Form of Transfer Agreement


     

    Exhibit
      10.5

     

    
      

    

     

     

    
      ENVIRONMENTAL
        CONTROL PROPERTY 

      TRANSFER
        AGREEMENT

       

      between

       

      PE
        RENAISSANCE FUNDING, LLC 

      Seller

       

      and

       

      THE
        POTOMAC EDISON COMPANY 

      Transferor

       

      Dated
        as
        of [__________]

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      TABLE
        OF CONTENTS

       

      Page

       

      ARTICLE
        I

      Definitions

      


      
        	
                Section
                  1.01.

              	
                Definitions

              	
                1

              
	
                Section
                  1.02.

              	
                Other
                  Definitional Provisions

              	
                2

              


      

      


      ARTICLE
        II

      Conveyance
        of Environmental Control Property

      


      
        	
                Section
                  2.01.

              	
                Conveyance
                  of Initial Environmental Control Property

              	
                2

              
	
                Section
                  2.02.

              	
                Conveyance
                  of Subsequent Environmental Control Property

              	
                2

              
	
                Section
                  2.03.

              	
                Conditions
                  to Conveyance of Environmental Control Property

              	
                2

              


      

      


      ARTICLE
        III

      Representations
        and Warranties of Transferor

      


      
        	
                Section
                  3.01.

              	
                Organization
                  and Good Standing

              	
                4

              
	
                Section
                  3.02.

              	
                Due
                  Qualification

              	
                4

              
	
                Section
                  3.03.

              	
                Power
                  and Authority

              	
                4

              
	
                Section
                  3.04.

              	
                Binding
                  Obligation

              	
                4

              
	
                Section
                  3.05.

              	
                No
                  Violation

              	
                4

              
	
                Section
                  3.06.

              	
                No
                  Proceedings

              	
                5

              
	
                Section
                  3.07.

              	
                Approvals

              	
                5

              
	
                Section
                  3.08.

              	
                The
                  Environmental Control Property

              	
                5

              
	
                Section
                  3.09.

              	
                Representations
                  and Warranties of Seller

              	
                8

              


      

      


      ARTICLE
        IV

      Covenants
        of the Transferor

      


      
        	
                Section
                  4.01.

              	
                Corporate
                  Existence

              	
                8

              
	
                Section
                  4.02.

              	
                No
                  Liens or Conveyances

              	
                8

              
	
                Section
                  4.03.

              	
                Delivery
                  of Collections

              	
                9

              
	
                Section
                  4.04.

              	
                Notice
                  of Liens

              	
                9

              
	
                Section
                  4.05.

              	
                Compliance
                  with Law

              	
                9

              
	
                Section
                  4.06.

              	
                Covenants
                  Related to Environmental Control Property

              	
                9

              
	
                Section
                  4.07.

              	
                Notice
                  of Indemnification Events

              	
                10

              
	
                Section
                  4.08.

              	
                Protection
                  of Title

              	
                10

              
	
                Section
                  4.09.

              	
                Taxes

              	
                10

              
	
                Section
                  4.10.

              	
                Third
                  Parties

              	
                11

              


      

      


      
        
          
          

        

        
          i

          
            

          

        

        
          
          

        

         

      

      ARTICLE
        V

      The
        Transferor

      


      
        	
                Section
                  5.01.

              	
                Liability
                  of Transferor; Indemnities

              	
                11

              
	
                Section
                  5.02.

              	
                Merger
                  or Consolidation of, or Assumption of the Obligations of,
                  Transferor

              	
                12

              
	
                Section
                  5.03.

              	
                Limitation
                  on Liability of Transferor and Others

              	
                13

              
	
                Section
                  5.04.

              	
                Opinions
                  of Counsel

              	
                13

              


      

      


      ARTICLE
        VI

      Miscellaneous
        Provisions

      


      
        	
                Section
                  6.01.

              	
                Amendment

              	
                14

              
	
                Section
                  6.02.

              	
                Notices

              	
                14

              
	
                Section
                  6.03.

              	
                Assignment

              	
                16

              
	
                Section
                  6.04.

              	
                Limitations
                  on Rights of Others

              	
                16

              
	
                Section
                  6.05.

              	
                Severability

              	
                16

              
	
                Section
                  6.06.

              	
                Separate
                  Counterparts

              	
                16

              
	
                Section
                  6.07.

              	
                Headings

              	
                16

              
	
                Section
                  6.08.

              	
                Governing
                  Law

              	
                16

              
	
                Section
                  6.09.

              	
                Assignment
                  to Issuer and to Indenture Trustee

              	
                17

              
	
                Section
                  6.10.

              	
                Nonpetition
                  Covenant

              	
                17

              
	
                Section
                  6.11.

              	
                Perfection

              	
                17

              
	
                Section
                  6.12.

              	
                Limitation
                  of Liability

              	
                17

              


      

      


      
        Exhibit
          A     
Pending
          Litigation

        Appendix
          A        Master
          Definitions

         

        
          
            
            

          

          
            ii

            
              

            

          

          
            
            

          

        

      

       

      ENVIRONMENTAL
        CONTROL PROPERTY TRANSFER AGREEMENT dated as of [__________] (as amended,
        restated, supplemented or otherwise modified from time to time, “this
        Agreement”),
        between PE RENAISSANCE FUNDING, LLC, a Delaware limited liability company
        (the
“Seller”),
        and
        THE POTOMAC EDISON COMPANY, an Ohio corporation, and its successors in interest
        to the extent permitted hereunder, as Transferor (the “Transferor”).

       

      WHEREAS
        the Transferor desires to contribute from time to time Environmental Control
        Property created pursuant to the Statute and the Financing Order; and


       

      WHEREAS
        the Seller is willing to acquire the Environmental Control Property;
        and

       

      WHEREAS
        the Seller intends to sell the Transferred Environmental Control Property
        to the
        Issuer and the Issuer intends to purchase the Transferred Environmental Control
        Property from the Seller pursuant to the Sale Agreement; and

       

      WHEREAS
        the Issuer, in order to finance the purchase of the Transferred Environmental
        Control Property, will from time to time issue Environmental Control Bonds
        under
        the Indenture; and

       

      WHEREAS
        the Issuer, to secure its obligations under the Environmental Control Bonds
        and
        the Indenture, will pledge its right, title and interest in the Transferred
        Environmental Control Property to the Indenture Trustee for the benefit of
        the
        Environmental Control Bondholders; and

       

      WHEREAS
        the Seller has determined that the transactions contemplated by the Basic
        Documents are in the best interest of the Seller and its creditors and represent
        a prudent and advisable course of action that does not impair the rights
        and
        interests of the Seller’s creditors; and

       

      WHEREAS
        the PSCWV or its attorney will enforce this Agreement pursuant to the Financing
        Order for the benefit of the Customers to the extent permitted by applicable
        Requirements of Law.

