File No. 70-9469
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 4
TO
FORM U-1
APPLICATION OR DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
West Penn Power Company
800 Cabin Hill Drive
Greensburg, PA 15601
(Name of company of companies filing this statement and addresses of
principal executive offices)
Allegheny Energy, Inc.
(Name of top registered holding company parent of each applicant or
declarant)
Thomas K. Henderson, Esq.
Vice President
Allegheny Energy, Inc.
10435 Downsville Pike
Hagerstown, MD 21740-1766
(Name and address of agent for services)
<PAGE>
1. Applicant hereby amends Item No. 6, Exhibits and Financial
Statements, of its Application or Declaration by filing the following
exhibits herewith:
Item No. 6. Exhibits and Financial Statements
(a) Exhibits
B-1 Form of Intangible Transition Property Transfer
Agreement
B-2 Form of Intangible Transition Property Sale Agreement
B-4 Form of Intangible Transition Property Servicing
Agreement
SIGNATURE
Pursuant to the requirements of the Public Utility Holding
Company Act of 1935, the undersigned company has duly caused this statement
to be signed on its behalf by the undersigned thereunto duly authorized.
WEST PENN POWER COMPANY
By: /s/ Carol G. Russ
----------------------------
Carol G. Russ
Counsel
Dated: July 12, 1999
EXHIBIT B-1
===========================================================================
INTANGIBLE TRANSITION PROPERTY
TRANSFER AGREEMENT
between
WEST PENN FUNDING CORPORATION
Seller
and
WEST PENN POWER COMPANY
Transferor
Dated as of [ ], 1999
===========================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
Definitions
SECTION 1.01. Definitions..............................................2
SECTION 1.02. Other Definitional Provisions............................8
ARTICLE II
Conveyance of Intangible Transition Property
SECTION 2.01. Conveyance of Initial Intangible
Transition Property....................................9
SECTION 2.02. Conveyance of Subsequent Intangible
Transition Property...................................10
SECTION 2.03. Conditions to Conveyance of Intangible
Transition Property...................................11
ARTICLE III
Representations and Warranties of Transferor
SECTION 3.01. Organization and Good Standing..........................14
SECTION 3.02. Due Qualification.......................................14
SECTION 3.03. Power and Authority.....................................14
SECTION 3.04. Binding Obligation......................................15
SECTION 3.05. No Violation............................................15
SECTION 3.06. No Proceedings..........................................16
SECTION 3.07. Approvals...............................................16
SECTION 3.08. The Intangible Transition Property......................17
ARTICLE IV
Covenants of the Transferor
SECTION 4.01. Corporate Existence.....................................22
SECTION 4.02. No Liens or Conveyances.................................23
SECTION 4.03. Delivery of Collections.................................23
SECTION 4.04. Notice of Liens.........................................24
SECTION 4.05. Compliance with Law.....................................24
SECTION 4.06. Covenants Related to Intangible
Transition Property...................................24
SECTION 4.07. Notice of Indemnification Events and
Mandatory Repurchase Events...........................26
SECTION 4.08. Protection of Title.....................................26
<PAGE>
Contents, p. ii
SECTION 4.09. Taxes...................................................27
ARTICLE V
The Transferor
SECTION 5.01. Liability of Transferor; Indemnities
and Mandatory Repurchase..............................28
SECTION 5.02. Merger or Consolidation of, or
Assumption of the Obligations of,
Transferor............................................35
SECTION 5.03. Limitation on Liability of Transferor
and Others............................................37
SECTION 5.04. Opinions of Counsel.....................................37
ARTICLE VI
Miscellaneous Provisions
SECTION 6.01. Amendment...............................................38
SECTION 6.02. Notices.................................................39
SECTION 6.03. Assignment..............................................40
SECTION 6.04. Limitations on Rights of Others.........................40
SECTION 6.05. Severability............................................41
SECTION 6.06. Separate Counterparts...................................41
SECTION 6.07. Headings................................................41
SECTION 6.08. Governing Law...........................................41
SECTION 6.09. Assignment to Issuer and to Bond
Trustee...............................................41
SECTION 6.10. Nonpetition Covenant....................................42
SECTION 6.11. Perfection..............................................43
<PAGE>
INTANGIBLE TRANSITION PROPERTY TRANSFER AGREEMENT
dated as of [ ], 1999, between WEST PENN FUNDING
CORPORATION, a [Delaware] corporation (the "Seller"),
and WEST PENN POWER COMPANY, a Pennsylvania
corporation, and its successors in interest to the
extent permitted hereunder, as Transferor (the
"Transferor").
WHEREAS the Transferor desires to contribute from time to time
Intangible Transition Property created pursuant to the Statute and the
Qualified Rate Order in exchange for all of the outstanding capital stock
of the Seller;
WHEREAS the Seller is willing to purchase the Intangible
Transition Property;
WHEREAS the Seller intends to sell the Transferred Intangible
Transition Property to the Issuer and the Issuer intends to purchase the
Transferred Intangible Transition Property from the Seller pursuant to the
Sale Agreement;
WHEREAS the Issuer, in order to finance the purchase of the
Transferred Intangible Transition Property, will from time to time issue
Transition Bonds under the Indenture;
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2
WHEREAS the Issuer, to secure its obligations under all
Transition Bonds and the Indenture, will pledge its right, title and
interest in the Transferred Intangible Transition Property to the Bond
Trustee for the benefit of the Transition Bondholders; and
WHEREAS the Seller has determined that the transactions
contemplated by the Basic Documents are in the best interest of the Seller
and its creditors and represent a prudent and advisable course of action
that does not impair the rights and interests of the Seller's creditors.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained and intending to be legally bound hereby, the
parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Definitions. (a) Whenever used in this Agreement,
each of the following words and phrases shall have the following meaning:
"Addition Notice" means, with respect to the transfer of
Subsequent Intangible Transition Property to the Seller pursuant to Section
2.02, notice, which shall be given by the Transferor to the Seller and the
Rating Agencies not later than 10 days prior to the related Subsequent
Contribution Date, specifying the Subsequent
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3
Contribution Date for such Subsequent Intangible Transition
Property.
"Agreement" means this Intangible Transition Property Transfer
Agreement, as the same may be amended and supplemented from time to time.
"Bill of Sale" means a bill of sale substantially in the form of
Exhibit A hereto.
"Business Day" has the meaning specified in the Servicing
Agreement.
"Competitive Transition Charges" has the meaning specified in the
Servicing Agreement.
"Corporate Trust Office" means, [Address of Bond Trustee]
Attention: [ ], or the principal corporate trust office of any successor
Bond Trustee (the address of which the successor Bond Trustee will notify
the Transition Bondholders and the Issuer).
"Customers" has the meaning specified in the Servicing Agreement.
"Deferred Repurchase Price" has the meaning specified in Section
5.01(d)(i).
"De Minimis Loss Amount" has the meaning specified in Section
5.01(d)(iii).
"Fitch IBCA" has the meaning specified in the Servicing
Agreement.
"Indemnification Event" has the meaning specified in Section
5.01(c)(i).
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4
"Indenture" means the Indenture dated as of[ ], 1999, between the
Issuer and [ ], as the same may be amended and supplemented from time to
time.
"Initial Contribution Date" means [ ], 1999.
"Initial Intangible Transition Property" means the Intangible
Transition Property, as identified in the related Bill of Sale, contributed
to the Seller on the Initial Contribution Date pursuant to such Bill of
Sale in connection with the issuance of the Series 1999-A Transition Bonds.
"Initial Loss Calculation Date" has the meaning specified in
Section 5.01(c)(ii).
"Intangible Transition Charges" has the meaning specified in the
Servicing Agreement.
"Intangible Transition Property" has the meaning specified in the
Servicing Agreement.
"ITC Collections" has the meaning specified in the Servicing
Agreement.
"Lien" has the meaning specified in the Servicing Agreement.
"Losses" has the meaning specified in the Servicing Agreement.
"Mandatory Repurchase Event" has the meaning specified in Section
5.01(d)(i).
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5
"Moody's" has the meaning specified in the Servicing Agreement.
"Officers' Certificate" means a certificate signed by (a) the
chairman of the board, the president, the vice chairman of the board, the
executive vice president or any vice president and (b) a treasurer,
assistant treasurer, secretary or assistant secretary, in each case of the
Transferor or the Servicer, as appropriate.
"Opinion of Counsel" means one or more written opinions of
counsel who may be an employee of or counsel to the Transferor or the
Servicer, which counsel shall be reasonably acceptable to the Bond Trustee,
the Seller, the Issuer or the Rating Agencies, as applicable, and which
shall be in form reasonably satisfactory to the Bond Trustee, the Seller,
if applicable.
"PUC" has the meaning specified in the Servicing Agreement.
"PUC Regulations" has the meaning specified in the Servicing
Agreement.
"Qualified Rate Order" has the meaning specified in the Servicing
Agreement.
"Qualified Transition Expenses" has the meaning specified in the
Servicing Agreement.
"Rate Schedule" has the meaning specified in the Servicing
Agreement.
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6
"Retained Intangible Transition Property" means Intangible
Transition Property other than the Transferred Intangible Transition
Property.
"Seller" has the meaning specified in the heading of this
Agreement.
"Serviced Intangible Transition Property" has the meaning
specified in the Servicing Agreement.
"Servicer" means West Penn, as the servicer of the Intangible
Transition Property, and each successor to West Penn (in the same capacity)
pursuant to Section 5.03 or 6.04 of the Servicing Agreement.
"Servicer Default" means an event specified in Section 6.01 of
the Servicing Agreement.
Servicing Agreement" means the Servicing Agreement dated as of [
], 1999, between the Issuer and the Servicer, as the same may be amended
and supplemented from time to time.
"Standard & Poor's" has the meaning specified in the Servicing
Agreement.
"Statute" has the meaning specified in the Servicing Agreement.
"Subsequent Contribution Date" means any date on which Subsequent
Intangible Transition Property is to be transferred to the Seller pursuant
to Section 2.02.
"Subsequent Intangible Transition Property" means Intangible
Transition Property, as identified in the related
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7
Bill of Sale, contributed to the Seller on any Subsequent Contribution Date
in connection with the issuance of a Series of Transition Bonds.
"Third Party" has the meaning specified in the Servicing
Agreement.
"Transferor" has the meaning specified in the heading of this
Agreement.
"Transferred Intangible Transition Property" means, collectively,
the Initial Intangible Transition Property and any Subsequent Intangible
Transition Property.
"UCC" has the meaning specified in the Servicing Agreement.
"West Penn" has the meaning specified in the Servicing Agreement.
(b) Except as otherwise specified herein or as the context may
otherwise require, each of the following terms has the meaning set forth in
the Indenture for all purposes of this Agreement, and the definitions of
such terms are equally applicable both to the singular and plural forms of
such terms:
Term Section of the Indenture
Adjustment Date.................... 1.01(a)
Affiliate.......................... 1.01(a)
Basic Documents.................... 1.01(a)
Bond Trustee....................... 1.01(a)
Capital Subaccount................. 1.01(a)
Collateral......................... 1.01(a)
Collection Account................. 1.01(a)
General Subaccount................. 1.01(a)
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8
Term Section of the Indenture
Holders or Transition
Bondholders ..................... 1.01(a)
Loss Subaccount.................... 1.01(a)
Operating Expenses................. 1.01(a)
Overcollateralization Amount....... 1.01(a)
Payment Date....................... 1.01(a)
Person............................. 1.01(a)
Rating Agency...................... 1.01(a)
Rating Agency Condition............ 1.01(a)
Reserve Subaccount................. 1.01(a)
Series............................. 1.01(a)
Servicing Fee...................... 1.01(a)
Transition Bonds................... 1.01(a)
SECTION 1.02. Other Definitional Provisions. (a) The words
"hereof", "herein", "hereunder" and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement; Section, Schedule and Exhibit
references contained in this Agreement are references to Sections,
Schedules and Exhibits in or to this Agreement unless otherwise specified;
and the term "including" shall mean "including without limitation".
(b) The definitions contained in this Agreement are applicable to
the singular as well as the plural forms of such terms and to the masculine
as well as to the feminine and neuter genders of such terms.
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ARTICLE II
Conveyance of Intangible Transition Property
SECTION 2.01. Conveyance of Initial Intangible Transition
Property. (a) In consideration of the Seller's delivery to the Transferor
of certificates evidencing [ ] shares of common stock, par value $.01 per
share, of the Seller (which constitutes 100% of the outstanding capital
stock of the Seller), subject to the conditions specified in Section 2.03,
the Transferor, pursuant to a Bill of Sale, will irrevocably contribute,
sell, transfer, assign, set over and otherwise convey to the Seller,
without recourse (subject to the obligations herein), all right, title and
interest of the Transferor in and to the Initial Intangible Transition
Property (such contribution, sale, transfer, assignment, set over and
conveyance of the Initial Intangible Transition Property will include, to
the fullest extent permitted by the Statute, the assignment of all
revenues, collections, claims, rights, payments, money or proceeds of or
arising from the Intangible Transition Charges related to the Initial
Intangible Transition Property, as the same may be adjusted from time to
time). Such contribution, sale, transfer, assignment, set over and
conveyance will be expressly stated to be a sale and, pursuant to Section
2812(e) of the Statute, shall be treated as an absolute transfer of all of
the Transferor's right, title and interest (as in a true sale), and not as
a pledge
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10
or other financing, of the Initial Intangible Transition Property. The
preceding sentence is the statement referred to in Section 2812(e) of the
Statute. The Transferor agrees and confirms that after giving effect to the
sale contemplated by such Bill of Sale it has no rights in the Initial
Intangible Transition Property to which a security interest of creditors of
the Transferor could attach because it has sold all rights in the Initial
Intangible Transition Property to the Seller pursuant to Section 2812(e) of
the Statute.
(b) Subject to the conditions specified in Section 2.03, the
Seller, pursuant to a Bill of Sale, will purchase the Initial Intangible
Transition Property from the Transferor for the consideration set forth in
paragraph (a) above.
(c) The Transferor and the Seller each acknowledge and agree that
the consideration for the Initial Intangible Transition Property sold
pursuant to the Bill of Sale is equal to its fair market value at the time
of sale.
SECTION 2.02. Conveyance of Subsequent Intangible Transition
Property. The Transferor may from time to time offer to sell additional
Intangible Transition Property to the Seller, subject to the conditions
specified in Section 2.03. If any such offer is accepted by the Seller,
such Subsequent Intangible Transition Property shall be sold to the Seller
effective on the Subsequent Contribution Date
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11
specified in the related Addition Notice, subject to the satisfaction or
waiver of the conditions specified in Section 2.03.
SECTION 2.03. Conditions to Conveyance of Intangible Transition
Property. The Transferor shall be permitted to sell Intangible Transition
Property to the Seller only upon the satisfaction or waiver of each of the
following conditions:
(i) on or prior to the Initial Contribution Date or Subsequent
Contribution Date, as applicable, the Transferor shall have delivered
to the Seller a duly executed Bill of Sale identifying the Intangible
Transition Property to be conveyed on that date;
(ii) as of the Initial Contribution Date or the Subsequent
Contribution Date, as applicable, the Transferor was not insolvent and
will not have been made insolvent by such sale and the Transferor is
not aware of any pending insolvency with respect to itself;
(iii) as of the Initial Contribution Date or the Subsequent
Contribution Date, as applicable, no breach by the Transferor of its
representations, warranties or covenants in this Agreement shall
exist; and no Servicer Default shall have occurred and be continuing;
(iv) as of the Initial Contribution Date or the Subsequent
Contribution Date, as applicable, (A) the Issuer shall have sufficient
funds available to pay the
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12
purchase price for the Transferred Intangible Transition Property to
be conveyed on such date and (B) all conditions to the issuance of one
or more Series of Transition Bonds intended to provide such funds set
forth in the Indenture shall have been satisfied or waived;
(v) on or prior to the Initial Contribution Date or Subsequent
Contribution Date, as applicable, the Transferor shall have taken all
action required to transfer to the Seller ownership of the Transferred
Intangible Transition Property to be conveyed on such date, free and
clear of all Liens other than Liens created by the Issuer pursuant to
the Indenture; the Seller shall have taken any action required for the
Seller to transfer to the Issuer ownership of the Transferred
Intangible Transition Property to be conveyed on such date, free and
clear of all Liens other than Liens created by the Issuer pursuant to
the Indenture; and the Issuer or the Servicer, on behalf of the
Issuer, shall have taken any action required for the Issuer to grant
the Bond Trustee a first priority perfected security interest in the
Collateral and maintain such security interest as of such date;
(vi) in the case of a sale of Subsequent Intangible Transition
Property only, on or prior to such Subsequent Contribution Date, the
Transferor shall have
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13
provided the Seller, the Issuer and the Rating Agencies with a timely
Addition Notice;
(vii) the Transferor shall have delivered to the Rating Agencies,
the Seller and the Issuer (A) an Opinion of Counsel with respect to
the transfer of the Transferred Intangible Transition Property then
being conveyed to the Seller substantially in the form of Exhibit B
hereto and (B) the Opinion of Counsel required by Section 5.04(a); and
(viii) the Transferor shall have delivered to the Bond Trustee,
the Seller and the Issuer an Officers' Certificate confirming the
satisfaction of each condition precedent specified in this Section
2.03.
ARTICLE III
Representations and Warranties of Transferor
As of the Initial Contribution Date and as of any Subsequent
Contribution Date, as applicable, the Transferor makes the following
representations and warranties on which the Seller has relied and will rely
in acquiring Transferred Intangible Transition Property. The Transferor
agrees and acknowledges that the following representations and warranties
are also for the benefit of the Issuer, as assignee of the Seller pursuant
to the Sale Agreement, and the Bond Trustee, as collateral assignee of the
Issuer pursuant to the Indenture. The representations and
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14
warranties shall survive the sale of Transferred Intangible Transition
Property to the Seller, the sale of the Transferred Intangible Transition
Property from the Seller to the Issuer pursuant to the Sale Agreement and
the pledge thereof to the Bond Trustee pursuant to the Indenture.
SECTION 3.01. Organization and Good Standing. The Transferor is a
corporation duly organized and in good standing under the laws of the
Commonwealth of Pennsylvania, with corporate power and authority to own its
properties and conduct its business as currently owned or conducted.
SECTION 3.02. Due Qualification. The Transferor is duly qualified
to do business as a foreign corporation in good standing, and has obtained
all necessary licenses and approvals, in all jurisdictions in which the
ownership or lease of property or the conduct of its business shall require
such qualifications, licenses or approvals (except where the failure to so
qualify would not be reasonably likely to have a material adverse effect on
the Transferor's business, operations, assets, revenues, properties or
prospects).
SECTION 3.03. Power and Authority. The Transferor has the
corporate power and authority to execute and deliver this Agreement and to
carry out its terms; the Transferor has full corporate power and authority
to own the Intangible Transition Property and contribute, sell and assign
the Initial Intangible Transition Property, in the
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15
case of the Initial Contribution Date, and the Subsequent Intangible
Transition Property, in the case of each Subsequent Contribution Date, as
applicable, and the Transferor has duly authorized such contribution, sale
and assignment to the Seller by all necessary corporate action; and the
execution, delivery and performance of this Agreement has been duly
authorized by the Transferor by all necessary corporate action.
SECTION 3.04. Binding Obligation. This Agreement constitutes a
legal, valid and binding obligation of the Transferor enforceable against
the Transferor in accordance with its terms subject to bankruptcy,
receivership, insolvency, fraudulent transfer, reorganization, moratorium
or other laws affecting creditors' rights generally from time to time in
effect and to general principles of equity (regardless of whether
considered in a proceeding in equity or at law).
SECTION 3.05. No Violation. The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof do
not conflict with, result in any breach of any of the terms and provisions
of, nor constitute (with or without notice or lapse of time) a default
under, the articles of incorporation or by-laws of the Transferor, or any
indenture, agreement or other instrument to which the Transferor is a party
or by which it shall be bound; nor result in the creation or imposition of
<PAGE>
16
any Lien upon any of its properties pursuant to the terms of any such
indenture, agreement or other instrument; nor violate any law or any order,
rule or regulation applicable to the Transferor of any court or of any
Federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Transferor or its
properties.
