-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NU1gG3e2tNpTC/wnQSv7piKt9HRkIEYMFDZYM/eLjo5rrWWsHxys/vw7nde5dcIS a86hoc6V2Mf+eLTU6pmgtA== 0000073960-96-000002.txt : 19960320 0000073960-96-000002.hdr.sgml : 19960320 ACCESSION NUMBER: 0000073960-96-000002 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 17 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960319 SROS: CSX SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: OHIO EDISON CO CENTRAL INDEX KEY: 0000073960 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 340437786 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-02578 FILM NUMBER: 96536229 BUSINESS ADDRESS: STREET 1: 76 S MAIN ST CITY: AKRON STATE: OH ZIP: 44308 BUSINESS PHONE: 2163845100 10-K 1 1995 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended December 31, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from to ------------------ ----------------- Commission File Number 1-2578 OHIO EDISON COMPANY (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) OHIO 34-0437786 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 76 SOUTH MAIN STREET, AKRON, OHIO 44308 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 1-800-736-3402 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED ------------------- --------------------- Each registered on Common Stock, $9 par value New York Stock Exchange Rights to Purchase Common Stock and Chicago Stock Exchange Cumulative Preferred Stock, $100 par value 3.90% Series 4.40% Series All series registered on 4.44% Series New York Stock Exchange 4.56% Series and Chicago Stock Exchange Cumulative Preferred Stock, $25 par value Registered on 7.75% Series New York Stock Exchange and Chicago Stock Exchange SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X --- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes X No --- --- State the aggregate market value of the voting stock held by non- affiliates of the registrant: $3,659,897,712 as of March 7, 1996. Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date: CLASS OUTSTANDING AT MARCH 19, 1996 ----- ----------------------------- Common Stock, $9 par value 152,569,437 Documents incorporated by reference (to the extent indicated herein): PART OF FORM 10-K INTO WHICH DOCUMENT DOCUMENT IS INCORPORATED -------- ---------------------------- Annual Report to Stockholders for the fiscal year ended December 31, 1995 (Pages 13-30) Part II Proxy Statement for 1996 Annual Meeting of Stockholders to be held April 25, 1996 Part III TABLE OF CONTENTS Page ---- Part I Item 1. Business............................................ 1 The Company....................................... 1 Central Area Power Coordination Group............. 1 Capital Requirements.............................. 2 Utility Regulation................................ 3 PUCO Rate Matters............................... 3 PPUC Rate Matters............................... 4 FERC Rate Matters............................... 4 Ohio Fuel Recovery Procedures................... 4 Nuclear Regulation................................ 5 Nuclear Insurance................................. 5 Environmental Matters............................. 6 Air Regulation.................................. 6 Water Regulation................................ 7 Waste Disposal.................................. 7 Summary......................................... 7 Fuel Supply....................................... 8 Nuclear Fuel.................................... 8 System Capacity and Reserves...................... 9 Regional Reliability.............................. 9 Competition....................................... 9 Research and Development.......................... 10 Executive Officers................................ 11 Item 2. Properties.......................................... 11 Item 3. Legal Proceedings................................... 13 Item 4. Submission of Matters to a Vote of Security Holders........................................... 13 Part II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters....................... 13 Item 6. Selected Financial Data............................. 13 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations..... 13 Item 8. Financial Statements and Supplementary Data......... 13 Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure............ 13 Part III Item 10. Directors and Executive Officers of the Registrant....................................... 13 Item 11. Executive Compensation............................. 13 Item 12. Security Ownership of Certain Beneficial Owners and Management............................ 13 Item 13. Certain Relationships and Related Transactions..... 14 Part IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.............................. 14 PART I ITEM 1. BUSINESS The Company Ohio Edison Company (Company) was organized under the laws of the State of Ohio in 1930 and owns property and does business as an electric public utility in that state. The Company also has ownership interests in certain generating facilities located in the Commonwealth of Pennsylvania. The Company furnishes electric service to communities in a 7,500 square mile area of central and northeastern Ohio. It also provides transmission services and electric energy for resale to certain municipalities in the Company's service area and transmission services to certain rural cooperatives. The Company also engages in the sale, purchase and interchange of electric energy with other electric companies. The area it serves has a population of approximately 2,530,000. The Company owns all of the outstanding common stock of Pennsylvania Power Company (Penn Power), a Pennsylvania corporation, which furnishes electric service to communities in a 1,500 square mile area of western Pennsylvania. Penn Power also provides transmission services and electric energy for resale to certain municipalities in Pennsylvania. The area served by Penn Power has a population of approximately 342,000. Central Area Power Coordination Group (CAPCO) In September 1967, the CAPCO companies, consisting of the Company, Penn Power, The Cleveland Electric Illuminating Company (CEI), Duquesne Light Company (Duquesne) and The Toledo Edison Company (Toledo), announced a program for joint development of power generation and transmission facilities. Included in the program are Unit 7 at the W. H. Sammis Plant, Units 1, 2 and 3 at the Bruce Mansfield Plant, Units 1 and 2 at the Beaver Valley Power Station and the Perry Nuclear Power Plant, each now in service. The present CAPCO Basic Operating Agreement provides, among other things, for