       

      NOW,
        THEREFORE, in consideration of the premises and the mutual covenants herein
        contained and intending to be legally bound hereby, the parties hereto agree
        as
        follows:

       

      ARTICLE
        I

      Definitions

       

      Section
        1.01.  Definitions. 
        Capitalized terms used but not otherwise defined herein have the meanings
        assigned to them in Appendix A to this Agreement.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

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

       

      (b)    The
        definitions contained in this Agreement are applicable to the singular as
        well
        as the plural forms of such terms and to the masculine as well as to the
        feminine and neuter genders of such terms.

       

      ARTICLE
        II

      Conveyance
        of Environmental Control Property

       

      Section
        2.01.  Conveyance
        of Initial Environmental Control Property.  (a)  Subject
        to the conditions specified in Section 2.03,
        the
        Transferor hereby irrevocably contributes, sells, transfers, assigns, sets
        over
        and otherwise conveys to the Seller, without recourse (subject to the
        obligations herein), all right, title and interest of the Transferor in and
        to
        the Initial Environmental Control Property created pursuant to the Statute
        and
        in accordance with the Financing Order (such contribution, sale, transfer,
        assignment, set over and conveyance of the Initial Environmental Control
        Property includes, to the fullest extent permitted by the Statute, the
        assignment of all revenues, collections, claims, rights, payments, money
        or
        proceeds of or arising from the Environmental Control Charges related to
        the
        Initial Environmental Control Property, as the same may be adjusted from
        time to
        time). Such contribution, sale, transfer, assignment, set over and conveyance
        is
        expressly an absolute transfer of all of the Transferor’s right, title and
        interest (as in a true sale), and not as a pledge or other secured transaction,
        of the Initial Environmental Control Property. The Transferor agrees and
        confirms that after giving effect to the contribution it has no rights in
        the
        Initial Environmental Control Property to which a security interest of creditors
        of the Transferor could attach because it has sold all rights in the Initial
        Environmental Control Property to the Seller pursuant to Section 24-2-4e(m)(1)
        of the Statute.

       

      (b)    In
        exchange for the contribution of the Initial Environmental Control Property
        from
        the Transferor, the Seller will distribute the net proceeds of the issuance
        and
        sale of the Environmental Control Bonds to the Transferor as a
        dividend.

       

      Section
        2.02.  Conveyance
        of Subsequent Environmental Control Property. 
        The Transferor may from time to time offer to contribute or convey additional
        Environmental Control Property to the Seller, subject to the conditions
        specified in Section 2.03.
        Such
        Subsequent Environmental Control Property, if any, shall be contributed or
        conveyed to the Seller effective on the Subsequent Contribution Date specified
        in the related Addition Notice, subject to the satisfaction or waiver of
        the
        conditions specified in Section 2.03.

       

      Section
        2.03.  Conditions
        to Conveyance of Environmental Control Property. 
        The Transferor shall be permitted to contribute and transfer Environmental
        Control Property to the Seller only upon the satisfaction or waiver of each
        of
        the following conditions:

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      (i)   as
        of the
        Initial Contribution Date or the Subsequent Contribution Date, as applicable,
        the Transferor was not insolvent and will not have been made insolvent by
        such
        contribution and the Transferor is not aware of any pending insolvency with
        respect to itself;

       

      (ii)   as
        of the
        Initial Contribution Date or the Subsequent Contribution Date, as applicable,
        no
        breach by the Transferor of its representations, warranties or covenants
        in this
        Agreement shall exist; and no Servicer Default shall have occurred and be
        continuing;

       

      (iii)   as
        of the
        Initial Contribution Date or the Subsequent Contribution Date, as applicable,
        (A) the Issuer shall have sufficient funds available to pay the purchase
        price for the Transferred Environmental Control Property to be conveyed on
        such
        date pursuant to the Sale Agreement and (B) all conditions to the issuance
        of one or more Series of Environmental Control Bonds intended to provide
        such
        funds set forth in the Indenture shall have been satisfied or
        waived;

       

      (iv)   on
        or
        prior to the Initial Contribution Date or the Subsequent Contribution Date,
        as
        applicable, the Transferor shall have taken all action required to transfer
        to
        the Seller ownership of the Environmental Control Property to be conveyed
        on
        such date, free and clear of all Liens, other than Liens created by the Issuer
        under the Indenture, the Seller shall have taken any action required for
        the
        Seller to transfer to the Issuer ownership of the Transferred Environmental
        Control Property to be conveyed on such date, free and clear of all Liens,
        other
        than Liens created by the Issuer under the Indenture, and the Issuer, or
        the
        Servicer on behalf of the Issuer, shall have taken any action required for
        the
        Issuer to grant the Indenture Trustee a first priority perfected security
        interest in the Collateral and maintain such security interest as of such
        date;

       

      (v)   in
        the
        case of a conveyance of Subsequent Environmental Control Property only, on
        or
        prior to such Subsequent Contribution Date, the Transferor shall have provided
        the Seller, the Issuer and the Rating Agencies with a timely Addition
        Notice;

       

      (vi)   the
        Transferor shall have delivered to the Rating Agencies, the Seller and the
        Issuer (A) an Opinion of Counsel with respect to the transfer of the
        Environmental Control Property then being conveyed to the Seller and
        (B) the Opinion of Counsel required by Section 5.04(a);
        and

       

      (vii)   the
        Transferor shall have delivered to the Indenture Trustee, the Seller and
        the
        Issuer an Officers’ Certificate confirming the satisfaction of each condition
        precedent specified in this Section 2.03.

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      ARTICLE
        III

      Representations
        and Warranties of Transferor

       

      As
        of the
        Initial Contribution Date, or as of any Subsequent Contribution Date, as
        applicable, the Transferor makes the following representations and warranties
        on
        which the Seller has relied and will rely in acquiring Environmental Control
        Property. The Transferor agrees and acknowledges that the following
        representations and warranties are also for the benefit of the Issuer, as
        assignee of the Seller pursuant to the Sale Agreement, and the Indenture
        Trustee, as collateral assignee of the Issuer pursuant to the Indenture.
        The
        representations and warranties shall survive the conveyance of Environmental
        Control Property to the Seller, the sale of the Transferred Environmental
        Control Property from the Seller to the Issuer pursuant to the Sale Agreement
        and the pledges and assignments thereof permitted hereby.