SECTION 3.06. No Proceedings. There are no proceedings or
investigations pending or, to the Transferor's best knowledge, threatened,
before any court, Federal or state regulatory body, administrative agency
or other governmental instrumentality having jurisdiction over the
Transferor or its properties (i) asserting the invalidity of the Basic
Documents or the Transition Bonds, (ii) seeking to prevent the issuance of
the Transition Bonds or the consummation of any of the transactions
contemplated by the Basic Documents or the Transition Bonds or (iii) except
as disclosed by the Transferor to the Seller, seeking any determination or
ruling that could reasonably be expected to materially and adversely affect
the performance by the Transferor of its obligations under, or the validity
or enforceability of, the Basic Documents or the Transition Bonds.
SECTION 3.07. Approvals. Except for UCC continuation filings, no
approval, authorization, consent, order or other action of, or filing with,
any court, Federal
<PAGE>
17
or state regulatory body, administrative agency or other governmental
instrumentality is required in connection with the execution and delivery
by the Transferor of this Agreement, the performance by the Transferor of
the transactions contemplated hereby or the fulfillment by the Transferor
of the terms hereof, except those that have been obtained or made.
SECTION 3.08. The Intangible Transition Property. (a)
Information. All information provided by the Transferor to the Seller with
respect to the Transferred Intangible Transition Property is correct in all
material respects.
(b) Effect of Transfer. The transfers and assignments herein
contemplated constitute sales of the Initial Intangible Transition Property
or the Subsequent Intangible Transition Property, as the case may be, from
the Transferor to the Seller and the beneficial interest in and title to
the Transferred Intangible Transition Property would not be part of the
debtor's estate in the event of the filing of a bankruptcy petition by or
against the Transferor under any bankruptcy law.
(c) Transfer Filings. The Transferor is the sole owner of the
Intangible Transition Property being sold to the Seller on the Initial
Contribution Date or Subsequent Contribution Date, as applicable; the
Transferred Intangible Transition Property has been validly transferred and
sold to
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the Seller free and clear of all Liens other than Liens contemplated
hereby. All filings, including filings with the PUC under the Statute,
necessary in any jurisdiction to give the Seller a valid ownership interest
in the Transferred Intangible Transition Property, free and clear of all
Liens of the Transferor or anyone claiming through the Transferor, and to
give the Seller a first priority perfected security interest in the
Transferred Intangible Transition Property have been made, other than any
such filings (except for filings with the PUC under the Statute and UCC
filings with the Secretary of State of the State of Delaware) the absence
of which would not have an adverse impact on (i) the ability of the
Servicer to collect Intangible Transition Charges with respect to the
Serviced Intangible Transition Property or (ii) the rights of the Seller
with respect to the Transferred Intangible Transition Property.
(d) Irrevocable; Process Valid; No Litigation; Etc. (i) The
Qualified Rate Order has been issued by the PUC in accordance with the
Statute, such order and the process by which it was issued comply with all
applicable laws, rules and regulations, and such order is in full force and
effect. (ii) As of the date of issuance of any Series of Transition Bonds,
such Transition Bonds are entitled to the protections provided by the
Statute and, accordingly, the provisions of the Qualified Rate Order
relating to
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Intangible Transition Property and Intangible Transition Charges are not
revocable by the PUC. (iii) (a) Under the Statute, neither the Commonwealth
of Pennsylvania nor the PUC may limit, alter or in any way impair or reduce
the value of Intangible Transition Property or Intangible Transition
Charges approved by the Qualified Rate Order or any rights thereunder,
except such a limitation or alteration may be made by the Commonwealth of
Pennsylvania or the PUC if adequate compensation is made by law for the
full protection of the Intangible Transition Charges and of Transition
Bondholders; and (b) under the Contract Clauses of the Constitutions of the
Commonwealth of Pennsylvania and the United States, the Commonwealth of
Pennsylvania and the PUC cannot take any action that substantially impairs
the rights of the Transition Bondholders unless such action is a reasonable
exercise of the Commonwealth of Pennsylvania's sovereign powers and
appropriate to further a legitimate public purpose, and, under the Takings
Clauses of the Pennsylvania and United States Constitutions, in the event
such action constitutes a permanent appropriation of the property interest
of Transition Bondholders in the Intangible Transition Property and
deprives the Transition Bondholders of their reasonable expectations
arising from their investments in Transition Bonds, unless just
compensation, as determined by a court of competent jurisdiction, is
provided to Transition Bondholders.
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(iv) There is no order by any court providing for the revocation,
alteration, limitation or other impairment of the Statute, Qualified Rate
Order, Intangible Transition Property or the Intangible Transition Charges
or any rights arising under any of them or which seeks to enjoin the
performance of any obligations under the Qualified Rate Order. (v) No other
approval, authorization, consent, order or other action of, or filing with,
any court, Federal or state regulatory body, administrative agency or other
governmental instrumentality is required in connection with the creation of
the Intangible Transition Property, except those that have been obtained or
made. (vi) Except as disclosed by the Transferor to the Seller, there are
no proceedings or investigations pending, or to the Transferor's best
knowledge, threatened before any court, Federal or state regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Transferor or its properties challenging the
Qualified Rate Order or the Statute. (vii) No failure on the Initial
Contribution Date or any Subsequent Contribution Date or any time
thereafter to satisfy any condition imposed by the Statute with respect to
the recovery of stranded costs will adversely affect the creation or sale
hereunder of Intangible Transition Property or the right to collect
Intangible Transition Charges.
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(e) Assumptions. The assumptions used in calculating Intangible
Transition Charges are reasonable and made in good faith.
(f) Creation of Intangible Transition Property. (i) The
Intangible Transition Property other than the Retained Intangible
Transition Property constitutes a current property right, (ii) the
Intangible Transition Property includes, without limitation, (A) the
irrevocable right of the Seller and the Issuer, as assignee of the Seller,
to receive through Intangible Transition Charges an amount sufficient to
recover all of the Transferor's Qualified Transition Expenses described in
the Qualified Rate Order in an amount equal to the aggregate principal
amount of Transition Bonds plus an amount sufficient to provide for any
credit enhancement (including the Overcollateralization Amount relating to
each Series of Transition Bonds), to fund any reserves, and to pay
interest, premium, if any, servicing fees and other expenses relating to
the Transition Bonds, and (B) all right, title and interest of the
Transferor or its assignee applicable to the Transition Bonds in the
Qualified Rate Order and in all revenues, collections, claims, payments,
money or proceeds of or arising from the Intangible Transition Charges
applicable to the Transition Bonds set forth in the Qualified Rate Order to
the extent that in accordance with the Statute, the Qualified Rate Order
and the rates and
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22
charges authorized under the Qualified Rate Order are declared to be
irrevocable and (iii) the Qualified Rate Order, including the right to
collect Intangible Transition Charges, have been declared to be irrevocable
by the PUC.
(g) Solvency. After giving effect to the sale of any Transferred
Intangible Transition Property hereunder, the Transferor (i) is solvent and
expects to remain solvent, (ii) is adequately capitalized to conduct its
business and affairs considering its size and the nature of its business
and intended purposes, (iii) is not engaged in nor does it expect to engage
in a business for which its remaining property represents an unreasonably
small capital, (iv) believes that it will be able to pay its debts as they
come due and that such belief is reasonable and (v) is able to pay its
debts as they mature and does not intend to incur, or believe that it will
incur, indebtedness that it will not be able to repay at its maturity.
ARTICLE IV
Covenants of the Transferor
SECTION 4.01. Corporate Existence. Subject to Section 5.02, so
long as any of the Transition Bonds are outstanding, the Transferor will
keep in full force and effect its corporate existence and remain in good
standing, in each case under the laws of the jurisdiction of its
incorporation, and will obtain and preserve its
<PAGE>
23
qualification to do business in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Agreement and each other instrument or agreement to
which the Transferor is a party necessary to the proper administration of
this Agreement and the transactions contemplated hereby.
SECTION 4.02. No Liens or Conveyances. Except for the conveyances
hereunder, the Transferor will not sell, pledge, assign or transfer to any
other Person, or grant, create, incur, assume or suffer to exist any Lien
on, any of the Intangible Transition Property, whether now existing or
hereafter created, or any interest therein. The Transferor shall not at any
time assert any Lien against or with respect to any Serviced Intangible
Transition Property, and shall defend the right, title and interest of the
Seller, the Issuer, as assignee of the Seller, and the Bond Trustee, as
collateral assignee of the Issuer, in, to and under the Intangible
Transition Property, whether now existing or hereafter created, against all
claims of third parties claiming through or under the Transferor.
SECTION 4.03. Delivery of Collections. If the Transferor receives
collections in respect of the Intangible Transition Charges, other than
Intangible Transition Charges relating to Retained Intangible Transition
Property, or the proceeds thereof, the Transferor agrees to pay the
Servicer all payments received by the Transferor in respect thereof
<PAGE>
24
as soon as practicable after receipt thereof by the Transferor, but in no
event later than two Business Days after such receipt.
SECTION 4.04. Notice of Liens. The Transferor shall notify the
Issuer and the Bond Trustee promptly after becoming aware of any Lien on
any Intangible Transition Property other than the conveyances hereunder,
under the Sale Agreement or under the Indenture.
SECTION 4.05. Compliance with Law. The Transferor hereby agrees
to comply with its organizational or governing documents and all laws,
treaties, rules, regulations and determinations of any governmental
instrumentality applicable to the Transferor, except to the extent that
failure to so comply would not adversely affect the Seller's, the Issuer's
or the Bond Trustee's interests in the Intangible Transition Property or
under any of the Basic Documents or the Transferor's performance of its
obligations hereunder or under any of the other Basic Documents to which it
is a party.
SECTION 4.06. Covenants Related to Intangible Transition
Property. (a) So long as any of the Transition Bonds are outstanding, the
Transferor shall treat the Transition Bonds as debt of the Seller for
Federal income tax purposes.
(b) So long as any of the Transition Bonds are outstanding, the
Transferor shall (i) clearly disclose in
<PAGE>
25
its financial statements that it is not the owner of the Serviced
Intangible Transition Property and that the assets of the Issuer are not
available to pay creditors of the Transferor or any of its Affiliates and
(ii) clearly disclose the effects of all transactions among the Transferor,
the Seller and the Issuer in accordance with generally accepted accounting
principles.
(c) The Transferor agrees that upon the sale by the Transferor of
the Transferred Intangible Transition Property to the Seller pursuant to a
Bill of Sale, (i) to the fullest extent permitted by law, including
applicable PUC Regulations, the Seller shall have all of the rights
originally held by the Transferor with respect to the Transferred
Intangible Transition Property (other than the rights of an electric
distribution company set forth in Section 2807 of the Statute), including
the right to collect any amounts payable by any Customer or Third Party in
respect of such Transferred Intangible Transition Property, notwithstanding
any objection or direction to the contrary by the Transferor and (ii) any
payment by any Customer or Third Party to the Seller shall discharge such
Customer's or such Third Party's obligations in respect of such Transferred
Intangible Transition Property to the extent of such payment,
notwithstanding any objection or direction to the contrary by the
Transferor.
<PAGE>
26
(d) So long as any of the Transition Bonds are outstanding, (i)
the Transferor shall not make any statement or reference in respect of the
Transferred Intangible Transition Property that is inconsistent with the
ownership thereof by the Seller or, after the sale of the Transferred
Intangible Transition Property by the Seller to the Issuer, the Issuer and
(ii) the Transferor shall not take any action in respect of the Serviced
Intangible Transition Property except solely in its capacity as the
Servicer thereof pursuant to the Servicing Agreement or as otherwise
contemplated by the Basic Documents.
SECTION 4.07. Notice of Indemnification Events and Mandatory
Repurchase Events. The Transferor shall deliver to the Seller, the Issuer
and the Bond Trustee promptly after having obtained knowledge thereof,
written notice in an Officers' Certificate of any Indemnification Event or
Mandatory Repurchase Event or any event which, with the giving of notice or
the passage of time, would become an Indemnification Event or Mandatory
Repurchase Event.
SECTION 4.08. Protection of Title. The Transferor shall execute
and file such filings, including filings with the PUC pursuant to the
Statute, and cause to be executed and filed such filings, all in such
manner and in such places as may be required by law fully to preserve,
maintain, and protect the interests of the Seller in the Transferred
Intangible Transition Property, including all
<PAGE>
27
filings required under the Statute relating to the transfer of the
ownership or security interest in the Transferred Intangible Transition
Property by the Transferor to the Seller. The Transferor shall deliver (or
cause to be delivered) to the Seller file-stamped copies of, or filing
receipts for, any document filed as provided above, as soon as available
following such filing. The Transferor agrees to take such legal or
administrative actions, including defending against or instituting and
pursuing legal actions and appearing or testifying at hearings or similar
proceedings, as may be reasonably necessary (i) to protect the Seller, the
Issuer and the Transition Bondholders from claims, state actions or other
actions or proceedings of third parties which, if successfully pursued,
would result in a breach of any representation or warranty set forth in
Article III or (ii) to block or overturn any attempts to cause a repeal of,
modification of or supplement to the Statute or the Qualified Rate Order or
the rights of holders of Intangible Transition Property by legislative
enactment or constitutional amendment that would be adverse to the holders
of Intangible Transition Property.
SECTION 4.09. Taxes. So long as any of the Transition Bonds are
outstanding, the Transferor shall, and shall cause each of its subsidiaries
to, pay all material taxes, including gross receipts taxes, assessments and
governmental charges imposed upon it or any of its
<PAGE>
28
properties or assets or with respect to any of its franchises, business,
income or property before any penalty accrues thereon if the failure to pay
any such taxes, assessments and governmental charges would, after any
applicable grace periods, notices or other similar requirements, result in
a lien on the Intangible Transition Property; provided that no such tax
need be paid if the Transferor or one of its subsidiaries is contesting the
same in good faith by appropriate proceedings promptly instituted and
diligently conducted and if the Transferor or such subsidiary has
established appropriate reserves as shall be required in conformity with
generally accepted accounting principles.
ARTICLE V
The Transferor
SECTION 5.01. Liability of Transferor; Indemnities and Mandatory
Repurchase. (a) The Transferor shall be liable in accordance herewith only
to the extent of the obligations specifically undertaken by the Transferor
under this Agreement.
(b) The Transferor shall indemnify the Seller, the Issuer and the
Bond Trustee, for itself and on behalf of the Transition Bondholders, and
each of their respective members, managers, officers, directors and agents
for, and defend and hold harmless each such Person from and against,
<PAGE>
29
any and all taxes (other than any taxes imposed on Transition Bondholders
solely as a result of their ownership of Transition Bonds) that may at any
time be imposed on or asserted against any such Person as a result of the
acquisition or holding of the Transferred Intangible Transition Property by
the Seller or the Issuer or the issuance and sale by the Issuer of the
Transition Bonds, including any sales, gross receipts, general corporation,
tangible personal property, privilege or license taxes.
(c)(i) The Transferor shall indemnify the Seller, the Issuer and
the Bond Trustee, on behalf of the Transition Bondholders, each of their
respective members, managers, officers, directors, and agents, and defend
and hold harmless each such Person from and against, any and all Losses
that may be imposed on, incurred by or asserted against any such Person as
a result of (x) the Transferor's wilful misconduct, bad faith or gross
negligence in the performance of its duties or observance of its covenants
under this Agreement, (y) the Transferor's reckless disre gard of its
obligations and duties under this Agreement or (z) the Transferor's breach
of any of its representations or warranties contained in this Agreement
other than those contained in Sections 3.08(b), 3.08(c), 3.08(d)(i), (ii)
and (iv) and 3.08(f) (any event described in any of the foregoing clauses
(x), (y) or (z), an "Indemnification Event"); provided, however, that the
amount of such Losses
<PAGE>
30
(other than those payable pursuant to Section 5.01(e)) for which the
Transferor shall be obligated to provide indemnification shall not exceed
the amount of the Deferred Repurchase Price. Amounts on deposit in the
Reserve Subaccount and the Capital Subaccount shall not be available to
satisfy any Losses for which indemnification is provided in this Agreement.
(ii) If an Indemnification Event shall occur, upon receipt of
written notice thereof by the Transferor from the Seller, the Issuer or the
Bond Trustee, the Transferor shall notify the Servicer of the occurrence of
such event so that the Servicer may, pursuant to Section 7 of Annex 1 to
the Servicing Agreement, calculate (x) on the day which is 90 days after
receipt of such notice by the Transferor (the "Initial Loss Calculation
Date") the amount of Losses expected to be incurred as a result of such
Indemnification Event from and including the time of its occurrence through
and including the next Payment Date after the Initial Loss Calculation Date
and (y) to the extent that Losses may be incurred as a result of such
Indemnification Event in an amount exceeding the amount of Losses
calculated pursuant to clause (x) above and unless the Transferor has paid
the Deferred Repurchase Price with respect to such Indemnification Event
pursuant to Section 5.01(d)(i)(B), not later than each Payment Date
succeeding the Initial Loss Calculation Date, the amount of Losses expected
to be
<PAGE>
31
incurred as a result of such Indemnification Event from but excluding such
Payment Date through and including the next Payment Date. All such
calculations shall be subject to the approval of the Bond Trustee. If such
Indemnification Event shall continue unremedied beyond the Initial Loss
Calculation Date, the Transferor shall pay to the Bond Trustee, as
collateral assignee of the Issuer (as assignee of the Seller), for deposit
into the General Subaccount of the Collection Account, (x) on the Payment
Date immediately following the Initial Loss Calculation Date, the amount of
Losses calculated pursuant to clause (x) and clause (y) of the preceding
sentence with respect to such Payment Date and (y) on each subsequent
Payment Date, the amount of Losses calculated as of such date pursuant to
clause (y) of the preceding sentence. Upon payment pursuant to this Section
5.01(c)(ii), the Transferor shall have no further obligations with respect
to such Losses to the extent of such payments.
(d)(i) In the event of a breach by the Transferor of any
representation and warranty specified in (A) Section 3.08(b), 3.08(c),
3.08(d)(i), (ii) or (iv) or 3.08(f) of this Agreement that has a material
adverse effect on the Transition Bondholders or (B) Sections 3.01, 3.03,
3.04, 3.05 and 3.08(d)(iii), (v) or (vi) of this Agreement for which the
full amount of Losses attributable thereto are reasonably expected to be
incurred beyond a 90-day period
<PAGE>
32
immediately following the occurrence of such Indemnification Event (any
event described in clause (A) or (B), a "Mandatory Repurchase Event"), the
Transferor will be required to repurchase the Transferred Intangible
Transition Property and, on each Payment Date following such repurchase,
the Transferor will be required to pay (any such payment by the Transferor
is referred to as the "Deferred Repurchase Price") to the Bond Trustee, as
collateral assignee of the Issuer (as assignee of the Seller), for deposit
in the General Subaccount of the Collection Account, an amount sufficient
to make the payments contemplated by clauses (i) through (viii) of Section
8.02(d) of the Indenture.
(ii) The Transferor shall not be obligated to pay the Deferred
Repurchase Price pursuant to Section 5.01(d)(i) (A) if within 90 days after
the date of the occurrence thereof such breach is cured or the Transferor
takes remedial action such that there is not and will not be a material
adverse effect on the Transition Bondholders as a result of such breach. In
the event that within such 90-day period (i) such breach is cured or (ii)
the Transferor takes the remedial action specified by this Section
5.01(d)(ii), any amounts paid by the Transferor to the Bond Trustee, as
collateral assignee of the Issuer (as assignee of the Seller) pursuant to
Section 5.01(d)(i) which have not been
<PAGE>
33
distributed pursuant to the Indenture shall be returned to the Transferor
at the end of such 90-day period.