coordinated maintenance responsibilities among the CAPCO companies, a limited and qualified mutual backup arrangement in the event of outage of CAPCO units and certain capacity and energy transactions among the CAPCO companies. The agreements among the CAPCO companies generally treat the Company and Penn Power (Companies) as a single system as between them and the other three CAPCO companies, but, in agreements between the CAPCO companies and others, all five companies are treated as separate entities. Subject to any rights that might arise among the CAPCO companies as such, each member company, - 1 - severally and not jointly, is obligated to pay only its proportionate share of the costs associated with the facilities and the cost of required fuel. The CAPCO companies have agreed that any modification of their arrangements or of their agreed-upon programs requires their unanimous consent. Should any member become unable to continue to pay its share of the costs associated with a CAPCO facility, each of the other CAPCO companies could be adversely affected in varying degrees because it may become necessary for the remaining members to assume such costs for the account of the defaulting member. Under the agreements governing the construction and operation of CAPCO generating units, the responsibility is assigned to a specific CAPCO company. CEI has such responsibilities for Perry, and Duquesne is responsible for Beaver Valley Units 1 and 2. The Company monitors activities in connection with these units but must rely to a significant degree on the operating company for necessary information. The Company in its oversight role as a practical matter cannot be privy to every detail; it is the operating company that must directly supervise activities and then exercise its reporting responsibilities to the co-owners. The Company critically reviews the information given to it by the operating company, but it cannot be absolutely certain that things it would have considered significant have been reported or that it always would have reached exactly the same conclusion about matters that are reported. In addition, the time that is necessarily part of the compiling and analyzing process creates a lag between the occurrence of events and the time the Company becomes aware of their significance. The Companies have similar responsibilities to the other CAPCO companies with respect to W.H. Sammis Unit 7 and Bruce Mansfield Units 1, 2 and 3. Capital Requirements The Companies' total construction costs, excluding nuclear fuel, amounted to approximately $166,000,000 in 1995. Such costs included expenditures for the betterment of existing facilities and for the construction of transmission lines, distribution lines, substations and other additions. For the years 1996-2000, such construction costs are estimated to be approximately $650,000,000, of which approximately $160,000,000 is applicable to 1996. See "Environmental Matters" below with regard to possible environment- related expenditures not included in this estimate. During the 1996-2000 period, maturities of, and sinking fund requirements for, long-term debt and preferred stock will require expenditures by the Companies of over $1,300,000,000, of which approximately $264,000,000 is applicable to 1996. In addition, the Companies optionally redeemed approximately $40,000,000 of long- term debt in February and March 1996. - 2 - Nuclear fuel purchases are financed through OES Fuel (a wholly owned subsidiary of the Company) commercial paper and loans, both of which are supported by a $225,000,000 long-term bank credit agreement. Investments for additional nuclear fuel during the 1996- 2000 period are estimated to be approximately $180,000,000, of which approximately $29,000,000 applies to 1996. During the same periods, the Companies' nuclear fuel investments are expected to be reduced by approximately $191,000,000 and $39,000,000, respectively, as the nuclear fuel is consumed. Also, the Companies have operating lease commitments of approximately $594,000,000 for the 1996-2000 period, of which approximately $108,000,000 relates to 1996. The Companies recover the cost of nuclear fuel consumed and operating leases through their electric rates. Short-term borrowings of $119,965,000 at December 31, 1995, represent debt of OES Capital (a wholly owned subsidiary of the Company), which is secured by customer accounts receivable. OES Capital can borrow up to $120,000,000 under a receivables financing agreement at rates based on certain bank commercial paper. The Companies also had $52,000,000 of unused short-term bank lines of credit as of December 31, 1995. In addition, $50,000,000 was available through bank facilities that provide for borrowings on a short-term basis at the banks' discretion. Through OES Fuel credit facilities, the Company had the capability to borrow approximately $128,000,000 as of the end of 1995. Based on their present plans, the Companies could provide for their cash requirements in 1996 from the following sources: funds to be received from operations; available cash and temporary cash investments (approximately $30,000,000 as of December 31, 1995); the issuance of long-term debt (for refunding purposes) and funds available under short-term bank credit arrangements. For the period 1996-2000, external financings may be used to provide a portion of the Companies' cash requirements. The extent and type of future financings will depend on the need for external funds as well as market conditions, the maintenance of an appropriate capital structure and the ability of the Companies to comply with coverage requirements in order to issue first mortgage bonds and preferred stock. The Companies will continue to monitor financial market conditions and, where appropriate, may take advantage of economic opportunities to refund debt and preferred stock to the extent that their financial resources permit. The coverage requirements contained in the first mortgage indentures under which the Companies issue first mortgage bonds provide that, except for certain refunding purposes, the Companies may not issue first mortgage bonds unless applicable net earnings (before income taxes), calculated as provided in the indentures, for any period of twelve consecutive months within the fifteen calendar months preceding the month in which such additional bonds are issued, are at least twice annual interest requirements on - 3 - outstanding first mortgage bonds, including those being issued. The Companies' respective articles of incorporation prohibit the sale of preferred stock unless applicable