Virginia Operating Company has not
executed a binding agreement with a lender pursuant to which such
lender agrees to finance the construction of the West Virginia
Facilities and the acquisition of real property interests on which such
facilities are to be located on terms and conditions reasonably
acceptable to AEPTHC before the later of: (A) thirty (30) Days after
the issuance of an initial order by FERC (excluding any deficiency
letters) in response to the Amos-Kemptown FERC 205 Application; or (B)
two hundred ten (210) Days after the Effective Date.
 (c)
    
    AET shall have the right to voluntarily withdraw as a Series
Member of the Ohio Series in the event, and solely in the event, that:
 *** Confidential Treatment Requested
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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 (i)
    
    the initial order issued by FERC (excluding any
deficiency letters) pursuant to the Companys application under Section
205 of the FPA regarding the Ohio Facilities fails to grant the Company
all of the following rate treatments with respect to the Ohio
Facilities to the extent, and only to the extent, such rate treatments
are requested in such application:
 (A)
    
    a return on equity that includes
an investment incentive component;(B)
    
    recovery of a return on capital
for Construction Work in Progress;(C)
    
    recovery on a current basis of
pre-commercial costs related to the Ohio Facilities; and(D)
    
    recovery of costs related to the
Ohio Facilities in the event of an abandonment caused by
circumstances beyond the control of the Company; or
 (ii)
    
    the Ohio Operating Company has not executed a
binding agreement with a lender pursuant to which such lender agrees to
finance the construction of the Ohio Facilities and the acquisition of
real property interests on which such facilities are to be located on
terms and conditions reasonably acceptable to AET before the later of:
(A) thirty (30) Days after the issuance of an initial order by FERC
(excluding any deficiency letters) in response to the Companys
application pursuant to Section 205 of the FPA; or (B) two hundred ten
(210) Days after designation of a Series Member (or such Affiliate as
may be designated pursuant to Section 3.01(b) to construct the Ohio
Facilities pursuant to an RTEP.
 (d)
    
    If AEPTHC elects to Withdraw pursuant to Section 12.01(b), it
shall: (i) Withdraw as a Member of the Company and as a Series Member of both
Joint Series; and (ii) provide irrevocable written notice of such Withdrawal to
AET no later than (A) ten (10) Days after the issuance by FERC of its initial
order (excluding any deficiency letters) pursuant to the Amos-Kemptown FERC 205
Application if the terms of such order are the basis of such Withdrawal, or (B)
two hundred twenty (220) days after the Effective Date if the failure to obtain
financing is the basis of such Withdrawal. If AET elects to Withdraw pursuant
to Section 12.01(c): (i) it shall Withdraw as a Series Member of the Ohio
Series; and (ii) it must provide irrevocable written notice of such Withdrawal
to AEPTHC no later than (A) ten (10) Days after the issuance by FERC of its
initial order (excluding any deficiency letters) pursuant to the Companys
application under Section 205 of the FPA regarding the Ohio Facilities if the
terms of such order are the basis of such Withdrawal, or (B) two hundred twenty
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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 (220) Days after designation of the Ohio Operating Company to construct the
Ohio Facilities pursuant to an RTEP.(e)
    
    If, for any reason, a Member Withdraws from the Company or a
Series Member Withdraws from a Series, no other Member shall have any liability
to return any portion of the Withdrawing Members Series Capital Account(s);
provided, however, that the Members of the Company (in the case of a Withdrawal
from the Company) or the Series Member of a Series (in the case of a Withdrawal
from a Series) shall cause the Company or the Operating Company associated with
such Series, as applicable, to exercise reasonable efforts to seek to recover
through rates any costs incurred by the Withdrawing Member in connection with
or allocated to the Company or such Operating Company, as applicable, and to
the extent the Company or any such Operating Company recovers such costs
through its rates, the Members of the Company or the Series Members of such
Series shall cause the Company or such Operating Company, as applicable, to
remit such amounts to the Withdrawing Member as such costs are recovered.(f)
    
    If AEPTHC elects to Withdraw from the Company pursuant to
Section 12.01(b), as a condition precedent to such Withdrawal, AEPTHC shall
agree in writing, in form and substance reasonably acceptable to AET:
 (i)
    
    to abide by the terms of Sections 3.06;(ii)
    
    subject to Good Utility Practice, applicable
Laws and any limitations set forth in the PJM Agreements, to exercise
reasonable efforts to obtain designation by PJM of AEPTHC or an
Affiliate to construct the Ohio Facilities along a path that connects
to transmission lines running to a point at or near the Prexy
Substation in the Allegheny Transmission Zone until the earlier of:
(a) PJMs designation of a Person to construct the Ohio Facilities; or
(b) PJMs issuance of the 2010 RTEP;(iii)
    
    subject to Good Utility Practice, applicable
Laws and any limitations set forth in the PJM Agreements, not to, and
not to permit any of its Affiliates to, without the written consent of
the Voting Members of the Company, advocate or support any alternative
proposals for the Ohio Facilities prior to such time as PJM issues the
2010 RTEP;(iv)
    