(iii) With respect to any Losses described in Section 5.01(c)(ii)
or Section 5.01(d)(i)(B) above, the full amount of which is reasonably
expected not to exceed [ ]% of the annual outstanding balance of Transition
Bonds per Payment Date (the "De Minimis Loss Amount"), the Transferor, on
the Payment Date immediately following the Initial Loss Calculation Date,
shall pay to the Bond Trustee, as collateral assignee of the Issuer (as
assignee of the Seller), for deposit in the Loss Subaccount of the
Collection Account, the aggregate expected amount of such Losses for all
Payment Dates on which such Losses are expected to be incurred, following
which the Transferor's obligation to pay indemnification or the Deferred
Repurchase Price, as applicable, as a result of such Losses shall be waived
so long as the actual Losses incurred on any Payment Date do not exceed the
De Minimis Loss Amount. If the aggregate amount of such Losses incurred as
of any Payment Date exceeds the amounts paid by the Transferor to the Bond
Trustee, as collateral assignee of the Issuer (as assignee of the Seller),
with respect thereto, the Transferor shall pay to the Bond Trustee, as
collateral assignee of the Issuer (as assignee of the Seller), on the next
Payment Date, the amount of such excess for such Payment Date and the
expected amount of excess for all subsequent Payment
<PAGE>
34
Dates. If the amount of such Losses on any Payment Date exceeds the De
Minimis Loss Amount, the full indemnification amount or Deferred Repurchase
Price, as applicable, is payable on the next Payment Date.
(iv) Upon the payment in full by the Transferor of the aggregate
amount of the Deferred Repurchase Price pursuant to Section 5.01(d)(i),
neither the Issuer, the Seller nor any other Person shall have any other
claims, rights or remedies against the Transferor for a breach of the
representations and warranties specified in Section 3.08(b), (c), (d)(i),
(d)(ii), (d)(iv) or (f).
(e) The Transferor shall indemnify the Bond Trustee and its
officers, directors and agents for, and defend and hold harmless each such
Person from and against, any and all Losses that may be imposed upon,
incurred by or asserted against any such Person as a result of the
acceptance or performance of the trusts and duties contained herein and in
the Indenture, except to the extent that any such Loss shall be due to the
wilful misfeasance, bad faith or gross negligence of the Bond Trustee. Such
amounts shall be deposited into the Collection Account and distributed in
accordance with the Indenture.
(f) The Transferor's indemnification obligations under Section
5.01(b),(c), (d) and (e) for events occurring prior to the removal or
resignation of the Bond Trustee or the termination of this Agreement shall
survive the
<PAGE>
35
resignation or removal of the Bond Trustee or the termination of this
Agreement and shall include reasonable fees and expenses of investigation
and litigation (including the Bond Trustee's reasonable attorney's fees and
expenses).
SECTION 5.02. Merger or Consolidation of, or Assumption of the
Obligations of, Transferor. Any Person (a) into which the Transferor may be
merged or consolidated and which succeeds to the major part of the electric
distribution business of the Transferor, (b) which results from the
division of the Transferor into two or more Persons and which succeeds to
the major part of the electric distribution business of the Transferor, (c)
which may result from any merger or consolidation to which the Transferor
shall be a party and which succeeds to the major part of the electric
distribution business of the Transferor, (d) which may succeed to the
properties and assets of the Transferor substantially as a whole and which
succeeds to the major part of the electric distribution business of the
Transferor or (e) which may otherwise succeed to the major part of the
electric distribution business of the Transferor, which Person in any of
the foregoing cases executes an agreement of assumption to perform every
obligation of the Transferor under this Agreement, shall be the successor
to the Transferor hereunder without the execution or filing of any document
or any further act by any of the parties to this Agreement;
<PAGE>
36
provided, however, that (i) immediately after giving effect to such
transaction, no representation or warranty made pursuant to Article III
shall have been breached and no Servicer Default, and no event that, after
notice or lapse of time, or both, would become a Servicer Default, shall
have occurred and be continuing, (ii) the Transferor shall have delivered
to the Seller, the Issuer and the Bond Trustee an Officers' Certificate and
an Opinion of Counsel each stating that such consolidation, merger or
succession and such agreement of assumption comply with this Section and
that all conditions precedent, if any, provided for in this Agreement
relating to such transaction have been complied with, (iii) the Rating
Agencies shall have received prior written notice of such transaction and
(iv) the Transferor shall have delivered to the Seller, the Issuer and the
Bond Trustee an Opinion of Counsel either (A) stating that, in the opinion
of such counsel, all filings, including filings with the PUC pursuant to
the Statute, have been executed and filed that are necessary fully to
preserve and protect the interest of the Seller in the Transferred
Intangible Transition Property and reciting the details of such filings or
(B) stating that, in the opinion of such counsel, no such action shall be
necessary to preserve and protect such interests. Notwithstanding anything
herein to the contrary, the execution of the above described agreement of
assumption and compliance with clauses (i), (ii), (iii)
<PAGE>
37
and (iv) above shall be conditions precedent to the consummation of any
transaction referred to in clauses (a), (b), (c), (d) or (e) above.
SECTION 5.03. Limitation on Liability of Transferor and Others.
The Transferor and any director or officer or employee or agent of the
Transferor may rely in good faith on the advice of counsel or on any
document of any kind, prima facie properly executed and submitted by any
Person, respecting any matters arising hereunder. Subject to Section 4.08,
the Transferor shall not be under any obligation to appear in, prosecute or
defend any legal action that is not incidental to its obligations under
this Agreement, and that in its opinion may involve it in any expense or
liability.
SECTION 5.04. Opinions of Counsel. The Transferor shall deliver
to the Seller, the Issuer and the Bond Trustee: (a) promptly after the
execution and delivery of this Agreement and of each amendment hereto or to
the Servicing Agreement and on each Subsequent Contribution Date, an
Opinion of Counsel either (i) to the effect that, in the opinion of such
counsel, all filings, including filings with the PUC pursuant to the
Statute, that are necessary to fully preserve and protect the interests of
the Seller in the Intangible Transition Property have been executed and
filed, and reciting the details of such filings or referring to prior
Opinions of Counsel in which such
<PAGE>
38
details are given, or (ii) to the effect that, in the opinion of such
counsel, no such action shall be necessary to preserve and protect such
interest; and (b) within 90 days after the beginning of each calendar year
beginning with the first calendar year beginning more than three months
after the Initial Contribution Date, an Opinion of Counsel, dated as of a
date during such 90-day period, either (i) to the effect that, in the
opinion of such counsel, all filings with the PUC pursuant to the Statute,
have been executed and filed that are necessary to preserve fully and
protect fully the interest of the Seller in the Intangible Transition
Property, and reciting the details of such filings or referring to prior
Opinions of Counsel in which such details are given, or (ii) to the effect
that, in the opinion of such counsel, no such action shall be necessary to
preserve and protect such interest. Each Opinion of Counsel referred to in
clause (a) or (b) above shall specify any action necessary (as of the date
of such opinion) to be taken in the following year to preserve and protect
such interest.
ARTICLE VI
Miscellaneous Provisions
SECTION 6.01. Amendment. This Agreement may be amended by the
Seller and the Transferor, with the consent of the Issuer and the Bond
Trustee. The Seller shall
<PAGE>
39
furnish to each of the Rating Agencies (i) prior to the execution of any
such amendment or consent, written notification of the substance thereof
and (ii) promptly after the execution of any such amendment or consent, a
copy thereof.
Prior to the execution of any amendment to this Agreement, the
Seller, the Issuer and the Bond Trustee shall be entitled to receive and
rely upon an Opinion of Counsel stating that the execution of such
amendment is authorized or permitted by this Agreement and the Opinion of
Counsel referred to in Section 5.04(a). The Seller, the Issuer and the Bond
Trustee may, but shall not be obligated to, enter into any such amendment
which affects their own rights, duties or immunities under this Agreement
or otherwise.
SECTION 6.02. Notices. All demands, notices and communications
upon or to the Transferor, the Seller, the Issuer, the Bond Trustee or the
Rating Agencies under this Agreement shall be in writing, delivered
personally, via facsimile, reputable overnight courier or by certified
mail, return-receipt requested, and shall be deemed to have been duly given
upon receipt (a) in the case of the Transferor, to West Penn Power Company,
800 Cabin Hill Drive, Greensburg, PA 15601, Attention of [ ], (b) in the
case of the Seller, to West Penn Funding Corporation, 800 Cabin Hill Drive,
Greensburg, PA 15601, Attention of [ ], (c) in the case of the Issuer, to
West Penn
<PAGE>
40
Funding LLC, 800 Cabin Hill Drive, Greensburg PA 15601, Attention of [ ],
(d) in the case of the Bond Trustee, at the Corporate Trust Office, (e) in
the case of Moody's, to Moody's Investors Service, Inc., ABS Monitoring
Department, 99 Church Street, New York, New York 10007, (f) in the case of
Standard & Poor's, to Standard & Poor's Corporation, 26 Broadway (15th
Floor), New York, New York 10004, Attention of Asset Backed Surveillance
Department, and (g) in the case of Fitch IBCA, to Fitch IBCA, Inc., One
State Street Plaza, New York, New York 10004, Attention of ABS
Surveillance; or, as to each of the foregoing, at such other address as
shall be designated by written notice to the other parties.
SECTION 6.03. Assignment. Notwithstanding anything to the
contrary contained herein, except as pro vided in Section 5.02, this
Agreement may not be assigned by the Transferor.
SECTION 6.04. Limitations on Rights of Others. The provisions of
this Agreement are solely for the benefit of the Transferor, the Seller,
the Issuer and the Bond Trustee, on behalf of itself and the Transition
Bondholders, and nothing in this Agreement, whether express or implied,
shall be construed to give to any other Person any legal or equitable
right, remedy or claim in the Collateral or under or in respect of this
Agreement or any covenants, conditions or provisions contained herein.
<PAGE>
41
SECTION 6.05. Severability. Any provision of this Agreement that
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction.
SECTION 6.06. Separate Counterparts. This Agreement may be
executed by the parties hereto in separate counterparts, each of which when
so executed and delivered shall be an original, but all such counterparts
shall together constitute but one and the same instrument.
SECTION 6.07. Headings. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define
or limit any of the terms or provisions hereof.
SECTION 6.08. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of New York, without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
SECTION 6.09. Assignment to Issuer and to Bond Trustee. (a) The
Transferor hereby acknowledges and consent to the sale, transfer,
assignment and conveyance of
<PAGE>
42
all right, title and interest of the Seller in, to and under the
Transferred Intangible Transition Property and the proceeds thereof and the
assignment of any or all of the Seller's rights hereunder to the Issuer
pursuant to the Sale
Agreement.
(b) The Transferor hereby acknowledges and consents to the
mortgage, pledge, assignment and grant of a security interest by the Issuer
(as assignee of the Seller) to the Bond Trustee pursuant to the Indenture
for the benefit of the Transition Bondholders of all right, title and
interest of the Issuer in, to and under the Transferred Intangible
Transition Property and the proceeds thereof and the assignment of any or
all of the Issuer's rights under the Sale Agreement to the Bond Trustee.
SECTION 6.10. Nonpetition Covenant. Notwithstanding any prior
termination of this Agreement or the Indenture, but subject to the PUC's
rights to order the sequestration and payment of revenues arising with
respect to the Intangible Transition Property notwithstanding any
bankruptcy, reorganization or other insolvency proceedings with respect to
the debtor, pledgor or transferor of the Intangible Transition Property
pursuant to Section 2812(d)(3)(v) of the Statute, the Transferor shall not,
prior to the date which is one year and one day after the termination of
the Indenture, petition or otherwise invoke or cause the Seller or the
Issuer to invoke the
<PAGE>
43
process of any court or government authority for the purpose of commencing
or sustaining a case against the Seller or the Issuer under any Federal or
state bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar
official of the Seller or the Issuer or any substantial part of the
property of the Seller or the Issuer, or ordering the winding up or
liquidation of the affairs of the Seller or the Issuer.
SECTION 6.11. Perfection. In accordance with Section 2812(e) of
the Statute, upon the execution and delivery of this Agreement and the
related Bill of Sale, the transfer of the Initial Intangible Transition
Property will be perfected as against all third persons, including any
judicial lien creditors, and upon the execution and delivery of a Bill of
Sale and, if applicable, a supplement to this Agreement, a transfer of
Subsequent Intangible Transition Property will be perfected against all
third persons, including any judicial lien creditors.
<PAGE>
44
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their respective officers as of the day and year
first above written.
WEST PENN FUNDING CORPORATION,
Seller,
by
----------------------------
Title:
WEST PENN POWER COMPANY,
Transferor,
by
-----------------------------
Title:
Acknowledged and Accepted:
WEST PENN FUNDING LLC,
as Issuer of the Transition
Bonds,
by [ ], as Manager,
by:
----------------------
Title:
[ ], not
in its individual capacity
but solely as Bond Trustee
on behalf of the Transition
Bondholders,
by:
------------------------
Title:
EXHIBIT B-2
===========================================================================
INTANGIBLE TRANSITION PROPERTY
SALE AGREEMENT
between
WEST PENN FUNDING LLC
Issuer
and
WEST PENN FUNDING CORPORATION
Seller
Dated as of [ ], 1999
===========================================================================
<PAGE>
Contents, p. i
TABLE OF CONTENTS
Page
ARTICLE I
Definitions
SECTION 1.01. Definitions.............................................2
SECTION 1.02. Other Definitional Provisions...........................7
ARTICLE II
Conveyance of Intangible Transition Property
SECTION 2.01. Conveyance of Initial Intangible
Transition Property...................................8
SECTION 2.02. Conveyance of Subsequent Intangible
Transition Property...................................9
SECTION 2.03. Conditions to Conveyance of Intangible
Transition Property..................................10
ARTICLE III
Representations and Warranties of Seller
SECTION 3.01. Organization and Good Standing.........................12
SECTION 3.02. Due Qualification......................................13
SECTION 3.03. Power and Authority....................................13
SECTION 3.04. Binding Obligation.....................................14
SECTION 3.05. No Violation...........................................14
SECTION 3.06. No Proceedings.........................................14
SECTION 3.07. Approvals..............................................15
SECTION 3.08. The Intangible Transition Property.....................15
ARTICLE IV
Covenants of the Seller
SECTION 4.01. Corporate Existence....................................17
SECTION 4.02. No Liens or Conveyances................................18
SECTION 4.03. Delivery of Collections................................18
SECTION 4.04. Notice of Liens........................................19
SECTION 4.05. Compliance with Law....................................19
SECTION 4.06. Covenants Related to Intangible
Transition Property..................................19
SECTION 4.07. Notice of Indemnification Events.......................21
<PAGE>
Contents, p. ii
SECTION 4.08. Protection of Title....................................21
SECTION 4.09. Taxes..................................................22
SECTION 4.10. Separate Entity........................................23
ARTICLE V
The Seller
SECTION 5.01. Liability of Seller; Indemnities.......................23
SECTION 5.02. Merger or Consolidation of, or
Assumption of the Obligations of,
Seller...............................................26
SECTION 5.03. Limitation on Liability of Seller
and Other............................................28
SECTION 5.04. Opinions of Counsel....................................28
ARTICLE VI
Miscellaneous Provisions
SECTION 6.01. Amendment..............................................30
SECTION 6.02. Notices................................................30
SECTION 6.03. Assignment.............................................31
SECTION 6.04. Limitations on Rights of Others........................31
SECTION 6.05. Severability...........................................32
SECTION 6.06. Separate Counterparts..................................32
SECTION 6.07. Headings...............................................32
SECTION 6.08. Governing Law..........................................32
SECTION 6.09. Assignment to Bond Trustee.............................33
SECTION 6.10. Nonpetition Covenant...................................33
SECTION 6.11. Perfection.............................................34
<PAGE>
INTANGIBLE TRANSITION PROPERTY SALE AGREEMENT
dated as of [ ], 1999, between WEST PENN FUNDING LLC, a
Delaware limited liability company (the "Issuer"), and
WEST PENN FUNDING CORPORATION, a [Delaware]
corporation, and its successors in interest to the
extent permitted hereunder, as Seller (the "Seller").
WHEREAS the Seller received a contribution from the Transferor of
Intangible Transition Property created pursuant to the Statute and the
Qualified Rate Order in exchange for all of the outstanding capital stock
of the Seller;
WHEREAS the Issuer desires to purchase from time to time
Intangible Transition Property;
WHEREAS the Seller is willing to sell Intangible Transition
Property to the Issuer;
WHEREAS the Issuer, in order to finance the purchase of the
Transferred Intangible Transition Property, will from time to time issue
Transition Bonds under the Indenture;
WHEREAS the Issuer, to secure its obligations under all
Transition Bonds and the Indenture, will pledge its right, title and
interest in the Transferred Intangible
<PAGE>
2
Transition Property to the Bond Trustee for the benefit of the Transition
Bondholders; and
WHEREAS the Issuer has determined that the transactions
contemplated by the Basic Documents are in the best interest of the Issuer
and its creditors and represent a prudent and advisable course of action
that does not impair the rights and interests of the Issuer's creditors.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained and intending to be legally bound hereby, the
parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Definitions. (a) Whenever used in this Agreement,
each of the following words and phrases shall have the following meaning:
"Addition Notice" means, with respect to the transfer of
Subsequent Intangible Transition Property to the Issuer pursuant to Section
2.02, notice, which shall be given by the Seller to the Issuer and the
Rating Agencies not later than 10 days prior to the related Subsequent
Transfer Date, specifying the Subsequent Transfer Date for such Subsequent
Intangible Transition Property.
<PAGE>
3
"Agreement" means this Intangible Transition Property Sale
Agreement, as the same may be amended and supplemented from time to time.
"Bill of Sale" means a bill of sale substantially in the form of
Exhibit A hereto.
"Business Day" has the meaning specified in the Servicing
Agreement.
"Competitive Transition Charges" has the meaning specified in the
Servicing Agreement.
"Corporate Trust Office" means [Address of Bond Trustee]
Attention: [ ], or the principal corporate trust office of any successor
Bond Trustee (the address of which the successor Bond Trustee will notify
the Transition Bondholders and the Issuer).
"Customers" has the meaning specified in the Servicing Agreement.
"Fitch IBCA" has the meaning specified in the Servicing
Agreement.
"Indemnification Event" has the meaning specified in Section
5.01(c)(i).
"Indenture" means the Indenture dated as of [ ], 1999, between
the Issuer and [ ], as the same may be amended and supplemented from time
to time.
"Initial Intangible Transition Property" means the Intangible
Transition Property, as identified in the related Bill of Sale, sold to the
Issuer on the Initial Transfer
<PAGE>
4
Date pursuant to such Bill of Sale in connection with the issuance of the
Series 1999-A Transition Bonds.
"Initial Loss Calculation Date" has the meaning specified in
Section 5.01(c)(ii).
"Initial Transfer Date" means [ ], 1999.
"Intangible Transition Charges" has the meaning specified in the
Servicing Agreement.
"Intangible Transition Property" has the meaning specified in the
Servicing Agreement.
"ITC Collections" has the meaning specified in the Servicing
Agreement.
"Lien" has the meaning specified in the Servicing Agreement.
"Losses" has the meaning specified in the Servicing Agreement.
"Moody's" has the meaning specified in the Servicing Agreement.
"Officers' Certificate" means a certificate signed by (a) the
chairman of the board, the president, the vice chairman of the board, the
executive vice president or any vice president and (b) a treasurer,
assistant treasurer, secretary or assistant secretary, in each case of the
Seller or the Servicer, as appropriate.
"Opinion of Counsel" means one or more written opinions of
counsel who may be an employee of or counsel to the Seller or the Servicer,
which counsel shall be
<PAGE>
5
reasonably acceptable to the Bond Trustee, the Issuer or the Rating
Agencies, as applicable, and which shall be in form reasonably satisfactory
to the Bond Trustee, if applicable.
"PUC" has the meaning specified in the Servicing Agreement.
"PUC Regulations" has the meaning specified in the Servicing
Agreement.
"Qualified Rate Order" has the meaning specified in the Servicing
Agreement.
"Qualified Transition Expenses" has the meaning specified in the
Servicing Agreement.
"Rate Schedule" has the meaning specified in the Servicing
Agreement.
"Servicer" means West Penn, as the servicer of the Intangible
Transition Property, and each successor to West Penn (in the same capacity)
pursuant to Section 5.03 or 6.04 of the Servicing Agreement.