gross income, calculated as provided in the articles of incorporation, is equal to at least 1-1/2 times the aggregate of the annual interest requirements on indebtedness and annual dividend requirements on preferred stock outstanding immediately thereafter. With respect to the issuance of first mortgage bonds under the Company's first mortgage indenture, the availability of property additions is more restrictive than the earnings test at the present time and would limit the amount of first mortgage bonds issuable against property additions to $388,000,000. The Company is currently able to issue $986,000,000 principal amount of first mortgage bonds against previously retired bonds without the need to meet the above restrictions. Based upon earnings for 1995, the Company would be permitted, under the earnings coverage test contained in its charter, to issue at least $1,539,000,000 of preferred stock at an assumed dividend rate of 8.25%. If the Company were to issue additional debt at or prior to the time it issued preferred stock, the amount of preferred stock which would be issuable would be reduced. To the extent that coverage requirements or market conditions restrict the Companies' abilities to issue desired amounts of first mortgage bonds or preferred stock, the Companies may seek other methods of financing. Such financings could include the sale of common stock and preference stock or of such other types of securities as might be authorized by applicable regulatory authorities which would not otherwise be sold and could result in annual interest charges and/or dividend requirements in excess of those that would otherwise be incurred. Utility Regulation The Companies are subject to broad regulation as to rates and other matters by the Public Utilities Commission of Ohio (PUCO) and the Pennsylvania Public Utility Commission (PPUC). With respect to their wholesale and interstate electric operations and rates, the Companies are subject to regulation, including regulation of their accounting policies and practices, by the Federal Energy Regulatory Commission (FERC). Under Ohio law, municipalities may regulate rates, subject to appeal to the PUCO if not acceptable to the utility. In 1986, a law was passed which extended the jurisdiction of the PUCO to nonutility affiliates of holding companies exempt under Section 3(a)(1) and 3(a)(2) of the Public Utility Holding Company Act of 1935 (1935 Act) to the extent that the activities of such affiliates affect or relate to the cost of providing electric utility service in Ohio. The law, among other things, requires PUCO approval of investments in, or the transfer of assets to, - 4 - nonutility affiliates. Investments in such affiliates are limited to 15% of the aggregate capitalization of the holding company on a consolidated basis. The Company is an exempt holding company under Section 3(a)(2) of the 1935 Act, but the law has not had any effect on its operations as they are currently conducted. The Energy Policy Act of 1992 (1992 Act) amended portions of the 1935 Act, providing independent power producers and other nonregulated generating facilities easier entry into electric generation markets. The 1992 Act also amended portions of the Federal Power Act, authorizing the FERC, under certain circumstances, to mandate access to utility-owned transmission facilities. PUCO Rate Matters On October 18, 1995, the PUCO approved the Company's Rate Reduction and Economic Development Plan (Regulatory Plan). The Regulatory Plan is designed to enhance and accelerate economic development within the Company's service area and to assure the Company's customers of long-term competitive pricing for energy services. Under the Regulatory Plan, the Company agreed to freeze base electric rates until December 31, 2005, unless additional revenues are needed to recover the costs of changes in environmental, regulatory or tax laws or regulations. Also, as part of the Regulatory Plan, transition rate credits were implemented for customers on November 1, 1995, which are expected to reduce operating revenues by approximately $600,000,000 during the Regulatory Plan period. The Regulatory Plan also established a revised fuel recovery rate formula which eliminated the automatic pass-through of fuel costs to the Company's retail customers (see "Ohio Fuel Recovery Procedures"). All of the Company's regulatory assets are now being recovered under provisions of the Regulatory Plan. In addition, the PUCO authorized the Company to recognize additional depreciation expense related to its generating assets and additional amortization of regulatory assets during the ten-year Regulatory Plan period of at least $2,000,000,000 more than the amount that would have been recognized if the Regulatory Plan were not in effect. These additional amounts are being recovered through current rates. Among other provisions, the Regulatory Plan also limits the Company's annual earnings on common stock; any amounts otherwise earned in excess of the limitation would be credited to the Company's retail customers in a future period. PPUC Rate Matters On March 7, 1996, Penn Power filed a petition and application with the PPUC requesting approval of a Rate Stability and Economic - 5 - Development Plan (Plan). The Plan, which would remain in effect unless certain significant events occur, provides for the roll-in to base rates of the energy cost rate and the freezing of base rates for a ten-year period. A major component of the Plan is the commitment to reduce fixed costs during the ten-year period. Penn Power expects to recognize additional depreciation expense related to generating assets and additional amortization of regulatory assets during the ten-year Plan period of at least $330,000,000 more than the amount that would have been recognized if the Plan were not in effect. Additionally, the Plan provides for an increase in contributions to Penn Power's nuclear decommissioning trusts amounting to $28,000,000 over the ten-year period. The entire $358,000,000 would be recovered through current rates. FERC Rate Matters Rates for the Companies' respective wholesale customers are regulated by the FERC. The Company's tariff for its customers was approved by the FERC in 1989. Penn Power has agreements to sell power to four wholesale customers; two of the agreements expire in March 1997, and the other two will be in effect until September 1999. A former municipal customer of Penn Power signed a contract with another energy supplier in November 1995. Penn Power and the former customer are in dispute over Penn Power's proposed transmission