Document:

EXHIBIT 10.3

                                                             EXECUTION COPY

===============================================================================

                            SERVICING AGREEMENT

                                  between

                           WEST PENN FUNDING LLC

                                    and

                          WEST PENN POWER COMPANY

                                  Servicer

                       Dated as of November 16, 1999

===============================================================================

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                                                             Contents, p. i

                             TABLE OF CONTENTS

                                                                       Page
                                                                       ----
                                 ARTICLE I
                                Definitions

SECTION 1.01.  Definitions...........................................    2
SECTION 1.02.  Other Definitional Provisions........................... 11

                                 ARTICLE II
                 Appointment and Authorization of Servicer

SECTION 2.01.  Appointment of Servicer; Acceptance of
                      Appointment...................................... 12
SECTION 2.02.  Authorization........................................... 12
SECTION 2.03.  Dominion and Control over Serviced
                  Intangible Transition Property....................... 13

                                ARTICLE III
                              Billing Services

SECTION 3.01.  Duties of Servicer...................................... 13
SECTION 3.02.  Collection of Intangible Transition
                      Charges.......................................... 16
SECTION 3.03.  Servicing and Maintenance Standards..................... 18
SECTION 3.04.  Servicer's Certificates................................. 19
SECTION 3.05.  Annual Statement as to Compliance;
                      Notice of Default................................ 19
SECTION 3.06.  Annual Independent Certified Public
                      Accountants' Report.............................. 20
SECTION 3.07.  Intangible Transition Property
                      Documentation.................................... 21
SECTION 3.08.  Computer Records; Audits of
                      Documentation.................................... 21
SECTION 3.09.  Defending Intangible Transition Property
                      Against Claims................................... 23
SECTION 3.10.  Opinions of Counsel  ................................... 24

                                 ARTICLE IV
                       Services Related to Intangible
                       Transition Charges Adjustments

SECTION 4.01.  Intangible Transition Charges
                      Adjustments...................................... 25

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                                                            Contents, p. ii

                                                                       Page
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                                 ARTICLE V
                                The Servicer

SECTION 5.01.  Representations and Warranties of
                      Servicer......................................... 26
SECTION 5.02.  Indemnities of Servicer; Release of
                      Claims........................................... 30
SECTION 5.03.  Merger or Consolidation of, or
                      Assumption of the Obligations of,
                      Servicer......................................... 32
SECTION 5.04.  Assignment of Servicer's Obligations.................... 34
SECTION 5.05.  Limitation on Liability of Servicer and
                      Others........................................... 34
SECTION 5.06.  West Penn Not To Resign as Servicer..................... 35
SECTION 5.07.  Servicing Fee........................................... 36
SECTION 5.08.  Servicer Expenses....................................... 37
SECTION 5.09.  Appointments............................................ 37
SECTION 5.10.  Remittances............................................. 38
SECTION 5.11.  Servicer Advances....................................... 39
SECTION 5.12.  Protection of Title..................................... 39

                                 ARTICLE VI
                              Servicer Default

SECTION 6.01.  Servicer Default........................................ 40
SECTION 6.02.  Notice of Servicer Default.............................. 43
SECTION 6.03.  Waiver of Past Defaults................................. 43
SECTION 6.04.  Appointment of Successor................................ 44

                                ARTICLE VII
                          Miscellaneous Provisions

SECTION 7.01.  Amendment............................................... 46
SECTION 7.02.  Notices................................................. 47
SECTION 7.03.  Assignment.............................................. 47
SECTION 7.04.  Limitations on Rights of Others......................... 48
SECTION 7.05.  Severability............................................ 48
SECTION 7.06.  Separate Counterparts................................... 48
SECTION 7.07.  Headings................................................ 49
SECTION 7.08.  Governing Law........................................... 49
SECTION 7.09.  Assignment to Bond Trustee.............................. 49
SECTION 7.10.  Nonpetition Covenants................................... 50
SECTION 7.11.  Termination............................................. 51
SECTION 7.12.  Limitation of Liability................................. 51

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                                                           Contents, p. iii

EXHIBIT A             Servicing Procedures

ANNEX 1               ITC Adjustment Process and Reports - West
                      Penn Funding LLC

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                         SERVICING AGREEMENT dated as of November 16, 1999,
                    between WEST PENN FUNDING LLC, a Delaware limited
                    liability company (the "Issuer"), and WEST PENN POWER
                    COMPANY, a Pennsylvania corporation, as the servicer of
                    the Intangible Transition Property (together with each
                    successor to WEST PENN POWER COMPANY (in the same
                    capacity) pursuant to Section 5.03 or 6.02, the
                    "Servicer").

          WHEREAS the Servicer is willing to service the Intangible
Transition Property purchased from the Seller by the Issuer; and WHEREAS
the Issuer, in connection with ownership of Serviced Intangible Transition
Property, desires to engage the Servicer to carry out the functions
described herein.

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

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                                 ARTICLE I

                                Definitions

          SECTION 1.01. Definitions. Whenever used in this Agreement, each
of the following words and phrases shall have the following meaning:

          "Administration Agreement" means the Service Agreement dated as
of November 16, 1999, between the Issuer and Allegheny Energy Service
Corporation, as administrative agent, as the same may be amended and
supplemented from time to time.

          "Administrative Fees" means the fees owed to Allegheny Energy
Service Corporation, as administrative agent, under the Administration
Agreement.

          "Agreement" means this Servicing Agreement, as the same may be
amended and supplemented from time to time.

          "Annual Accountant's Report" has the meaning specified in Section
3.06(a).

          "Basic Documents" has the meaning set forth in the Indenture.

          "Bond Trustee" means Bankers Trust Company, a New York banking
corporation, as bond trustee under the Indenture, or any successors to the
foregoing.

          "Business Day" means any day other than a Satur day, Sunday or a
day on which banking institutions in the City of New York, the City of
Greensburg, Pennsylvania or

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the State of Delaware are required by law or executive order
to remain closed.

          "Class" means, with respect to any Series, any one of the classes
of Transition Bonds of that Series.

          "Collateral" means, with respect to the Issuer, all property of
the Issuer pledged by it to secure Transition Bonds issued by the Issuer as
provided in the Indenture.

          "Collection Period" means the monthly period represented by each
of West Penn's 12 revenue months each year.

          "Competitive Transition Charges" means the competitive transition
charges that West Penn may impose on Customers as set forth in Appendix A
to the Joint Petition for Approval of Full Settlement of West Penn Power
Company's Restructuring Plan and Related Court Proceedings and approved in
the Final Order issued on November 19, 1998 by the PUC with respect to West
Penn's restructuring plan.

          "Customers" means each person that (i) was a customer of West
Penn located within West Penn's retail electric service territory on
January 1, 1997 or that became a customer of electric services within such
territory after January 1, 1997, (ii) is still located within such
territory, and (iii) is in a Rate Schedule that has been assigned stranded
cost responsibility.

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          "Fitch IBCA" means Fitch IBCA, Inc. or its successor.

          "Formation Document" means the Amended and Restated Limited
Liability Company Agreement of the Issuer dated as of November 3, 1999,
between the Seller and the Special Members named therein, as the same may
be amended and supplemented from time to time.

          "Holder" or "Transition Bondholder" means the Person in whose
name a Transition Bond of any Series or Class is registered as provided in
the Indenture therefor.

          "Indenture" means the indenture dated as of November 16, 1999,
between the Issuer and the Bond Trustee, as the same may be amended and
supplemented from time to time, including by any Series Supplement.

          "Independent Directors" means the persons acting as Independent
Directors of the Issuer pursuant to the Formation Document.

          "Insolvency Event" means, with respect to a specified Person, (a)
the filing of a decree or order for relief by a court having jurisdiction
in the premises in respect of such Person or any substantial part of its
property in an involuntary case under any applicable Federal or state
bankruptcy, insolvency or other similar law now or hereafter in effect, or
appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official for such Person or for any substantial
part of its

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property, or ordering the winding-up or liquidation of such Person's
affairs, and such decree or order shall remain unstayed and in effect for a
period of 90 consecutive days or (b) the commencement by such Person of a
voluntary case under any applicable Federal or state bankruptcy, insolvency
or other similar law now or hereafter in effect, or the consent by such
Person to the entry of an order for relief in an involuntary case under any
such law, or the consent by such Person to the appointment of or taking
possession by a receiver, liquidator, assignee, custodian, trustee, seques
trator or similar official for such Person or for any sub stantial part of
its property, or the making by such Person of any general assignment for
the benefit of creditors, or the failure by such Person generally to pay
its debts as such debts become due, or the taking of action by such Person
in furtherance of any of the foregoing.

          "Intangible Transition Charges" means the amounts authorized by
the PUC to be imposed on all Customer bills with respect to the Intangible
Transition Property and collected, through a non-bypassable mechanism, by
West Penn or its successor or by any other entity which provides electric
service to Customers, to recover Qualified Transition Expenses pursuant to
the Qualified Rate Order.

          "Intangible Transition Charges Adjustment" means

          each adjustment to Intangible Transition Charges related to the
Serviced Intangible Transition Property made in

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accordance with Section 4.01 and Annex 1 hereto or in connection with the
redemption by the Issuer of Transition Bonds.

          "Intangible Transition Property" means the irrevocable right of
West Penn or its successor or assignee to collect Intangible Transition
Charges from Customers to recover the Qualified Transition Expenses
described in the Qualified Rate Order, including all right, title and
interest of West Penn or its successor or assignee in such order and in all
revenues, collections, claims, payments, money or proceeds of or arising
from Intangible Transition Charges pursuant to such order, and all proceeds
of any of the foregoing.

          "Intangible Transition Property Documentation" has the meaning
assigned to that term in Section 3.07.

          "Issuer" means West Penn Funding LLC until a successor replaces
it and, thereafter, such successor.

          "ITC Collections" means amounts collected in respect of
Intangible Transition Charges or the Intangible Transition Property.

          "Lien" means a security interest, lien, charge, pledge, equity or
encumbrance of any kind.

          "Losses" means collectively, any and all liabilities,
obligations, losses, damages, payments, costs or expenses of any kind
whatsoever.

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          "Moody's" means Moody's Investors Service Inc., or its successor.
"Officers' Certificate" means a certificate signed by (a) the chairman of
the board, the president, the vice chairman of the board, the executive
vice president or any vice president and (b) a treasurer, assistant
treasurer, secretary or assistant secretary, in each case of the Servicer.

          "Operating Expenses" means, with respect to the Issuer, all fees,
costs, expenses and indemnity payments owed by the Issuer, including all
amounts owed by the Issuer to the Bond Trustee and the Independent
Directors, the Servicing Fee payable in respect of Transition Bonds issued
by the Issuer, the Administrative Fees, legal fees and expenses of the
Servicer and legal and accounting fees, costs and expenses of the Issuer
and the Bond Trustee.

          "Opinion of Counsel" means one or more written opinions of
counsel who may be an employee of or counsel to West Penn or the Servicer,
which counsel shall be reasonably acceptable to the Bond Trustee, the
Issuer or the Rating Agencies, as applicable, and shall be in form
reasonably satisfactory to the Bond Trustee, if applicable.

          "Payment Date" means each March 25, June 25, September 25 and
December 26, commencing on March 27, 2000, or if any such date is not a
Business Day, the next succeeding Business Day.

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

          "PUC" means the Pennsylvania Public Utility Commission or any
successor.

          "PUC Regulations" means any regulations promulgated or adopted by
the PUC.

          "Qualified Rate Order" means the order of the PUC issued on
November 19, 1998, as supplemented by a supplemental qualified rate order
of the PUC issued on August 12, 1999, adopted in accordance with the
Statute, which, among other things, creates the Intangible Transition
Property and authorizes the imposition and collection of the Intangible
Transition Charges by West Penn or its assignee.

          "Qualified Transition Expenses" has the meaning assigned to that
term in the Qualified Rate Order.

          "Rate Schedule" means each of the rate schedules into which
Customers are divided as of the date hereof, as such rate schedules may be
reconfigured from time to time.

          "Rating Agency" means any rating agency rating the Transition
Bonds of any Class or Series at the time of issuance thereof at the request
of the Issuer. If no such organization or successor is any longer in
existence, "Rating Agency" shall be a nationally recognized statistical

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rating organization or other comparable Person designated by the Issuer,
notice of which designation shall be given to the Bond Trustee under the
Indenture and the Servicer.

          "Rating Agency Condition" means, with respect to any action, the
notification in writing by each Rating Agency to the Transferor, the
Seller, the Servicer, the Bond Trustee and the Issuer that such action will
not result in a reduction or withdrawal of the then current rating by such
Rating Agency of any outstanding Series or Class of Transition Bonds issued
by the Issuer.

          "Released Parties" has the meaning specified in Section 5.02(f).

          "Remittance Date" means each date on which ITC Collections are to
be remitted by the Servicer to the Bond Trustee pursuant to Section 5.10.

          "Sale Agreement" means the Intangible Transition Property Sale
Agreement dated as of November 16, 1999, between the Seller and the Issuer,
relating to the sale of Intangible Transition Property to the Issuer, as
the same may be amended and supplemented from time to time.

          "Seller" means West Penn Funding Corporation and its successors
in interest to the extent permitted under the Sale Agreement.

          "Series" means any series of Transition Bonds issued by the
Issuer.

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          "Series Supplement" means an indenture supplemental to the
Indenture that authorizes a particular Series of Transition Bonds.

          "Serviced Intangible Transition Property" means, collectively,
all Intangible Transition Property sold, conveyed, assigned or otherwise
transferred to the Issuer by the Seller.

          "Servicer Default" means an event specified in Section 6.01.

          "Servicing Fee" means, with respect to any Series of Transition
Bonds, the fee payable to the Servicer on each Payment Date for services
rendered, determined pursuant to Section 5.07.

          "Standard & Poor's means Standard & Poor's Rating Group, or its
successor. "Statute" means the Pennsylvania Electricity Generation Customer
Choice and Competition Act, Chapter 28 of Title 66 of the Pennsylvania
Consolidated Statutes, 66 Pa. C.S.,ss.2801, et seq.

          "Termination Notice" has the meaning specified in Section 6.01.

          "Third Party" means any third party, including any electric
generation supplier, providing billing or metering services, licensed by
the PUC pursuant to relevant provisions of the Statute and any PUC order.

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          "Transfer Agreement" means the Intangible Transition Property
Transfer Agreement dated as of November 16, 1999, between the Transferor
and the Seller relating to the transfer of Intangible Transition Property
to the Seller, as the same may be amended and supplemented from time to
time.

          "Transfer Date" means each date on which the Seller sells,
conveys, or otherwise transfers any Intangible Transition Property to the
Issuer.

          "Transferor" means West Penn Power Company, as transferor under
the Transfer Agreement, and its successors in interest to the extent
permitted hereunder.

          "Transition Bonds" means "transition bonds" (as defined in the
Statute) issued by the Issuer.

