Document:

PE Administration Agreement

     

    Exhibit
      10.9

     

    EXECUTION
      COPY

     

    ADMINISTRATION
      AGREEMENT

     

    BETWEEN

     

    PE
      ENVIRONMENTAL FUNDING LLC

     

    AND

     

    ALLEGHENY
      ENERGY SERVICE CORPORATION

     

    THIS
      ADMINISTRATION AGREEMENT dated as of April 11, 2007 (as amended, restated,
      supplemented or otherwise modified from time to time, this “Administration
      Agreement”),
      between PE Environmental Funding LLC, a limited liability company formed
      under the laws of the State of Delaware (the “Company”),
      and
      Allegheny Energy Service Corporation, a corporation formed under the laws of
      the
      State of West Virginia (the “Administrator”).
      Capitalized terms used but not otherwise defined herein have the meanings
      assigned to such terms in Appendix A to this Administration
      Agreement.

     

    WITNESSETH:

     

      WHEREAS,
      the Administrator was created to perform certain management duties on behalf
      of
      Allegheny Energy, Inc. (the “System”),
      its
      utility subsidiary companies and its non-utility subsidiary companies (the
      “Subsidiaries”);
      and

     

      WHEREAS,
      the Administrator offers to provide a central organization to furnish to the
      System, the Subsidiaries and the Company certain advisory, supervisory and
      other
      services in accordance with current practices and procedures; and

     

      WHEREAS,
      the Company wishes to accept the offer proposed by the
      Administrator;

     

      NOW,
      THEREFORE, in consideration of the mutual covenants and agreements herein
      contained, and for other good and valuable consideration, the receipt of which
      is hereby acknowledged, the parties hereto, intending to be reasonably bound,
      hereby agree as follows:

     

        Section
      1.  Duties
      of Administrator; Management Services.
      The
      Administrator hereby offers to furnish to the Company the services detailed
      on
      Exhibit I attached hereto and made a part hereof.

     

    Section
      2.  Compensation.
      (a) For
      all services rendered for the Company by the Administrator pursuant to this
      Administration Agreement, as compensation for the performance of the
      Administrator’s obligations under this Administration Agreement (including the
      compensation of Persons serving as Managers), the Administrator shall be
      entitled to an annual fee (the “Administration
      Fee”),
      payable by the Company in arrears proportionately on each Payment Date. The
      Administration Fee shall not exceed $50,000 in the aggregate annually. The
      Administrator’s compensation and other expenses, including any indemnities,
      payable hereunder shall be paid from the Collection Account 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    pursuant
      to Section 8.02(e) of the Indenture, and the Administrator shall have no
      recourse against the Company for payment of such amounts other than in
      accordance with Section 8.02 of the Indenture. For services rendered to one
      or more of the companies in the System, the applicable approved allocation
      factor will be used.

     

    (b)  The
      payment for services rendered by the Administrator to the System, the
      Subsidiaries and the Company shall cover all the costs and expenses of the
      Administrator doing business, excluding only a return for the use of equity
      capital, and each Subsidiary, the System and the Company shall pay its direct
      or
      fair proportionate share for such services.

     

    (c)  Payment
      shall be made by the Indenture Trustee, on behalf of the Company, to the
      Administrator on each Payment Date. 

     

    (d)  Nothing
      herein shall be construed to release the officers and directors of the Company
      from the performance of their respective duties or limit the exercise of their
      powers as prescribed by applicable Requirements of Law or
      otherwise.

     

    Section
      3.  Terms
      of the Agreement; Resignation and Removal of Administrator.
      (a) This
      Administration Agreement shall continue in full force and effect until the
      payment in full of the Environmental Control Bonds and any Additional
      Securities, although the Company may terminate this Administration Agreement
      at
      any time with or without notice for any cause deemed by it to be sufficient,
      provided, however, that removal of the Administrator pursuant to this
Section 3
      shall be
      effective until (i) a Successor Administrator shall have been appointed by
      the
      Company and (ii) such Successor Administrator has agreed in writing to be bound
      by the terms of this Administration Agreement in the same manner as the
      Administrator is bound hereunder, and the PSCWV Condition set forth in Section
      7(b) of this Administration Agreement has been satisfied.

     

    (b)  The
      Administrator shall not resign from the obligations and duties imposed on it
      as
      Administrator under this Administration Agreement except upon a determination
      that the performance of its duties under this Administration Agreement shall
      no
      longer be permissible under applicable Requirements of Law. Notice of any such
      determination permitting the resignation of the Administrator shall be
      communicated to the Company, the PSCWV, the Indenture Trustee and each Rating
      Agency at the earliest practicable time (and, if such communication is not
      in
      writing, shall be confirmed in writing at the earliest practicable time), and
      any such determination shall be evidenced by an Opinion of Counsel to such
      effect delivered to the Company, the PSCWV and the Indenture Trustee
      concurrently with or promptly after such notice.

     

    (c)  Subject
      to satisfaction of the PSCWV Condition set forth in Section 7(b)
      of this
      Administration Agreement, the Administrator may be removed by the Indenture
      Trustee, as assignee of the Issuer, immediately upon written notice of
      termination to the Administrator if any of the following events shall
      occur.

     

        (i)  the
      Administrator defaults in the performance of any of its duties under this
      Administration Agreement and, after notice of such default, fails to cure such
      default within 30 days (or, if such default cannot be cured in such time, fails
      to give within 30

     

    
      
        
        

      

      
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    days
      such
      assurance of cure as shall be reasonably satisfactory to the Company and the
      PSCWV); or

     

        (ii)  an
      Insolvency Event occurs with respect to the Administrator;

     

    The
      Administrator agrees that if an event specified in clause (ii) of this
Section 3(c)
      occurs,
      it shall give written notice thereof to the Company, the PSCWV and the Indenture
      Trustee within seven days after the occurrence of such event.

     

    (d)  No
      resignation or removal of the Administrator pursuant to this Section 3
      shall be
      effective until a Successor Administrator shall have been appointed by the
      Company, the Rating Agency Condition shall have been satisfied with respect
      to
      the proposed appointment, the PSCWV Condition set forth in Section 7(b)
      of this
      Administration Agreement has been satisfied, and such Successor Administrator
      shall have agreed in writing to be bound by the terms of this Administration
      Agreement in the same manner as the Administrator is bound
      hereunder.

     

    (e)  No
      Administrator default may be waived without satisfaction of the PSCWV Condition
      set forth in Section 7(b)
      of this
      Administration Agreement.

     

    Section
      4.  Action
      Upon Termination; Resignation or Removal.
      Promptly upon the effective date of termination of this Administration Agreement
      pursuant to Section 3(a),
      the
      resignation of the Administrator pursuant to Section 3(b)
      or the
      removal of the Administrator under Section 3(c),
      the
      Administrator shall be entitled to be paid all fees and reimbursable expenses
      accruing to it to the date of such termination, resignation or removal. The
      Administrator shall forthwith upon such termination pursuant to Section 3(a)
      deliver
      to the Company all property and documents of or relating to the Collateral
      then
      in the custody of the Administrator. In the event of the resignation of the
      Administrator pursuant to Section 3(b)
      or the
      removal of the Administrator under Section 3(c),
      the
      Administrator shall cooperate with the Company and take all reasonable steps
      requested to assist the Company in making an orderly transfer of the duties
      of
      the Administrator.

     

    Section
      5.  Enforcement
      by PSCWV.
      The
      Administrator acknowledges that the PSCWV has authority to enforce all
      provisions of this Administration Agreement for the benefit of Customers
      pursuant to the Financing Order to the extent permitted by applicable
      Requirements of Law. Notwithstanding anything to the contrary contained in
      this
      Administration Agreement, for the avoidance of doubt, any right, remedy or
      claim
      to which any Customer may be entitled pursuant to this Administration Agreement
      may be asserted or exercised only by the PSCWV for the benefit of such
      Customer.

     

    
      
        
        

      

      
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    Section
      6.  Indemnity.
      (a) The
      Company shall indemnify the Administrator, its shareholders, directors,
      officers, employees and Affiliates against all losses, claims, damages,
      penalties, judgments, liabilities and expenses (including, without limitation,
      all expenses of litigation or preparation therefor whether or not the
      Administrator is a party thereto) which any of them may pay or incur arising
      out
      of or relating to this Administration Agreement and the services called for
      herein; provided, however, that such indemnity shall not apply to any such
      loss,
      claim, damage, penalty, judgment, liability or expense resulting from the
      Administrator’s negligence or willful misconduct in the performance of its
      obligations hereunder.

     

    (b)  The
      Administrator shall indemnify the Company and the Indenture Trustee and their
      respective officers, officials, directors, managers and employees (each, an
      “Indemnified
      Party”)
      against all losses, claims, damages, penalties, judgments, liabilities and
      expenses (including, without limitation, all expenses of litigation or
      preparation therefor whether or not such Indemnified Party is a party thereto)
      which any of them may incur as a result of the Administrator’s gross negligence
      or willful misconduct in the performance of its obligations
      hereunder.

     

    Section
      7.  Amendment.
      (a) Subject
      to Section 7(b),
      this
      Administration Agreement may be amended by the Administrator and the Company,
      with the consent of the Indenture Trustee and the satisfaction of the Rating
      Agency Condition. Promptly after the execution of any such amendment and
      consent, the Company shall furnish written notification of the substance of
      such
      amendment and consent to each of the Rating Agencies. Prior to the execution
      of
      any amendment to this Administration Agreement, the Company and the Indenture
      Trustee shall be entitled to receive and rely upon an Opinion of Counsel stating
      that the execution of such amendment is authorized or permitted by this
      Administration Agreement and the Opinion of Counsel referred to in
      Section 3.10 of the Servicing Agreement. Subject to Section 7(b),
      the
      Company and the Indenture Trustee may, but shall not be obligated to, enter
      into any such amendment which affects their own rights, duties or immunities
      under this Administration Agreement or otherwise.

     

    (b)  Notwithstanding
      anything to the contrary in Section 7(a),
      no
      amendment or modification of this Administration Agreement shall be effective
      unless the process set forth in this Section
      7(b)
      has been
      followed.

     

        (i)  The
      PSCWV Condition.
      At
      least 16 days prior to the effectiveness of any such amendment or
      modification, and after obtaining the other necessary approvals set forth in
      Section 7(a),
      except
      for the consent of the Indenture Trustee and the Environmental Control
      Bondholders if the consent of the Environmental Control Bondholders is required
      or sought by the Indenture Trustee in connection with such amendment or
      modification, the Company shall have delivered to the PSCWV’s executive director
      and general counsel written notification of any proposed amendment or
      modification, which notification shall contain:

     

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

     

    
      
        
        

      

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    (iii)  Following
      the delivery of a notice to the PSCWV by the Company under Section
      7(b)(i)
      above,
      the Company shall have the right at any time to withdraw from the PSCWV further
      consideration of any notification of a proposed amendment or modification.
      Such
      withdrawal shall be evidenced by the prompt written notice thereof by the
      Company to the PSCWV, the Indenture Trustee and the Servicer.

     

    (c)  For
      the
      purpose of this Section 7,
      an
“authorized representative” of the PSCWV means any person authorized to act on
      behalf of the PSCWV, as evidenced by an Opinion of Counsel (which may be the
      general counsel) to the PSCWV.

     

    
      
        
        

      

      
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    Section
      8.  Successors
      and Assigns.
      This
      Administration Agreement may not be assigned by the Administrator unless such
      assignment is previously consented to in writing by the Company, the PSCWV
      and
      the Indenture Trustee and subject to satisfaction of the Rating Agency Condition
      in respect thereof. Any assignment with such consent and satisfaction, if
      accepted by the assignee, shall bind the assignee hereunder in the same manner
      as the Administrator is bound hereunder. Notwithstanding the foregoing, this
      Administration Agreement may be assigned by the Administrator without the
      consent of the Company, the PSCWV or the Indenture Trustee to a corporation
      or
      other organization that is a successor (by merger, consolidation or purchase
      of
      assets) to the Administrator or to any affiliate of the Administrator; provided
      that such successor corporation or other organization executes and delivers
      to
      the Company and the PSCWV a written agreement in which such corporation or
      other
      organization agrees to be bound hereunder by the terms of said assignment in
      the
      same manner as the Administrator is bound hereunder. Subject to the foregoing,
      this Administration Agreement shall bind any successors or assigns of the
      parties hereto.

     

    Section
      9.  Administrator
      as Independent Contractor.
      For all
      purposes of this Administration Agreement, the Administrator shall be an
      independent contractor and shall not be subject to the supervision of the
      Company with respect to the manner in which it accomplishes the performance
      of
      its obligations hereunder. Unless expressly authorized by the Company, the
      Administrator shall have no authority to act for or represent the Company in
      any
      way and shall not otherwise be deemed an agent of the Company.

     

    Section
      10.  No
      Joint Venture.
      Nothing
      contained in this Administration Agreement shall (a) constitute the
      Administrator and the Company as members of any partnership, joint venture,
      association, syndicate, unincorporated business or other separate entity,
      (b) be construed to impose any liability as such on any of them or
      (c) be deemed to confer on any of them any express, implied or apparent
      authority to incur any obligation or liability on behalf of the
      others.

     

    Section
      11.  Other
      Activities as Administrator.
      Nothing
      herein shall prevent the Administrator or its Affiliates from engaging in other
      businesses or, in its sole discretion, from acting in a similar capacity as
      an
      administrator for any other person or entity even though such person or entity
      may engage in business activities similar to those of the Company.

     

    Section
      12.  Assignment
      to Indenture Trustee.
      The
      Administrator hereby acknowledges and consents to the mortgage, pledge,
      assignment and grant of a security interest by the Company to the Indenture
      Trustee pursuant to the Indenture for the benefit of the Environmental Control
      Bondholders of any and all of the Company’s rights hereunder to the Indenture
      Trustee. 

     

    Section
      13.  Nonpetition
      Covenants.
      Notwithstanding any prior termination of this Administration Agreement or the
      Indenture, but subject to a court of competent jurisdiction’s rights, upon
      application by the Company or the Indenture Trustee, to order the sequestration
      and payment of Environmental Control Revenues arising with respect to the
      Transferred Environmental Control Property, notwithstanding any bankruptcy,
      reorganization or other insolvency proceedings with respect to the debtor,
      pledgor or transferor of the Transferred Environmental Control Property pursuant
      to Section 24-2-4e(k)(4) of the Statute, the Administrator shall not, prior
      to the date which is one year and one day after the termination of

     

    
      
        
        

      

      
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    the
      Indenture, petition or otherwise invoke or cause the Company to invoke the
      process of any court or government authority for the purpose of commencing
      or
      sustaining a case against the Company 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 Company or
      any
      substantial part of the property of the Company, or ordering the winding up
      or
      liquidation of the affairs of the Company.