rate. Both parties have filed proposals with the FERC requesting it to establish final terms. FERC has accepted the proposed transmission rate, subject to refund upon hearing. Ohio Fuel Recovery Procedures In accordance with the Regulatory Plan, the Company's Electric Fuel Component (EFC) rate will be frozen until December 31, 2005, subject only to limited periodic adjustments. The rate will be adjusted annually based on changes in the GDP Implicit Price Deflator, unless significant changes in environmental, regulatory or tax laws or regulations increase or decrease the cost of fuel. Such changes in laws, regulations and/or taxes would require PUCO approval to be reflected as an adjustment to the EFC rate. Furthermore, for the period July 1, 1996 through July 1, 1999, the EFC rate will be limited to the average fuel cost rate of certain utilities within the state. Commencing July 1, 2000, the EFC rate will be limited to 97% of the average fuel cost rate of these companies. The average fuel cost rate for these utilities may be adjusted by the PUCO to reflect any significant changes in the Phase II environmental compliance plans of such companies involving capital additions or equipment utilization. Nuclear Regulation The construction and operation of nuclear generating units are subject to the regulatory jurisdiction of the Nuclear Regulatory Commission (NRC) including the issuance by it of - 6 - construction permits and operating licenses. The NRC's procedures with respect to application for construction permits and operating licenses afford opportunities for interested parties to request public hearings on health, safety, environmental and antitrust issues. In this connection, the NRC may require substantial changes in operation or the installation of additional equipment to meet safety or environmental standards with resulting delay and added costs. The possibility also exists for modification, denial or revocation of licenses or permits. Full power operating licenses were issued for Beaver Valley Unit 1, Perry and Beaver Valley Unit 2 on July 1, 1976, November 13, 1986 and August 14, 1987, respectively. The NRC has promulgated and continues to promulgate regulations related to the safe operation of nuclear power plants. The Companies cannot predict what additional regulations will be promulgated or design changes required or the effect that any such regulations or design changes, or the consideration thereof, may have upon the Beaver Valley and Perry plants. Although the Companies have no reason to anticipate an accident at any nuclear plant in which they have an interest, if such an accident did happen, it could have a material but presently undeterminable adverse effect on the Company's consolidated financial position. In addition, such an accident at any operating nuclear plant, whether or not owned by the Companies, could result in regulations or requirements that could affect the operation or licensing of plants that the Companies do own with a consequent but presently undeterminable adverse impact, and could affect the Companies' abilities to raise funds in the capital markets. Nuclear Insurance The Price-Anderson Act limits the public liability which can be assessed with respect to a nuclear power plant to $8,920,000,000 (assuming 110 units licensed to operate) for a single nuclear incident, which amount is covered by: (i) private insurance amounting to $200,000,000; and (ii) $8,720,000,000 provided by an industry retrospective rating plan required by the NRC pursuant thereto. Under such retrospective rating plan, in the event of a nuclear incident at any unit in the United States resulting in losses in excess of private insurance, up to $75,500,000 (but not more than $10,000,000 per unit per year in the event of more than one incident) must be contributed for each nuclear unit licensed to operate in the country by the licensees thereof to cover liabilities arising out of the incident. Based on their present ownership and leasehold interests in the Beaver Valley Station and the Perry Plant, the Companies' maximum potential assessment under these provisions (assuming the other CAPCO companies were to contribute their proportionate share of any assessments under the retrospective rating plan) would be $102,800,000 per incident but not more than $13,000,000 in any one year for each incident. - 7 - In addition to the public liability insurance provided pursuant to the Price-Anderson Act, the Companies have also obtained insurance coverage in limited amounts for economic loss and property damage arising out of nuclear incidents. The Companies are members of Nuclear Electric Insurance Limited (NEIL) which provides coverage (NEIL I) for the extra expense of replacement power incurred due to prolonged accidental outages of nuclear units. Under NEIL I, the Companies have policies, renewable yearly, corresponding to their respective interests in the Beaver Valley Station and the Perry Plant, which provide an aggregate indemnity of up to approximately $414,000,000 for replacement power costs incurred during an outage after an initial 21-week waiting period. Members of NEIL I pay annual premiums and are subject to assessments if losses exceed the accumulated funds available to the insurer. The Companies' present maximum aggregate assessment for incidents at any covered nuclear facility occurring during a policy year would be approximately $4,100,000. The Companies are insured as to their respective interests in the Beaver Valley Station and Perry Plant under property damage insurance provided by American Nuclear Insurers, Mutual Atomic Energy Liability Underwriters and NEIL to the operating company for each plant. Under these arrangements, $2,750,000,000 of coverage for decontamination costs, decommissioning costs, debris removal and repair and/or replacement of property is provided for the Beaver Valley Station and the Perry Plant. The Companies pay annual premiums for this coverage and are liable for retrospective assessments of up to approximately $13,300,000 during a policy year. The Companies intend to maintain insurance against nuclear risks as described above as long as it is available. To the extent that replacement power, property damage, decontamination, decommissioning, repair and replacement costs and other such costs arising from a nuclear incident at any of the Companies' plants exceed the policy limits of the insurance in effect with respect to that plant, to the extent a nuclear incident is determined not to be covered by the Companies' insurance policies, or to the extent such insurance becomes