       

      Section
        3.01.  Organization
        and Good Standing. 
        The Transferor is a corporation duly organized, validly existing and in good
        standing under the laws of the State of West Virginia, with corporate power
        and
        authority to own its properties and conduct its business as currently owned
        or
        conducted.

       

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

       

      Section
        3.03.  Power
        and Authority. 
        The Transferor has the corporate power and authority to execute and deliver
        this
        Agreement and to carry out its terms; the Transferor has full corporate power
        and authority to own the Environmental Control Property and contribute, convey
        and assign the Initial Environmental Control Property, in the case of the
        Initial Contribution Date, and the Subsequent Environmental Control Property,
        in
        the case of each Subsequent Contribution Date, as applicable, and the Transferor
        has duly authorized such contribution, conveyance and assignment to the Seller
        by all necessary corporate action; and the execution, delivery and performance
        of this Agreement have been duly authorized by the Transferor by all necessary
        corporate action.

       

      Section
        3.04.  Binding
        Obligation. 
        This Agreement constitutes a legal, valid and binding obligation of the
        Transferor enforceable against the Transferor in accordance with its terms
        subject to bankruptcy, receivership, insolvency, fraudulent transfer,
        reorganization, moratorium or other laws affecting creditors’ rights generally
        from time to time in effect and to general principles of equity (regardless
        of
        whether considered in a proceeding in equity or at law).

       

      Section
        3.05.  No
        Violation. 
        The consummation of the transactions contemplated by this Agreement and the
        fulfillment of the terms hereof do not conflict with, result in any breach
        of
        any of the terms and provisions of, nor constitute (with or without notice
        or

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      lapse
        of
        time) a default under, the articles of incorporation or by-laws of the
        Transferor, or any indenture, agreement or other instrument to which the
        Transferor is a party or by which it shall be bound; nor result in the creation
        or imposition of any Lien upon any of its properties (other than under this
        Agreement) pursuant to the terms of any such indenture, agreement or other
        instrument; nor, to the Transferor’s knowledge, violate any Requirements of Law
        applicable to the Transferor of any Governmental Authority having jurisdiction
        over the Transferor or its properties.

       

      Section
        3.06.  No
        Proceedings. 
        Except as described in Exhibit A, there are no proceedings or investigations
        pending or, to the Transferor’s best knowledge, threatened, before any
        Governmental Authority having jurisdiction over the Transferor or its properties
        (i) asserting the invalidity of the Basic Documents, the Environmental
        Control Bonds, the Statute or the Financing Order, (ii) seeking to prevent
        the issuance of the Environmental Control Bonds or the consummation of any
        of
        the transactions contemplated by the Basic Documents or the Environmental
        Control Bonds or (iii)  seeking any determination or ruling that could
        reasonably be expected to materially and adversely affect the performance
        by the
        Transferor of its obligations under, or the validity or enforceability of,
        the
        Basic Documents, the Environmental Control Bonds or the Financing
        Order.

       

      Section
        3.07.  Approvals. 
        Except for UCC filings or filings under the Statute, no approval,
        authorization, consent, order or other action of, or filing with, any
        Governmental Authority is required in connection with the execution and delivery
        by the Transferor of this Agreement, the performance by the Transferor of
        the
        transactions contemplated hereby or the fulfillment by the Transferor of
        the
        terms hereof, except those that have been obtained or made.

       

      Section
        3.08.  The
        Environmental Control Property.  (a)  Information. 
        All information provided by the Transferor to the Seller in writing with
        respect
        to the Environmental Control Property is correct in all material
        respects.

       

      (b)    Effect
        of Transfer. 
        The transfers and assignments herein contemplated constitute absolute transfers
        of the Initial Environmental Control Property or the Subsequent Environmental
        Control Property, as the case may be, from the Transferor to the Seller,
        and the
        beneficial interest in and title to the Environmental Control Property would
        not
        be part of the debtor’s estate in the event of the filing of a bankruptcy
        petition by or against the Transferor under any bankruptcy law.

       

      (c)    Transfer
        Filings.
        

       

      (i)    The
        Transferor is the sole owner of the Environmental Control Property being
        contributed to the Seller on the Initial Contribution Date or Subsequent
        Contribution Date, as applicable.

       

      (ii)   The
        Environmental Control Property has been validly transferred to the Seller
        free
        and clear of all Liens other than Liens created by the Issuer under the
        Indenture.

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      (iii)   All
        filings, including filings with the Secretary of State of West Virginia under
        the Statute, necessary in any jurisdiction to give the Seller a valid ownership
        interest in the Environmental Control Property, free and clear of all Liens
        of
        the Transferor or anyone claiming through the Transferor, and to give the
        Seller
        a first priority perfected security interest in the Environmental Control
        Property have been made, other than any such filings (except for filings
        with
        the Secretary of State of the State of West Virginia, Delaware and Nevada,
        under
        the Statute and UCC, as applicable) the absence of which would not have a
        material adverse impact on (A) the ability of the Servicer to collect
        Environmental Control Charges with respect to the Environmental Control Property
        or (B) the rights of the Seller with respect to the Environmental Control
        Property.

       

      (d)    Irrevocable;
        Process Valid; No Litigation; Etc.
        

       

      (i)    The
        Financing Order has been issued by the PSCWV in accordance with the Statute,
        the
        Financing Order and the process by which it was issued comply with all
        applicable Requirements of Law, and Order is in full force and effect, final,
        and not subject to appeal by any Person.

       

      (ii)   As
        of the
        date of issuance of any Series of Environmental Control Bonds, such
        Environmental Control Bonds are entitled to the protections provided by the
        Statute and, accordingly, the provisions of the Financing Order relating
        to
        Environmental Control Property and Environmental Control Charges are not
        revocable by the PSCWV.