"Servicer Default" means an event specified in Section 6.01 of
the Servicing Agreement.
"Servicing Agreement" means the Servicing Agreement dated as of [
], 1999, between the Issuer and the Servicer, as the same may be amended
and supplemented from time to time.
"Standard & Poor's" has the meaning specified in the Servicing
Agreement.
<PAGE>
6
"Statute" has the meaning specified in the Servicing Agreement.
"Subsequent Intangible Transition Property" means Intangible
Transition Property, as identified in the related Bill of Sale, sold to the
Issuer on any Subsequent Transfer Date in connection with the issuance of a
Series of Transition Bonds.
"Subsequent Transfer Date" means any date on which Subsequent
Intangible Transition Property is to be transferred to the Issuer pursuant
to Section 2.02.
"Third Party" has the meaning specified in the Servicing
Agreement.
"Transfer Agreement" has the meaning specified in the Servicing
Agreement.
"Transferred Intangible Transition Property" means, collectively,
the Initial Intangible Transition Property and any Subsequent Intangible
Transition Property.
"UCC" has the meaning specified in the Servicing Agreement.
"West Penn" has the meaning specified in the Servicing Agreement.
(b) Except as otherwise specified herein or as the context may
otherwise require, each of the following terms has the meaning set forth in
the Indenture for all purposes of this Agreement, and the definitions of
such
<PAGE>
7
terms are equally applicable both to the singular and plural forms of such
terms:
Term Section of the Indenture
Adjustment Date.............................. 1.01(a)
Affiliate.................................... 1.01(a)
Basic Documents.............................. 1.01(a)
Bond Trustee................................. 1.01(a)
Capital Subaccount........................... 1.01(a)
Collateral................................... 1.01(a)
Collection Account........................... 1.01(a)
General Subaccount........................... 1.01(a)
Holders or Transition
Bondholders ............................... 1.01(a)
Loss Subaccount.............................. 1.01(a)
Operating Expenses........................... 1.01(a)
Overcollateralization Amount................. 1.01(a)
Person....................................... 1.01(a)
Rating Agency................................ 1.01(a)
Rating Agency Condition...................... 1.01(a)
Reserve Subaccount........................... 1.01(a)
Series....................................... 1.01(a)
Servicing Fee................................ 1.01(a)
Transition Bonds............................. 1.01(a)
SECTION 1.02. Other Definitional Provisions. (a) The words
"hereof", "herein", "hereunder" and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement; Section, Schedule and Exhibit
references contained in this Agreement are references to Sections,
Schedules and Exhibits in or to this Agreement unless otherwise specified;
and the term "including" shall mean "including without limitation".
(b) The definitions contained in this Agreement are applicable to
the singular as well as the plural forms
<PAGE>
8
of such terms and to the masculine as well as to the feminine and neuter
genders of such terms.
ARTICLE II
Conveyance of Intangible Transition Property
SECTION 2.01. Conveyance of Initial Intangible Transition
Property. (a) In consideration of the Issuer's delivery to or upon the
order of the Seller of $[ ], subject to the conditions specified in Section
2.03, the Seller, pursuant to a Bill of Sale, will irrevocably sell,
transfer, assign, set over and otherwise convey to the Issuer, without
recourse (subject to the obligations herein), all right, title and interest
of the Seller in and to the Initial Intangible Transition Property (such
sale, transfer, assignment, set over and conveyance of the Initial
Intangible Transition Property will include, to the fullest extent
permitted by the Statute, the assignment of all revenues, collections,
claims, rights, payments, money or proceeds of or arising from the
Intangible Transition Charges related to the Initial Intangible Transition
Property, as the same may be adjusted from time to time). Such sale,
transfer, assignment, set over and conveyance will be expressly stated to
be a sale and, pursuant to Section 2812(e) of the Statute, shall be treated
as an absolute transfer of all of the Seller's right, title and interest
(as in a true sale), and not as a pledge or other
<PAGE>
9
financing, of the Initial Intangible Transition Property. The preceding
sentence is the statement referred to in Section 2812(e) of the Statute.
The Seller agrees and confirms that after giving effect to the sale
contemplated by such Bill of Sale it has no rights in the Initial
Intangible Transition Property to which a security interest of creditors of
the Seller could attach because it has sold all rights in the Initial
Intangible Transition Property to the Issuer pursuant to Section 2812(e) of
the Statute.
(b) Subject to the conditions specified in Section 2.03, the
Issuer, pursuant to a Bill of Sale, will purchase the Initial Intangible
Transition Property from the Seller for the consideration set forth in
paragraph (a) above.
(c) The Seller and the Issuer each acknowledge and agree that the
purchase price for the Initial Intangible Transition Property sold pursuant
to the Bill of Sale is equal to its fair market value at the time of sale.
SECTION 2.02. Conveyance of Subsequent Intangible Transition
Property. The Seller may from time to time offer to sell additional
Intangible Transition Property to the Issuer, subject to the conditions
specified in Section 2.03. If any such offer is accepted by the Issuer,
such Subsequent Intangible Transition Property shall be sold to the Issuer
effective on the Subsequent Transfer Date specified in the
<PAGE>
10
related Addition Notice, subject to the satisfaction or waiver of the
conditions specified in Section 2.03.
SECTION 2.03. Conditions to Conveyance of Intangible Transition
Property. The Seller shall be permitted to sell Intangible Transition
Property to the Issuer only upon the satisfaction or waiver of each of the
following conditions:
(i) on or prior to the Initial Transfer Date or Subsequent
Transfer Date, as applicable, the Seller shall have delivered to the
Issuer a duly executed Bill of Sale identifying the Intangible
Transition Property to be conveyed on that date;
(ii) as of the Initial Transfer Date or the Subsequent Transfer
Date, as applicable, the Seller was not insolvent and will not have
been made insolvent by such sale and the Seller is not aware of any
pending insolvency with respect to itself;
(iii) as of the Initial Transfer Date or the Subsequent Transfer
Date, as applicable, no breach by the Seller of its representations,
warranties or covenants in this Agreement shall exist; no Servicer
Default shall have occurred and be continuing; and no breach by the
Transferor of its representations and warranties in the Transfer
Agreement shall exist;
(iv) as of the Initial Transfer Date or the Subsequent Transfer
Date, as applicable, (A) the Issuer
<PAGE>
11
shall have sufficient funds available to pay the purchase price for
the Transferred Intangible Transition Property to be conveyed on such
date and (B) all conditions to the issuance of one or more Series of
Transition Bonds intended to provide such funds set forth in the
Indenture shall have been satisfied or waived;
(v) on or prior to the Initial Transfer Date or Subsequent
Transfer Date, as applicable, the Seller shall have taken all action
required to transfer to the Issuer ownership of the Transferred
Intangible Transition Property to be conveyed on such date, free and
clear of all Liens other than Liens created by the Issuer pursuant to
the Indenture; and the Issuer or the Servicer, on behalf of the
Issuer, shall have taken any action required for the Issuer to grant
the Bond Trustee a first priority perfected security interest in the
Collateral and maintain such security interest as of such date;
(vi) in the case of a sale of Subsequent Intangible Transition
Property only, on or prior to such Subsequent Transfer Date, the
Seller shall have provided the Issuer and the Rating Agencies with a
timely Addition Notice;
(vii) the Seller shall have delivered to the Rating Agencies and
the Issuer (A) an Opinion of Counsel with
<PAGE>
12
respect to the transfer of the Transferred Intangible Transition
Property then being conveyed to the Issuer substantially in the form
of Exhibit B hereto and (B) the Opinion of Counsel required by Section
5.04(a); and
(viii) the Seller shall have delivered to the Bond Trustee and
the Issuer an Officers' Certificate confirming the satisfaction of
each condition precedent specified in this Section 2.03.
ARTICLE III
Representations and Warranties of Seller
As of the Initial Transfer Date and as of any Subsequent Transfer
Date, as applicable, the Seller makes the following representations and
warranties on which the Issuer has relied and will rely in acquiring
Transferred Intangible Transition Property. The Seller agrees and
acknowledges that the following representations and warranties are also for
the benefit of the Bond Trustee, as collateral assignee of the Issuer
pursuant to the Indenture. The representations and warranties shall survive
the sale of Transferred Intangible Transition Property to the Issuer and
the pledge thereof to the Bond Trustee pursuant to the Indenture.
SECTION 3.01. Organization and Good Standing. The Seller is a
corporation duly organized and in good standing under the laws of the State
of Delaware, with
<PAGE>
13
corporate power and authority to own its properties and conduct its
business as currently owned or conducted.
SECTION 3.02. Due Qualification. The Seller is duly qualified to
do business as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals, in all jurisdictions in which the
ownership or lease of property or the conduct of its business shall require
such qualifications, licenses or approvals (except where the failure to so
qualify would not be reasonably likely to have a material adverse effect on
the Seller's business, operations, assets, revenues, properties or
prospects).
SECTION 3.03. Power and Authority. The Seller has the corporate
power and authority to execute and deliver this Agreement and to carry out
its terms; the Seller has full corporate power and authority to own the
Intangible Transition Property and sell and assign the Initial Intangible
Transition Property, in the case of the Initial Transfer Date, and the
Subsequent Intangible Transition Property, in the case of each Subsequent
Transfer Date, as applicable, and the Seller has duly authorized such sale
and assignment to the Issuer by all necessary corporate action; and the
execution, delivery and performance of this Agreement has been duly
authorized by the Seller by all necessary corporate action.
<PAGE>
14
SECTION 3.04. Binding Obligation. This Agreement constitutes a
legal, valid and binding obligation of the Seller enforceable against the
Seller in accordance with its terms subject to bankruptcy, receivership,
insolvency, fraudulent transfer, reorganization, moratorium or other laws
affecting creditors' rights generally from time to time in effect and to
general principles of equity (regardless of whether considered in a
proceeding in equity or at law).
SECTION 3.05. No Violation. The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof do
not conflict with, result in any breach of any of the terms and provisions
of, nor constitute (with or without notice or lapse of time) a default
under, the articles of incorporation or by-laws of the Seller, or any
indenture, agreement or other instrument to which the Seller is a party or
by which it shall be bound; nor result in the creation or imposition of any
Lien upon any of its properties pursuant to the terms of any such
indenture, agreement or other instrument; nor violate any law or any order,
rule or regulation applicable to the Seller of any court or of any Federal
or state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Seller or its properties.
SECTION 3.06. No Proceedings. There are no proceedings or
investigations pending or, to the Seller's
<PAGE>
15
best knowledge, threatened, before any court, Federal or state regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over the Seller or its properties (i) asserting the invalidity
of the Basic Documents or the Transition Bonds, (ii) seeking to prevent the
issuance of the Transition Bonds or the consummation of any of the
transactions contemplated by the Basic Documents or the Transition Bonds or
(iii) except as disclosed by the Seller to the Issuer, seeking any
determination or ruling that could reasonably be expected to materially and
adversely affect the performance by the Seller of its obligations under, or
the validity or enforceability of, the Basic Documents or the Transition
Bonds.
SECTION 3.07. Approvals. Except for UCC continuation filings, no
approval, authorization, consent, order or other action of, or filing with,
any court, Federal or state regulatory body, administrative agency or other
governmental instrumentality is required in connection with the execution
and delivery by the Seller of this Agreement, the performance by the Seller
of the transactions contemplated hereby or the fulfillment by the Seller of
the terms hereof, except those that have been obtained or made.
SECTION 3.08. The Intangible Transition Property. (a)
Information. All information provided by the Seller to the Issuer with
respect to the Transferred
<PAGE>
16
Intangible Transition Property is correct in all material respects.
(b) Effect of Transfer. The transfers and assignments herein
contemplated constitute sales of the Initial Intangible Transition Property
or the Subsequent Intangible Transition Property, as the case may be, from
the Seller to the Issuer and the beneficial interest in and title to the
Transferred Intangible Transition Property would not be part of the
debtor's estate in the event of the filing of a bankruptcy petition by or
against the Seller under any bankruptcy law.
(c) Transfer Filings. The Seller is the sole owner of the
Intangible Transition Property being sold to the Issuer on the Initial
Transfer Date or Subsequent Transfer Date, as applicable; the Transferred
Intangible Transition Property has been validly transferred and sold to the
Issuer free and clear of all Liens other than Liens created by the Issuer
pursuant to the Indenture. All filings, including filings with the PUC
under the Statute, necessary in any jurisdiction to give the Issuer a valid
ownership interest in the Transferred Intangible Transition Property, free
and clear of all Liens of the Seller or anyone claiming through the Seller,
and to give the Bond Trustee a first priority perfected security interest
in the Transferred Intangible Transition Property have been made, other
than any such filings (except for filings with the PUC
<PAGE>
17
under the Statute and UCC filings with the Secretary of State of the State
of Delaware) the absence of which would not have an adverse impact on (i)
the ability of the Servicer to collect Intangible Transition Charges with
respect to the Serviced Intangible Transition Property or (ii) the rights
of the Issuer or the Bond Trustee with respect to the Transferred
Intangible Transition Property.
(d) Solvency. After giving effect to the sale of any Transferred
Intangible Transition Property hereunder, the Seller (i) is solvent and
expects to remain solvent, (ii) is adequately capitalized to conduct its
business and affairs considering its size and the nature of its business
and intended purposes, (iii) is not engaged in nor does it expect to engage
in a business for which its remaining property represents an unreasonably
small capital, (iv) believes that it will be able to pay its debts as they
come due and that such belief is reasonable and (v) is able to pay its
debts as they mature and does not intend to incur, or believe that it will
incur, indebtedness that it will not be able to repay at its maturity.
ARTICLE IV
Covenants of the Seller
SECTION 4.01. Corporate Existence. Subject to Section 5.02, so
long as any of the Transition Bonds are outstanding, the Seller will keep
in full force and effect
<PAGE>
18
its corporate existence and remain in good standing, in each case under the
laws of the jurisdiction of its incorporation, and will obtain and preserve
its qualification to do business in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Agreement and each other instrument or agreement to
which the Seller is a party necessary to the proper administration of this
Agreement and the transactions contemplated hereby.
SECTION 4.02. No Liens or Conveyances. Except for the conveyances
hereunder, the Seller will not sell, pledge, assign or transfer to any
other Person, or grant, create, incur, assume or suffer to exist any Lien
on, any of the Intangible Transition Property, whether now existing or
hereafter created, or any interest therein. The Seller shall not at any
time assert any Lien against or with respect to any Serviced Intangible
Transition Property, and shall defend the right, title and interest of the
Issuer and the Bond Trustee, as collateral assignee of the Issuer, in, to
and under the Intangible Transition Property, whether now existing or
hereafter created, against all claims of third parties claiming through or
under the Seller.
SECTION 4.03. Delivery of Collections. If the Seller receives
collections in respect of the Intangible Transition Charges or the proceeds
thereof, the Seller agrees to pay the Servicer all payments received by the
<PAGE>
19
Seller in respect thereof as soon as practicable after receipt thereof by
the Seller, but in no event later than two Business Days after such
receipt.
SECTION 4.04. Notice of Liens. The Seller shall notify the Issuer
and the Bond Trustee promptly after becoming aware of any Lien on any
Intangible Transition Property other than the conveyances hereunder, under
the Transfer Agreement or under the Indenture.
SECTION 4.05. Compliance with Law. The Seller hereby agrees to
comply with its organizational or governing documents and all laws,
treaties, rules, regulations and determinations of any governmental
instrumentality applicable to the Seller, except to the extent that failure
to so comply would not adversely affect the Issuer's or the Bond Trustee's
interests in the Intangible Transition Property or under any of the Basic
Documents or the Seller's performance of its obligations hereunder or under
any of the other Basic Documents to which it is a party.
SECTION 4.06. Covenants Related to Intangible Transition
Property. (a) So long as any of the Transition Bonds are outstanding, the
Seller shall treat the Transition Bonds as debt of the Seller for Federal
income tax purposes.
(b) So long as any of the Transition Bonds are outstanding, the
Seller shall (i) clearly disclose in its financial statements that it is
not the owner of the Transferred Intangible Transition Property and that
the
<PAGE>
20
assets of the Issuer are not available to pay creditors of the Seller or
any of its Affiliates and (ii) clearly disclose the effects of all
transactions between the Seller and the Issuer in accordance with generally
accepted accounting principles.
(c) The Seller agrees that upon the sale by the Seller of the
Transferred Intangible Transition Property to the Issuer pursuant to a Bill
of Sale, (i) to the fullest extent permitted by law, including applicable
PUC Regulations, the Issuer shall have all of the rights originally held by
the Seller with respect to the Transferred Intangible Transition Property,
including the right to collect any amounts payable by any Customer or Third
Party in respect of such Transferred Intangible Transition Property,
notwithstanding any objection or direction to the contrary by the Seller
and (ii) any payment by any Customer or Third Party to the Issuer shall
discharge such Customer's or such Third Party's obligations in respect of
such Transferred Intangible Transition Property to the extent of such
payment, notwithstanding any objection or direction to the contrary by the
Seller.
(d) So long as any of the Transition Bonds are outstanding, the
Seller shall not make any statement or reference in respect of the
Transferred Intangible Transition Property that is inconsistent with the
ownership thereof by the Issuer.
<PAGE>
21
SECTION 4.07. Notice of Indemnification Events.
The Seller shall deliver to the Issuer and the Bond Trustee
promptly after having obtained knowledge thereof, written notice in an
Officers' Certificate of any Indemnification Event or any event which, with
the giving of notice or the passage of time, would become an
Indemnification Event.
SECTION 4.08. Protection of Title. The Seller shall execute and
file such filings, including filings with the PUC pursuant to the Statute,
and cause to be executed and filed such filings, all in such manner and in
such places as may be required by law fully to preserve, maintain, and
protect the interests of the Issuer in the Transferred Intangible
Transition Property, including all filings required under the Statute
relating to the transfer of the ownership or security interest in the
Transferred Intangible Transition Property by the Seller to the Issuer. The
Seller shall deliver (or cause to be delivered) to the Issuer file-stamped
copies of, or filing receipts for, any document filed as provided above, as
soon as available following such filing. The Seller agrees to take such
legal or administrative actions, including defending against or instituting
and pursuing legal actions and appearing or testifying at hearings or
similar proceedings, as may be reasonably necessary (i) to protect the
Issuer and the Transition Bondholders from claims, state actions or other
<PAGE>
22
actions or proceedings of third parties which, if successfully pursued,
would result in a breach of any representation or warranty set forth in
Article III or (ii) to block or overturn any attempts to cause a repeal of,
modification of or supplement to the Statute or the Qualified Rate Order or
the rights of holders of Intangible Transition Property by legislative
enactment or constitutional amendment that would be adverse to the holders
of Intangible Transition Property.
SECTION 4.09. Taxes. So long as any of the Transition Bonds are
outstanding, the Seller shall, and shall cause each of its subsidiaries to,
pay all material taxes, including gross receipts taxes, assessments and
governmental charges imposed upon it or any of its properties or assets or
with respect to any of its franchises, business, income or property before
any penalty accrues thereon if the failure to pay any such taxes,
assessments and governmental charges would, after any applicable grace
periods, notices or other similar requirements, result in a lien on the
Intangible Transition Property; provided that no such tax need be paid if
the Seller or one of its subsidiaries is contesting the same in good faith
by appropriate proceedings promptly instituted and diligently conducted and
if the Seller or such subsidiary has established appropriate reserves as
shall be
<PAGE>
23
required in conformity with generally accepted accounting principles.
SECTION 4.10. Separate Entity. The Seller shall take all
reasonable steps to continue its identity as a separate legal entity and to
make it apparent to third persons that it is an entity with assets and
liabilities distinct from those of West Penn, other affiliates or any other
Person, and that, except for financial reporting purposes (to the extent
required by generally accepted accounting principles) and for state and
Federal income and franchise tax purposes, it is not a division of West
Penn or any of its affiliated entities or any other Person.
ARTICLE V
The Seller
SECTION 5.01. Liability of Seller; Indemnities. (a) The Seller
shall be liable in accordance herewith only to the extent of the
obligations specifically undertaken by the Seller under this Agreement.