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

          "West Penn" means West Penn Power Company, a Pennsylvania
corporation. SECTION 1.02. Other Definitional Provisions. (a) The words
"hereof", "herein", "hereunder" and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement; Section, Annex, Schedule and
Exhibit references contained in this Agreement are references to Sections,
Annexes, Schedules and Exhibits in

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or to this Agreement unless otherwise specified; and the term "including"
shall mean "including without limitation".

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

                                 ARTICLE II

                 Appointment and Authorization of Servicer

          SECTION 2.01. Appointment of Servicer; Acceptance of Appointment.
Subject to Section 5.04 and Article VI, the Issuer hereby appoints the
Servicer, and the Servicer hereby accepts such appointment, to perform the
Servicer's obligations pursuant to this Agreement on behalf of and for the
benefit of the Issuer in accordance with the terms of this Agreement. This
appointment and the Servicer's acceptance thereof may not be revoked except
in accordance with the express terms of this Agreement.

          SECTION 2.02. Authorization. With respect to all or any portion
of the Serviced Intangible Transition Property, the Servicer shall be, and
hereby is, authorized and empowered by the Issuer to (a) execute and
deliver, on behalf of itself or the Issuer, as the case may be, any and all
instruments, documents or notices, and (b) on behalf of itself or the
Issuer, as the case may be, make any filing and participate in proceedings
of any kind with any governmental authorities, including with the PUC. The

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Issuer shall furnish the Servicer with such documents as have been prepared
by the Servicer for execution by the Issuer, and with the other documents
as may be in the Issuer's possession, as necessary or appropriate to enable
the Servicer to carry out its servicing and administrative duties
hereunder. Upon the written request of the Servicer, the Issuer shall
furnish the Servicer with any powers of attorney or other documents
necessary or appropriate to enable the Servicer to carry out its duties
hereunder.

          SECTION 2.03. Dominion and Control over Serviced Intangible
Transition Property. Notwithstanding any other provision herein, the
Servicer and the Issuer agree that the Issuer shall have dominion and
control over its respective Serviced Intangible Transition Property. The
Servicer hereby agrees that it shall not take any action that is not
authorized by this Agreement, that is not consistent with its customary
procedures and practices, or that shall impair the rights of the Issuer in
its respective Serviced Intangible Transition Property, in each case unless
such action is required by law or court or regulatory order.

                                ARTICLE III

                              Billing Services

          SECTION 3.01. Duties of Servicer. The Servicer shall have the
following duties:

               (a) Duties of Servicer Generally. The Servicer will manage,
          service, administer and make collections

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          in respect of the Serviced Intangible Transition Property. The
          Servicer's duties will include (i) calculating and billing the
          Intangible Transition Charges and collecting (from Customers and
          Third Parties, as applicable) and posting all ITC Collections;
          (ii) responding to inquiries by Customers, Third Parties, the
          PUC, or any Federal, local or other state governmental
          authorities with respect to the Serviced Intangible Transition
          Property and Intangible Transition Charges; (iii) accounting for
          ITC Collections, investigating delinquencies, processing and
          depositing collections and making periodic remittances,
          furnishing periodic reports to the Issuer, the Bond Trustee and
          the Rating Agencies; (iv) selling defaulted or written off
          accounts in accordance with the Servicer's usual and customary
          practices; and (v) taking action in connection with Intangible
          Transition Charge Adjustments as set forth herein. Anything to
          the contrary notwithstanding, the duties of the Servicer set
          forth in this Agreement shall be qualified in their entirety by
          any PUC Regulations as in effect at the time such duties are to
          be performed. Without limiting the generality of this Section
          3.01(a), in furtherance of the foregoing, the Servicer hereby
          agrees that it shall also have, and shall comply with, the duties
          and responsibilities

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          relating to data acquisition, usage and bill calculation,
          billing, customer service functions, collections, payment
          processing and remittance set forth in Exhibit A hereto.

               (b) Notification of Laws and Regulations. The Servicer shall
          immediately notify the Issuer, the Bond Trustee and the Rating
          Agencies in writing of any laws or PUC Regulations hereafter
          promulgated that have a material adverse effect on the Servicer's
          ability to perform its duties under this Agreement.

               (c) Other Information. Upon the reasonable request of the
          Issuer, the Bond Trustee or any Rating Agency, the Servicer shall
          provide to the Issuer, the Bond Trustee or such Rating Agency, as
          the case may be, any public financial information in respect of
          the Servicer, or any material information regarding the
          Intangible Transition Property to the extent it is reasonably
          available to the Servicer, as may be reasonably necessary and
          permitted by law for the Issuer, the Bond Trustee or such Rating
          Agency to monitor the performance by the Servicer hereunder. In
          addition, so long as any of the Transition Bonds of any Series
          are outstanding, the Servicer shall provide the Issuer and the
          Bond Trustee, within a reasonable time after written request
          therefor, any information available to the Servicer or reasonably
          obtainable by

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          it that is necessary to calculate the Intangible Transition
          Charges applicable to each Rate Schedule.

          SECTION 3.02. Collection of Intangible Transition Charges. (a)
The Servicer shall use all reasonable efforts consistent with its customary
servicing procedures to collect all amounts owed in respect of Intangible
Transition Charges as and when the same shall become due and shall follow
such collection procedures as it follows with respect to collection
activities that the Servicer conducts for itself or others. The Servicer
shall not change the amount of or reschedule the due date of any scheduled
payment of Intangible Transition Charges, except as contemplated in this
Agreement or as required by law or court or PUC order; provided, however,
that the Servicer may take any of the foregoing actions to the extent that
such action would be in accordance with customary billing and collection
practices of the Servicer with respect to billing and collection activities
that it conducts for itself.

          (b) Any amounts received by the Servicer from a Customer that
represent a partial payment toward an outstanding balance will be applied
first to state sales tax charges, then Intangible Transition Charges, then
to Competitive Transition Charges, then to transmission and distribution
charges and finally to electric generation charges. Notwithstanding the
foregoing, when West Penn is providing billing for its transmission and
distribution

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charges which is separate from billing for generation, any amounts received
from Customers remitting partial payments will be applied in the following
priority: (i) to the outstanding balance before direct access to electric
generation from electric generation suppliers or the installment amount for
a payment agreement on such balance; (ii) to the balance due for state
sales tax charges; (iii) to the balance due or the installment amount for a
payment agreement for Intangible Transition Charges; (iv) to the balance
due or the installment amount for a payment agreement for Competitive
Transition Charges; (v) to the balance due or the installment amount for a
payment agreement for fixed and variable utility distribution service
charges; (vi) to the current state sales tax charges; (vii) to the current
Intangible Transition Charges; and (viii) to the current Competitive
Transition Charges; (ix) to the current fixed and variable utility
distribution service charges; (x) to the balance due for prior charges for
energy and capacity (if West Penn is the provider of last resort); (xi) to
the current charges for energy and capacity charges (if West Penn is the
provider of last resort); and (xii) to the non-basic service charges.

          (c) Notwithstanding anything contained herein to the contrary,
the Servicer will collect sales tax related to Intangible Transition
Charges and report and remit the amount so collected to the appropriate
state tax agency.

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Collection and remission of sales tax is not a final determination by the
Servicer or the Issuer of sales tax liability associated with Intangible
Transition Charges. The Servicer will cooperate with any Person who seeks a
refund of sales tax collected by the Servicer and remitted to the
appropriate government agency.

          SECTION 3.03. Servicing and Maintenance Standards. The Servicer
shall, on behalf of the Issuer, (a) manage, service, administer and make
collections in respect of the Serviced Intangible Transition Property with
reasonable care and in material compliance with applicable law, including
all applicable PUC Regulations and guidelines, using the same degree of
care and diligence that the Servicer exercises with respect to billing and
collection activities that the Servicer conducts for itself and others; (b)
follow standards, policies and procedures in performing its duties as
Servicer that are customary in the Servicer's industry; (c) use all
reasonable efforts, consistent with its customary servicing procedures, to
enforce and maintain rights in respect of the Intangible Transition
Property; and (d) calculate Intangible Transition Charges in compliance
with the Statute, the Qualified Rate Order and any applicable tariffs,
except where the failure to comply with any of the foregoing would not
adversely affect the Issuer's or the Bond Trustee's interest in the
Serviced Intangible Transition Property. The Servicer shall

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follow such customary and usual practices and procedures as it shall deem
necessary or advisable in its servicing of all or any portion of the
Serviced Intangible Transition Property, which, in the Servicer's judgment,
may include the taking of legal action pursuant to Section 3.09 hereof or
otherwise.

          SECTION 3.04. Servicer's Certificates. (a) The Servicer will
provide to the Issuer, the Bond Trustee and each of the Rating Agencies the
statements and certificates specified in Annex 1 hereto.

          SECTION 3.05. Annual Statement as to Compliance; Notice of
Default. (a) The Servicer shall deliver to the Issuer, the Bond Trustee and
each Rating Agency, on or before March 31 of each year beginning March 31,
2000, an Officers' Certificate, stating that (i) a review of the activities
of the Servicer during the preceding calendar year (or relevant portion
thereof) and of its performance under this Agreement has been made under
such officers' supervision and (ii) to the best of such officers'
knowledge, based on such review, the Servicer has fulfilled all its
obligations under this Agreement throughout such period or, if there has
been a default in the fulfillment of any such obligation, describing each
such default.

          (b) The Servicer shall deliver to the Issuer, the Bond Trustee
and each Rating Agency, promptly after having obtained knowledge thereof,
but in no event later than five

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Business Days thereafter, written notice in an Officers' Certificate of any
event which with the giving of notice or lapse of time, or both, would
become a Servicer Default under Section 6.01.

          SECTION 3.06. Annual Independent Certified Public Accountants'
Report. (a) The Servicer shall cause a firm of independent certified public
accountants (which may also provide other services to the Servicer, West
Penn or the Seller) to prepare, and the Servicer shall deliver to the
Issuer, the Bond Trustee and each Rating Agency, on or before March 31 of
each year, beginning March 31, 2000 to and including the March 31
succeeding the retirement of all Transition Bonds, a report addressed to
the Servicer (the "Annual Accountant's Report"), which may be included as
part of the Servicer's customary auditing activities, to the effect that
such firm has performed certain procedures in connection with the
Servicer's compliance with its obligations under this Agreement during the
preceding calendar year ended December 31 (or, in the case of the first
Annual Accountant's Report, the period of time from the first Transfer Date
until December 31, 1999), identifying the results of such procedures and
including any exceptions noted. In the event such accounting firm requires
the Bond Trustee or the Issuer to agree or consent to the procedures
performed by such firm, the Issuer shall direct the Bond Trustee in writing
to so agree; it being

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understood and agreed that the Bond Trustee will deliver such letter of
agreement or consent in conclusive reliance upon the direction of the
Issuer, and neither the Bond Trustee nor the Issuer will make any
independent inquiry or investigation as to, and shall have no obligation or
liability in respect of, the sufficiency, validity or correctness of such
procedures.

          (b) The Annual Accountant's Report shall also indicate that the
accounting firm providing such report is independent of the Servicer within
the meaning of the Code of Professional Ethics of the American Institute of
Certified Public Accountants.

          SECTION 3.07. Intangible Transition Property Documentation. To
assure uniform quality in servicing the Serviced Intangible Transition
Property and to reduce administrative costs, the Servicer shall keep on
file, in accordance with its customary procedures, all documents relating
to the Intangible Transition Property, including copies of the Qualified
Rate Order and all documents filed with the PUC in connection with any
Intangible Transition Charges Adjustment (collectively, the "Intangible
Transition Property Documentation").

          SECTION 3.08. Computer Records; Audits of Documentation. (a)
Safekeeping. The Servicer shall maintain accurate and complete accounts,
records and computer systems pertaining to the Intangible Transition

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Property and the Intangible Transition Property Documentation in accordance
with its standard accounting procedures and in sufficient detail to permit
reconciliation between payments or recoveries on (or with respect to)
Intangible Transition Charges and the ITC Collections from time to time
remitted to the Bond Trustee pursuant to Section 5.10 and to enable the
Issuer to comply with this Agreement and the Indenture. The Servicer shall
conduct, or cause to be conducted, periodic audits of the Intangible
Transition Property Documentation held by it under this Agreement and of
the related accounts, records and computer systems, in such a manner as
shall enable the Issuer and the Bond Trustee, as pledgee of the Issuer, to
verify the accuracy of the Servicer's record keeping. The Servicer shall
promptly report to the Issuer and the Bond Trustee any failure on the
Servicer's part to hold the Intangible Transition Property Documentation
and maintain its accounts, records and computer systems as herein provided
and promptly take appropriate action to remedy any such failure. Nothing
herein shall be deemed to require an initial review or any periodic review
by the Issuer or the Bond Trustee of the Intangible Transition Property
Documentation.

          (b) Maintenance of and Access to Records. The Servicer shall
maintain the Intangible Transition Property Documentation at 800 Cabin Hill
Drive, Greensburg, Pennsylvania or at such other office as shall be
specified

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to the Issuer and the Bond Trustee by written notice not later than 30 days
prior to any change in location. The Servicer shall permit the Issuer and
the Bond Trustee or their respective duly authorized representatives,
attorneys, agents or auditors at any time during normal business hours as
the Issuer or Bond Trustee shall reasonably request to inspect, audit and
make copies of and abstracts from the Servicer's records regarding the
Intangible Transition Property and Intangible Transition Charges and the
Intangible Transition Property Documentation. The failure of the Servicer
to provide access to such information as a result of an obligation or
applicable law (including PUC Regulations) prohibiting disclosure of
information regarding customers shall not constitute a breach of this
Section 3.08(b).

          SECTION 3.09. Defending Intangible Transition Property Against
Claims. The Servicer shall institute any action or proceeding necessary to
compel performance by the PUC or the Commonwealth of Pennsylvania of any of
their obligations or duties under the Statute or the Qualified Rate Order
with respect to the Intangible Transition Property. The costs of any such
action shall be payable from ITC Collections as an Operating Expense in
accordance with the priorities set forth in Section 8.02(d) of the
Indenture at the time such costs are incurred. The Servicer's obligations
pursuant to this Section 3.09 shall

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survive and continue notwithstanding the fact that the payment of Operating
Expenses pursuant to the priorities set forth in Section 8.02(d) of the
Indenture may be delayed (it being understood that the Servicer may be
required to advance its own funds to satisfy its obligations hereunder).

