Exhibit 4.25

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                    AMENDED AND RESTATED DECLARATION OF TRUST



                            ALLEGHENY CAPITAL TRUST III





















                          DATED AS OF _________, 200__




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                             CROSS-REFERENCE TABLE*


Section of Trust Indenture                                            Section of
Act of 1939, as amended                                              Declaration
310(a)....................................................                   5.3
310(b)....................................................        5.3(c); 5.3(d)
311(a)....................................................                2.2(b)
311(b)....................................................                2.2(b)
312(a)....................................................                2.2(a)
312(b)....................................................                2.2(b)
313.......................................................                   2.3
314(a)....................................................    2.4;2.7(a); 3.6(i)
314(b)....................................................        Not Applicable
314(c)....................................................                   2.5
314(d)....................................................        Not Applicable
314(e)....................................................              1.1; 2.5
314(f)....................................................                   2.1
315(a)....................................................           3.6(i); 3.9
315(b)....................................................                2.7(a)
315(c)....................................................                3.9(a)
315(d)....................................................                3.9(b)
316(a)....................................................                   2.6
316(b)....................................................               12.1(c)
316(c)....................................................                3.6(e)
317(a)....................................................        3.8(e); 3.8(h)
317(b)....................................................           3.8(h); 7.3
318.......................................................                   2.1

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* This Cross-Reference Table does not constitute part of this Declaration and
shall not affect the interpretation of any of its terms or provisions.

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                                TABLE OF CONTENTS

                                                                            PAGE


                                    ARTICLE I
                         INTERPRETATION AND DEFINITIONS

SECTION 1.1  Definitions.......................................................1

                                   ARTICLE II
                               TRUST INDENTURE ACT

SECTION 2.1   Trust Indenture Act: Application.................................7
SECTION 2.2   Lists of Holders of Securities...................................7
SECTION 2.3   Reports by the Institutional Trustee.............................8
SECTION 2.4   Periodic Reports to Institutional Trustee........................8
SECTION 2.5   Evidence of Compliance with Conditions Precedent.................8
SECTION 2.6   Events of Default: Waiver........................................8
SECTION 2.7   Event of Default: Notice........................................10

                                    ARTICLE III
                                   ORGANIZATION

SECTION 3.1   Name............................................................11
SECTION 3.2   Office..........................................................11
SECTION 3.3   Declaration.....................................................11
SECTION 3.4   Authority.......................................................12
SECTION 3.5   Title to Property of the Trust..................................12
SECTION 3.6   Powers and Duties of the Regular Trustees.......................12
SECTION 3.7   Prohibition of Actions by the Trust and the Trustees............15
SECTION 3.8   Powers and Duties of the Institutional Trustee..................16
SECTION 3.9   Certain Duties and Responsibilities of the
              Institutional Trustee...........................................18
SECTION 3.10  Certain Rights of Institutional Trustee.........................19
SECTION 3.11  Delaware Trustee................................................21
SECTION 3.12  Execution of Documents..........................................22
SECTION 3.13  Not Responsible for Recitals or Issuance of Securities..........22
SECTION 3.14  Duration of Trust...............................................22
SECTION 3.15  Mergers.........................................................22

                                   ARTICLE IV
                                     SPONSOR

SECTION 4.1  Sponsor's Purchase of Common Securities..........................24
SECTION 4.2  Responsibilities of the Sponsor..................................24
SECTION 4.3  Guarantee of Payment of Trust Obligations........................25

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                                                                            PAGE
                                    ARTICLE V
                                    TRUSTEES

SECTION 5.1  Number of Trustees...............................................26
SECTION 5.2  Delaware Trustee.................................................26
SECTION 5.3  Institutional Trustee: Eligibility...............................26
SECTION 5.4  Qualifications of Regular Trustees and Delaware
             Trustee Generally................................................27
SECTION 5.5  Initial Trustees: Additional Powers of Regular Trustees..........27
SECTION 5.6  Appointment, Removal and Resignation of Trustees.................28
SECTION 5.7  Vacancies among Trustees.........................................30
SECTION 5.8  Effect of Vacancies..............................................30
SECTION 5.9  Meetings.........................................................30
SECTION 5.10  Delegation of Power.............................................31
SECTION 5.11  Merger, Conversion, Consolidation or Succession to Business.....31

                                   ARTICLE VI
                                  DISTRIBUTIONS

SECTION 6.1  Distributions....................................................31

                                   ARTICLE VII
                             ISSUANCE OF SECURITIES

SECTION 7.1  General Provisions Regarding Securities..........................32
SECTION 7.2  Registrar and Paying Agent.......................................33
SECTION 7.3  Paying Agent to Hold Money in Trust..............................33

                                  ARTICLE VIII
                              DISSOLUTION OF TRUST

SECTION 8.1  Dissolution of Trust.............................................34

                                   ARTICLE IX
                              TRANSFER OF INTERESTS

SECTION 9.1  Transfer of Securities...........................................34
SECTION 9.2  Transfer of Certificates.........................................35
SECTION 9.3  Deemed Security Holders..........................................36
SECTION 9.4  Book Entry Interests.............................................36
SECTION 9.5  Notices to Clearing Agency.......................................37
SECTION 9.6  Appointment of Successor Clearing Agency.........................37
SECTION 9.7  Definitive Preferred Security Certificates.......................37
SECTION 9.8  Mutilated, Destroyed, Lost or Stolen Certificates................38

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                                                                            PAGE
                                    ARTICLE X
      LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, TRUSTEES OR OTHERS

SECTION 10.1  Liability.......................................................38
SECTION 10.2  Exculpation.....................................................39
SECTION 10.3  Fiduciary Duty..................................................39
SECTION 10.4  Indemnification.................................................40
SECTION 10.5  Outside Businesses..............................................43

                                   ARTICLE XI
                                   ACCOUNTING

SECTION 11.1  Fiscal Year.....................................................44
SECTION 11.2  Certain Accounting Matters......................................44
SECTION 11.3  Banking.........................................................44
SECTION 11.4  Withholding.....................................................45

                                   ARTICLE XII
                             AMENDMENTS AND MEETINGS

SECTION 12.1  Amendments......................................................45
SECTION 12.2  Meetings of the Holders of Securities:
              Action by Written Consent.......................................47

                                  ARTICLE XIII
          REPRESENTATIONS OF INSTITUTIONAL TRUSTEE AND DELAWARE TRUSTEE

SECTION 13.1  Representations and Warranties of Institutional Trustee.........48
SECTION 13.2  Representations and Warranties of Delaware Trustee..............49

                                   ARTICLE XIV
                                  MISCELLANEOUS

SECTION 14.1  Notices.........................................................50
SECTION 14.2  Governing Law...................................................51
SECTION 14.3  Intention of the Parties........................................51
SECTION 14.4  Headings........................................................51
SECTION 14.5  Successors and Assigns..........................................51
SECTION 14.6  Partial Enforceability..........................................52
SECTION 14.7  Counterparts....................................................52

ATTACHMENTS

Annex I - Terms of Securities
Exhibit A-1 - Form of Preferred Security Certificate
Exhibit A-2 - Form of Common Security Certificate

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       AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration") dated and
effective as of [________, 200__], by the Trustees (as defined herein), the
Sponsor (as defined herein) and by the holders, from time to time, of undivided
beneficial interests in the assets of the Trust to be issued pursuant to this
Declaration;

       WHEREAS, certain of the Trustees and the Sponsor established Allegheny
Capital Trust III (the "Trust"), a trust under the Business Trust Act (as
defined herein), pursuant to a Declaration of Trust dated as of January 31, 2002
(the "Original Declaration"), and a Certificate of Trust filed with the
Secretary of State of the State of Delaware on January 31, 2002, for the sole
purpose of issuing and selling certain securities representing undivided
beneficial interests in the assets of the Trust and investing the proceeds
thereof in certain Debentures (as defined herein) of the Debenture Issuer (as
defined herein);

         WHEREAS, all of the Trustees and the Sponsor, by this Declaration,
amend and restate each and every term and provision of the Original Declaration.

       NOW, THEREFORE, it being the intention of the parties hereto to continue
the Trust as a business trust under the Business Trust Act and that this
Declaration constitute the governing instrument of such business trust, the
Trustees declare that all assets contributed to the Trust will be held in trust
for the benefit of the holders, from time to time, of the securities
representing undivided beneficial interests in the assets of the Trust issued
hereunder, subject to the provisions of this Declaration.

                                   ARTICLE I
                         INTERPRETATION AND DEFINITIONS

SECTION 1.1  DEFINITIONS.

       Unless the context otherwise requires:

       (a) Capitalized terms used in this Declaration but not defined in the
preamble above have the respective meanings assigned to them in this Section
1.1;

       (b) a term defined anywhere in this Declaration has the same meaning
throughout;

       (c) all references to "the Declaration" or "this Declaration" are to this
Declaration as modified, supplemented or amended from time to time;

       (d) all references in this Declaration to Articles, Sections, Annexes and
Exhibits are to Articles and Sections of, and Annexes and Exhibits to, this
Declaration unless otherwise specified;

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       (e) a term defined in the Trust Indenture Act has the same meaning when
used in this Declaration unless otherwise defined in this Declaration or unless
the context otherwise requires; and

       (f)    a reference to the singular includes the plural and vice versa.

       "Affiliate" has the same meaning as given to that term in Rule 405 under
the Securities Act, or any successor provision thereto and as may be amended
from time to time.

       "Allegheny Energy" means Allegheny Energy, Inc., a Maryland corporation.

       "Authorized Officer" of a Person means any vice president, senior vice
president, president, chief executive officer, treasurer, controller or other
individual executing a document or otherwise acting by virtue of authority
vested in such individual by such Person in an instrument expressly designating
such individual as an Authorized Officer and referencing this Declaration.

       "Book Entry Interest" means a beneficial interest in a Global
Certificate, ownership and transfers of which shall be maintained and made
through book entries by a Clearing Agency as described in Section 9.4.

       "Business Day" means any day other than a day on which banking
institutions in the City of New York, New York are authorized or required by any
applicable law or executive order to close.

       "Business Trust Act" means Chapter 38 of Title 12 of the Delaware Code,
12 Del. Code Sections 3801 et seq., as it may be amended from time to time, or
any successor legislation.

       "Certificate" means a Common Security Certificate or a Preferred Security
Certificate.

       "Clearing Agency" means an organization registered as a "Clearing Agency"
pursuant to Section 17A of the Exchange Act that is acting as depositary for the
Preferred Securities and in whose name or in the name of a nominee of that
organization shall be registered a Global Certificate and which shall undertake
to effect book entry transfers and pledges of the Preferred Securities.

       "Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time the Clearing
Agency effects book entry transfers and pledges of securities deposited with the
Clearing Agency.

       "Closing Date" means the Closing Date as defined in the Underwriting
Agreement, which date is also the date of execution and delivery of this
Declaration.

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       "Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor legislation.

       "Commission" means the Securities and Exchange Commission.

       "Common Security" has the meaning specified in Section 7.1.

       "Common Security Certificate" means a definitive certificate in fully
registered form representing a Common Security substantially in the form of
Exhibit A-2.

       "Company Indemnified Person" means (a) any Regular Trustee; (b) any
Affiliate of any Regular Trustee; (c) any officers, directors, shareholders,
members, partners, employees, representatives or agents of any Regular Trustee;
or (d) any officer, employee or agent of the Trust or its Affiliates.

       "Corporate Trust Office" means the office of the Institutional Trustee at
which the corporate trust business of the Institutional Trustee shall, at any
particular time, be principally administered, which office at the date of
execution of this Declaration is located at 153 West 51st Street, 5th Floor, New
York, New York 10019.

       "Covered Person" means: (a) any officer, director, shareholder,  partner,
member,  representative,  employee or agent of (i) the Trust or (ii) the Trust's
Affiliates; and (b) any Holder of Securities.

       "Debenture Issuer" means the Sponsor, in its capacity as issuer of the
Debentures under the Indenture.

       "Debenture  Trustee" means Bank One Trust Company,  N.A. as trustee under
the Indenture until a successor is appointed  thereunder,  and thereafter  means
such successor trustee.

       "Debentures" means the [O]% Subordinated Debentures due [O], to be issued
by the Debenture Issuer pursuant to the Indenture to be held by the
Institutional Trustee.

       "Definitive Preferred Security Certificates" has the meaning set forth in
Section 9.4.

       "Delaware Trustee" has the meaning set forth in Section 5.2.

       "Distribution" has the meaning set forth in Section 6.1.

       "DTC" means The Depository Trust Company, the initial Clearing Agency.

       "Event of Default" in respect of the Securities means an Event of Default
(as defined in the Indenture) has occurred and is continuing in respect of the
Debentures.

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       "Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, or any successor legislation.

       "Fiduciary Indemnified Person" has the meaning set forth in Section
10.4(b).

       "Global Certificate" has the meaning set forth in Section 9.4.

       "Holder" means a Person in whose name a Certificate representing a
Security is registered, such Person being a beneficial owner within the meaning
of the Business Trust Act.

       "Indemnified  Person" means a Company  Indemnified  Person or a Fiduciary
Indemnified Person.

       "Indenture" means the Subordinated Debt Indenture dated as of
[__________, 200__], between the Debenture Issuer and the Debenture Trustee, as
amended or supplemented from time to time, pursuant to which the Debentures are
to be issued.

       "Institutional Trustee" means the Trustee meeting the eligibility
requirements set forth in Section 5.3.

       "Institutional Trustee Account" has the meaning set forth in Section
3.8(c).

       "Investment Company" means an investment company as defined in the
Investment Company Act.

       "Investment Company Act" means the Investment Company Act of 1940, as
amended, or any successor legislation.

       "Investment Company Event" has the meaning set forth in Annex I hereto.

       "Legal Action" has the meaning set forth in Section 3.6(g).

       "List of Holders" has the meaning set forth in Section 2.2(a).

       "Majority in liquidation amount of the Securities" means, except to the
extent otherwise provided in the terms of the Preferred Securities or by the
Trust Indenture Act, Holder(s) of outstanding Securities voting together as a
single class or, as the context may require, Holders of outstanding Preferred
Securities or Holders of outstanding Common Securities voting separately as a
class, who are the record owners of an aggregate liquidation amount representing
more than 50% of the aggregate liquidation amount (including the stated amount
that would be paid on redemption, liquidation or otherwise, plus accrued and
unpaid Distributions to the date upon which the voting percentages are
determined) of all outstanding Securities of the relevant class.

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       "Officers' Certificate" means, with respect to any Person, a certificate
signed by two Authorized Officers of such Person. Any Officers' Certificate
delivered with respect to compliance with a condition or covenant provided for
in this Declaration shall include:

       (A)    a statement that each officer signing the Officers' Certificate
has read the covenant or condition and the definitions relating thereto;

       (B)    a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers' Certificate;

       (C)    a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such officer
to express an informed opinion as to whether or not such covenant or condition
has been complied with; and

       (D)    a statement as to whether, in the opinion of each such officer,
such condition or covenant has been complied with.

       "Paying Agent" has the meaning specified in Section 3.8(h).

       "Payment Amount" has the meaning specified in Section 6.1.

       "Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.

       "Preferred Securities Guarantee" means the guarantee agreement dated as
of [__________, 200__], between the Sponsor and the trustee named therein
relating to the Preferred Securities.

       "Preferred Security" has the meaning specified in Section 7.1.

       "Preferred Security Beneficial Owner" means, with respect to a Book Entry
Interest, a Person who is the beneficial owner of such Book Entry Interest, as
reflected on the books of the Clearing Agency, or on the books of a Person
maintaining an account with such Clearing Agency (directly as a Clearing Agency
Participant or as an indirect participant, in each case in accordance with the
rules of such Clearing Agency).

       "Preferred Security Certificate" means a certificate representing a
Preferred Security substantially in the form of Exhibit A-1.

       "Quorum" means a majority of the Regular Trustees or, if there are only
two Regular Trustees, both of them.

       "Regular Trustee" has the meaning specified in Section 5.1.

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       "Related Party" means, with respect to the Sponsor, any direct or
indirect wholly owned subsidiary of the Sponsor or any other Person that owns,
directly or indirectly, 100% of the outstanding voting securities of the
Sponsor.

       "Responsible Officer" means, with respect to the Institutional Trustee,
any officer of the Institutional Trustee with direct responsibility for the
administration of this Amended and Restated Declaration of Trust and also means,
with respect to a particular corporate trust matter, any other officer to whom
such matter is referred because of that officer's knowledge of and familiarity
with the particular subject.

       "Securities" means the Common Securities and the Preferred Securities.

       "Securities Act" means the Securities Act of 1933, as amended from time
to time, or any successor legislation.

       "Special Event" has the meaning set forth in Annex I hereto.

       "Sponsor" means Allegheny Energy, Inc., or any successor entity in a
merger, consolidation or amalgamation, in its capacity as sponsor of the Trust.

       "Successor Delaware Trustee" has the meaning set forth in Section 5.6.

       "Successor Entity" has the meaning set forth in Section 3.15(b).

       "Successor Institutional Trustee" has the meaning set forth in Section
5.6.

       "Successor Securities" has the meaning set forth in Section 3.15(b).

       "Super Majority" has the meaning set forth in Section 2.6(a)(ii).

       "Tax Event" has the meaning set forth in Annex I hereto.

       "Treasury Regulations" means the income tax regulations, including
temporary and proposed regulations, promulgated under the Code by the United
States Treasury, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).

       "Trustee" or "Trustees" means each Person who has signed this Declaration
as a trustee, so long as such Person shall continue in office in accordance with
the terms hereof, and all other Persons who may from time to time be duly
appointed, qualified and serving as Trustees in accordance with the provisions
hereof, and references herein to a Trustee or the Trustees shall refer to such
Person or Persons solely in their capacity as trustees hereunder.

       "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended
from time to time, or any successor legislation.

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       "25% in liquidation amount of the Securities" means, except as provided
in the terms of the Preferred Securities or by the Trust Indenture Act,
Holder(s) of outstanding Securities voting together as a single class or, as the
context may require, Holders of outstanding Preferred Securities or Holders of
outstanding Common Securities voting separately as a class, who are the record
owners of an aggregate liquidation amount representing 25% or more of the
aggregate liquidation amount (including the stated amount that would be paid on
redemption, liquidation or otherwise, plus accrued and unpaid Distributions to
the date upon which the voting percentages are determined) of all outstanding
Securities of the relevant class.

       "Underwriting Agreement" means the Underwriting Agreement for the
offering and sale of Preferred Securities which shall be incorporated by
reference into the registration statement on Form S-3 of Allegheny Energy and
the Trust relating to the Preferred Securities and the related Preferred
Securities Guarantee.

                                   ARTICLE II
                               TRUST INDENTURE ACT

       SECTION 2.1   TRUST INDENTURE ACT: APPLICATION.

       (a)    This Declaration is subject to the provisions of the Trust
Indenture Act that are required to be part of this Declaration and shall, to the
extent applicable, be governed by such provisions.

       (b)    The Institutional Trustee shall be the only Trustee that is a
Trustee for the purposes of the Trust Indenture Act.

       (c)    If and to the extent that any provision of this Declaration
limits, qualifies or conflicts with the duties imposed by Sections 310 to 317,
inclusive, of the Trust Indenture Act, such imposed duties shall control.

       (d)    The application of the Trust Indenture Act to this Declaration
shall not affect the nature of the Securities as equity securities representing
undivided beneficial interests in the assets of the Trust.

       SECTION 2.2   LISTS OF HOLDERS OF SECURITIES.

       (a)    Each of the Sponsor and the Regular Trustees on behalf of the
       Trust shall provide the Institutional Trustee (i) within 14 days after
       each record date for payment of Distributions, a list, in such form as
       the Institutional Trustee may reasonably require, of the names and
       addresses of the Holders of the Securities ("List of Holders") as of such
       record date, and (ii) at any other time, within 30 days of receipt by the
       Trust of a written request therefor, a List of Holders as of a date no
       more than 14 days before such List of Holders is given to the
       Institutional Trustee; PROVIDED, that neither the Sponsor nor the Regular
       Trustees on behalf of the Trust shall be obligated to provide such List
       of Holders

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       at any time the List of Holders does not differ from the most recent List
       of Holders given to the Institutional Trustee by the Sponsor and the
       Regular Trustees on behalf of the Trust. The Institutional Trustee shall
       preserve, in as current a form as is reasonably practicable, all
       information contained in Lists of Holders given to it or which it
       receives in the capacity as Paying Agent (if acting in such capacity)
       provided that the Institutional trustee may destroy any List of Holders
       previously given to it on receipt of a new List of Holders. Unless
       supplemented, amended or restated pursuant to this Section 2.2(a), the
       Institutional Trustee shall be entitled to rely exclusively on the last
       List of Holders provided to it by the Sponsor or any Regular Trustee.