     

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

     

    
      
        
        

      

      
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    IN
      WITNESS WHEREOF, the Company and the Administrator have caused this
      Administration Agreement to be signed by its duly authorized officers, effective
      as of the date first written above.

     

    

      
        	 	 	
                PE
                  ENVIRONMENTAL FUNDING LLC

              
	 	 	 
	 	 	
                By:

              	
                 /s/
                  Philip L. Goulding

              
	 	 	
                Name: 
                  Philip L. Goulding
Title:    Vice
                  President

              

      

    

     

    
      	
              Attest:

            
	 
	/s/ David
              M. Feinberg 
	
              Name: 
                David M. Feinberg
Title:    Vice President and
                Secretary

            

    

     

    
      

        
          	 	 	
                  ALLEGHENY
                    ENERGY SERVICE CORPORATION

                
	 	 	 
	 	 	
                  By:

                	 /s/ David
                  M. Feinberg
	 	 	
                  
                    Name: 
                      David M. Feinberg
Title:    Vice President and
                      Secretary

                  

                

        

      

    

     

    
       

      
        	 Attest:
	 
	/s/
                Philip L. Goulding
	
                
                  Name: 
                    Philip L. Goulding
Title:    Vice
                    President

                

              

      

       

    

    
      
        
        

      

      
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    Exhibit I

     

    Duties
      of the Administrator

     

    In
      accordance with the terms and conditions of the Administration Agreement dated
      as of April 11, 2007 (as amended, restated, supplemented or otherwise modified
      from time to time, the “Administration
      Agreement”),
      the
      Administrator agrees to perform all its duties as Administrator under the
      Administration Agreement in accordance with the terms of the Administration
      Agreement and applicable Requirements of Law. In addition, the Administrator
      shall consult with the Company regarding the Company’s duties under the
      applicable Basic Documents. Unless otherwise notified in writing by the Company,
      the Administrator shall prepare for execution by the Company, or shall cause
      the
      preparation by other appropriate Persons of all such documents, reports,
      filings, instruments, certificates and opinions as it shall be the duty of
      the
      Company to prepare, file or deliver pursuant to any Basic Document.

     

    (a)  In
      furtherance of the foregoing, the Administrator shall take all appropriate
      action that it is the duty of the Company to take pursuant to the Indenture
      including, without limitation, such of the foregoing as are required with
      respect to the following matters under the Indenture:

     

    (1)  the
      preparation of or obtaining of the documents and instruments required for
      authentication of the Bonds, if any, and delivery of the same to the Indenture
      Trustee as specified in Sections 2.01, 2.02, 2.04, 2.06 and 2.10 of the
      Indenture;

     

    (2)  the
      duty
      to keep the Bond Register and to give the Indenture Trustee notice of any
      appointment of a new Bond Registrar and the location, or change in location,
      of
      the Bond Register as specified in Section 2.05 of the
      Indenture;

     

    (3)  the
      fixing or causing to be fixed of any special record date and the notification
      of
      each affected Bondholder with respect to special record dates, Payment Dates,
      and the amount of defaulted interest to be paid, if any as specified in
      Section 2.08(c) of the Indenture;

     

    (4)  the
      maintenance of an office or agency in the Borough of Manhattan, City of New
      York, where the Bonds may be surrendered for registration of transfer or
      exchange, and where notices and demands to or upon the Company in respect of
      the
      Bonds and the Indenture may be served as specified in Section 3.02 of the
      Indenture;

     

    (5)  the
      duty
      to cause newly appointed Paying Agents, if any, to deliver to the Indenture
      Trustee the instrument specified in the Indenture regarding funds held in trust
      as specified in Section 3.03 of the Indenture;

     

    (6)  the
      direction to Paying Agents to pay to the Indenture Trustee all sums held in
      trust by such Paying Agents as specified Section 3.03 of the
      Indenture;

     

    (7)  the
      preparation and filing of all documents and instruments necessary to maintain
      the Company’s existence, good standing, rights and franchises as a limited
      liability company under the laws of the State of Delaware (unless the Company
      becomes, or any successor Company under the Indenture is or becomes, organized
      under the laws of any other State or of the United States of America, in which
      case the Administrator will prepare and file all 

     

    
      
        
        

      

      
        Exh
          I-1

        
          

        

      

      
        
        

      

    

     

    documents
      and instruments necessary to maintain such Company’s existence, good standing,
      rights and franchises under the laws of such other jurisdiction), as specified
      in Section 3.04 of the Indenture; 

     

    (8)  the
      obtaining and preservation of the Company’s qualification to do business in each
      jurisdiction in which such qualification is or shall be necessary to protect
      the
      validity and enforceability of the Indenture, the Bonds, the Collateral and
      each
      other instrument or agreement included in the Collateral, as specified in
      Section 3.04 of the Indenture;

     

    (9)  the
      preparation of all supplements and amendments to the Indenture, filings with
      the
      PSCWV and the Secretary of State of the State of West Virginia pursuant to
      the
      Statute, financing statements, continuation statements, instruments of further
      assurance and other instruments, in accordance with Section 3.05 of the
      Indenture, necessary to protect the Collateral;

     

    (10)  the
      preparation and filing of all documents required under the Statute relating
      to
      the security interest in the Transferred Environmental Control Property as
      specified in Section 3.05 of the Indenture;

     

    (11)  the
      obtaining of the Opinions of Counsel and the delivery of such Opinions of
      Counsel, in accordance with Section 3.06 of the Indenture, as to the
      Collateral, and the annual delivery of the Officers’ Certificate and certain
      other statements, in accordance with Section 3.09 of the Indenture, as to
      compliance with the Indenture;

     

    (12)  the
      identification to the Indenture Trustee in an Officer’s Certificate of any
      Person with whom the Company has contracted to perform its duties under the
      Indenture, as specified in Section 3.07(b) of the Indenture;

     

    (13)  the
      annual preparation and delivery of an Officer’s Certificate to the Indenture
      Trustee, Potomac Edison and the Rating Agencies as to compliance with conditions
      and covenants under the Indenture, as specified in Section 3.09 of the
      Indenture;

     

    (14)  the
      preparation and obtaining of documents and instruments required for the release
      of the Company from its obligations under the Indenture, as specified in
      Section 3.11(b) of the Indenture;

     

    (15)  the
      delivery of notice to the Indenture Trustee, Potomac Edison and the Rating
      Agencies of each Default or Event of Default, as specified in Section 3.17
      of the Indenture;

     

    (16)  the
      taking of all lawful action to enforce the Company’s rights under the Transfer
      Agreement, the Sale Agreement and the Servicing Agreement and to compel and
      secure performance by the Transferor, the Seller and the Servicer, of each
      of
      their obligations to the Company or under the Transfer Agreement, the Sale
      Agreement or the Servicing Agreement, as applicable, as specified in
      Sections 3.20(a) of the Indenture;

     

    (17)  the
      taking of all lawful action that the Indenture Trustee may request following
      a
      default by any of the Transferor, the Seller or the Servicer, of any of their
      obligations

     

    
      
        
        

      

      
        Exh
          I-2

        
          

        

      

      
        
        

      

    

     

     to
      the Company under the Transfer Agreement, the Sale Agreement or the Servicing
      Agreement, as applicable, as specified in Section 3.20(f) of the
      Indenture;

     

    (18)  the
      delivery of notice to the Indenture Trustee and the Rating Agencies of a
      Servicer Default under the Servicing Agreement and the taking of all reasonable
      steps available to the Company to remedy such Servicer Default, as specified
      in
      Section 3.20(g) of the Indenture;

     

    (19)  the
      preparation of an Officers’ Certificate and an Independent Certificate relating
      to (i) the satisfaction and discharge of the Indenture under Section 4.01
      of the Indenture or (ii) the exercise of the Legal Defeasance Option or the
      Covenant Defeasance Option under Section 4.02 of the
      Indenture;

     

    (20)  the
      delivery to a Responsible Officer of the Indenture Trustee and the Rating
      Agencies, within five days after an Authorized Officer of the Company has
      knowledge of the occurrence thereof, written notice in the form of an Officers’
Certificate of any event which with the giving of notice and the lapse of time
      would become an Event of Default under clause (iv) of the definition of
“Event of Default” set forth in Section 5.01 of the Indenture, its status and
      what action the Company is taking or proposes to take with respect
      thereto;

     

    (21)  the
      furnishing to the Indenture Trustee of (i) each Record Date with respect to
      each Series and (ii) three months after the last Record Date with respect to
      each Series, the names and addresses of Environmental Control Bondholders during
      any period when the Indenture Trustee is not the Bond Registrar as specified
      in
      Section 7.01 of the Indenture; 

     

    (22)  to
      the
      extent not required to be performed by the Servicer, the preparation and, after
      execution by the Company, the filing with the Indenture Trustee of the annual
      reports and of the information, documents and other reports as specified in
      Section 7.03 of the Indenture;

     

    (23)  the
      notification of the Indenture Trustee if and when the Bonds are listed on any
      stock exchange as specified in Section 7.04 of the Indenture;

     

    (24)  the
      preparation, obtaining or filing of the instruments, opinions and certificates
      and other documents required for the release of Collateral as specified in
      Section 8.03 of the Indenture;

     

    (25)  the
      opening of one or more segregated trust accounts in the Indenture Trustee’s
      name, the preparation of Issuer Orders, and the obtaining of Opinions of Counsel
      and the taking of all other actions necessary with respect to investment and
      reinvestment of funds in the Collection Account as specified in Sections 8.02
      and 8.04 of the Indenture; 

     

    (26)  the
      preparation of Issuer Requests and Officers’ Certificates and the obtaining of
      Opinions of Counsel and Independent Certificates, if necessary, for the release
      of the Collateral as specified in Sections 8.03 and 8.04 of the
      Indenture;

     

    (27)  the
      preparation and delivery of Officers’ Certificates, Issuer Requests, Opinions of
      Counsel and Independent Certificates for the release of property from the lien
      of the Indenture as specified in Section 8.03(c) of the
      Indenture;

     

    
      
        
        

      

      
        Exh
          I-3

        
          

        

      

      
        
        

      

    

     

    (28)  the
      appointment of a firm of Independent certified public accountants of recognized
      national reputation for purposes of preparing and delivering the reports or
      certificates of such accountants required by the Indenture and the related
      Series Supplements as specified in Section 8.05 of the
      Indenture;

     

    (29)  the
      preparation of Issuer Orders, the obtaining of Officers’ Certificates and
      Opinions of Counsel with respect to the execution of supplemental indentures
      as
      specified in Sections 9.01 and 9.02 of the Indenture;

     

    (30)  the
      preparation of new Bonds conforming to any supplemental indenture as specified
      in Section 9.04 of the Indenture;

     

    (31)  the
      preparation of all Officers’ Certificates, Opinions of Counsel and Independent
      Certificates with respect to any requests by the Company to the Indenture
      Trustee to take any action under the Indenture as specified in
      Section 11.01 of the Indenture; and

     

    (32)  the
      notification of the Indenture Trustee of any notice received by the Company
      from
      the Environmental Control Bondholders, and the delivery of any notices to
      relevant parties at the addresses specified in Section 11.04 of the
      Indenture.

     

    (b)  The
      Administrator shall also take all appropriate action that it is the duty of
      the
      Company to take pursuant to the Issuer LLC Agreement. 

     

    (c)  The
      Administrator shall also take all appropriate action that it is the duty of
      the
      Company to take pursuant to the Underwriting Agreement.

     

    (d)  In
      carrying out the foregoing duties or any of its other obligations under the
      Administration Agreement, the Administrator may enter into transactions with
      or
      otherwise deal with any of its Affiliates; provided, however, that the terms
      of
      any such transactions or dealings shall be, in the Administrator’s reasonable
      opinion, no less favorable to the Company than would be available from
      unaffiliated parties.

     

    (e)  With
      respect to matters that in the reasonable judgment of the Administrator are
      non-ministerial, the Administrator shall not take any action unless the
      Administrator shall have notified the Company of the proposed action and the
      Company shall have consented. For the purpose of the preceding sentence,
“non-ministerial matters” shall include, without limitation:

     

    (1)  the
      amendment of, or any supplement to, the Indenture; 

     

    (2)  the
      initiation of any action, claim or lawsuit by the Company and the compromise
      of
      any action, claim or lawsuit brought by or against the Company (other than
      in
      connection with the collection of the Environmental Control
      Charge);

     

    (3)  the
      amendment, change or modification of the Basic Documents; 

     

    (4)  the
      appointment of successor Bond Registrars, successor Paying Agents and successor
      Indenture Trustees pursuant to the Indenture or the appointment of
      successor

     

    
      
        
        

      

      
        Exh
          I-4

        
          

        

      

      
        
        

      

    

     

    Administrators
      or Successor Servicers, or the consent to the assignment by the Bond Registrar,
      Paying Agent or Indenture Trustee of its obligations under the Indenture;
      and

     

    (5)  the
      removal of the Indenture Trustee.

     

    (f)  Notwithstanding
      anything to the contrary in the Administration Agreement, the Administrator
      shall not be obligated to, and hereby agrees that it shall not, take any action
      that the Company directs the Administrator not to take on its
      behalf.

     

    (g)  The
      Administrator shall maintain appropriate books of account and records relating
      to services performed hereunder, which books of account and records shall be
      accessible for inspection by the Company and the Indenture Trustee at any time
      during normal business hours.

     

    (h)  During
      the term of the Administration Agreement, the Administrator shall make available
      to or provide the Company with such facilities as are necessary to conduct
      the
      business of the Company and to comply with the terms of the Basic Documents.
      Such facilities shall include office space to serve as the principal place
      of
      business of the Company. Initially such office space will be located at 2215-B
      Renaissance Drive, Suite #5, Las Vegas, Nevada 89119.  All facilities
      provided to the Company hereunder shall be provided without warranty of any
      kind.

     

    
      
        
        

      

      
        Exh
          I-5

        
          

        

      

      
        
        

      

    

     

    Table
      of
      Contents

    

      
        	 	 	
                Page

              
	
                Section
                  1.

                 

              	
                Duties
                  of Administrator; Management Services

                 

              	
                1

              
	
                Section
                  2.

                 

              	
                Compensation

                 

              	
                1

                 

              
	
                Section
                  3.

                 

              	
                Terms
                  of the Agreement; Resignation and Removal of Administrator

                 

              	
                2

                 

              
	
                Section
                  4.

                 

              	
                Action
                  Upon Termination; Resignation or Removal.

                 

              	
                3

                 

              
	
                Section
                  5.

                 

              	
                Enforcement
                  by PSCWV.