          SECTION 3.10. Opinions of Counsel. The Servicer shall deliver to
the Issuer and the Bond Trustee:

               (a) promptly after the execution and delivery of this
          Agreement and of each amendment hereto, promptly after the
          execution of each Sale Agreement and of each amendment thereto
          and on each Transfer Date, an Opinion of Counsel either (i) to
          the effect that, in the opinion of such counsel, all filings,
          including filings with the PUC pursuant to the Statute, that are
          necessary to fully preserve and protect the interests of the Bond
          Trustee in the Serviced Intangible Transition Property have been
          executed and filed, and reciting the details of such filings or
          referring to prior Opinions of Counsel in which such details are
          given, or (ii) to the effect that, in the opinion of such
          counsel, no such action shall be necessary to preserve and
          protect such interest; and

               (b) within 90 days after the beginning of each calendar year
          beginning with the first calendar year beginning more than three
          months after the first Transfer Date, an Opinion of Counsel,
          dated as of a

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          date during such 90-day period, either (i) to the effect that, in
          the opinion of such counsel, all filings with the PUC pursuant to
          the Statute, have been executed and filed that are necessary to
          preserve fully and protect fully the interest of the Bond Trustee
          in the Serviced Intangible Transition Property, and reciting the
          details of such filings or referring to prior Opinions of Counsel
          in which such details are given, or (ii) to the effect that, in
          the opinion of such counsel, no such action shall be necessary to
          preserve and protect such interest.

          Each Opinion of Counsel referred to in clause (a) or (b) above
shall specify any action necessary (as of the date of such opinion) to be
taken in the following year to preserve and protect such interest.

                                 ARTICLE IV

                       Services Related to Intangible
                       Transition Charges Adjustments

          SECTION 4.01. Intangible Transition Charges Adjustments. The
Servicer shall perform the calculations and take the actions relating to
revising the Intangible Transition Charges, in each case set forth in Annex
1 to this Agreement.

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                                 ARTICLE V
                                The Servicer

          SECTION 5.01. Representations and Warranties of Servicer. The
Servicer makes the following representations and warranties as of each
Transfer Date, on which the Issuer has relied and will rely in acquiring
Serviced Intangible Transition Property. The representations and warranties
shall survive the sale of any of the Serviced Intangible Transition
Property to the Issuer and the pledge thereof to the Bond Trustee pursuant
to the Indenture.

               (a) Organization and Good Standing. The Servicer is a
          corporation duly organized and in good standing under the laws of
          the state of its incorporation, with the corporate power and
          authority to own its properties and to conduct its business as
          such properties are currently owned and such business is
          presently conducted, and has the power, authority and legal right
          to service the Serviced Intangible Transition Property.

               (b) Due Qualification. The Servicer is duly qualified to do
          business as a foreign corporation in good standing, and has
          obtained all necessary licenses and approvals in, all
          jurisdictions in which the owner ship or lease of property or the
          conduct of its busi ness (including the servicing of the Serviced
          Intangible Transition Property as required by this Agreement)
          requires such qualifications, licenses or

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          approvals (except where the failure to so qualify would not be
          reasonably likely to have a material adverse effect on the
          Servicer's business, operations, assets, revenues, properties or
          prospects or adversely affect the servicing of the Serviced
          Intangible Transition Property).

               (c) Power and Authority. The Servicer has the corporate
          power and authority to execute and deliver this Agreement and to
          carry out its terms; and the execution, delivery and performance
          of this Agreement have been duly authorized by the Servicer by
          all necessary corporate action.

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

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

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          or lapse of time) a default under, the articles of incorporation
          or by-laws of the Servicer, or any indenture, agreement or other
          instrument to which the Servicer is a party or by which it shall
          be bound; nor result in the creation or imposition of any Lien
          upon any of its properties pursuant to the terms of any such
          indenture, agreement or other instrument; nor violate any law or
          any order, rule or regulation applicable to the Servicer of any
          court or of any Federal or state regulatory body, administrative
          agency or other governmental instrumentality having jurisdiction
          over the Servicer or its properties.

               (f) Approvals. Except for filings with the PUC for revised
          Intangible Transition Charges pursuant to Section 4.01 and Annex
          1 hereto and UCC continuation filings, no approval,
          authorization, consent, order or other action of, or filing with,
          any court, Federal or state regulatory body, administrative
          agency or other governmental instrumentality is required in
          connection with the execution and delivery by the Servicer of
          this Agreement, the performance by the Servicer of the
          transactions contemplated hereby or the fulfillment by the
          Servicer of the terms hereof, except those that have been
          obtained or made.

               (g) No Proceedings. There are no proceedings or
          investigations pending or, to the Servicer's best

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          knowledge, threatened before any court, Federal or state
          regulatory body, administrative agency or other governmental
          instrumentality having jurisdiction over the Servicer or its
          properties: (i) except as disclosed by the Servicer to the
          Issuer, seeking any determination or ruling that might materially
          and adversely affect the performance by the Servicer of its
          obligations under, or the validity or enforceability against the
          Servicer of this Agreement or (ii) relating to the Servicer and
          which might adversely affect the Federal or state income tax
          attributes of the Transition Bonds.

               (h) Reports and Certificates. Each report and certificate
          delivered in connection with any filing made to the PUC by the
          Servicer on behalf of the Issuer with respect to Intangible
          Transition Charges or Intangible Transition Charges Adjustments
          will constitute a representation and warranty by the Servicer
          that each such report or certificate, as the case may be, is true
          and correct in all material respects; provided, however, that to
          the extent any such report or certificate is based in part upon
          or contains assumptions, forecasts or other predictions of future
          events, the representation and warranty of the Servicer with
          respect thereto will be limited to the representation and
          warranty that such assumptions,

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          forecasts or other predictions of future events are reasonable
          based upon historical performance.

          SECTION 5.02. Indemnities of Servicer; Release of Claims. (a) The
Servicer shall be liable in accordance herewith only to the extent of the
obligations specifically undertaken by the Servicer under this Agreement.

          (b) The Servicer shall indemnify the Issuer and the Bond Trustee,
for itself and on behalf of the Transition Bondholders for which it acts as
Bond Trustee, and each of their respective managers, members, officers,
directors, employees and agents for, and defend and hold harmless each such
Person from and against, any and all Losses that may be imposed upon,
incurred by or asserted against any such Person as a result of (i) the
Servicer's wilful misfeasance, bad faith or gross negligence in the
performance of its duties or observance of its covenants under this
Agreement or the Servicer's reckless disregard of its obligations and
duties under this Agreement or (ii) the Servicer's breach of any of its
representations or warranties in this Agreement.

          (c) If any action, claim, demand or proceeding (including any
governmental investigation) shall be brought or asserted against a party
(the "indemnified party") entitled to any indemnification provided for
under this Section 5.02, such indemnified party shall promptly notify the
Servicer in writing; provided, however, that failure to give such
notification shall not affect the indemnification

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provided hereunder except to the extent the Servicer shall have been
actually prejudiced as a result of such failure.

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

          (e) The Servicer's indemnification obligations under Section
5.02(b) and (d) for events occurring prior to the removal or resignation of
the Bond Trustee or the termination of this Agreement with respect to the
Issuer shall survive the resignation or removal of the Bond Trustee or the
termination of this Agreement with respect to the Issuer and shall include
reasonable costs, fees and expenses of investigation and litigation
(including the Issuer's and the Bond Trustee's reasonable attorneys' fees
and expenses).

          (f) Except to the extent expressly provided for in this Agreement
or the other Basic Documents (including the Servicer's claims with respect
to the Servicing Fees), the Servicer hereby releases and discharges the
Issuer

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(including its managers, members, officers, directors and agents, if any)
and the Bond Trustee (including its officers, directors and agents)
(collectively, the "Released Parties") from any and all actions, claims and
demands whatsoever, which the Servicer, in its capacity as Servicer, shall
or may have against any such Person relating to the Serviced Intangible
Transition Property or the Servicer's activities with respect thereto other
than any actions, claims and demands arising out of the wilful misconduct,
bad faith or gross negligence of the Released Parties.

          SECTION 5.03. Merger or Consolidation of, or Assumption of the
Obligations of, Servicer. Any Person (a) into which the Servicer may be
merged or consolidated and which succeeds to the major part of the electric
distribution business of the Servicer, (b) which results from the division
of the Servicer into two or more Persons and which succeeds to the major
part of the electric distribution business of the Servicer, (c) which may
result from any merger or consolidation to which the Servicer shall be a
party and which succeeds to the major part of the electric distribution
business of the Servicer, (d) which may succeed to the properties and
assets of the Servicer substantially as a whole and which succeeds to the
major part of the electric distribution business of the Servicer or (e)
which may otherwise succeed to the major part of the electric distribution
business of the Servicer, which Person

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in any of the foregoing cases executes an agreement of assumption to
perform every obligation of the Servicer hereunder, shall be the successor
to the Servicer under this Agreement without further act on the part of any
of the parties to this Agreement; provided, however, that (i) immediately
after giving effect to such transaction, no representation and warranty
made pursuant to Section 5.01 shall have been breached and no Servicer
Default, and no event which, after notice or lapse of time, or both, would
become a Servicer Default, shall have occurred and be continuing, (ii) the
Servicer shall have delivered to the Issuer and the Bond Trustee an
Officers' Certificate and an Opinion of Counsel stating that such
consolidation, merger or succession and such agreement of assumption comply
with this Section 5.03 and that all conditions precedent provided for in
this Agreement relating to such transaction have been complied with, (iii)
the Rating Agencies shall have received prior written notice of such
transaction, (iv) the Servicer shall have delivered to the Issuer, the Bond
Trustee and the Rating Agency an Opinion of Counsel either (A) stating
that, in the opinion of such counsel, all filings, including filings with
the PUC pursuant to the Statute, have been executed and filed that are
necessary to preserve fully and protect fully the interests of the Issuer
in the Serviced Intangible Transition Property and reciting the details of
such filings or (B) stating that, in the opinion of such

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<PAGE>

counsel, no such action shall be necessary to preserve and protect such
interests. Notwithstanding anything herein to the contrary, the execution
of the above referenced agreement of assumption and compliance with clauses
(i), (ii), (iii) and (iv) above shall be conditions precedent to the
consummation of the transactions referred to in clause (a), (b), (c), (d)
or (e) above.

          SECTION 5.04. Assignment of Servicer's Obligations. Subject to
the satisfaction of the conditions set forth in Section 5.03, pursuant to
paragraph 13 of the Qualified Rate Order in which the PUC authorizes West
Penn to contract with an alternative party to perform West Penn's
obligations contemplated in the Qualified Rate Order, the Servicer may
assign its obligations hereunder to any electric distribution company (as
such term is defined in the Statute) which succeeds to the major part of
West Penn's electric distribution business.

          SECTION 5.05. Limitation on Liability of Servicer and Others. The
Servicer shall not be liable to the Issuer, the Bond Trustee, the holders
of the Transition Bonds or any other Person, except as provided under this
Agreement, for any action taken or for refraining from the taking of any
action pursuant to this Agreement or for errors in judgment; provided,
however, that this provision shall not protect the Servicer against any
liability that would otherwise be imposed by reason of wilful misfeasance,
bad faith or gross

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<PAGE>

negligence in the performance of its duties or by reason of reckless
disregard of obligations and duties under this Agreement. The Servicer and
any director or officer or employee or agent of the Servicer may rely in
good faith on the advice of counsel reasonably acceptable to the Bond
Trustee or on any document of any kind, prima facie properly executed and
submitted by any Person, respecting any matters arising under this
Agreement.

          Except as provided in this Agreement, the Servicer shall not be
under any obligation to appear in, prosecute or defend any legal action
that is not incidental to its duties to service the Serviced Intangible
Transition Property in accordance with this Agreement or related to its
obligation to pay indemnification, and that in its reasonable opinion may
cause it to incur any expense or liability.

          SECTION 5.06. West Penn Not To Resign as Servicer. Subject to the
provisions of Sections 5.03 and 5.04, West Penn shall not resign from the
obligations and duties hereby imposed on it as Servicer under this
Agreement except upon a determination that the performance of its duties
under this Agreement shall no longer be permissible under applicable law.
Notice of any such determination permitting the resignation of West Penn
shall be communicated to the Issuer, the Bond Trustee and each Rating
Agency at the earliest practicable time (and, if such communication is not
in writing, shall be confirmed in

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<PAGE>

writing at the earliest practicable time), and any such determination shall
be evidenced by an Opinion of Counsel to such effect delivered to the
Issuer and the Bond Trustee concurrently with or promptly after such
notice. No such resignation shall become effective until a successor
Servicer shall have assumed the servicing obligations and duties hereunder
of West Penn in accordance with Section 6.04.

          SECTION 5.07. Servicing Fee. The Issuer agrees to pay the
Servicer, solely to the extent amounts are available therefor in accordance
with the Indenture, the Servicing Fee with respect to all Series of
Transition Bonds issued by the Issuer. The Servicing Fee with respect to a
Series for a Payment Date shall be as follows: so long as West Penn acts as
the Servicer, the Servicing Fee will be $312,500 per quarter or, if less,
the maximum amount approved by the PUC; if a successor Servicer is
appointed, the Servicing Fee will be based on an amount approved by the
PUC, but not in excess of a per annum rate equal to 1.5% of the outstanding
principal balance of the Transition Bonds. The Servicer will be entitled to
retain as additional compensation net investment income on ITC Collections
related to Serviced Intangible Transition Property received by the Servicer
prior to each Remittance Date and the late fees, if any, paid by Customers
to the Servicer. The

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<PAGE>

foregoing fees constitute a fair and reasonable price for
the obligations to be performed by the Servicer.

          SECTION 5.08. Servicer Expenses. Except as otherwise expressly
provided herein, the Servicer shall be required to pay all expenses
incurred by it in connection with its activities hereunder, including fees
and disbursements of independent accountants and counsel, taxes imposed on
the Servicer and expenses incurred in connection with reports to Transition
Bondholders.

          SECTION 5.09. Appointments. The Servicer may at any time appoint
a subservicer to perform all or any portion of its obligations as Servicer
hereunder; provided, however, that the Rating Agency Condition shall have
been satisfied in connection therewith with respect to all Rating Agencies
other than Moody's (and the Servicer shall have furnished Moody's with
written notice of such appointment prior to its effectiveness); provided
further that the Servicer shall remain obligated and be liable to the
Issuer for the servicing and administering of the Serviced Intangible
Transition Property in accordance with the provisions hereof without
diminution of such obligation and liability by virtue of the appointment of
such subservicer and to the same extent and under the same terms and
conditions as if the Servicer alone were servicing and administering the
Serviced Intangible Transition Property. The fees and expenses of the
subservicer shall be as agreed between the

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<PAGE>

Servicer and its subservicer from time to time, and none of the Issuer (or
its members or managers), the Bond Trustee or any Transition Bondholder
shall have any responsibility therefor.

          SECTION 5.10. Remittances. (a) Subject to Section 5.07, the
Servicer shall remit all ITC Collections (from whatever source) and all
proceeds of other Collateral of such Issuer, if any, received by the
Servicer to the Bond Trustee under the Indenture, for deposit pursuant to
the Indenture, not later than the second Business Day after receipt
thereof.