       (b)    The Institutional Trustee shall comply with its obligations under
Sections 311(a), 311(b) and 312(b) of the Trust Indenture Act.

       SECTION 2.3   REPORTS BY THE INSTITUTIONAL TRUSTEE.

       Within 60 days after May 15 of each year, the Institutional Trustee shall
provide to the Holders of the Preferred Securities such reports as are required
by Section 313 of the Trust Indenture Act, if any, in the form and in the manner
provided by such Section 313. The Institutional Trustee shall also comply with
the requirements of Section 313(d) of the Trust Indenture Act.

       SECTION 2.4   PERIODIC REPORTS TO INSTITUTIONAL TRUSTEE.

       Each of the Sponsor and the Regular Trustees on behalf of the Trust shall
provide to the Institutional Trustee such documents, reports and information as
required by Sections 314 (if any) and the compliance certificate required by
Section 314 of the Trust Indenture Act in the form, in the manner and at the
times required by Section 314 of the Trust Indenture Act.

       SECTION 2.5   EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.

       Each of the Sponsor and the Regular Trustees on behalf of the Trust shall
provide to the Institutional Trustee such evidence of compliance with any
conditions precedent, if any, provided for in this Declaration that relate to
any of the matters set forth in Sections 314(c) of the Trust Indenture Act. Any
certificate or opinion required to be given by an officer pursuant to Section
314(c)(1) may be given in the form of an Officers' Certificate.

       SECTION 2.6   EVENTS OF DEFAULT: WAIVER.

       (a)    The Holders of a Majority in liquidation amount of Preferred
Securities may, by vote, on behalf of the Holders of all of the Preferred
Securities, waive any past Event of Default in respect of the Preferred
Securities and its consequences; PROVIDED, that if the underlying Event of
Default under the Indenture:

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              (i)    is not waivable under the Indenture, the Event of Default
under the Declaration shall also not be waivable; or

              (ii)   is waivable only with the consent of holders of more than a
majority in principal amount of the Debentures (a "Super Majority") affected
thereby, only the Holders of at least the proportion in aggregate liquidation
amount of the Preferred Securities that the relevant Super Majority represents
of the aggregate principal amount of the Debentures outstanding may waive such
Event of Default in respect of the Preferred Securities under the Declaration.

              The foregoing provisions of this Section 2.6(a) shall be in lieu
of Section 316(a)(1)(B) of the Trust Indenture Act and such Section 316(a)(l)(B)
of the Trust Indenture Act is hereby expressly excluded from this Declaration
and the Securities, as permitted by the Trust Indenture Act. Upon such waiver,
any such default shall cease to exist, and any Event of Default with respect to
the Preferred Securities arising therefrom shall be deemed to have been cured,
for every purpose of this Declaration, but no such waiver shall extend to any
subsequent or other default or an Event of Default with respect to the Preferred
Securities or impair any right consequent thereon. Any waiver by the Holders of
the Preferred Securities of an Event of Default with respect to the Preferred
Securities shall also be deemed to constitute a waiver by the Holders of the
Common Securities of any such Event of Default with respect to the Common
Securities for all purposes of this Declaration without any further act, vote,
or consent of the Holders of the Common Securities.

       (b)    The Holders of a Majority in liquidation amount of the Common
Securities may, by vote, on behalf of the Holders of all of the Common
Securities, waive any past Event of Default with respect to the Common
Securities and its consequences; PROVIDED, that if the underlying Event of
Default under the Indenture:

              (i)    is not waivable under the Indenture, except where the
Holders of the Common Securities are deemed to have waived such Event of Default
under the Declaration as provided in this Section 2.6(b), the Event of Default
under the Declaration shall also not be waivable; or

              (ii)   is waivable only with the consent of a Super Majority,
except where the Holders of the Common Securities are deemed to have waived such
Event of Default under the Declaration as provided in this Section 2.6(b), only
the Holders of at least the proportion in aggregate liquidation amount of the
Common Securities that the relevant Super Majority represents of the aggregate
principal amount of the Debentures outstanding may waive such Event of Default
in respect of the Common Securities under the Declaration; PROVIDED, FURTHER,
each Holder of Common Securities will be deemed to have waived any such Event of
Default and all Events of Default with respect to the Common Securities and its
consequences until all Events of Default with respect to the Preferred
Securities have been cured, waived or otherwise eliminated, and until such
Events of Default with respect to the Preferred Securities have been cured,
waived or

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otherwise eliminated, the Institutional Trustee will be deemed to be acting
solely on behalf of the Holders of the Preferred Securities and only the Holders
of the Preferred Securities will have the right to direct the Institutional
Trustee in accordance with the terms of the Securities. The foregoing provisions
of this Section 2.6(b) shall be in lieu of Sections 316(a)(1)(A) and
316(a)(l)(B) of the Trust Indenture Act and such sections are hereby expressly
excluded from this Declaration and the Securities, as permitted by the Trust
Indenture Act. Subject to the foregoing provisions of this Section 2.6(b), upon
the waiver of an Event of Default by the Holders of a Majority in liquidation
amount of the Common Securities, any such default shall cease to exist and any
Event of Default with respect to the Common Securities arising therefrom shall
be deemed to have been cured for every purpose of this Declaration, but no such
waiver shall extend to any subsequent or other default or Event of Default with
respect to the Common Securities or impair any right consequent thereon.

       (c)    A waiver of an Event of Default under the Indenture by the
Institutional Trustee, at the direction of the Holders of the Preferred
Securities, constitutes a waiver of the corresponding Event of Default under
this Declaration. The foregoing provisions of this Section 2.6(c) shall be in
lieu of Sections 316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act and
such Sections 316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act are
hereby expressly excluded from this Declaration and the Securities, as permitted
by the Trust Indenture Act.

       SECTION 2.7   EVENT OF DEFAULT: NOTICE.

       (a)    The Institutional Trustee shall, within 90 days after a
Responsible Officer of the Institutional Trustee has knowledge of the occurrence
of an Event of Default, transmit by mail, first class postage prepaid, to the
Holders of the Securities (i) notices of all such defaults, unless such Event of
Default has been cured before the giving of such notice and (ii) any notice of
default received from the Indenture Trustee with respect to the Debentures,
which notice from the Institutional Trustee to the Holders shall state that an
Event of Default under the Indenture also constitutes an Event of Default with
respect to the Securities; PROVIDED, that except for a default in the payment of
principal of (or premium, if any) or interest on any of the Debentures or in the
payment of any sinking fund installment established for the Debentures, the
Institutional Trustee shall be protected in withholding such notice if and so
long as a Responsible Officer of the Institutional Trustee in good faith
determines that the withholding of such notice is in the interests of the
Holders of the Securities.

       (b)    The Institutional Trustee shall not be deemed to have knowledge of
any default except:

              (i)    a default under Sections 501(1) and 501(2) of the
Indenture; or

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              (ii)   any default as to which the Institutional Trustee shall
have received written notice or of which a Responsible Officer of the
Institutional Trustee charged with the administration of this Declaration shall
have actual knowledge.

                                   ARTICLE III
                                  ORGANIZATION

       SECTION 3.1   NAME.

       The Trust is named "Allegheny Capital Trust I", as such name may be
modified from time to time by the Regular Trustees following written notice to
the Holders of Securities. The Trust's activities may be conducted under the
name of the Trust or any other name deemed advisable by the Regular Trustees.

       SECTION 3.2   OFFICE.

       The address of the principal office of the Trust is c/o Allegheny Energy,
Inc., 10435 Downsville Pike, Hagerstown, Maryland 21740. On ten Business Days'
written notice to the Institutional Trustee, the Delaware Trustee and the
Holders of Securities, the Regular Trustees may designate another principal
office.

       SECTION 3.3   DECLARATION.

       (a)    The exclusive purposes and functions of the Trust are (i) to issue
and sell Securities and use the proceeds from such sale to acquire the
Debentures, (ii) to maintain the status of the Trust as a grantor trust for
United States federal income tax purposes, and (iii) except as otherwise limited
herein, to engage in only those other activities necessary, advisable or
incidental thereto. The Trust shall not borrow money, issue debt or reinvest
proceeds derived from investments, pledge any of its assets, or otherwise
undertake (or permit to be undertaken) any activity that would cause the Trust
not to be classified for United States federal income tax purposes as a grantor
trust.

       (b)    The Trust will be classified as a grantor trust for United States
federal income tax purposes under Subpart E of Subchapter J of the Code,
pursuant to which the Holders of the Preferred Securities and the Common
Securities will be the owners of the Trust for United States federal income tax
purposes, and such Holders will include directly in their gross income the
income, gain, deduction or loss of the Trust as if the Trust did not exist. By
the acceptance of this Trust, neither the Trustees, the Sponsor nor the owners
of the Preferred Securities or Common Securities will take any position for
United States federal income tax purposes which is contrary to the
classification of the Trust as a grantor trust.

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       SECTION 3.4   AUTHORITY.

       Subject to the limitations provided in this Declaration and to the
specific duties of the Institutional Trustee, the Regular Trustees shall have
exclusive and complete authority to carry out the purposes of the Trust. An
action taken by the Regular Trustees in accordance with their powers shall
constitute the act of and serve to bind the Trust and an action taken by the
Institutional Trustee on behalf of the Trust in accordance with its powers shall
constitute the act of and serve to bind the Trust. In dealing with the Trustees
acting on behalf of the Trust, no person shall be required to inquire into the
authority of the Trustees to bind the Trust. Persons dealing with the Trust are
entitled to rely conclusively on the power and authority of the Trustees as set
forth in this Declaration.

       SECTION 3.5   TITLE TO PROPERTY OF THE TRUST.

       Except as provided in Section 3.8 with respect to the Debentures and the
Institutional Trustee Account or as otherwise expressly provided in this
Declaration, legal title to all assets of the Trust shall be vested in the
Trust. The Holders shall not have legal title to any part of the assets of the
Trust, but shall have an undivided beneficial interest in the assets of the
Trust.

       SECTION 3.6   POWERS AND DUTIES OF THE REGULAR TRUSTEES.

       The Regular Trustees shall have the exclusive power, duty and authority
to cause the Trust to engage in the following activities:

       (a)    to issue and sell the Preferred Securities and the Common
Securities in accordance with this Declaration; PROVIDED, HOWEVER, that the
Trust may issue no more than one series of Preferred Securities and no more than
one series of Common Securities, and, PROVIDED, FURTHER, that there shall be no
beneficial interests in the Trust other than the Securities, and the issuance of
Securities shall be limited to a simultaneous issuance of both Preferred
Securities and Common Securities on the Closing Date;

       (b)    in connection with the issue and sale of the Preferred Securities,
at the direction of the Sponsor, to:

              (i)    assist in the preparation of a prospectus in preliminary
and final form prepared by the Sponsor in relation to the offering and sale of
Preferred Securities and to assist in the preparation of and filing with the
Commission on behalf of the Trust a registration statement on Form S-3 or on
another appropriate form (including, if appropriate, a registration statement
under Rule 462(b) of the Securities Act), including any pre-effective or
post-effective amendments thereto, relating to the registration under the
Securities Act of the Preferred Securities;

              (ii)   execute and file any documents prepared by the Sponsor, or
take any acts determined by the Sponsor to be necessary, in order to qualify or
register all or

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part of the Preferred Securities in any State in which the Sponsor has
determined to qualify or register such Preferred Securities for sale;

              (iii)  assist in the filing of an application, prepared by the
Sponsor, to the New York Stock Exchange, Inc., any other national stock exchange
or the Nasdaq National Market for listing upon notice of issuance of any
Preferred Securities;

              (iv)   assist in the filing with the Commission on behalf of the
Trust of a registration statement on Form 8-A, prepared by the Sponsor,
including any pre-effective or post-effective amendments thereto, relating to
the registration of the Preferred Securities under Section 12(b) of the Exchange
Act;

              (v)    assist in the preparation of the Underwriting Agreement
providing for the sale and distribution of the Preferred Securities; and

              (vi)   execute and deliver letters, documents, or instruments with
the Clearing Agency relating to the Preferred Securities;

       (c)    to acquire the Debentures with the proceeds of the sale of the
Preferred Securities and the Common Securities; PROVIDED, HOWEVER, that the
Regular Trustees shall cause legal title to the Debentures to be held of record
in the name of the Institutional Trustee for the benefit of the Trust and the
Holders of the Preferred Securities and the Holders of Common Securities;

       (d)    to give the Sponsor and the Institutional Trustee prompt written
notice of the occurrence of a Special Event;

       (e)    to establish a record date with respect to all actions to be taken
hereunder that require a record date be established, including and with respect
to, for the purposes of Section 316(c) of the Trust Indenture Act,
Distributions, voting rights, redemptions and exchanges, and to issue relevant
notices to the Holders of Preferred Securities and Holders of Common Securities
as to such actions and applicable record dates;

       (f)    to take all actions and perform such duties as may be required of
the Regular Trustees pursuant to the terms of the Securities or this
Declaration;

       (g)    to bring or defend, pay, collect, compromise, arbitrate, resort to
legal action, or otherwise adjust claims or demands of or against the Trust
("Legal Action"), unless pursuant to Section 3.8(e), the Institutional Trustee
has the exclusive power to bring such Legal Action;

       (h)    to employ or otherwise engage employees and agents (who may be
designated as officers with titles) and managers, contractors, advisors, and
consultants and pay reasonable compensation for such services;

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       (i)    to give the certificate required by Section 314(a)(4) of the Trust
Indenture Act to the Institutional Trustee, which certificate may be executed by
any Regular Trustee;

       (j)    to incur expenses that are necessary or incidental to carry out
any of the purposes of the Trust;

       (k)    to act as, or appoint another Person to act as, registrar and
transfer agent for the Securities;

       (l)    to give prompt written notice to the Holders of the Securities of
any notice received from the Debenture Issuer of its election to defer payments
of interest on the Debentures by extending the interest payment period under the
Indenture;

       (m)    to take all action that may be necessary or appropriate for the
preservation and the continuation of the Trust's valid existence, rights,
franchises and privileges as a statutory business trust under the laws of the
State of Delaware and of each other jurisdiction in which such existence is
necessary to protect the limited liability of the Holders of the Preferred
Securities or to enable the Trust to effect the purposes for which the Trust was
created;

       (n)    to take any action, not inconsistent with this Declaration or with
applicable law, that the Regular Trustees determine in their discretion to be
necessary or desirable in carrying out the activities of the Trust as set out in
this Section 3.6, including, but not limited to: (i) causing the Trust not to be
deemed to be an Investment Company required to be registered as such under the
Investment Company Act; (ii) causing the Trust to be classified for United
States federal income tax purposes as a grantor trust; and (iii) cooperating
with the Debenture Issuer to ensure that the Debentures will be treated as
indebtedness of the Debenture Issuer for United States federal income tax
purposes; PROVIDED, that such action does not materially and adversely affect
the interests of Holders;

       (o)    to the extent provided in this Declaration, terminating,
dissolving and liquidating the Trust and preparing, executing and filing the
certificate of cancellation with the Secretary of State of the State of
Delaware;

       (p)    to take all action necessary to cause all applicable tax returns
and tax information reports that are required to be filed with respect to the
Trust to be duly prepared and filed by the Regular Trustees, on behalf of the
Trust; and

       (q)    to execute all documents or instruments, perform all duties and
powers, and do all things for and on behalf of the Trust in all matters
necessary or incidental to the foregoing.

       The Regular Trustees must exercise the powers set forth in this Section
3.6 in a manner that is consistent with the purposes and functions of the Trust
set out in Section

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3.3, and the Regular Trustees shall not take any action that is inconsistent
with the purposes and functions of the Trust set forth in Section 3.3.

       Subject to this Section 3.6, the Regular Trustees shall have none of the
powers or the authority of the Institutional Trustee set forth in Section 3.8.

       Any expenses incurred by the Regular Trustees pursuant to this Section
3.6 shall be reimbursed by the Debenture Issuer.

       SECTION 3.7   PROHIBITION OF ACTIONS BY THE TRUST AND THE TRUSTEES.

       (a)    The Trust shall not, and the Trustees (including the Institutional
Trustee) shall not cause the Trust to, engage in any activity other than as
required or authorized by this Declaration. In particular, the Trust shall not
and no Trustee (including the Institutional Trustee) shall cause the Trust to:

              (i)    invest any proceeds received by the Trust from holding the
Debentures, but shall promptly distribute all such proceeds to Holders of
Securities pursuant to the terms of this Declaration and of the Securities;

              (ii)   acquire any assets other than as expressly provided herein;

              (iii)  possess Trust property for other than a Trust purpose;

              (iv)   make any loans or incur any indebtedness other than loans
represented by the Debentures;

              (v)    possess any power or otherwise act in such a way as to vary
the Trust assets or the terms of the Securities in any way whatsoever;

              (vi)   issue any securities or other evidences of beneficial
ownership of, or beneficial interest in, the Trust other than the Securities;

              (vii)  other than as provided in this Declaration or Annex I, (A)
direct the time, method and place of exercising any trust or power conferred
upon the Debenture Trustee with respect to the Debentures, (B) waive any past
default that is waivable under the Indenture, or (C) exercise any right to
rescind or annul any declaration that the principal of all the Debentures shall
be due and payable;

              (viii) consent to any amendment, modification or termination of
the Indenture or the Debentures where such consent shall be required unless the
Trust shall have received an opinion of counsel to the effect that such
amendment, modification or termination will not cause more than an insubstantial
risk that the Trust will not be classified as a grantor trust for United States
federal income tax purposes; or

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              (ix)   take any action inconsistent with the status of the Trust
as a grantor trust for United States federal income tax purposes.

       SECTION 3.8   POWERS AND DUTIES OF THE INSTITUTIONAL TRUSTEE.

       (a)    The legal title to the Debentures shall be owned by and held of
record in the name of the Institutional Trustee in trust for the benefit of the
Holders of the Securities. The right, title and interest of the Institutional
Trustee to the Debentures shall vest automatically in each Person who may
hereafter be appointed as Institutional Trustee in accordance with Section 5.6.
Such vesting and cessation of title shall be effective whether or not
conveyancing documents with regard to the Debentures have been executed and
delivered.

       (b)    The Institutional Trustee shall not transfer its right, title and
interest in the Debentures to the Regular Trustees or to the Delaware Trustee
(if the Institutional Trustee does not also act as Delaware Trustee).

       (c)    The Institutional Trustee shall:

              (i)    establish and maintain a segregated non-interest bearing
trust account (the "Institutional Trustee Account") in the name of and under the
exclusive control of the Institutional Trustee on behalf of the Holders of the
Securities and, upon the receipt of payments of funds made in respect of the
Debentures held by the Institutional Trustee, deposit such funds into the
Institutional Trustee Account and make payments to the Holders of the Preferred
Securities and Holders of the Common Securities from the Institutional Trustee
Account in accordance with Section 6.1. Funds in the Institutional Trustee
Account shall be held uninvested until disbursed in accordance with this
Declaration. The Institutional Trustee Account shall be an account that is
maintained with a banking institution the rating on whose long-term unsecured
indebtedness assigned by a "nationally recognized statistical rating
organization," as that term is defined for purposes of Rule 436(g)(2) under the
Securities Act, is at least equal to the rating assigned to the Preferred
Securities by a nationally recognized statistical rating organization, unless
the Preferred Securities are not rated, in which case the banking institution's
long-term unsecured indebtedness shall be rated at least investment grade by
such an organization;

              (ii)   engage in such ministerial activities as shall be specified
in written instructions from the Regular Trustees or the Sponsor to effect the
redemption of the Preferred Securities and the Common Securities to the extent
the Debentures are redeemed or mature; and

              (iii)  upon written notice of distribution issued by the Regular
Trustees in accordance with the terms of the Securities, engage in such
ministerial activities as shall be specified in written instructions from the
Regular Trustees or the Sponsor to effect the distribution of the Debentures to
Holders of Securities upon the occurrence of

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certain Special Events or other specified circumstances pursuant to the terms of
the Securities.