unavailable in the future, the Companies would remain at risk for such costs. The NRC requires nuclear power plant licensees to obtain minimum property insurance coverage of $1,060,000,000 or the amount generally available from private sources, whichever is less. The proceeds of this insurance are required to be used first to ensure that the licensed reactor is in a safe and stable condition and can be maintained in that condition so as to prevent any significant risk to the public health and safety. Within 30 days of stabilization, the licensee is required to prepare and submit to the NRC a cleanup plan for approval. The plan is required to identify all cleanup operations necessary to decontaminate the reactor sufficiently to permit the resumption of operations or to - 8 - commence decommissioning. Any property insurance proceeds not already expended to place the reactor in a safe and stable condition must be used first to complete those decontamination operations that are ordered by the NRC. The Companies are unable to predict what effect these requirements may have on the availability of insurance proceeds to the Companies for the Companies' bondholders. Environmental Matters Various federal, state and local authorities regulate the Companies with regard to air and water quality and other environmental matters. The Companies have estimated capital expenditures for environmental compliance of approximately $17,000,000, which is included in the construction estimate given under "Capital Requirements" for 1996 through 2000. Air Regulation Under the provisions of the Clean Air Act of 1970, both the State of Ohio and the Commonwealth of Pennsylvania adopted ambient air quality standards, and related emission limits, including limits for sulfur dioxide (SO2) and particulates. In addition, the U.S. Environmental Protection Agency (EPA) promulgated an SO2 regulatory plan for Ohio which became effective for the Company's plants in 1977. Generating plants to be constructed in the future and some future modifications of existing facilities will be covered not only by the applicable state standards but also by EPA emission performance standards for new sources. In both Ohio and Pennsylvania the construction or modification of emission sources requires approval from appropriate environmental authorities, and the facilities involved may not be operated unless a permit or variance to do so has been issued by those same authorities. The Companies are in compliance with the SO2 and nitrogen oxides (NOx) reduction requirements for 1995 under the Clean Air Act Amendments of 1990. SO2 reductions for the years 1995 through 1999 are being achieved by burning lower-sulfur fuel, generating more electricity from lower-emitting plants, and/or purchasing emission allowances. Plans for complying with reductions required for the year 2000 and thereafter have not been finalized. EPA is conducting additional studies which could indicate the need for additional NOx reductions from the Companies' Pennsylvania facilities by the year 2003. The cost of such reductions, if required, may be substantial. The Companies continue to evaluate their compliance plans and other compliance options. The Companies are required to meet federally approved SO2 regulations. Violations of such regulations can result in shutdown of the generating unit involved and/or civil or criminal penalties of up to $25,000 for each day the unit is in violation. The EPA has an interim enforcement policy for SO2 regulations in Ohio that - 9 - allows for compliance based on a 30-day averaging period. The EPA has proposed regulations that could change the interim enforcement policy, including the method of determining compliance with emission limits. The Companies cannot predict what action the EPA may take in the future with respect to proposed regulations or the interim enforcement policy. Water Regulation Various water quality regulations, the majority of which are the result of the federal Clean Water Act and its amendments, apply to the Companies' plants. In addition, Ohio and Pennsylvania have water quality standards applicable to the Companies' operations. As provided in the Clean Water Act, authority to grant federal National Pollutant Discharge Elimination System (NPDES) water discharge permits can be assumed by a state. Ohio and Pennsylvania have assumed such authority. The Ohio Environmental Protection Agency (Ohio EPA) has issued NPDES Permits for the R.E. Burger, Edgewater, Niles, W.H. Sammis and West Lorain plants and has proposed a water discharge permit for the Mad River Plant. The West Lorain Plant is in compliance with all permit conditions. The other plants are in compliance with chemical limitations of the permits. The permit conditions would have required the addition of cooling towers at all of the above plants except West Lorain. However, the EPA and Ohio EPA have approved variance requests for the W.H. Sammis, R.E. Burger, Edgewater and Niles plants, eliminating the current need for cooling towers at those plants. Waste Disposal As a result of the Resource Conservation and Recovery Act of 1976, as amended, and the Toxic Substances Control Act of 1976, federal and state hazardous waste regulations have been promulgated. These regulations may result in significantly increased costs to dispose of waste materials. The ultimate effect of these requirements cannot presently be determined. The Pennsylvania Department of Environmental Resources (DER) issued regulations dealing with the storage, treatment, transportation and disposal of residual waste such as coal ash and scrubber sludge. These regulations impose additional requirements relating to permitting, ground water monitoring, leachate collection systems, closure, liability insurance and operating matters. Penn Power recently entered into an agreement with the Pennsylvania Department of Environmental Protection (formerly DER) resolving the major repermitting issues for the Bruce Mansfield Plant's waste disposal facility. As a result of the agreement, the Companies expect that the increased costs of compliance with these regulations will not be material. - 10 - Summary Environmental controls are still in the process of development and require, in many instances, balancing the needs for additional quantities of energy in future years and the need to protect the environment. As a result, the Companies cannot now estimate the precise effect of existing and potential regulations and legislation upon any of their existing and proposed facilities and operations or upon their ability to issue additional first mortgage