          (b) Notwithstanding the foregoing clause (a), (i) as long as West
Penn or any successor to West Penn's electric distribution business remains
the Servicer, (ii) no Servicer Default has occurred and is continuing and
(iii) (A) West Penn or such successor maintains a short-term rating of
"A-1" or better by Standard & Poor's, "P-1" or better by Moody's and, if
rated by Fitch IBCA, "F-1" by Fitch IBCA (and for five Business Days
following a reduction in any such rating) or (B) the Rating Agency
Condition shall have been satisfied with respect to all Rating Agencies
other than Moody's (to which prior written notice will be sent) (and any
conditions or limitations imposed by such Rating Agencies in connection
therewith are complied with), the Servicer need not make the daily
remittances required by such clause (a), but in lieu thereof, shall remit
all ITC

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<PAGE>

Collections (from whatever source) and all proceeds of other Collateral of
such Issuer, if any, received by the Servicer during any Collection Period
to the Bond Trustee, for deposit pursuant to the Indenture, not later than
the Business Day immediately preceding the 25th day of each month.

          SECTION 5.11. Servicer Advances. The Servicer shall make advances
of interest or principal on the Transition Bonds of any Series in the
manner and to the extent, if any, specified in any Annex to this Agreement
entered into in connection with the issuance of such Transition Bonds.

          SECTION 5.12. Protection of Title. The Servicer shall execute and
file such filings, including filings with the PUC pursuant to the Statute,
and cause to be executed and filed such filings, all in such manner and in
such places as may be required by law fully to preserve, maintain, and
protect the interests of the Issuer in the Serviced Intangible Transition
Property, including all filings required under the Statute relating to the
transfer of the ownership or security interest in the Serviced Intangible
Transition Property by the Seller to the Issuer or any security interest
granted by the Issuer in the Serviced Intangible Transition Property. The
Servicer shall deliver (or cause to be delivered) to the Issuer file-
stamped copies of, or filing receipts for, any document

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filed as provided above, as soon as available following such
filing.

                                 ARTICLE VI

                              Servicer Default

          SECTION 6.01. Servicer Default. If any one of the following
events (a "Servicer Default") shall occur and be continuing:

               (a) any failure by the Servicer to remit to the Bond Trustee
          on behalf of the Issuer any required remittance that shall
          continue unremedied for a period of three Business Days after
          written notice of such failure is received by the Servicer from
          the Issuer or Bond Trustee; or

               (b) any failure by the Servicer or, so long as the
          Transferor and the Servicer are the same Person, the Transferor,
          as applicable, duly to observe or perform in any material respect
          any other covenant or agreement of the Servicer or the
          Transferor, as the case may be, set forth in this Agreement or
          any other Basic Document to which it is a party, which failure
          shall (i) materially and adversely affect the Intangible
          Transition Property and (ii) continue unremedied for a period of
          60 days after written notice of such failure shall have been
          given to the Servicer or the Transferor, as the case may be, by
          the Issuer or the Bond Trustee or after discovery of such failure
          by an

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          officer of the Servicer or the Transferor, as the case may be; or

               (c) any representation or warranty made by the Servicer in
          this Agreement shall prove to have been incorrect when made,
          which has a material adverse effect on the Issuer or the
          Transition Bondholders and which material adverse effect
          continues unremedied for a period of 60 days after the date on
          which written notice thereof shall have been given to the
          Servicer by the Issuer or the Bond Trustee; or

               (d) an Insolvency Event occurs with respect to the Servicer;

then, and in each and every case, so long as the Servicer Default shall not
have been remedied, the Bond Trustee, as assignee of the Issuer, with the
consent of Holders of a majority of the outstanding principal amount of the
Transition Bonds of all Series, by notice then given in writing to the
Servicer (a "Termination Notice") may terminate all the rights and
obligations (other than the indemnification obligations set forth in
Section 5.02 hereof and the obligation under Section 6.02 to continue
performing its functions as Servicer until a successor Servicer is
appointed) of the Servicer under this Agreement. In addition, upon a
Servicer Default described in Section 6.01(a), each of the following shall
be entitled to apply to the PUC for sequestration and payment of revenues

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arising with respect to the Serviced Intangible Transition Property: (i)
the Issuer or its assignees or (ii) pledgees or transferees, including
transferees under the Statute, of the Serviced Intangible Transition
Property. On or after the receipt by the Servicer of a Termination Notice,
all authority and power of the Servicer under this Agreement with respect
to the Issuer, whether with respect to the Serviced Intangible Transition
Property, the related Intangible Transition Charges or otherwise, shall,
upon appointment of a successor Servicer pursuant to Section 6.02, without
further action, pass to and be vested in such successor Servicer and,
without limitation, the Bond Trustee is hereby authorized and empowered to
execute and deliver, on behalf of the predecessor Servicer, as attorney-
in-fact or otherwise, any and all documents and other instruments, and to
do or accomplish all other acts or things necessary or appropriate to
effect the purposes of such Termination Notice, whether to complete the
transfer of the Intangible Transition Property Documentation and related
documents, or otherwise. The predecessor Servicer shall cooperate with the
successor Servicer, the Bond Trustee and the Issuer in effecting the
termination of the responsibilities and rights of the predecessor Servicer
under this Agreement, including the transfer to the successor Servicer for
administration by it of all cash amounts that shall at the time be held by
the predecessor

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Servicer for remittance, or shall thereafter be received by it with respect
to the Serviced Intangible Transition Property or the related Intangible
Transition Charges. As soon as practicable after receipt by the Servicer of
such Termination Notice, the Servicer shall deliver the Intangible
Transition Property Documentation to the successor Servicer. All reasonable
costs and expenses (including attorneys fees and expenses) incurred in
connection with transferring the Intangible Transition Property
Documentation to the successor Servicer and amending this Agreement to
reflect such succession as Servicer pursuant to this Section shall be paid
by the predecessor Servicer upon presentation of reasonable documentation
of such costs and expenses. Termination of West Penn as Servicer shall not
terminate West Penn's rights or obligations as Transferor under the
Transfer Agreement.

          SECTION 6.02. Notice of Servicer Default. The Servicer shall
deliver to the Issuer, the Bond Trustee and each Rating Agency promptly
after having obtained knowledge thereof, but in no event later than five
Business Days thereafter, written notice in an Officers' Certificate of any
event or circumstance (such as a breach of any representation or warranty
made by the Servicer in this Agreement) which, with the giving of notice or
the passage of time, would become a Servicer Default under Section 6.01.

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          SECTION 6.03. Waiver of Past Defaults. The Bond Trustee, with the
consent of Holders of the majority of the outstanding principal amount of
the Transition Bonds of all Series, may waive in writing any default by the
Servicer in the performance of its obligations hereunder and its
consequences, except a default in making any required remittances to the
Bond Trustee of ITC Collections from Serviced Intangible Transition
Property in accordance with Section 5.10 of this Agreement. Upon any such
waiver of a past default, such default shall cease to exist, and any
Servicer Default arising therefrom shall be deemed to have been remedied
for every purpose of this Agreement. No such waiver shall extend to any
subsequent or other default or impair any right consequent thereto.

          SECTION 6.04. Appointment of Successor. (a) Upon the Servicer's
receipt of a Termination Notice, pursuant to Section 6.01 or the Servicer's
resignation in accordance with the terms of this Agreement, the predecessor
Servicer shall continue to perform its functions as Servicer under this
Agreement and shall be entitled to receive the requisite portion of the
Servicing Fees, until a successor Servicer shall have assumed in writing
the obligations of the Servicer hereunder as described below. In the event
of the Servicer's termination hereunder, the Bond Trustee, as assignee of
the Issuer, with the consent of Holders of a majority of the outstanding
principal amount of the

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Transition Bonds, shall appoint a successor Servicer, and the successor
Servicer shall accept its appointment by a written assumption in form
acceptable to the Issuer and the Bond Trustee. If, within 30 days after the
delivery of the Termination Notice, a new Servicer shall not have been
appointed and accepted such appointment, the Bond Trustee may petition the
PUC or a court of competent jurisdiction to appoint a successor Servicer
under this Agreement. A Person shall qualify as a successor Servicer only
if (i) such Person is permitted under PUC Regulations to perform the duties
of the Servicer pursuant to the Statute, the Qualified Rate Order and this
Agreement, (ii) the Rating Agency Condition shall have been satisfied with
respect to all Rating Agencies other than Moody's (and Moody's shall have
been furnished with written notice of such appointment prior to its
effectiveness) and (iii) such Person enters into a servicing agreement with
the Issuer having substantially the same provisions as this Agreement.

          (b) Upon appointment, the successor Servicer shall be the
successor in all respects to the predecessor Servicer and shall be subject
to all the responsibilities, duties and liabilities arising thereafter
relating thereto placed on the predecessor Servicer and shall be entitled
to the Servicing Fees and all the rights granted to the prede cessor
Servicer by the terms and provisions of this Agreement.

                                     255

<PAGE>

                                     256

          (c) The successor Servicer may not resign unless it is prohibited
from serving as such by law.

          SECTION 6.05. Cooperation with Successor. The Servicer covenants
and agrees with the Issuer that it will, on an ongoing basis, cooperate
with the successor Servicer and provide whatever information is, and take
whatever actions are, reasonably necessary to assist the successor Servicer
in performing its obligations hereunder.

                                ARTICLE VII

                          Miscellaneous Provisions

          SECTION 7.01. Amendment. This Agreement may be amended by the
Servicer and the Issuer, with the prior written consent of the Bond Trustee
and the satisfaction of the Rating Agency Condition (other than with
respect to Moody's); provided that the Issuer shall furnish to Moody's
prior to the execution of any such amendment or consent, written
notification of the substance thereof. Promptly after the execution of any
such amendment or consent, the Issuer shall deliver a copy thereof to each
of the Rating Agencies.

          Prior to the execution of any amendment to this Agreement, the
Issuer and the Bond Trustee shall be entitled to receive and rely upon an
Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement and the Opinion of Counsel
referred to in Section 3.10. The Issuer and the Bond Trustee may, but

                                     257

<PAGE>

shall not be obligated to, enter into any such amendment which affects
their own rights, duties or immunities under this Agreement or otherwise.

          SECTION 7.02. Notices. All demands, notices and communications
upon or to the Servicer, the Issuer, the Bond Trustee or the Rating
Agencies under this Agreement shall be in writing, delivered personally,
via facsimile, reputable overnight courier or by first class mail, postage
prepaid, and shall be deemed to have been duly given upon receipt (a) in
the case of the Servicer, to West Penn Power Company, 800 Cabin Hill Drive,
Greensburg, Pennsylvania 15601, Attention of President, (b) in the case of
the Issuer or the Bond Trustee, at the address provided for notices or
communications to such Person in the Indenture, (c) in the case of Moody's,
to Moody's Investors Service, Inc., ABS Monitoring Department, 99 Church
Street, New York, New York 10007, (d) in the case of Standard & Poor's, to
Standard & Poor's Corporation, 26 Broadway (15th Floor), New York, New York
10004, Attention of Asset Backed Surveillance Department, and (e) in the
case of Fitch IBCA, to Fitch IBCA, Inc., One State Street Plaza, New York,
New York 10004, Attention of ABS Surveillance; or, as to each of the
foregoing, at such other address as shall be designated by written notice
to the other parties.

          SECTION 7.03. Assignment. Notwithstanding anything to the
contrary contained herein, except as pro-

<PAGE>

vided in Sections 5.03 and 5.04 and as provided in the provisions of this
Agreement concerning the resignation of the Servicer, this Agreement may not
be assigned by the Servicer.

          SECTION 7.04. Limitations on Rights of Others. The provisions of
this Agreement are solely for the benefit of the Servicer, the Issuer
(including its managers and members) and the Bond Trustee, on behalf of
itself and the Transition Bondholders, and nothing in this Agreement,
whether express or implied, shall be construed to give to any other Person
any legal or equitable right, remedy or claim in any Collateral or under or
in respect of this Agreement or any covenants, conditions or provisions
contained herein.

          SECTION 7.05. Severability. Any provision of this Agreement that
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction.

          SECTION 7.06. Separate Counterparts. This Agreement may be
executed by the parties hereto in separate counterparts, each of which when
so executed and delivered

                                     258

<PAGE>

shall be an original, but all such counterparts shall
together constitute but one and the same instrument.

          SECTION 7.07. Headings. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define
or limit any of the terms or provisions hereof. SECTION 7.08. Governing
Law. This Agreement shall be construed in accordance with the laws of the
State of New York, without reference to its conflict of law provisions, and
the obligations, rights and remedies of the parties hereunder shall be
determined in accordance with such laws.

          SECTION 7.09. Assignment to Bond Trustee. The Servicer hereby
acknowledges and consents to the mortgage, pledge, assignment and grant of
a security interest by the Issuer to the Bond Trustee pursuant to the
Indenture for the benefit of the Transition Bondholders of all right, title
and interest of the Issuer in, to and under the Serviced Intangible
Transition Property owned by the Issuer and the proceeds thereof and the
assignment of any or all of the Issuer's rights hereunder to the Bond
Trustee. In no event shall the Bond Trustee have any liability for the
representations, warranties, covenants, agreements or other obligations of
the Issuer, hereunder or in any of the certificates, notices or agreements
delivered pursuant

                                     259

<PAGE>

hereto, as to all of which recourse shall be had solely to
the assets of the Issuer.

          SECTION 7.10. Nonpetition Covenants. Notwithstanding any prior
termination of this Agreement or the Indenture, but subject to the PUC's
rights to order the sequestration and payment of revenues arising with
respect to the Serviced Intangible Transition Property notwithstanding any
bankruptcy, reorganization or other insolvency proceedings with respect to
the debtor, pledgor or transferor of the Serviced Intangible Transition
Property pursuant to Section 2812(d)(3)(v) of the Statute, the Servicer
shall not, prior to the date which is one year and one day after the
termination of the Indenture, petition or otherwise invoke or, to the
fullest extent permitted by law, cause the Issuer to invoke the process of
any court or government authority for the purpose of commencing or
sustaining a case against the Issuer under the Federal or state bankruptcy,
insolvency or similar law or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Issuer or
any substantial part of the property of the Issuer, or ordering the winding
up or liquidation of the affairs of the Issuer.

                                     260

<PAGE>

          SECTION 7.11. Termination. This Agreement shall terminate when
all Transition Bonds issued by the Issuer have been retired, redeemed or
defeased in full.

          SECTION 7.12. Limitation of Liability. It is expressly understood
and agreed by the parties hereto that this Agreement is executed and
delivered by Bankers Trust Company, not individually or personally but
solely as Bond Trustee for the benefit of the Transition Bondholders, in
the exercise of the powers and authority conferred and vested in it, and
nothing herein contained shall be construed as creating any liability on
Bankers Trust Company, individually or personally, to perform any covenant
either expressed or implied contained herein, all such liability, if any,
being expressly waived by the parties who are signatories to this Agreement
and by any Person claiming by, through or under such parties; provided,
however, that this provision shall not protect Bankers Trust Company
against any liability that would otherwise be imposed by reason of willful
misconduct, bad faith or gross negligence in the performance of duties or
by reason of reckless disregard of obligations or duties under this
Agreement.