    in the event AEPTHC or any of its Affiliates is
designated to construct the Ohio Facilities pursuant to an RTEP, to
file, or to cause such Affiliate to file, an application with the OPSB
seeking (A) a certificate of environmental compatibility and public
need and authority to construct the Ohio Facilities, and (B) authority
to exercise the right of eminent domain to acquire real property
 *** Confidential Treatment Requested
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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 interests necessary to construct the Ohio Facilities, and if,
pursuant to such application, the OPSB grants a certificate of
environmental compatibility and public need to AEPTHC or such
Affiliate and authorizes AEPTHC or such Affiliate the right of
eminent domain to acquire real property interests necessary to
construct the Ohio Facilities, to, or to cause such Affiliate to, (X)
exercise such rights to acquire all real property interests on which
the Ohio Facilities are to be located and (Y) construct the Ohio
Facilities; and(v)
    
    if: (i) by the Ohio Regulatory Deadline, the
OPSB fails to grant AEPTHC or an Affiliate a certificate of
environmental compatibility and public need and authority to exercise
the right of eminent domain to acquire real property interests
necessary to construct the Ohio Facilities; (ii) the Ohio Facilities
are within an NIETC; and (iii) AEPTHC or such Affiliate determines that
it would be more expeditious and/or more certain to obtain a
certificate of public convenience and necessity to construct the Ohio
Facilities from FERC under Section 216 of the FPA, AEPTHC or such
Affiliate shall file an application with FERC under Section 216 of the
FPA seeking siting authority (including the right to exercise federal
eminent domain rights) to construct the Ohio Facilities.
 Deemed Withdrawal
 Effect of Withdrawal Withdrawn Member
 (a)
    
    The Withdrawn Member shall cease to be a Series Member in the
applicable Series immediately upon the occurrence of the applicable Withdrawal
event.(b)
    
    The Withdrawn Member shall not be entitled to receive any
distributions except as set forth in Section 12.03(g), and neither it nor its
Representatives or Administrators shall be entitled to exercise any voting or
consent rights, to designate any Representative or Administrator to any
Governing Body (and any such Representatives or Administrators designated by
such Withdrawn Member shall be deemed to have resigned).(c)
    
    The Series Percentage of a Withdrawn Member shall not be taken
into account in calculating the Voting Percentages of the Members for any
purposes.
 *** Confidential Treatment Requested
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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 (d)
    
    A Withdrawn Member shall remain obligated for all liabilities
it may have to the Company, the Operating Companies or the other Members under
this Agreement or otherwise that accrued prior to its Withdrawal.(e)
    
    Any indemnities under this Agreement or any OpCo LLC Agreement
in favor of the Withdrawn Member shall survive Withdrawal by such Withdrawn
Member with respect to liabilities that accrued prior to such Withdrawal.(f)
    
    The obligations of the Company, the Members and their
Affiliates (including the Withdrawn Member and its Affiliates) under this
Agreement with respect to the treatment of Confidential Information shall
survive a Withdrawal.(g)
    
    A Withdrawn Member or a Withdrawn Series Member shall not be
entitled to receive any return of its Series Capital Contributions or other
payment from the Company or a Series in respect of its Series Interest. If the
Company, a Series or any Operating Company owes any amount to a Withdrawn
Member pursuant to the terms of any indebtedness executed in writing prior to
the time of its Withdrawal, such amount shall be repaid to the Withdrawn Member
in accordance with the terms and conditions of such indebtedness.(h)
    
    If a Withdrawn Member is a Voting Member of any Series, the
Series Percentages and Voting Percentages of such Withdrawn Member shall be
allocated among the remaining Voting Members of each Series from which the
Withdrawn Member has Withdrawn in the proportion that each remaining Voting
Members Voting Percentage bears to the total Voting Percentages of all
remaining Voting Members of such Series, or in such other proportion as the
remaining Voting Members of such Series may unanimously agree. If the
Withdrawn Member is not a Voting Member, the Series Percentage of the Withdrawn
Member shall be allocated among the remaining Series Members of the Series from
which the Series Member has Withdrawn in the proportion that each remaining
Series Members Series Percentage bears to the total Series Percentage of all
remaining Series Members, or in such other proportion as the remaining Voting
Members of such Series may unanimously agree.
 Destruction of Confidential Information
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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 provided, however
 ARTICLE 13
DISPUTES
 Disputes Dispute provided, however Disputing Member
 Negotiation to Resolve Disputes
 (a)
    
    first, the Representatives of each of the Disputing Members (or
if the Dispute involves only one Series, the Administrators of the Disputing
Members of such Series) shall promptly meet (whether by phone or in person) in
a good faith attempt to resolve the Dispute; and(b)
    
    second, if the Dispute is not resolved within twenty (20) Days
of being referred to the Representatives or Administrators, as applicable (or
such longer period as may be agreed among the Disputing Members), such Dispute
shall be referred to senior executives of the Disputing Members for resolution.
 Litigation
 Deadlock Arbitration
 (a)
    