bonds under their respective mortgages. These mortgages contain covenants by the Companies to observe and conform to all valid governmental requirements at the time applicable unless in course of contest, and provisions which, in effect, prevent the issuance of additional bonds if there is a completed default under the mortgage. The provisions of each of the mortgages, in effect, also require, in the opinion of counsel for the respective Companies, that certification of property additions as the basis for the issuance of bonds or other action under the mortgages be accompanied by an opinion of counsel that the company certifying such property additions has all governmental permissions at the time necessary for its then current ownership and operation of such property additions. The Companies intend to contest any requirements they deem unreasonable or impossible for compliance or otherwise contrary to the public interest. Developments in these and other areas of regulation may require the Companies to modify, supplement or replace equipment and facilities, and may delay or impede the construction and operation of new facilities, at costs which could be substantial. Fuel Supply The Companies' sources of generation during 1995 were 74.0% coal and 26.0% nuclear. Over two-thirds of the Company's annual coal purchase requirements are supplied under long-term contracts. These contracts have minimum annual tonnage levels of approximately 5,300,000 tons (including the Company's portion of the coal purchase contract relating to the Bruce Mansfield Plant discussed below). This contract coal is produced primarily from mines located in Ohio, Pennsylvania, Kentucky and West Virginia; the contracts expire at various times through February 28, 2003. The Companies estimate their 1996 coal requirements to be approximately 9,800,000 tons (including their respective shares of the coal requirements of CAPCO's W. H. Sammis Unit 7 and the Bruce Mansfield Plant). See "Environmental Matters" for factors pertaining to meeting environmental regulations affecting coal- fired generating units. The Companies, together with the other CAPCO companies, have each severally guaranteed (the Company's and Penn Power's composite percentages being approximately 46.8% and 6.7%, respectively) certain debt and lease obligations in connection with a coal supply - 11 - contract for the Bruce Mansfield Plant (see Note 7 of Notes to Consolidated Financial Statements). As of December 31, 1995, the Companies' shares of the guarantees were $72,851,000. The price under the coal supply contract, which includes certain minimum payments, has been determined to be sufficient to satisfy the debt and lease obligations. This contract extends to December 31, 1999. The Companies' fuel costs (excluding disposal costs) for each of the five years ended December 31, 1995, were as follows: 1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- Cost of fuel consumed per million BTUs: Coal $1.36 $1.36 $1.37 $1.40 $1.40 Nuclear $ .65 $ .75 $ .76 $ .83 $ .87 Average fuel cost per kilowatt-hour generated (cents) 1.22 1.26 1.31 1.31 1.34 Nuclear Fuel OES Fuel is the sole lessor for the Companies' nuclear fuel requirements (see "Capital Requirements" and Note 5F of Notes to Consolidated Financial Statements). The Companies and OES Fuel have contracts for the supply of uranium sufficient to meet projected needs through 2000 and conversion services sufficient to meet projected needs through 2001. Fabrication services for fuel assemblies have been contracted by the CAPCO companies for the next four reloads for Beaver Valley Unit 1, two reloads for Beaver Valley Unit 2 (through approximately 2000 and 1998, respectively), and the next six reloads for Perry (through approximately 2004). The Companies have a contract with U.S. Enrichment Corporation for the majority of their enrichment requirements for nuclear fuel through 2014. Prior to the expiration of existing commitments, the Companies intend to make additional arrangements for the supply of uranium and for the subsequent conversion, enrichment, fabrication, reprocessing and/or waste disposal services, the specific prices and availability of which are not known at this time. Due to the present lack of availability of domestic reprocessing services, to the continuing absence of any program to begin development of such reprocessing capability and questions as to the economics of reprocessing, the Companies are calculating nuclear fuel costs based on the assumption that spent fuel will not be reprocessed. On-site spent fuel storage facilities for the Perry Plant are expected to be adequate through 2010; facilities at Beaver Valley Units 1 and 2 are expected to be adequate through 2011 and 2005, respectively. After on-site storage capacity is exhausted, additional storage capacity will have to be obtained which could - 12 - result in significant additional costs unless reprocessing services or permanent waste disposal facilities become available. The Federal Nuclear Waste Policy Act of 1982 provides for the construction of facilities for the disposal of high-level nuclear wastes, including spent fuel from nuclear power plants operated by electric utilities; however, the selection of a suitable site has become embroiled in the political process. Duquesne and CEI have each previously entered into contracts with the U.S. Department of Energy for the disposal of spent fuel from the Beaver Valley Power Station and the Perry Plant, respectively. System Capacity and Reserves The 1995 net maximum hourly demand on the Companies of 6,332,000 kilowatts (kW) (including 450,000 kW of firm power sales which extend through 2005 as discussed under "Competition") occurred on August 15, 1995. The seasonal capability of the Companies on that day was 6,489,000 kW. Of that system capability, 2.2% was available to serve additional load, after giving effect to net firm and capacity purchases at that hour of 864,000 kW and term power sales to other utilities. Based on existing capacity plans, the load forecast made in October 1995 and anticipated term power sales to other utilities, the capacity margins during the 1996-2000 period are expected to range from about 6% to 10%. Regional Reliability The Company participates with 26 other electric companies operating in nine states in the East Central Area Reliability Coordination Agreement (ECAR), which was organized for the purpose of furthering the reliability of bulk power supply in the area through coordination of the planning and operation by the ECAR members of their bulk power supply facilities. The ECAR