                                     261

<PAGE>

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

                                        WEST PENN FUNDING LLC,

                                          by
                                             ------------------------------
                                             Title:

                                        WEST PENN POWER COMPANY, Servicer,

                                          by
                                             ------------------------------
                                             Title:

Acknowledged and Accepted:

BANKERS TRUST COMPANY, not in its
individual capacity but solely as Bond
Trustee on behalf of the Holders of
Transition Bonds issued by the Issuer,

    by
        ------------------------------
        Title:

                                     262

<PAGE>

                                  ANNEX 1

                                     to

                            SERVICING AGREEMENT

The Servicer agrees to comply with the following with respect to West Penn
Funding LLC (the "Issuer"):

          SECTION 1. Definitions. (a) Capitalized terms used herein and not
otherwise defined shall have the meanings set forth in the Servicing
Agreement dated as of November 16, 1999 (the "Servicing Agreement"),
between the Issuer and West Penn Power Company, as Servicer.

          (b) Whenever used in this Annex 1, the following words and
phrases shall have the following meanings:

          "Adjustment Date" means, with respect to any Series of Transition
Bonds, such date or dates specified as such in the Series Supplement
therefor.

          "Adjustment Request" means an application filed by the Servicer
with the PUC for revised Intangible Transition Charges pursuant to Section
5(b) of this Annex.

          "Available Reserve Amount" means, as of any date, the amount on
deposit in the Reserve Subaccount.

          "Bond Trustee" has the meaning specified in the Indenture.

          "Calculation Date" means, with respect to any Series of
Transition Bonds, such date or dates specified as such in the Series
Supplement therefor.

                                     263

<PAGE>

          "Calculated Overcollateralization Level" means, with respect to
any Series of Transition Bonds, the amount specified as such in the Series
Supplement therefor.

          "Capital Subaccount" has the meaning set forth in the Indenture.

          "Class" has the meaning specified in the Indenture.

          "Expected Amortization Percentage" means, with respect to any
Regulatory Year, the percentage equivalent of a fraction, the numerator of
which is the aggregate amount of Transition Bonds of all Series to be
amortized during such Regulatory Year as set forth in Expected Amortization
Schedules therefor and the denominator of which is the Projected Transition
Bond Balance on the first day of such Regulatory Year.

          "Expected Amortization Schedule" means, with respect to any
Series of Transition Bonds, the expected amortization schedule for
principal thereof, as specified in the Series Supplement therefor.

          "Expected Final Payment Date" means, with respect to any Series
or Class of Transition Bonds, the expected final payment date therefor, as
specified in the Series Supplement therefor.

          "Holder" or "Transition Bondholder" has the meaning set forth in
the Indenture.

                                     264

<PAGE>

          "Indenture" means the Indenture dated as of November 16, 1999,
between the Issuer and the Bond Trustee, as amended and supplemented from
time to time, including any Series Supplement.

          "Overcollateralization Subaccount" has the meaning set forth in
the Indenture.

          "Payment Date" has the meaning specified in the Indenture and the
applicable Series Supplement.

          "Projected Transition Bond Balance" has the meaning specified in
the Indenture.

          "Regulatory Period" means with respect to any Series (i) the
period from the Series Issuance Date therefor through and including the
first Adjustment Date (the "Initial Regulatory Period") and (ii) following
the Initial Regulatory Period until December 1, 2008, each period from and
including each Adjustment Date through but excluding the following
Adjustment Date.

          "Required Capital Amount" means, with respect to any Series of
Transition Bonds, the amount specified as such in the Series Supplement
therefor.

          "Reserve Subaccount" has the meaning set forth in the Indenture.

          "Sale Agreement" has the meaning set forth in the Indenture.

          "Schedule Revision Date" has the meaning set forth in the
Indenture.

                                     265

<PAGE>

          "Series" has the meaning specified in the Indenture.

          "Series Issuance Date" has the meaning specified in the Indenture
and the applicable Series Supplement.

          "Series Supplement" has the meaning specified in the Indenture.

          "Transferred Intangible Transition Property" has the meaning
specified in the Sale Agreement.

          "Transition Bonds" has the meaning specified in the Indenture.

          "Transition Bond Balance" has the meaning specified in the
Indenture.

          SECTION 2. Adjustment Date Statements. For each Adjustment Date,
the Servicer will provide to the Issuer and the Bond Trustee a statement
indicating (i) the Transition Bond Balance and the Projected Transition
Bond Balance for each Series as of the immediately preceding Payment Date,
(ii) the amount on deposit in the Overcollateralization Subaccount and the
Calculated Overcollateralization Level as of the immediately preceding
Payment Date, (iii) the amount on deposit in the Capital Subaccount and the
Required Capital Amount as of the immediately preceding Payment Date, (iv)
the Projected Transition Bond Balance for each Payment Date prior to the
next Adjustment Date and the Servicer's projection of the Transition Bond
Balance as of each Payment Date prior to the next Adjustment Date, (v) the
Calculated

                                     266

<PAGE>

Overcollateralization Level for each Payment Date prior to the next
Adjustment Date and the Servicer's projection of the amount on deposit in
the Overcollateralization Subaccount as of each Payment Date prior to the
next Adjustment Date, (vi) the Required Capital Amount for each Payment
Date prior to the next Adjustment Date and the Servicer's projections of
the amount on deposit in the Capital Subaccount as of each Payment Date
prior to the next Adjustment Date and (vii) the projected ITC Collections
from the Payment Date immediately preceding the Adjustment Date through the
next Adjustment Date.

          SECTION 3. Remittance Date Statements. On or before each
Remittance Date, the Servicer will prepare and furnish to the Issuer and
the Bond Trustee a statement setting forth the aggregate amount remitted or
to be remitted by the Servicer to the Bond Trustee for deposit on such
Remittance Date pursuant to Section 5.10 of the Servicing Agreement and the
Indenture.

          SECTION 4. Payment Date Statements. At least three Business Days
before each Payment Date for each Series of Transition Bonds, the Servicer
will prepare and furnish to the Issuer and the Bond Trustee a statement
setting forth the amounts to be paid to Holders of Transition Bonds of such
Series pursuant to Section 8.02(d) of the Indenture, as well as all other
amounts to be paid pursuant to Section 8.02(d) of the Indenture.

                                     267

<PAGE>

          SECTION 5. Intangible Transition Charges Adjustments. (a) Prior
to each Calculation Date, the Servicer shall calculate (i) the Transition
Bond Balance as of the Payment Date immediately preceding such Calculation
Date (a written copy of which shall be delivered by the Servicer to the
Bond Trustee within five days following such Calculation Date) and (ii) the
revised Intangible Transition Charges with respect to the Transferred
Intangible Transition Property for the then-current Regulatory Period and
any subsequent Regulatory Periods until a Payment Date occurs, such that
the Servicer projects that ITC Collections will be sufficient so that (w)
the outstanding principal balance of each outstanding Series will equal the
amount provided for in the Expected Amortization Schedule therefor, (x) the
amount on deposit in the Overcollateralization Subaccount will equal the
Calculated Overcollateralization Level, (y) the amount on deposit in the
Capital Subaccount will equal the Required Capital Amount and (z) the
amount on deposit in the Reserve Subaccount will equal zero, in each case
by the Payment Date immediately preceding the next Adjustment Date or,
during the period when Adjustment Dates occur monthly, the 25th day of the
calendar month in which the next Adjustment Date occurs, in each case
taking into account the Available Reserve Amount.

          (b) In order to obtain approval of each annual adjustment as
expeditiously as possible, on October 1 of

                                     268

<PAGE>

each year the Servicer will file an Adjustment Request with the PUC which
will include a schedule of actual ITC Collections for the nine months ended
August 31, together with an estimate of ITC Collections for the three
months ending on the immediately following November 30, and the estimated
Intangible Transition Charges for the following year. On December 15, the
Servicer will file with the PUC a schedule of actual ITC Collections as of
November 30, replacing the estimates submitted on October 1, and the actual
Intangible Transition Charges for the following year. Interim adjustments
beginning twelve months before the Expected Final Payment Date of the last
Series or Class of the Transition Bonds will not reflect updated
assumptions of projected future usage of electricity by customers, expected
delinquencies and write-offs and future expenses relating to Intangible
Transition Property and the Transition Bonds. Beginning twelve months
before the Expected Final Payment Date of the last Series or Class of the
Transition Bonds, the PUC will permit each Adjustment Request to become
effective within 15 days after filing. The adjustment process will continue
until the earlier of the final payment of all Series of Transition Bonds
and December 31, 2008.

          (c) The Servicer shall (i) take all reasonable actions and make
all reasonable efforts in order to effectuate such revision to such
Intangible Transition Charges and (ii) promptly send to the Bond Trustee
copies of

                                     269

<PAGE>

all material notices and documents relating to such .

          SECTION 6. Servicer Advances. The Servicer shall not make any
advances of interest or principal on the Transition Bonds of any Series.

          SECTION 7. Schedule Revision Date Schedules. Prior to each
Schedule Revision Date, the Servicer shall deliver to the Issuer
replacement Schedules A and replacement Schedules B to each Series
Supplement to which such Schedule Revision Date applies, adjusted to
reflect the event giving rise to such Schedule Revision Date and setting
forth the Calculated Overcollateralization Level and the Expected
Amortization Schedule for each Payment Date applicable thereto; provided,
however, that no such replacement Schedule A or Schedule B shall be
required with respect to a Series if the event giving rise to such Schedule
Revision Date is a redemption of the Transition Bonds of such Series in
whole.

                                     270LEASE

                                      from

                       BRICK/BURNT TAVERN EQUITIES, L.L.C.

                                       to

                           COMMERCE BANK/SHORE, N. A.

                                    Article 1

                           Reference Date and Exhibits

1.1      Data

DATE                              :        November 30, 1998

LOCATION OF PREMISES              :        Burnt Tavern & Van Zile Road
                                           Brick, NJ

LANDLORD                          :        BRICK/BURNT TAVERN EQUITIES, L.L.C.

ORIGINAL ADDRESS OF               :        17000 Horizon Way
                                           Suite 200
                                           Mt. Laurel, NJ 08054

TENANT                            :        COMMERCE BANK/SHORE, N.A.

ORIGINAL ADDRESS OF               :        c/o Commerce Bancorp, Inc.
                                           1701 Route 70 East
                                           Cherry Hill, NJ 08034

LEASE TERM                        :        Twenty Years

ANNUAL FIXED RENT RATE            :        Year   1-5      $70,000.00
                                                  6-10     $77,000.00
                                                  11-15    $84,700.00
                                                  16-20    $93,170.00

                                       1
<PAGE>
1.2      Table of Contents

ARTICLE I - Reference Data and Exhibits                                  Page

1.1      Data                                                              1
1.2      Table of Contents                                                 2

ARTICLE II - Premises and Term

2.1      Premises                                                          4
2.2      Term                                                              4
2.3      Option to Extend                                                  4

ARTICLE III - Improvements

3.1      Construction of Improvements                                      4
3.2      Contractor                                                        4
3.3      Signs                                                             5

ARTICLE IV - Rent

4.1      The Rent, Minimum Fixed and Percentage                            5

ARTICLE V - Real Estate Taxes

5.1      Real Estate Taxes                                                 5
5.2      Taxes                                                             5
5.3      Method of Payment                                                 6

ARTICLE VI - Utilities and Services

6.1      Utilities and Charges Therefore                                   6

ARTICLE VII - TENANT'S Additional Covenants

7.1      Affirmative Covenants                                             6
         7.1.1    Use                                                      6
         7.1.2    Compliance with Law                                      7
         7.1.3    Payment of TENANT'S Work                                 7
         7.1.4    Indemnity and Liability Insurance                        7
         7.1.5    LANDLORD'S Right to Enter                                8
         7.1.6    Personal Property at TENANT'S Risk                       8
         7.1.7    Payment of LANDLORD'S Cost of Enforcement                8
         7.1.8    Yield Up                                                 8
         7.1.9    Maintenance                                              9
         7.1.10   Insurance                                                9

7.2      Negative Comments                                                 9

         7.2.1    Overloading, Nuisance, etc.                              9
         7.2.2    Installation, Alteration or Additions                    9

ARTICLE VIII - LANDLORD'S Additional Covenants

8.1      Warranty on Use                                                   10
8.2      Competing Use                                                     10

ARTICLE IX - Casualty or Taking

9.1      TENANT to Repair or Rebuild in the Event of Casualty              10
9.2      Right to Terminate in Event of Casualty                           10
9.3      Eminent Domain                                                    10

                                       2
<PAGE>
                                                                         Page
ARTICLE X - Defaults

10.1     Events of Default                                                 11
10.2     Remedies                                                          12
10.3     Remedies Cumulative                                               12
10.4     LANDLORD'S and TENANT'S Right to Cure Defaults                    12
10.5     Effect of Waivers of Default                                      12

ARTICLE XI - Miscellaneous Provisions

11.1     Assignment, Subletting, etc.                                      13
11.2     Notice from One Party to Other                                    13
11.3     Quiet Employment                                                  13
11.4     Recording                                                         13
11.5     Acts of God                                                       13
11.6     Waiver of Subrogation                                             14
11.7     Rights of Mortgagee and Subordination                             14
         11.7.1                                                            14
         11.7.2   No Accord and Satisfaction                               14
11.8     Applicable Law and Construction                                   15

ARTICLE XII - Permits and Approvals

12.1     Tenant Obligations                                                15
12.2     Approvals                                                         15
12.3     Easements                                                         15

ARTICLE XIII - Net, Net, Net Lease

13.1     Net, Net, Net Lease                                               15

ARTICLE XIV - Right of First Refusal

14.1     Right of First Refusal to Lease                                   16
14.2     Right of First Refusal to Purchase                                16

ARTICLE XV - Holdover

15.1     Holdover                                                          16

ARTICLE XVI - Common Area

16.1     Common Area                                                       17
16.2     Common Area Charges                                               17
16.3     Determination and Payment of Common Area Charges                  17
16.4     Construction Cost                                                 17

ARTICLE XVII - Environmental

17.1     Environmental Matters                                             17

ARTICLE XVIII -

18.1     Title                                                             18
18.2     Ownership                                                         18

                                       3

<PAGE>
                                   ARTICLE II

                                Premises and Term

     2.1 Premises - LANDLORD  hereby  leases to TENANT and TENANT  hereby leases
from  LANDLORD,  subject  to and  with  the  benefit  of the  terms,  covenants,
conditions and  provisions of this Lease,  the premises shown on Exhibit "A" and
described in Exhibit "B", both annexed  hereto and made a part hereof,  together
with any and all improvements,  appurtenances,  rights, privileges and easements
befitting,  belonging or pertaining thereto and a building no greater than 4,000
square  feet,  so long as such  building is within the  perimeter  of the leased
premises as shown on Exhibit "A".