    No later than ten (10) Days after issuance of a written notice
to commence a Deadlock Arbitration pursuant to Section 8.09(b), each Deadlock
Arbitration Party shall prepare and deliver to each other Deadlock Arbitration
Party a written statement (an Issues Statement) of each
 *** Confidential Treatment Requested
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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 issue that such Deadlock Arbitration Party believes constitutes a Triggering
Deadlock. No later than twenty (20) Days after the deadline for delivery of
Issue Statements, each Deadlock Arbitration Party shall deliver to each
other Deadlock Arbitration Party a written statement (a Settlement
Proposal) of such Deadlock Arbitration Partys proposed resolution of the
Deadlock, which shall be limited to the issues set forth in the Issues
Statements. A Settlement Proposal need not address every issue described in
every Issues Statement. If a Deadlock Arbitration Party fails to deliver a
Settlement Proposal within such period, such Deadlock Arbitration Party
shall be deemed to have waived its rights to submit a Settlement Proposal.(b)
    
    The Deadlock Arbitration Parties shall attempt in good faith to
resolve the Deadlock that is the subject of the Deadlock Arbitration based on
the positions set forth in the Members Settlement Proposals. If the Deadlock
Arbitration Parties are unable to resolve such Deadlock within twenty (20) Days
after the deadline for delivery of Settlement Proposals (or such longer period
as may be agreed among the Deadlock Arbitration Parties), each Deadlock
Arbitration Party shall submit the name of a Qualified Person in writing to
each other Deadlock Arbitration Party. Any Deadlock Arbitration Party that
fails to submit the name of a Qualified Person within such period shall be
deemed to have waived its right to designate a Qualified Person.(c)
    
    All of the Qualified Persons designated by the Deadlock
Arbitration Parties pursuant to Section 13.04(b) shall, within ten (10) Days of
their designation (or such longer period as may be agreed among the Deadlock
Arbitration Parties), select a single Qualified Person (the Deadlock
Arbitrator) to resolve the Deadlock; provided, however, that if only one
Deadlock Arbitration Party designates a Qualified Person or if all Deadlock
Arbitration Parties submitting names of Qualified Persons submit the name of
the same Qualified Person, such Qualified Person shall serve as the Deadlock
Arbitrator. The Qualified Persons shall notify each Deadlock Arbitration Party
of the name of the Deadlock Arbitrator promptly upon designation of such
Deadlock Arbitrator.(d)
    
    No later than three (3) Days (or such longer period as may be
agreed among the Deadlock Arbitration Parties) after the Deadlock Arbitrator is
selected, each Deadlock Arbitration Party shall deliver a copy of its
Settlement Proposal to the Deadlock Arbitrator.(e)
    
    The Deadlock Arbitrator shall review the Settlement Proposals
and, after due consideration thereof, the Deadlock Arbitrator shall select the
one Settlement Proposal that, in the Deadlock Arbitrators reasoned judgment,
best resolves the Deadlock; provided, however, that the Deadlock Arbitrator may
not alter or add to the terms of any Settlement Proposal in reaching its
determination. A Deadlock Arbitrators decision pursuant to
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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 this Section 13.04 shall be final and binding on the Company and the Voting
Members with respect to the Deadlock.(f)
    
    No Member or any of its Affiliates, nor any of their respective
employees, agents, counsel, consultants or other representatives, shall be
permitted to have any ex partecommunications with the Deadlock Arbitrator.
The Deadlock Arbitrator shall be advised of this restriction and shall be
instructed by the Deadlock Arbitration Parties to notify all Deadlock
Arbitrator Parties of any such attempted ex partecommunications.(g)
    
    Each Deadlock Arbitration Party shall pay the fees and expenses
of the Qualified Person selected by it. The Deadlock Arbitration Parties shall
equally share the fees and expenses of the Deadlock Arbitrator.
 ARTICLE 14
DEFAULT AND REMEDIES; LIMITATION OF LIABILITY
 Default Default
 (a)
    
    except to the extent permitted pursuant to Sections 6.10(b) and
8.10(c), the failure of such Member to pay any Series Capital Contribution
(including a failure to deposit such amount into a Capital Contribution Escrow
Account) within ten (10) Days of the date required by a Series Capital Call
properly issued with respect to such Series Capital Contribution pursuant to
the terms of this Agreement;(b)
    
    the failure of such Member to comply in any material respect
with any of its other covenants or obligations under this Agreement which
failure is not cured within thirty (30) Days of such non-complying Members
receipt of notice of such failure from any other non-Affiliated Member or, if
such non-compliance is not capable of being cured within such thirty (30) Day
period, such longer period (not to exceed ninety (90) Days) as shall be
reasonably necessary to cure such failure so long as such Member promptly
commences substantial efforts to cure such failure and prosecutes such curative
efforts with continuity and diligence;or(c)
    