       (d)    The Institutional Trustee shall take all actions and perform such
duties as may be specifically required of the Institutional Trustee pursuant to
the terms of the Securities or this Declaration.

       (e)    Subject to Section 2.6, the Institutional Trustee shall take any
Legal Action which arises out of or in connection with an Event of Default of
which a Responsible Officer of the Institutional Trustee has actual knowledge or
the Institutional Trustee's duties and obligations under this Declaration or the
Trust Indenture Act.

       (f)    The Institutional Trustee shall not resign as a Trustee unless
either:

              (i)    the Trust has been completely liquidated and the proceeds
of the liquidation distributed to the Holders of Securities pursuant to the
terms of the Securities; or

              (ii)   a Successor Institutional Trustee has been appointed and
has accepted that appointment in accordance with Section 5.6.

       (g)    The Institutional Trustee shall have the legal power to exercise
all of the rights, powers and privileges of a holder of Debentures under the
Indenture and, if an Event of Default actually known to a Responsible Officer of
the Institutional Trustee occurs and is continuing, the Institutional Trustee
shall, for the benefit of Holders of the Securities, enforce its rights as
holder of the Debentures subject to the rights of the Holders pursuant to the
terms of such Securities, this Declaration, the Business Trust Act and the Trust
Indenture Act.

       (h)    The Institutional Trustee may authorize one or more Persons (each,
a "Paying Agent") to pay Distributions, redemption payments or liquidation
payments on behalf of the Trust with respect to all Securities and any such
Paying Agent shall comply with Section 317(b) of the Trust Indenture Act. Any
Paying Agent may be removed by the Institutional Trustee at any time and a
successor Paying Agent or additional Paying Agents may be appointed at any time
by the Institutional Trustee.

       (i)    Subject to this Section 3.8, the Institutional Trustee shall have
none of the duties, liabilities, powers or the authority of the Regular Trustees
set forth in Section 3.6.

       The Institutional Trustee shall be authorized to undertake any actions
set forth in Section 317(a) of the Trust Indenture Act.

       The Institutional Trustee must exercise the powers set forth in this
Section 3.8 in a manner that is consistent with the purposes and functions of
the Trust set out in Section 3.3, and the Institutional Trustee shall not take
any action that is inconsistent with the purposes and functions of the Trust set
out in Section 3.3.

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       SECTION 3.9   CERTAIN DUTIES AND RESPONSIBILITIES OF THE INSTITUTIONAL
TRUSTEE.

       (a)    The Institutional Trustee, before the occurrence of any Event of
Default and after the curing of all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth in
this Declaration and no implied covenants shall be read into this Declaration
against the Institutional Trustee. In case an Event of Default has occurred
(that has not been cured or waived pursuant to Section 2.6) of which a
Responsible Officer of the Institutional Trustee has actual knowledge, the
Institutional Trustee shall exercise such of the rights and powers vested in it
by this Declaration, and use the same degree of care and skill in the exercise
of such rights and powers, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.

       (b)    No provision of this Declaration shall be construed to relieve the
Institutional Trustee from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:

              (i)    prior to the occurrence of an Event of Default and after
the curing or waiving of all such Events of Default that may have occurred:

                     (A)    the duties and obligations of the Institutional
       Trustee shall be determined solely by the express provisions of this
       Declaration and the Institutional Trustee shall not be liable except for
       the performance of such duties and obligations as are specifically set
       forth in this Declaration, and no implied covenants or obligations shall
       be read into this Declaration against the Institutional Trustee; and

                     (B)    in the absence of bad faith on the part of the
       Institutional Trustee, the Institutional Trustee may conclusively rely,
       as to the truth of the statements and the correctness of the opinions
       expressed therein, upon any certificates or opinions furnished to the
       Institutional Trustee and substantially conforming to the requirements of
       this Declaration; but in the case of any such certificates or opinions
       that by any provision hereof are specifically required to be furnished to
       the Institutional Trustee, the Institutional Trustee shall be under a
       duty to examine the same to determine whether or not they substantially
       conform to the requirements of this Declaration;

              (ii)   the Institutional Trustee shall not be liable for any error
of judgment made in good faith by a Responsible Officer of the Institutional
Trustee, unless it shall be proved that the Institutional Trustee was negligent
in ascertaining the pertinent facts;

              (iii)  the Institutional Trustee shall not be liable with respect
to any action taken or omitted to be taken by it in good faith in accordance
with the direction of the Holders of not less than a Majority in liquidation
amount of the Securities relating to


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the time, method and place of conducting any proceeding for any remedy available
to the Institutional Trustee, or exercising any trust or power conferred upon
the Institutional Trustee under this Declaration;

              (iv)   no provision of this Declaration shall require the
Institutional Trustee to expend or risk its own funds or otherwise incur
personal financial liability in the performance of any of its duties or in the
exercise of any of its rights or powers, if it shall have reasonable grounds for
believing that the repayment of such funds or liability is not reasonably
assured to it under the terms of this Declaration or indemnity reasonably
satisfactory to the Institutional Trustee against such risk or liability is not
reasonably assured to it;

              (v)    the Institutional Trustee's sole duty with respect to the
custody, safe keeping and physical preservation of the Debentures and the
Institutional Trustee Account shall be to deal with such property in a similar
manner as the Institutional Trustee deals with similar property for its own
account, subject to the protections and limitations on liability afforded to the
Institutional Trustee under this Declaration and the Trust Indenture Act;

              (vi)   the Institutional Trustee shall have no duty or liability
for or with respect to the value, genuineness, existence or sufficiency of the
Debentures or the payment of any taxes or assessments levied thereon or in
connection therewith;

              (vii)  the Institutional Trustee shall not be liable for any
interest on any money received by it except as it may otherwise agree in writing
with the Sponsor. Money held by the Institutional Trustee need not be segregated
from other funds held by it except in relation to the Institutional Trustee
Account maintained by the Institutional Trustee pursuant to Section 3.8(c)(i) to
the extent required by law; and

              (viii) the Institutional Trustee shall not be responsible for
monitoring the compliance by the Regular Trustees or the Sponsor with their
respective duties under this Declaration, nor shall the Institutional Trustee be
liable for any act, omission, default or misconduct of the Regular Trustees or
the Sponsor.

       SECTION 3.10  CERTAIN RIGHTS OF INSTITUTIONAL TRUSTEE.

       (a)    Subject to the provisions of Section 3.9:

              (i)    the Institutional Trustee may conclusively rely and shall
be fully protected in acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness or other
paper or document believed by it to be genuine and to have been signed, sent or
presented by the proper party or parties;

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              (ii)   any direction or act of the Sponsor or the Regular Trustees
contemplated by this Declaration shall be sufficiently evidenced by an Officers'
Certificate;

              (iii)  whenever in the administration of this Declaration, the
Institutional Trustee shall deem it desirable that a matter be proved or
established before taking, suffering or omitting any action hereunder, the
Institutional Trustee (unless other evidence is herein specifically prescribed)
may, in the absence of bad faith on its part, request and conclusively rely upon
an Officers' Certificate which, upon receipt of such request, shall be promptly
delivered by the Sponsor or the Regular Trustees;

              (iv)   the Institutional Trustee shall have no duty to see to any
recording, filing or registration of any instrument (including any financing or
continuation statement or any filing under tax or securities laws) or any
rerecording, refiling or registration thereof;

              (v)    the Institutional Trustee may consult with counsel or other
experts and the advice or opinion of such counsel and experts with respect to
legal matters or advice within the scope of such experts' area of expertise
shall be full and complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in accordance with
such advice or opinion, such counsel may be counsel to the Sponsor or any of its
Affiliates, and may include any of its employees. The Institutional Trustee
shall have the right at any time to seek instructions concerning the
administration of this Declaration from any court of competent jurisdiction;

              (vi)   the Institutional Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Declaration at the
request or direction of any Holder, unless such Holder shall have provided to
the Institutional Trustee security and indemnity, reasonably satisfactory to the
Institutional Trustee, against the costs, expenses (including attorneys' fees
and expenses and the expenses of the Institutional Trustee's agents, nominees or
custodians) and liabilities that might be incurred by it in complying with such
request or direction, including such reasonable advances as may be requested by
the Institutional Trustee; PROVIDED, that, nothing contained in this Section
3.10(a)(vi) shall be taken to relieve the Institutional Trustee, upon the
occurrence of an Event of Default, of its obligation to exercise the rights and
powers vested in it by this Declaration;

              (vii)  the Institutional Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Institutional Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as it may see fit;

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              (viii) the Institutional Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by or
through agents, custodians, nominees or attorneys and the Institutional Trustee
shall not be responsible for any misconduct or negligence on the part of any
agent or attorney appointed with due care by it hereunder;

              (ix)   any action taken by the Institutional Trustee or its agents
hereunder shall bind the Trust and the Holders of the Securities, and the
signature of the Institutional Trustee or its agents alone shall be sufficient
and effective to perform any such action and no third party shall be required to
inquire as to the authority of the Institutional Trustee to so act or as to its
compliance with any of the terms and provisions of this Declaration, both of
which shall be conclusively evidenced by the Institutional Trustee's or its
agent's taking such action;

              (x)    whenever in the administration of this Declaration the
Institutional Trustee shall deem it desirable to receive instructions with
respect to enforcing any remedy or right or taking any other action hereunder,
the Institutional Trustee (i) may request instructions from the Holders of the
Securities which instructions may only be given by the Holders of the same
proportion in liquidation amount of the Securities as would be entitled to
direct the Institutional Trustee under the terms of the Securities in respect of
such remedy, right or action, (ii) may refrain from enforcing such remedy or
right or taking such other action until such instructions are received, and
(iii) shall be protected in conclusively relying on or acting in or accordance
with such instructions; and

              (xi)   except as otherwise expressly provided by this Declaration,
the Institutional Trustee shall not be under any obligation to take any action
that is discretionary under the provisions of this Declaration.

       (b)    No provision of this Declaration shall be deemed to impose any
duty or obligation on the Institutional Trustee to perform any act or acts or
exercise any right, power, duty or obligation conferred or imposed on it, in any
jurisdiction in which it shall be illegal, or in which the Institutional Trustee
shall be unqualified or incompetent in accordance with applicable law, to
perform any such act or acts, or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Institutional
Trustee shall be construed to be a duty.

       SECTION 3.11  DELAWARE TRUSTEE.

       Notwithstanding any other provision of this Declaration other than
Section 5.2, the Delaware Trustee shall not be entitled to exercise any powers,
nor shall the Delaware Trustee have any of the duties and responsibilities of
the Trustees described in this Declaration. Except as set forth in Section 5.2,
the Delaware Trustee shall be a Trustee for the sole and limited purpose of
fulfilling the requirements of Section 3807(a) of the Business Trust Act. In
performing such limited role, the Delaware Trustee shall have all

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of the rights and protections afforded to the Institutional Trustee under
Section 3.9(b)(i) (except that (i) the Delaware Trustee's standard of care shall
be gross negligence, and (ii) such rights and protections shall pertain to the
Delaware Trustee without regard to the occurrence of any Event of Default) and
Section 3.10 of this Declaration.

       SECTION 3.12  EXECUTION OF DOCUMENTS.

       Unless otherwise determined by the Regular Trustees, and except as
otherwise required by the Business Trust Act, a majority of or, if there are
only two, any Regular Trustee or, if there is only one, such Regular Trustee is
authorized to execute on behalf of the Trust any documents that the Regular
Trustees have the power and authority to execute pursuant to Section 3.6.

       SECTION 3.13  NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES.

       The recitals contained in this Declaration and the Securities shall be
taken as the statements of the Sponsor, and the Trustees do not assume any
responsibility for their correctness. The Trustees make no representations as to
the value or condition of the property of the Trust or any part thereof. The
Trustees make no representations as to the validity or sufficiency of this
Declaration or the Securities.

       SECTION 3.14  DURATION OF TRUST.

       The Trust, unless dissolved pursuant to the provisions of Article VIII
hereof, shall dissolve on January __, 2037.

       SECTION 3.15  MERGERS.

       (a)    The Trust may not consolidate, amalgamate, merge with or into, or
be replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other body, except as
described in Section 3.15(b) and (c) or in Annex I.

       (b)    The Trust may, with the consent of the Regular Trustees or, if
there are more than two, a majority of the Regular Trustees and without the
consent of the Holders of the Securities, the Delaware Trustee or the
Institutional Trustee, and subject to the terms of Section 3.15(c), consolidate,
amalgamate, merge with or into, or be replaced by a trust organized as such
under the laws of any State; provided that:

              (i)    such successor entity (the "Successor Entity") either:

                     (A)    expressly assumes all of the obligations of the
       Trust under the Securities; or

                     (B)    substitutes for the Securities other securities
       having substantially the same terms as the Preferred Securities (the
       "Successor

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<PAGE>


       Securities") so long as the Successor Securities rank the same as the
       Preferred Securities rank with respect to Distributions and payments upon
       liquidation, redemption and otherwise;

              (ii)   the Debenture Issuer expressly acknowledges a trustee of
the Successor Entity that possesses substantially the same powers and duties as
the Institutional Trustee as the Holder of the Debentures;

              (iii)  if the Preferred Securities or any Successor Securities are
listed or traded, or any Successor Securities will be listed upon notification
of issuance, on the same national securities exchange or with any other
organization on which the Preferred Securities are then listed or traded;

              (iv)   such merger, consolidation, amalgamation or replacement
does not cause the Preferred Securities (including any Successor Securities) to
be downgraded by any nationally recognized statistical rating organization;

              (v)    such merger, consolidation, amalgamation or replacement
does not adversely affect the rights, preferences and privileges of the Holders
of the Securities (including any Successor Securities) in any material respect
(other than with respect to any dilution of such Holders' interests in the
Successor Entity as a result of such merger, consolidation, amalgamation or
replacement);

              (vi)   such Successor Entity has a purpose substantially identical
to that of the Trust;

              (vii)  prior to such merger, consolidation, amalgamation or
replacement, the Trust has received an opinion of a nationally recognized
independent counsel to the Trust experienced in such matters to the effect that:

                     (A)    such merger, consolidation, amalgamation or
       replacement does not adversely affect the rights, preferences and
       privileges of the Holders of the Securities (including any Successor
       Securities) in any material respect (other than with respect to any
       dilution of the Holders' interest in the Successor Entity);

                     (B)    following such merger, consolidation, amalgamation
       or replacement, neither the Trust nor the Successor Entity will be
       required to register as an Investment Company;

                     (C)    following such merger, consolidation, amalgamation
       or replacement, the Trust (or the Successor Entity) will continue to be
       classified as a grantor trust for United States federal income tax
       purposes;

              (viii) the Sponsor guarantees the obligations of such Successor
Entity under the Successor Securities at least to the extent provided by the
Preferred Securities Guarantee, and

                                      -23-
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              (ix)   the Sponsor, or, subject to Section 9.1(c), a Related
Party, continues to hold the Common Securities so long as any Preferred
Securities or Successor Securities remain outstanding.

       (c)    Notwithstanding Section 3.15(b), the Trust shall not, without the
consent of Holders of 100% in liquidation amount of the Securities, consolidate,
amalgamate, merge with or into, or be replaced by any other entity or permit any
other entity to consolidate, amalgamate, merge with or into, or replace it, if
in the opinion of a nationally recognized independent tax counsel experienced in
such matters, such consolidation, amalgamation, merger or replacement would
cause the Trust or Successor Entity to be classified as other than a grantor
trust for United States federal income tax purposes.

                                   ARTICLE IV
                                     SPONSOR

       SECTION 4.1   SPONSOR'S PURCHASE OF COMMON SECURITIES.

       On the Closing Date, the Sponsor will purchase all of the Common
Securities issued by the Trust in an amount equal to 3% or more of the capital
of the Trust, at the same time as the Preferred Securities are sold.

       SECTION 4.2   RESPONSIBILITIES OF THE SPONSOR.

       In connection with the issue and sale of the Preferred Securities, the
Sponsor is hereby appointed an agent of the Trust pursuant to Section 3806(b)(7)
of the Business Trust Act and in such capacity shall have the exclusive right
and responsibility to engage in the following activities:

       (a)    to prepare a prospectus relating to the offering of Preferred
Securities by the Trust and to prepare for filing by the Trust with the
Commission, and execute on behalf of the Trust, a registration statement on Form
S-3 or on another appropriate form (including, if appropriate, a registration
statement under Rule 462(b) of the Securities Act) and any pre-effective or
post-effective amendments thereto, relating to the registration under the
Securities Act of the Preferred Securities;

       (b)    to determine the States in which to take appropriate action to
qualify or register for sale of all or part of the Preferred Securities and to
do any and all such acts, other than actions which must be taken by the Trust,
and advise the Trust of actions it must take, and prepare for execution and
filing any documents to be executed and filed by the Trust, as the Sponsor deems
necessary or advisable in order to comply with the applicable laws of any such
States;

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       (c)    to prepare for filing by the Trust, and execute on behalf of the
Trust, an application to the New York Stock Exchange, any other national stock
exchange or the Nasdaq National Market for listing upon notice of issuance of
any Preferred Securities;

       (d)    to prepare for filing by the Trust with the Commission, and
execute on behalf of the Trust, a registration statement on Form 8-A, including
any pre-effective or post-effective amendments thereto, relating to the
registration of the Preferred Securities under Section 12(b) of the Exchange
Act, including any amendments thereto;

       (e)    to negotiate the terms of, and execute on behalf of the Trust, the
Underwriting Agreement providing for the sale of the Preferred Securities; and

       (f)    to execute and deliver letters, documents or instruments on behalf
of the Trust with any Clearing Agency.

       The Sponsor must exercise the powers set forth in this Section 4.2 in a
manner that is consistent with the purposes and functions of the Trust set out
in Section 3.3, and the Sponsor shall not take any action that is inconsistent
with the purposes and functions of the Trust set forth in Section 3.3.

       Subject to this Section 4.2, the Sponsor shall have none of the powers or
the authority of the Institutional Trustee set forth in Section 3.8.

       SECTION 4.3   GUARANTEE OF PAYMENT OF TRUST OBLIGATIONS.

       (a)    Subject to the terms and conditions of this Section 4.3, the
Debenture Issuer hereby irrevocably and unconditionally guarantees to each
Person to whom the Trust is now or hereafter becomes indebted or liable (the
"Beneficiaries") the full payment, when and as due, of any and all costs,
expenses or liabilities of the Trust (other than obligations of the Trust to
make payments to holders of a Trust Security pursuant to the terms thereof)
("Obligations") to such Beneficiaries.

       (b)    The agreement of the Debenture Issuer in Section 4.3(a) is
intended to be for the benefit of, and to be enforceable by, all such
Beneficiaries, whether or not such Beneficiaries have received notice hereof.

       (c)    The agreement of the Debenture Issuer set forth in Section 4.3(a)
shall terminate and be of no further force and effect upon the later of (a) the
date on which full payment has been made of all amounts payable to all Holders
of all the Preferred Securities (whether upon redemption, liquidation, exchange
or otherwise) and (b) the date on which there are no Beneficiaries remaining;
PROVIDED, HOWEVER, that such agreement shall continue to be effective or shall
be reinstated, as the case may be, if at any time any Holder of Preferred
Securities or any Beneficiary must restore payment of any sums paid under the
Preferred Securities, under any Obligation, under the Preferred Securities
Guarantee or under this Declaration for any reason whatsoever. Such agreement is
continuing, irrevocable, unconditional and absolute.

                                      -25-
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                                    ARTICLE V
                                    TRUSTEES

SECTION 5.1  NUMBER OF TRUSTEES.

       The number of Trustees initially shall be [FOUR (4)], and:

       (a)    at any time before the issuance of any Securities, the Sponsor
may, by written instrument, increase or decrease the number of Trustees; and

       (b)    after the issuance of any Securities, the number of Trustees may
be increased or decreased by vote of the Holders of a majority in liquidation
amount of the Common Securities voting as a class at a meeting of the Holders of
the Common Securities, PROVIDED, HOWEVER, that, the number of Trustees shall in
no event be less than two (2); PROVIDED, FURTHER, that (i) if required by the
Business Trust Act, there shall be at least one Delaware Trustee; (ii) there
shall be at least one Trustee who is an employee or officer of, or is affiliated
with, the Sponsor (a "Regular Trustee"); and (iii) for so long as this
Declaration is required to qualify as an indenture under the Trust Indenture
Act, there shall be one Institutional Trustee, who may also serve as Delaware
Trustee if it meets the applicable requirements.