       

      (iii)   (A) 
        Under the Statute, the State of West Virginia has pledged (the “State
        Pledge”)
        that
        it will not take or permit any action that impairs the value of Environmental
        Control Property or, except as allowed in connection with the True-Up
        Adjustments, reduce, alter or impair Environmental Control Charges that are
        imposed, collected and remitted for the benefit of the Environmental Control
        Bondholders, until any principal, interest and redemption premium in respect
        of
        the Environmental Control Bonds, all financing costs and all amounts to be
        paid
        under any ancillary agreement are paid or performed in full. (B) Under the
        Contract Clauses of the Constitutions of the State of West Virginia and the
        United States, the State of West Virginia could not, absent a demonstration
        that
        such action was necessary to serve a significant and legitimate public purpose,
        repeal or amend the Statute, nor could the State of West Virginia (or the
        PSCWV
        in exercising its legislative powers) take any action or fail to take any
        action
        required by the State Pledge if the repeal or amendment, or the action or
        inaction, would substantially limit, alter, impair or reduce the value of
        the
        Environmental Control Property or the Environmental Control Charges.
        (C) Under applicable West Virginia constitutional principles relating to
        the impairment of liens, the State of West Virginia could not enact legislation
        (other than a law passed by the State of West Virginia in the valid exercise
        of
        the state’s police power) that repeals the State Pledge or limits, alters,
        impairs or reduces the value of the Environmental Control Property or the
        Environmental Control Charges so as to impair (x) the terms of the Indenture
        or
        the Environmental

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      Control
        Bonds or (y) the rights and remedies of the Environmental Control Bondholders
        (or the Indenture Trustee acting on their behalf) prior to the time that
        the
        Environmental Control Bonds are fully paid and discharged if such action
        would
        prevent the payment of the Environmental Control Bonds or would significantly
        affect the security for the Environmental Control Bonds.

       

      (iv)   There
        is
        no order by any court providing for the revocation, alteration, limitation
        or
        other impairment of the Statute, Financing Order, Environmental Control Property
        or the Environmental Control Charges or any rights arising under any of them
        or
        which seeks to enjoin the performance of any obligations under the Financing
        Order.

       

      (v)    No
        other
        approval, authorization, consent, order or other action of, or filing with,
        any
        Governmental Authority is required in connection with the creation of the
        Environmental Control Property, except those that have been obtained or
        made.

       

      (vi)   Except
        as
        described in Exhibit A, there are no proceedings or investigations challenging
        the Financing Order or the Statute pending, or to the best of the Transferor’s
        knowledge, threatened before any Governmental Authority having jurisdiction
        over
        the Transferor or its properties.

       

      (vii)   No
        failure on the Initial Contribution Date or any Subsequent Contribution Date
        or
        any time thereafter to satisfy any condition imposed by the Statute with
        respect
        to the recovery of Environmental Control Costs will have a material adverse
        affect on the creation or contribution hereunder of Environmental Control
        Property or the right to collect Environmental Control Charges.

       

      (viii)   The
        voters of the State of West Virginia have no right of referendum or initiative
        to amend, repeal or revoke the Statute in a manner that would impair the
        security of the Environmental Control Bondholders.

       

      (e)    Assumptions. 
        The assumptions used in calculating Environmental Control Charges are reasonable
        and made in good faith.

       

      (f)    Creation
        of Environmental Control Property.
        

       

      (i)    The
        Environmental Control Property constitutes an existing present property right
        that will continue to exist until the Environmental Control Bonds issued
        pursuant to the Financing Order and all Financing Costs of the Environmental
        Control Bonds have been paid in full.

       

      (ii)   The
        Environmental Control Property consists of (A) the rights and interests of
        the Transferor, the Seller, as assignee of the Transferor, and the Issuer,
        as
        assignee of the Seller, including the right to impose, charge, collect and
        receive Environmental Control Charges in the amount necessary to provide
        for
        full payment and recovery of all Environmental Control Costs and
        Financing

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

      Costs
        determined to be recoverable in the Financing Order, and any interest in
        such
        rights and interests; (B) the right under the Financing Order, to obtain
        True-Up Adjustments; and (C) all revenues, receipts, collections, rights to
        payment, payments, moneys, claims or other proceeds arising from the rights and
        interests described in clauses (A) and (B) above.

       

      (iii)   The
        Financing Order, including the right to collect Environmental Control Charges,
        has been declared to be irrevocable by the PSCWV.

       

      (g)    Solvency. 
        After giving effect to the contribution of any Environmental Control Property
        hereunder, the Transferor (i) is solvent and expects to remain solvent,
        (ii) is adequately capitalized to conduct its business and affairs
        considering its size and the nature of its business and intended purposes,
        (iii) is not engaged in nor does it expect to engage in a business for
        which its remaining property represents unreasonably small capital,
        (iv) reasonably believes that it will be able to pay its debts as they come
        due and (v) is able to pay its debts as they mature and does not intend to
        incur, or believe that it will incur, indebtedness that it will not be able
        to
        repay at its maturity.

       

      Section
        3.09.   Representations
        and Warranties of Seller. 
        The representations and warranties made by the Seller under the Sale Agreement
        are true and correct in all material respects.

       

      ARTICLE
        IV

      Covenants
        of the Transferor

       

      Section
        4.01.   Corporate
        Existence. 
        Subject to Section 5.02,
        so long
        as Environmental Control Bonds of any Series remain Outstanding, except in
        the
        case of a merger, consolidation, division, asset disposition or other similar
        transaction permitted under the terms of this Agreement, the Transferor will
        keep in full force and effect its corporate existence and remain in good
        standing, in each case under the laws of the jurisdiction of its incorporation,
        and will obtain and preserve its qualification to do business in each
        jurisdiction in which such qualification is or shall be necessary to protect
        the
        validity and enforceability of this Agreement and each other instrument or
        agreement to which the Transferor is a party necessary to the proper
        administration of this Agreement and the transactions contemplated
        hereby.

       

      Section
        4.02.   No
        Liens or Conveyances. 
        Except for the conveyances hereunder, the Transferor will not sell, pledge,
        assign or transfer to any other Person, or grant, create, incur, assume or
        suffer to exist any Lien on, any of the Environmental Control Property, whether
        now existing or hereafter created, or any interest therein. The Transferor
        shall
        not at any time assert any Lien against or with respect to any Environmental
        Control Property, and shall defend the right, title and interest of the Seller,
        the Issuer, as assignee of the Seller, and the Indenture Trustee, as collateral
        assignee of the Issuer, in, to and under the Environmental Control Property
        and
        the Transferred Environmental Control

       

      
        
          
          

        

        
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      Property,
        as the case may be, whether now existing or hereafter created, against all
        claims of third parties claiming through or under the Transferor.

       

      Section
        4.03.  Delivery
        of Collections. 
        Subject to the terms of the Servicing Agreement, if the Transferor receives
        collections in respect of the Environmental Control Charges, the Transferor
        agrees to pay the Servicer all estimated payments received by the Transferor
        in
        respect thereof as soon as practicable after receipt is known by the Transferor,
        but in no event later than two Business Days after such receipt is known
        by the
        Transferor, and the Transferor shall reconcile estimated payment amounts
        with
        the Servicer within 25 Business Days after the estimated payments are paid
        to
        the Servicer.