                 

              	
                3

                 

              
	
                Section
                  6.

                 

              	
                Indemnity.

                 

              	
                4

                 

              
	
                Section
                  7.

                 

              	
                Amendment

                 

              	
                4

                 

              
	
                Section
                  8.

                 

              	
                Successors
                  and Assigns.

                 

              	
                6

                 

              
	
                Section
                  9.

                 

              	
                Administrator
                  as Independent Contractor.

                 

              	
                6

                 

              
	
                Section
                  10.

                 

              	
                No
                  Joint Venture

                 

              	
                6

                 

              
	
                Section
                  11.

                 

              	
                Other
                  Activities as Administrator.

                 

              	
                6

                 

              
	
                Section
                  12.

                 

              	
                Assignment
                  to Indenture Trustee.

                 

              	
                6

                 

              
	
                Section
                  13.

                 

              	
                Nonpetition
                  Covenants

                 

              	
                6

                 

              
	Section
                14.	
                GOVERNING
                  LAW

                 

              	
                7

              
	
                Appendix
                  A

                 

              	
                Master
                  Definitions

                 

              	 

      

    

     

    
      
        
        

      

      
        iPE Amended and Restated Limited Liability Agreement of PE Environmental Funding,
      LLC

     

    Exhibit
      10.10

     

    EXECUTION
      COPY

     

      
        

      

    

    

      

       

      AMENDED
        AND RESTATED

       

      LIMITED
        LIABILITY COMPANY AGREEMENT

       

      OF
        PE ENVIRONMENTAL FUNDING LLC

       

       

      

      

         

        Dated
          as
          of April 11,
          2007

      

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      TABLE
        OF CONTENTS

       

      
        	 	 	
                Page

              
	 	 	 
	
                ARTICLE
                  I 

              	
                DEFINITIONS

              	
                1

              
	 	 	 
	
                SECTION
                  1.01

              	
                Capitalized
                  Terms

              	
                1

              
	
                SECTION
                  1.02

              	
                Other
                  Definitional Provisions

              	
                6

              
	 	 	 
	
                ARTICLE
                  II 

              	
                CONTINUATION
                  OF THE LIMITED LIABILITY COMPANY

              	
                7

              
	 	 	 
	
                SECTION
                  2.01

              	
                Continuation;
                  Filings

              	
                7

              
	
                SECTION
                  2.02

              	
                Name
                  and Office

              	
                7

              
	
                SECTION
                  2.03

              	
                Business
                  Purpose

              	
                8

              
	
                SECTION
                  2.04

              	
                Term

              	
                9

              
	
                SECTION
                  2.05

              	
                No
                  State Law Partnership

              	
                9

              
	
                SECTION
                  2.06

              	
                Authority
                  of Member

              	
                9

              
	
                SECTION
                  2.07

              	
                Liability
                  to Third Parties

              	
                9

              
	
                SECTION
                  2.08

              	
                No
                  Personal Liability of Any Member, Special Member, Manager,
                  Etc.

              	
                9

              
	
                SECTION
                  2.09

              	
                Separateness

              	
                10

              
	
                SECTION
                  2.10

              	
                Limited
                  Liability and Bankruptcy Remoteness

              	
                12

              
	
                SECTION
                  2.11

              	
                Additional
                  Issuance

              	
                13

              
	 	 	 
	
                ARTICLE
                  III 

              	
                MANAGEMENT

              	
                14

              
	 	 	 
	
                SECTION
                  3.01

              	
                Management
                  by Managers

              	
                14

              
	
                SECTION
                  3.02

              	
                Acts
                  by Managers

              	
                14

              
	
                SECTION
                  3.03

              	
                Number
                  and Qualifications

              	
                15

              
	
                SECTION
                  3.04

              	
                Independent
                  Managers

              	
                15

              
	
                SECTION
                  3.05

              	
                Appointment
                  and Vacancy

              	
                16

              
	
                SECTION
                  3.06

              	
                Term

              	
                16

              
	
                SECTION
                  3.07

              	
                Removal

              	
                16

              
	
                SECTION
                  3.08

              	
                Resignation

              	
                16

              
	
                SECTION
                  3.09

              	
                Place
                  of Meetings of Managers

              	
                16

              
	
                SECTION
                  3.10

              	
                Meetings
                  of Managers

              	
                16

              
	
                SECTION
                  3.11

              	
                Quorum;
                  Majority Vote

              	
                17

              
	
                SECTION
                  3.12

              	
                Methods
                  of Voting; Proxies

              	
                17

              
	
                SECTION
                  3.13

              	
                Actions
                  Without a Meeting

              	
                17

              
	
                SECTION
                  3.14

              	
                Telephone
                  and Similar Meetings

              	
                17

              
	
                SECTION
                  3.15

              	
                Managers

              	
                17

              

      

       

      
        
          
          

        

        
          i

          
            

          

        

        
          
          

        

      

       

      
        	
                ARTICLE
                  IV 

              	
                OFFICERS

              	
                18

              
	 	 	 
	
                SECTION
                  4.01

              	
                Designation;
                  Term; Qualifications

              	
                18

              
	
                SECTION
                  4.02

              	
                Removal
                  and Resignation

              	
                18

              
	
                SECTION
                  4.03

              	
                Vacancies

              	
                18

              
	
                SECTION
                  4.04

              	
                Compensation

              	
                18

              
	 	 	 
	
                ARTICLE
                  V 

              	
                MEMBER

              	
                18

              
	 	 	 
	
                SECTION
                  5.01

              	
                Compensation
                  of Member

              	
                18

              
	
                SECTION
                  5.02

              	
                Actions
                  of Member

              	
                19

              
	
                SECTION
                  5.03

              	
                Control
                  by Member

              	
                19

              
	
                SECTION
                  5.04

              	
                Special
                  Members

              	
                19

              
	 	 	 
	
                ARTICLE
                  VI 

              	
                COMMON
                  INTEREST

              	
                20

              
	 	 	 
	
                SECTION
                  6.01

              	
                General

              	
                20

              
	
                SECTION
                  6.02

              	
                Distributions

              	
                20

              
	
                SECTION
                  6.03

              	
                Rights
                  on Dissolution and Winding Up

              	
                20

              
	
                SECTION
                  6.04

              	
                Redemption

              	
                21

              
	
                SECTION
                  6.05

              	
                Voting
                  Rights

              	
                21

              
	
                SECTION
                  6.06

              	
                Class

              	
                21

              
	
                SECTION
                  6.07

              	
                Capital
                  Contributions

              	
                21

              
	 	 	 
	
                ARTICLE
                  VII 

              	
                ALLOCATIONS;
                  DISTRIBUTIONS; EXPENSES; TAXES; BOOKS; REPORTS; AND BANK
                  ACCOUNTS

              	
                21

              
	 	 	 
	
                SECTION
                  7.01

              	
                Allocations

              	
                21

              
	
                SECTION
                  7.02

              	
                Expenses

              	
                22

              
	
                SECTION
                  7.03

              	
                Annual
                  Tax Information

              	
                22

              
	
                SECTION
                  7.04

              	
                Tax
                  Matters

              	
                22

              
	
                SECTION
                  7.05

              	
                Maintenance
                  of Books

              	
                23

              
	
                SECTION
                  7.06

              	
                Reports

              	
                23

              
	
                SECTION
                  7.07

              	
                Bank
                  and Investment Accounts

              	
                23

              
	 	 	 
	
                ARTICLE
                  VIII 

              	
                INDEMNIFICATION

              	
                23

              
	 	 	 
	
                SECTION
                  8.01

              	
                Mandatory
                  Indemnification of the Member, the Special Members and the
                  Managers

              	
                23

              
	
                SECTION
                  8.02

              	
                Mandatory
                  Advancement of Expenses

              	
                24

              
	
                SECTION
                  8.03

              	
                Indemnification
                  of Officers, Employees and Agents

              	
                24

              
	SECTION
                8.04	Nonexclusivity
                of Rights	25
	SECTION
                8.05	
                Contract
                  Rights

              	25
	SECTION
                8.06	Insurance	26

      

       

      
        
          
          

        

        
          ii

          
            

          

        

        
          
          

        

      

       

      
        	
                SECTION
                  8.07

              	
                Savings
                  Clause

              	
                26

              
	
                SECTION
                  8.08

              	
                Other
                  Ventures

              	
                26

              
	
                SECTION
                  8.09

              	
                Survival

              	
                26

              
	 	 	 
	
                ARTICLE
                  IX 

              	
                MISCELLANEOUS
                  PROVISIONS

              	
                26

              
	 	 	 
	
                SECTION
                  9.01

              	
                Offset

              	
                26

              
	
                SECTION
                  9.02

              	
                Notices

              	
                27

              
	
                SECTION
                  9.03

              	
                Effect
                  of Waiver or Consent

              	
                27

              
	
                SECTION
                  9.04

              	
                Governing
                  Law; Severability

              	
                27

              
	
                SECTION
                  9.05

              	
                No
                  Bankruptcy Petition; No Dissolution

              	
                27

              
	
                SECTION
                  9.06

              	
                Amendment

              	
                28

              
	
                SECTION
                  9.07

              	
                Headings
                  and Sections

              	
                28

              
	
                SECTION
                  9.08

              	
                Binding
                  Agreement

              	
                29

              
	
                SECTION
                  9.09

              	
                Dissolution

              	
                29

              

      

      

      

      
        	
                SCHEDULE
                  A:  SCHEDULE OF
                  INITIAL
                  CAPITAL
                  CONTRIBUTION OF MEMBER

              	
                A-1

              
	
                SCHEDULE
                  B:  MANAGERS

              	
                B-1

              
	
                SCHEDULE
                  C:  OFFICERS

              	
                C-1

              
	
                SCHEDULE
                  D:  MANAGEMENT
                  AGREEMENT

              	
                D-1

              

      

      

      
        
          
          

        

        
          iii

          
            

          

        

        
          
          

        

      

       

      AMENDED
        AND RESTATED

      LIMITED
        LIABILITY COMPANY AGREEMENT

      OF

      PE
        ENVIRONMENTAL FUNDING LLC,

      a
        Delaware limited liability company

       

      AMENDED
        AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT, dated as of April 11, 2007
        (as
        it may be further amended, supplemented or otherwise modified and in effect
        from
        time to time, this “Agreement”), of PE ENVIRONMENTAL FUNDING LLC, a Delaware
        limited liability company (the “Company”), having its principal office at 2215-B
        Renaissance Drive, Suite #5, Las Vegas, Nevada 89119.

       

      WHEREAS,
        the Company was formed as a Delaware limited liability company (i) by the
        filing of the Certificate of Formation of the Company with the Secretary
        of
        State of the State of Delaware on November 17, 2006, as amended by the
        Certificate of Amendment thereto filed with the Secretary of State of the
        State
        of Delaware on December 27, 2006 and (ii) the execution of the Limited
        Liability Company Agreement, dated as of December 5, 2006, as amended March
        12,
        2007 (the “Original LLC Agreement”); and

       

      WHEREAS,
        this Agreement amends and restates the Original LLC Agreement in all respects
        and from and after the date hereof constitutes the governing instrument of
        the
        Company;

       

      NOW
        THEREFORE, the Member (as defined below) hereby agrees as follows:

       

      ARTICLE
        I

      DEFINITIONS

       

      SECTION
        1.01   Capitalized
        Terms.
        For all
        purposes of this Agreement, the following terms shall have the meanings set
        forth below:

       

      “Additional
        Issuance” has the meaning assigned to such term in the Indenture.

       

      “Additional
        Securities” has the meaning assigned to such term in the Indenture

       

      “Administration
        Agreement” shall mean the Administration Agreement, to be dated on or about
        April 11, 2007, between the Company and Allegheny Energy Service Corporation,
        as
        administrator, as the same may be amended or supplemented from time to
        time.

       

      “Administrator”
        means Allegheny Energy Service Corporation, as administrator under the
        Administration Agreement, and its permitted successors and assigns
        thereunder.

       

      “Affiliate”
        means, with respect to any specified Person, any other Person controlling
        or
        controlled by or under common control with such specified Person. For the
        purposes of this definition, “control” when used with respect to any specified
        Person means the power to direct or cause the direction of the management
        or
        policies of such Person, directly or indirectly, whether through the ownership
        of voting securities or general partnership or

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

       

      managing
        member interests, by contract or otherwise; and the terms “controlling” and
“controlled” have meanings correlative to the foregoing. Without limiting the
        generality of the foregoing, a Person shall be deemed to control any other
        Person in which it owns, directly or indirectly, a majority of the ownership
        interests.

       

      “Agreement”
        shall have the meaning set forth in the first paragraph of this
        Agreement.

       

      “Bankruptcy”
        shall mean, with respect to any Person, if (A) such Person (i) makes an
        assignment for the benefit of creditors, (ii) files a voluntary petition
        in
        bankruptcy, (iii) is adjudged a bankrupt or insolvent, or has entered against
        it
        an order for relief, in any bankruptcy or insolvency proceedings, (iv) files
        a
        petition or answer seeking for itself any reorganization, arrangement,
        composition, readjustment, liquidation or similar relief under any statute,
        law
        or regulation, (v) files an answer or other pleading admitting or failing
        to
        contest the material allegations of a petition filed against it in any
        proceeding of this nature or (vi) seeks, consents to or acquiesces in the
        appointment of a trustee, receiver or liquidator of the Person or of all
        or any
        substantial part of its properties, or (B)(i) if 120 days after the commencement
        of any proceeding against the Person seeking reorganization, arrangement,
        composition, readjustment, liquidation or similar relief under any statute,
        law
        or regulation, the proceeding has not been dismissed, or (ii) within ninety
        days after the appointment without such Person’s consent or acquiescence of a
        trustee, receiver or liquidator of such Person or of all or any substantial
        part
        of its properties, the appointment is not vacated or stayed, or within ninety
        days after the expiration of any such stay, the appointment is not vacated.
        The
        foregoing definition of “Bankruptcy” is intended to replace and shall supersede
        and replace the definition of “Bankruptcy” set forth in Sections 18-101(1) and
        18-304 of the LLC Act.

       

      “Basic
        Documents” shall mean the Transfer Agreement, the Sale Agreement, the Bill of
        Sale, the Servicing Agreement, the Administration Agreement, each Swap
        Agreement, the Indenture (including any Series Supplement), the Underwriting
        Agreement and the Independent Manager Agreements, each as may be amended
        or
        supplemented from time to time.

       

      “Bill
        of
        Sale” means any bill of sale delivered by the Seller to the Company pursuant to
        the Sale Agreement.

       

      “Business
        Day” means any day other than a Saturday, Sunday or a day on which banking
        institutions in the City of New York, New York or the City of Charleston,
        West
        Virginia, is authorized or obligated by law, regulation or executive order
        to
        remain closed.