       SECTION 5.2   DELAWARE TRUSTEE.

       If required by the Business Trust Act, one Trustee (the "Delaware
Trustee") shall be:

       (a)    a natural person who is a resident of the State of Delaware; or

       (b)    if not a natural person, an entity which has its principal place
of business in the State of Delaware, and otherwise meets the requirements of
applicable law, provided that, if the Institutional Trustee has its principal
place of business in the State of Delaware and otherwise meets the requirements
of applicable law, then the Institutional Trustee shall also be the Delaware
Trustee and Section 3.11 shall have no application.

       SECTION 5.3   INSTITUTIONAL TRUSTEE: ELIGIBILITY.

       (a)    There shall at all times be one Trustee that shall act as
Institutional Trustee which shall:

              (i)    not be an Affiliate of the Sponsor;

              (ii)   be a corporation organized and doing business under the
laws of the United States of America or any State or territory thereof or of the
District of Columbia, or a corporation or Person permitted by the Commission to
act as an institutional trustee under the Trust Indenture Act, authorized under
such laws to exercise corporate trust powers, having a combined capital and
surplus of at least 50 million U.S.

                                      -26-
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<PAGE>


dollars ($50,000,000), and subject to supervision or examination by Federal,
State, territorial or District of Columbia authority. If such corporation
publishes reports of condition at least annually, pursuant to law or to the
requirements of the supervising or examining authority referred to above, then
for the purposes of this Section 5.3(a)(ii), the combined capital and surplus of
such corporation shall be deemed to be its combined capital and surplus as set
forth in its most recent report of condition so published; and

              (iii)  if the Trust is excluded from the definition of an
Investment Company solely by means of Rule 3a-7 and to the extent Rule 3a-7
requires a trustee having certain qualifications to hold title to the "eligible
assets" of the Trust, the Institutional Trustee shall possess those
qualifications.

       (b)    If at any time the Institutional Trustee shall cease to be
eligible to so act under Section 5.3(a), the Institutional Trustee shall
immediately resign in the manner and with the effect set forth in Section
5.6(c).

       (c)    If the Institutional Trustee has or shall acquire any "conflicting
interest" within the meaning of Section 310(b) of the Trust Indenture Act, the
Institutional Trustee and the Holders of the Common Securities (as if such
Holders were the obligor referred to in Section 310(b) of the Trust Indenture
Act) shall in all respects comply with the provisions of Section 310(b) of the
Trust Indenture Act.

       (d)    The Preferred Securities Guarantee shall be deemed to be
specifically described in this Declaration for purposes of clause (i) of the
first provision contained in Section 310(b) of the Trust Indenture Act.

       (e)    The initial Institutional Trustee shall be as set forth in Section
5.5 hereof.

       SECTION 5.4   QUALIFICATIONS OF REGULAR TRUSTEES AND DELAWARE TRUSTEE
GENERALLY.

       Each Regular Trustee and the Delaware Trustee (unless the Institutional
Trustee also acts as Delaware Trustee) shall be either a natural person who is
at least 21 years of age or a legal entity that shall have the power and
authority to act as a trustee hereunder and shall be represented in such
capacity by one or more Authorized Officers.

       SECTION 5.5   INITIAL TRUSTEES: ADDITIONAL POWERS OF REGULAR TRUSTEES.

       (a)    The initial Regular Trustees shall be:

              Regis F. Binder and
              Bruce E. Walenczyk
              in each case c/o Allegheny Energy, Inc.
              10435 Downsville Pike
              Hagerstown, Maryland 21740

                                      -27-
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<PAGE>


              The initial Delaware Trustee shall be:

              Bank One Delaware, Inc.
              Three Christina Centre
              201 North Walnut Street
              Wilmington, Delaware 19801

              Attention:

              The initial Institutional Trustee shall be:

              Bank One Trust Company, N.A.
              153 West 51st Street, 5th Floor
              New York, New York 10019
              Attention:

       (b)    Except as expressly set forth in this Declaration and except if a
meeting of the Regular Trustees is called with respect to any matter over which
the Regular Trustees have power to act, any power of the Regular Trustees may be
exercised by, or with the consent of, any one such Regular Trustee.

       SECTION 5.6   APPOINTMENT, REMOVAL AND RESIGNATION OF TRUSTEES.

       (a)    Subject to Section 5.6(b), Trustees may be appointed or removed
without cause at any time:

              (i)    until the issuance of any Securities, by written instrument
executed by the Sponsor;

              (ii)   after the issuance of any Securities, by vote of the
Holders of a Majority in liquidation amount of the Common Securities voting as a
class at a meeting of the Holders of the Common Securities or acting by
unanimous written consent; and

              (iii)  if an Event of Default shall have occurred and be
continuing after the issuance of any Preferred Securities, the Institutional
Trustee and the Delaware Trustee may only be removed and appointed by the vote
of Holders of a Majority in liquidation amount of the Preferred Securities
voting as a class.

       (b)    (i)    The Trustee that acts as Institutional Trustee shall not be
removed in accordance with Section 5.6(a) until a successor Trustee possessing
the qualifications to act as Institutional Trustee under Section 5.3 (a
"Successor Institutional Trustee") has been appointed and has accepted such
appointment by written instrument executed by such Successor Institutional
Trustee and delivered to the Regular Trustees and the Sponsor; and

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              (ii)   the Trustee that acts as Delaware Trustee shall not be
removed in accordance with Section 5.6(a) until a successor Trustee possessing
the qualifications to act as Delaware Trustee under Sections 5.2 and 5.4 (a
"Successor Delaware Trustee") has been appointed and has accepted such
appointment by written instrument executed by such Successor Delaware Trustee
and delivered to the Regular Trustees and the Sponsor.

       (c)    A Trustee appointed to office shall hold office until his
successor shall have been appointed or until his death, removal or resignation.
Any Trustee may resign from office (without need for prior or subsequent
accounting) by an instrument in writing signed by the Trustee and delivered to
the Sponsor and the Trust, which resignation shall take effect upon such
delivery or upon such later date as is specified therein; PROVIDED, HOWEVER,
that:

              (i)    No such resignation of the Trustee that acts as the
Institutional Trustee shall be effective:

                     (A)    until a Successor Institutional Trustee has been
       appointed and has accepted such appointment by instrument executed by
       such Successor Institutional Trustee and delivered to the Trust, the
       Sponsor and the resigning Institutional Trustee; or

                     (B)    until the assets of the Trust have been completely
       liquidated and the proceeds thereof distributed to the holders of the
       Securities; and

              (ii)   no such resignation of the Trustee that acts as the
Delaware Trustee shall be effective until a Successor Delaware Trustee has been
appointed and has accepted such appointment by instrument executed by such
Successor Delaware Trustee and delivered to the Trust, the Sponsor and the
resigning Delaware Trustee whereupon the resigning Trustee shall be released and
discharged of the trusts and other duties imposed on such Trustee in connection
herewith.

       (d)    The Holders of the Common Securities shall use their best efforts
to promptly appoint a Successor Delaware Trustee or Successor Institutional
Trustee as the case may be if the Institutional Trustee or the Delaware Trustee
delivers an instrument of resignation in accordance with this Section 5.6.

       (e)    If no Successor Institutional Trustee or Successor Delaware
Trustee shall have been appointed and accepted appointment as provided in this
Section 5.6 within 60 days after delivery to the Sponsor and the Trust of an
instrument of resignation, the resigning Institutional Trustee or Delaware
Trustee, as applicable, may petition any court of competent jurisdiction for
appointment of a Successor Institutional Trustee or Successor Delaware Trustee.
Such court may thereupon, after prescribing such notice, if any, as it may deem
proper and prescribe, appoint a Successor Institutional Trustee or Successor
Delaware Trustee, as the case may be.

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<PAGE>


       (f)    No Institutional Trustee or Delaware Trustee shall be liable for
the acts or omissions to act of any Successor Institutional Trustee or Successor
Delaware Trustee, as the case may be.

       SECTION 5.7   VACANCIES AMONG TRUSTEES.

       If a Trustee ceases to hold office for any reason and the number of
Trustees is not reduced pursuant to Section 5.1, or if the number of Trustees is
increased pursuant to Section 5.1, a vacancy shall occur. A resolution
certifying the existence of such vacancy by the Regular Trustees or, if there
are more than two, a majority of the Regular Trustees shall be conclusive
evidence of the existence of such vacancy. The vacancy shall be filled with a
Trustee appointed in accordance with Section 5.6.

       SECTION 5.8   EFFECT OF VACANCIES.

       The death, resignation, retirement, removal, bankruptcy, dissolution,
liquidation, incompetence or incapacity to perform the duties of a Trustee shall
not operate to annul, dissolve or terminate the Trust or terminate this
Declaration. Whenever a vacancy in the number of Regular Trustees shall occur,
until such vacancy is filled by the appointment of a Regular Trustee in
accordance with Section 5.6, the Regular Trustees in office, regardless of their
number, shall have all the powers granted to the Regular Trustees and shall
discharge all the duties imposed upon the Regular Trustees by this Declaration.

       SECTION 5.9   MEETINGS.

       If there is more than one Regular Trustee, meetings of the Regular
Trustees shall be held from time to time upon the call of any Regular Trustee.
Regular meetings of the Regular Trustees may be held at a time and place fixed
by resolution of the Regular Trustees. Notice of any in-person meetings of the
Regular Trustees shall be hand delivered or otherwise delivered in writing
(including by facsimile, with a hard copy by overnight courier) not less than 48
hours before such meeting. Notice of any telephonic meetings of the Regular
Trustees or any committee thereof shall be hand delivered or otherwise delivered
in writing (including by facsimile, with a hard copy by overnight courier) not
less than 24 hours before a meeting. Notices shall contain a brief statement of
the time, place and anticipated purposes of the meeting. The presence (whether
in person or by telephone) of a Regular Trustee at a meeting shall constitute a
waiver of notice of such meeting except where a Regular Trustee attends a
meeting for the express purpose of objecting to the transaction of any activity
on the ground that the meeting has not been lawfully called or convened. Unless
provided otherwise in this Declaration, any action of the Regular Trustees may
be taken at a meeting by vote of a majority of the Regular Trustees present
(whether in person or by telephone) and eligible to vote with respect to such
matter, provided that a Quorum is present, or without a meeting by the unanimous
written consent of the Regular Trustees. In the event there is only one Regular
Trustee, any and all action of such Regular Trustee shall be evidenced by a
written consent of such Regular Trustee.

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       SECTION 5.10  DELEGATION OF POWER.

       (a)    Any Regular Trustee may, by power of attorney consistent with
applicable law, delegate to any other natural person over the age of 21 his or
her power for the purpose of executing any documents contemplated in Section
3.6, including making any governmental filing; and

       (b)    the Regular Trustees shall have power to delegate from time to
time to such of their number or to officers of the Trust the doing of such
things and the execution of such instruments either in the name of the Trust or
the names of the Regular Trustees or otherwise as the Regular Trustees may deem
expedient, to the extent such delegation is not prohibited by applicable law or
contrary to the provisions of the Trust, as set forth herein.

       SECTION 5.11  MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO
BUSINESS.

       Any corporation into which the Institutional Trustee or the Delaware
Trustee, as the case may be, may be merged or converted or with which either may
be consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Institutional Trustee or the Delaware Trustee, as the
case may be, shall be a party, or any corporation succeeding to all or
substantially all the corporate trust business of the Institutional Trustee or
the Delaware Trustee, as the case may be, shall be the successor of the
Institutional Trustee or the Delaware Trustee, as the case may be, hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto.

                                   ARTICLE VI
                                  DISTRIBUTIONS

       SECTION 6.1   DISTRIBUTIONS.

       Holders shall receive Distributions (as defined herein) in accordance
with the applicable terms of the relevant Holder's Securities. Distributions
shall be made on the Preferred Securities and the Common Securities in
accordance with the preferences set forth in their respective terms. If and to
the extent that the Debenture Issuer makes a payment of interest (including
Additional Interest (as defined in the Indenture)), premium or principal, or
both, on the Debentures held by the Institutional Trustee (the amount of any
such payment being a "Payment Amount"), the Institutional Trustee shall and is
directed to make a distribution (a "Distribution") of the Payment Amount to
Holders.

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                                   ARTICLE VII
                             ISSUANCE OF SECURITIES

       SECTION 7.1   GENERAL PROVISIONS REGARDING SECURITIES.

       (a)    The Trust shall issue one class of preferred securities
representing undivided beneficial interests in the assets of the Trust having
such terms as are set forth in Annex I (the "Preferred Securities") and one
class of common securities representing undivided beneficial interests in the
assets of the Trust having such terms as are set forth in Annex I (the "Common
Securities"). The Trust shall issue no securities or other interests in the
assets of the Trust other than the Preferred Securities and the Common
Securities.

       (b)    The Certificates shall be signed on behalf of the Trust by a
Regular Trustee. Such signature shall be the manual or facsimile signature of
any present or any future Regular Trustee. In case any Regular Trustee of the
Trust who shall have signed any of the Securities shall cease to be such Regular
Trustee before the Certificates so signed shall be delivered by the Trust, such
Certificates nevertheless may be delivered as though the person who signed such
Certificates had not ceased to be such Regular Trustee; and any Certificate may
be signed on behalf of the Trust by such persons who, at the actual date of
execution of such Security, shall be the Regular Trustees of the Trust, although
at the date of the execution and delivery of the Declaration any such person was
not such a Regular Trustee. Certificates shall be printed, lithographed or
engraved or may be produced in any other manner as is reasonably acceptable to
the Regular Trustees, as evidenced by their execution thereof, and may have such
letters, numbers or other marks of identification or designation and such
legends or endorsements as the Regular Trustees may deem appropriate, or as may
be required to comply with any law or with any rule or regulation of any stock
exchange on which Securities may be listed, or to conform to usage.

       (c)    The Preferred Security Certificates shall not be valid until
authenticated by the manual signature of an authorized officer of the
Institutional Trustee, the signature of whom shall be conclusive evidence that
the Preferred Security Certificates have been authenticated under this
Declaration. Upon a written order of the Trust signed by one Regular Trustee,
the Institutional Trustee shall authenticate the Preferred Security Certificates
for original issue. The Institutional Trustee may appoint an authenticating
agent acceptable to the Trust to authenticate the Preferred Security
Certificates. An authenticating agent may authenticate the Preferred Security
Certificates whenever the Institutional Trustee may do so. Each reference to
authentication by the Institutional Trustee includes authentication by such
agent. An authenticating agent has the same rights as the Institutional Trustee
to deal with the Sponsor or an Affiliate thereof.

       (d)    The consideration received by the Trust for the issuance of the
Securities shall constitute a contribution to the capital of the Trust and shall
not constitute a loan to the Trust.

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<PAGE>


       (e)    Upon issuance of the Securities as provided in this Declaration,
the Securities so issued shall be deemed to be validly issued, fully paid and
non-assessable; subject to Section 10.1 with respect to the Common Securities.

       (f)    Every Person, by virtue of having become a Holder or a Preferred
Security Beneficial Owner in accordance with the terms of this Declaration,
shall be deemed to have expressly assented and agreed to the terms of, and shall
be bound by, this Declaration.

       SECTION 7.2   REGISTRAR AND PAYING AGENT.

       The Trust shall maintain in New York, New York (i) an office or agency
where Preferred Securities may be presented for registration of transfer or for
exchange ("Registrar"), and (ii) an office or agency where Preferred Securities
may be presented for payment. The Registrar shall keep a register of the
Preferred Securities and of their transfer and exchange. The Trust may appoint
the Registrar and the Paying Agent and may appoint one or more co-registrars and
one or more additional paying agents in such other locations as it shall
determine. The term "Paying Agent" includes any additional paying agent. The
Trust may change any Paying Agent, Registrar or co-registrar without prior
notice to any Holder. The Trust shall notify the Institutional Trustee of the
name and address of any agent not a party to this Declaration. If the Trust
fails to appoint or maintain another entity as Registrar or Paying Agent, the
Institutional Trustee shall act as such. The Trust or any of its Affiliates may
act as Paying Agent or Registrar. The Trust shall act as Paying Agent, Registrar
and co-registrar for the Common Securities.

       The Trust initially appoints the Institutional Trustee as Registrar and
Paying Agent for the Preferred Securities.

       SECTION 7.3   PAYING AGENT TO HOLD MONEY IN TRUST.

       The Trust shall require each Paying Agent other than the Institutional
Trustee to agree in writing that the Paying Agent will hold in trust for the
benefit of Holders or the Institutional Trustee all money held by the Paying
Agent for the payment of principal or Distributions on Securities, and will
notify the Institutional Trustee if there are insufficient funds. While any such
insufficiency continues, the Institutional Trustee may require a Paying Agent to
pay all money held by it to the Institutional Trustee. The Trust at any time may
require a Paying Agent to pay all money held by it to the Institutional Trustee
and to account for any money disbursed by it. Upon payment to the Institutional
Trustee, the Paying Agent (if other than the Trust or an Affiliate of the Trust)
shall have no further liability for the money. If the Trust or the Sponsor or an
Affiliate of the Trust or the Sponsor acts as Paying Agent, it shall segregate
and hold in a separate trust fund for the benefit of the Holders all money held
by it as Paying Agent.

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                                  ARTICLE VIII
                              DISSOLUTION OF TRUST

       SECTION 8.1   DISSOLUTION OF TRUST.

       (a)    The Trust shall dissolve:

              (i)    upon the bankruptcy of any Holder of the Common Securities
or the Sponsor;

              (ii)   upon the filing of a certificate of dissolution or its
equivalent with respect to any Holder of the Common Securities or the Sponsor;
or the revocation of the Holder of the Common Securities or the Sponsor's
charter and the expiration of 90 days after the date of revocation without a
reinstatement thereof;

              (iii)  upon the entry of a decree of judicial dissolution of any
Holder of the Common Securities, the Sponsor or the Trust;

              (iv)   when all of the Securities shall have been called for
redemption and the amounts necessary for redemption thereof shall have been paid
to the Holders in accordance with the terms of the Securities;

              (v)    at the election of the Sponsor (which is wholly within its
sole discretion); PROVIDED, that the Trust shall have been dissolved in
accordance with the terms of the Securities and all of the Debentures endorsed
thereon shall have been distributed to the Holders of Securities in exchange for
all of the Securities; or

              (vi)   before the issuance of any Securities, with the consent of
all of the Regular Trustees and the Sponsor.

       (b)    As soon as is practicable after the occurrence of an event
referred to in Section 8.1(a) or upon the expiration of the term of the Trust
set forth in Section 3.14 and the winding up of the affairs of the Trust, the
Trustees shall file a certificate of cancellation with the Secretary of State of
the State of Delaware.

       (c)    The provisions of Section 3.9(b) and Article X shall survive the
termination of the Trust.

                                   ARTICLE IX
                              TRANSFER OF INTERESTS

       SECTION 9.1   TRANSFER OF SECURITIES.

       (a)    Securities may only be transferred, in whole or in part, in
accordance with the terms and conditions set forth in this Declaration and in
the terms of the Securities.

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Any transfer or purported transfer of any Security not made in accordance with
this Declaration shall be null and void.

       (b)    Subject to this Article IX, Preferred Securities shall be freely
transferable.

       (c)    Subject to this Article IX, the Sponsor and any Related Party may
only transfer Common Securities to the Sponsor or a Related Party of the
Sponsor; PROVIDED, that any such transfer is subject to the condition precedent
that the transferor obtain the written opinion of a nationally recognized
independent counsel experienced in such matters that such transfer would not
cause more than an insubstantial risk that:

              (i)    the Trust would not continue to be classified for United
States federal income tax purposes as a grantor trust; or

              (ii)   the Trust would be an Investment Company or the transferee
would become an Investment Company.

       SECTION 9.2   TRANSFER OF CERTIFICATES.