       

      Section
        4.04.  Notice
        of Liens. 
        The Transferor shall notify the Issuer and the Indenture Trustee promptly
        after
        becoming aware of any Lien on any Environmental Control Property other than
        the
        conveyances hereunder or under the Sale Agreement, the Indenture or the other
        Basic Documents.

       

      Section
        4.05.  Compliance
        with Law. 
        The Transferor hereby agrees to comply with its organizational or governing
        documents and all Requirements of Law applicable to the Transferor, except
        to
        the extent that failure to so comply would not have a material adverse affect
        on
        the Seller’s, the Issuer’s or the Indenture Trustee’s interests in the
        Environmental Control Property or the Transferred Environmental Control
        Property, as applicable, under any of the Basic Documents or the Transferor’s
        performance of its obligations hereunder or under any of the other Basic
        Documents to which it is a party.

       

      Section
        4.06.  Covenants
        Related to Environmental Control Property.  (a)  So
        long
        as Environmental Control Bonds of any Series remain Outstanding, the Transferor
        shall treat the Environmental Control Bonds as debt of the Seller for federal
        income tax purposes to the extent permitted by applicable Requirements of
        Law.

       

      (b)    So
        long
        as Environmental Control Bonds of any Series remain Outstanding, the Transferor
        shall (i) clearly disclose in its financial statements that it is not the
        owner of the Environmental Control Property and that the assets of the Issuer
        are not available to pay creditors of the Transferor or any of its Affiliates
        and (ii) clearly disclose the effects of all transactions among the
        Transferor, the Seller and the Issuer in accordance with GAAP.

       

      (c)    The
        Transferor agrees that upon the conveyance by the Transferor of the
        Environmental Control Property to the Seller, (i) to the fullest extent
        permitted by applicable Requirements of Law, the Seller shall have all of
        the
        rights originally held by the Transferor with respect to the Environmental
        Control Property, including the right to collect any amounts payable by any
        Customer or Third Party in respect of such Environmental Control Property,
        notwithstanding any objection or direction to the contrary by the Transferor
        and
        (ii) any payment by any Customer or Third Party to the Seller shall
        discharge such Customer’s or such Third Party’s obligations in respect of such
        Environmental Control Property to the extent of such payment, notwithstanding
        any objection or direction to the contrary by the Transferor.

       

      
        
          
          

        

        
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      (d)    So
        long
        as Environmental Control Bonds of any Series remain Outstanding, (i) the
        Transferor shall not make any statement or reference in respect of the
        Environmental Control Property that is inconsistent with the ownership thereof
        by the Seller or, after the sale of the Transferred Environmental Control
        Property by the Seller to the Issuer, the Issuer and (ii) the Transferor
        shall not take any action in respect of the Environmental Control Property
        except solely in its capacity as the Servicer thereof pursuant to the Servicing
        Agreement or as otherwise contemplated by the Basic Documents.

       

      Section
        4.07.  Notice
        of Indemnification Events. 
        The Transferor shall deliver to the Seller, the Issuer and the Indenture
        Trustee
        promptly after having obtained knowledge thereof, written notice in an Officers’
Certificate of any Indemnification Event or any event which, with the giving
        of
        notice or the passage of time, would become an Indemnification
        Event.

       

      Section
        4.08.  Protection
        of Title. 
        The Transferor shall execute and file such filings, including filings with
        the
        PSCWV pursuant to the Statute and the Financing Order, and cause to be executed
        and filed such filings, all in such manner and in such places as may be required
        by law fully to preserve, maintain, and protect the interests of the Seller
        in
        the Environmental Control Property, including all filings required under
        the
        Statute relating to the transfer of the ownership or security interest in
        the
        Environmental Control Property by the Transferor to the Seller. The Transferor
        shall deliver (or cause to be delivered) to the Seller file-stamped copies
        of,
        or filing receipts for, any document filed as provided above, as soon as
        available following such filing. The Transferor agrees to take such legal
        or
        administrative actions, including defending against or instituting and pursuing
        legal actions and appearing or testifying at hearings or similar proceedings,
        as
        may be reasonably necessary (i) to protect the Seller, the Issuer, the
        Indenture Trustee and the Environmental Control Bondholders from claims,
        state
        actions or other actions or proceedings of third parties which, if successfully
        pursued, would result in a breach of any representation or warranty set forth
        in
        Article III or (ii) to block or overturn any attempts to cause a
        repeal of, modification of or supplement to the Statute or the Financing
        Order
        or the rights of holders of Environmental Control Property by legislative
        enactment or constitutional amendment that would be materially adverse to
        the
        holders of Environmental Control Property.

       

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

       

      
        
          
          

        

        
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      Section
        4.10.  Third
        Parties. 
        So long as Environmental Control Bonds of any Series remain Outstanding,
        the
        Transferor shall not permit any Third Party to bill or collect Environmental
        Control Charges on behalf of the Issuer except (a) as a subcontractor under
        the
        active supervision of the Servicer or (b) as required by applicable law or
        regulation and to the extent permitted by applicable law or regulation, after
        written notice of such arrangement is furnished to the Rating
        Agencies.

       

      ARTICLE
        V

      The
        Transferor

       

      Section
        5.01.  Liability
        of Transferor; Indemnities.  (a)  The
        Transferor shall be liable in accordance herewith only to the extent of the
        obligations specifically undertaken by the Transferor under this
        Agreement.

       

      (b)    The
        Transferor shall indemnify the Seller, the Issuer, the Indenture Trustee,
        for
        itself and on behalf of the Environmental Control Bondholders, and each of
        their
        respective members, managers, officers, directors and agents for, and defend
        and
        hold harmless each such Person from and against, any and all taxes (other
        than
        any taxes imposed on Environmental Control Bondholders, solely as a result
        of
        their ownership of Environmental Control Bonds ) that may at any time be
        imposed
        on or asserted against any such Person as a result of the acquisition or
        holding
        of the Environmental Control Property by the Seller or the Transferred
        Environmental Control Property by the Issuer or the issuance and sale by
        the
        Issuer of the Environmental Control Bonds, or any other transactions
        contemplated herein, including any sales, gross receipts, general corporation,
        tangible personal property, privilege or license taxes.