       

      “Certificate
        of Formation” means the certificate of formation of the Company, that was filed
        with the Secretary of State of the State of Delaware on November 17, 2006,
        as
        amended on December 27, 2006 and as further amended or restated from time
        to
        time.

       

      “Code”
        shall mean the Internal Revenue Code of 1986, as amended from time to time,
        and
        all Treasury Regulations promulgated thereunder.

       

      “Collateral”
        shall have the meaning assigned to it in the Indenture.

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      “Common
        Interest” shall mean the limited liability company interest of the Member in the
        Company as described in Article VI. 

       

      “Company”
        shall have the meaning set forth in the first paragraph of this
        Agreement.

       

      “Covered
        Persons” shall have the meaning set forth in Section 2.08(b).

       

      “Environmental
        Control Bonds” or “Bonds” means the “environmental control bonds” (as defined in
        the Statute and the Financing Order) issued and authenticated under the
        Indenture.

       

      “Environmental
        Control Property” shall have the meaning assigned to such term in the Statute
        and the Financing Order.

       

      “Financing
        Order” means the order, Case Nos. 05-0402-E-CN and 05-0750-E-PC, issued by the
        PSCWV on April 7, 2006, as amended on June 13, 2006 and January 17, 2007,
        pursuant to the Statute, as the same may be further amended or supplemented
        in
        accordance with the Statute and the terms of such order.

       

      “Fiscal
        Year” shall mean, unless the Managers shall at any time determine otherwise
        pursuant to the requirements of the Code, the fiscal year of the
        Member.

       

      “Fitch”
        means Fitch, Inc., or its successor.

       

      “GAAP”
        shall mean the generally accepted accounting principles of the United States
        promulgated or adopted by the Financial Accounting Standards Board and its
        successors from time to time.

       

      “Governmental
        Authority” shall mean any federal, state, local or foreign court or governmental
        department, commission, board, bureau, agency, authority, instrumentality
        or
        regulatory body.

       

      “Indenture”
        shall mean the Indenture, to be dated on or about April 11, 2007, between
        the
        Company and the Trustee, as the same may be amended or supplemented from
        time to
        time, and shall include each Series Supplement and the forms and terms of
        the
        Environmental Control Bonds established thereunder.

       

      “Independent
        Manager” shall mean, with respect to the Company, a Manager who is not, and
        within the previous five years was not (except solely by virtue of such Person’s
        serving as, or being an Affiliate of any other Person serving as, an independent
        director or manager, as applicable, of any bankruptcy-remote special purpose
        entity that is an Affiliate of Potomac Edison or the Company), (i) a
        stockholder, member (other than a Special Member), partner, director, officer,
        employee, Affiliate, customer, supplier, creditor or independent contractor
        of,
        or any Person, except for Corporation Service Company, its agents and
        employees, and any successor entity thereof, that has received any benefit
        in
        any form whatever from (other than in such Manager’s capacity as a ratepayer or
        customer of Potomac Edison or any of its Affiliates in the ordinary course
        of
        business), or any Person that has provided any service in any 

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      form
        whatsoever to, or any major creditor (or any Affiliate of any major creditor)
        of, the Company, Potomac Edison, or any of their Affiliates, (ii) any Person
        owning beneficially, directly or indirectly, any outstanding shares of common
        stock, any limited liability company interests or any partnership interests,
        as
        applicable, of the Company, Potomac Edison or any of their Affiliates, or
        of any
        major creditor (or any Affiliate of any major creditor) of any of the foregoing,
        or a stockholder, member, partner, director, officer, employee, Affiliate,
        customer, supplier, creditor or independent contractor of, or any Person
        that
        has received any benefit in any form whatever from (other than in such Person’s
        capacity as a ratepayer or customer of Potomac Edison or any of its Affiliates
        in the ordinary course of business), or any Person that has provided any
        service
        in any form whatever to, such beneficial owner or any of such beneficial
        owner’s
        Affiliates, or (iii) a member of the immediate family of any Person described
        above; provided,
        that the
        indirect or beneficial ownership of stock through a mutual fund or similar
        diversified investment vehicle with respect to which the owner does not have
        discretion or control over the investments held by such diversified investment
        vehicle shall not preclude such owner from being an Independent Manager.
        For
        purposes of this definition, “major creditor” shall mean a Person to which the
        Company, Potomac Edison or any of their Affiliates has outstanding indebtedness
        for borrowed money or credit on open account in a sum sufficiently large
        as
        would reasonably be expected to influence the judgment of the proposed
        Independent Manager adversely to the interests of the Company when the interests
        of that Person are adverse to those of the Company.

       

      “Independent
        Manager Agreement” shall mean the agreement by and between Corporation
        Service Company and the Company, dated as of March 30, 2007.

       

      “LLC
        Act”
shall mean the Delaware Limited Liability Company Act, as amended, as in
        effect
        on the date hereof (currently Chapter 18 of Title 6, Sections 18-101 through
        18-1109 of the Delaware Code) and as it may be amended hereafter, from time
        to
        time.

       

      “Management
        Agreement” means the agreement of the Managers in the form attached as Schedule
        D to this Agreement. The Management Agreement shall be deemed incorporated
        into,
        and a part of, this Agreement.

       

      “Manager”
        shall mean any manager of the Company within the meaning of the LLC Act,
        including the Independent Managers.

       

      “Member”
        shall mean PE Funding, in its capacity as sole member of the Company under
        this
        Agreement, or any successor thereto as a member pursuant to Article VI;
provided, however,
        the
        term “Member” shall not include any Special Member.

       

      “Moody’s”
        shall mean Moody’s Investors Service, Inc.

       

      “Original
        LLC Agreement” shall have the meaning set forth in the second paragraph of this
        Agreement.

       

      “Outstanding”
        shall have the meaning assigned to such term in the Indenture.

       

      
        “PE
          Funding” means PE Renaissance Funding, LLC, a Delaware limited liability
          company, or its successor.

         

      

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      “Person”
        shall mean any individual, corporation, estate, partnership, joint venture,
        association, joint stock company, trust (including any beneficiary thereof),
        business trust, limited liability company, unincorporated organization or
        Governmental Authority.

       

      “Potomac
        Edison” means The Potomac Edison Company doing business as Allegheny Power, or
        its successor.

       

      “Proceeding”
        shall have the meaning set forth in Section 8.01.

       

      “PSCWV”
        means the Public Service Commission of West Virginia or any
        successor.

       

      “Rating
        Agency” means any rating agency rating the Environmental Control Bonds of any
        Tranche or Series or any Additional Securities, as the case may be, at the
        request of the Company or the Trustee, as the case may be. If no such
        organization or successor is any longer in existence, “Rating Agency” shall be a
        nationally recognized statistical rating organization or other comparable
        Person
        designated by the Company, notice of which designation shall be given to
        the
        Trustee.

       

      “Registration
        Statement” shall mean the registration statement on Form S-1 filed by the
        Company with the Securities and Exchange Commission on January 11, 2007,
        as such
        Registration Statement may be amended and supplemented from time to time
        or any
        registration statement subsequently filed by the Company with the Securities
        and
        Exchange Commission with respect to any Additional Securities.

       

      “S&P”
        means Standard & Poor’s Ratings Group, a division of The McGraw-Hill
        Companies.

       

      “Sale
        Agreement” shall mean the Transferred Environmental Control Property Sale
        Agreement, dated on or about, April 11, 2007, between PE Funding, as Seller,
        and
        the Company, as the same may be amended or supplemented from time to
        time.

       

      “Seller”
        means PE Renaissance Funding, LLC and its successors in interest to the extent
        permitted under the Sale Agreement.

       

      “Series”
        shall mean each series of Environmental Control Bonds issued and authenticated
        pursuant to the Indenture as specified in the Series Supplement
        therefor.

       

      “Series
        Supplement” shall mean a supplemental indenture to the Indenture that authorizes
        a particular Series of Environmental Control Bonds, as the same may be amended
        or supplemented from time to time.

       

      
        “Servicing
          Agreement” shall mean the Transferred Environmental Control Property Servicing
          Agreement, to be dated on or about April 11, 2007, between the Company
          and
          Potomac Edison, as servicer, as the same may be amended or supplemented
          from
          time to time.

         

      

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      “Special
        Member” shall have the meaning set forth in Section 5.04. A Special Member shall
        have the rights and duties expressly set forth in this Agreement.

       

      “State”
        shall mean any one of the fifty states of the United States of America or
        the
        District of Columbia.

       

      “Statute”
        means the West Virginia Code, Chapter 24, Article 2,
§§ 24-2-4e(a) through and including 24-2-4e(v).

       

      “Swap
        Agreement” means each Swap Agreement, as defined in and permitted by the
        Indenture and any Series Supplement thereto.

       

      “Swap
        Counterparty” means, with respect to any Swap Agreement, the Company
        counterparty under the Swap Agreement.

       

      “Tranche”
        means, with respect to any Series of Environmental Control Bonds, any one
        of the
        tranches of Environmental Control Bonds of that Series.

       

      “Transfer
        Agreement” shall mean the Environmental Control Property Transfer Agreement
        dated as of April 11, 2007 between The Potomac Edison Company and PE Funding,
        as
        the same may be amended and supplemented from time to time.

       

      “Transferor”
        means The Potomac Edison Company under the Transfer Agreement and its successors
        in interest.

       

      “Trustee”
        shall mean the party named as such in the Indenture until a successor replaces
        it in accordance with the applicable provisions of the Indenture and thereafter
        means the successor serving thereunder.

       

      “Underwriting
        Agreement” means the Underwriting Agreement dated April 3, 2007, among the
        Company, Potomac Edison, the Seller, and the underwriters named therein,
        as the
        same may be amended and supplemented from time to time.

       

      SECTION
        1.02   Other
        Definitional Provisions.

       

      (a)    Unless
        otherwise defined herein, all capitalized terms herein shall have the meanings
        ascribed thereto in the Indenture.

       

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

       

      (c)   As
        used
        in this Agreement and in any certificate or other documents made or delivered
        pursuant hereto or thereto, accounting terms not defined in this Agreement
        or in
        any such certificate or other document, and accounting terms partly defined
        in
        this Agreement or in any such certificate or other document to the extent
        not
        defined, shall have the respective meanings given to them under GAAP. To
        the
        extent that the definitions of accounting terms in this Agreement or in any
        such
        certificate or other document are inconsistent with the meanings

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      of
        such
        terms under GAAP, the definitions contained in this Agreement or in any such
        certificate or other document shall control.

       

      (d)   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; Article and Section references contained in
        this
        Agreement are references to Articles and Sections in this Agreement unless
        otherwise specified; and the term “including” shall mean “including without
        limitation.”

       

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

       

      (f)   Any
        agreement, instrument or statute defined or referred to herein or in any
        instrument or certificate delivered in connection herewith means such agreement,
        instrument or statute as from time to time amended, modified or supplemented
        and
        includes (in the case of agreements or instruments) references to all
        attachments thereto and instruments incorporated therein; references to a
        Person
        are also to its permitted successors and assigns.

       

      ARTICLE
        II

      CONTINUATION
        OF THE LIMITED LIABILITY COMPANY

       

      
        SECTION
          2.01   Continuation;
          Filings.  Pursuant
          to the LLC Act and in accordance with the further terms and provisions
          hereof,
          the Member hereby continues the Company as a limited liability company.
          The
          Certificate of Formation has been duly executed and filed with the Secretary
          of
          State of the State of Delaware by Daniel M. Dunlap as an authorized person
          within the meaning of the LLC Act. Upon such filing, his powers as an
“authorized person” ceased. Kristine W. Eppes, as an authorized person, has
          executed, delivered and filed the Certificate of Amendment to the Certificate
          of
          Formation with the Secretary of State of the State of Delaware. Upon such
          filing, her powers as an authorized person ceased. The Managers, as authorized
          persons, shall execute or cause to be executed from time to time all other
          instruments, certificates, notices and documents, and shall do or cause
          to be
          done all such filing, recording, publishing and other acts, in each case,
          as may
          be necessary or appropriate from time to time to comply with all applicable
          requirements for the formation, operation and, when appropriate, termination
          of
          a limited liability company in the State of Delaware and all other jurisdictions
          where the Company shall desire to conduct its business.

         

        
          SECTION
            2.02   Name
            and Office.  (a) The
            name
            of the Company shall be “PE Environmental Funding LLC”. All business of the
            Company shall be conducted in such name and all contracts, property and
            other
            assets of the Company shall be held in that name and the Member shall
            not have
            any ownership interest in such contracts, property or other assets in
            its
            individual name.

           

          (b)   The
            address of the registered office of the Company in the State of Delaware
            is c/o
            The Corporation Trust Company, Corporation Trust Center, 1209 Orange
            Street,
            Wilmington, Delaware 19801. The name of the Company’s registered agent at that
            address is The Corporation Trust Company.

           

        

      

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

      (c)   The
        Company may also have offices at such other places both within and without
        the
        State of Delaware as the Member may from time to time determine.

       

      SECTION
        2.03   Business
        Purpose.

       

      (a)   The
        nature of the business or purpose to be conducted or promoted by the Company
        is
        to engage exclusively in the following business and financial
        activities:

       

      (i)   to
        authorize, issue, sell and deliver (A) one or more Series or Tranches of
        Environmental Control Bonds under the Indenture and, in connection therewith,
        to
        execute and deliver Series Supplements, including Series Supplements providing
        for the issuance of additional Series of Environmental Control Bonds, each
        as
        permitted by and in accordance with the terms of the Indenture and
        (B) securities of one or more Additional Issuances;

       

      (ii)   (A) to
        purchase and hold Environmental Control Property and pledge the same and
        other
        Collateral to the Trustee pursuant to the terms and conditions of the Basic
        Documents and (B) to purchase and hold other collateral and pledge the same
        as permitted by the PSCWV and the terms herein in connection with any Additional
        Issuance;

       

      (iii)   to
        negotiate, authorize, execute, deliver, assume the obligations under, and
        perform, any agreement or instrument or document relating to the activities
        set
        forth in subclauses (i) and (ii) above, including but not limited to agreements
        with third-party credit enhancers and additional swap or hedge agreement
        counterparties relating to any Series of Environmental Control Bonds and
        any
        Additional Issuance; provided,
        that
        each
        party to any such agreement with the Company shall covenant that it shall
        not,
        prior to the date which is one year and one day after the termination of
        the
        Indenture, or the termination of any other indenture pursuant to which any
        Additional Securities are issued, and the payment in full of any Series of
        the
        Environmental Control Bonds and Additional Securities and any other amounts
        owed
        under the Indenture or other indenture pursuant to which Additional Securities
        are issued, including, without limitation, any amounts owed to third-party
        credit enhancers and of all securities of any Additional Issuance, acquiesce,
        petition or otherwise invoke or cause the Company to invoke the process of
        any
        court or Governmental Authority for the purpose of commencing or sustaining
        an
        involuntary case against the Company under any federal or State bankruptcy,
        insolvency or similar law or appointing a receiver, liquidator, assignee,
        trustee, custodian, sequestrator or other similar official of the Company
        or any
        substantial part of the property of the Company, or ordering the winding
        up or
        liquidation of the affairs of the Company; and
        provided, further,
        that

        the
          Company shall be permitted to incur additional indebtedness or other liabilities
          payable to service providers in the ordinary course of business in connection
          with the foregoing activities; and

         

        (iv)   to
          engage
          in any activity and to exercise any powers permitted to limited liability
          companies under the laws of the State of Delaware that are related or incidental
          to the foregoing and necessary, convenient or advisable to accomplish the
          foregoing.