     2.2 Term - TO HAVE AND TO HOLD for a term  beginning  at the earlier of (a)
Ninety  (90)  days  (inclusive  of the  time for  objectors  to  appeal  for any
approval)  after  LANDLORD has obtained  approval  for the  construction  of the
branch  bank as set forth in  Article  12  (notwithstanding  TENANT may not have
commenced  construction)  and continuing for the Lease term of twenty (20) years
unless sooner  terminated as hereinafter  provided.  When dates of the beginning
and end of the Lease term have been determined, such dates shall be evidenced by
a document in form for recording,  executed by LANDLORD and TENANT and delivered
each to the other.

     2.3  Option  to Extend - So long as  TENANT  is not in  default  hereunder,
TENANT  shall  have the  right to extend  this  Lease for four (4) five (5) year
terms under the same terms,  conditions  and provisions as in the original term,
at the following rentals:

                  Option Years      1 - 5                     $ 102,487.00
                                    6 -10                     $ 112,735.00
                                    11-15                     $ 124,009.00
                                    16-20                     $ 136,410.00

     TENANT  shall  give  written  notice  of its  intention  to  exercise  each
extension  option not less than Ninety (90) days prior to the  expiration of the
then current term. Lack of written notice by TENANT of its intention to exercise
any option prior to ninety (90) days before the  expiration  of the then current
term shall be deemed to constitute exercise of that option by the TENANT.

                                   ARTICLE III
                                  Improvements

     3.1 Construction of Improvements - TENANT agrees to construct,  at its sole
cost, a branch banking facility,  pursuant to the attached Site Plan, subject to
reasonable approval by the LANDLORD of the building plans and specifications.

     3.2  Contractor  - TENANT  shall have the right to select and  approve  the
contractor to complete the construction,  which shall be subject to the approval
of the LANDLORD. Approval by LANDLORD shall not be unreasonably withheld.

                                       4
<PAGE>
     3.3 Signs - TENANT shall have the right to erect such signs as permitted by
applicable  zoning  ordinances  within the  leased  area,  provided  it does not
preclude  LANDLORD  from  erecting  signs for  tenants  for the  balance  of the
shopping center.

                                   ARTICLE IV
                                      Rent

     4.1 The Rent,  Minimum  Fixed - TENANT  covenants and agrees to pay rent to
LANDLORD at the original address of LANDLORD or such other place as LANDLORD may
by notice in writing to TENANT from time to time direct,  at the following rates
and times.

     (a)  TENANT  agrees  to pay to  LANDLORD  base  annual  fixed  rent for the
Premises in accordance with and in the amount set forth in Paragraph 1.1 "Data".
The base  annual  fixed  rent  shall be paid in equal  monthly  installments  in
advance on the first (1st) day of each month beginning on the Commencement Date.
In addition to the base annual fixed rent, TENANT shall pay as and when the same
become due and owing as additional  rents,  all other monies provided for in the
Lease. It is the parties  intention that all charges and assessments  charged to
or assessed against the Premises shall be the responsibility of the TENANT, such
that the Lease shall be "net, net, net" to the LANDLORD, excepting only interest
and principal on any mortgage made by the LANDLORD and effecting the Premises.

     (b) For purposes of this Lease, the scheduled  increases in the base annual
fixed rate shall occur on the first day of the sixth (6th),  eleventh (11th) and
sixteenth  (16th)  years of the Initial Term as same is  determined  pursuant to
Paragraph  2.2 and on the first  day of the sixth  (6th),  eleventh  (11th)  and
sixteenth (16th), years of the Option Terms.

     (c) If any  installment  under this Lease is not paid within  fifteen  (15)
days of the time and at the place and in the  manner  specified,  then  LANDLORD
may, at its option, declare TENANT in default.

                                    ARTICLE V
                                Real Estate Taxes

     5.1 Real Estate Taxes - As additional  rent,  TENANT agrees to pay all real
estate taxes levied upon the Premises, improvements located on the Premises, the
leasehold  estate,  or any sublease hold estate of any nature including  special
assessments. The obligation for payment by TENANT of all real estate taxes shall
commence simultaneously with the payment of rent hereunder.

     5.2 Taxes - TENANT  agrees to pay all taxes  levied upon rents and personal
property,  including trade fixtures and inventory, kept on the demised Premises,
covered by Section 5.1 after  presentation  to TENANT by LANDLORD of  statements
from the taxing jurisdiction in which said property is located. TENANT, however,
will pay only the lowest discounted amount and will not be required to pay

                                       5
<PAGE>
any  penalty,  interest or cost  occurring  by reason of  LANDLORD'S  failure to
secure said tax statements in a timely fashion from the taxing  authorities  for
any tax required to be paid by TENANT.

LANDLORD may,  however,  direct the taxing  authorities  to send the  statements
directly to TENANT.  "In the event  LANDLORD  directs the taxing  authorities to
send a  statement  directly  to  TENANT,  TENANT  shall  make all such  payments
directly to the taxing  authority at least ten (10) days before any  delinquency
and  before  any fine,  interest  or  penalty  shall  become  due or  imposed by
operation  of law for  their  non-payment.  Further,  TENANT  shall  furnish  to
LANDLORD  within  ten (10) days of the date when any tax,  assessment  or charge
would become delinquent,  receipts or other satisfactory  evidence  establishing
the timely  payment of said taxes or  charges."  LANDLORD  further  agrees  that
TENANT, in the name of LANDLORD,  but at TENANT'S sole expense,  may protest any
assessment  before any taxing authority or board or maintain any necessary legal
action in  reference  to said  assessment  or for the recovery of any taxes paid
thereon.  Nothing  herein  contained  shall require  TENANT to pay any income or
excess profits,  taxes assessed  against  LANDLORD or any  corporation,  capital
stock, or franchise tax imposed upon LANDLORD.

     5.3 Method of Payment - LANDLORD shall give written notice  advising TENANT
of the amount of real estate taxes,  together  with a copy of the tax bill,  and
TENANT shall pay such amount to LANDLORD  within  thirty (30) days after receipt
of such notice.  If this Lease shall terminate  during a tax year,  TENANT shall
pay to LANDLORD,  a prorated  portion of the amount that would have been due for
the full tax year  based on the  number of days of said tax year  expired on the
date of termination.

                                   ARTICLE VI
                             Utilities and Services

     6.1 Utilities and Charges  Therefore - TENANT agrees to pay directly to the
authority  charged  with the  collection  thereof,  all charges for water,  gas,
electricity,  sanitary  sewer and sprinkler  changes,  telephone  connection and
standby fees and other utilities used or consumed in the Premises and shall make
its own arrangements  for such utilities.  In the event any such services cannot
be reasonably  procured from any public agency,  and LANDLORD  provides any such
services,  TENANT shall reimburse  LANDLORD for its  proportionate  share of any
such services used or consumed in the demised premises as additional rental.

                                   ARTICLE VII
                          TENANT'S Additional Covenants

     7.1  Affirmative  Covenants - TENANT  covenants at its expense at all times
during the Lease term and such further  time as TENANT  occupies the Premises or
any part thereof.

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<PAGE>
          7.1.1 Use - TENANT  shall use and permit the use of the  Premises  and
the  improvements  to be  constructed  thereon  primarily for the operation of a
branch bank,  provided that  (subject to the other terms and  conditions of this
Lease),  TENANT  may at any time use the  Premises  and the  building  and other
improvements to be constructed thereon, for any other lawful commercial purposes
which do not conflict  with existing  primary uses in the Shopping  Center which
forms part of the common  area,  with such uses to be approved by the  LANDLORD,
which  approval  shall not be  unreasonably  withheld.  Neither  TENANT  nor its
subtenants,  if any,  shall commit any nuisance,  nor permit the emission of any
objectionable  noise or odor, nor bring on, deposit or allow to be brought on or
deposited  on  the  Premises  any  asbestos  materials  or any  other  Hazardous
Substance  or  materials  as the same may be defined by Federal,  State or local
laws,  rules,  statutes or  regulations  or in the  Environmental  Rider annexed
hereto,  nor use the  property  in such a manner  which  negatively  effects the
reversion.

          7.1.2  Compliance  with  Law  -  To  make  all  repairs,  alterations,
additions or  replacements  to the Premises  required by any law or ordinance or
any order or regulation of any public  authority  because of TENANT'S use of the
Premises,  to keep the Premises  equipped with all safety appliances so required
because  of such  use;  to pay all  municipal,  county or state  taxes  assessed
against the  personal  property of any kind owned by or placed in, upon or about
the  premises by TENANT;  and to comply with the orders and  regulations  of all
governmental authorities, as well as all Insurance Carriers and Underwriters.

          7.1.2 (A) TENANT has the right to contest by  appropriate  judicial or
administrative proceeding, without cost or expense to the LANDLORD, the validity
or application of any law,  ordinance,  order,  rule,  regulation or requirement
("law") which the TENANT  legitimately  deems unduly burdensome or inappropriate
and TENANT shall not be in default for failure to comply with such law until the
legally  permitted  time  following  final  determination  of  TENANT'S  contest
expires;  provided,  however, if LANDLORD gives notice of request,  TENANT shall
first  furnish  LANDLORD  with a bond,  satisfactory  to  LANDLORD  in form  and
insurer,   guaranteeing   compliance  by  TENANT  with  the  contested  law  and
indemnifying  LANDLORD against all liability that LANDLORD may sustain by reason
of TENANT'S failure or delay in complying with the law. LANDLORD may, but is not
required to, contest any such law  independent of TENANT.  On TENANT'S notice of
request, LANDLORD may join in TENANT'S contest.

          7.1.3  Payment for TENANT'S Work - To pay promptly when due the entire
cost of any work to the  Premises  undertaken  by TENANT and to bond  against or
discharge  any liens for labor or materials  within ten (10) days after  written
request by LANDLORD;  to procure all necessary  permits before  undertaking such
work; and to do all of such work in a good and workmanlike manner, employing new
materials of good quality and complying with all governmental requirements.

          7.1.4 Indemnity and Liability Insurance - To defend with counsel, save
harmless and indemnify LANDLORD from all claims or damage to or of any person or
property  while  on the  premises

                                       7
<PAGE>
unless  arising from any  omission,  fault,  negligence  or other  misconduct of
LANDLORD,  and from  all  claims  or  damage  to or of any  person  or  property
occasioned by any omission,  fault,  neglect or other  misconduct of TENANT;  to
maintain in responsible companies qualified to do business in the state in which
the premises is located and in good standing therein, public liability insurance
covering the premises insuring LANDLORD, as well as TENANT, with limits at least
equal to those  stated in Section 1.1,  workmen's  compensation  insurance  with
statutory  limits,  covering all of TENANT'S  employees working in the premises,
and to deposit  promptly with LANDLORD  certificates  for such insurance and all
renewals thereof, bearing the endorsement that the policies will not be canceled
until  after ten (10) days  written  notice to  LANDLORD.  TENANT'S  obligations
hereunder may be satisfied  through a blanket  insurance  policy  covering other
interests of the TENANT.

          7.1.5 LANDLORD'S Right to Enter - To permit LANDLORD and its agents to
examine the premises at reasonable times and to show the premises to prospective
purchasers  and lenders,  provided such entry shall not  unreasonably  interfere
with TENANT'S  operation and conduct of its business in the demised  premises or
compromise security.

          7.1.6   Personal   Property  at  TENANT'S  Risk  -  That  all  of  the
furnishings, fixtures, equipment, effects and property of every kind, nature and
description of TENANT and of all persons  claiming  under TENANT,  may be on the
premises,  shall be at the sole risk and hazard of  TENANT,  and if the whole or
any part thereof shall be destroyed or damaged by fire, water, or otherwise,  or
by the leakage or bursting of water pipes,  steam pipes or other pipes, by theft
or from any other  cause,  no part of said loss or damage is to charged to or be
borne by LANDLORD, except that LANDLORD shall in no event be indemnified or held
harmless or exonerated  from any liability  resulting from its sole  negligence,
failure  to  perform  any of its  obligations  under this Lease or to any extent
prohibited by law.

          7.1.7  Payment of  LANDLORD'S  Cost of  Enforcement - To pay on demand
LANDLORD'S expenses, including reasonable attorney's fees, incurred in enforcing
any  obligation  of TENANT  under this Lease or in curing any  default by TENANT
under this Lease as provided in Section 10.4, provided LANDLORD shall prevail in
any judicial proceedings in respect to such enforcement.

          7.1.8  Yield  Up - At the  expiration  of the  Lease  term or  earlier
termination  of this Lease,  TENANT shall remove all trade fixtures and personal
property,  to repair any damage caused by such  removal,  to remove all TENANT'S
signs  wherever  located and to surrender  all keys to the premises and yield up
the premises,  broom clean and in the same good order and repair in which TENANT
is obligated to keep and maintain the premises by the  provisions of this Lease,
reasonable  wear  and tear and  insured  damage  by  fire,  casualty  or  taking
excepted.  Any  property  not so removed  shall be deemed  abandoned  and may be
removed and disposed of by LANDLORD in such manner as LANDLORD shall  determine,
without  any  obligation  on the part of  LANDLORD  to account to TENANT for any
proceeds  therefrom,  all of which shall become the  property of  LANDLORD.  Any
holdover by TENANT  will not be deemed an

                                       8
<PAGE>
extension of this Lease, and TENANT shall indemnify  LANDLORD against all losses
and damages from a failure to surrender.

          7.1.9  Maintenance - Throughout  the term,  TENANT shall,  at TENANT'S
sole cost and expense maintain the premises and all improvements thereon in good
condition and repair,  ordinary wear and tear excepted,  and in accordance  with
all applicable laws, rules,  ordinances,  orders and regulations of (1) federal,
state,  county,  municipal and other governmental  agencies and bodies having or
claiming  jurisdiction  and all of their  respective  departments,  bureaus  and
officials;  (2) the insurance  underwriting board or insurance inspection bureau
having or claiming jurisdiction; and (3) all insurance companies insuring all or
any part of the premises of the improvements  located thereon, or both except as
provided below and subject only to the provisions of Paragraph 9.2, TENANT shall
promptly and diligently repair,  restore and replace as required to maintain the
premises and the improvements in the condition set forth above, or to remedy all
damage to or destruction of all or any part of the improvements.

          (A) The completed work of maintenance, compliance, repair, restoration
or replacement shall be equal in value,  quality and use to the condition of the
improvements before the event giving rise to the work, unless otherwise provided
for in this Lease.  LANDLORD  shall not be  required to furnish any  services or
facilities  or to make any repairs or  alterations  of any kind in or upon or on
the premises, LANDLORD'S election to perform any obligations of the TENANT under
this  provision on TENANT'S  failure or refusal to do so shall not  constitute a
waiver of any right or remedy for  TENANT'S  default and TENANT  shall  promptly
reimburse,  defend and indemnify LANDLORD against all liability,  loss, cost and
expense arising from it.