members have established principles and procedures regarding matters affecting the reliability of the bulk power supply within the ECAR region. Procedures have been adopted regarding: i) the evaluation and simulated testing of systems' performance; ii) the establishment of minimum levels of daily operating reserves; iii) the development of a program regarding emergency procedures during conditions of declining system frequency; and iv) the basis for uniform rating of generating equipment. Competition The Companies compete with other utilities for intersystem bulk power sales and for sales to municipalities and cooperatives. The Companies compete with suppliers of natural gas and other forms of energy in connection with their industrial and commercial sales and in the home climate control market, both with respect to new customers and conversions, and with all other suppliers of electricity. To date, there has been no substantial cogeneration by the Companies' customers. - 13 - Technological advances and regulatory changes are driving forces toward increasing competition in the energy market. In addition, many large electricity users continue to push for some form of retail wheeling, which would enable retail customers to purchase electricity from producers other than the local utility. In February 1996, the PUCO approved a change allowing large industrial customers that have interruptible service contracts to buy their power from other sources when they have been advised by their local utility that service will be interrupted. While regulators appear to be reluctant to pursue full retail wheeling (primarily because of the adverse impact retail wheeling would have on small users) the debate could place further downward pressure on the Companies' prices in the future. In an effort to more fully utilize their facilities and hold down rates to their other customers, the Companies have entered into a long-term power sales agreement with another utility. Currently, the Companies are selling 450,000 kW annually under this contract through December 31, 2005. The Companies have the option to reduce this commitment by 150,000 kW, with three years advance notice. Research and Development The Company participates in funding the Electric Power Research Institute (EPRI), which was formed for the purpose of expanding electric research and development under the voluntary sponsorship of the nation's electric utility industry - public, private and cooperative. Its goal is to mutually benefit utilities and their customers by promoting the development of new and improved technologies to help the utility industry meet present and future electric energy needs in environmentally and economically acceptable ways. EPRI conducts research on all aspects of electric power production and use, including fuels, generating, delivery, energy management and conservation, environmental effects and energy analysis. The major portion of EPRI research and development projects is directed toward practical solutions and their applications to problems currently facing the electric utility industry. In 1995, approximately 82% of the Company's research and development expenditures were related to EPRI. The Company also participates in various research and development efforts by sponsoring clean coal technology demonstration projects at Company-owned coal-fired units. These projects are designed to derive alternate ways of using coal that would otherwise be environmentally unacceptable. In addition to researching environmentally acceptable ways of burning coal, the Company is also researching technology which will produce ash waste with properties and characteristics different from present fly ash and bottom ash, with the initial goal of producing marketable products for use in agronomy and civil engineering applications. - 14 - Executive Officers The executive officers are elected at the annual organization meeting of the Board of Directors, held immediately after the annual meeting of stockholders, and hold office until the next such organization meeting, unless the Board of Directors shall otherwise determine, or unless a resignation is submitted. Position Held During Name Age Past Five Years Dates - ---------------- --- ----------------------------- ------------- W. R. Holland 59 President and Chief Executive Officer 1993-present President and Chief Operating Officer 1991-1993 Senior Vice President of Detroit Edison Company *-1991 A. J. Alexander 44 Senior Vice President and General Counsel 1991-present Vice President and General Counsel *-1991 H. P. Burg 49 Senior Vice President and Chief Financial Officer *-present R. J. McWhorter 63 Senior Vice President- Generating Plant and Transmission Operations *-present E. T. Carey 53 Vice President-Division Operations and Customer Service 1995-present Vice President-Marketing and Customer Service Support 1994-1995 Manager, Performance Initiatives 1993-1994 Division Manager *-1993 A. R. Garfield 57 Vice President-System Operations 1991-present Manager, System Operations *-1991 J. A. Gill 58 Vice President-Administration *-present B. M. Miller 63 Vice President-Engineering and Construction *-present D. L. Yeager 61 Vice President-Special Projects *-present - 15 - N. C. Ashcom 48 Secretary 1994-present Assistant Secretary *-1994 R. H. Marsh 45 Treasurer 1991-present Manager, Assets Administration *-1991 H. L. Wagner 43 Comptroller *-present *Indicates position held at least since January 1, 1991. At December 31, 1995, the Company had 3,592 employees and Penn Power had 1,220 employees for a total of 4,812 employees for the Companies. ITEM 2. PROPERTIES The Companies' respective first mortgage indentures constitute, in the opinion of the Companies' counsel, direct first liens on substantially all of the respective Companies' physical property, subject only to excepted encumbrances, as defined in the indentures. See Notes 4 and 5 to the Consolidated Financial Statements for information concerning leases and financing encumbrances affecting certain of the Companies' properties. The Companies own, individually or together with one or more of the other CAPCO companies as tenants in common, and/or lease, the generating units in service as of March 1, 1996, shown on the table below. Net Demonstrated Interest --------------------- Capacity (kW) Penn ------------------ Companies' Ohio Edison Power ------------- Plant-Location Unit Total Entitlement Owned Leased Owned - ---------------- ---- --------- ----------- ------- ------- ------- Coal-Fired Units R.E. Burger- 3-5 406,000 406,000 100.00% - - Shadyside, OH B. Mansfield- 