    the failure of any representation or warranty made in this
Agreement by such Member to be true and correct in all material respects when
made which failure is not cured within thirty (30) Days of such Members
receipt of notice of such failure from any other non-Affiliated Member or, if
such failure is not capable of being cured within such thirty (30) Day period,
such longer period (not to exceed ninety (90) Days) as shall be reasonably
necessary to cure such failure so long as such Member promptly commences
substantial efforts to cure such failure and prosecutes such curative efforts
with continuity and diligence.
 *** Confidential Treatment Requested
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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 General Remedies
 AET Default
 (a)
    
    In the event AEPTHC declares a Default by AET in its capacity
as a Member of the Company or a Series Member of a Joint Series, and AET either
admits that it is in Default or is adjudged to be in Default:
 (i)
    
    AET shall have the right, exercisable by
written notice delivered to the AEPTHC Representatives no later than
thirty (30) Days after such admission or entry of judgment, [***]; and(ii)
    
    AEPTHC shall have the right, exercisable by
written notice delivered to the AET Representatives no later than
thirty (30) Days after such admission or entry of judgment, [***].
 (b)
    
    Subject to rights of the Members set forth in Section 14.02,
[***]pursuant to Section 14.03(a) shall be the exclusive remedy for an AET
Default and shall be consummated as soon as practical after receipt of notice
from the purchasing Member, but in no event later than fifteen (15) days after
the receipt of any necessary Governmental Approvals and the expiration of all
applicable waiting periods. [***].(c)
    
    In the event AET does not timely exercise its right [***]
pursuant to Section 14.03(a), the AEPTHC Representatives shall have the right,
in their sole discretion and without any consent or vote of the AET
Representatives, to cause the Company to [***]. The AEPTHC Representatives
shall deliver [***]to the Company and the West Virginia Series Members of
their intent to initiate a [***], which notice shall include an irrevocable
election by AEPTHC whether it shall [***]. Failure to include such an
irrevocable election in an [***]shall be deemed to be a waiver by AEPTHC of
its right to [***]. If AEPTHC does not [***], AEPTHC shall have the right to
[***]. If AEPTHC or one of its Affiliates elects to [***], AEPTHC shall select
[***]reasonably acceptable to AET to [***]. The costs of [***]pursuant to
this Section 14.03(c) shall be borne by the West Virginia Series. In [***]
pursuant to this Section 14.03(c): (i) the Company shall not [***].
 *** Confidential Treatment Requested
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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 AEPTHC Default
 (a)
    
    In the event AET declares a Default by AEPTHC in its capacity
as a Member of the Company or a Series Member of a Joint Series, and AEPTHC
either admits that it is in Default or is adjudged to be in Default:
 (i)
    
    AET shall have the right, exercisable by
written notice delivered to the AEPTHC Representatives no later than
thirty (30) Days after such admission or entry of judgment, [***]; and(ii)
    
    AET shall have the right, in its sole
discretion and without any consent or vote of AEPTHC, to cause the
Company [***].
 (b)
    
    Subject to [***]pursuant to Section 14.04(a) shall be the
exclusive remedy for an AEPTHC Default and shall be consummated as soon as
practical after receipt of notice from the [***], but in no event later than
fifteen (15) days after the receipt of any necessary Governmental Approvals and
the expiration of all applicable waiting periods. [***].(c)
    
    In the event AET elects to cause the Company to [***], the AET
Representatives shall deliver [***]to the Company and the Ohio Series Members
of their intent to [***], which notice shall include an irrevocable election by
AET whether it shall [***]. Failure to include such an irrevocable election in
[***]shall be deemed to be a waiver by AET of its right to [***]. If AET does
not [***], AET shall have the right to [***]. If AET or one of its Affiliates
elects to [***], AET shall [***]reasonably acceptable to AEPTHC [***]. The
costs of a [***]undertaken pursuant to this Section 14.04(c) shall be borne
exclusively by the Ohio Series. In a [***]pursuant to this Section 14.04(c):
(i) the Company shall not [***].
 Exclusion of Consequential Damages
 *** Confidential Treatment Requested
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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 ARTICLE 15
INDEMNIFICATION
 Indemnification Obligations
 (a)
    
    Each Series Member of a Series shall indemnify, defend and hold
harmless each other Series Member of such Series, and each other Series
Members Affiliates, Representatives, Administrators, directors, officers,
trustees, employees and agents from and against any losses resulting from
Claims asserted by Persons not Affiliated with such other Series Member to the
extent arising out of: (i) any breach of this Agreement by the Indemnifying
Party; or (ii) the gross negligence or willful misconduct of the Indemnifying
Party.(b)
    