          7.1.10 Insurance - TENANT shall maintain in full force and effect,  at
its own cost,  full  replacement  cost coverage  insurance  covering the demised
premises (and all  improvements  for the full  insurable  value) against loss or
damage by fire or  casualty,  with the  usual  extended  coverage  endorsements,
together will  endorsements  protecting  against loss or damage  resulting  from
malicious mischief, sprinkler leakage and vandalism all in amounts not less than
replacement  parts value above foundation  walls.  All insurance  policies shall
name the LANDLORD as its interest may appear.

     7.2  Negative  Covenants - TENANT  covenants  at all times during the Lease
term and such further times as TENANT occupies the premises or any part thereof:

          7.2.1 Overloading Nuisance, etc. - Not to injure, overload,  deface or
otherwise  harm the premises;  nor commit any nuisance;  nor make any use of the
premises which is improper, offensive or contrary to any law or ordinance.

          7.2.2  Installation,  Alteration  or  Additions  -  Not  to  make  any
installations,  alterations  or  additions  (except  only  the  installation  of
fixtures  necessary for the conduct of its  business),  without on each occasion
obtaining  prior  written  consent  of  LANDLORD,   LANDLORD'S  consent  not  be
unreasonable   withheld.   No  consent  shall  be  required  for   nonstructural
alterations  not  exceeding  $100,000 in cost. No

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<PAGE>
addition  will be allowed  which  increases the building size to more than 4,000
square feet, or which violates the terms of Paragraph 2.1 of this Lease.

                                  ARTICLE VIII
                         LANDLORD'S Additional Covenants

     8.1  Warranty  on  Use -  LANDLORD  warrants  and  represents  that  at the
commencement  of  construction  it will be the Owner in Fee of the Land shown on
Exhibit "A" and  described  in Exhibit  "B".  LANDLORD  has no  knowledge of and
TENANT  requires that there be no zoning  regulations,  restrictive  agreements,
leases  or other  instruments  which  prevent  the use of the  premises  for the
purpose  intended herein,  nor otherwise  conflict with any of the provisions of
this Lease.  TENANT'S sole and  conclusive  remedy for a breach of this warranty
shall  be  its  right,  at  its  election,  to  terminate  the  Lease  prior  to
commencement of construction.

     8.2 Competing Use - During the term of this Lease,  provided  TENANT is not
in default,  LANDLORD agrees not to lease or sell any portion of the project, of
which the leased premises is a part, to a commercial bank, savings bank, savings
and loan or credit union.

                                   ARTICLE IX
                               Casualty or Taking

     9.1  TENANT to Repair or  Rebuild  in the Event of  Casualty  - In case the
Premises  or any part  thereof  shall be  damaged  or  destroyed  by fire  other
casualty, taken (which term or reference to eminent domain action generally, for
the purposes of this Article shall include a sale in lieu of the exercise of the
right of eminent domain) or ordered to be demolished by the action of any public
authority in consequence of a fire or other casualty,  this Lease shall,  unless
it is terminated as provided  below in Section 9.2 or 9.3,  remain in full force
and  effect  and TENANT  shall,  at its  expense,  proceed  with all  reasonable
dispatch,  to repair or rebuild the premises and the  improvements,  or what may
remain thereof,  so as to restore them as nearly as practicable to the condition
they were in immediately prior to such damage or destruction.

     9.2 Right to  Terminate  in Event of  Casualty  - In case of any  damage or
destruction  occurring in the last five years of the original term of this Lease
or  during  any  extension  of the  term,  to the  extent  of 50% or more of the
insurable  value of the building,  TENANT may at its option,  to be evidenced by
notice  in  writing  given to the  LANDLORD  within  seven  (7) days  after  the
occurrence of such damage or destruction,  in lieu of repairing or replacing the
building,  elect  to  terminate  this  Lease as of the  date of said  damage  or
destruction.  In the event the TENANT shall so terminate the lease all insurance
proceeds shall become the property of the LANDLORD.

     9.3  Eminent  Domain - If the whole,  or any part of the  demised  premises
shall be taken or condemned  by any  competent  authority  for any public use or
purpose during the term of this Lease.

                                       10
<PAGE>
TENANT  reserves the unto itself the right to  prosecute  its claim for an award
based upon its leasehold interest for such taking,  without impairing any rights
of LANDLORD for the taking of or injury to the reversion.

     In the  event  that a part  of the  demised  premises  shall  be  taken  or
condemned  that (a) the part so  taken  includes  the  building  on the  demised
premises  or any part  thereof or (b) the part so taken  shall  remove  from the
premises 20% or more of the front depth of the parking areas thereof, or (c) the
part so taken shall  consist of 25% or more of the total  parking  area,  or (d)
such partial  taking shall result in cutting off direct  access from the demised
premises to any adjacent  public street or highway,  then and in any such event,
the TENANT may at any time either prior to or within a period of sixty (60) days
after  the  date  when  possession  of the  premises  shall be  required  by the
condemning authority elect to terminate this Lease, or if any option to purchase
the premises is conferred upon the TENANT by any other  provision of this Lease,
may as an  alternative  to such  termination of this Lease elect to purchase the
demised  premises in  accordance  with such  purpose  option.  In the event that
TENANT  shall fail to  exercise  any such option to  terminate  this Lease or to
purchase the premises or in the event that a part of the demised  premises shall
be taken or condemned  under  circumstances  under which the TENANT will have no
such option,  then and in either such event the LANDLORD shall,  with reasonable
promptness, make necessary repairs to and alterations of the improvements on the
demised  premises  for  the  purpose  of  restoring  the  same  to  an  economic
architectural  unit,  susceptible  to the same use as that  which  was in effect
immediately  prior to such taking, to the extent that may have been necessary by
such  condemnation,  subject to a pro-rata  reduction  in  rental.  Any  dispute
resulting  from  Section 9.3 of this Lease shall be  submitted  to the  American
Arbitration Society, whose decision shall be binding on the parties hereto.

                                    ARTICLE X
                                    Defaults

     10.1 Events of Default - If (a) Tenant shall default in the  performance of
any of its  obligations  to pay rent or  additional  rent  hereunder and if such
default  shall  continue for ten (10) days after  written  notice from  LANDLORD
designating such default or if within thirty (30) days after written notice from
LANDLORD to TENANT specifying any other non-monetary default or defaults, TENANT
has not commenced  diligently to correct the default or defaults so specified or
has not thereafter  diligently pursued such corrective action to completion,  or
(b) any assignment shall be made by TENANT for the benefit of credits, or (c) if
TENANT'S leasehold interest shall be taken on execution,  attached,  levied upon
or (d) if a petition is filed by TENANT for  adjudication as a bankrupt,  or for
reorganization  or an  arrangement  under any provision of the Bankruptcy Act as
then in force and effect,  or (e) if an  involuntary  petition  under any of the
provisions of said  Bankruptcy Act is filed against TENANT and such  involuntary
petition is not dismissed within sixty (60) days thereafter, then, and in any of
such cases,  LANDLORD  lawfully may exercise all defaults rights

                                       11
<PAGE>
available  to it under  law,  including  repossession  of the  leased  property,
termination of the lease,  acceleration of all future rental payments,  and such
other rights as may be lawfully permitted.

     10.2 Remedies - In the event that this Lease is terminated under any of the
provisions contained in Section 10.1 or shall be otherwise terminated for breach
of any obligation of TENANT,  TENANT covenants to pay punctually to LANDLORD all
the sums and perform all the obligations which TENANT covenants in this Lease to
pay and to perform in the same manner and to the same extent at the same time as
if this Lease had not been terminated so long as such obligations shall have not
been  rendered  unnecessary  or  impossible  of  performance  by the  subsequent
re-letting or other occupancy permitted by LANDLORD.  In calculating the amounts
to be paid by TENANT under the foregoing covenant, TENANT shall be credited with
the net  proceeds of any rent or the value of other  considerations  obtained by
LANDLORD by re-letting the premises,  after deducting all LANDLORD'S expenses in
connection with such re-letting, including, without limitation, all repossession
costs, brokerage commissions, reasonable fees for legal services and expenses of
preparing the premises for  re-letting,  it being agreed by TENANT that LANDLORD
may (i) re-let the  premises or any part or parts  thereof,  for a term or terms
which may at  LANDLORD'S  option be equal to or less than or exceed  the  period
which would  otherwise have  constituted the balance of the Lease term, and (ii)
make such  alterations,  repairs and  decorations in the premises as LANDLORD in
its sole judgement considers advisable or necessary to re-let the same.

     Nothing  contained in this Lease  shall,  however,  limit or prejudice  the
right of  LANDLORD  to prove for and obtain in  proceedings  for  bankruptcy  or
insolvency by reason of the  termination  of this Lease,  an amount equal to the
maximum  allowed by any  statute or rule of law in effect at the time when,  and
governing the proceedings in which, the damages are to be proved, whether or not
the amount be greater, equal to, or less than the amounts of the loss or damages
referred to above.

     10.3 Remedies  Cumulative - Any and all rights and remedies  which LANDLORD
may have under this Lease, and at law and equity,  shall be cumulative and shall
not be  deemed  inconsistent  with each  other,  and any two or more of all such
rights and  remedies  may be  exercised at the same time insofar as permitted by
law.

     10.4  LANDLORD'S  and TENANT'S  Right to Cure  Defaults - LANDLORD may, but
shall not be  obligated  to,  cure at any time,  following  ten (10) days  prior
written  notice to TENANT,  except in cases of emergency when no notice shall be
required,  any default by TENANT  under this  Lease;  and  whenever  LANDLORD so
elects,  all costs and  expenses  incurred  by  LANDLORD,  including  reasonable
attorney's  fees,  in curing a default  shall be paid by TENANT to  LANDLORD  as
additional rent on demand. TENANT shall have a like right to cure any default of
LANDLORD, and TENANT may reimburse itself for the cost thereof out of succeeding
rental payments.

                                       12
<PAGE>
     10.5  Effect of Waivers on  Default - No  consent or waiver,  expressed  or
implied,  by either party to or of any breach of any  covenants,  conditions  or
duty of the other shall be  construed  as a consent or waiver to or of any other
breach of the same of any other covenant, condition or duty.

                                   ARTICLE XI
                            Miscellaneous Provisions

     11.1  Assignment,  Subletting,  etc. - LANDLORD'S  written consent shall be
required for any assignment,  transfer or subletting except to another financial
institution which consent shall not be unreasonably withheld.

     11.2  Notice  from One Party to the Other - Any  notice  from  LANDLORD  to
TENANT or from  TENANT to  LANDLORD  shall be  deemed  duly  served if mailed by
registered  or certified  mail,  return  receipt  requested,  postage  pre-paid,
addressed,  if to  TENANT,  at the  original  address  of TENANT  or such  other
addresses as TENANT shall have last designated by notice in writing to LANDLORD,
and if to LANDLORD, at the original address of LANDLORD or such other address as
LANDLORD shall have last designated by notice in writing to TENANT.

     11.3 Quiet  Employment - LANDLORD agrees that upon TENANT'S paying the rent
and performing and observing the agreements,  conditions and other provisions on
its part to be  performed  and  observed,  TENANT  shall and may  peaceably  and
quietly have, hold and enjoy the demised  premises during the Lease term without
any manner or hindrance or  molestation  from LANDLORD or anyone  claiming under
LANDLORD, subject to the covenants and conditions of this Lease.

     11.4  Recording - TENANT  agrees not to record  this Lease,  but each party
hereto agrees on request of the other, to execute a Notice or Short Form of this
Lease in recordable form in compliance with applicable statutes,  and reasonably
satisfactory  to  LANDLORD'S  and  TENANT'S  attorneys.  In no event  shall such
document  set forth the rental or other  charges  payable  by TENANT  under this
Lease; and any such document shall expressly state that it is executed  pursuant
to the provisions contained in this Lease, and is not intended to vary the terms
and conditions of this Lease.  In the event LANDLORD  and/or TENANT believe that
the Lease has been lawfully  terminated,  abandoned or otherwise of no force and
effect  and the  other  party  will  not  voluntarily  execute  a  Discharge  of
Memorandum of Lease,  the party seeking the Discharge of Memorandum of Lease may
move summarily  before the Superior Court of New Jersey for a  determination  of
whether or not the  Memorandum  of Lease should be  discharged.  The other party
consents to the  jurisdiction  of the Superior Court of New Jersey and agrees to
proceed in a summary  manner.  It is  expressly  understood  and agreed  that in
addition to the relief  provided  herein,  the parties will have such additional
cumulative  remedies  as are  available  to it at law or in equity  for  damages
suffered by reason of a wrongful  refusal to execute and deliver a Discharge  of
Memorandum of Lease.

                                       13
<PAGE>
     11.5 Acts of God - In any case where  either party hereto is required to do
any act,  delays caused by or resulting from Acts of God, war, civil  commotion,
fire or other casualty,  labor  difficulties,  shortages of labor,  materials or
equipment,   government  regulations,   or  other  causes  beyond  such  party's
reasonable  control  shall not be counted in  determining  the time during which
work shall be  completed,  whether or such time be designated by a fixed date, a
fixed time or "a reasonable time".

     11.6 Waiver of Subrogation - All insurance which is carried by either party
with respect to the demised  premises,  whether or not  required,  shall include
provisions which either designates the other party as one of the insured or deny
to the insurer  acquisition  by  subrogation  of rights of recovery  against the
other party.  Each party shall be entitled to have duplicates or certificates of
any policies containing such provisions.  Each party hereby waives all rights of
recovery against the other for loss or injury against which the waiving party is
protected by insurance containing such provisions.

     11.7 Rights of Mortgagee and Subordination -

          11.7.1 This Lease is subject and is hereby subordinated to all present
and future  mortgages,  deeds of trust,  and other  encumbrances  affecting  the
premises or the property of which said premises are a part;  provided,  however,
that an agreement or instrument  affecting such subordination  shall be executed
by the  mortgagee  or other  Lender,  be  recorded  with such  mortgage or other
security  agreement,  and a copy delivered to the TENANT and contain provisions,
to the effect that (i) so long as TENANT  observes the terms and  provisions  of
this Lease and notwithstanding  the Lease may be foreclosed,  TENANT will not be
effected or  disturbed  by the  mortgagee  in the  exercise of any of its rights
under the  mortgage  or other  security  agreement,  or the  bond,  note or debt
secured  thereby;  (ii) in the event the  mortgagee  comes  into  possession  or
ownership of the premises by foreclosing or otherwise,  TENANT'S use,  occupancy
and  quiet  enjoyment  of the  premises  shall  not  be  disturbed  by any  such
proceedings;  (iii) in the event the premises are sold or otherwise  disposed of
pursuant  to any right or power  contained  in the  mortgage  or other  security
agreement,  or the bond or note secured  thereby,  or as a result of proceedings
thereon,  the  purchaser  shall take  title  subject  to this  Agreement  of Non
Disturbance,  and all of the rights of the TENANT  hereunder;  (iv) in the event
the buildings and  improvements  upon the premises are damaged by fire and other
casualty,  for which loss the proceeds  payable  under any  insurance  policy or
policies are payable to the mortgagee, such insurance funds, when paid, shall be
made  available  for the purpose of repair and  restoration  as provided in this
Lease;  and (v) the agreement shall be binding upon the LANDLORD,  mortgagee and
their respective heirs, executors,  administrators,  successors and assigns. The
TENANT agrees to execute,  at no expense to the LANDLORD,  any instrument  which
may be deemed  necessary  or  desirable  by the  LANDLORD to further  effect the
subordination of this Lease to any such mortgage, deed of trust or encumbrance.