       The Registrar shall provide for the registration of Certificates
representing Preferred Securities and of transfers of such Certificates, which
will be effected without charge but only upon payment (with such indemnity as
the Registrar may require) in respect of any tax or other government charges
that may be imposed in relation to it. Upon surrender for registration of
transfer of any Certificate representing Preferred Securities, the Registrar
shall cause one or more new Certificates to be issued in the name of the
designated transferee or transferees. Every such Certificate surrendered for
registration of transfer shall be accompanied by a written instrument of
transfer in form satisfactory to the Registrar duly executed by the Holder or
such Holder's attorney duly authorized in writing. Each such Certificate
surrendered for registration of transfer shall be canceled by the Registrar.

       The Regular Trustees shall provide for the registration of Certificates
representing Common Securities and of transfers of such Certificates, which will
be effected without charge but only upon payment (with such indemnity as the
Regular Trustees may require) in respect of any tax or other government charges
that may be imposed in relation to it. Upon surrender for registration of
transfer of any such Certificate, the Regular Trustees shall cause one or more
new Certificates to be issued in the name of the designated transferee or
transferees. Every Certificate representing a Common Security surrendered for
registration of transfer shall be accompanied by a written instrument of
transfer in form satisfactory to the Regular Trustees duly executed by the
Holder or such Holder's attorney duly authorized in writing. Each such
Certificate surrendered for registration of transfer shall be canceled by the
Regular Trustees.

       A transferee of a Certificate shall be entitled to the rights and subject
to the obligations of a Holder hereunder upon the receipt by such transferee of
a Certificate. By


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acceptance of a Certificate, each transferee shall be deemed to have agreed to
be bound by this Declaration.

       SECTION 9.3   DEEMED SECURITY HOLDERS.

       The Trustees may treat the Person in whose name any Certificate shall be
registered on the books and records of the Trust as the sole holder of such
Certificate and of the Securities represented by such Certificate for purposes
of receiving Distributions and for all other purposes whatsoever and,
accordingly, shall not be bound to recognize any equitable or other claim to or
interest in such Certificate or in the Securities represented by such
Certificate on the part of any Person, whether or not the Trust shall have
actual or other notice thereof.

       SECTION 9.4   BOOK ENTRY INTERESTS.

       Unless otherwise specified in the terms of the Preferred Securities, the
Preferred Securities Certificates, on original issuance, will be issued in the
form of one or more, fully registered, global Preferred Security Certificates
(each a "Global Certificate"), to be delivered to DTC, the initial Clearing
Agency, or its custodian, by, or on behalf of, the Trust. Such Global
Certificates shall initially be registered on the books and records of the Trust
in the name of Cede & Co., the nominee of DTC, and no Preferred Security
Beneficial Owner will receive a definitive Preferred Security Certificate
representing such Preferred Security Beneficial Owner's interests in such Global
Certificates, except as provided in Section 9.7. Unless and until definitive,
fully registered Preferred Security Certificates (the "Definitive Preferred
Security Certificates") have been issued to the Preferred Security Beneficial
Owners pursuant to Section 9.7:

       (a)    the provisions of this Section 9.4 shall be in full force and
effect;

       (b)    the Trust and the Trustees shall be entitled to deal with the
Clearing Agency for all purposes of this Declaration (including the payment of
Distributions on the Global Certificates and receiving approvals, votes or
consents hereunder) as the Holder of the Preferred Securities and the sole
holder of the Global Certificates and shall have no obligation to the Preferred
Security Beneficial Owners;

       (c)    to the extent that the provisions of this Section 9.4 conflict
with any other provisions of this Declaration, the provisions of this Section
9.4 shall control; and

       (d)    the rights of the Preferred Security Beneficial Owners shall be
exercised only through the Clearing Agency and shall be limited to those
established by law and agreements between such Preferred Security Beneficial
Owners and the Clearing Agency and/or the Clearing Agency Participants and
receive and transmit payments of Distributions on the Global Certificates to
such Clearing Agency Participants. DTC will make book entry transfers among the
Clearing Agency Participants.

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       SECTION 9.5   NOTICES TO CLEARING AGENCY.

       Whenever a notice or other communication to the Preferred Security
Holders is required under this Declaration, unless and until Definitive
Preferred Security Certificates shall have been issued to the Preferred Security
Beneficial Owners pursuant to Section 9.7, the Trustees shall give all such
notices and communications specified herein to be given to the Preferred
Security Holders to the Clearing Agency, and shall have no notice obligations to
the Preferred Security Beneficial Owners.

       SECTION 9.6   APPOINTMENT OF SUCCESSOR CLEARING AGENCY.

       If any Clearing Agency elects to discontinue its services as securities
depositary with respect to the Preferred Securities, the Regular Trustees may,
in their sole discretion, appoint a successor Clearing Agency with respect to
such Preferred Securities.

       SECTION 9.7   DEFINITIVE PREFERRED SECURITY CERTIFICATES.

       If:

       (a)    a Clearing Agency elects to discontinue its services as securities
depositary with respect to the Preferred Securities and a successor Clearing
Agency is not appointed within 90 days after such discontinuance pursuant to
Section 9.6; or

       (b)    the Regular Trustees elect after consultation with the Sponsor to
terminate the book entry system through the Clearing Agency with respect to the
Preferred Securities, then:

              (i)    Definitive Preferred Security Certificates shall be
prepared by the Regular Trustees on behalf of the Trust with respect to such
Preferred Securities; and

              (ii)   upon surrender of the Global Certificates by the Clearing
Agency, accompanied by registration instructions, the Regular Trustees shall
cause Definitive Certificates to be executed, and the Institutional Trustee
shall cause such Definitive Securities to be authenticated and delivered, to
Preferred Security Beneficial Owners in accordance with the instructions of the
Clearing Agency. Neither the Trustees nor the Trust shall be liable for any
delay in delivery of such instructions and each of them may conclusively rely
on, and shall be protected in relying on, said instructions of the Clearing
Agency. The Definitive Preferred Security Certificates shall be printed,
lithographed or engraved or may be produced in any other manner as is reasonably
acceptable to the Regular Trustees, as evidenced by their execution thereof, and
may have such letters, numbers or other marks of identification or designation
and such legends or endorsements as the Regular Trustees may deem appropriate,
or as may be required to comply with any law or with any rule or regulation made
pursuant thereto or with any rule or regulation of any stock exchange on which
Preferred Securities may be listed, or to conform to usage.

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       SECTION 9.8   MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES.

       If:

       (a)    any mutilated Certificates should be surrendered to the Regular
Trustees, or if the Regular Trustees shall receive evidence to their
satisfaction of the destruction, loss or theft of any Certificate; and

       (b)    there shall be delivered to the Regular Trustees such security or
indemnity as may be required by them to keep each of the Trustees harmless

       then, in the absence of notice that such Certificate shall have been
acquired by a Protected Purchaser (as such term is used in section 8-405(a)(1)
of the UCC as in effect in the State of Delaware (1994 Rev)), any Regular
Trustee on behalf of the Trust shall execute, and, in the case of any Preferred
Security, cause the Institutional Trustee to authenticate and deliver, in
exchange for or in lieu of any such mutilated, destroyed, lost or stolen
Certificate, a new Certificate of like denomination. In connection with the
issuance of any new Certificate under this Section 9.8, the Regular Trustees may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection therewith. Any duplicate Certificate
issued pursuant to this Section shall constitute conclusive evidence of an
ownership interest in the relevant Securities, as if originally issued, whether
or not the lost, stolen or destroyed Certificate shall be found at any time.

                                    ARTICLE X
                LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES,
                               TRUSTEES OR OTHERS

       SECTION 10.1  LIABILITY.

       (a)    Except as expressly set forth in this Declaration, the Preferred
Securities Guarantee and the terms of the Securities, the Sponsor shall not be:

              (i)    personally liable for the return of any portion of the
capital contributions (or any return thereon) of the Holders of the Securities
which shall be made solely from assets of the Trust; and

              (ii)   required to pay to the Trust or to any Holder of Securities
any deficit upon dissolution of the Trust or otherwise.

       (b)    The Holder of the Common Securities shall be liable for all of the
debts and obligations of the Trust (other than with respect to the Securities)
to the extent not satisfied out of the Trust's assets.

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       (c)    Pursuant to Section 3803(a) of the Business Trust Act, the Holders
of the Preferred Securities shall be entitled to the same limitation of personal
liability extended to stockholders of private corporations for profit organized
under the General Corporation Law of the State of Delaware.

       SECTION 10.2  EXCULPATION.

       (a)    No Indemnified Person shall be liable, responsible or accountable
in damages or otherwise to the Trust or any Covered Person for any loss, damage
or claim incurred by reason of any act or omission performed or omitted by such
Indemnified Person in good faith on behalf of the Trust and in a manner such
Indemnified Person reasonably believed to be within the scope of the authority
conferred on such Indemnified Person by this Declaration or by law, except that
an Indemnified Person shall be liable for any such loss, damage or claim
incurred by reason of such Indemnified Person's gross negligence or willful
misconduct with respect to such acts or omissions.

       (b)    An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Trust and upon such information, opinions, reports
or statements presented to the Trust by any Person as to matters the Indemnified
Person reasonably believes are within such other Person's professional or expert
competence and who has been selected with reasonable care by or on behalf of the
Trust, including information, opinions, reports or statements as to the value
and amount of the assets, liabilities, profits, losses, or any other facts
pertinent to the existence and amount of assets from which Distributions to
Holders of Securities might properly be paid.

       SECTION 10.3  FIDUCIARY DUTY.

       (a)    To the extent that, at law or in equity, an Indemnified Person has
duties (including fiduciary duties) and liabilities relating thereto to the
Trust or to any other Covered Person, an Indemnified Person acting under this
Declaration shall not be liable to the Trust or to any other Covered Person for
its good faith reliance on the provisions of this Declaration. The provisions of
this Declaration, to the extent that they restrict the duties and liabilities of
an Indemnified Person otherwise existing at law or in equity (other than the
duties imposed on the Institutional Trustee under the Trust Indenture Act), are
agreed by the parties hereto to replace such other duties and liabilities of
such Indemnified Person.

       (b)    Unless otherwise expressly provided herein:

              (i)    whenever a conflict of interest exists or arises between
any Covered Person and any Indemnified Person; or

              (ii)   whenever this Declaration or any other agreement
contemplated herein or therein provides that an Indemnified Person shall act in
a manner that is, or provides terms that are, fair and reasonable to the Trust
or any Holder of Securities, the Indemnified Person shall resolve such conflict
of interest, take such action or provide

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such terms, considering in each case the relative interest of each party
(including its own interest) to such conflict, agreement, transaction or
situation and the benefits and burdens relating to such interests, any customary
or accepted industry practices, and any applicable generally accepted accounting
practices or principles. In the absence of bad faith by the Indemnified Person,
the resolution, action or term so made, taken or provided by the Indemnified
Person shall not constitute a breach of this Declaration or any other agreement
contemplated herein or of any duty or obligation of the Indemnified Person at
law or in equity or otherwise.

       (c)    Whenever in this Declaration an Indemnified Person is permitted or
required to make a decision:

              (i)    in its "discretion" or under a grant of similar authority,
the Indemnified Person shall be entitled to consider such interests and factors
as it desires, including its own interests, and shall have no duty or obligation
to give any consideration to any interest of or factors affecting the Trust or
any other Person; or

              (ii)   in its "good faith" or under another express standard, the
Indemnified Person shall act under such express standard and shall not be
subject to any other or different standard imposed by this Declaration or by
applicable law.

       SECTION 10.4  INDEMNIFICATION.

       (a)    (i)    The Debenture Issuer shall indemnify, to the full extent
permitted by law, any Company Indemnified Person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Trust) by reason of the fact
that he is or was a Company Indemnified Person against expenses (including
attorneys fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Trust, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the Company Indemnified Person
did not act in good faith and in a manner which he reasonably believed to be in
or not opposed to the best interests of the Trust, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.

              (ii)   The Debenture Issuer shall indemnify, to the full extent
permitted by law, any Company Indemnified Person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Trust to procure a judgment in its favor by
reason of the fact that he is or was a Company Indemnified Person against
expenses (including attorneys' fees) actually and

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reasonably incurred by him in connection with the defense or settlement of such
action or suit if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Trust and except that no
such indemnification shall be made in respect of any claim, issue or matter as
to which such Company Indemnified Person shall have been adjudged to be liable
to the Trust unless and only to the extent that the Court of Chancery of
Delaware or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which such Court of Chancery or such other court
shall deem proper.

              (iii)  To the extent that a Company Indemnified Person shall be
successful on the merits or otherwise (including dismissal of an action without
prejudice or the settlement of an action without admission of liability) in
defense of any action, suit or proceeding referred to in paragraphs (i) and (ii)
of this Section 10.4(a), or in defense of any claim, issue or matter therein, he
shall be indemnified, to the full extent permitted by law, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.

              (iv)   Any indemnification under paragraphs (i) and (ii) of this
Section 10.4(a) (unless ordered by a court) shall be made by the Debenture
Issuer only as authorized in the specific case upon a determination that
indemnification of the Company Indemnified Person is proper in the circumstances
because he has met the applicable standard of conduct set forth in paragraphs
(i) and (ii). Such determination shall be made (1) by the Regular Trustees by a
majority vote of a quorum consisting of such Regular Trustees who were not
parties to such action, suit or proceeding, (2) if such a quorum is not
obtainable, or, even if obtainable, if a quorum of disinterested Regular
Trustees so directs, by independent legal counsel in a written opinion, or (3)
by the Common Security Holder of the Trust.

              (v)    Expenses (including attorneys' fees) incurred by a Company
Indemnified Person in defending a civil, criminal, administrative or
investigative action, suit or proceeding referred to in paragraphs (i) and (ii)
of this Section 10.4(a) shall be paid by the Debenture Issuer in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such Company Indemnified Person to repay such
amount if it shall ultimately be determined that he is not entitled to be
indemnified by the Debenture Issuer as authorized in this Section 10.4(a).
Notwithstanding the foregoing, no advance shall be made by the Debenture Issuer
if a determination is reasonably and promptly made (i) by the Regular Trustees
by a majority vote of a quorum of disinterested Regular Trustees, (ii) if such a
quorum is not obtainable, or, even if obtainable, if a quorum of disinterested
Regular Trustees so directs, by independent legal counsel in a written opinion
or (iii) the Common Security Holder of the Trust, that, based upon the facts
known to the Regular Trustees, counsel or the Common Security Holder at the time
such determination is made, such Company Indemnified Person acted in bad faith
or in a manner that such person did not believe to

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be in or not opposed to the best interests of the Trust, or, with respect to any
criminal proceeding, that such Company Indemnified Person believed or had
reasonable cause to believe his conduct was unlawful. In no event shall any
advance be made in instances where the Regular Trustees, independent legal
counsel or Common Security Holder reasonably determine that such person
deliberately breached his duty to the Trust or its Common or Preferred Security
Holders.

              (vi)   The indemnification and advancement of expenses provided
by, or granted pursuant to, the other paragraphs of this Section 10.4(a) shall
not be deemed exclusive of any other rights to which those seeking
indemnification and advancement of expenses may be entitled under any agreement,
vote of stockholders or disinterested directors of the Debenture Issuer or
Preferred Security Holders of the Trust or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office. All rights to indemnification under this Section 10.4(a) shall be deemed
to be provided by a contract between the Debenture Issuer and each Company
Indemnified Person who serves in such capacity at any time while this Section
10.4(a) is in effect. Any repeal or modification of this Section 10.4(a) shall
not affect any rights or obligations then existing.

              (vii) The Debenture Issuer may purchase and maintain insurance on
behalf of any person who is or was a Company Indemnified Person against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the Debenture Issuer would
have the power to indemnify him against such liability under the provisions of
this Section 10.4(a).

              (viii) For purposes of this Section 10.4(a), references to "the
Trust" shall include, in addition to the resulting or surviving entity, any
constituent entity (including any constituent of a constituent) absorbed in a
consolidation or merger, so that any person who is or was a director, trustee,
officer or employee of such constituent entity, or is or was serving at the
request of such constituent entity as a director, trustee, officer, employee or
agent of another entity, shall stand in the same position under the provisions
of this Section 10.4(a) with respect to the resulting or surviving entity as he
would have with respect to such constituent entity if its separate existence had
continued.

              (ix)   The indemnification and advancement of expenses provided
by, or granted pursuant to, this Section 10.4(a) shall, unless otherwise
provided when authorized or ratified, continue as to a person who has ceased to
be a Company Indemnified Person and shall inure to the benefit of the heirs,
executors and administrators of such a person.

       (b)    The Sponsor agrees to indemnify (i) the Institutional Trustee,
(ii) the Delaware Trustee, (iii) any Affiliate of the Institutional Trustee and
the Delaware Trustee, and (iv) any officers, directors, shareholders, members,
partners, employees, representatives, custodians, nominees or agents of the
Institutional Trustee and the Delaware Trustee (each of the Persons in (i)
through (iv) being referred to as a "Fiduciary Indemnified Person") for, and to
hold each Fiduciary Indemnified Person harmless

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against, any loss, liability or expense incurred without negligence or bad faith
on its part, arising out of or in connection with the acceptance or
administration or the trust or trusts hereunder, including the costs and
expenses (including reasonable legal fees and expenses) of defending itself
against or investigating any claim or liability in connection with the exercise
or performance of any of its powers or duties hereunder. The provisions set
forth in this Section 10.4(b) shall survive the resignation or removal of the
Institutional Trustee or the Delaware Trustee, the satisfaction and discharge of
this Declaration and the termination of the Trust.

       (c)    The Sponsor agrees to pay the Institutional Trustee and the
Delaware Trustee, from time to time, such compensation for all services rendered
by the Institutional Trustee and the Delaware Trustee hereunder as may be
mutually agreed upon in writing by the Sponsor and the Institutional Trustee or
the Delaware Trustee, as the case may be, and except as otherwise expressly
provided herein, to reimburse the Institutional Trustee and the Delaware Trustee
upon its or their request for all reasonable expenses (including counsel fees
and expenses), disbursements and advances incurred or made by the Institutional
Trustee or the Delaware Trustee, as the case may be, in accordance with the
provisions of this Declaration, except any such expense, disbursement or advance
as may be attributable to its or their negligence or bad faith.

       SECTION 10.5  OUTSIDE BUSINESSES.

       Any Covered Person, the Sponsor, the Delaware Trustee and the
Institutional Trustee (subject to Section 5.3(c)) may engage in or possess an
interest in other business ventures of any nature or description, independently
or with others, similar or dissimilar to the business of the Trust, and the
Trust and the Holders of Securities shall have no rights by virtue of this
Declaration in and to such independent ventures or the income or profits derived
therefrom, and the pursuit of any such venture, even if competitive with the
business of the Trust, shall not be deemed wrongful or improper. No Covered
Person, the Sponsor, the Delaware Trustee, or the Institutional Trustee shall be
obligated to present any particular investment or other opportunity to the Trust
even if such opportunity is of a character that, if presented to the Trust,
could be taken by the Trust, and any Covered Person, the Sponsor, the Delaware
Trustee and the Institutional Trustee shall have the right to take for its own
account (individually or as a partner or fiduciary) or to recommend to others
any such particular investment or other opportunity. Any Covered Person, the
Delaware Trustee and the Institutional Trustee may engage or be interested in
any financial or other transaction with the Sponsor or any Affiliate of the
Sponsor, or may act as depositary for, trustee or agent for, or act on any
committee or body of holders of, securities or other obligations of the Sponsor
or its Affiliates.

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                                   ARTICLE XI
                                   ACCOUNTING

       SECTION 11.1  FISCAL YEAR.

       The fiscal year ("Fiscal Year") of the Trust shall be the calendar year,
or such other year as is required by the Code.

       SECTION 11.2  CERTAIN ACCOUNTING MATTERS.

       (a)    At all times during the existence of the Trust, the Regular
Trustees shall keep, or cause to be kept, full books of account, records and
supporting documents, which shall reflect in reasonable detail, each transaction
of the Trust. The books of account shall be maintained on the accrual method of
accounting, in accordance with generally accepted accounting principles of the
United States, consistently applied. The Trust shall use the accrual method of
accounting for United States federal income tax purposes.

       (b)    The Regular Trustees shall cause to be prepared and delivered to
each of the Holders of Securities, within 90 days after the end of each Fiscal
Year of the Trust, annual financial statements of the Trust, including a balance
sheet of the Trust as of the end of such Fiscal Year, and the related statements
of income or loss.