         

        (b)   Notwithstanding
          anything in this Agreement to the contrary, the Company, the Member, and
          each
          officer and Manager of the Company on behalf of the Company, acting alone,
          has
          authority and is hereby authorized to enter into and perform the

      

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

      Basic
        Documents and all documents, agreements, certificates or financing statements
        contemplated thereby or related thereto, and to execute and file with the
        Commission, and cause to go effective, one or more registration statements,
        including the Registration Statement, all without any further act, vote or
        approval of any other Person.

       

      SECTION
        2.04   Term.
        The
        term of the Company shall continue until the Company is dissolved and wound-up
        in accordance with the LLC Act and this Agreement. The existence of the Company
        as a separate legal entity shall continue until the cancellation of the
        Certificate of Formation in accordance with the LLC Act.

       

      SECTION
        2.05   No
        State Law Partnership.
        The
        Member and the Special Members intend that the Company shall not be a
        partnership (including, without limitation, a general partnership or a limited
        partnership) or joint venture, and that neither the Member, any Special Member
        nor any Manager shall be a partner or joint venturer of the Member, any Special
        Member or any Manager with respect to the business of the Company for any
        purposes, and this Agreement shall not be construed to suggest
        otherwise.

       

      SECTION
        2.06   Authority
        of Member.
        Subject
        to Section 3.04, the Member, acting in such capacity, shall have the authority
        and power to act for and on behalf of the Company, to do any act that would
        be
        binding on the Company, and to incur any expenditures, debts, liabilities
        and
        obligations on behalf of the Company.

       

      SECTION
        2.07   Liability
        to Third Parties.
        Except
        as otherwise expressly provided by the LLC Act, neither the Member nor any
        Special Member nor any Manager shall be liable personally for the debts,
        obligations or liabilities of the Company (whether arising in contract, tort
        or
        otherwise), including, without limitation, any debts, obligations or liabilities
        of the Company arising under a judgment, decree or order of a court, solely
        by
        reason of such Person being the Member, or a Special Member or Manager of
        the
        Company.

       

      SECTION
        2.08   No
        Personal Liability of Any Member, Special Member, Manager, Etc.

       

      (a)   Except
        as
        otherwise expressly provided by the LLC Act, the debts, obligations and
        liabilities of the Company, whether arising in contract, tort or otherwise,
        shall be the debts, obligations and liabilities solely of the Company, and
        neither the Member nor any Special Member nor any Manager shall be obligated
        personally for any such debt, obligation or liability
        of the Company solely by reason of such Person being a Member, Special Member
        or
        Manager.
         

        (b)   To
          the
          fullest extent permitted by law, neither the Member nor any Special Member
          nor
          any officer, Manager, employee or agent of the Company, nor any employee,
          agent
          or Affiliate of the Member, a Manager or a Special Member (collectively,
          the
“Covered Persons”) shall be liable to the Company or the Member, any Special
          Member or any Manager for any loss, damage or claim incurred by reason
          of any
          act or omission performed or omitted by such Covered Person in good faith on
          behalf of the Company and in a manner reasonably believed to be within
          the scope
          of the authority conferred on such Covered Person by this Agreement, except
          that
          a Covered Person shall be liable for any loss, damage or claim incurred
          

      

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

      by
        reason
        of such Covered Person’s gross negligence or willful misconduct, and except that
        a Manager shall be liable for (i) liabilities arising from the failure by
        such
        Manager to perform obligations expressly undertaken by it in this Agreement
        and
        (ii) taxes, fees or other charges, based on or measured by any fees, commissions
        or compensation received by such Manager in connection with the transactions
        described in this Agreement and the Basic Documents.

       

      SECTION
        2.09   Separateness.
        Except
        for financial reporting purposes (to the extent required by GAAP) and for
        federal income tax purposes and, to the extent consistent with applicable
        state
        tax law, state income and corporation business tax purposes, the Member and
        the
        Managers shall take all steps necessary to continue the identity of the Company
        as a separate legal entity and to make it apparent to third Persons that
        the
        Company is an entity with assets and liabilities distinct from those of the
        Member, Affiliates of the Member or any other Person, and that the Company
        is
        not a division of any of the Affiliates of the Company or any other Person.
        In
        that regard, and without limiting the foregoing in any manner:

       

      (a)   Except
        as
        provided in the Basic Documents, the funds and other assets of the Company
        shall
        not be commingled with those of any other Person, and the Company shall maintain
        its accounts separate from the Member and any other Person.

       

      (b)   The
        Company shall not hold itself out as being liable for the debts of any other
        Person, and shall conduct its own business in its own name.

       

      (c)   The
        Company shall not form, or cause to be formed, any subsidiaries.

       

      (d)   The
        Company shall act solely in its limited liability company name and through
        its
        duly authorized Member, Special Members, Managers, officers or agents in
        the
        conduct of its business, and shall conduct its business so as not to mislead
        others as to the identity of the entity or assets with which they are concerned
        and (except as provided in the Basic Documents) shall at all times maintain
        its
        assets in a manner that facilitates their identification and segregation
        from
        those of the Member or any of its Affiliates or any other Person.

       

      (e)   The
        Company shall practice and adhere to organizational formalities, such as
        maintaining separate records, books of account and financial statements,
        and
        shall not commingle its records and books of account with the records and
        books
        of account of the Member or any of its Affiliates or any other
        Person.

       

      
        (f)   The
          Managers shall act by written consent or hold appropriate meetings to authorize
          all of the Company’s limited liability company actions, which meetings may be
          held by telephone conference call or by electronic transmission. The Company
          shall observe all formalities required by this Agreement.

         

        (g)   The
          Company shall at all times remain solvent and ensure that its capitalization
          is
          adequate in light of its business and purpose, provided, however, the foregoing
          shall not require the Member to make any additional capital contributions
          to the
          Company.

         

        (h)   Neither
          the Member nor any Special Member nor any Manager shall guarantee, become
          liable
          on or hold itself out as being liable for the debts of the Company.
          The

         

      

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

      Company
        shall not guarantee or become obligated for the debts of the Member, any
        Special
        Member, any Manager, any Affiliate of the foregoing or any other Person,
        or
        otherwise hold out its credit as being available to satisfy the obligations
        of
        the Member, any Special Member, any Manager or any other Person, shall not
        pledge its assets for the benefit of any Person other than the Trustee for
        the
        benefit of the Holders of the Environmental Control Bonds, shall not make
        loans
        or advances to any Person, and shall not acquire obligations or securities
        of
        the Member, any Special Member, any Manager or any Affiliate of the
        foregoing.

       

      (i)   The
        Company shall pay its own liabilities out of its own funds, including fees
        and
        expenses earned by Allegheny Energy Service Corporation, as administrator,
        pursuant to the Administration Agreement, Potomac Edison, as servicer, pursuant
        to the Servicing Agreement and PE Funding, as Seller, pursuant to the Sale
        Agreement, provided, however, the foregoing shall not require the Member
        to make
        any additional capital contributions to the Company.

       

      (j)   The
        Company shall maintain an arm’s-length relationship with its
        Affiliates.

       

      (k)   The
        Company shall allocate fairly and reasonably, on market-based terms, any
        overhead for office space shared with the Member, any Special Member or any
        Manager.

       

      (l)   The
        Company shall use its own separate stationery, invoices, checks and other
        business forms distinct from those of the Member or any of its Affiliates
        or any
        other Person.

       

      (m)   The
        Company shall hold itself out as a separate entity and correct any known
        misunderstanding regarding its separate identity.

       

      (n)   The
        Company shall not engage in any activity other than (i) those activities
        expressly permitted under this Agreement and the Basic Documents to which
        it is
        a party, nor will the Company enter into any agreement other than those
        necessary to fulfill the purposes of the Company as described in Section
        2.03
        hereof and such other agreements that are permitted by the Basic Documents
        and
        are necessary or desirable for the Company to exercise its rights and perform
        its obligations under such Basic Documents and this Agreement and
        (ii) those activities reasonable and necessary to undertake an offering of
        Additional Securities, as authorized by the PSCWV.

       

      
        (o)   To
          the
          fullest extent permitted by law, the Company shall make all decisions with
          respect to its business and daily operations independently and in the Company’s
          best interest without obligation or reference to how such decision might
          affect
          any other Person, including the Member or any of its Affiliates; provided,
          that
          the officer making any particular decision may also be an employee, officer
          or
          director of the Member, any other member, or any of their respective
          Affiliates.

         

        (p)   The
          Company shall maintain office space separate from the office space of the
          Member, any other member and any of their respective Affiliates (but which
          may
          be located at the same address).

         

      

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

      (q)   The
        Company shall allocate, on an arm’s-length basis, all shared corporate operating
        services, leases and expenses and otherwise maintain an arm’s-length
        relationship with the Member, any other members and any of their respective
        Affiliates.

       

      (r)    The
        Company, without the consent of the Independent Managers, shall not file
        or
        otherwise initiate or support the filing of a motion in any Bankruptcy or
        other
        insolvency proceeding involving the Member, any other member or any of their
        respective Affiliates to substantively consolidate the Member or any Affiliate
        of the Member with the Company.

       

      (s)    The
        Company shall not acquire obligations or securities of the Member, any other
        member or any of their respective Affiliates.

       

      Failure
        of the Company, the Member, any Special Member or any Manager on behalf of
        the
        Company to comply with any of the foregoing covenants or any of the covenants
        contained in this Agreement shall not affect the status of the Company as
        a
        separate legal entity or the limited liability of the Member, any Special
        Member
        or any Manager.

       

      SECTION
        2.10   Limited
        Liability and Bankruptcy Remoteness.
        Without
        limiting the generality of Section 2.09, the Company shall be operated in
        such a
        manner as the Managers deem reasonable and necessary or appropriate to
        preserve:

       

      (a)   the
        limited liability of PE Funding (or its successor) as the Member in the Company
        and the limited liability of the Special Members,

       

      (b)   the
        separateness of the Company from the business of PE Funding (or its successor),
        as the Member of the Company, or any other Affiliate thereof, and 

       

      (c)   until
        the
        expiration of the one year and one day period of time as specified in Section
        9.05(a), the bankruptcy-remote status of the Company.

       

      SECTION
        2.11   Additional
        Issuance.
        If the
        Company receives a financing order or other authorization or approval from
        the
        PSCWV, the Company may, in its sole discretion, acquire additional and separate
        property (including property other than Environmental Control Property) and
        issue one or more Additional Issuances that are backed by such separate
        additional property. Any new Additional Issuance may include terms and
        provisions unique to that Additional Issuance.

       

      
        (a)   The
          Company shall not issue additional Environmental Control Bonds or other
          Additional Securities if the Additional Issuance would result in the
          then-current ratings on any Outstanding Series of Environmental Control
          Bonds or
          other Outstanding Additional Securities being reduced or withdrawn.

         

        (b)   The
          following conditions must be satisfied in connection with any Additional
          Issuance:

         

        (i)   if
          the
          Additional Issuance is a new series of Environmental Control Bonds, such
          Bonds
          shall be rated “Aaa” by Moody’s and “AAA” by S&P and Fitch;

         

      

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

       

      (ii)   each
        Additional Issuance shall have recourse only to the assets pledged in connection
        with such Additional Issuance, shall be nonrecourse to any of the Company’s
        other assets and shall not constitute a claim against the Company if cash
        flow
        from the pledged assets is insufficient to pay such Additional Issuance in
        full;

       

      (iii)   the
        Company has delivered to the Trustee an Opinion of Counsel of a nationally
        recognized firm experienced in such matters to the effect that after such
        issuance, in the opinion of such counsel, if either or both of Potomac Edison
        or
        the Seller were to become a debtor in a case under the United States Bankruptcy
        Code (Title 11, U.S.C.), a federal court exercising bankruptcy jurisdiction
        and
        exercising reasonable judgment after full consideration of all relevant factors
        would not order substantive consolidation of the assets and liabilities of
        the
        Company with those of the bankruptcy estate of Potomac Edison or the Seller,
        subject to the customary exceptions, qualifications and assumptions contained
        therein;

       

      (iv)   the
        Company has delivered to the Trustee a certificate meeting the criteria of
        Section 3.19(c)(iv) of the Indenture stating that the securities issued pursuant
        to such Additional Issuance shall have the benefit of a true-up
        mechanism;

       

      (v)   the
        transaction documentation for such Additional Issuance provides that holders
        of
        the securities of such Additional Issuance will not file or join in the filing
        of any bankruptcy petition against the Company;

       

      (vi)   if
        the
        holders of the securities of any Additional Issuance are deemed to have any
        interest in any of the Collateral pledged under the Indenture (other than
        collateral pledged with respect to such Additional Issuance), the holders
        of
        such securities must agree that any such interest is subordinate to the claims
        and rights of the Holders of such other related series of Environmental Control
        Bonds;

       

      (vii)   the
        Additional Issuance shall have its own bank accounts or trust accounts;
        and

       

      (viii)   the
        Additional Issuance shall bear its own trustees fees and servicer fees, except
        that the allocation of such fees with respect to any Additional Issuance
        of
        Environmental Control Bonds shall be governed by the terms of the Indenture
        and
        the Servicing Agreement.

       

      
        ARTICLE
          III

        MANAGEMENT

         

        SECTION
          3.01   Management
          by Managers.
          Except
          as otherwise expressly set forth in this Agreement, the powers of the Company
          shall be exercised by or under the authority of, and the business and affairs
          of
          the Company shall be managed under the direction of, the Managers.

         

        SECTION
          3.02   Acts
          by Managers.