(b) The Seller shall indemnify the Issuer and the Bond Trustee,
for itself and on behalf of the Transition Bondholders, and each of their
respective members, managers, officers, directors and agents for, and
defend and hold harmless each such Person from and against, any and all
taxes (other than any taxes imposed on Transition Bondholders solely as a
result of their ownership of
<PAGE>
24
Transition Bonds) that may at any time be imposed on or asserted against
any such Person as a result of the acquisition or holding of the
Transferred Intangible Transition Property by the Issuer or the issuance
and sale by the Issuer of the Transition Bonds, including any sales, gross
receipts, general corporation, tangible personal property, privilege or
license taxes.
(c)(i) The Seller shall indemnify the Issuer and the Bond
Trustee, on behalf of the Transition Bondholders, each of their respective
members, managers, officers, directors, and agents, and defend and hold
harmless each such Person from and against, any and all Losses that may be
imposed on, incurred by or asserted against any such Person as a result of
(x) the Seller's wilful misconduct, bad faith or gross negligence in the
performance of its duties or observance of its covenants under this
Agreement, (y) the Seller's reckless disregard of its obligations and
duties under this Agreement or (z) the Seller's breach of any of its
representations or warranties contained in this Agreement (any event
described in any of the foregoing clauses (x), (y) or (z), an
"Indemnification Event"). Amounts on deposit in the Reserve Subaccount and
the Capital Subaccount shall not be available to satisfy any Losses for
which indemnification is provided in this Agreement.
(ii) If an Indemnification Event shall occur, upon receipt of
written notice thereof by the Seller from the
<PAGE>
25
Issuer or the Bond Trustee, the Seller shall notify the Servicer of the
occurrence of such event so that the Servicer may, pursuant to Section 7 of
Annex 1 to the Servicing Agreement, calculate (x) on the day which is 90
days after receipt of such notice by the Seller (the "Initial Loss
Calculation Date") the amount of Losses expected to be incurred as a result
of such Indemnification Event from and including the time of its occurrence
through and including the next Payment Date after the Initial Loss
Calculation Date and (y) to the extent that Losses may be incurred as a
result of such Indemnification Event in an amount exceeding the amount of
Losses calculated pursuant to clause (x) above, not later than each Payment
Date succeeding the Initial Loss Calculation Date, the amount of Losses
expected to be incurred as a result of such Indemnification Event from but
excluding such Payment Date through and including the next Payment Date.
All such calculations shall be subject to the approval of the Bond Trustee.
If such Indemnification Event shall continue unremedied beyond the Initial
Loss Calculation Date, the Seller shall pay to the Bond Trustee, as
collateral assignee of the Issuer, for deposit into the General Subaccount
of the Collection Account, (x) on the Payment Date immediately following
the Initial Loss Calculation Date, the amount of Losses calculated pursuant
to clause (x) and clause (y) of the preceding sentence with respect to such
Payment Date and
<PAGE>
26
(y) on each subsequent Payment Date, the amount of Losses calculated as of
such date pursuant to clause (y) of the preceding sentence. Upon payment
pursuant to this Section 5.01(c)(ii), the Seller shall have no further
obligations with respect to such Losses to the extent of such payments.
(d) The Seller shall indemnify the Bond Trustee and its officers,
directors and agents for, and defend and hold harmless each such Person
from and against, any and all Losses that may be imposed upon, incurred by
or asserted against any such Person as a result of the acceptance or
performance of the trusts and duties contained herein and in the Indenture,
except to the extent that any such Loss shall be due to the wilful
misfeasance, bad faith or gross negligence of the Bond Trustee. Such
amounts shall be deposited into the Collection Account and distributed in
accordance with the Indenture.
(e) The Seller's indemnification obligations under Section
5.01(b),(c) and (d) for events occurring prior to the removal or
resignation of the Bond Trustee or the termination of this Agreement shall
survive the resignation or removal of the Bond Trustee or the termination
of this Agreement and shall include reasonable fees and expenses of
investigation and litigation (including the Bond Trustee's reasonable
attorney's fees and expenses).
SECTION 5.02. Merger or Consolidation of, or Assumption of the
Obligations of, Seller. Any Person
<PAGE>
27
(a) into which the Seller may be merged or consolidated, (b) which results
from the division of the Seller into two or more Persons, (c) which may
result from any merger or consolidation to which the Seller shall be a
party, or (d) which may succeed to the properties and assets of the Seller
substantially as a whole, which Person in any of the foregoing cases
executes an agreement of assumption to perform every obligation of the
Seller under this Agreement, shall be the successor to the Seller hereunder
without the execution or filing of any document or any further act by any
of the parties to this Agreement; provided, however, that (i) immediately
after giving effect to such transaction, no representation or warranty made
pursuant to Article III shall have been breached and no Servicer Default,
and no event that, after notice or lapse of time, or both, would become a
Servicer Default, shall have occurred and be continuing, (ii) the Seller
shall have delivered to the Issuer and the Bond Trustee an Officers'
Certificate and an Opinion of Counsel each stating that such consolidation,
merger or succession and such agreement of assumption comply with this
Section and that all conditions precedent, if any, provided for in this
Agreement relating to such transaction have been complied with, (iii) the
Rating Agencies shall have received prior written notice of such
transaction and (iv) the Seller shall have delivered to the Issuer and the
Bond Trustee an Opinion of Counsel either
<PAGE>
28
(A) stating that, in the opinion of such counsel, all filings, including
filings with the PUC pursuant to the Statute, have been executed and filed
that are necessary fully to preserve and protect the interest of the Issuer
in the Transferred Intangible Transition Property and reciting the details
of such filings or (B) stating that, in the opinion of such counsel, no
such action shall be necessary to preserve and protect such interests.
Notwithstanding anything herein to the contrary, the execution of the above
described agreement of assumption and compliance with clauses (i), (ii),
(iii) and (iv) above shall be conditions precedent to the consummation of
any transaction referred to in clauses (a), (b), (c) or (d) above.
SECTION 5.03. Limitation on Liability of Seller and Others. The
Seller and any director or officer or employee or agent of the Seller may
rely in good faith on the advice of counsel or on any document of any kind,
prima facie properly executed and submitted by any Person, respecting any
matters arising hereunder. Subject to Section 4.08, the Seller shall not be
under any obligation to appear in, prosecute or defend any legal action
that is not incidental to its obligations under this Agreement, and that in
its opinion may involve it in any expense or liability.
SECTION 5.04. Opinions of Counsel. The Seller shall deliver to
the Issuer and the Bond Trustee: (a)
<PAGE>
29
promptly after the execution and delivery of this Agreement and of each
amendment hereto or to the Servicing Agreement and on each Subsequent
Transfer Date, an Opinion of Counsel either (i) to the effect that, in the
opinion of such counsel, all filings, including filings with the PUC
pursuant to the Statute, that are necessary to fully preserve and protect
the interests of the Issuer in the Intangible Transition Property have been
executed and filed, and reciting the details of such filings or referring
to prior Opinions of Counsel in which such details are given, or (ii) to
the effect that, in the opinion of such counsel, no such action shall be
necessary to preserve and protect such interest; and (b) within 90 days
after the beginning of each calendar year beginning with the first calendar
year beginning more than three months after the Initial Transfer Date, an
Opinion of Counsel, dated as of a date during such 90-day period, either
(i) to the effect that, in the opinion of such counsel, all filings with
the PUC pursuant to the Statute, have been executed and filed that are
necessary to preserve fully and protect fully the interest of the Issuer in
the Intangible Transition Property, and reciting the details of such
filings or referring to prior Opinions of Counsel in which such details are
given, or (ii) to the effect that, in the opinion of such counsel, no such
action shall be necessary to preserve and protect such interest. Each
Opinion of Counsel referred to in clause (a) or (b)
<PAGE>
30
above shall specify any action necessary (as of the date of such opinion)
to be taken in the following year to preserve and protect such interest.
ARTICLE VI
Miscellaneous Provisions
SECTION 6.01. Amendment. This Agreement may be amended by the
Seller and the Issuer, with the consent of the Bond Trustee. The Issuer
shall furnish to each of the Rating Agencies (i) prior to the execution of
any such amendment or consent, written notification of the substance
thereof and (ii) promptly after the execution of any such amendment or
consent, a copy thereof.
Prior to the execution of any amendment to this Agreement, the
Issuer and the Bond Trustee shall be entitled to receive and rely upon an
Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement and the Opinion of Counsel
referred to in Section 5.04(a). The Issuer and the Bond Trustee may, but
shall not be obligated to, enter into any such amendment which affects
their own rights, duties or immunities under this Agreement or otherwise.
SECTION 6.02. Notices. All demands, notices and communications
upon or to the Seller, the Issuer, the Bond Trustee or the Rating Agencies
under this Agreement shall be in writing, delivered personally, via
facsimile, reputable
<PAGE>
31
overnight courier or by certified mail, return-receipt requested, and shall
be deemed to have been duly given upon receipt (a) in the case of the
Seller, to West Penn Funding Corporation, 800 Cabin Hill Drive, Greensburg,
PA 15601, Attention of [ ], (b) in the case of the Issuer, to West Penn
Funding LLC, 800 Cabin Hill Drive, Greensburg, PA 15601, Attention of [ ],
(c) in the case of the Bond Trustee, at the Corporate Trust Office, (d) in
the case of Moody's, to Moody's Investors Service, Inc., ABS Monitoring
Department, 99 Church Street, New York, New York 10007, (e) in the case of
Standard & Poor's, to Standard & Poor's Corporation, 26 Broadway (15th
Floor), New York, New York 10004, Attention of Asset Backed Surveillance
Department, and (f) in the case of Fitch IBCA, to Fitch IBCA, Inc., One
State Street Plaza, New York, New York 10004, Attention of ABS
Surveillance; or, as to each of the foregoing, at such other address as
shall be designated by written notice to the other parties.
SECTION 6.03. Assignment. Notwithstanding anything to the
contrary contained herein, except as pro vided in Section 5.02, this
Agreement may not be assigned by the Seller.
SECTION 6.04. Limitations on Rights of Others. The provisions of
this Agreement are solely for the benefit of the Seller, the Issuer and the
Bond Trustee, on behalf of itself and the Transition Bondholders, and
nothing in this
<PAGE>
32
Agreement, whether express or implied, shall be construed to give to any
other Person any legal or equitable right, remedy or claim in the
Collateral or under or in respect of this Agreement or any covenants,
conditions or provisions contained herein.
SECTION 6.05. Severability. Any provision of this Agreement that
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction.
SECTION 6.06. Separate Counterparts. This Agreement may be
executed by the parties hereto in separate counterparts, each of which when
so executed and delivered shall be an original, but all such counterparts
shall together constitute but one and the same instrument.
SECTION 6.07. Headings. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define
or limit any of the terms or provisions hereof.
SECTION 6.08. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of New York, without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
<PAGE>
33
parties hereunder shall be determined in accordance with such laws.
SECTION 6.09. Assignment to Bond Trustee. The Seller hereby
acknowledges and consents to the mortgage, pledge, assignment and grant of
a security interest by the Issuer to the Bond Trustee pursuant to the
Indenture for the benefit of the Transition Bondholders of all right, title
and interest of the Issuer in, to and under the Transferred Intangible
Transition Property and the proceeds thereof and the assignment of any or
all of the Issuer's rights hereunder to the Bond Trustee. In no event shall
[Name of Bond Trustee] have any liability for the representations,
warranties, covenants, agreements or other obligations of the Issuer,
hereunder or in any of the certificates, notices or agreements delivered
pursuant hereto, as to all of which recourse shall be had solely to the
assets of the Issuer.
SECTION 6.10. Nonpetition Covenant. Notwithstanding any prior
termination of this Agreement or the Indenture, but subject to the PUC's
rights to order the sequestration and payment of revenues arising with
respect to the Intangible Transition Property notwithstanding any
bankruptcy, reorganization or other insolvency proceedings with respect to
the debtor, pledgor or transferor of the Intangible Transition Property
pursuant to Section 2812(d)(3)(v) of the Statute, the Seller shall not,
prior to the date which is one year and one day after the
<PAGE>
34
termination of the Indenture, petition or otherwise invoke or cause the
Issuer to invoke the process of any court or government authority for the
purpose of commencing or sustaining a case against the Issuer under any
Federal or state bankruptcy, insolvency or similar law or appointing a
receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Issuer or any substantial part of the property of
the Issuer, or ordering the winding up or liquidation of the affairs of the
Issuer.
SECTION 6.11. Perfection. In accordance with Section 2812(e) of
the Statute, upon the execution and delivery of this Agreement and the
related Bill of Sale, the transfer of the Initial Intangible Transition
Property will be perfected as against all third persons, including any
judicial lien creditors, and upon the execution and delivery of a Bill of
Sale and, if applicable, a supplement to this Agreement, a transfer of
Subsequent Intangible Transition
<PAGE>
35
Property will be perfected against all third persons, including any
judicial lien creditors.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their respective officers as of the day and year
first above written.
WEST PENN FUNDING LLC, Issuer,
by [ ], as Manager,
by
-------------------------------
Title:
WEST PENN FUNDING
CORPORATION, Seller,
by
--------------------------------
Title:
Acknowledged and Accepted:
[ ], not
in its individual capacity
but solely as Bond Trustee
on behalf of the Transition
Bondholders,
by
------------------------
Title:
EXHIBIT B-4
===========================================================================
SERVICING AGREEMENT
between
WEST PENN FUNDING LLC
and
WEST PENN POWER COMPANY
Servicer
Dated as of [ ], 1999
===========================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
Definitions
SECTION 1.01. Definitions.......................................... 2
SECTION 1.02. Other Definitional Provisions........................ 12
ARTICLE II
Appointment and Authorization of Servicer
SECTION 2.01. Appointment of Servicer; Acceptance
of Appointment..................................... 12
SECTION 2.02. Authorization........................................ 13
SECTION 2.03. Dominion and Control over Serviced
Intangible Transition Property..................... 13
ARTICLE III
Billing Services
SECTION 3.01. Duties of Servicer................................... 14
SECTION 3.02. Collection of Intangible Transition
Charges............................................ 16
SECTION 3.03. Servicing and Maintenance Standards.................. 18
SECTION 3.04. Servicer's Certificates.............................. 19
SECTION 3.05. Annual Statement as to Compliance;
Notice of Default.................................. 19
SECTION 3.06. Annual Independent Certified Public
Accountants' Report................................ 20
SECTION 3.07. Intangible Transition Property
Documentation...................................... 22
SECTION 3.08. Computer Records; Audits of
Documentation...................................... 22
SECTION 3.09. Defending Intangible Transition Property
Against Claims..................................... 24
SECTION 3.10. Opinions of Counsel.................................. 24
<PAGE>
Contents, p. ii
ARTICLE IV
Services Related to Intangible
Transition Charges Adjustments
SECTION 4.01. Intangible Transition Charges
Adjustments........................................ 26
ARTICLE V
The Servicer
SECTION 5.01. Representations and Warranties of
Servicer........................................... 26
SECTION 5.02. Indemnities of Servicer; Release of
Claims............................................. 30
SECTION 5.03. Merger or Consolidation of, or
Assumption of the Obligations of,
Servicer........................................... 33
SECTION 5.04. Assignment of Servicer's Obligations................. 35
SECTION 5.05. Limitation on Liability of Servicer
and Others......................................... 35
SECTION 5.06. West Penn Not To Resign as Servicer.................. 36
SECTION 5.07. Servicing Fee........................................ 37
SECTION 5.08. Servicer Expenses.................................... 37
SECTION 5.09. Appointments......................................... 38
SECTION 5.10. Remittances.......................................... 39
SECTION 5.11. Servicer Advances.................................... 40
SECTION 5.12. Protection of Title.................................. 40
ARTICLE VI
Servicer Default
SECTION 6.01. Servicer Default..................................... 41
SECTION 6.02. Notice of Servicer Default........................... 44
SECTION 6.03. Waiver of Past Defaults.............................. 45
SECTION 6.04. Appointment of Successor............................. 45
ARTICLE VII
Miscellaneous Provisions
SECTION 7.01. Amendment............................................ 47
SECTION 7.02. Notices.............................................. 48
SECTION 7.03. Assignment........................................... 49
<PAGE>
Contents, p. iii
SECTION 7.04. Limitations on Rights of Others...................... 49
SECTION 7.05. Severability......................................... 49
SECTION 7.06. Separate Counterparts................................ 50
SECTION 7.07. Headings............................................. 50
SECTION 7.08. Governing Law........................................ 50
SECTION 7.09. Assignment to Bond Trustee........................... 50
SECTION 7.10. Nonpetition Covenants................................ 51
SECTION 7.11. Termination.......................................... 52
EXHIBIT A Servicing Procedures
ANNEX 1 ITC Adjustment Process and Reports - West
Penn Funding LLC
<PAGE>
SERVICING AGREEMENT dated as of [ ], 1999, between
WEST PENN FUNDING LLC, a Delaware limited liability
company (the "Issuer"), and WEST PENN POWER COMPANY, a
Pennsylvania corporation, as the servicer of the
Intangible Transition Property (together with each
successor to WEST PENN POWER COMPANY (in the same
capacity) pursuant to Section 5.03 or 6.02, the
"Servicer").
WHEREAS the Servicer is willing to service the Intangible
Transition Property purchased from the Seller by the Issuer; and
WHEREAS the Issuer, in connection with ownership of Serviced
Intangible Transition Property, desires to engage the Servicer to carry out
the functions described herein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained and intending to be legally bound hereby, the
parties hereto agree as follows:
<PAGE>
2
ARTICLE I
Definitions
SECTION 1.01. Definitions. Whenever used in this Agreement, each
of the following words and phrases shall have the following meaning:
"Administration Agreements" means, collectively, the Seller
Administration Agreement and the Issuer Administration Agreement.
"Administrative Fees" means the fees owed to Allegheny Power
Service Corporation, as administrative agent, under the Administration
Agreements.
"Agreement" means this Servicing Agreement, as the same may be
amended and supplemented from time to time.
"Annual Accountant's Report" has the meaning specified in Section
3.06(a).
"Bond Trustee" means, [ ], a [ ], as bond trustee under the
Indenture, or any successors to the foregoing.
"Business Day" means any day other than a Satur day, Sunday or a
day on which banking institutions in the City of New York, the City of
Greensburg, Pennsylvania or the State of Delaware are required by law or
executive order to remain closed.
"Class" means, with respect to any Series, any one of the classes
of Transition Bonds of that Series.
<PAGE>
3
"Collateral" means, with respect to the Issuer, all property of
the Issuer pledged by it to secure Transition Bonds issued by the Issuer as
provided in the Indenture.
"Collection Period" means the period from and including the first
day of a calendar month to and including the last day of the same calendar
month.
"Competitive Transition Charges" means the competitive transition
charges that West Penn may impose on Customers as set forth in Appendix A
to the Joint Petition for Approval of Full Settlement of West Penn Power
Company's Restructuring Plan and Related Court Proceedings and approved in
the Final Order issued on November 19, 1998 by the PUC with respect to West
Penn's restructuring plan.
"Customers" means each person that (i) was a customer of West
Penn located within West Penn's retail electric service territory on
January 1, 1997 or that became a customer of electric services within such
territory after January 1, 1997, (ii) is still located within such
territory, and (iii) is in a Rate Schedule that has been assigned stranded
cost responsibility.
"Fitch IBCA" means Fitch IBCA, Inc. or its successor.
"Formation Document" means the Amended and Restated Limited
Liability Company Agreement of the Issuer
<PAGE>
4
dated as of [ ], 1999, between the Seller and [ ], as the
same may be amended and supplemented from time to time.
"Holder" or "Transition Bondholder" means the Person in whose
name a Transition Bond of any Series or Class is registered as provided in
the Indenture therefor.
"Indenture" means the indenture dated as of [ ], 1999, between
the Issuer and [ ], as the same may be amended and supplemented from time
to time, including by any Series Supplement.