    Each Series and the Series Members of each such Series shall
indemnify, defend and hold harmless the Company, the Series Members of each
other Series and the Operating Companies associated with each other Series from
and against any Claims related to the ownership or operation of the properties
owned by the Operating Company associated with the indemnifying Series or
related to or arising out of any Indebtedness or other obligation of such
Operating Company, except to the extent of any such Claims arising out of, or
caused by, the negligence or willful misconduct of the Indemnified Party or any
of its Affiliates.(c)
    
    The Company shall indemnify, defend and hold harmless each
Representative and officer of the Company from and against any Claims related
to the Company, any Operating Company, the Project, any Project Facilities or
any real property interests on which such facilities are located, except to the
extent of any such Claims arising out of, or caused by, the gross negligence or
willful misconduct of the Indemnified Party.(d)
    
    Each Series shall indemnify, defend and hold harmless each
Administrator of such Series from and against any Claims related to the
Company, such Series, any Operating Company, the Project, any Project
Facilities or any real property interests on which such facilities are located,
except to the extent of any such Claims arising out of, or caused by, the gross
negligence or willful misconduct of the Indemnified Party.(e)
    
    Notwithstanding any other provision of this Agreement, a Person
shall not be indemnified from and against the portion of any Claim resulting
from such Persons failure to exercise commercially reasonable efforts to
mitigate damages.
 *** Confidential Treatment Requested
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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 Indemnification Procedures
 (a)
    
    Within a reasonable time after receipt by any Indemnified Party
of any Claim as to which the indemnity provided for in Section 15.01 may apply,
such Indemnified Party shall notify the Indemnifying Party in writing of such
fact; provided, however, that delay in notifying the Indemnifying Party shall
not relieve the Indemnifying Party of its indemnification obligations except to
the extent that it is materially prejudiced by such delay.(b)
    
    The Indemnifying Party shall diligently, competently and in
good faith control and conduct the defense of any Claim as to which the
indemnity provided for in Article 15 applies; provided, however, that the
Indemnifying Party may not settle or compromise any such Claim without the
Indemnified Partys consent unless the terms of such settlement or compromise
unconditionally release the Indemnified Party from any and all liability with
respect thereto and do not impose any obligations on any Indemnified Party.(c)
    
    An Indemnified Party shall have the right, but not the
obligation, to be represented at its own expense by advisory counsel of its own
selection in order to monitor the progress and handling of an indemnified
Claim.(d)
    
    An Indemnified Party shall have the right, but not the
obligation, to retain counsel of its choice (at the Indemnifying Partys
expense) and to assume the defense of any indemnified Claim (including settling
or compromising any such Claim) if: (i) the Indemnifying Party fails to
acknowledge, in writing, its responsibility to assume the defense of such
Claim; (ii) the Indemnifying Party fails to diligently, competently and in good
faith control and conduct the defense of such Claim; (iii) there is an apparent
conflict of interest between the Indemnifying Party and the Indemnified Party
with respect to such Claim; or (iv) such Indemnified Party shall have
reasonably concluded that there are legal defenses available to it that are
different from, additional to or inconsistent with those available to the
Indemnifying Party; provided, however, that in any such case the Indemnified
Party shall defend such Claim diligently, competently and in good faith; and
provided further, that an Indemnified Party may not settle or compromise any
such Claim if the Indemnifying Party has unequivocally acknowledged, in
writing, its responsibility to indemnify the Indemnified Party in accordance
with Section 15.01.(e)
    
    The Indemnifying Partys obligations to indemnify, defend and
hold each Indemnified Party harmless shall not be reduced or limited by reason
of any limitation on the amount or type of damages, compensation or benefits
payable by or for the Indemnifying Party or any of its subcontractors under
workers compensation acts, disability benefit acts or other employee benefit
acts.
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##### 



FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.
 (f)
    
    Assumption of the defense of any matter by an Indemnifying
Party shall not constitute a waiver by such Indemnifying Party of its right to
claim at a later date that such third party claim for which the defense was
assumed is not a proper matter for indemnification pursuant to Section 15.01;
provided, however, that if an Indemnifying Party at any time determines that a
Claim is not a proper matter for indemnification pursuant to Section 15.01,
such Indemnifying Party shall: (i) promptly notify the Indemnified Party; (ii)
promptly turn over defense of the indemnified Claim and all relevant documents
and information to the Indemnified Party; and (iii) reasonably cooperate in the
transition of such defense to the Indemnified Party, in each case if so
requested by the Indemnified Party.
 Subrogation
 ARTICLE 16
DISSOLUTION, WINDING-UP AND TERMINATION
 Dissolution
 (a)
    
    The Company and each Series shall dissolve and its affairs
shall be wound up on the first to occur of the following events (each a
Company Dissolution Event):
 (i)
    
    the dissolution of all Series;(ii)
    
    the decision to dissolve the Company by the
vote of a Unanimous Interest of the Voting Members of the Company;(iii)
    
    entry of a decree of judicial dissolution of
the Company under Section 18-802 of the Act; or(iv)
    
    an event that makes it unlawful for the Company
to continue to carry on its business and affairs.
 (b)
    