         

        (a)   The
          Managers shall be obliged to devote only as much of their time to the Company’s
          business as shall be reasonably required in light of the Company’s business and

         

      

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

       

      objectives.
        A Manager shall perform his or her duties as a Manager in good faith, in
        a
        manner he or she reasonably believes to be in the best interests of the Company,
        and with such care as an  ordinarily prudent person in a like position
        would use under similar circumstances.

       

      (b)   Every
        Manager is an agent of the Company for the purpose of its business, and the
        act
        of every Manager, including the execution in the name of the Company of any
        instrument for carrying on the business of the Company, binds the Company,
        unless such act is in contravention of this Agreement or unless the Manager
        so
        acting otherwise lacks the authority to act for the Company and the Person
        with
        whom he or she is dealing has knowledge of the fact that he or she has no
        such
        authority.

       

      (c)   The
        Managers shall have the right and authority to take all actions which the
        Managers deem necessary, useful or appropriate for the day-to-day management
        and
        conduct of the Company’s business.

       

      (d)   The
        Managers may exercise all powers of the Company and do all such lawful acts
        and
        things as are not required or directed by the LLC Act, other applicable law
        or
        this Agreement to be exercised or done by the Member. Except as provided
        in
        Section 2.03(b), all instruments, contracts, agreements and documents providing
        for the acquisition or disposition of property of the Company shall be valid
        and
        binding on the Company if executed by one or more of the Managers. Except
        as
        provided in Section 2.03(b), all instruments, contracts, agreements and
        documents of whatsoever type executed on behalf of the Company shall be executed
        in the name of the Company by one or more Managers.

       

      SECTION
        3.03   Number
        and Qualifications.
        The
        number of Managers of the Company shall be as determined by the Member from
        time
        to time but shall not be less than five, and no decrease in the number of
        Managers shall have the effect of shortening the term of any incumbent Manager.
        The Member hereby determines the initial number of Managers to be
        five.

       

      SECTION
        3.04   Independent
        Managers.

       

      (a)   The
        Company shall have at all times at least two individuals who are Independent
        Managers. One Independent Manager shall be appointed by the Member and the
        other
        Independent Manager shall be appointed by PSCWV in accordance with Section
        3.04(e). The Independent Managers may not delegate their duties, authorities
        or
        responsibilities hereunder. If any Independent Manager resigns, dies or becomes
        incapacitated, or such position is
        otherwise vacant, no action requiring the unanimous affirmative vote of the
        Managers shall be taken until a successor Independent Manager is appointed
        by
        the Member or the PSCWV as applicable and such successor Independent Manager
        qualifies and approves such action.
         

        (b)   Notwithstanding
          any other provision of this Agreement and any provision of law that otherwise
          so
          empowers the Company, the Member, any Special Member, any Manager or any
          other
          Person, the Company shall not, and neither the Member nor any Special Member
          nor
          any Manager nor any other Person on behalf of the Company shall, without
          the
          prior unanimous consent of the Managers, including each of the Independent
          Managers, do any of the following: (i) engage in any business or activity
          other
          than those set forth in Article II; (ii) except as provided in the Basic
          Documents, incur any indebtedness, other than the

      

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

       

      Environmental
        Control Bonds, obligations under agreements with third party credit enhancers
        and swap or hedge agreement counterparties relating to any Series of
        Environmental Control Bonds and ordinary course expenses incurred in accordance
        with Article II, or assume or guarantee any indebtedness of any other entity;
        (iii) make a general assignment for the benefit of creditors; (iv) file a
        petition commencing a voluntary bankruptcy case; (v) file a petition or answer
        seeking reorganization, arrangement, composition, readjustment, liquidation,
        dissolution or similar relief under any statute, law or regulation; (vi)
        file an
        answer or other pleading admitting or failing to contest the material
        allegations of a petition filed against the Company in any proceeding seeking
        reorganization, arrangement, composition, readjustment, liquidation, dissolution
        or similar relief under any statute, law or regulation, or the entry of any
        order appointing a trustee, liquidator or receiver of the Company or of the
        Company’s assets or any substantial portion thereof; (vii) seek, consent to or
        acquiesce in the appointment of a trustee, receiver or liquidator of the
        Company
        or of all or any substantial part of the Company’s assets; (viii) consolidate,
        convert or merge with or into any other entity or convey or transfer
        substantially all of the Company’s properties and assets substantially as an
        entirety to any entity; or (ix) amend this Agreement or take any action in
        furtherance of any such action. With regard to any action contemplated by
        the
        preceding sentence, or with regard to any action taken or determination made
        at
        any time when the Company is insolvent, each Independent Manager will, to
        the
        fullest extent permitted by law, owe its primary fiduciary duty to the Company
        (including the creditors of the Company).

       

      (c)   At
        all
        times, one of the Managers shall have been selected by and shall be subject
        to
        removal by the PSCWV and shall be an Independent Manager. Such Independent
        Manager shall be compensated in accordance with the terms of the Financing
        Order
        The Company shall submit the name of a proposed Independent Manager to the
        PSCWV, and the PSCWV shall either affirmatively approve or disapprove the
        appointment of such Person as an Independent Manger within fifteen days.
        If the
        PSCWV does not approve or disapprove such proposal within fifteen days, such
        PSCWV approval shall have been deemed to have been made. If the PSCWV
        disapproves such proposal, the PSCWV may select any individual the PSCWV
        deems
        appropriate, so long as such individual qualifies as an “Independent Manager”
pursuant to the definition herein.

       

      SECTION
        3.05   Appointment
        and Vacancy.
        The
        Member will appoint each Manager other than the Manager approved by the PSCWV
        in
        accordance with the terms of Section 3.04(e), including any Manager to be
        appointed by reason of an increase in the number of
        Managers. The initial Managers hereby appointed by the Member and the PSCWV
        are
        listed on Schedule B attached hereto.
         

        SECTION
          3.06   Term.
          Each
          Manager shall hold office until his or her successor shall be selected
          by the
          Member and qualified, or until his or her earlier death, resignation or
          removal
          as provided in this Agreement.

         

        SECTION
          3.07   Removal.
          Subject
          to Section 3.04(a) and Section 3.15, the Member may remove, with or without
          cause, any Manager. However, the Member may not remove the Independent
          Manager
          selected or deemed selected by the PSCWV pursuant to Section
          3.04(c).

      

       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

       

      SECTION
        3.08   Resignation.
        Any
        Manager may resign at any time. Such resignation shall be made in writing
        and
        shall take effect at the time specified therein or, if no time is specified
        therein, at the time of its receipt by the remaining Managers; provided, that
        the
        resignation of an Independent Manager shall not be effective until a replacement
        Independent Manager has been appointed. The acceptance of a resignation shall
        not be necessary to make it effective, unless so expressly provided in the
        resignation.

       

      SECTION
        3.09   Place
        of Meetings of Managers.
        Any
        meetings of the Managers may be held either within or without the State of
        Delaware at such place or places as shall be determined from time to time
        by
        resolution of the Managers.

       

      SECTION
        3.10   Meetings
        of Managers.
        Meetings of the Managers may be held when called by any Manager or Managers.
        The
        Manager or Managers calling any meeting shall cause notice to be given of
        such
        meeting, including therein the time, date and place of such meeting, to each
        Manager at least two Business Days before such meeting. The business to be
        transacted at, or the purpose of, any meeting of the Managers shall be specified
        in the notice or waiver of notice of any such meeting. If fewer than all
        of the
        Managers are present in person, by telephone or by proxy, business transacted
        at
        any such meeting shall be confined to the business or purposes specifically
        stated in the notice or waiver of notice of such meeting.

       

      SECTION
        3.11   Quorum;
        Majority Vote.
        At all
        meetings of the Managers, the presence in person, by telephone or by proxy
        of a
        majority of the Managers shall be necessary and sufficient to constitute
        a
        quorum for the transaction of business unless a greater number is required
        by
        this Agreement or by law. The act of a majority of the Managers present in
        person, by telephone or by proxy at a meeting at which a quorum is present
        in
        person, by telephone or by proxy shall be the act of the Managers, except
        as
        otherwise provided by law or this Agreement. If a quorum shall not be present
        in
        person, by telephone or by proxy at any meeting of the Managers, the Managers
        present in person, by telephone or by proxy at the meeting may adjourn the
        meeting from time to time, without notice other than announcement at the
        meeting, until a quorum shall be present in person, by telephone or by
        proxy.

       

      SECTION
        3.12   Methods
        of Voting; Proxies.
        A
        Manager may vote either in person, by telephone, electronic transmission
        or by
        proxy executed in writing by the Manager; provided,
        that
        the
        Person designated to act as proxy for an Independent Manager must be an
        Independent Manager.

       

      
        SECTION
          3.13   Actions
          Without a Meeting.
          Any
          action required or permitted to be taken at a meeting of the Managers may
          be
          taken without a meeting, without prior notice, and without a vote, if a
          consent
          in writing, setting forth the action so taken, is signed by the Managers
          having
          not fewer than the minimum number of votes that would be necessary to take
          the
          action at a meeting at which all Managers entitled to vote on the action
          were
          present and voted. Copies of any such consents shall be filed with the
          minutes
          and permanent records of the Company.

      

       

      SECTION
        3.14   Telephone
        and Similar Meetings.
        The
        Managers, or members of any committee thereof, may participate in and hold
        meetings by means of conference telephone or similar communications equipment
        by
        means of which all persons participating in

       

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

       

      the
        meeting can hear each other. Such participation in any such meeting shall
        constitute presence in person at such meeting, except where a Person
        participates in such meeting for the express purpose of objecting to the
        transaction of any business on the ground that such meeting is not lawfully
        called or convened.

       

      SECTION
        3.15   Managers.
        The
        Member and each Manager shall take all actions necessary from time to time
        to
        ensure that at all times the number of Managers shall not be less than five;
        provided,
        however,
        that
        pursuant to Section 3.04, the Company shall at all times have at least two
        Independent Managers.

       

      ARTICLE
        IV

      OFFICERS

       

      SECTION
        4.01   Designation;
        Term; Qualifications.
        The
        Managers may, from time to time, designate one or more Persons to be officers
        of
        the Company. Any officer so designated shall have such title and authority
        and
        perform such duties as the Managers may, from time to time, delegate to them.
        Each officer shall hold office for the term for which such officer is designated
        and until his or her successor shall be duly designated and shall qualify
        or
        until his or her death, resignation or removal as provided in this Agreement.
        Any Person may hold any number of offices. No officer need be a Manager,
        the
        Member, a Delaware resident, or a United States citizen. To the extent the
        Managers do not enumerate the powers and duties of an officer of the Company,
        such officers shall have the powers and duties of an officer with a comparable
        title of a corporation organized under the General Corporation Law of the
        State
        of Delaware. The persons identified on Schedule C are hereby designated the
        initial officers of the Company.

       

      SECTION
        4.02   Removal
        and Resignation.
        Any
        officer of the Company may be removed as such, with or without cause, by
        the
        Managers at any time. Any officer of the Company may resign as such at any
        time
        upon written notice to the Company. Such resignation shall be made in writing
        and shall take effect at the time specified therein or, if no time is specified
        therein, at the time of its receipt by the Managers.

       

      SECTION
        4.03   Vacancies.
        Any
        vacancy occurring in any office of an officer of the Company shall be filled
        by
        the Managers.

       

      
        SECTION
          4.04   Compensation.
          The
          compensation, if any, of the officers of the Company shall be fixed from
          time to
          time by the Managers.

      

       

      ARTICLE
        V

      MEMBER

       

      SECTION
        5.01   Compensation
        of Member.
        The
        Company shall have authority to pay to the Member reasonable compensation
        for
        the Member’s services to the Company. It is understood that the compensation
        paid to the Member under the provisions of this Section 5.01 shall be determined
        without regard to the income of the Company, shall not be deemed to constitute
        distributions to the recipient of any profit, loss or capital of the Company
        and
        shall be considered as an operating expense of the Company.

       

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

       

      SECTION
        5.02   Actions
        of Member.
        All
        actions of the Member may be taken by written resolution of the Member which
        shall be signed on behalf of the Member by an authorized officer of the Member
        and filed with the minutes and permanent records of the Company.

       

      SECTION
        5.03   Control
        by Member.
        To the
        extent the Member takes any action with respect to the Company (including
        by
        means of its appointment of any individual Manager or its control or employment
        of any individual Manager in any other capacity), the Member, or any such
        Manager, as applicable, will act in good faith in accordance with the terms
        of
        this Agreement, and make decisions with respect to the business and daily
        operations of the Company independent of, and not dictated by, in the case
        of
        any such Manager, the Member, or in either case any Affiliate of the foregoing,
        and, to the fullest extent permitted by law, each Independent Manager shall
        bear
        a fiduciary duty to the Company (including its creditors) under the
        circumstances set forth in Section 3.04.

       

      SECTION
        5.04   Special
        Members.
        Upon
        the occurrence of any event that causes the Member to cease to be a member
        of
        the Company other than by a transfer by the Member of its limited liability
        company interest in the Company pursuant to Section 6.01 and the admission
        of a
        substitute Member pursuant to Section 6.01, each person acting as an Independent
        Manager pursuant to Section 3.04 shall, without any action of any Person
        and
        simultaneously with the Member ceasing to be a member of the Company,
        automatically be admitted to the Company as a special member (a “Special
        Member”) and shall continue the Company without dissolution. No Special Member
        may resign from the Company or transfer its rights as a Special Member unless
        (a) a successor Special Member has been admitted to the Company as a Special
        Member by executing a counterpart to this Agreement and (b) such successor
        has
        also accepted its appointment as Independent Manager; provided,
        however,
        the
        Special Members shall automatically cease to be members of the Company upon
        the
        admission to the Company of a substitute Member appointed by the personal
        representative of the last Member that ceased to be a member of the Company.
        Each Special Member shall be a member of the Company that has no interest
        in the
        profits, losses and capital of the Company and has no right to receive any
        distributions of Company assets. Pursuant to Section 18-301 of the LLC Act,
        a
        Special Member shall not be required to make any capital contributions to
        the
        Company and shall not receive a limited liability company interest in the
        Company. A Special Member, in its capacity as Special Member, may not bind
        the
        Company. Except as required by any mandatory provision of the LLC
        Act,
        each Special Member, in its capacity as Special Member, shall have no right
        to
        vote on, approve or otherwise consent to any action by, or matter relating
        to,
        the Company, including, without limitation, the merger, consolidation or
        conversion of the Company. In order to implement the admission to the Company
        of
        each Special Member pursuant to this Section 5.04, each person acting as
        an
        Independent Manager pursuant to Section 3.04 shall execute a counterpart
        to this
        Agreement. Prior to its admission to the Company as Special Member, each
        person
        acting as an Independent Manager pursuant to Section 3.04 shall not be a
        member
        of the Company.