"Insolvency Event" means, with respect to a specified Person, (a)
the filing of a decree or order for relief by a court having jurisdiction
in the premises in respect of such Person or any substantial part of its
property in an involuntary case under any applicable Federal or state
bankruptcy, insolvency or other similar law now or hereafter in effect, or
appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official for such Person or for any substantial
part of its property, or ordering the winding-up or liquidation of such
Person's affairs, and such decree or order shall remain unstayed and in
effect for a period of 90 consecutive days or (b) the commencement by such
Person of a voluntary case under any applicable Federal or state
bankruptcy, insolvency or other similar law now or hereafter in effect, or
the
<PAGE>
5
consent by such Person to the entry of an order for relief in an
involuntary case under any such law, or the consent by such Person to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, seques trator or similar official for such Person or
for any sub stantial part of its property, or the making by such Person of
any general assignment for the benefit of creditors, or the failure by such
Person generally to pay its debts as such debts become due, or the taking
of action by such Person in furtherance of any of the foregoing.
"Intangible Transition Charges" means the amounts authorized by
the PUC to be imposed on all Customer bills with respect to the Intangible
Transition Property and collected, through a non-bypassable mechanism, by
West Penn or its successor or by any other entity which provides electric
service to Customers, to recover Qualified Transition Expenses pursuant to
the Qualified Rate Order.
"Intangible Transition Charges Adjustment" means each adjustment
to Intangible Transition Charges related to the Serviced Intangible
Transition Property made in accordance with Section 4.01 and Annex 1 hereto
or in connection with the redemption by the Issuer of Transition Bonds.
"Intangible Transition Property" means the irrevocable right of
West Penn or its successor or assignee
<PAGE>
6
to collect Intangible Transition Charges from Customers to recover the
Qualified Transition Expenses described in the Qualified Rate Order,
including all right, title and interest of West Penn or its successor or
assignee in such order and in all revenues, collections, claims, payments,
money or proceeds of or arising from Intangible Transition Charges pursuant
to such order, and all proceeds of any of the foregoing.
"Intangible Transition Property Documentation" has the meaning
assigned to that term in Section 3.07.
"Issuer" means West Penn Funding LLC until a successor replaces
it and, thereafter, such successor.
"Issuer Administration Agreement" means the Administration
Agreement dated as of [ ], 1999, between the Issuer and Allegheny Power
Service Corporation, as administrative agent.
"ITC Collections" means amounts collected in respect of
Intangible Transition Charges or the Intangible Transition Property.
"Lien" means a security interest, lien, charge, pledge, equity or
encumbrance of any kind.
"Losses" means collectively, any and all liabilities,
obligations, losses, damages, payments, costs or expenses of any kind
whatsoever.
<PAGE>
7
"Moody's" means Moody's Investors Service Inc., or its successor.
"Officers' Certificate" means a certificate signed by (a) the
chairman of the board, the president, the vice chairman of the board, the
executive vice president or any vice president and (b) a treasurer,
assistant treasurer, secretary or assistant secretary, in each case of the
Servicer.
"Operating Expenses" means, with respect to the Issuer, all fees,
costs, expenses and indemnity payments owed by the Issuer, including all
amounts owed by the Issuer to the Bond Trustee, the Servicing Fee payable
in respect of Transition Bonds issued by such Issuer, the Administration
Fees, legal fees and expenses of the Servicer and legal and accounting
fees, costs and expenses of the Issuer and the Bond Trustee.
"Opinion of Counsel" means one or more written opinions of
counsel who may be an employee of or counsel to West Penn or the Servicer,
which counsel shall be reasonably acceptable to the Bond Trustee, the
Issuer or the Rating Agencies, as applicable, and shall be in form
reasonably satisfactory to the Bond Trustee, if applicable.
"Payment Date" means each [ ], [ ], [ ]
and [ ], commencing on [ ], 1999, or if any
<PAGE>
8
such date is not a Business Day, the next succeeding Business Day.
"Person" means any individual, corporation, estate, partnership,
joint venture, association, joint stock company, trust (including any
beneficiary thereof), business trust, unincorporated organization or
government or any agency or political subdivision thereof.
"PUC" means the Pennsylvania Public Utility Commission or any
successor.
"PUC Regulations" means any regulations promulgated or adopted by
the PUC.
"Qualified Rate Order" means the order of the PUC issued on
November 19, 1998, as supplemented by a supplemental qualified rate order
of the PUC issued on [ ], 1999, adopted in accordance with the Statute,
which, among other things, creates the Intangible Transition Property and
authorizes the imposition and collection of the Intangible Transition
Charges by West Penn or its assignee.
"Qualified Transition Expenses" has the meaning assigned to that
term in the Qualified Rate Order.
"Rate Schedule" means each of the rate schedules into which
Customers are divided as of the date hereof, as such rate schedules may be
reconfigured from time to time.
"Rating Agency" means any rating agency rating the Transition
Bonds of any Class or Series at the time of
<PAGE>
9
issuance thereof at the request of the Issuer. If no such organization or
successor is any longer in existence, "Rating Agency" shall be a nationally
recognized statistical rating organization or other comparable Person
designated by the Issuer, notice of which designation shall be given to the
Bond Trustee under the Indenture and the Servicer.
"Rating Agency Condition" means, with respect to any action, the
notification in writing by each Rating Agency to the Transferor, the
Seller, the Servicer, the Bond Trustee and the Issuer that such action will
not result in a reduction or withdrawal of the then current rating by such
Rating Agency of any outstanding Series or Class of Transition Bonds issued
by the Issuer.
"Released Parties" has the meaning specified in Section 5.02(e).
"Remittance Date" means each date on which ITC Collections are to
be remitted by the Servicer to the Bond Trustee pursuant to Section 5.10.
"Sale Agreement" means the Intangible Transition Property Sale
Agreement dated as of [ ], 1999, between the Seller and the Issuer,
relating to the sale of Intangible Transition Property to the Issuer.
"Seller" means West Penn Funding Corporation and its successors
in interest to the extent permitted under the Sale Agreement.
<PAGE>
10
"Seller Administration Agreement" means the Administration
Agreement dated as of [ ], 1999, between the Seller and
Allegheny Power Service Corporation, as administrative agent.
"Series" means any series of Transition Bonds issued by any of
the Issuers.
"Series Supplement" means an indenture supplemental to the
Indenture that authorizes a particular Series of Transition Bonds.
"Serviced Intangible Transition Property" means, collectively,
all Intangible Transition Property sold, conveyed, assigned or otherwise
transferred to the Issuer by the Seller.
"Servicer Default" means an event specified in Section 6.01.
"Servicing Fee" means, with respect to any Series of Transition
Bonds, the fee payable to the Servicer on each Payment Date for services
rendered, determined pursuant to Section 5.07.
"Servicing Fee Rate" means, with respect to any Series of
Transition Bonds, the per annum rate specified in the Series Supplement
pursuant to which such Transition Bonds are issued.
"Standard & Poor's means Standard & Poor's Rating Group, or its
successor.
<PAGE>
11
"Statute" means the Pennsylvania Electricity Generation Customer
Choice and Competition Act, Chapter 28 of Title 66 of the Pennsylvania
Consolidated Statutes, 66 Pa. C.S., ss.2801, et seq.
"Termination Notice" has the meaning specified in Section
6.01(d).
"Third Party" means any third party, including any electric
generation supplier, providing billing or metering services, licensed by
the PUC pursuant to relevant provisions of the Statute and any PUC order.
"Transfer Agreement" means the Intangible Transition Property
Transfer Agreement dated as of [ ], 1999, between the Transferor and the
Seller relating to the transfer of Intangible Transition Property to the
Seller.
"Transfer Date" means each date on which the Seller sells,
conveys, or otherwise transfers any Intangible Transition Property to the
Issuer.
"Transferor" means West Penn Power Company, as transferor under
the Transfer Agreement, and its successors in interest to the extent
permitted hereunder.
"Transition Bonds" means "transition bonds" (as defined in the
Statute) issued by the Issuer.
"UCC" means, unless the context otherwise requires, the Uniform
Commercial Code, as in effect in the relevant jurisdiction, as amended from
time to time.
<PAGE>
12
"West Penn" means West Penn Power Company, a Pennsylvania
corporation.
SECTION 1.02. Other Definitional Provisions. (a) The words
"hereof", "herein", "hereunder" and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement; Section, Annex, Schedule and
Exhibit references contained in this Agreement are references to Sections,
Annexes, Schedules and Exhibits in or to this Agreement unless otherwise
specified; and the term "including" shall mean "including without
limitation".
(b) The definitions contained in this Agreement are applicable to
the singular as well as the plural forms of such terms and to the masculine
as well as to the feminine and neuter genders of such terms.
ARTICLE II
Appointment and Authorization of Servicer
SECTION 2.01. Appointment of Servicer; Acceptance of Appointment.
Subject to Section 5.04 and Article VI, the Issuer hereby appoints the
Servicer, and the Servicer hereby accepts such appointment, to perform the
Servicer's obligations pursuant to this Agreement on behalf of and for the
benefit of the Issuer in accordance with the terms of this Agreement. This
appointment and the Servicer's
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13
acceptance thereof may not be revoked except in accordance with the express
terms of this Agreement.
SECTION 2.02. Authorization. With respect to all or any portion
of the Serviced Intangible Transition Property, the Servicer shall be, and
hereby is, authorized and empowered by the Issuer to (a) execute and
deliver, on behalf of itself or the Issuer, as the case may be, any and all
instruments, documents or notices, and (b) on behalf of itself or the
Issuer, as the case may be, make any filing and participate in proceedings
of any kind with any governmental authorities, including with the PUC. The
Issuer shall furnish the Servicer with such documents as have been prepared
by the Servicer for execution by the Issuer, and with the other documents
as may be in the Issuer's possession, as necessary or appropriate to enable
the Servicer to carry out its servicing and administrative duties
hereunder. Upon the written request of the Servicer, the Issuer shall
furnish the Servicer with any powers of attorney or other documents
necessary or appropriate to enable the Servicer to carry out its duties
hereunder.
SECTION 2.03. Dominion and Control over Serviced Intangible
Transition Property. Notwithstanding any other provision herein, the
Servicer and the Issuer agree that the Issuer shall have dominion and
control over its respective Serviced Intangible Transition Property, and
the Servicer,
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14
in accordance with the terms hereof, is acting solely as the servicing
agent of the Issuer with respect to the Serviced Intangible Transition
Property owned by the Issuer. The Servicer hereby agrees that it shall not
take any action that is not authorized by this Agreement, that is not
consistent with its customary procedures and practices, or that shall
impair the rights of the Issuer in its respective Serviced Intangible
Transition Property, in each case unless such action is required by law or
court or regulatory order.
ARTICLE III
Billing Services
SECTION 3.01. Duties of Servicer. The Servicer, as agent for the
Issuer (to the extent provided herein), shall have the following duties:
(a) Duties of Servicer Generally. The Servicer will manage,
service, administer and make collections in respect of the Serviced
Intangible Transition Property. The Servicer's duties will include (i)
calculating and billing the Intangible Transition Charges and
collecting (from Customers and Third Parties, as applicable) and
posting all ITC Collections; (ii) responding to inquiries by
Customers, Third Parties, the PUC, or any Federal, local or other
state governmental authorities with respect to the Serviced Intangible
Transition Property and Intangible
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15
Transition Charges; (iii) accounting for ITC Collections,
investigating delinquencies, processing and depositing collections and
making periodic remittances, furnishing periodic reports to the
Issuer, the Bond Trustee and the Rating Agencies; (iv) selling, as the
agent for the Issuer, as its interest may appear, defaulted or written
off accounts in accordance with the Servicer's usual and customary
practices; and (v) taking action in connection with Intangible
Transition Charge Adjustments as set forth herein. Anything to the
contrary notwithstanding, the duties of the Servicer set forth in this
Agreement shall be qualified in their entirety by any PUC Regulations
as in effect at the time such duties are to be performed. Without
limiting the generality of this Section 3.01(a), in furtherance of the
foregoing, the Servicer hereby agrees that it shall also have, and
shall comply with, the duties and responsibilities relating to data
acquisition, usage and bill calculation, billing, customer service
functions, collections, payment processing and remittance set forth in
Exhibit A hereto.
(b) Notification of Laws and Regulations. The Servicer shall
immediately notify the Issuer, the Bond Trustee and the Rating
Agencies in writing of any laws
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16
or PUC Regulations hereafter promulgated that have a material adverse
effect on the Servicer's ability to perform its duties under this
Agreement.
(c) Other Information. Upon the reasonable request of the Issuer,
the Bond Trustee or any Rating Agency, the Servicer shall provide to
the Issuer, the Bond Trustee or such Rating Agency, as the case may
be, any public financial information in respect of the Servicer, or
any material information regarding the Intangible Transition Property
to the extent it is reasonably available to the Servicer, as may be
reasonably necessary and permitted by law for the Issuer, the Bond
Trustee or such Rating Agency to monitor the performance by the
Servicer hereunder. In addition, so long as any of the Transition
Bonds of any Series are outstanding, the Servicer shall provide the
Issuer and the Bond Trustee, within a reasonable time after written
request therefor, any information available to the Servicer or
reasonably obtainable by it that is necessary to calculate the
Intangible Transition Charges applicable to each Rate Schedule.
SECTION 3.02. Collection of Intangible Transition Charges. (a)
The Servicer shall use all reasonable efforts consistent with its customary
servicing procedures to collect all amounts owed in respect of Intangible
Transition
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17
Charges as and when the same shall become due and shall follow such
collection procedures as it follows with respect to collection activities
that the Servicer conducts for itself or others. The Servicer shall not
change the amount of or reschedule the due date of any scheduled payment of
Intangible Transition Charges, except as contemplated in this Agreement or
as required by law or court or PUC order; provided, however, that the
Servicer may take any of the foregoing actions to the extent that such
action would be in accordance with customary billing and collection
practices of the Servicer with respect to billing and collection activities
that it conducts for itself.
(b) Any amounts received by the Servicer from a Customer that
represent a partial payment toward an outstanding balance will be applied
first to state tax charges, then Intangible Transition Charges, then to
Competitive Transition Charges, then to transmission and distribution
charges and finally to electric generation charges. Notwithstanding the
foregoing, when West Penn is providing billing for its transmission and
distribution charges which is separate from billing for generation, any
amounts received from Customers remitting partial payments will be applied
in the following priority: (i) to the outstanding balance before direct
access to electric generation from electric generation suppliers or the
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18
installment amount for a payment agreement on such balance; (ii) to the
balance due for state tax charges; (iii) to the balance due or the
instalment amount for a payment agreement for Intangible Transition
Charges; (iv) to the balance due or the instalment amount for a payment
agreement for Competitive Transition Charges; [(v) to the balance due or
the instalment amount for a payment agreement for fixed and variable
utility distribution service charges;] (vi) to the current state tax
charges; (vii) to the current Intangible Transition Charges; and (viii) to
the current Competitive Transition Charges; [(ix) to the current fixed and
variable utility distribution service charges;] (x) to the balance due for
prior charges for energy and capacity (if West Penn is the provider of last
resort); (xi) to the current charges for energy and capacity charges (if
West Penn is the provider of last resort); and (xii) to the non-basic
service charges.
SECTION 3.03. Servicing and Maintenance Standards. The Servicer
shall, on behalf of the Issuer, (a) manage, service, administer and make
collections in respect of the Serviced Intangible Transition Property with
reasonable care and in material compliance with applicable law, including
all applicable PUC Regulations and guidelines, using the same degree of
care and diligence that the Servicer exercises with respect to billing and
<PAGE>
19
collection activities that the Servicer conducts for itself and others;
(b) follow standards, policies and procedures in performing its duties as
Servicer that are customary in the Servicer's industry; (c) use all
reasonable efforts, consistent with its customary servicing procedures, to
enforce and maintain rights in respect of the Intangible Transition
Property; and (d) calculate Intangible Transition Charges in compliance
with the Statute, the Qualified Rate Order and any applicable tariffs,
except where the failure to comply with any of the foregoing would not
adversely affect the Issuer's or the Bond Trustee's interest in the
Serviced Intangible Transition Property. The Servicer shall follow such
customary and usual practices and procedures as it shall deem necessary or
advisable in its servicing of all or any portion of the Serviced Intangible
Transition Property, which, in the Servicer's judgment, may include the
taking of legal action pursuant to Section 3.09 hereof or otherwise.
SECTION 3.04. Servicer's Certificates. (a) The Servicer will
provide to the Issuer, the Bond Trustee and each of the Rating Agencies the
statements and certificates specified in Annex 1 hereto.
SECTION 3.05. Annual Statement as to Compliance; Notice of
Default. (a) The Servicer shall deliver to the Issuer, the Bond Trustee and
each Rating Agency, on or
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20
before [March 31] of each year beginning [March 31], 2000, an Officers'
Certificate, stating that (i) a review of the activities of the Servicer
during the preceding calendar year (or relevant portion thereof) and of its
performance under this Agreement has been made under such officers'
supervision and (ii) to the best of such officers' knowledge, based on such
review, the Servicer has fulfilled all its obligations under this Agreement
throughout such period or, if there has been a default in the fulfillment
of any such obligation, describing each such default.
(b) The Servicer shall deliver to the Issuer, the Bond Trustee
and each Rating Agency, promptly after having obtained knowledge thereof,
but in no event later than five Business Days thereafter, written notice in
an Officers' Certificate of any event which with the giving of notice or
lapse of time, or both, would become a Servicer Default under Section 6.01.
SECTION 3.06. Annual Independent Certified Public Accountants'
Report. (a) The Servicer shall cause a firm of independent certified public
accountants (which may also provide other services to the Servicer, West
Penn or the Seller) to prepare, and the Servicer shall deliver to the
Issuer, the Bond Trustee and each Rating Agency, on or before [March 31] of
each year, beginning [March 31], 2000 to and including the [March 31]
succeeding the retirement of
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21
all Transition Bonds, a report addressed to the Servicer (the "Annual
Accountant's Report"), which may be included as part of the Servicer's
customary auditing activities, to the effect that such firm has performed
certain procedures in connection with the Servicer's compliance with its
obligations under this Agreement during the preceding calendar year ended
December 31 (or, in the case of the first Annual Accountant's Report, the
period of time from the first Transfer Date until December 31, 1999),
identifying the results of such procedures and including any exceptions
noted. In the event such accounting firm requires the Bond Trustee or the
Issuer to agree or consent to the procedures performed by such firm, the
Issuer shall direct the Bond Trustee in writing to so agree; it being
understood and agreed that the Bond Trustee will deliver such letter of
agreement or consent in conclusive reliance upon the direction of the
Issuer, and neither the Bond Trustee nor the Issuer will make any
independent inquiry or investigation as to, and shall have no obligation or
liability in respect of, the sufficiency, validity or correctness of such
procedures.
(b) The Annual Accountant's Report shall also indicate that the
accounting firm providing such report is independent of the Servicer within
the meaning of the Code
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22
of Professional Ethics of the American Institute of Certified Public
Accountants.
SECTION 3.07. Intangible Transition Property Documentation. To
assure uniform quality in servicing the Serviced Intangible Transition
Property and to reduce administrative costs, the Servicer shall keep on
file, in accordance with its customary procedures, all documents relating
to the Intangible Transition Property, including copies of the Qualified
Rate Order and all documents filed with the PUC in connection with any
Intangible Transition Charges Adjustment (collectively, the "Intangible
Transition Property Documentation").
SECTION 3.08. Computer Records; Audits of Documentation. (a)
Safekeeping. The Servicer shall maintain accurate and complete accounts,
records and computer systems pertaining to the Intangible Transition
Property and the Intangible Transition Property Documentation in accordance
with its standard accounting procedures and in sufficient detail to permit
reconciliation between payments or recoveries on (or with respect to)
Intangible Transition Charges and the ITC Collections from time to time
remitted to the Bond Trustee pursuant to Section 5.10 and to enable the
Issuer to comply with this Agreement and the Indenture. The Servicer shall
conduct, or cause to be conducted, periodic audits of the Intangible
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23
Transition Property Documentation held by it under this Agreement and of
the related accounts, records and computer systems, in such a manner as
shall enable the Issuer and the Bond Trustee, as pledgee of the Issuer, to
verify the accuracy of the Servicer's record keeping. The Servicer shall
promptly report to the Issuer and the Bond Trustee any failure on the
Servicer's part to hold the Intangible Transition Property Documentation
and maintain its accounts, records and computer systems as herein provided
and promptly take appropriate action to remedy any such failure. Nothing
herein shall be deemed to require an initial review or any periodic review
by the Issuer or the Bond Trustee of the Intangible Transition Property
Documentation.