       

      (c)    The
        Transferor shall indemnify the Seller, the Issuer, the Indenture Trustee,
        on
        behalf of the Environmental Control Bondholders, and each of their respective
        members, managers, officers, directors, and agents for, and defend and hold
        harmless each such Person from and against, any and all amounts of principal
        of
        and interest on the Environmental Control Bonds not paid when due or when
        scheduled to be paid in accordance with their terms and the amount of any
        deposits to the Issuer required to have been made in accordance with the
        terms
        of the Basic Documents which are not made when so required, in either case
        as a
        result of the Transferor’s breach of any of its representations, warranties or
        covenants contained in this Agreement.

       

      (d)    The
        Transferor shall indemnify the Seller, the Issuer, the Indenture Trustee,
        on
        behalf of the Environmental Control Bondholders, and each of their respective
        members, managers, officers, directors, and agents, and defend and hold harmless
        each such Person from and against, any and all Losses that may be imposed
        on,
        incurred by or asserted against any such Person as a result of (i) the
        Transferor’s willful misconduct, bad faith or negligence in the performance of
        its duties or observance of its covenants under this Agreement, (ii) the
        Transferor’s reckless disregard of its obligations and duties under this
        Agreement or (iii) the Transferor’s breach of any of its representations or
        warranties contained in this Agreement (any event described in any of the
        foregoing clauses (i), (ii) or (iii), an “Indemnification
        Event”).
        Amounts on deposit in

       

      
        
          
          

        

        
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      the
        Excess Funds Subaccount and the Capital Subaccount shall not be available
        to
        satisfy any Losses for which indemnification is provided in this
        Agreement.

       

      (e)    The
        Transferor also will indemnify the PSCWV, for the benefit of Customers, for
        any
        and all Losses, including but not limited to Losses in the form of higher
        Environmental Control Charges, that Customers may incur by reason of
        (i) any failure of the Transferor’s representations or warranties in this
        Agreement, (ii) any breach of the Transferor’s covenants in this Agreement,
        (iii) any failure of the Seller’s representations in the Sale Agreement or
        (iv) by breach of the Seller’s covenants in the Sale Agreement. The
        Transferor will not be liable for any Losses resulting solely from a downgrade
        in the ratings on the Environmental Control Bonds or any consequential,
        incidental or indirect damages, including any loss of market value of the
        Environmental Control Bonds, resulting from any downgrade of the ratings
        of the
        Environmental Control Bonds.

       

      (f)    The
        Transferor shall indemnify the Indenture Trustee and its officers, directors
        and
        agents for, and defend and hold harmless each such Person from and against,
        any
        and all Losses that may be imposed upon, incurred by or asserted against
        any
        such Person as a result of the acceptance or performance of the trusts and
        duties contained herein and in the Basic Documents to which the Indenture
        Trustee is a party, except to the extent that any such Loss shall be due
        to the
        willful misconduct, bad faith or gross negligence of the Indenture Trustee.
        Such
        amounts shall be deposited into the Collection Account and distributed in
        accordance with the Indenture.

       

      (g)    The
        Transferor’s indemnification obligations under Section 5.01(b),
        (c), (d), (e) and (f)
        for
        events occurring prior to the removal or resignation of the Indenture Trustee,
        or the termination of this Agreement, shall survive the resignation or removal
        of the Indenture Trustee, or the termination of this Agreement, and shall
        include reasonable fees and expenses of investigation and litigation (including
        the reasonable attorney’s fees and expenses of the Indenture Trustee). Any
        amounts indemnified by the Transferor pursuant to its obligations under
Sections
        5.01(b), (c), (d) or (e)
        shall be
        deposited into the Collection Account and distributed in accordance with
        the
        Indenture. 

       

      Section
        5.02.  Merger
        or Consolidation of, or Assumption of the Obligations of,
        Transferor. 
        Any Person (a) into which the Transferor may be merged or consolidated and
        which succeeds to all or any material part of the electric distribution business
        of the Transferor, (b) which results from the division of the Transferor
        into two or more Persons and which succeeds to all or any material part of
        the
        electric distribution business of the Transferor, (c) which may result from
        any merger or consolidation to which the Transferor shall be a party and
        which
        succeeds to all or any material part of the electric distribution business
        of
        the Transferor, (d) which may succeed to the properties and assets of the
        Transferor substantially as a whole and which succeeds to all or any material
        part of the electric distribution business of the Transferor or (e) which
        may otherwise succeed to all or any material part of the electric distribution
        business of the Transferor, which Person in any of the foregoing cases executes
        an agreement of assumption to perform every obligation of the Transferor
        under
        this Agreement, shall be the successor

       

      
        
          
          

        

        
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      to
        the
        Transferor hereunder without the execution or filing of any document or any
        further act by any of the parties to this Agreement; provided, however, that
        (i) immediately after giving effect to such transaction, no representation
        or warranty made pursuant to Article III shall have been breached and no
        Servicer Default, and no event that, after notice or lapse of time, or both,
        would become a Servicer Default, shall have occurred and be continuing,
        (ii) the Transferor shall have delivered to the Seller, the Issuer and the
        Indenture Trustee an Officers’ Certificate and an Opinion of Counsel each
        stating that such consolidation, merger or succession and such agreement
        of
        assumption comply with this Section and that all conditions precedent, if
        any,
        provided for in this Agreement relating to such transaction have been complied
        with, (iii) the Rating Agencies shall have received prior written notice of
        such transaction and (iv) the Transferor shall have delivered to the
        Seller, the Issuer and the Indenture Trustee an Opinion of Counsel either
        (A) stating that, in the opinion of such counsel, all filings, including
        filings by the Transferor with the PSCWV pursuant to the Statute and UCC
        filings, have been executed and filed that are necessary fully to preserve
        and
        protect the interest of the Seller in the Environmental Control Property
        and
        reciting the details of such filings or (B) stating that, in the opinion of
        such counsel, no such action shall be necessary to preserve and protect such
        interests. Notwithstanding anything herein to the contrary, the execution
        of the
        above described agreement of assumption and compliance with clauses (i),
        (ii), (iii) and (iv) above shall be conditions precedent to the consummation
        of
        any transaction referred to in clause (a), (b), (c), (d) or (e)
        above.

       

      Section
        5.03.  Limitation
        on Liability of Transferor and Others. 
        The Transferor and any director or officer or agent of the Transferor, or
        any
        employee of Allegheny Energy Service Corporation, may rely in good faith
        on the
        advice of counsel or on any document of any kind, prima facie properly executed
        and submitted by any Person, respecting any matters arising hereunder. Subject
        to Section 4.08,
        the
        Transferor shall not be under any obligation to appear in, prosecute or defend
        any legal action that is not incidental to its obligations under this Agreement,
        and that in its opinion may involve it in any expense or liability.