       (c)    The Regular Trustees shall cause to be duly prepared and delivered
to each of the Holders of Securities, any annual United States federal income
tax information statement, required by the Code, containing such information
with regard to the Securities held by each Holder as is required by the Code and
the Treasury Regulations. Notwithstanding any right under the Code to deliver
any such statement at a later date, the Regular Trustees shall endeavor to
deliver all such statements within 30 days after the end of each Fiscal Year of
the Trust.

       (d)    The Regular Trustees shall cause to be duly prepared and filed
with the appropriate taxing authority, an annual United States federal income
tax return, on a Form 1041 or such other form required by United States federal
income tax law, and any other annual income tax returns required to be filed by
the Regular Trustees on behalf of the Trust with any state or local taxing
authority.

       SECTION 11.3  BANKING.

       The Trust shall maintain one or more bank accounts in the name and for
the sole benefit of the Trust; PROVIDED, HOWEVER, that all payments of funds in
respect of the Debentures held by the Institutional Trustee shall be made
directly to the Institutional Trustee Account and no other funds of the Trust
shall be deposited in the Institutional Trustee Account. The sole signatories
for such accounts shall be designated by the Regular Trustees; PROVIDED,
HOWEVER, that the Institutional Trustee shall designate the signatories for the
Institutional Trustee Account.

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       SECTION 11.4  WITHHOLDING.

       The Regular Trustees shall, and shall cause the Trust to, comply with all
withholding requirements under United States federal, state and local law. The
Trust shall request, and the Holders shall provide to the Trust, such forms or
certificates as are necessary to establish an exemption from withholding with
respect to each Holder, and any representations and forms as shall reasonably be
requested by the Trust to assist it in determining the extent of, and in
fulfilling, its withholding obligations. The Regular Trustees shall file
required forms with applicable jurisdictions and, unless an exemption from
withholding is properly established by a Holder, shall remit amounts withheld
with respect to the Holder to applicable jurisdictions. To the extent that the
Trust is required to withhold and pay over any amounts to any authority with
respect to distributions or allocations to any Holder, the amount withheld shall
be deemed to be a distribution in the amount of the withholding to the Holder.
In the event of any claimed over withholding, Holders shall be limited to an
action against the applicable jurisdiction. If the amount required to be
withheld was not withheld from actual Distributions made, the Trust may reduce
subsequent Distributions by the amount of such withholding.

                                   ARTICLE XII
                             AMENDMENTS AND MEETINGS

       SECTION 12.1  AMENDMENTS.

       (a)    Except as otherwise provided in this Declaration or by any
applicable terms of the Securities, this Declaration may only be amended by a
written instrument approved and executed by the Regular Trustees (or, if there
are more than two Regular Trustees a majority of the Regular Trustees) and:

              (i)    if the amendment affects the rights, powers, duties,
obligations or immunities of the Institutional Trustee, also by the
Institutional Trustee; or

              (ii)   if the amendment affects the rights, powers, duties,
obligations or immunities of the Delaware Trustee, also by the Delaware Trustee.

       (b)    No amendment shall be made, and any such purported amendment shall
be void and ineffective:

              (i)    unless, in the case of any proposed amendment, the
Institutional Trustee shall have first received an Officers' Certificate from
each of the Trust and the Sponsor that such amendment is permitted by, and
conforms to, the terms of this Declaration (including the terms of the
Securities);

              (ii)   unless, in the case of any proposed amendment which affects
the rights, powers, duties, obligations or immunities of the Institutional
Trustee, the Institutional Trustee shall have first received:

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                     (A)    an Officers' Certificate from each of the Trust and
       the Sponsor that such amendment is permitted by, and conforms to, the
       terms of this Declaration (including the terms of the Securities); and

                     (B)    an opinion of counsel (who may be counsel to the
       Sponsor or the Trust) that such amendment is permitted by, and conforms
       to, the terms of this Declaration (including the terms of the
       Securities); and

              (iii)  to the extent the result of such amendment would be to:

                     (A)    cause the trust to fail to continue to be classified
       for purposes of United States federal income taxation as a grantor trust;

                     (B)    reduce or otherwise adversely affect the powers of
       the Institutional Trustee in contravention of the Trust Indenture Act; or

                     (C)    cause the Trust to be deemed to be an Investment
       Company required to be registered under the Investment Company Act.

       (c)    At such time after the Trust has issued any Securities that remain
outstanding, any amendment that would materially and adversely affect the
rights, privileges or preferences of any Holder of Securities may be effected
only with such additional requirements as may be set forth in the terms of such
Securities; PROVIDED, HOWEVER, that without the consent of each Holder of Common
Securities or Preferred Securities, as the case may be, the Declaration may not
be amended to (i) change the amount of timing of any Distribution or otherwise
adversely effect the amount of any Distribution required to be made as of a
specified date, (ii) change any of the redemption provisions, or (iii) restrict
the right of the Holder of the Securities to institute suit for the enforcement
of any required payment on or after the due date therefor.

       (d)    Section 9.1(c) and this Section 12.1 shall not be amended without
the consent of all of the Holders of the Securities.

       (e)    Article IV shall not be amended without the consent of the Holders
of a Majority in liquidation amount of the Common Securities.

       (f)    The rights of the Holders of the Common Securities under Article V
to increase or decrease the number of, and appoint and remove Trustees shall not
be amended without the consent of the Holders of a Majority in liquidation
amount of the Common Securities.

       (g)    Subject to Section 12.1(c), this Declaration may be amended
without the consent of the Holders of the Securities to:

              (i)    cure any ambiguity;

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              (ii)   correct or supplement any provision in this Declaration
that may be defective or inconsistent with any other provision of this
Declaration;

              (iii)  add to the covenants, restrictions or obligations of the
Sponsor;

              (iv)   modify, eliminate or add to any provisions of this
Declaration to such extent as shall be necessary to ensure that the Trust will
not be taxable as a corporation or will be classified as other than a grantor
trust for United States federal income tax purposes at all times that any
Securities are outstanding, or to ensure that the Debentures are treated as
indebtedness of the Debenture Issuer for United States federal income tax
purposes, or to ensure that the Trust will not be deemed to be an Investment
Company required to register as such under the Investment Company Act; and

              (v)    to modify, eliminate and add to any provision of the
Declaration to such extent as may be reasonably necessary to effectuate any of
the foregoing or to otherwise comply with applicable law.

       SECTION 12.2  MEETINGS OF THE HOLDERS OF SECURITIES: ACTION BY WRITTEN
CONSENT.

       (a)    Meetings of the Holders of any class of Securities may be called
at any time by the Regular Trustees (or as provided in the terms of the
Securities) to consider and act on any matter on which Holders of such class of
Securities are entitled to act under the terms of this Declaration, the terms of
the Securities or the rules of any stock exchange on which the Preferred
Securities are listed or admitted for trading. The Regular Trustees shall call a
meeting of the Holders of such class if directed to do so by the Holders of
Securities representing at least 25% in liquidation amount of such class of
Securities. Such direction shall be given by delivering to the Regular Trustees
one or more calls in a writing stating that the signing Holders of Securities
wish to call a meeting and indicating the general or specific purpose for which
the meeting is to be called. Any Holders of Securities calling a meeting shall
specify in writing the Security Certificates held by the Holders of Securities
exercising the right to call a meeting and only those Securities specified shall
be counted for purposes of determining whether the required percentage set forth
in the second sentence of this paragraph has been met.

       (b)    Except to the extent otherwise provided in the terms of the
Securities, the following provisions shall apply to meetings of Holders of
Securities:

              (i)    notice of any such meeting shall be given to all the
Holders of Securities having a right to vote thereat at least 7 days but not
more than 60 days before the date of such meeting. Whenever a vote, consent or
approval of the Holders of Securities is permitted or required under this
Declaration or the rules of any stock exchange on which the Preferred Securities
are listed or admitted for trading, such vote, consent or approval may be given
at a meeting of the Holders of Securities. Any action that may be taken at a
meeting of the Holders of Securities may be taken without a meeting if a consent
in writing setting forth the action so taken is signed by the Holders

                                      -47-
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<PAGE>


of Securities owning not less than the minimum amount of Securities in
liquidation amount that would be necessary to authorize or take such action at a
meeting at which all Holders of Securities having a right to vote thereon were
present and voting. Prompt notice of the taking of action without a meeting
shall be given to the Holders of Securities entitled to vote who have not
consented in writing. The Regular Trustees may specify that any written ballot
submitted to the Security Holder for the purpose of taking any action without a
meeting shall be returned to the Trust within the time specified by the Regular
Trustees;

              (ii)   each Holder of a Security may authorize any Person to act
for it by proxy on all matters in which a Holder of Securities is entitled to
participate, including waiving notice of any meeting, or voting or participating
at a meeting. No proxy shall be valid after the expiration of 11 months from the
date thereof unless otherwise provided in the proxy. Every proxy shall be
revocable at the pleasure of the Holder of Securities executing it. Except as
otherwise provided herein, all matters relating to the giving, voting or
validity of proxies shall be governed by the General Corporation Law of the
State of Delaware relating to proxies, and judicial interpretations thereunder,
as if the Trust were a Delaware corporation and the Holders of the Securities
were stockholders of a Delaware corporation;

              (iii)  each meeting of the Holders of the Securities shall be
conducted by the Regular Trustees or by such other Person that the Regular
Trustees may designate; and

              (iv)   unless the Business Trust Act, this Declaration, the terms
of the Securities, the Trust Indenture Act or the listing rules of any stock
exchange or market on which the Preferred Securities are then listed or traded,
otherwise provides, the Regular Trustees, in their sole discretion, shall
establish all other provisions relating to meetings of Holders of Securities,
including notice of the time, place or purpose of any meeting at which any
matter is to be voted on by any Holders of Securities, waiver of any such
notice, action by consent without a meeting, the establishment of a record date,
quorum requirements, voting in person or by proxy or any other matter with
respect to the exercise of any such right to vote.

                                  ARTICLE XIII
                    REPRESENTATIONS OF INSTITUTIONAL TRUSTEE
                              AND DELAWARE TRUSTEE

       SECTION 13.1  REPRESENTATIONS AND WARRANTIES OF INSTITUTIONAL TRUSTEE.

       The Trustee that acts as initial Institutional Trustee represents and
warrants to the Trust and to the Sponsor at the date of this Declaration, and
each Successor Institutional Trustee represents and warrants to the Trust and
the Sponsor at the time of the Successor Institutional Trustee's acceptance of
its appointment as Institutional Trustee that:

                                      -48-
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<PAGE>


       (a)    the Institutional Trustee is a national banking association with
trust powers, duly organized, validly existing and in good standing under the
laws of the United States, with trust power and authority to execute and
deliver, and to carry out and perform its obligations under the terms of, the
Declaration;

       (b)    the execution, delivery and performance by the Institutional
Trustee of the Declaration has been duly authorized by all necessary corporate
action on the part of the Institutional Trustee. The Declaration has been duly
executed and delivered by the Institutional Trustee, and it constitutes a legal,
valid and binding obligation of the Institutional Trustee, enforceable against
it in accordance with its terms, subject to applicable bankruptcy,
reorganization, moratorium, insolvency, and other similar laws affecting
creditors' rights generally and to general principles of equity and the
discretion of the court (regardless of whether the enforcement of such remedies
is considered in a proceeding in equity or at law);

       (c)    the execution, delivery and performance of the Declaration by the
Institutional Trustee does not conflict with or constitute a breach of the
Articles of Incorporation or by-laws of the Institutional Trustee; and

       (d)    no consent, approval or authorization of, or registration with or
notice to, any State or Federal banking authority governing the banking or trust
powers of the Institutional Trustee is required for the execution, delivery or
performance by the Institutional Trustee, of the Declaration.

       SECTION 13.2  REPRESENTATIONS AND WARRANTIES OF DELAWARE TRUSTEE.

       The Trustee that acts as initial Delaware Trustee represents and warrants
to the Trust and to the Sponsor at the date of this Declaration, and each
Successor Delaware Trustee represents and warrants to the Trust and the Sponsor
at the time of the Successor Delaware Trustee's acceptance of its appointment as
Delaware Trustee that:

       (a)    The Delaware Trustee is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. The
Delaware Trustee has all requisite corporate power and authority to execute and
deliver, and to carry out and perform its obligations under the terms of, the
Declaration.

       (b)    The Delaware Trustee has been authorized to perform its
obligations under the Certificate of Trust and the Declaration. The Declaration
under Delaware law constitutes a legal, valid and binding obligation of the
Delaware Trustee, enforceable against it in accordance with its terms, subject
to applicable bankruptcy, reorganization, moratorium, insolvency, and other
similar laws affecting creditors' rights generally and to general principles of
equity and the discretion of the court (regardless of whether the enforcement of
such remedies is considered in a proceeding in equity or at law).

                                      -49-
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<PAGE>


       (c)    No consent, approval or authorization of, or registration with or
notice to, any Delaware banking authority is required for the execution,
delivery or performance by the Delaware Trustee of the Declaration.

       (d)    The Delaware Trustee has its principal place of business in the
State of Delaware.

                                   ARTICLE XIV
                                  MISCELLANEOUS

       SECTION 14.1  NOTICES.

       All notices provided for in this Declaration shall be in writing, duly
signed by the party giving such notice, and shall be delivered, telecopied or
mailed by registered or certified mail, as follows:

       (a)    if given to the Trust, in care of the Regular Trustees at the
Trust's mailing address set forth below (or such other address as the Trust may
give notice of to the Institutional Trustee, the Delaware Trustee and the
Holders of the Securities):

              Allegheny Capital Trust III
              c/o Allegheny Energy, Inc.
              10435 Downsville Pike
              Hagerstown, Maryland 21740
              Attention:  Regis F. Binder
              With a copy to:

       (b)    if given to the Delaware Trustee, at the mailing address set forth
below (or such other address as Delaware Trustee may give notice of to the
Holders of the Securities):

              Bank One Delaware, Inc.
              Three Christina Centre
              201 North Walnut Street
              Wilmington, Delaware 19801
              Attention:

       (c)    if given to the Institutional Trustee, at its Corporate Trust
Office (or such other address as the Institutional Trustee may give notice of to
the Holders of the Securities):

              Bank One Trust Company, N.A.
              153 West 51st Street, 5th Floor
              New York, New York 10019
              Attention:

                                      -50-
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<PAGE>


       (d)    if given to the Holder of the Common Securities, at the mailing
address of the Sponsor set forth below (or such other address as the Holder of
the Common Securities may give notice of to the Trust):

              Allegheny Energy, Inc.
              10435 Downsville Pike
              Hagerstown, Maryland 21740
              Attention:  Regis F. Binder
              With a copy to:

       (e)    if given to any other Holder, at the address set forth on the
books and records of the Trust.

       All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered because of a changed address of which no notice was given,
such notice or other document shall be deemed to have been delivered on the date
of such refusal or inability to deliver.

       SECTION 14.2  GOVERNING LAW.

       This Declaration and the rights of the parties hereunder shall be
governed by and interpreted in accordance with the laws of the State of Delaware
and all rights and remedies shall be governed by such laws without regard to
principles of conflict of laws.

       SECTION 14.3  INTENTION OF THE PARTIES.

       It is the intention of the parties hereto that the Trust be classified
for United States federal income tax purposes as a grantor trust. The provisions
of this Declaration shall be interpreted to further this intention of the
parties.

       SECTION 14.4  HEADINGS.

       Headings contained in this Declaration are inserted for convenience of
reference only and do not affect the interpretation of this Declaration or any
provision hereof.

       SECTION 14.5  SUCCESSORS AND ASSIGNS.

       Whenever in this Declaration any of the parties hereto is named or
referred to, the successors and assigns of such party shall be deemed to be
included, and all covenants and agreements in this Declaration by the Sponsor
and the Trustees shall bind and inure to the benefit of their respective
successors and assigns, whether so expressed.

                                      -51-
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<PAGE>


       SECTION 14.6  PARTIAL ENFORCEABILITY.

       If any provision of this Declaration, or the application of such
provision to any Person or circumstance, shall be held invalid, the remainder of
this Declaration, or the application of such provision to persons or
circumstances other than those to which it is held invalid, shall not be
affected thereby.

       SECTION 14.7  COUNTERPARTS.

       This Declaration may contain more than one counterpart of the signature
page and this Declaration may be executed by the affixing of the signature of
each of the parties hereto to one of such counterpart signature pages. All of
such counterpart signature pages shall be read as though one, and they shall
have the same force and effect as though all of the signers had signed a single
signature page.

                                      -52-
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<PAGE>


       IN WITNESS WHEREOF, the undersigned has caused these presents to be
executed as of the day and year first above written.




                                    --------------------------------------------
                                    Regis F. Binder, as Regular Trustee



                                    --------------------------------------------
                                    Bruce E. Walenczyk, as Regular Trustee


                                    Bank One Delaware, Inc., as Delaware Trustee



                                    By:
                                    --------------------------------------------
                                    Name:
                                    Title:


                                    Bank One Trust Company, N.A., as
                                    Institutional Trustee



                                    By:
                                    --------------------------------------------
                                    Name:
                                    Title:


                                    ALLEGHENY ENERGY, INC., as Sponsor
                                    and Debenture Issuer



                                    By:
                                    --------------------------------------------
                                    Name: Regis F. Binder
                                    Title: Vice President and Treasurer

                                      -53-
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<PAGE>


                                     ANNEX I
                                    TERMS OF
                         [ ]% TRUST PREFERRED SECURITIES
                          [ ]% TRUST COMMON SECURITIES

       Pursuant to Section 7.1 of the Amended and Restated Declaration of Trust,
dated as of [_________, 200__] (as amended from time to time, the
"Declaration"), the designation, rights, privileges, restrictions, preferences
and other terms and provisions of the Preferred Securities and the Common
Securities are set out below (each capitalized term used but not defined herein
has the meaning set forth in the Declaration or, if not defined in such
Declaration, as defined in the Prospectus referred to below):

1.     Designation and Number.

       (a)    Preferred Securities. [____________ ( _______ )] Preferred
Securities of the Trust with an aggregate liquidation amount with respect to the
assets of the Trust of [_________] dollars [($_________)] and a liquidation
amount with respect to the assets of the Trust of [$ ] per preferred security,
are hereby designated for the purposes of identification only as "[ ]% Trust
Preferred Securities" (the "Preferred Securities"). The Preferred Security
Certificates evidencing the Preferred Securities shall be substantially in the
form of Exhibit A-1 to the Declaration, with such changes and additions thereto
or deletions therefrom as may be required by ordinary usage, custom or practice
or to conform to the rules of any stock exchange on which the Preferred
Securities are listed.

       (b)    Common Securities. [____________ ( _______ )] Common Securities of
the Trust with an aggregate liquidation amount with respect to the assets of the
Trust of [_________] dollars [($_________)] and a liquidation amount with
respect to the assets of the Trust of [$ ] per common security, are hereby
designated for the purposes of identification only as "[ ]% Trust Common
Securities" (the "Common Securities"). The Common Security Certificates
evidencing the Common Securities shall be substantially in the form of Exhibit
A-2 to the Declaration, with such changes and additions thereto or deletions
therefrom as may be required by ordinary usage, custom or practice.

2.     Distributions.

       (a)    Distributions payable on each Security will be fixed at a rate per
annum of [ ]% (the "Coupon Rate") of the stated liquidation amount of [$ ] per
Security, such rate being the rate of interest payable on the Debentures to be
held by the Institutional Trustee. Distributions in arrears beyond the first
date such Distributions are payable (or would be payable if not for any
Extension Period (as defined below) or default by the Debenture Issuer on the
Debentures) will bear interest thereon at the Coupon Rate compounded quarterly
(to the extent permitted by applicable law) from the relevant payment date for
such Distribution. The term "Distributions" as used herein includes such cash
distributions and any such interest payable unless otherwise stated. A
Distribution is payable only to the extent that payments are made in respect of
the

                                       -1-
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<PAGE>


Debentures held by the Institutional Trustee and to the extent the Institutional
Trustee has funds available therefor. The amount of Distributions payable for
any period will be computed for any full quarterly Distribution period on the
basis of a 360-day year consisting of twelve 30-day months. Distributions
payable for any period shorter than a full quarterly Distribution period for
which Distributions are computed will be computed on the basis of a 30-day month
and, for periods of less than one month, the actual number of days elapsed
during such month.