    A Series shall dissolve and its affairs shall be wound up on
the first to occur of the following events (each a Series Dissolution Event):
 (i)
    
    the decision to dissolve such Series by the
vote of a Unanimous Interest of the Voting Members of such Series;
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FOIA Confidential Treatment
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 (ii)
    
    entry of a decree of judicial dissolution of
such Series under Section 18-802 of the Act;(iii)
    
    an event that makes it unlawful for such
Series to continue to carry on its business and affairs; or(iv)
    
    the Disposition of the Operating Company
associated with such Series.
 (c)
    
    A Member may elect to dissolve the Company by delivering a
notice (a Dissolution Notice) to each of the other Members in the event that
as of December 31, 2007:
 (i)
    
    FERC has failed to issue an order granting the
Companys application on behalf of the West Virginia Operating Company
and the AYE Operating Company for approval of the sale of equity and
the issuance of debt under Section 204 of the FPA; or(ii)
    
    PJM has failed to designate the Company or,
with respect to any Project Facilities to be located in the
Transmission Zone of a Series Member or any Affiliate of such Series
Member, the Person determined in accordance with Section 3.01(b), to
construct the Bedington-Kemptown Facilities and the West Virginia
Facilities.
 Winding-Up and Termination
 (a)
    
    On the occurrence of a Series Dissolution Event, the
Administrative Committee of such Series shall designate a Series Member of such
Series or other Person to serve as liquidator. The liquidator shall proceed
diligently to wind up the affairs of the Series and make final distributions as
provided herein and in the Act. The costs of winding-up a Series shall be
borne exclusively by such Series. Until final distribution, the liquidator
shall continue to manage the Series with all of the power and authority of the
Series Members of such Series. The steps to be accomplished by the liquidator
shall be as follows:
 (i)
    
    as promptly as possible after dissolution and
again after final winding-up, the liquidator shall cause a proper
accounting to be made by the Series Certified Public Accountants of
the Series assets, liabilities and operations through the last calendar
day of the month in which the dissolution occurs or the final
winding-up is completed, as applicable;(ii)
    
    the liquidator shall discharge from Series
funds all of the indebtedness of the Series and the Operating Company
associated with such Series and other debts, liabilities and
obligations of the Series or such Operating Company (including all
expenses
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FOIA Confidential Treatment
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 incurred in winding-up) or otherwise make adequate provision for
payment and discharge thereof (including the establishment of a cash
escrow fund for contingent liabilities in such amount and for such
term as the liquidator may reasonably determine); and(iii)
    
    with respect to any remaining property owned
by the Operating Company associated with such Series:
 (A)
    
    subject to the rights of the
Series Members pursuant to Sections 14.03 and 14.04, the
liquidator may sell (or direct such Operating Company to sell)
any or all Operating Company property, including to Members, and
any resulting gain or loss from each sale shall be computed and
allocated to the Series Capital Accounts of the Series Members
in accordance with the provisions of Article 7;(B)
    
    with respect to all Operating
Company property that has not been sold, the Fair Market Value
of such property shall be determined and the Series Capital
Accounts of the Series Members shall be adjusted to reflect the
manner in which the unrealized income, gain, loss and deduction
inherent in such property that has not been reflected in the
Series Capital Accounts previously shall be allocated among the
Series Members as if there were a taxable disposition of such
property at its Fair Market Value; and(C)
    
    after adjusting the Series
Capital Accounts of all Series Members for all distributions
made pursuant to Section 7.01 and all allocations pursuant to
Sections 7.03 and 7.04, all remaining assets shall, subject to
any set-off rights hereunder, be distributed among the Series
Members of such Series in amounts (determined by reference to
the Fair Market Value of such assets) equal to such Series
Members positive Series Capital Account balances, such
distributions to be made no later than the end of the taxable
year of the Series during which the liquidation of the Series
occurs (or, if later, ninety (90) Days after the date of the
liquidation).
 (b)
    
    The distribution of cash or property to a Series Member in
accordance with the provisions of this Section 16.02 constitutes a complete
return to such Series Member of its Series Capital Contributions and a complete
distribution to such Series Member of all Company property to which it is
entitled in connection with its Series Interest and constitutes a compromise to
which all Members have consented pursuant to Section 18-502(b) of the Act. To
the extent that a Member returns funds to the
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FOIA Confidential Treatment
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 Company or any Series, it has no claim against any other Member for those
funds.(c)
    
    No dissolution or termination of the Company or any Series
shall relieve a Member from any obligation to the extent such obligation: (i)
has accrued as of the date of such dissolution or termination; or (ii) is for
the payment of goods or services that have been provided pursuant to contracts
entered into in accordance with this Agreement between the Company and other
Persons (including any Member).(d)
    