          11.7.2 No Accord and  Satisfaction  - No  acceptance  by  LANDLORD  of
lesser  sum than the rent or any  other  charges  then due shall be deemed to be
other than on account of the earliest

                                       14
<PAGE>
installment  of such rent or charge due, nor shall any  endorsement or statement
on any check or any  letter  accompanying  any check or payment as rent or other
charge be deemed an accord and satisfaction,  and LANDLORD may accept such check
or payment without  prejudice to LANDLORD'S right to recover and balance of such
installments or pursue any other remedy in this Lease provided.

     11.8 Applicable Law and  Construction - This Lease shall be governed by and
construed  in  accordance  with the laws of the State of New Jersey,  and if any
provisions  of this Lease shall to any extent be invalid,  the remainder of this
Lease shall not be  affected  thereby.  There are no oral or written  agreements
between LANDLORD and TENANT affecting this Lease. This Lease may be amended only
by instruments in writing executed by LANDLORD and TENANT. LANDLORD shall not be
deemed in any way or for any purpose,  to have become,  by the execution of this
Lease or any action  taken  thereunder,  a partner of TENANT in its  business or
otherwise a joint venturer or member of any enterprises of TENANT. The titles of
the several Articles and Sections  contained herein are for convenience only and
shall not be  considered  in  construing  this Lease.  Unless  repugnant  to the
context,  the words  "LANDLORD  and  TENANT"  appearing  in this Lease  shall be
construed to mean those names above and their respective heirs,  administrators,
successors and assigns, and those claiming through or under them respectively.

                                   ARTICLE XII
                              Permits and Approvals

     12.1  TENANT'S  Obligations  - The  obligations  of  TENANT  hereunder  are
contingent  upon  final  approval  by the  bank's  Board  of  Directors  of this
transaction  and upon TENANT securing on or before January 1, 1999 the following
unconditional and unappealable approvals:

     A.   All state and federal  regulatory  approvals for the  construction and
          operation of a branch bank on the leased premises.

     B.   All municipal and governmental approvals required for the construction
          of TENANT'S  proposed  building  including  the issuance of a building
          permit ("Permit and Approvals").

     12.2 Approvals - TENANT shall diligently pursue all required approvals.

     12.3  Easements  - TENANT  shall  have  absolutely  no  right to grant  any
easement  with  regard  to the  premises  other  than such  easements  to public
entities or public  service  corporations  for the  purpose of serving  only the
premises,  rights-of-way  or  easements  on or over the  premises  for  poles or
conduits, or both, for telephone,  electricity,  water, sanitary or storm sewers
or both and for other  utilities  and  municipal or special  district  services.
LANDLORD  shall  cooperate  with TENANT to permit the creation of all  necessary
easements.

                                       15

<PAGE>
                                  ARTICLE XIII
                               Net, Net, Net Lease

     13.1 Net,  Net, Net Lease - It is the intention of LANDLORD and TENANT that
the rental herein  specified  shall be net to LANDLORD in each lease year,  that
all costs,  expenses, and obligations of every kind relating to the TENANT'S use
and  occupancy  of the  premises  which may arise  during the term of this Lease
shall be paid by  TENANT,  and that  LANDLORD  shall be  indemnified  by  TENANT
against any such costs, expenses and obligations.

                                   ARTICLE XIV
                             Right of First Refusal

     14.1  Right of First  Refusal  to Lease - Prior to or  within  one  hundred
eighty (180) days after the  conclusion  of this Lease and all options to extend
the term thereof,  LANDLORD shall desire to accept a bona fide offer received by
it to lease any part of the  Premises,  LANDLORD  shall notify  TENANT of such a
desire in the manner provided in this Lease for the giving of notice, and TENANT
shall have the right of first refusal to lease said premises  exercisable within
ten (10) days of said  written  notice upon the terms  contained  in the notice.
This  provision  shall only be effective  after the  termination,  expiration or
conclusion of the original  lease term and all options to extend the Lease,  and
shall not  affect  the  premises  during the term of this Lease or any option to
extend the term thereof.

     14.2 Right of First  Refusal to  Purchase - TENANT  shall have the right of
first refusal to purchase the demised  premises as hereinafter  set forth. If at
any time during the term as extended,  LANDLORD  shall receive a bona fide offer
from a third  person for the  purchase  of the  demised  premises,  which  offer
LANDLORD shall desire to accept,  LANDLORD  shall  promptly  deliver to TENANT a
copy of such offer, and TENANT may, within fifteen (15) days  thereafter,  elect
to purchase  the  demised  premises on the same terms as those set forth in such
offer,  excepting that TENANT shall be credited against the purchase price to be
paid by TENANT, with a sum equal to the amount of any brokerage commissions,  if
any, which LANDLORD shall save by a sale to TENANT. If LANDLORD shall receive an
offer for the  purchase of the demised  premises,  which is not  consummated  by
delivering  a deed to the  offerer,  the  TENANT'S  right  of first  refusal  to
purchase shall remain  applicable to subsequent  offers.  If LANDLORD shall sell
the demised  premises  after a failure of TENANT to exercise  its right of first
refusal,  such shall be subject to the Lease and shall continue to be applicable
to subsequent  sales of the demised  premises.  Notwithstanding  the  foregoing,
TENANT'S  right of first  refusal  shall  not  apply or  extend  to any sales or
transfers  between  LANDLORD and any  affiliates in which the  principals of the
LANDLORD are the majority  shareholders  to any family trusts or to the heirs of
the  principals of LANDLORD.  LANDLORD  shall be entitled to net the same amount
under any right of first refusal exercise.

                                       16
<PAGE>
                                   ARTICLE XV
                                    Holdover

     15.1 Holdover - In the event that TENANT continues in use and occupancy and
holds over in  possession  of the premises  after the  expiration of the Initial
Term or, properly  exercised,  the Option Term, in addition to all other damages
to which  LANDLORD  may be  entitled,  the  monthly  rent  during  the period of
holdover shall be in a sum equal to double the amount of the monthly installment
of base  annual  fixed  rent  during  the last  month of the term which has just
expired.  Said  holdover rent shall be in addition to all  additional  rents for
which the TENANT shall be responsible during the holdover period.

                                   ARTICLE XVI
                                   Common Area

     16.1  Common  Area -  LANDLORD  hereby  grants to  TENANT,  in common  with
LANDLORD and other tenants, with respective invitees and licensees, the right to
use the parking and public areas in the project of which the Leased  Premises is
a part,  subject to the conditions  hereinafter  provided.  TENANT hereby agrees
that:

               (a)  LANDLORD may designate an area for TENANT'S employee parking

               (b)  Said parking area will not be used for permanent garaging or
                    overnight parking

               (c)  TENANT  will   conform   with  the   reasonable   rules  and
                    regulations of the Shopping Center common area

               (d)  LANDLORD  agrees  that it will  permit  construction  of the
                    parking area in  substantial  conformance  with the attached
                    plan.

     16.2 Common Area Charges - As additional  rental,  TENANT agrees to pay its
pro rata  share  of the  common  area  maintenance  costs  which  shall  include
maintenance, landscaping,  illumination, cleaning, snow and ice removals, common
sewerage disposal costs, common signs, and all other common area costs.

     16.3  Determination  and Payment of Common  Area  Charges - All such common
area  charges  shall be deemed  additional  rental  and shall be paid in monthly
installments  equal to 1/12th of  TENANT'S  estimated  common are  contribution.
TENANT'S  common area pro rata shall be  determined  pursuant  to the  following
formula:

Total Common Area Charges x  TENANT Net Square Ft     =     TENANT Common Area
                             Total Shopping Center Square Ft     Charges

     16.4 Construction Cost - TENANT shall construct its own building at its own
costs and bear all construction  within its demised  premises,  as identified in
Exhibit A.

                                       17

<PAGE>
                                  ARTICLE XVII
                                  Environmental

     17.1 Environmental Matters -

          A. LANDLORD represents and warrants that any handling, transportation,
storage,  treatment or usage of hazardous or toxic substances (as defined by any
applicant  government  authority and hereinafter being referred to as "Hazardous
Materials")  that has occurred or will occur on the Demised Premises shall be in
compliance with all applicable  federal,  state and local laws,  regulations and
ordinances.  TENANT  represents and warrants that any handling,  transportation,
storage,  treatment  or usage of  Hazardous  Materials  by TENANT at the Demised
Premises shall be in compliance with applicable  federal,  state and local laws.
LANDLORD  further  represents  and  warrants  that no  leak,  spill,  discharge,
emission or disposal of  Hazardous  Materials  has occurred or will occur on the
Demised  Premises  and that the soil,  groundwater,  soil  vapor on or under the
Demised  Premises  is or  will be free of  Hazardous  Materials  as of the  date
hereof.  LANDLORD agrees to indemnify,  defend and hold TENANT and its officers,
from any  claims,  judgments,  damages,  fines,  penalties,  costs,  liabilities
(including sums paid in settlement of claims) or loss including attorney's fees,
consultants  fees,  and expert fees which arise during or after the Primary Term
or any Renewal Term, or in connection with the presence of suspected presence of
Hazardous  Materials  in the soil,  groundwater,  or soil  vapor on or under the
Demised  Premises,  unless such  Hazardous  Materials are present  solely as the
result  of the acts of  TENANT,  its  officers,  employees  or  agents.  Without
limiting the generality of the foregoing, this indemnification shall survive the
expiration  of  this  Lease  and  does  specifically  cover  costs  incurred  in
connection with any  investigation of site conditions or any cleanup,  remedial,
removal or restoration work required by any federal, state or local governmental
agency or political subdivision because of the presence or suspected presence of
Hazardous  Materials  in the soil,  groundwater  or soil  vapor  odor  under the
Demised  Premises,  unless the  hazardous  Materials  are present  solely as the
result  of the acts of  TENANT,  its  officers,  agents  or  employees.  Without
limiting  the  generality  of the  foregoing,  this  indemnification  shall also
specifically cover costs in connection with:

               1.   Hazardous  Materials  present or  suspected to be present in
                    the soil,  groundwater or soil vapor on or under the Demised
                    Premises before the date hereof; or

               2.   Hazardous Materials that migrate,  flow, percolate,  diffuse
                    or in any move onto or under the Demised  Premises after the
                    date hereof; or

               3.   Hazardous Materials present on or under the Demised Premises
                    as a result of any discharge,  dumping, spilling (accidental
                    or otherwise) onto the Demised  Premises during or after the
                    Primary Term or any Renewal Term by any person or entity.

                                       18
<PAGE>
          B. TENANT agrees to indemnify LANDLORD and its officers, employees and
agents harmless from any claims,  judgments,  damages, fines, penalties,  costs,
liabilities  (including  sums paid in  settlement  of claims) or loss  including
attorney's  fees,  consultants  fees and expert fees which arise during or after
the Primary Term or any Renewal Term in connection with the presence of toxic or
hazardous  substances  in the soil,  groundwater,  or soil vapor on or under the
Demised  Premises to the extent  such  presence is caused by the acts of Tenant,
its officers, employees and agents.

          C. A condition precedent to this Lease shall be TENANT's  satisfactory
review of the report (the "Phase I Environmental  Survey") on the  environmental
condition of the land on which the Demised Premises is located.  LANDLORD agrees
to provide TENANT with a Phase I  Environmental  Survey of the land on which the
Demised  Premises is located.  In the event that  TENANT  shall  discover in its
review of the Phase I Environmental  Survey that any Hazardous  Materials may be
present  in the  soil,  ground  water  or soil  vapor on or  under  the  Demised
Premises, TENANT may, upon written notice to LANDLORD within ten (10) days after
the date TENANT receives the Phase I Environmental Survey, terminate this Lease.

          D. If  during  the  term  of this  Lease  any  governmental  authority
requires the remediation of Hazardous Materials from the Demised Premises or the
Shopping  Center  and such  remediation  materially  affects  TENANT's  business
operations  or poses a safety threat to TENANT's  employees or  customers,  then
TENANT  shall be entitled to an  equitable  abatement of rent from the date such
interference  or safety hazard occurs to the date such  interference  and safety
hazard are no longer present.

                                  ARTICLE XVIII

          18.1 Title - This lease shall be subject and  subordinate  to the lien
of any bank or  institution  or other  mortgage or mortgages now or hereafter in
force against  LANDLORD's  property,  and to all advances made upon the security
thereof,  provided the holder of any such mortgage  shall execute and deliver to
TENANT an agreement,  in the form of Exhibit D attached hereto,  or as otherwise
agreed to by TENANT,  LANDLORD and such holder,  providing that such holder will
recognize this lease and not disturb TENANT's  possession of the premises in the
event of  foreclosure  if TENANT is not then in  default  hereunder  beyond  any
applicable  cure  period.  TENANT  agrees,  upon receipt of such  agreement,  to
execute such further instrument(s) as may be necessary to subordinate this lease
to the lien of any such  mortgage.  The term  "mortgage"  shall include deeds of
trust or any other similar hypothecations.

          18.2  Ownership  - LANDLORD  warrants  that it owns in fee the subject
premises  subject only to the liens,  mortgages and  encumbrances  listed on the
attached  schedule,  evidenced by a title report  provided by LANDLORD to TENANT
within  forty-five  (45) days of the  execution  of this  lease,  which shall be
subject to TENANT's  reasonable  approval.  TENANT'S lease  hereunder  shall be
subordinate  only to

                                       19
<PAGE>
such liens where the holder of such liens has executed  and  delivered to TENANT
in the form attached hereto a Subordination and Non-Disturbance Agreement.

     IN WITNESS  WHEREOF,  the parties  have  hereunto set their hands and seals
this day and year first above written.

                               COMMERCE BANK/SHORE, N.A.

/s/ Jacqueline Watson          BY: /s/ Thomas H. Arasz
-------------------------          -----------------------------------------
Attest                             Thomas H. Arasz
                                   Senior Vice President/Real Estate Officer

                               BRICK/BURNT TAVERN EQUITIES, L.L.C.

/s/ Jacqueline Watson          BY: /s/ John P. Silvestri
-------------------------          -----------------------------------------
Attest                             John P. Silvestri
                                   Managing Member

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