       

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

       

      ARTICLE
        VI

      COMMON
        INTEREST

       

      SECTION
        6.01   General.
        The
        Common Interest constitutes personal property and shall be freely transferable
        and assignable in whole but not in part upon registration of such transfer
        and
        assignment on the books of the Company in accordance with the procedures
        established for such purpose by the Managers of the Company. Immediately
        upon
        registration of the transfer and assignment of the Common Interest on the
        books
        of the Company and execution by the transferee/assignee of an instrument
        evidencing its agreement to be bound by this Agreement and without the need
        for
        any other action by any Person, the transferee/assignee shall be and become
        the
        sole Member of the Company and shall have the rights and powers, and be subject
        to the restrictions and liabilities, of the Member under this Agreement and
        the
        LLC Act, and the transferor/assignor shall cease to be the Member, each as
        of
        the date of such registration. Notwithstanding the foregoing, the Common
        Interest may not be transferred unless S&P shall have confirmed in writing
        to the Trustee and the Company that such transfer will not result in a reduction
        or withdrawal of the then current rating by any such Rating Agency of any
        outstanding Series or Tranche of Environmental Control Bonds and any outstanding
        securities of all Additional Issuances and ten days prior written notice
        of such
        transfer shall be provided to Moody’s and Fitch. 

       

      SECTION
        6.02   Distributions.
        The
        Member shall be entitled to receive, out of the assets of the Company legally
        available therefor, when, as and if declared by the Managers, distributions
        payable in cash in such amounts, if any, as the Managers shall declare.
        Notwithstanding any provision to the contrary contained in this Agreement,
        the
        Company shall not be required to make a distribution to the Member on account
        of
        its interest in the Company if such distribution would violate the LLC Act
        or
        any other applicable law or any Basic Document.

       

      SECTION
        6.03   Rights
        on Dissolution and Winding Up.

       

      (a)   In
        the
        event of any dissolution and winding up of the Company, the Member shall
        be
        entitled to all remaining assets of the Company available for distribution
        to
        the Member after satisfaction (whether by payment or reasonable provision
        for
        payment) of all liabilities, debts and obligations of the Company to creditors,
        as set forth in Section 18-804 of the LLC Act.

       

      (b)   Neither
        the sale of all or substantially all of the property or business of the Company,
        nor the merger, conversion or consolidation of the Company into or with another
        company
        or other entity, shall be deemed to be a dissolution, liquidation or winding
        up,
        voluntary or involuntary, for the purpose of this Section 6.03.

       

      (c)   The
        commencement of a Bankruptcy, insolvency, receivership or other similar
        proceeding by or against the Company, any Special Member or the Member shall
        not, by itself, result in the dissolution of the Company or in the cessation
        of
        the interest of the Member in the Company. The resignation of the Member
        or any
        Special Member or the dissolution of the Member or any Special Member shall
        not,
        by itself, constitute a dissolution of the Company.

       

      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

       

      (d)   Upon
        the
        occurrence of any event that causes the last remaining member of the Company
        to
        cease to be a member of the Company, to the fullest extent permitted by law,
        the
        personal representative of such member is hereby authorized to, and shall,
        within ninety days after the occurrence of the event that terminated the
        continued membership of such member in the Company, agree in writing (i)
        to
        continue the Company and (ii) to the admission of the personal representative
        or
        its nominee or designee, as the case may be, as a substitute member of the
        Company, effective as of the occurrence of the event that terminated the
        continued membership of the last remaining member of the Company in the
        Company.

       

      (e)   Notwithstanding
        any other provision of this Agreement, the Bankruptcy of the Member or any
        Special Member shall not cause the Member or Special Member, respectively,
        to
        cease to be a member of the Company, and, upon the occurrence of such an
        event,
        the business of the Company shall continue without dissolution.

       

      SECTION
        6.04   Redemption.
        The
        Common Interest shall not be redeemable.

       

      SECTION
        6.05   Voting
        Rights.
        The
        Member shall have the sole right to vote on all matters as to which members
        of a
        limited liability company shall be entitled to vote pursuant to the LLC Act
        and
        other applicable law.

       

      SECTION
        6.06   Class.
        The
        Company shall have one class of Common Interest.

       

      SECTION
        6.07   Capital
        Contributions.
        The
        Member shall contribute the amount of cash to the Company listed on Schedule
        A
        attached hereto. The Member is not required to make any additional capital
        contribution to the Company. To the extent that the Member makes an additional
        capital contribution to the Company, the Member shall revise Schedule A
        accordingly.

       

      ARTICLE
        VII

      ALLOCATIONS;
        DISTRIBUTIONS; EXPENSES;

      TAXES;
        BOOKS; REPORTS; AND BANK ACCOUNTS

       

      SECTION
        7.01   Allocations.
        All
        items of income, gain, loss, deduction and credit of the Company for each
        Fiscal
        Year shall be allocated to the Member. Any credit available for federal income
        tax purposes shall be allocated to the Member in the same manner.

       

      SECTION
        7.02   Expenses.
        Except
        as otherwise provided in this Agreement, and subject to the provisions of
        the
        Basic Documents and the documents governing the terms of any Additional
        Issuance, the Company shall be responsible for all of its own expenses and
        the
        allocation thereof including without limitation:

       

      (a)   all
        expenses incurred by the Member or its Affiliates in organizing the
        Company;

       

      
        
          
          

        

        
          20

          
            

          

        

        
          
          

        

      

       

      (b)   all
        expenses related to the payment of the principal of and interest on the
        Environmental Control Bonds and the securities of any Additional Issuance
        issued
        by the Company;

       

      (c)   all
        expenses related to the business of the Company and all routine administrative
        expenses of the Company, including any amounts payable under the Administration
        Agreement and the Servicing Agreement, the maintenance of books and records
        of
        the Company, and the preparation and dispatch to the Member of checks, financial
        reports, tax returns and notices required pursuant to this
        Agreement;

       

      (d)   all
        expenses incurred in connection with any litigation or arbitration involving
        the
        Company (including the cost of any investigation and preparation) and the
        amount
        of any judgment or settlement paid in connection therewith;

       

      (e)   all
        expenses for indemnity or contribution payable by the Company to any
        Person;

       

      (f)   all
        expenses incurred in connection with the collection of amounts due to the
        Company from any Person;

       

      (g)   all
        expenses incurred in connection with the preparation of amendments to this
        Agreement;

       

      (h)   all
        expenses incurred in connection with the liquidation, dissolution and winding
        up
        of the Company; and

       

      (i)   all
        expenses otherwise allocated in good faith to the Company by the
        Managers.

       

      SECTION
        7.03   Annual
        Tax Information.
        The
        Managers shall cause the Company to deliver to the Member all information
        necessary for the preparation of the Member’s federal or state income tax
        return.

       

      SECTION
        7.04   Tax
        Matters.  (a)
        The Member shall
        communicate and negotiate with the Internal Revenue Service on any tax matter
        on
        behalf of the Member and the Company.

       

      (b)   The
        Member acknowledges that at all times that two or more persons or entities
        hold
        equity interests in the Company for federal income tax purposes (i) it is
        the
        intention of the Company to be treated as a “partnership” for federal and all
        relevant state tax purposes, and
        (ii)
        the Company will be treated as a “partnership” for federal and all relevant
        state tax purposes and shall make all available elections to be so treated.
        Until such time, however, it is the intention of the Member that the Company
        be
        disregarded for federal and all relevant state tax purposes and that the
        activities of the Company be deemed to be activities of the Member for such
        purposes. All provisions of the Company’s certificate of formation and this
        Agreement are to be construed so as to preserve that tax status under those
        circumstances.

       

      
        
          
          

        

        
          21

          
            

          

        

        
          
          

        

      

       

      (c)   In
        accordance with the provisions of Treasury Regulations section 301.7701-3,
        the
        Company will not elect to be treated as a corporation for Federal income
        tax
        purposes, and therefore will be treated as either a disregarded entity or
        a
        division of the Member. Any other election under any provision of any tax
        law
        shall be made only by the Managers or by a person authorized to do so by
        the
        Managers.

       

      SECTION
        7.05   Maintenance
        of Books.
        The
        Company shall keep books and records of accounts and shall keep minutes of
        the
        proceedings of the Member and the Managers. The Fiscal Year shall be the
        accounting year of the Company.

       

      SECTION
        7.06   Reports.
        Within
        sixty days following the end of each Fiscal Year during the term of the Company,
        the Managers shall cause to be furnished to the Member a balance sheet, an
        income statement and a statement of changes in the Member’s capital account for,
        or as of the end of, that Fiscal Year. Such financial statements shall be
        prepared in accordance with the accounting method selected by the Managers
        consistently applied (except as therein noted), and shall be accompanied
        by an
        audit report from a nationally recognized accounting firm. The Managers also
        may
        cause to be prepared or delivered such other reports as they may deem
        appropriate. The Company shall bear the costs of all such financial statements
        and reports.

       

      SECTION
        7.07   Bank
        and Investment Accounts.
        The
        Managers shall establish and maintain one or more separate bank and investment
        accounts and arrangements for Company funds in the Company name with such
        financial institutions and firms as the Managers determine.

       

      ARTICLE
        VIII

      INDEMNIFICATION

       

      SECTION
        8.01   Mandatory
        Indemnification of the Member, the Special Members and the
        Managers.
        Any
        Person who was or is a party or is threatened to be made a party to, or is
        involved in, any threatened, pending or completed suit in equity, action
        at law
        or other judicial or administrative proceeding (hereafter a “Proceeding”), or
        any appeal in such a Proceeding or any inquiry or investigation that could
        lead
        to such a Proceeding, by reason of the fact that such Person is or was the
        Member, a Special Member or a Manager, or by reason of the fact that the
        Member,
        such Special Member or such Manager is or was serving at the request of the
        Company as a member, director, manager, officer, partner, venturer, proprietor,
        trustee, employee, agent or similar functionary of another foreign or domestic
        corporation, limited liability company, partnership, joint venture, trust,
        sole
        proprietorship, employee benefit plan or other enterprise, shall be indemnified
        by the Company to the fullest extent permitted by applicable law, as the
        same
        exists or may hereafter be amended (but, in the case of any such amendment,
        only to the extent that such amendment permits the Company to provide greater
        or
        broader indemnification rights than such law permitted the Company to provide
        prior to such amendment) against judgments, penalties (including, without
        limitation, excise and similar taxes and punitive damages), fines, settlements
        and reasonable expenses (including, without limitation, reasonable attorneys’
fees) actually incurred by such Person in connection with such Proceeding;
        provided,
        that such
        judgments, penalties, settlements, fines or other expenses are not directly
        caused by the negligence or willful misconduct of such Person except that
        such
        Person shall be

       

      
        
          
          

        

        
          22

          
            

          

        

        
          
          

        

      

       

      liable
        for (i) liabilities arising from the failure by such Person to perform
        obligations expressly undertaken by it in this Agreement; and (ii) taxes,
        fees or other charges, based on or measured by any fees, commissions or
        compensation received by such Person in connection with the transactions
        described in this Agreement and the Basic Documents. It is expressly
        acknowledged that the indemnification provided in this Article VIII could
        involve indemnification under theories of strict liability. Notwithstanding
        anything herein to the contrary, including the provisions of Section 8.02,
        for
        so long as any Environmental Control Bonds are outstanding, no payment from
        funds of the Company (as distinct from funds from other sources, such as
        insurance) of any indemnity of the Member, any Special Member or any Manager
        under this Article VIII shall be payable except out of funds available for
        payment of Company expenses as provided in the Indenture.

       

      SECTION
        8.02   Mandatory
        Advancement of Expenses.
        Expenses incurred by a Person of the type entitled to be indemnified under
        Section 8.01 in defending any Proceeding shall be paid or reimbursed by the
        Company in advance of the final disposition of the Proceeding, without any
        determination as to such Person’s ultimate entitlement to indemnification under
        Section 8.01, upon receipt of a written affirmation by such Person of such
        Person’s good faith belief that such Person has met the standard of conduct
        necessary for indemnification under this Agreement and a written undertaking
        by
        or on behalf of such Person to repay all amounts so advanced if it shall
        ultimately be determined that such Person is not entitled to be indemnified
        by
        the Company as authorized in Section 8.01 or otherwise. The written undertaking
        shall be an unlimited general obligation of the Person but need not be secured
        and shall be accepted without reference to financial ability to make
        repayment.

       

      SECTION
        8.03   Indemnification
        of Officers, Employees and Agents.
        To the
        fullest extent permitted by law, the Company shall indemnify and pay and
        advance
        expenses to an officer, employee or agent of the Company to the same extent
        and
        subject to the same conditions under which it may indemnify and pay and advance
        expenses to the Member, any Special Member or any Manager under this Article
        VIII; and, to the fullest extent permitted by law, the Company shall indemnify
        and pay and advance expenses to any Person who is or was an officer, employee
        or
        agent of the Company and who is or was serving at the request of the Company
        as
        a member, manager, director, officer, partner, venturer, proprietor, trustee,
        employee, agent or similar functionary of another foreign or domestic limited
        liability company, corporation, partnership, joint venture, sole proprietorship,
        trust, employee benefit plan or other enterprise against any liability asserted
        against such Person and incurred by such Person in such a capacity or arising
        out of such Person’s status as such to the same extent and subject to the same
        conditions that the Company may indemnify and pay and advance expenses to
        the
        Member, any Special Member or any Manager under this Article VIII.

       

      SECTION
        8.04   Nonexclusivity
        of Rights.
        Subject
        to Section 8.01, the indemnification and advancement and payment of expenses
        provided by this Article VIII:

       

      (a)   shall
        not
        be deemed exclusive of any other rights to which the Member, a Special Member,
        a
        Manager or other Person seeking indemnification may be entitled under any
        statute, agreement, decision of the Member or disinterested Managers, or
        otherwise both as to action in such Person’s official capacity and as to action
        in another capacity while holding such office;

       

      
        
          
          

        

        
          23

          
            

          

        

        
          
          

        

      

       

      (b)   shall
        continue as to any Person who has ceased to serve in the capacity which
        initially entitled such Person to indemnity and advancement and payment of
        expenses;

       

      (c)   shall
        inure to the benefit of the heirs, executors, administrators, successors
        and
        assigns of the Member, such Special Member, such Manager or such other
        Person;

       

      (d)   shall
        not
        exclude any other rights to which a Person seeking indemnification or
        advancement of expenses may be entitled under any agreement, decision of
        the
        Member, disinterested Managers or otherwise, for either an action of the
        Member,
        any Special Member or any Manager, officer, employee or agent in the official
        capacity of such Person or an action in another capacity while holding such
        position, except that indemnification, unless ordered by a court, may not
        be
        made to or on behalf of the Member, any Special Member or any Manager if
        a final
        adjudication established that such Person’s acts or omissions involved gross
        negligence or willful misconduct; and

       

      (e)   shall
        continue for a Person who has ceased to be the Member, a Special Member or
        a
        Manager, officer, employee or agent and inures to the benefit of the heirs,
        executors, administrators, successors and assigns of such a Person.