       

      Section
        5.04.  Opinions
        of Counsel. 
        The Transferor shall deliver to the Seller, the Issuer and the Indenture
        Trustee: (a) promptly after the execution and delivery of this Agreement
        and of each amendment hereto or to the Servicing Agreement and on each
        Subsequent Contribution Date, an Opinion of Counsel either (i) to the
        effect that, in the opinion of such counsel, all filings, including filings
        with
        the PSCWV pursuant to the Statute, that are necessary to fully preserve and
        protect the interests of the Seller in the Environmental Control Property
        have
        been executed and filed, and reciting the details of such filings or referring
        to prior Opinions of Counsel in which such details are given, or (ii) to
        the effect that, in the opinion of such counsel, no such action shall be
        necessary to preserve and protect such interest; and (b) within 90 days
        after the beginning of each calendar year beginning with the first calendar
        year
        beginning more than three months after the Initial Contribution Date, an
        Opinion
        of Counsel, dated as of a date during such 90-day period, either (i) to the
        effect that, in the opinion of such counsel, all filings with the PSCWV pursuant
        to the Statute, have been executed and filed that are necessary to preserve
        fully and protect fully the interest of the Seller in the Environmental Control
        Property, and reciting the details of such filings or referring to prior
        Opinions of Counsel

       

      
        
          
          

        

        
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      in
        which
        such details are given, or (ii) to the effect that, in the opinion of such
        counsel, no such action shall be necessary to preserve and protect such
        interest. Each Opinion of Counsel referred to in clause (a) or (b) above
        shall specify any action necessary (as of the date of such opinion) to be
        taken
        in the following year to preserve and protect such interest.

       

      ARTICLE
        VI

      Miscellaneous
        Provisions

       

      Section
        6.01.  Amendment.

       

      (a)    Subject
        to Section
        6.01(b)
        below,
        this Agreement may be amended by the Transferor and the Seller, with the
        prior
        written consent of the Indenture Trustee and the satisfaction of the Rating
        Agency Condition. Promptly after the execution of any such amendment and
        consent, the Transferor shall furnish written notification of the substance
        of
        such amendment or consent to each of the Rating Agencies. Prior to the execution
        of any amendment to this Agreement, the Issuer and the Indenture Trustee
        shall
        be entitled to receive and rely upon an Opinion of Counsel stating that the
        execution of such amendment is authorized or permitted by this Agreement
        and the
        Opinion of Counsel referred to in Section 3.10 of the Servicing Agreement.
        Subject to paragraph (b) below, the Issuer and the Indenture Trustee may,
        but
        shall not be obligated to, enter into any such amendment which affects their
        own
        rights, duties or immunities under this Agreement or otherwise.

       

      (b)    Notwithstanding
        anything to the contrary in Section
        6.01(a),
        no
        amendment or modification of this Agreement shall be effective except upon
        satisfaction of the conditions precedent in this Section
        6.01(b).

       

      (i)    PSCWV
        Condition. 
        At least 16 days prior to the effectiveness of any such amendment or
        modification, and after obtaining the other necessary approvals set forth
        in
Section 6.01(a),
        except
        for the consent of the Indenture Trustee and the Environmental Control
        Bondholders if the consent of the Environmental Control Bondholders is required
        or sought by the Indenture Trustee in connection with such amendment or
        modification, the Issuer shall have delivered to the PSCWV’s executive director
        and general counsel written notification of any proposed amendment or
        modification, which notification shall contain:

       

      (A)    a
        reference to Case Nos. 05-0402-E-CN and 05-0750-E-PC and any other case number
        under which a Financing Order has been issued;

       

      (B)    an
        Officers’ Certificate stating that the proposed amendment or modification has
        been approved by all parties to this Agreement; and

       

      
        
          
          

        

        
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      (C)    a
        statement identifying the person to whom the PSCWV is to address any response
        to
        the proposed amendment or to request additional time.

       

      (ii)   The
        PSCWV
        or its authorized representative shall, within 15 days of receiving the
        notification complying with Section
        6.01(b)(i)
        above,
        either:

       

      (A)    provide
        notice of its determination that the proposed amendment or modification will
        not
        under any circumstances have the effect of increasing the ongoing qualified
        costs related to the Environmental Control Bonds,

       

      (B)    provide
        notice of its consent or lack of consent to the person specified in Section
        6.01(b)(i)(C)
        above,
        or

       

      (C)    be
        conclusively deemed to have consented to the proposed amendment or
        modification,

       

      unless,
        within 15 days of receiving the notification complying with Section
        6.01(b)(i)
        above,
        the PSCWV or its authorized representative delivers to the office of the
        person
        specified in Section
        6.01(b)(i)(C)
        above
        with a written statement requesting an additional amount of time not to exceed
        15 days in which to consider whether to consent to the proposed amendment
        or
        modification. If the PSCWV or its authorized representative requests an
        extension of time in the manner set forth in the preceding sentence, then
        the
        PSCWV shall either provide notice of its consent or lack of consent or notice
        of
        its determination that the proposed amendment or modification will not under
        any
        circumstances increase ongoing qualified costs to the person specified in
        Section
        6.01(b)(i)(C)
        above
        not later than the last day of such extension of time or be conclusively
        deemed
        to have consented to the proposed amendment or modification on the last day
        of
        such extension of time. Any amendment or modification requiring the consent
        of
        the PSCWV shall become effective on the later of (i) the date proposed by
        the
        parties to such amendment or modification or (ii) the first day after the
        expiration of the 15-day period provided for in this Section
        6.01(b)(ii),
        or, if
        such period has been extended pursuant hereto, the first day after the
        expiration of such period as so extended.

       

      (c)    For
        the
        purpose of this Section
        6.01,
        an
“authorized representative” of the PSCWV means any person authorized to act on
        behalf of the PSCWV, as evidenced by an Opinion of Counsel (which may be
        the
        general counsel) to the PSCWV.