       (b)    Distributions on the Securities will be cumulative, will accrue
from and including [________, 200__], and will be payable quarterly in arrears,
on [__________], [_________], [_________] and [_________] of each year,
commencing on [_________, 200__]. When, as and if available for payment,
Distributions will be made by the Institutional Trustee, except as otherwise
described below. The Debenture Issuer has the right under the Indenture to defer
payments of interest on the Debentures by extending each interest payment period
from time to time on the Debentures for a period not exceeding 20 consecutive
quarterly periods (each an "Extension Period"), during which Extension Period no
interest shall be due and payable on the Debentures, provided that no Extension
Period may extend beyond the date of maturity or prepayment of the Debentures.
As a consequence of the Debenture Issuer's extension of the interest payment
period, Distributions will also be deferred. Despite such deferral, quarterly
Distributions will continue to accrue with interest thereon (to the extent
permitted by applicable law) at the Coupon Rate compounded quarterly (to the
extent permitted by applicable law) from the relevant payment date for such
Distribution during any such Extension Period. In the event that the Debenture
Issuer exercises its right to extend the interest payment period, then (a) the
Debenture Issuer shall not declare or pay any dividend on, make any
distributions with respect to, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital stock or make any
guarantee payment with respect thereto (other than (i) repurchases, redemptions
or other acquisitions of shares of capital stock of Allegheny Energy in
connection with any employment contract, benefit plan or other similar
arrangement with or for the benefit of employees, officers, directors or
consultants, (ii) repurchases, redemptions or other acquisitions of shares of
capital stock of Allegheny Energy or such subsidiary as a result of an exchange
or conversion of any class or series of capital stock of Allegheny Energy for
any other class or series of the capital stock of Allegheny Energy's or such
subsidiary's, (iii) the purchase of fractional interests in shares of capital
stock of Allegheny Energy pursuant to the conversion or exchange provisions of
such capital stock or the security being converted or exchanged, or (iv)
distributions of rights under any shareholders' rights plan adopted by Allegheny
Energy or such subsidiary) and (b) the Debenture Issuer shall not make any
payment of interest on or principal of (or premium, if any, on), or repay,
repurchase or redeem, any debt securities issued by the Debenture Issuer or its
subsidiaries that rank pari passu with or junior to the Debentures. The
foregoing, however, will not apply to any stock dividends paid by Allegheny
Energy where the dividend stock is the same stock as that on which the dividend
is being paid. Prior to the termination of any such Extension Period, the
Debenture Issuer may further extend such Extension Period; PROVIDED, that such
Extension Period, together with all

                                      -2-
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<PAGE>


such previous and further extensions thereof, may not exceed 20 quarterly
periods; PROVIDED, FURTHER, that no Extension Period may extend beyond the
maturity of the Debentures. Payments of accrued Distributions will be payable to
Holders as they appear on the books and records of the Trust on the first record
date after the end of the Extension Period. Upon the termination of any
Extension Period and the payment of all amounts then due, the Debenture Issuer
may commence a new Extension Period, subject to the above requirements. The
Regular Trustees will give notice to each Holder of any Extension Period upon
their receipt of notice thereof from the Debenture Issuer.

       (c)    Distributions on the Securities will be payable to the Holders
thereof as they appear on the books and records of the Trust at the close of
business on the relevant record dates. While the Preferred Securities remain in
book-entry only form, the relevant record dates shall be one Business Day prior
to the relevant payment dates which payment dates shall correspond to the
interest payment dates on the Debentures. Subject to any applicable laws and
regulations and the provisions of the Declaration, each such payment in respect
of the Preferred Securities will be made as described under the heading
"Book-Entry Issuance" in the Prospectus, dated [_________, 200__] (the
"Prospectus"), of the Trust included in the Registration Statement on Form S-3
of the Sponsor and the Trust. The relevant record dates for the Common
Securities shall be the same record date as for the Preferred Securities. If the
Preferred Securities shall not continue to remain in book-entry only form, the
relevant record dates for the Preferred Securities shall conform to the rules of
any securities exchange on which the securities are listed and, if none, shall
be selected by the Regular Trustees, which dates shall be at least 14 days but
no more than 60 days before the relevant payment dates, which payment dates
shall correspond to the interest payment dates on the Debentures. Distributions
payable on any Securities that are not punctually paid on any Distribution
payment date, as a result of the Debenture Issuer having failed to make a
payment under the Debentures (other than while an Extension Period shall be
continuing), will cease to be payable to the Person in whose name such
Securities are registered on the relevant record date, and such defaulted
Distribution will instead be payable to the Person in whose name such Securities
are registered on the special record date or other specified date determined in
accordance with the Indenture. If any date on which Distributions are payable on
the Securities is not a Business Day, then payment of the Distribution payable
on such date will be made on the next succeeding day that is a Business Day (and
without any interest or other payment in respect of any such delay) except that,
if such Business Day is in the next succeeding calendar year, such payment shall
be made on the immediately preceding Business Day, in each case with the same
force and effect as if made on such Distribution payment date.

       (d)    In the event that there is any money or other property held by or
for the Trust that is not accounted for hereunder, such property shall be
distributed Pro Rata (as defined herein) among the Holders of the Securities.

                                      -3-
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<PAGE>


3.     Liquidation Distribution Upon Dissolution.

       In the event of any voluntary or involuntary liquidation, dissolution or
winding-up of the Trust, the Holders of the Securities on the date of the
liquidation, dissolution or winding-up, as the case may be, will be entitled to
receive out of the assets of the Trust available for distribution to Holders of
Securities after satisfaction of liabilities of creditors, distributions in an
amount equal to the aggregate of the stated liquidation amount of [$ ] per
Security plus accrued and unpaid Distributions thereon to the date of payment
(such amount being the "Liquidation Distribution"), unless, in connection with
such liquidation, dissolution, or winding-up, Debentures in an aggregate
principal amount equal to the aggregate stated liquidation amount of, with an
interest rate equal to the Coupon Rate, and bearing accrued and unpaid interest
in an amount equal to the accrued and unpaid Distributions on, such Securities
outstanding at such time, have been distributed on a Pro Rata basis to the
Holders of the Securities in exchange for such Securities.

       If, upon any such liquidation, dissolution, or winding-up the Liquidation
Distribution can be paid only in part because the Trust has insufficient assets
available to pay in full the aggregate Liquidation Distribution, then the
amounts payable directly by the Trust on the Securities shall be paid on a Pro
Rata basis, as such term is defined in Section 8 below.

4.     Redemption and Distribution.

       (a)    Upon the repayment of the Debentures in whole or in part, whether
at maturity or upon redemption (either at the option of the Debenture Issuer or
pursuant to a Special Event, as described below), the proceeds from such
repayment or payment shall be simultaneously applied to redeem Securities having
an aggregate liquidation amount equal to the aggregate principal amount of the
Debentures so repaid or redeemed at a redemption price equal to the proceeds
from such repayment or redemption of the Debentures (the "Redemption Price").
Holders shall be given not less than 30 nor more than 60 days notice of such
redemption.

       (b)    If fewer than all the outstanding Securities are to be so
redeemed, the Securities will be redeemed Pro Rata and the Preferred Securities
to be redeemed will be as described in Section 4(h)(ii) below.

       (c)    The Debenture Issuer shall have the right, at any time, to
dissolve the Trust and, after satisfaction of creditors, cause Debentures held
by the Institutional Trustee, having an aggregate principal amount equal to the
aggregate stated liquidation amount of, with an interest rate identical to the
Coupon Rate, and with accrued and unpaid interest equal to accrued and unpaid
Distributions on, the Securities outstanding at such time, to be distributed to
the Holders of the Securities in liquidation of such Holders' interests in the
Trust on a Pro Rata basis.

                                      -4-
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<PAGE>


       (d)    The Debenture Issuer shall have the right (subject to the
conditions set forth in the Indenture) to elect to prepay the Debentures, in
whole or in part, at any time on or after [________, 200__] (the "Initial
Optional Redemption Date"), and, simultaneous with such prepayment, to cause a
Like Amount (as defined below) of the Debentures to be redeemed by the Trust at
the Optional Redemption Price on a Pro Rata basis.

       "Like Amount" means, with respect to a redemption of the Securities,
Securities having a stated liquidation amount equal to the principal amount of
Debentures to be paid in accordance with their terms.

       "Optional Redemption Price" means an amount equal to 100% of the stated
liquidation amount of the Securities to be redeemed by the Trust plus
accumulated and unpaid Distributions thereon, if any to the date of such
redemption.

       (e)    The Debenture Issuer shall have the right, upon not less than 30
nor more than 60 days notice, to redeem the Debentures, in whole but not in
part, for cash within 90 days following the occurrence of a Tax Event or an
Investment Company Event (each as defined below, and each a "Special Event"),
and, following such redemption, Securities with an aggregate liquidation amount
equal to the aggregate principal amount of the Debentures so redeemed shall be
redeemed by the Trust at the Redemption Price on a Pro Rata basis.

       "Tax Event" means that the Regular Trustees shall have received an
opinion of a nationally recognized independent tax counsel experienced in such
matters (a "Tax Event Opinion") to the effect that, as a result of (a) any
amendment to, or change (including any announced prospective change) in, the
laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein, or (b) as a result of any
official administrative pronouncement or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
which pronouncement or decision is announced on or after the date of the
original issuance of the Securities there is more than an insubstantial risk
that (i) the Trust is, or will be within 90 days of the date of such opinion,
subject to United States federal income tax with respect to income accrued or
received on the Debentures, (ii) the Trust is, or, within 90 days of the date of
such opinion, will be subject to more than a de minimis amount of other taxes,
duties or other governmental charges, or (iii) interest payable to the Trust on
the Debentures is not or will not, within 90 days of the date of such opinion,
be deductible, in whole or in part, by the Debenture Issuer for United States
federal income tax purposes.

       "Investment Company Event" means that the Regular Trustees shall have
received an opinion of a nationally recognized independent counsel experienced
in practice under the Investment Company Act (an "Investment Company Event
Opinion") to the effect that, as a result of (a) an amendment to or a change
(including any announced prospective change) in law or regulation of the United
States or any rules,

                                      -5-
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<PAGE>


guidelines or policies of any applicable regulatory authority for the Debenture
Issuer, or (b) as a result of any official administrative pronouncement or
judicial decision interpreting or applying such laws or regulations, which
amendment or change is effective or which pronouncement or decision is announced
on or after the date of the original issuance of the Securities (a "Change in
1940 Act Law"), there is a more than an insubstantial risk that the Trust is or
will be considered, within 90 days of the date of such opinion, an Investment
Company which is required to be registered under the Investment Company Act.

       On and from the date fixed by the Regular Trustees for any distribution
of Debentures and dissolution of the Trust: (i) the Securities will no longer be
deemed to be outstanding, (ii) DTC or its nominee (or any successor Clearing
Agency or its nominee), as the record Holder of the Preferred Securities, will
receive a registered global certificate or certificates representing the
Debentures to be delivered upon such distribution and (iii) any certificates
representing Securities, except for certificates representing Preferred
Securities held by DTC or its nominee (or any successor Clearing Agency or its
nominee), will be deemed to represent beneficial interests in the Debentures
having an aggregate principal amount equal to the aggregate stated liquidation
amount of, with an interest rate identical to the Coupon Rate of, and accrued
and unpaid interest equal to accrued and unpaid Distributions on such Securities
until such certificates are presented to the Debenture Issuer or its agent for
transfer or reissue.

       (f)    The Trust may not redeem fewer than all the outstanding Securities
unless all accrued and unpaid Distributions have been paid on all Securities for
all quarterly Distribution periods terminating on or before the date of
redemption.

       (g)    If the Debentures are distributed to Holders of the Securities,
pursuant to the terms of the Indenture, the Debenture Issuer will use its best
efforts to have the Debentures listed on the New York Stock Exchange or on such
other exchange as the Preferred Securities were listed immediately prior to the
distribution of the Debentures.

       (h)    Redemption or Distribution procedures will be as follows:

              (i)    Notice of any redemption of, or notice of distribution of
Debentures in exchange for the Securities (a "Redemption/Distribution Notice")
will be given by the Trust by mail to each Holder of Securities to be redeemed
or exchanged not fewer than 30 nor more than 60 days before the date fixed for
redemption or exchange thereof which, in the case of a redemption, will be the
date fixed for redemption of the Debentures. For purposes of the calculation of
the date of redemption or exchange and the dates on which notices are given
pursuant to this Section 4(h)(i), a Redemption/Distribution Notice shall be
deemed to be given on the day such notice is first mailed by first-class mail,
postage prepaid, to Holders of Securities. Each Redemption/Distribution Notice
shall be addressed to the Holders of Securities at the address of each such
Holder appearing in the books and records of the Trust. No defect in the
Redemption/ Distribution Notice or in the mailing of either thereof with respect
to any Holder shall

                                      -6-
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<PAGE>


affect the validity of the redemption or exchange proceedings with respect to
any other Holder.

              (ii)   In the event that fewer than all the outstanding Securities
are to be redeemed, the Securities to be redeemed shall be redeemed Pro Rata
from each Holder of Preferred Securities, it being understood that, in respect
of Preferred Securities registered in the name of and held of record by DTC or
its nominee (or any successor Clearing Agency or its nominee) or any nominee,
the distribution of the proceeds of such redemption will be made to each
Clearing Agency Participant (or Person on whose behalf such nominee holds such
securities) in accordance with the procedures applied by such agency or nominee.

              (iii)  If Securities are to be redeemed and the Trust gives a
Redemption/Distribution Notice, which notice may only be issued if the
Debentures are redeemed as set out in this Section 4 (which notice will be
irrevocable), then (A) while the Preferred Securities are in book-entry only
form, with respect to the Preferred Securities, by 12:00 noon, New York City
time, on the redemption date, provided, that the Debenture Issuer has paid the
Institutional Trustee a sufficient amount of cash in connection with the related
redemption or maturity of the Debentures, the Institutional Trustee will deposit
irrevocably with DTC or its nominee (or successor Clearing Agency or its
nominee) funds sufficient to pay the applicable Redemption Price with respect to
the Preferred Securities and will give DTC (or any successor Clearing Agency)
irrevocable instructions and authority to pay the Redemption Price to the
Preferred Security Beneficial Owners, and (B) with respect to Preferred
Securities issued in definitive form and Common Securities, provided that the
Debenture Issuer has paid the Institutional Trustee a sufficient amount of cash
in connection with the related redemption or maturity of the Debentures, the
Institutional Trustee will pay the relevant Redemption Price to the Holders of
such Securities by check mailed to the address of the relevant Holder appearing
on the books and records of the Trust on the redemption date. If a
Redemption/Distribution Notice shall have been given and funds deposited as
required, if applicable, then immediately prior to the close of business on the
date of such deposit, or on the redemption date, as applicable, Distributions
will cease to accrue on the Securities so called for redemption and all rights
of Holders of such Securities so called for redemption will cease, except the
right of the Holders of such Securities to receive the Redemption Price, but
without interest on such Redemption Price. Neither the Regular Trustees nor the
Trust shall be required to register or cause to be registered the transfer of
any Securities that have been so called for redemption. If any date fixed for
redemption of Securities is not a Business Day, then payment of the Redemption
Price payable on such date will be made on the next succeeding day that is a
Business Day (and without any interest or other payment in respect of any such
delay) except that, if such Business Day falls in the next calendar year, such
payment will be made on the immediately preceding Business Day, in each case
with the same force and effect as if made on such date fixed for redemption. If
payment of the Redemption Price in respect of any Securities is improperly
withheld or refused and not paid either by the Institutional Trustee or by the
Sponsor as guarantor pursuant to the Preferred Securities Guarantee,

                                      -7-
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<PAGE>


Distributions on such Securities will continue to accrue from the original
redemption date to the actual date of payment, in which case the actual payment
date will be considered the date fixed for redemption for purposes of
calculating the Redemption Price.

              (iv)   Redemption/Distribution Notices shall be sent by the
Regular Trustees on behalf of the Trust to (A) in respect of the Preferred
Securities, DTC or its nominee (or any successor Clearing Agency or its nominee)
if the Global Certificates have been issued or, if Definitive Preferred Security
Certificates have been issued, to the Holder thereof, and (B) in respect of the
Common Securities to the Holder thereof.

              (v)    Subject to the foregoing and applicable law (including,
without limitation, United States federal securities laws), the Debenture Issuer
or its affiliates may at any time and from time to time purchase outstanding
Preferred Securities by tender, in the open market or by private agreement.

5.     Voting Rights - Preferred Securities.

       (a)    Except as provided under Sections 5(b) and 7 and as otherwise
required by law and the Declaration, the Holders of the Preferred Securities
will have no voting rights.

       (b)    Subject to the requirements set forth in this paragraph, the
Holders of a Majority in aggregate liquidation amount of the Preferred
Securities, voting separately as a class, may direct the time, method, and place
of conducting any proceeding for any remedy available to the Institutional
Trustee, or direct the exercise of any trust or power conferred upon the
Institutional Trustee under the Declaration, including the right to direct the
Institutional Trustee, as holder of the Debentures, to (i) direct the time,
method and place of conducting any proceeding for any remedy available to the
Debenture Trustee, or exercise any trust or power conferred on the Debenture
Trustee with respect to the Debentures, (ii) waive any past Event of Default
that is waivable under the Indenture, (iii) exercise any right to rescind or
annul a declaration that the principal of all the Debentures shall be due and
payable or (iv) consent to any amendment, modification or termination of the
Indenture or the Debentures where such consent shall be required; PROVIDED,
HOWEVER, that where a consent or action under the Indenture would require the
consent or act of the Holders of greater than a majority in principal amount of
Debentures affected thereby (a "Super Majority"), the Institutional Trustee may
only give such consent or take such action at the written direction of the
Holders of at least the proportion in liquidation amount of the Preferred
Securities which the relevant Super Majority represents of the aggregate
principal amount of the Debentures outstanding. The Institutional Trustee shall
not revoke any action previously authorized or approved by a vote of the Holders
of the Preferred Securities. Except with respect to directing the time, method
and place of conducting a proceeding for a remedy available to the Institutional
Trustee, the Institutional Trustee, as holder of the Debentures, shall not take
any of the actions described in clauses (i), (ii), (iii) or (iv) above unless
the Institutional Trustee has obtained, at the expense of the Debenture Issuer,
an opinion of a nationally

                                      -8-
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<PAGE>


recognized independent tax counsel experienced in such matters to the effect
that as a result of such action, the Trust will not fail to be classified as a
grantor trust for United States federal income tax purposes. If the
Institutional Trustee fails to enforce its rights under the Declaration, (other
than by reason of the failure to obtain the opinion set forth in the previous
sentence) any Holder of Preferred Securities may, to the fullest extent
permitted by law, directly institute a legal proceeding against the Debenture
Issuer to enforce the Institutional Trustee's rights under the Debentures
without first instituting a legal proceeding against the Institutional Trustee
or any other Person. Notwithstanding the foregoing, with respect to a
declaration that the principal amount of the Debentures is immediately due and
payable as a result of a Debenture Event of Default, if the Institutional
Trustee fails to make such a declaration, then 25% in liquidation amount of the
Securities may instruct the Institutional Trustee to make such a declaration. If
a Declaration Event of Default has occurred and is continuing and such event is
attributable to the failure of the Debenture Issuer to pay interest or principal
on the Debentures on the date such interest or principal is otherwise payable
(or in the case of redemption, on the redemption date), then a Holder of
Preferred Securities may also directly institute a proceeding for enforcement of
payment to such Holder (a "Direct Action") of the principal of or interest on
the Debentures having a principal amount equal to the aggregate liquidation
amount of the Preferred Securities of such Holder on or after the respective due
date specified in the Debentures without first (i) directing the Institutional
Trustee to enforce the terms of the Debentures or (ii) instituting a legal
proceeding directly against the Debenture Issuer to enforce the Institutional
Trustee's rights under the Debentures. Except as provided in the preceding
sentence, the Holders of Preferred Securities will not be able to exercise
directly any other remedy available to the Holders of the Debentures. In
connection with such Direct Action, Allegheny Energy will be subrogated to the
rights of such Holder of Preferred Securities under the Declaration to the
extent of any payment made by Allegheny Energy to such Holder of Preferred
Securities in such Direct Action.