(b) Maintenance of and Access to Records. The Servicer shall
maintain the Intangible Transition Property Documentation at 800 Cabin Hill
Drive, Greensburg, Pennsylvania or at such other office as shall be
specified to the Issuer and the Bond Trustee by written notice not later
than 30 days prior to any change in location. The Servicer shall permit the
Issuer and the Bond Trustee or their respective duly authorized
representatives, attorneys, agents or auditors at any time during normal
business hours to inspect, audit and make copies of and abstracts from the
Servicer's records regarding the Intangible Transition Property and
Intangible Transition Charges and the
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24
Intangible Transition Property Documentation. The failure of the Servicer
to provide access to such information as a result of an obligation or
applicable law (including PUC Regulations) prohibiting disclosure of
information regarding customers shall not constitute a breach of this
Section 3.08(b).
SECTION 3.09. Defending Intangible Transition Property Against
Claims. The Servicer shall institute any action or proceeding necessary to
compel performance by the PUC or the Commonwealth of Pennsylvania of any of
their obligations or duties under the Statute or the Qualified Rate Order
with respect to the Intangible Transition Property. The costs of any such
action shall be payable from ITC Collections as an Operating Expense in
accordance with the Indenture at the time such costs are incurred. The
Servicer's obligations pursuant to this Section 3.09 shall survive and
continue notwithstanding the fact that the payment of Operating Expenses
pursuant to the Indenture may be delayed (it being understood that the
Servicer may be required to advance its own funds to satisfy its
obligations hereunder).
SECTION 3.10. Opinions of Counsel. The Servicer shall deliver to
the Issuer and the Bond Trustee:
(a) promptly after the execution and delivery of this Agreement
and of each amendment hereto, promptly
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25
after the execution of each Sale Agreement and of each amendment
thereto and on each Transfer Date, an Opinion of Counsel either (i) to
the effect that, in the opinion of such counsel, all filings,
including filings with the PUC pursuant to the Statute, that are
necessary to fully preserve and protect the interests of the Bond
Trustee in the Serviced Intangible Transition Property have been
executed and filed, and reciting the details of such filings or
referring to prior Opinions of Counsel in which such details are
given, or (ii) to the effect that, in the opinion of such counsel, no
such action shall be necessary to preserve and protect such interest;
and
(b) within 90 days after the beginning of each calendar year
beginning with the first calendar year beginning more than three
months after the first Transfer Date, an Opinion of Counsel, dated as
of a date during such 90-day period, either (i) to the effect that, in
the opinion of such counsel, all filings with the PUC pursuant to the
Statute, have been executed and filed that are necessary to preserve
fully and protect fully the interest of the Bond Trustee in the
Serviced Intangible Transition Property, and reciting the details of
such filings or referring to prior Opinions of Counsel in which such
details are
<PAGE>
26
given, or (ii) to the effect that, in the opinion of such counsel, no
such action shall be necessary to preserve and protect such interest.
Each Opinion of Counsel referred to in clause (a) or (b) above
shall specify any action necessary (as of the date of such opinion) to be
taken in the following year to preserve and protect such interest.
ARTICLE IV
Services Related to Intangible
Transition Charges Adjustments
SECTION 4.01. Intangible Transition Charges Adjustments. The
Servicer shall perform the calculations and take the actions relating to
revising the Intangible Transition Charges, in each case set forth in Annex
1 to this Agreement.
ARTICLE V
The Servicer
SECTION 5.01. Representations and Warranties of Servicer. The
Servicer makes the following representations and warranties as of each
Transfer Date, on which the Issuer has relied and will rely in acquiring
Serviced Intangible Transition Property. The representations and warranties
shall survive the sale of any of the Serviced Intangible Transition
Property to the Issuer and the pledge thereof to the Bond Trustee pursuant
to the Indenture.
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27
(a) Organization and Good Standing. The Servicer is a corporation
duly organized and in good standing under the laws of the state of its
incorporation, with the corporate power and authority to own its
properties and to conduct its business as such properties are
currently owned and such business is presently conducted, and has the
power, authority and legal right to service the Serviced Intangible
Transition Property.
(b) Due Qualification. The Servicer is duly qualified to do
business as a foreign corporation in good standing, and has obtained
all necessary licenses and approvals in, all jurisdictions in which
the owner ship or lease of property or the conduct of its busi ness
(including the servicing of the Serviced Intangible Transition
Property as required by this Agreement) requires such qualifications,
licenses or approvals (except where the failure to so qualify would
not be reasonably likely to have a material adverse effect on the
Servicer's business, operations, assets, revenues, properties or
prospects or adversely affect the servicing of the Serviced Intangible
Transition Property).
(c) Power and Authority. The Servicer has the corporate power and
authority to execute and deliver this Agreement and to carry out its
terms; and the
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28
execution, delivery and performance of this Agreement have been duly
authorized by the Servicer by all necessary corporate action.
(d) Binding Obligation. This Agreement consti tutes a legal,
valid and binding obligation of the Servicer enforceable against the
Servicer in accordance with its terms subject to bankruptcy,
receivership, insolvency, fraudulent transfer, reorganization,
moratorium or other laws affecting creditors' rights generally from
time to time in effect and to general principles of equity (regardless
of whether considered in a proceeding in equity or at law).
(e) No Violation. The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof
shall not conflict with, result in any breach of any of the terms and
provisions of, nor constitute (with or without notice or lapse of
time) a default under, the articles of incorporation or by-laws of the
Servicer, or any indenture, agreement or other instrument to which the
Servicer is a party or by which it shall be bound; nor result in the
creation or imposition of any Lien upon any of its properties pursuant
to the terms of any such indenture, agreement or other instrument; nor
violate any law or any order, rule or regulation applicable to
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29
the Servicer of any court or of any Federal or state regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Servicer or its properties.
(f) Approvals. Except for filings with the PUC for revised
Intangible Transition Charges pursuant to Section 4.01 and Annex 1
hereto and UCC continuation filings, no approval, authorization,
consent, order or other action of, or filing with, any court, Federal
or state regulatory body, administrative agency or other governmental
instrumentality is required in connection with the execution and
delivery by the Servicer of this Agreement, the performance by the
Servicer of the transactions contemplated hereby or the fulfillment by
the Servicer of the terms hereof, except those that have been obtained
or made.
(g) No Proceedings. There are no proceedings or investigations
pending or, to the Servicer's best knowledge, threatened before any
court, Federal or state regulatory body, administrative agency or
other governmental instrumentality having jurisdiction over the
Servicer or its properties: (i) except as disclosed by the Servicer to
the Issuer, seeking any determination or ruling that might materially
and adversely affect the performance by the Servicer of its
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30
obligations under, or the validity or enforceability against the
Servicer of this Agreement or (ii) relating to the Servicer and which
might adversely affect the Federal or state income tax attributes of
the Transition Bonds.
(h) Reports and Certificates. Each report and certificate
delivered in connection with any filing made to the PUC by the
Servicer on behalf of the Issuer with respect to Intangible Transition
Charges or Intangible Transition Charges Adjustments will constitute a
representation and warranty by the Servicer that each such report or
certificate, as the case may be, is true and correct in all material
respects; provided, however, that to the extent any such report or
certificate is based in part upon or contains assumptions, forecasts
or other predictions of future events, the representation and warranty
of the Servicer with respect thereto will be limited to the
representation and warranty that such assumptions, forecasts or other
predictions of future events are reasonable based upon historical
performance.
SECTION 5.02. Indemnities of Servicer; Release of Claims. (a) The
Servicer shall be liable in accordance herewith only to the extent of the
obligations specifically undertaken by the Servicer under this Agreement.
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31
(b) The Servicer shall indemnify the Issuer and the Bond Trustee,
for itself and on behalf of the Transition Bondholders for which it acts as
Bond Trustee, and each of their respective managers, members, officers,
directors and agents for, and defend and hold harmless each such Person
from and against, any and all Losses that may be imposed upon, incurred by
or asserted against any such Person as a result of (i) the Servicer's
wilful misfeasance, bad faith or gross negligence in the performance of its
duties or observance of its covenants under this Agreement or the
Servicer's reckless disregard of its obligations and duties under this
Agreement or (ii) the Servicer's breach of any of its representations or
warranties in this Agreement.
(c) If any action, claim, demand or proceeding (including any
governmental investigation) shall be brought or asserted against a party
(the "indemnified party") entitled to any indemnification provided for
under this Section 5.02, such indemnified party shall promptly notify the
Servicer in writing; provided, however, that failure to give such
notification shall not affect the indemnification provided hereunder except
to the extent the Servicer shall have been actually prejudiced as a result
of such failure.
(d) The Servicer shall indemnify the Bond Trustee and its
officers, directors and agents for, and defend and hold harmless each such
Person from and against, any and all
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32
Losses that may be imposed upon, incurred by or asserted against any such
Person as a result of the acceptance or performance of the trusts and
duties contained herein and in the Indenture, except to the extent that any
such Loss shall be due to the wilful misfeasance, bad faith or gross
negligence of the Bond Trustee. Such amounts shall be deposited and
distributed in accordance with the Indenture.
(e) The Servicer's indemnification obligations under Section
5.02(b) and (d) for events occurring prior to the removal or resignation of
the Bond Trustee or the termination of this Agreement with respect to the
Issuer shall survive the resignation or removal of the Bond Trustee or the
termination of this Agreement with respect to the Issuer and shall include
reasonable costs, fees and expenses of investigation and litigation
(including the Issuer's and the Bond Trustee's reasonable attorneys' fees
and expenses).
(f) Except to the extent expressly provided for in this Agreement
or the Formation Document (including the Servicer's claims with respect to
the Servicing Fees), the Servicer hereby releases and discharges the Issuer
(including its managers, members, officers, directors and agents, if any)
and the Bond Trustee (including its officers, directors and agents)
(collectively, the "Released Parties") from any and all actions, claims and
demands whatsoever, which the Servicer, in its capacity as Servicer,
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33
shall or may have against any such Person relating to the Serviced
Intangible Transition Property or the Servicer's activities with respect
thereto other than any actions, claims and demands arising out of the
wilful misconduct, bad faith or gross negligence of the Released Parties.
SECTION 5.03. Merger or Consolidation of, or Assumption of the
Obligations of, Servicer. Any Person (a) into which the Servicer may be
merged or consolidated and which succeeds to the major part of the electric
distribution business of the Servicer, (b) which results from the division
of the Servicer into two or more Persons and which succeeds to the major
part of the electric distribution business of the Servicer, (c) which may
result from any merger or consolidation to which the Servicer shall be a
party and which succeeds to the major part of the electric distribution
business of the Servicer, (d) which may succeed to the properties and
assets of the Servicer substantially as a whole and which succeeds to the
major part of the electric distribution business of the Servicer or (e)
which may otherwise succeed to the major part of the electric distribution
business of the Servicer, which Person in any of the foregoing cases
executes an agreement of assumption to perform every obligation of the
Servicer hereunder, shall be the successor to the Servicer under this
Agreement without further act on the part of any of the
<PAGE>
34
parties to this Agreement; provided, however, that (i) immediately after
giving effect to such transaction, no representation and warranty made
pursuant to Section 5.01 shall have been breached and no Servicer Default,
and no event which, after notice or lapse of time, or both, would become a
Servicer Default, shall have occurred and be continuing, (ii) the Servicer
shall have delivered to the Issuer and the Bond Trustee an Officers'
Certificate and an Opinion of Counsel the stating that such consolidation,
merger or succession and such agreement of assumption comply with this
Section 5.03 and that all conditions precedent provided for in this
Agreement relating to such transaction have been complied with, (iii) the
Rating Agencies shall have received prior written notice of such
transaction, (iv) the Servicer shall have delivered to the Issuer, the Bond
Trustee and the Rating Agency an Opinion of Counsel either (A) stating
that, in the opinion of such counsel, all filings, including filings with
the PUC pursuant to the Statute, have been executed and filed that are
necessary to preserve fully and protect fully the interests of the Issuer
in the Serviced Intangible Transition Property and reciting the details of
such filings or (B) stating that, in the opinion of such counsel, no such
action shall be necessary to preserve and protect such interests.
Notwithstanding anything herein to the contrary, the execution of the above
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35
referenced agreement of assumption and compliance with clauses (i), (ii),
(iii) and (iv) above shall be conditions precedent to the consummation of
the transactions referred to in clause (a), (b), (c), (d) or (e) above.
SECTION 5.04. Assignment of Servicer's Obligations. Subject to
the conditions set forth in Section 5.03, pursuant to paragraph 13 of the
Qualified Rate Order in which the PUC authorizes West Penn to contract with
an alternative party to perform West Penn's obligations contemplated in the
Qualified Rate Order, the Servicer may assign its obligations hereunder to
any electric distribution company (as such term is defined in the Statute)
which succeeds to the major part of West Penn's electric distribution
business.
SECTION 5.05. Limitation on Liability of Servicer and Others. The
Servicer shall not be liable to the Issuer, except as provided under this
Agreement, for any action taken or for refraining from the taking of any
action pursuant to this Agreement or for errors in judgment; provided,
however, that this provision shall not protect the Servicer against any
liability that would otherwise be imposed by reason of wilful misfeasance,
bad faith or gross negligence in the performance of its duties or by reason
of reckless disregard of obligations and duties under this Agreement. The
Servicer and any director or officer or
<PAGE>
36
employee or agent of the Servicer may rely in good faith on the advice of
counsel reasonably acceptable to the Bond Trustee or on any document of any
kind, prima facie properly executed and submitted by any Person, respecting
any matters arising under this Agreement.
Except as provided in this Agreement, the Servicer shall not be
under any obligation to appear in, prosecute or defend any legal action
that is not incidental to its duties to service the Serviced Intangible
Transition Property in accordance with this Agreement or related to its
obligation to pay indemnification, and that in its reasonable opinion may
cause it to incur any expense or liability.
SECTION 5.06. West Penn Not To Resign as Servicer. Subject to the
provisions of Sections 5.03 and 5.04, West Penn shall not resign from the
obligations and duties hereby imposed on it as Servicer under this
Agreement except upon a determination that the performance of its duties
under this Agreement shall no longer be permissible under applicable law.
Notice of any such determination permitting the resignation of West Penn
shall be communicated to the Issuer, the Bond Trustee and each Rating
Agency at the earliest practicable time (and, if such communication is not
in writing, shall be confirmed in writing at the earliest practicable
time), and any such determination shall be evidenced by an Opinion of
Counsel to
<PAGE>
37
such effect delivered to the Issuer and the Bond Trustee concurrently with
or promptly after such notice. No such resignation shall become effective
until a successor Servicer shall have assumed the servicing obligations and
duties hereunder of West Penn in accordance with Section 6.04.
SECTION 5.07. Servicing Fee. The Issuer agrees to pay the
Servicer, solely to the extent amounts are available therefor in accordance
with the Indenture, the Servicing Fee with respect to all Series of
Transition Bonds issued by the Issuer. The Servicing Fee with respect to a
Series for a Payment Date shall equal the product of (a) [1/4], (b) the
Servicing Fee Rate for such Series and (c) the outstanding principal amount
of the Transition Bonds of such Series as of such Payment Date. The
Servicer will be entitled to retain as additional compensation net
investment income on ITC Collections related to Serviced Intangible
Transition Property received by the Servicer prior to each Remittance Date
and the late fees, if any, paid by Customers to the Servicer. The foregoing
fees constitute a fair and reasonable price for the obligations to be
performed by the Servicer.
SECTION 5.08. Servicer Expenses. Except as otherwise expressly
provided herein, the Servicer shall be required to pay all expenses
incurred by it in connection
<PAGE>
38
with its activities hereunder, including fees and disbursements of
independent accountants and counsel, taxes imposed on the Servicer and
expenses incurred in connection with reports to Transition Bondholders.
SECTION 5.09. Appointments. The Servicer may at any time appoint
a subservicer to perform all or any portion of its obligations as Servicer
hereunder; provided, however, that the Rating Agency Condition shall have
been satisfied in connection therewith with respect to all Rating Agencies
other than Moody's (and the Servicer shall have furnished Moody's with
written notice of such appointment prior to its effectiveness); provided
further that the Servicer shall remain obligated and be liable to the
Issuer for the servicing and administering of the Serviced Intangible
Transition Property in accordance with the provisions hereof without
diminution of such obligation and liability by virtue of the appointment of
such subservicer and to the same extent and under the same terms and
conditions as if the Servicer alone were servicing and administering the
Serviced Intangible Transition Property. The fees and expenses of the
subservicer shall be as agreed between the Servicer and its subservicer
from time to time, and none of the Issuer (or member or manager thereof, if
any), the Bond Trustee or any Transition Bondholder shall have any
responsibility therefor.
<PAGE>
39
SECTION 5.10. Remittances. (a) Subject to Section 5.07, the
Servicer shall remit all ITC Collections (from whatever source) and all
proceeds of other Collateral of such Issuer, if any, received by the
Servicer to the Bond Trustee under the Indenture, for deposit pursuant to
the Indenture, not later than the second Business Day after receipt
thereof.
(b) Notwithstanding the foregoing clause (a), (i) as long as West
Penn or any successor to West Penn's electric distribution business remains
the Servicer, (ii) no Servicer Default has occurred and is continuing and
(iii) (A) West Penn or such successor maintains a short-term rating of
"A-1" or better by Standard & Poor's, "P-1" or better by Moody's and, if
rated by Fitch IBCA, "F-2" by Fitch IBCA (and for five Business Days
following a reduction in any such rating) or (B) the Rating Agency
Condition shall have been satisfied (and any conditions or limitations
imposed by the Rating Agencies in connection therewith are complied with),
the Servicer need not make the daily remittances required by such clause
(a), but in lieu thereof, shall remit all ITC Collections (from whatever
source) and all proceeds of other Collateral of such Issuer, if any,
received by the Servicer during any Collection Period to the Bond Trustee,
for deposit pursuant to the Indenture, not later than the [ ] of each month
(or, if any
<PAGE>
40
such day is not a Business Day, the next succeeding Business Day).
SECTION 5.11. Servicer Advances. The Servicer shall make advances
of interest or principal on the Transition Bonds of any Series in the
manner and to the extent, if any, specified in any Annex to this Agreement
entered into in connection with the issuance of such Transition Bonds.
SECTION 5.12. Protection of Title. The Servicer shall execute and
file such filings, including filings with the PUC pursuant to the Statute,
and cause to be executed and filed such filings, all in such manner and in
such places as may be required by law fully to preserve, maintain, and
protect the interests of the Issuer in the Serviced Intangible Transition
Property, including all filings required under the Statute relating to the
transfer of the ownership or security interest in the Serviced Intangible
Transition Property by the Seller to the Issuer or any security interest
granted by the Issuer in the Serviced Intangible Transition Property. The
Servicer shall deliver (or cause to be delivered) to the Issuer file-
stamped copies of, or filing receipts for, any document filed as provided
above, as soon as available following such filing.