    On the occurrence of a Company Dissolution Event, there shall
be a winding up and liquidation of all the Series in accordance with Section
16.02(a).
 Fair Market Value Appraisals
 (a)
    
    If the Fair Market Value of any property owned by a Joint
Series Operating Company is to be determined for any purpose under this
Agreement, the Administrative Committee of the Joint Series associated with
such Joint Series Operating Company that owns such property shall seek to
determine such Fair Market Value by mutual agreement. If any Series Member of
such Joint Series determines that such mutual agreement is not likely to be
reached in a reasonable or expeditious manner, such Series Member (the
Initiating Party) shall deliver a notice (the FMV Notice) to each other
Series Member of such Joint Series to initiate a Fair Market Value appraisal
process.(b)
    
    An FMV Notice shall include a description of the assets or
property for which a Fair Market Value appraisal is being proposed and shall
identify an appraisal firm selected by the Initiating Party.(c)
    
    No later than thirty (30) Days after receipt of an FMV Notice
from the Initiating Party, any other Series Member of such Joint Series
interested in the applicable appraisal process (each, a Responding Party)
shall deliver written notice (the Response Notice) to each other Series
Member of such Joint Series, including the Initiating Party. Such Response
Notice shall identify an appraisal firm selected by the Responding Party.(d)
    
    Each appraisal firm identified in the FMV Notice and any
Response Notices shall, within fifteen (15) Days after the deadline for
delivery of Response Notices, select a mutually acceptable appraisal firm (the
Appraiser). If a Series Member of the applicable Joint Series fails to
deliver a Response Notice or to identify an appraisal firm within such period
of time, such Series Member shall be deemed to have waived its right to
designate an appraisal firm and the appraisal firm identified in the FMV Notice
shall be the Appraiser. If the identified appraisal firms fail
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FOIA Confidential Treatment
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 to select an Appraiser within such time period, an Appraiser shall be
selected by the American Arbitration Association at the request of the
Initiating Party or any Responding Parties within ten (10) Days after such
request. The appraisal firms identified by the Initiating Party and the
Responding Parties and the Appraiser shall each be investment banking or
accounting firms that perform appraisal and valuation services and have
substantial experience in the appraisal of electric transmission assets.(e)
    
    Within thirty (30) Days after the Appraiser is selected, the
Initiating Party and any Responding Parties shall submit proposals, including
supporting documentation, to the Appraiser with respect to the Fair Market
Value of the property or assets at issue. If the Initiating Party or any
Responding Party fails to submit such a proposal within such period of time,
such Series Member shall be deemed to have waived its right to present such
information.(f)
    
    If more than one proposal with respect to Fair Market Value is
submitted to the Appraiser, the Appraiser shall determine the Fair Market Value
of the property at issue. Such determination shall: (i) be made as promptly
as possible and in any event no later than thirty (30) Days after the deadline
for submission of Fair Market Value proposals; and (ii) be final and binding on
all Series Members of the applicable Joint Series.(g)
    
    The cost of the Appraiser shall be paid in equal portions by
the Initiating Party and all Responding Parties; provided, however, that the
Initiating Party and each Responding Party shall bear any fees and expenses
charged by the appraisal firms they identified in the FMV Notice and the
Response Notice.
 Certificate of Cancellation
 ARTICLE 17
CONFIDENTIAL INFORMATION
 Confidentiality Obligation
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FOIA Confidential Treatment
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 Permissible Disclosures
 (a)
    
    disclosures to a Member or a Service Provider in connection
with the Project;(b)
    
    disclosures that may be required from time to time to obtain
required Governmental Approvals (subject to the provisions of Section
17.02(g));(c)
    
    disclosures that are reasonably necessary in connection with
obtaining financing, provided that each Person to whom such Confidential
Information is disclosed has been informed of the confidential nature of the
information disclosed to such Person;(d)
    
    disclosures to an Affiliate if such Affiliate has a need to
know such Confidential Information in connection with the Project;(e)
    
    disclosures to a potential purchaser of a Series Interest if
such potential purchaser agrees in writing to abide by the terms of Article 17;(f)
    
    disclosures to a contractor or consultant of the Company, a
Series or an Operating Company if such Person agrees in writing to abide by the
terms of Article 17;(g)
    
    disclosures required by Governmental Authorities, including
disclosures required pursuant to: (i) the Securities Act of 1933 and the rules
and regulations promulgated thereunder; (ii) the Securities Exchange Act of
1934 and the rules and regulations promulgated thereunder, (iii) any state
securities Laws, or (iv) any national securities exchange or automated
quotation system; and(h)
    
    disclosures that a Recipient is legally compelled to make by
deposition, interrogatory, request for documents, subpoena, civil investigative
demand, order of a court of competent jurisdiction or similar process, or
otherwise by Law; provided, however, that the Recipient shall disclose only
that portion of Confidential Information that, in the opinion of its legal
counsel, is legally required to be disclosed; and provided further, that prior
to any such disclosure, a Recipient shall, to the extent legally permissible:
 (i)
    
    provide the Disclosing Party with notice of
such requirements so that the Disclosing Party may seek a protective
order or other appropriate remedy;(ii)
    
    consult with the Disclosing Party on the
advisability of taking steps to resist or narrow any compelled
disclosures; and
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FOIA Confidential Treatment
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 (iii)
    
    reasonably cooperate with the Disclosing Party
if it attempts to obtain a protective order or other appropriate remedy
or assurance that confidential treatment will be afforded the
Confidential Information.
 Obligation with respect to Third Parties
 Remedy
 Duration
 ARTICLE 18
GENERAL PROVISIONS
 Setoff Rights
 (a)
    