       

      SECTION
        8.05   Contract
        Rights.
        The
        rights granted pursuant to this Article VIII shall be deemed to be contract
        rights, and no amendment, modification or repeal of this Article VIII shall
        have
        the effect of limiting or denying any such rights with respect to actions
        taken
        or Proceedings arising prior to any such amendment, modification or
        repeal.

       

      SECTION
        8.06   Insurance.
        The
        Company may purchase and maintain insurance or other arrangement or both,
        at its
        expense, on behalf of itself or any Person who is or was serving as the Member,
        a Special Member or a Manager, officer, employee or agent of the Company
        or as
        an officer, employee or agent of the Member, or is or was serving at the
        request
        of the Company as a member, manager, director, officer, partner, venturer,
        proprietor, trustee, employee, agent or similar functionary of another foreign
        or domestic limited liability company, partnership, corporation, joint venture,
        sole proprietorship, trust, employee benefit plan or other enterprise, against
        any liability, expense or loss, whether or not the Company would have the
        power
        to indemnify such Person against such liability under the provisions of this
        Article VIII.

       

      SECTION
        8.07   Savings
        Clause.
        If this
        Article VIII or any portion of this Agreement shall be invalidated on any
        ground
        by any court of competent jurisdiction, then the Company shall nevertheless
        indemnify and hold harmless the Member, each Special Member, each Manager
        or any
        other Person indemnified pursuant to this Article VIII as to costs, charges
        and
        expenses (including, without limitation, attorneys’ fees), judgments, fines and
        amounts paid in
        settlement with respect to any action, suit or proceeding, whether civil,
        criminal, administrative or investigative, to the fullest extent permitted
        by
        any applicable portion of this Article VIII that shall not have been invalidated
        and to the fullest extent permitted by applicable law.

       

      SECTION
        8.08   Other
        Ventures.
        Notwithstanding any other provision at law or in equity, it is expressly
        agreed
        that the Member, any Special Member, any Manager and any Affiliates, officers,
        directors, managers, stockholders, partners or employees of the Member,
        any

       

      
        
          
          

        

        
          24

          
            

          

        

        
          
          

        

      

       

      Special
        Member or any Manager, may engage in other business ventures of every nature
        and
        description, whether or not in competition with the Company, independently
        or
        with others, and the Company shall not have any rights in and to any independent
        venture or activity or the income or profits derived therefrom.

       

      SECTION
        8.09   Survival.
        The
        foregoing provisions of this Article VIII shall survive any termination of
        the
        Company or this Agreement. 

       

      ARTICLE
        IX

      MISCELLANEOUS
        PROVISIONS

       

      SECTION
        9.01   Offset.
        Whenever the Company is to pay any sum to the Member, any amounts the Member
        owes the Company may be deducted from such sum before payment.

       

      SECTION
        9.02   Notices.
        Except
        as expressly set forth to the contrary in this Agreement, all notices, requests
        or consents provided for or permitted to be given under this Agreement shall
        be
        in writing and shall be given either by depositing such writing in the United
        States mail, addressed to the recipient, postage paid, and registered or
        certified with return receipt requested or by delivering such writing to
        the
        recipient in person, by reputable overnight courier, or by facsimile or
        electronic transmission; and a notice, request or consent given under this
        Agreement shall be effective on receipt by the Person to whom sent. All notices,
        requests and consents to be sent to the Member shall be sent to or made to
        PE
        Renaissance Funding, LLC, 2215-B Renaissance Drive, Suite #5, Las Vegas,
        Nevada
        89119 or such other address as the Member may specify by notice to the Company
        and the Managers. Any notice, request or consent to the Company or the Managers
        must be given to the Managers at the following address: PE Environmental
        Funding
        LLC, 2215-B Renaissance Drive, Suite #5, Las Vegas, Nevada 89119. Whenever
        any
        notice is required to be given by law or this Agreement, a written waiver
        thereof, signed by the Person entitled to notice, whether before or after
        the
        time stated therein, shall be deemed equivalent to the giving of such
        notice.

       

      SECTION
        9.03   Effect
        of Waiver or Consent.
        A
        waiver or consent, express or implied, to or of any breach or default by
        any
        Person in the performance by such Person of its obligations with respect
        to the
        Company shall not be a consent or waiver to or of any other breach or default
        in
        the performance by such Person of the same or any other obligations of such
        Person with respect to the Company.

       

      SECTION
        9.04   Governing
        Law; Severability.
        This
        Agreement shall be governed by and shall be construed in accordance with
        the law
        of the State of Delaware, excluding
        any conflict-of-laws rule or principle that might refer the governance or
        the
        construction of this Agreement to the law of another jurisdiction. If there
        is a
        direct conflict between the provisions of this Agreement and any mandatory
        and
        non-modifiable provision of the LLC Act, then the applicable provision of
        the
        LLC Act shall control. If any provision of this Agreement or the application
        thereof to any Person or circumstance is held invalid or unenforceable to
        any
        extent, the remainder of this Agreement and the application of that provision
        to
        other Persons or circumstances shall not be affected thereby and such provision
        shall be enforced to the fullest extent permitted by law.

       

      
        
          
          

        

        
          25

          
            

          

        

        
          
          

        

      

       

      SECTION
        9.05   No
        Bankruptcy Petition; No Dissolution.

       

      (a)   Each
        Member, each Special Member and each Manager hereby covenants and agrees
        (or
        shall be deemed to have hereby covenanted and agreed) that it shall not,
        prior
        to the date which is one year and one day after the termination of the
        Indenture, or the termination of any other indenture pursuant to which any
        Additional Securities are issued, and the payment in full of all Series of
        the
        Environmental Control Bonds or Additional Securities and any other amounts
        owed
        under the Indenture or other indenture pursuant to which any Additional
        Securities are issued, including, without limitation, any amounts owed to
        third-party credit enhancers, consent to, or make application for, or institute
        or maintain any action for, the Company to invoke the process of any court
        or
        government authority for the purpose of commencing or sustaining an involuntary
        case against the Company under any federal or State bankruptcy, insolvency
        or
        similar law or appointing a receiver, liquidator, assignee, trustee, custodian,
        sequestrator or other similar official of the Company or of all or any
        substantial part of the property of the Company, or to the fullest extent
        permitted by law ordering the winding up or liquidation of the affairs of
        the
        Company; provided,
        however,
        that
        nothing in this Section 9.05 shall constitute a waiver of any right to
        indemnification, reimbursement or other payment from the Company pursuant
        to
        this Agreement.

       

      (b)   To
        the
        fullest extent permitted by law, each Member, each Special Member and each
        Manager hereby covenants and agrees (or shall be deemed to have hereby
        covenanted and agreed) that, until the termination of the Indenture, or other
        termination of any other indenture pursuant to which any Additional Securities
        are issued, and the payment in full of all Series of the Environmental Control
        Bonds and Additional Securities and any other amounts owed under the Indenture
        or other indenture pursuant to which any Additional Securities are issued,
        including, without limitation, any amounts owed to third-party credit enhancers,
        the Member, such Special Member and such Manager will not consent to, or
        make
        application for, or institute or maintain any action for, the dissolution
        of the
        Company under Section 18-801 or 18-802 of the LLC Act or otherwise.

       

      (c)   In
        the
        event that the Member, any Special Member or any Manager takes action in
        violation of this Section 9.05, the Company agrees that it will file an answer
        with the court or otherwise properly contest the taking of such action and
        raise
        the defense that the Member, the Special Member or the Manager, as the case
        may
        be, has agreed in writing not to take such action and should be estopped
        and
        precluded therefrom and such other defenses, if any, as its counsel advises
        that
        it may assert.

       

      (d)    The
        provisions of this Section 9.05 shall survive the termination of this Agreement
        and the resignation, withdrawal or removal of the Member, any Special Member
        or
        any Manager. Nothing herein contained shall preclude participation by the
        Member, any Special Member or a Manager in assertion or defense of its claims
        in
        any such proceeding involving the Company.

       

      SECTION
        9.06   Amendment.
        This
        Agreement may not be amended, except in writing by the Member, upon prior
        approval of the Trustee and with prior notice to the Rating Agencies and
        notification from each of Moody’s, Fitch and S&P, or their respective
        successors, to the Company, that such amendment will not result in a reduction
        or withdrawal of the then

       

      
        
          
          

        

        
          26

          
            

          

        

        
          
          

        

      

       

      current
        rating by any such Rating Agency of any outstanding Series or Tranche of
        Environmental Control Bonds (except that with regard to Moody’s and Fitch, it
        will be sufficient to provide ten days’ written notice of the
        amendment).

       

      SECTION
        9.07   Headings
        and Sections.
        The
        headings in this Agreement are inserted for convenience only and are in no
        way
        intended to describe, interpret, define or limit the scope, extent or intent
        of
        this Agreement or any provision hereof.

       

      SECTION
        9.08   Binding
        Agreement.
        Notwithstanding any other provision of this Agreement, the Member agrees
        that
        this Agreement constitutes a legal, valid and binding agreement of the Member,
        and is enforceable against the Member by the Independent Managers, in accordance
        with its terms. In addition, the Independent Managers shall be intended
        beneficiaries of this Agreement.

       

      SECTION
        9.09   Dissolution.
        The
        Company shall be dissolved, and its affairs shall be wound up, upon the first
        to
        occur of the following: (i) the termination of the legal existence of the
        last
        remaining member of the Company or the occurrence of any other event which
        terminates the continued membership of the last remaining member of the Company
        in the Company unless the Company is continued without dissolution in a manner
        permitted by this Agreement or by the LLC Act; or (ii) the entry of a decree
        of
        judicial dissolution under Section 18-802 of the LLC Act.

       

      
        
          
          

        

        
          27

          
            

          

        

        
          
          

        

      

       

      IN
        WITNESS WHEREOF,
        this
        Agreement is hereby executed by the undersigned as of April 11,
        2007.

       

      
        	 	
                MEMBER:

                 

                PE
                  RENAISSANCE FUNDING, LLC

                 

                 

              
	 	
                By:

              	 /s/
                Kristine W. Eppes
	 	 	
                Name: 
                  Kristine W. Eppes

                Title:   
                  Vice President, Treasurer and
                  Secretary

              

      

      

      
        	 	
                Agreed
                  and Consented to by the Independent Managers:

                 

              
	 	/s/
                Kari L. Johnson
	 	
                Name: 
                  Kari L. Johnson

                 

              
	 	/s/
                Darryl E. Smith
	 	
                Name: 
                  Darryl E. Smith

              

      

       

      
        
          
          

        

        
          Signature
            Page to Amended and Restated LLC Agreement

          
            

          

        

        
          
          

        

      

       

      SCHEDULE
        A

       

      SCHEDULE
        OF INITIAL CAPITAL CONTRIBUTION OF MEMBER

      

       

      COMMON
        INTEREST

       

      
        	
                MEMBER’S
                  NAME

              	
                INITIAL

                CAPITAL

                CONTRIBUTION*

              	
                COMMON

                INTEREST

                PERCENTAGE

              
	 	 	 
	
                PE
                  Renaissance Funding, LLC

              	
                 $574,125

              	
                100%

              

      

      

      ____________

      * 
        0.50% of original principal amount of the Environmental Control
        Bonds.

      

      
        
          
          

        

        
          A-1

          
            

          

        

        
          
          

        

      

      SCHEDULE
        B

       

      MANAGERS

       

      Names

      

      
        	
                1.

              	
                Paul
                  J. Evanson

              

      

       

      
        	
                2.

              	
                David
                  E. Flitman

              

      

       

      
        	
                3.

              	
                Philip
                  L. Goulding

              

      

       

      
        	
                4.

              	Kari L. Johnson

      

       

      
        	
                5.

              	Darryl E. Smith

      

       

      
        
          
          

        

        
          B-1

          
            

          

        

        
          
          

        

      

       

      SCHEDULE
        C

       

      OFFICERS

       

      
        	
                Names

              	 	
                Office

              
	 	 	 
	
                Paul
                  J. Evanson

              	 	
                Chief
                  Executive Officer

              
	 	 	 
	
                Philip
                  L. Goulding

              	 	
                Vice
                  President

              
	 	 	 
	
                Thomas
                  R. Gardner

              	 	
                Controller

              

      

      

      
        
          
          

        

        
          C-1

          
            

          

        

        
          
          

        

      

       

      SCHEDULE
        D

       

      Management
        Agreement

       

      ________
        __, 200_

       

      PE
        Environmental Funding LLC 

       

       

      [                    ]

       

      

       

      Re:   Management
        Agreement 

       

       PE
        Environmental Funding LLC

       

      Ladies
        and Gentlemen:

       

      For
        good
        and valuable consideration, each of the undersigned persons, who have been
        designated as managers of PE Environmental Funding LLC, a Delaware limited
        liability company (the “Company”), in accordance with the Amended and Restated
        Limited Liability Company Agreement of the Company, dated as of April
        11, 2007, as it may be amended or restated from time to time (the “LLC
        Agreement”), hereby agree as follows:

       

      1.    Each
        of
        the undersigned accepts such person’s rights and authority as a Manager (as
        defined in the LLC Agreement) under the LLC Agreement and agrees to perform
        and
        discharge such person’s duties and obligations as a Manager under the LLC
        Agreement, and further agrees that such rights, authorities, duties and
        obligations under the LLC Agreement shall continue until such person’s successor
        as a Manager is designated or until such person’s resignation or removal as a
        Manager in accordance with the LLC Agreement. Each of the undersigned agrees
        and
        acknowledges that he has been designated as a “manager” of the Company within
        the meaning of the Delaware Limited Liability Company Act.

       

      2.   THIS
        MANAGEMENT AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
        THE
        LAWS OF THE STATE OF DELAWARE, AND ALL RIGHTS AND REMEDIES SHALL BE GOVERNED
        BY
        SUCH LAWS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.

      

      
        
          
          

        

        
          D-1

          
            

          

        

        
          
          

        

      

       

      IN
        WITNESS WHEREOF, the undersigned have executed this Management Agreement
        as of
        the day and year first above written.

       

      
        	 	 
	 	
                Name:

                 

              
	 	 
	 	
                Name:

                 

              
	 	 
	 	
                Name:

                 

              
	 	 
	 	
                Name:

                 

              
	 	 
	 	
                Name:

              

      

    

     

    
      
        
        

      

      
        D-2

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