       (c)    Any required approval or direction of Holders of Preferred
Securities may be given at a separate meeting of Holders of Preferred Securities
convened for such purpose, at a meeting of all of the Holders of Securities in
the Trust or pursuant to written consent. The Regular Trustees or, at their
election, the Institutional Trustee, will cause a notice of any meeting at which
Holders of Preferred Securities are entitled to vote to be mailed to each Holder
of record of Preferred Securities. Each such notice will include a statement
setting forth (i) the date of such meeting or the date by which such action is
to be taken, (ii) a description of any resolution proposed for adoption at such
meeting on which such Holders are entitled to vote or of such matter upon which
written consent is sought and (iii) instructions for the delivery of proxies or
consents.

       No vote or consent of the Holders of the Preferred Securities will be
required for the Trust to redeem and cancel Preferred Securities or to
distribute the Debentures in accordance with the Declaration and the terms of
the Securities.

                                      -9-
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<PAGE>


       Notwithstanding that Holders of Preferred Securities are entitled to vote
or consent under any of the circumstances described above, any of the Preferred
Securities that are owned by the Sponsor or any Affiliate of the Sponsor shall
not be entitled to vote or consent and shall, for purposes of such vote or
consent, be treated as if they were not outstanding.

6.     Voting Rights - Common Securities.

       (a)    Except as provided under Sections 6(b), (c) and 7 as otherwise
required by law and the Declaration, the Holders of the Common Securities will
have no voting rights.

       (b)    The Holders of the Common Securities are entitled, in accordance
with Article V of the Declaration, to vote to appoint, remove or replace any
Trustee or to increase or decrease the number of Trustees.

       Subject to Section 2.6 of the Declaration and only after the Event of
Default with respect to the Preferred Securities has been cured, waived, or
otherwise eliminated and subject to the requirements of the second to last
sentence of this paragraph, the Holders of a Majority in aggregate liquidation
amount of the Common Securities, voting separately as a class, may direct the
time, method, and place of conducting any proceeding for any remedy available to
the Institutional Trustee, or direct the exercise of any trust or power
conferred upon the Institutional Trustee under the Declaration, including (i)
directing the time, method, place of conducting any proceeding for any remedy
available to the Debenture Trustee, or exercising any trust or power conferred
on the Debenture Trustee with respect to the Debentures, (ii) waiving any past
default and its consequences that is waivable under the Indenture, or (iii)
exercising any right to rescind or annul a declaration that the principal of all
the Debentures shall be due and payable; PROVIDED, that where a consent or
action under the Indenture would require the consent or act of Super Majority,
the Institutional Trustee may only give such consent or take such action at the
written direction of the Holders of at least the proportion in liquidation
amount of the Common Securities which the relevant Super Majority represents of
the aggregate principal amount of the Debentures outstanding. Pursuant to this
Section 6(c), the Institutional Trustee shall not revoke any action previously
authorized or approved by a vote of the Holders of the Preferred Securities.
Other than with respect to directing the time, method and place of conducting
any proceeding for any remedy available to the Institutional Trustee or the
Debenture Trustee as set forth above, the Institutional Trustee shall not take
any action in accordance with the directions of the Holders of the Common
Securities under this paragraph unless the Institutional Trustee has obtained,
at the expense of the Debenture Issuer, an opinion of tax counsel to the effect
that for the purposes of United States federal income tax the Trust will not be
classified as other than a grantor trust on account of such action. If the
Institutional Trustee fails to enforce its rights under the Declaration, any
Debenture Issuer may institute a legal proceeding directly against any Person to
enforce the Institutional Trustee's rights under the

                                      -10-
================================================================================
<PAGE>


Declaration without first instituting a legal proceeding against the
Institutional Trustee or any other Person.

       Any approval or direction of Holders of Common Securities may be given at
a separate meeting of Holders of Common Securities convened for such purpose, at
a meeting of all of the Holders of Securities in the Trust or pursuant to
written consent. The Regular Trustees will cause a notice of any meeting at
which Holders of Common Securities are entitled to vote to be mailed to each
Holder of record of Common Securities. Each such notice will include a statement
setting forth (i) the date of such meeting, (ii) a description of any resolution
proposed for adoption at such meeting on which such Holders are entitled to vote
and (iii) instructions for the delivery of proxies.

       No vote or consent of the Holders of the Common Securities will be
required for the Trust to redeem and cancel Common Securities or to distribute
the Debentures in accordance with the Declaration and the terms of the
Securities.

7.     Amendments to Declaration and Indenture.

       (a)    In addition to any requirements under Section 12.1 of the
Declaration, if any proposed amendment to the Declaration provides for, or the
Regular Trustees otherwise propose to effect, (i) any action that would
adversely affect the powers, preferences or special rights of the Securities in
any material respect, whether by way of amendment to the Declaration or
otherwise, or (ii) the dissolution, winding-up or termination of the Trust,
other than as described in Section 8.1 of the Declaration, then the Holders of
outstanding Securities as a class, will be entitled to vote on such amendment or
proposal (but not on any other amendment or proposal) and such amendment or
proposal shall not be effective except with the approval of the Holders of at
least a Majority in liquidation amount of the Securities, voting together as a
single class; PROVIDED, HOWEVER, if any amendment or proposal referred to in
clause (i) above would adversely affect only the Preferred Securities or only
the Common Securities, then only the affected class will be entitled to vote on
such amendment or proposal and such amendment or proposal shall not be effective
except with the approval of a Majority in liquidation amount of such class of
Securities; PROVIDED, FURTHER, HOWEVER, that with respect to any amendment or
proposal referred to in clause (i) above, the Institutional Trustee shall
receive, at the expense of the Debenture Issuer, an opinion of counsel to the
effect that such amendment or proposal will not cause the Trust to be taxable as
a corporation or classified as other than a grantor trust for United States
federal income tax purposes, or affect the treatment of the Debentures as
indebtedness of the Debenture Issuer for United States federal income tax
purposes, or affect the Trust's exemption from status as an Investment Company
under the Investment Company Act. Notwithstanding the foregoing, that without
the consent of each Holder of Common Securities or Preferred Securities, as the
case may be, the Declaration may not be amended to (i) change the amount of
timing of any Distribution or otherwise adversely effect the amount of any
Distribution required to be made as of a specified date, (ii) change any of the
redemption

                                      -11-
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<PAGE>


provisions, or (iii) restrict the right of the Holder of the Securities to
institute suit for the enforcement of any required payment on or after the due
date therefor.

       (b)    In the event the consent of the Institutional Trustee as the
holder of the Debentures is required under the Indenture with respect to any
amendment, modification or termination on the Indenture or the Debentures, the
Institutional Trustee shall request the written direction of the Holders of the
Securities with respect to such amendment, modification or termination and shall
vote with respect to such amendment, modification or termination as directed by
a Majority in liquidation amount of the Securities voting together as a single
class; PROVIDED, HOWEVER, that where a consent under the Indenture would require
the consent of the holders of greater than a majority in aggregate principal
amount of the Debentures (a "Super Majority", as defined in Section 5(b)), the
Institutional Trustee may only give such consent at the direction of the Holders
of at least the proportion in liquidation amount of the Securities which the
relevant Super Majority represents of the aggregate principal amount of the
Debentures outstanding; PROVIDED, FURTHER, that the Institutional Trustee shall
not take any action in accordance with the directions of the Holders of the
Securities under this Section 7(b) unless the Institutional Trustee has
obtained, at the expense of the Debenture Issuer, an opinion of tax counsel to
the effect that for the purposes of United States federal income tax the Trust
will not be classified as other than a grantor trust on account of such action.

8.     Pro Rata.

       A reference in these terms of the Securities to any payment, distribution
or treatment as being "Pro Rata" shall mean pro rata to each Holder of
Securities according to the aggregate liquidation amount of the Securities held
by the relevant Holder in relation to the aggregate liquidation amount of all
Securities outstanding unless, in relation to a payment, an Event of Default
under the Declaration has occurred and is continuing, in which case any funds
available to make such payment shall be paid first to each Holder of the
Preferred Securities pro rata according to the aggregate liquidation amount of
Preferred Securities held by the relevant Holder relative to the aggregate
liquidation amount of all Preferred Securities outstanding, and only after
satisfaction of all amounts owed to the Holders of the Preferred Securities, to
each Holder of Common Securities pro rata according to the aggregate liquidation
amount of Common Securities held by the relevant Holder relative to the
aggregate liquidation amount of all Common Securities outstanding.

9.     Ranking.

         The Preferred Securities rank pari passu and payment thereon shall be
made Pro Rata with the Common Securities except that, where an Event of Default
occurs and is continuing under the Indenture in respect of the Debentures held
by the Institutional Trustee, the rights of Holders of the Common Securities to
payment in respect of Distributions and payments upon liquidation, redemption
and otherwise are subordinated to the rights to payment of the Holders of the
Preferred Securities.

                                      -12-
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<PAGE>


10.    Listing.

       The Regular Trustees shall use their reasonable best efforts to cause the
Preferred Securities to be listed on the New York Stock Exchange, Inc.

11.    Acceptance of Securities Guarantee and Indenture.

       Each Holder of Preferred Securities and Common Securities, by the
acceptance thereof, agrees to the provisions of the Preferred Securities
Guarantee, including the subordination provisions therein and to the provisions
of the Indenture.

12.    No Preemptive Rights.

       The Holders of the Securities shall have no preemptive or similar rights
to subscribe for any additional securities.

13.    Miscellaneous.

       These terms constitute a part of the Declaration.

       The Sponsor will provide a copy of any one or more of the Declaration,
the Preferred Securities Guarantee and the Indenture to a Holder without charge
on written request to the Sponsor at its principal place of business.

                                      -13-
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<PAGE>


               EXHIBIT A-1 FORM OF PREFERRED SECURITY CERTIFICATE

       [IF THE PREFERRED SECURITY IS TO BE A GLOBAL CERTIFICATE INSERT --THIS
PREFERRED SECURITY IS A GLOBAL CERTIFICATE WITHIN THE MEANING OF THE DECLARATION
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY TRUST
COMPANY (THE "DEPOSITARY") OR A NOMINEE OF THE DEPOSITARY. THIS PREFERRED
SECURITY IS EXCHANGEABLE FOR PREFERRED SECURITIES REGISTERED IN THE NAME OF A
PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE DECLARATION AND NO TRANSFER OF THIS PREFERRED
SECURITY (OTHER THAN A TRANSFER OF THIS PREFERRED SECURITY AS A WHOLE BY THE
DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO
THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY) MAY BE REGISTERED EXCEPT IN
LIMITED CIRCUMSTANCES.

       UNLESS THIS PREFERRED SECURITY IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW
YORK) TO THE TRUST OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY PREFERRED SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE &
CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY AND ANY PAYMENT HEREON IS MADE TO CEDE & CO., ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS
WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]

       Certificate Number __________
       Number of Preferred Securities ___________

       CUSIP No. _________

       Certificate Evidencing Preferred Securities of

       ALLEGHENY CAPITAL TRUST III

       [ ]% Trust Preferred Securities (Liquidation Amount [$ ] per Preferred
Security)

       ALLGHENY CAPITAL TRUST III, a statutory business trust created under the
laws of the State of Delaware (the "Trust"), hereby certifies that Cede & Co.
(the "Holder") is the registered owner of [________________________] preferred
securities of the Trust representing preferred undivided beneficial interests in
the assets of the Trust designated the [ ]% Trust Preferred Securities (the
"Preferred Securities"). The Preferred Securities are transferable on the books
and records of the Trust, in person or

                                      A1-1
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<PAGE>


by a duly authorized attorney, upon surrender of this certificate duly endorsed
and in proper form for transfer. The designation, rights, privileges,
restrictions, preferences and other terms and provisions of the Preferred
Securities are set forth in, and this certificate and the Preferred Securities
represented hereby are issued and shall in all respects be subject to, the
provisions of the Amended and Restated Declaration of Trust of the Trust dated
as of [__________, 200__] as the same may be amended from time to time (the
"Declaration"), including the designation of the terms of the Preferred
Securities as set forth in Annex I thereto. Capitalized terms used herein but
not defined shall have the meaning given them in the Declaration. The Holder is
entitled to the benefits of the Preferred Securities Guarantee to the extent
provided therein. The Sponsor will provide a copy of the Declaration, the
Preferred Securities Guarantee and the Indenture to a Holder without charge upon
written request to the Sponsor at its principal place of business.

       The Holder of this certificate, by accepting this certificate, is deemed
to have (i) agreed to the terms of the Indenture and the Debentures, including
that the Debentures are subordinate and junior in right of payment to all Senior
Indebtedness (as defined in the Indenture) and (ii) agreed to the terms of the
Preferred Securities Guarantee, including that the Preferred Securities
Guarantee is (A) subordinate and junior in right of payment to all Senior
Indebtedness (as defined in the Indenture) of Allegheny Energy, (B) pari passu
with the most senior preferred or preference stock now or hereafter issued by
Allegheny Energy and with any guarantee now or hereafter issued by Allegheny
Energy with respect to preferred or preference stock of Allegheny Energy's
affiliates and (C) senior to Allegheny Energy's common stock.

       Upon receipt of this certificate, the Holder is bound by the Declaration
and is entitled to the benefits thereunder.

       By acceptance, the Holder agrees to treat, for United States federal
income tax purposes, the Debentures as indebtedness and the Preferred Securities
as evidence of indirect beneficial ownership in the Debentures.

       IN WITNESS WHEREOF, the Trust has executed this certificate this [____]
day of [________, 200__].

                                                     ALLEGHENY CAPITAL TRUST III




                                                     -------------------------
                                                     By:    Regis F. Binder
                                                     Title: Regular Trustee

                                      A1-2
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<PAGE>


              INSTITUTIONAL TRUSTEE'S CERTIFICATE OF AUTHENTICATION

       This is one of the Preferred Securities referred to in the
within-mentioned Declaration.


                                                 By:
                                                     ---------------------------
                                                     Authorized Officer

                                      A1-3
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<PAGE>


                          [FORM OF REVERSE OF SECURITY]

       Distributions payable on each Preferred Security will be fixed at a rate
per annum of [ ]% (the "Coupon Rate") of the stated liquidation amount of [$ ]
per Preferred Security, such rate being the rate of interest payable on the
Debentures to be held by the Institutional Trustee. Distributions in arrears
will bear interest thereon at the Coupon Rate compounded quarterly (to the
extent permitted by applicable law). The term "Distributions" as used herein
includes such cash distributions and any such interest payable unless otherwise
stated. A Distribution is payable only to the extent that payments are made in
respect of the Debentures held by the Institutional Trustee and to the extent
the Institutional Trustee has funds available therefor. The amount of
Distributions payable for any period will be computed for any full quarterly
Distribution period on the basis of a 360-day year consisting of twelve 30-day
months. Distributions payable for any period of less than a full quarterly
period will be computed on the basis of a 30-day month and, for periods of less
than one month, the actual number of elapsed days per 30-day month.

       Distributions on the Preferred Securities will be cumulative, will accrue
from the date of original issuance and will be payable quarterly in arrears, on
the following dates, which dates correspond to the interest payment dates on the
Debentures: [_________], [_________], [________] and [________] of each year,
commencing on [_______, 200__], except as otherwise described below. The
Debenture Issuer has the right under the Indenture to defer payments of interest
by extending the interest payment period from time to time on the Debentures for
a period not exceeding 20 quarterly periods (each an "Extension Period") and, as
a consequence of such deferral, Distributions will also be deferred. Despite
such deferral, quarterly Distributions will continue to accrue with interest
thereon (to the extent permitted by applicable law) at the Coupon Rate
compounded quarterly during any such Extension Period. Prior to the termination
of any such Extension Period, the Debenture Issuer may further extend such
Extension Period; PROVIDED, that such Extension Period together with all such
previous and further extensions thereof may not exceed 20 quarterly periods or
extend beyond the maturity (whether at the stated maturity or by declaration of
acceleration, call for redemption or otherwise) of the Debentures under the
Indenture. Payments of accrued Distributions will be payable to Holders as they
appear on the books and records of the Trust on the first record date after the
end of the Extension Period. Upon the termination of any Extension Period and
the payment of all amounts then due, the Debenture Issuer may commence a new
Extension Period, subject to the above requirements.

       The Preferred Securities shall be redeemable as provided in the
Declaration.

                                      A1-4
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<PAGE>


                                   ASSIGNMENT

FOR VALUE RECEIVED, the undersigned assigns and transfers this Preferred
Security Certificate to:

________________________________________________________________________________

________________________________________________________________________________

_______________ (Insert assignee's social security or tax identification number)

________________________________________________________________________________

________________________________________________________________________________

_____________ (Insert address and zip code of assignee) and irrevocably appoints

________________________________________________________________________________

________________________________________________________________________________

_______________________________________________________________________ agent to
transfer this Preferred Security Certificate on the books of the Trust. The
agent may substitute another to act for him or her.

Date: ___________________________

Signature: _______________________
(Sign exactly as your name appears on the other side of this Preferred Security
Certificate)

                                      A1-5
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<PAGE>


                                   EXHIBIT A-2

                       FORM OF COMMON SECURITY CERTIFICATE

       TRANSFER OF THIS CERTIFICATE IS SUBJECT TO THE CONDITIONS SET FORTH IN
THE DECLARATION REFERRED TO BELOW.

       Certificate Number ____________

       Number of Common Securities ____________

       Certificate Evidencing Common Securities of ____________

       ALLEGHENY CAPITAL TRUST III

       [ ]% Trust Common Securities (Liquidation Amount [$ ] per Common
Security)

       ALLEGHENY CAPITAL TRUST III, a statutory business trust created under the
laws of the State of Delaware (the "Trust"), hereby certifies that Allegheny
Energy, Inc., a Maryland corporation, (the "Holder") is the registered owner of
[ ] common securities of the Trust representing undivided beneficial interests
in the assets of the Trust designated the [ ]% Trust Common Securities (the
"Common Securities"). The Common Securities are transferable on the books and
records of the Trust, in person or by a duly authorized attorney, upon surrender
of this certificate duly endorsed and in proper form for transfer and
satisfaction of the other conditions set forth in the Declaration (as defined
below), including, without limitation, Section 9.1 thereof. The designation,
rights, privileges, restrictions, preferences and other terms and provisions of
the Common Securities represented hereby are issued and shall in all respects be
subject to the provisions of the Amended and Restated Declaration of Trust of
the Trust dated as of [___________, 200__], as the same may be amended from time
to time (the "Declaration"), including the designation of the terms of the
Common Securities as set forth in Annex I thereto. Capitalized terms used herein
but not defined shall have the meaning given them in the Declaration. The
Sponsor will provide a copy of the Declaration and the Indenture to a Holder
without charge upon written request to the Sponsor at its principal place of
business.

       Upon receipt of this certificate, the Holder is bound by the Declaration
and is entitled to the benefits thereunder.

       The Holder of this certificate, by accepting this certificate, is deemed
to have agreed to the terms of the Indenture and the Debentures, including that
the Debentures are subordinate and junior in right of payment to all Senior
Indebtedness (as defined in the Indenture) as and to the extent provided in the
Indenture.

                                      A2-1
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<PAGE>


       By acceptance, the Holder agrees to treat, for United States federal
income tax purposes, the Debentures as indebtedness and the Common Securities as
evidence of indirect beneficial ownership in the Debentures.

       IN WITNESS WHEREOF, the Trust has executed this certificate this [____]
day of [___________, 200__].



                                    ALLEGHENY CAPITAL TRUST III



                                    -------------------------
                                    By:    Regis F. Binder
                                    Title: Regular Trustee

                                      A2-2
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<PAGE>


                                   ASSIGNMENT

FOR VALUE RECEIVED, the undersigned assigns and transfers this Common Security
Certificate to:

________________________________________________________________________________

________________________________________________________________________________

_______________ (Insert assignee's social security or tax identification number)

________________________________________________________________________________

________________________________________________________________________________

_____________ (Insert address and zip code of assignee) and irrevocably appoints

________________________________________________________________________________

________________________________________________________________________________

_______________________________________________________________________ agent to
transfer this Common Security Certificate on the books of the Trust. The agent
may substitute another to act for him or her.

Date: ___________________________

Signature: _______________________ (Sign exactly as your name appears on the
other side of this Common Security Certificate)

                                      B-1
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