    A Member shall be entitled to setoff any amounts it owes to
another Member pursuant to this Agreement by the amount such other Member owes
to it pursuant to this Agreement.(b)
    
    In the event a Member (the Claiming Member) has a good faith
Claim against the Company, such Claiming Member may require the Company or any
Series in which the Claiming Member is a Series Member to withhold
distributions until such Claim is resolved in order that such distributions
shall be available to satisfy any award of damages or costs in respect to such
Claim; provided, however, that: (i) the amount required to be withheld shall
not exceed the good faith estimate of the amount of such Claim; and (ii) a
Claiming Member may not require the withholding of any distribution to any
Member unless an equal amount of distributions from the Company is withheld by
the Company.(c)
    
    In the event a Claiming Member has a good faith Claim against a
Series in which such Claiming Member is a Series Member, such Claiming Member
may require such Series to withhold distributions until such Claim is resolved
in order that such distributions shall be available to satisfy any award of
damages or costs in respect to such Claim; provided, however, that: (i) the
amount required to be withheld shall not exceed the
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FOIA Confidential Treatment
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 good faith estimate of the amount of such Claim; and (ii) a Claiming Member
may not require the withholding of any distribution to any Series Member
unless an equal amount of distributions to the Claiming Member is withheld
by the Series.(d)
    
    In the event a Claiming Member has a good faith Claim,
including a Claim on behalf of the Company or a Series, against a Series Member
of a Series in which such Claiming Member is a Series Member, such Claiming
Member may require such Series to withhold distributions until such Claim is
resolved in order that such distributions shall be available to satisfy any
award of damages or costs in respect to such Claim; provided, however, that:
(i) the amount required to be withheld shall not exceed the good faith estimate
of the amount of such Claim; and (ii) a Claiming Member may not require the
withholding of any distribution to any Series Member unless an equal amount of
distributions to the Claiming Member is withheld by the Series.
 Notices provided, however Schedule 18.02
 Entire Agreement; Superseding Effect
 Effect of Waiver or Consent
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FOIA Confidential Treatment
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  Amendment or Restatement
 Binding Effect
 Severability
 Governing Law, Jurisdiction and Venue
 (a)
    
    This Agreement shall be governed by, and construed in
accordance with, the Laws of the State of Delaware, excluding any
conflict-of-laws rules or principles that might refer the governance or the
construction of this Agreement to the Laws of another jurisdiction.(b)
    
    The Members hereby irrevocably submit to the exclusive
jurisdiction of any state or federal court sitting in either the District of
Columbia or the State of Delaware in any action or proceeding arising out of,
or relating to, this Agreement and hereby irrevocably agree that all claims in
respect of such action or proceeding may be heard and determined by any such
court.(c)
    
    Each of the Members irrevocably consents to service of process
in any action or proceeding arising out of, or relating to, this Agreement by
the mailing of copies thereof by registered mail, postage prepaid, such service
to become effective thirty (30) Days after such mailing; provided, however,
that nothing in this Section 18.08(c) shall affect the right of any Member to
serve process in any other manner permitted by Law.
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FOIA Confidential Treatment
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 (d)
    
    TO THE FULLEST EXTENT PERMITTED BY LAW, EACH OF THE MEMBERS
IRREVOCABLY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF VENUE IN ANY STATE OR FEDERAL COURT SITTING IN EITHER THE DISTRICT OF
COLUMBIA OR THE STATE OF DELAWARE IN ANY ACTION OR PROCEEDING ARISING OUT OF,
OR RELATING TO, THIS AGREEMENT, AND HEREBY FURTHER IRREVOCABLY WAIVES AND
AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR
PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
 Waiver of Right to Jury Trial
 Further Assurances provided, however
 Waiver of Certain Rights
 Public Announcements
 Counterparts
 Construction
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 [Signature Page Follows]
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FOIA Confidential Treatment
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  MEMBERS:
 AET PATH COMPANY, LLCBy:
    
    /s/ David E. FlitmanName:
    
    David E. FlitmanTitle:
    
    PresidentAEP TRANSMISSION HOLDING COMPANY, LLCBy:
    
    /s/ Michael HeyeckName:
    
    Michael HeyeckTitle:
    
    President
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