       

      Section
        6.02.  Notices. 
        All demands, notices and communications upon or to the Transferor, the Seller,
        the Issuer, the Indenture Trustee, the Rating Agencies or the PSCWV under
        this
        Agreement shall be in writing, delivered personally, via facsimile, reputable
        overnight courier or by certified mail, return-receipt requested, and shall
        be
        deemed to have been duly given upon receipt (a) in the case of the
        Transferor, to The Potomac Edison Company, 800 Cabin Hill Drive, Greensburg,
        Pennsylvania 15601, Attention of [__________], (b) in the case of the
        Seller, to PE Renaissance Funding,

       

      
        
          
          

        

        
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      LLC,
        2215-B Renaissance Drive, Suite #5, Las Vegas, Nevada 89119, Attention of
        [__________], (c) in the case of the Issuer, to PE Environmental Funding
        LLC, 2215-B Renaissance Drive, Suite #5, Las Vegas, Nevada 89119, Attention
        of [__________], (d) in the case of the Indenture Trustee, at the Corporate
        Trust Office, (e) in the case of Moody’s, to Moody’s Investors Service, Inc.,[
        ABS Monitoring Department], 99 Church Street, New York, New York 10007,
        (f) in the case of Standard & Poor’s, to Standard & Poor’s Ratings
        Services, a division of The McGraw-Hill Companies, Inc., 55 Water Street,
        New
        York, New York 10041, Attention of [Asset Backed Surveillance Department],
        (g) in the case of Fitch, to Fitch, Inc., One State Street Plaza, New York,
        New York 10004, Attention of ABS Surveillance, and (h) in the case of the
        PSCWV,
        to 201 Brooks Street, P.O. Box 812, Charleston, West Virginia 25325, Attention
        of [___________]; or, as to each of the foregoing, at such other address
        as
        shall be designated by written notice to the other parties.

       

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

       

      Section
        6.04.  Limitations
        on Rights of Others. 
        The provisions of this Agreement are solely for the benefit of the Transferor,
        the Seller, PSCWV, the Issuer and the Indenture Trustee, on behalf of itself
        and
        the Environmental Control Bondholders, and nothing in this Agreement, whether
        express or implied, shall be construed to give to any other Person any legal
        or
        equitable right, remedy or claim in the Collateral or under or in respect
        of
        this Agreement or any covenants, conditions or provisions contained
        herein.

       

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

       

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

       

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

       

      Section
        6.08.  GOVERNING
        LAW. 
        THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
        OF
        WEST VIRGINIA, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE
        OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED
        IN
        ACCORDANCE WITH SUCH LAWS.

       

      
        
          
          

        

        
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      Section
        6.09.  Assignment
        to Issuer and to Indenture Trustee.  (a)  The
        Transferor hereby acknowledges and consents to the sale, transfer, assignment
        and conveyance of all right, title and interest of the Seller in, to and
        under
        the Transferred Environmental Control Property and the proceeds thereof and
        the
        assignment of any or all of the Seller’s rights hereunder to the Issuer pursuant
        to the Sale Agreement.

       

      (b)    The
        Transferor hereby acknowledges and consents to the mortgage, pledge, assignment
        and grant of a security interest by the Issuer (as assignee of the Seller)
        to
        the Indenture Trustee pursuant to the Indenture for the benefit of the
        Environmental Control Bondholders of all right, title and interest of the
        Issuer
        in, to and under the Transferred Environmental Control Property and the proceeds
        thereof and the assignment of any or all of the Issuer’s rights under the Sale
        Agreement to the Indenture Trustee. 

       

      Section
        6.10.  Nonpetition
        Covenant. 
        Notwithstanding any prior termination of this Agreement or the Indenture,
        but
        subject to a court of competent jurisdiction’s rights to order the sequestration
        and payment of Environmental Control Revenues arising with respect to the
        Environmental Control Property upon application by the Issuer or the Indenture
        Trustee notwithstanding any bankruptcy, reorganization or other insolvency
        proceedings with respect to the debtor, pledgor or transferor of the
        Environmental Control Property pursuant to Section 24-2-4e(k)(4) of the
        Statute, the Transferor shall not, prior to the date which is one year and
        one
        day after the termination of the Indenture, petition or otherwise invoke
        or
        cause the Seller or the Issuer to invoke the process of any court or government
        authority for the purpose of commencing or sustaining a case against the
        Seller
        or the Issuer under any federal or state bankruptcy, insolvency or similar
        law
        or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator
        or other similar official of the Seller or the Issuer or any substantial
        part of
        the property of the Seller or the Issuer, or ordering the winding up or
        liquidation of the affairs of the Seller or the Issuer.

       

      Section
        6.11.  Perfection. 
        In accordance with Section 24-2-4e(m) of the Statute, (i) upon the Financing
        Order creating the Environmental Control Property becoming effective, (ii)
        the
        execution and delivery of this Agreement (iii) the receipt of value and (iv)
        the
        filing of a financing statement with the office of the Secretary of State
        of
        West Virginia, a transfer of an interest in the Environmental Control Property
        will be perfected as against all third persons, including any judicial lien
        creditors, other than creditors holding a prior security interest, ownership
        interest or assignment in the Environmental Control Property previously
        perfected in accordance with the relevant provisions of the
        Statute.

       

      Section
        6.12.  Limitation
        of Liability. 
        It is expressly understood and agreed by the parties hereto that this Agreement
        is executed and delivered by [__________], not individually or personally
        but
        solely as Indenture Trustee for the benefit of the Environmental Control
        Bondholders, in the exercise of the powers and authority conferred and vested
        in
        it, and nothing herein contained shall be construed as creating any liability
        on
        [__________], individually or personally, to perform any covenant either
        expressed or implied contained herein, all such liability, if any, being
        expressly waived

       

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

       

      by
        the
        parties who are signatories to this Agreement and by any Person claiming
        by,
        through or under such parties; provided, however, that this provision shall
        not
        protect [__________] against any liability that would otherwise be imposed
        by
        reason of willful misconduct, bad faith or gross negligence in the performance
        of duties or by reason of reckless disregard of obligations or duties under
        this
        Agreement.

       

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      


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

       

      
        	 	
                PE
                  RENAISSANCE FUNDING, LLC,

                Seller,

                 

                 

              
	 	
                by:

              	 
	 	 	
                Title:

              
	 	 	
                 

                 

              
	 	
                THE
                  POTOMAC EDISON COMPANY,

                Transferor,

                 

                 

              
	 	
                by:

              	 
	 	 	
                Title:

              
	 	 	
                 

                 

              
	 	
                Acknowledged
                  and Accepted:

                 

                PE
                  ENVIRONMENTAL FUNDING LLC,

                as
                  Issuer of the Environmental Control Bonds,

                 

                 

              
	 	
                by:

              	 
	 	 	
                Title:

              
	 	 	
                 

                 

              
	 	
                [__________],
                  not in its individual capacity but solely as Indenture Trustee
                  on behalf
                  of the Environmental Control Bondholders,

                 

                 

              
	 	
                by:

              	 
	 	 	
                Title:

              


      

      


      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

       

      EXHIBIT
        A

      


      PENDING
        LITIGATION


      
 

      None.