<PAGE>
41
ARTICLE VI
Servicer Default
SECTION 6.01. Servicer Default. If any one of the following
events (a "Servicer Default") shall occur and be continuing:
(a) any failure by the Servicer to remit to the Bond Trustee on
behalf of the Issuer any required remittance that shall continue
unremedied for a period of three Business Days after written notice of
such failure is received by the Servicer from the Issuer or Bond
Trustee; or
(b) any failure by the Servicer or, so long as the Transferor and
the Servicer are the same Person, the Transferor, as applicable, duly
to observe or perform in any material respect any other covenant or
agreement of the Servicer or the Transferor, as the case may be, set
forth in this Agreement or any other Basic Document to which it is a
party, which failure shall (i) materially and adversely affect the
Intangible Transition Property and (ii) continue unremedied for a
period of 30 days after written notice of such failure shall have been
given to the Servicer or the Transferor, as the case may be, by the
Issuer or the Bond Trustee or after discovery of such failure by an
<PAGE>
42
officer of the Servicer or the Transferor, as the case may be; or
(c) any representation or warranty made by the Servicer in this
Agreement shall prove to have been incorrect when made, which has a
material adverse effect on the Issuer or the Transition Bondholders
and which material adverse effect continues unremedied for a period of
60 days after the date on which written notice thereof shall have been
given to the Servicer by the Issuer or the Bond Trustee; or
(d) an Insolvency Event occurs with respect to the Servicer;
then, and in each and every case, so long as the Servicer Default shall not
have been remedied, the Bond Trustee, as assignee of the Issuer, with
respect to Holders of a majority of the outstanding principal amount of the
Transition Bonds, by notice then given in writing to the Servicer (a
"Termination Notice") may terminate all the rights and obligations (other
than the indemnification obligations set forth in Section 5.02 hereof and
the obligation under Section 6.02 to continue performing its functions as
Servicer until a successor Servicer is appointed) of the Servicer under
this Agreement. In addition, upon a Servicer Default described in Section
6.01(a), each of the following shall be entitled to
<PAGE>
43
apply to the PUC for sequestration and payment of revenues arising with
respect to the Serviced Intangible Transition Property: (i) the Issuer or
its assignees or (ii) pledgees or transferees, including transferees under
the Statute, of the Serviced Intangible Transition Property. On or after
the receipt by the Servicer of a Termination Notice, all authority and
power of the Servicer under this Agreement with respect to the Issuer,
whether with respect to the Serviced Intangible Transition Property, the
related Intangible Transition Charges or otherwise, shall, upon appointment
of a successor Servicer pursuant to Section 6.02, without further action,
pass to and be vested in such successor Servicer and, without limitation,
the Bond Trustee is hereby authorized and empowered to execute and deliver,
on behalf of the predecessor Servicer, as attorney- in-fact or otherwise,
any and all documents and other instruments, and to do or accomplish all
other acts or things necessary or appropriate to effect the purposes of
such Termination Notice, whether to complete the transfer of the Intangible
Transition Property Documentation and related documents, or otherwise. The
predecessor Servicer shall cooperate with the successor Servicer, the Bond
Trustee and the Issuer in effecting the termination of the responsibilities
and rights of the predecessor Servicer under this Agreement, including the
transfer to the
<PAGE>
44
successor Servicer for administration by it of all cash amounts that shall
at the time be held by the predecessor Servicer for remittance, or shall
thereafter be received by it with respect to the Serviced Intangible
Transition Property or the related Intangible Transition Charges. As soon
as practicable after receipt by the Servicer of such Termination Notice,
the Servicer shall deliver the Intangible Transition Property Documentation
to the successor Servicer. All reasonable costs and expenses (including
attorneys fees and expenses) incurred in connection with transferring the
Intangible Transition Property Documentation to the successor Servicer and
amending this Agreement to reflect such succession as Servicer pursuant to
this Section shall be paid by the predecessor Servicer upon presentation of
reasonable documentation of such costs and expenses. Termination of West
Penn as Servicer shall not terminate West Penn's rights or obligations as
Transferor under the Transfer Agreement.
SECTION 6.02. Notice of Servicer Default. The Servicer shall
deliver to the Issuer, the Bond Trustee and each Rating Agency promptly
after having obtained knowledge thereof, but in no event later than five
Business Days thereafter, written notice in an Officers' Certificate of any
event or circumstance (such as a breach of any representation or warranty
made by the Servicer in this
<PAGE>
45
Agreement) which, with the giving of notice or the passage of time, would
become a Servicer Default under Section 6.01.
SECTION 6.03. Waiver of Past Defaults. The Bond Trustee may waive
in writing any default by the Servicer in the performance of its
obligations hereunder and its consequences, except a default in making any
required remittances to the Bond Trustee of ITC Collections from Serviced
Intangible Transition Property in accordance with Section 5.10 of this
Agreement. Upon any such waiver of a past default, such default shall cease
to exist, and any Servicer Default arising therefrom shall be deemed to
have been remedied for every purpose of this Agreement. No such waiver
shall extend to any subsequent or other default or impair any right
consequent thereto.
SECTION 6.04. Appointment of Successor. (a) Upon the Servicer's
receipt of a Termination Notice, pursuant to Section 6.01 or the Servicer's
resignation in accordance with the terms of this Agreement, the predecessor
Servicer shall continue to perform its functions as Servicer under this
Agreement and shall be entitled to receive the requisite portion of the
Servicing Fees, until a successor Servicer shall have assumed in writing
the obligations of the Servicer hereunder as described below. In the event
of the Servicer's termination hereunder, the Bond Trustee, as assignee of
the Issuer, with respect to Holders of a
<PAGE>
46
majority of the outstanding principal amount of the Transition Bonds, shall
appoint a successor Servicer, and the successor Servicer shall accept its
appointment by a written assumption in form acceptable to the Issuer and
the Bond Trustee. If, within 30 days after the delivery of the Termination
Notice, a new Servicer shall not have been appointed and accepted such
appointment, the Bond Trustee may petition the PUC or a court of competent
jurisdiction to appoint a successor Servicer under this Agreement. A Person
shall qualify as a successor Servicer only if (i) such Person is permitted
under PUC Regulations to perform the duties of the Servicer pursuant to the
Statute, the Qualified Rate Order and this Agreement, (ii) the Rating
Agency Condition shall have been satisfied with respect to all Rating
Agencies other than Moody's (and Moody's shall have been furnished with
written notice of such appointment prior to its effectiveness) and (iii)
such Person enters into a servicing agreement with the Issuer having
substantially the same provisions as this Agreement.
(b) Upon appointment, the successor Servicer shall be the
successor in all respects to the predecessor Servicer and shall be subject
to all the responsibilities, duties and liabilities arising thereafter
relating thereto placed on the predecessor Servicer and shall be entitled
to the Servicing Fees and all the rights granted to the prede-
<PAGE>
47
cessor Servicer by the terms and provisions of this Agreement.
(c) The successor Servicer may not resign unless it is prohibited
from serving as such by law.
SECTION 6.05. Cooperation with Successor. The Servicer covenants
and agrees with the Issuer that it will, on an ongoing basis, cooperate
with the successor Servicer and provide whatever information is, and take
whatever actions are, reasonably necessary to assist the successor Servicer
in performing its obligations hereunder.
ARTICLE VII
Miscellaneous Provisions
SECTION 7.01. Amendment. This Agreement may be amended by the
Servicer and the Issuer, with the consent of the Bond Trustee. The Issuer
shall furnish to each of the Rating Agencies (i) prior to the execution of
any such amendment or consent, written notification of the substance
thereof and (ii) promptly after the execution of any such amendment or
consent, a copy thereof.
Prior to the execution of any amendment to this Agreement, the
Issuer and the Bond Trustee shall be entitled to receive and rely upon an
Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement and the Opinion of Counsel
referred to in Section 3.10. The Issuer and the Bond Trustee may, but
<PAGE>
48
shall not be obligated to, enter into any such amendment which affects
their own rights, duties or immunities under this Agreement or otherwise.
SECTION 7.02. Notices. All demands, notices and communications
upon or to the Servicer, the Issuer, the Bond Trustee or the Rating
Agencies under this Agreement shall be in writing, delivered personally,
via facsimile, reputable overnight courier or by first class mail, postage
prepaid, and shall be deemed to have been duly given upon receipt (a) in
the case of the Servicer, to West Penn Power Company, 800 Cabin Hill Drive,
Greensburg, Pennsylvania 15601, Attention of [ ], (b) in the case of the
Issuer or the Bond Trustee, at the address provided for notices or
communications to such Person in the Indenture, (c) in the case of Moody's,
to Moody's Investors Service, Inc., ABS Monitoring Department, 99 Church
Street, New York, New York 10007, (d) in the case of Standard & Poor's, to
Standard & Poor's Corporation, 26 Broadway (15th Floor), New York, New York
10004, Attention of Asset Backed Surveillance Department, and (e) in the
case of Fitch IBCA, to Fitch IBCA, Inc., One State Street Plaza, New York,
New York 10004, Attention of ABS Surveillance; or, as to each of the
foregoing, at such other address as shall be designated by written notice
to the other parties.
<PAGE>
49
SECTION 7.03. Assignment. Notwithstanding anything to the
contrary contained herein, except as pro vided in Sections 5.03 and 5.04
and as provided in the provisions of this Agreement concerning the
resignation of the Servicer, this Agreement may not be assigned by the
Servicer.
SECTION 7.04. Limitations on Rights of Others. The provisions of
this Agreement are solely for the benefit of the Servicer, the Issuer
(including its manager and members) and the Bond Trustee, on behalf of
itself and the Transition Bondholders, and nothing in this Agreement,
whether express or implied, shall be construed to give to any other Person
any legal or equitable right, remedy or claim in any Collateral or under or
in respect of this Agreement or any covenants, conditions or provisions
contained herein.
SECTION 7.05. Severability. Any provision of this Agreement that
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction.
<PAGE>
50
SECTION 7.06. Separate Counterparts. This Agreement may be
executed by the parties hereto in separate counterparts, each of which when
so executed and delivered shall be an original, but all such counterparts
shall together constitute but one and the same instrument.
SECTION 7.07. Headings. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define
or limit any of the terms or provisions hereof.
SECTION 7.08. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of New York, without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
SECTION 7.09. Assignment to Bond Trustee. The Servicer hereby
acknowledges and consents to the mortgage, pledge, assignment and grant of
a security interest by the Issuer to the Bond Trustee pursuant to the
Indenture for the benefit of the Transition Bondholders of all right, title
and interest of the Issuer in, to and under the Serviced Intangible
Transition Property owned by the Issuer and the proceeds thereof and the
assignment of any or all of the Issuer's rights hereunder to the Bond
Trustee. In no event shall the Bond Trustee have any liability for the
<PAGE>
51
representations, warranties, covenants, agreements or other obligations of
the Issuer, hereunder or in any of the certificates, notices or agreements
delivered pursuant hereto, as to all of which recourse shall be had solely
to the assets of the Issuer.
SECTION 7.10. Nonpetition Covenants. Notwithstanding any prior
termination of this Agreement or the Indenture, but subject to the PUC's
rights to order the sequestration and payment of revenues arising with
respect to the Serviced Intangible Transition Property notwithstanding any
bankruptcy, reorganization or other insolvency proceedings with respect to
the debtor, pledgor or transferor of the Serviced Intangible Transition
Property pursuant to Section 2812(d)(3)(v) of the Statute, the Servicer
shall not, prior to the date which is one year and one day after the
termination of the Indenture, petition or otherwise invoke or cause the
Issuer to invoke the process of any court or government authority for the
purpose of commencing or sustaining a case against the Issuer under the
Federal or state bankruptcy, insolvency or similar law or appointing a
receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Issuer or any substantial part of the property of
the Issuer, or ordering the winding up or liquidation of the affairs of the
Issuer.
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52
SECTION 7.11. Termination. This Agreement shall terminate when
all Transition Bonds issued by the Issuer have been retired, redeemed or
defeased in full.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their respective officers as of the day and year
first above written.
WEST PENN FUNDING LLC,
by [ ], as Manager,
by
------------------------------
Title:
WEST PENN POWER COMPANY, Servicer,
by
-----------------------------
Title:
Acknowledged and Accepted:
[ ], not in its
individual capacity but
solely as Bond Trustee on
behalf of the Holders of
Transition Bonds issued by
the Issuer,
by
---------------------------
Title:
<PAGE>
ANNEX 1
to
SERVICING AGREEMENT
The Servicer agrees to comply with the following with respect to West Penn
Funding LLC (the "Issuer"):
SECTION 1. Definitions. (a) Capitalized terms used herein and not
otherwise defined shall have the meanings set forth in the Servicing
Agreement dated as of [ ], 1999 (the "Servicing Agreement"), between the
Issuer and West Penn Power Company, as Servicer.
(b) Whenever used in this Annex 1, the following words and
phrases shall have the following meanings:
"Adjustment Date" means, with respect to any Series of Transition
Bonds, such date or dates specified as such in the Series Supplement
therefor.
"Adjustment Request" means an application filed by the Servicer
with the PUC for revised Intangible Transition Charges pursuant to Section
4(b) of this Annex.
"Available Reserve Amount" means, as of any date, the amount on
deposit in the Reserve Subaccount less the product of (a) the Prepayment
Amount and (b) the difference, expressed as a percentage, between 100% and
the Expected Amortization Percentage for the immediately following
Regulatory Year.
"Bond Trustee" has the meaning specified in the Indenture.
<PAGE>
2
"Calculation Date" means, with respect to any Series of
Transition Bonds, such date or dates specified as such in the Series
Supplement therefor.
"Calculated Overcollateralization Level" means, with respect to
any Series of Transition Bonds, the amount specified as such in the Series
Supplement therefor.
"Capital Subaccount" has the meaning set forth in the Indenture.
"Class" has the meaning specified in the Indenture.
"Expected Amortization Percentage" means, with respect to any
Regulatory Year, the percentage equivalent of a fraction, the numerator of
which is the aggregate amount of Transition Bonds of all Series to be
amortized during such Regulatory Year as set forth in Expected Amortization
Schedules therefor and the denominator of which is the Projected Transition
Bond Balance on the first day of such Regulatory Year.
"Expected Amortization Schedule" means, with respect to any
Series of Transition Bonds, the expected amortization schedule for
principal thereof, as specified in the Series Supplement therefor.
"Expected Final Payment Date" means, with respect to any Series
or Class of Transition Bonds, the expected
<PAGE>
3
final payment date therefor, as specified in the Series Supplement
therefor.
"Holder" or "Transition Bondholder" has the meaning set forth in
the Indenture.
"Indenture" means the Indenture dated as of [ ], 1999, between
the Issuer and [ ], as amended and supplemented from time to time,
including any Series Supplement.
"Overcollateralization Subaccount" has the meaning set forth in
the Indenture.
"Payment Date" has the meaning specified in the Indenture and the
applicable Series Supplement.
"Prepayment Amount" means, as of any date, the sum of all amounts
currently on deposit in the Reserve Subaccount arising from prepayment by
customers allocable to Intangible Transition Charges.
"Projected Transition Bond Balance" has the meaning specified in
the Indenture.
"Regulatory Period" means with respect to any Series (i) the
period from the Series Issuance Date therefor through and including the
first Adjustment Date (the "Initial Regulatory Period") and (ii) following
the Initial Regulatory Period until [September 25, 2009], each period from
and including each Adjustment Date through but excluding the following
Adjustment Date.
<PAGE>
4
"Required Capital Amount" means, with respect to any Series of
Transition Bonds, the amount specified as such in the Series Supplement
therefor.
"Reserve Subaccount" has the meaning set forth in the Indenture.
"Sale Agreement" has the meaning set forth in the Indenture.
"Schedule Revision Date" has the meaning set forth in the
Indenture.
"Series" has the meaning specified in the Indenture.
"Series Issuance Date" has the meaning specified in the Indenture
and the applicable Series Supplement.
"Series Supplement" has the meaning specified in the Indenture.
"Transferred Intangible Transition Property" has the meaning
specified in the Sale Agreement.
"Transition Bonds" has the meaning specified in the Indenture.
"Transition Bond Balance" has the meaning specified in the
Indenture.
SECTION 2. Adjustment Date Statements. For each Adjustment Date,
the Servicer will provide to the Issuer and the Bond Trustee a statement
indicating (i) the Transition Bond Balance and the Projected Transition
Bond Balance for
<PAGE>
5
each Series as of the immediately preceding Payment Date, (ii) the amount
on deposit in the Overcollateralization Subaccount and the Calculated
Overcollateralization Level as of the immediately preceding Payment Date,
(iii) the amount on deposit in the Capital Subaccount and the Required
Capital Amount as of the immediately preceding Payment Date, (iv) the
Projected Transition Bond Balance for each Payment Date prior to the next
Adjustment Date and the Servicer's projection of the Transition Bond
Balance as of each Payment Date prior to the next Adjustment Date, (v) the
Calculated Overcollateralization Level for each Payment Date prior to the
next Adjustment Date and the Servicer's projection of the amount on deposit
in the Overcollateralization Subaccount as of each Payment Date prior to
the next Adjustment Date, (vi) the Required Capital Amount for each Payment
Date prior to the next Adjustment Date and the Servicer's projections of
the amount on deposit in the Capital Subaccount as of each Payment Date
prior to the next Adjustment Date and (vii) the projected ITC Collections
from the Payment Date immediately preceding the Adjustment Date through the
next Adjustment Date.
SECTION 3. Remittance Date Statements. On or before each
Remittance Date, the Servicer will prepare and furnish to the Issuer and
the Bond Trustee a statement setting forth the aggregate amount remitted or
to be
<PAGE>
6
remitted by the Servicer to the Bond Trustee for deposit on such Remittance
Date pursuant to Section 5.10 of the Servicing Agreement and the Indenture.
SECTION 4. Payment Date Statements. At least three Business Days
before each Payment Date for each Series of Transition Bonds, the Servicer
will prepare and furnish to the Issuer and the Bond Trustee a statement
setting forth the amounts to be paid to Holders of Transition Bonds of such
Series pursuant to Section 8.02(d) of the Indenture.
SECTION 5. Intangible Transition Charges Adjustments. (a) Prior
to each Calculation Date, the Servicer shall calculate (i) the Transition
Bond Balance as of the Payment Date immediately preceding such Calculation
Date (a written copy of which shall be delivered by the Servicer to the
Bond Trustee within five days following such Calculation Date) and (ii) the
revised Intangible Transition Charges with respect to the Transferred
Intangible Transition Property for the then-current Regulatory Period and
any subsequent Regulatory Periods until a Payment Date occurs, such that
the Servicer projects that ITC Collections will be sufficient so that (x)
the outstanding principal balance of each outstanding Series will equal the
amount provided for in the Expected Amortization Schedule therefor, the
amount on deposit in the Overcollateralization Subaccount will equal the
Calculated Overcollateralization
<PAGE>
7
Level and the amount on deposit in the Capital Subaccount will equal the
Required Capital Amount, by the next Adjustment Date (or the immediately
succeeding Payment Date after such Adjustment Date if specified in the
Series Supplement therefor) or, if earlier with respect to any Series or
Class of Transition Bonds, by the Expected Final Payment Date therefor,
taking into account the Available Reserve Amount.
(b) On each Calculation Date, the Servicer shall (i) file an
Adjustment Request with the PUC for such revised Intangible Transition
Charges with respect to the Transferred Intangible Transition Property to
remain in effect until the earlier of (A) the effective date of the next
Intangible Transition Charges Adjustment with respect to the Transition
Bonds, (B) the Expected Final Payment Date for any Series or Class of
Transition Bonds and (C) [September 25, 2009], (ii) take all reasonable
actions and make all reasonable efforts in order to effectuate such
revision to such Intangible Transition Charges and (iii) promptly send to
the Bond Trustee copies of all material notices and documents relating to
such revision.
SECTION 6. Servicer Advances. The Servicer shall not make any
advances of interest or principal on the Transition Bonds of any Series.
<PAGE>
8
SECTION 7. Loss Calculations. Upon notice from the Seller or the
Transferor, the Servicer shall perform the calculations specified in
Sections 5.01(c)(ii)(x) and 5.01(c)(ii)(y) of the Sale Agreement or the
Transfer Agreement, respectively, in the manner specified in such Sections
and notify the Issuer and the Bond Trustee thereof.
SECTION 8. Schedule Revision Date Schedules. Prior to each
Schedule Revision Date, the Servicer shall deliver to the Issuer
replacement Schedules A and replacement Schedules B to each Series
Supplement to which such Schedule Revision Date applies, adjusted to
reflect the event giving rise to such Schedule Revision Date and setting
forth the Calculated Overcollateralization Level and the Expected
Amortization Schedule for each Payment Date applicable thereto; provided,
however, that no such replacement Schedule A or Schedule B shall be
required with respect to a Series if the event giving rise to such Schedule
Revision Date is a redemption of the Transition Bonds of such Series in
whole.