1 780,000 501,000 60.00% - 4.20% Shippingport, PA 2 780,000 360,000 39.30% - 6.80% 3 800,000 335,000 35.60% - 6.28% New Castle- 3-5 333,000 333,000 - - 100.00% W. Pittsburg, PA Niles-Niles, OH 1-2 216,000 216,000 100.00% - - W.H. Sammis- 1-6 1,620,000 1,620,000 100.00% - - - 16 - Stratton, OH 7 600,000 413,000 48.00% - 20.80% Nuclear Units Beaver Valley- 1 810,000 425,000 35.00% - 17.50% Shippingport, PA 2 820,000 343,000 20.22% 21.66% - Perry- 1,194,000 421,000 17.42%* 12.58% 5.24% N. Perry Village, OH Oil/Gas-Fired Units Edgewater-Lorain, OH 4 100,000 100,000 100.00% - - West Lorain- Lorain, OH 1 120,000 120,000 100.00% - - Other 164,000 164,000 84.82% - 15.18% --------- Total 5,757,000 ========= * Represents portion leased from a wholly owned subsidiary of the Company. Prolonged outages of existing generating units might make it necessary for the Companies, depending upon the demand for electric service upon their system, to use to a greater extent than otherwise, less efficient and less economic generating units, or purchased power, and in some cases may require the reduction of load during peak periods under the Companies' interruptible programs, all to an extent not presently determinable. The Companies' generating plants and load centers are connected by a transmission system consisting of elements having various voltage ratings ranging from 23 kilovolts (kV) to 345 kV. The Companies' overhead and underground transmission lines aggregate 4,576 miles. The Companies' electric distribution systems include 26,114 miles of overhead pole line and underground conduit carrying primary, secondary and street lighting circuits. They own, individually or together with one or more of the other CAPCO companies as tenants in common, 443 substations with a total installed transformer capacity of 24,380,724 kilovolt-amperes, of which 69 are transmission substations, including 9 located at generating plants. The Company's transmission lines also interconnect with those of American Electric Power Company, CEI, The Dayton Power and Light Company, Duquesne, Monongahela Power Company and Toledo; Penn Power's interconnect with those of Duquesne and West Penn Power Company. These interconnections make possible utilization by the Company and Penn Power of generating capacity constructed as a part - 17 - of the CAPCO program, as well as providing opportunities for the sale of power to other utilities. ITEM 3. LEGAL PROCEEDINGS None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCK- HOLDER MATTERS ITEM 6. SELECTED FINANCIAL DATA ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information called for by Items 5 through 8 is incorporated herein by reference to the Common Stock Data, Classification of Holders of Common Stock as of December 31, 1995, Selected Financial Data, Management's Discussion and Analysis of Results of Operations and Financial Condition, and Consolidated Financial Statements included on pages 13 through 30 in the Company's 1995 Annual Report to Stockholders (Exhibit 13). ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNT- ING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by Item 10, with respect to Identification of Directors and with respect to reports required to be filed under Section 16 of the Securities Exchange Act of 1934, is incorporated herein by reference to the Company's 1996 Proxy Statement filed with the Securities and Exchange Commission (SEC) pursuant to Regulation 14A and, with respect to Identification of Executive Officers, to "Part I, Item 1. Business- Executive Officers" herein. ITEM 11. EXECUTIVE COMPENSATION ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT - 18 - ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by Items 11, 12 and 13 is incorporated herein by reference to the Company's 1996 Proxy Statement filed with the SEC pursuant to Regulation 14A. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1. Financial Statements Included in Part II of this report and incorporated herein by reference to the Company's 1995 Annual Report to Stockholders (Exhibit 13 below) at the pages indicated. Page No. -------- Consolidated Statements of Income-Three Years Ended December 31, 1995........................... 17 Consolidated Balance Sheets-December 31, 1995 and 1994..................................... 18 Consolidated Statements of Retained Earnings- Three Years Ended December 31, 1995............... 19 Consolidated Statements of Capital Stock and Other Paid-In Capital-Three Years Ended December 31, 1995................................. 19 Consolidated Statements of Capitalization- December 31, 1995 and 1994........................20-21 Consolidated Statements of Cash Flows-Three Years Ended December 31, 1995..................... 22 Consolidated Statements of Taxes-Three Years Ended December 31, 1995........................... 23 Notes to Consolidated Financial Statements..........24-30 Report of Independent Public Accountants............ 30 2. Financial Statement Schedules Included in Part IV of this report: Page No. -------- Report of Independent Public Accountants............ 29 Schedule - Three Years Ended December 31, 1995: II - Consolidated Valuation and Qualifying Accounts..................... 30 - 19 - Schedules other than the schedule listed above are omitted for the reason that they are not required or are not applicable, or the required information is shown in the financial statements or notes thereto. 3. Exhibits Exhibit Number - ------- 3-1 - Amended Articles of Incorporation, Effective June 21, 1994, constituting the Company's Articles of Incorporation. (1994 Form 10-K, Exhibit 3-1.) 3-2 - Code of Regulations of the Company as amended April 24, 1986. (Registration No. 33-5081, Exhibit (4)(d).) (B) 4-1 - Indenture dated as of August 1, 1930 between the Company and Bankers Trust Company, as Trustee, as amended and supplemented by Supplemental Indentures: Dated as of File Reference Exhibit No. ----------- -------------- ----------- March 3, 1931 2-1725 B-1,B-1(a),B-1(b) November 1, 1935 2-2721 B-4 January 1, 1937 2-3402 B-5 September 1, 1937 Form 8-A B-6 June 13, 1939 2-5462 7(a)-7 August 1, 1974 Form 8-A, August 28, 1974 2(b) July 1, 1976 Form 8-A, July 28, 1976 2(b) December 1, 1976 Form 8-A, December 15, 1976 2(b) June 15, 1977 Form 8-A, June 27, 1977 2(b) Supplemental Indentures: Dated as of File Reference Exhibit No. ----------- -------------- ----------- September 1, 1944 2-61146 2(b)(2) April 1, 1945 2-61146 2(b)(2) September 1, 1948 2-61146 2(b)(2) May 1, 1950 2-61146 2(b)(2) January 1, 1954 2-61146 2(b)(2) May 1, 1955 2-61146 2(b)(2) August 1, 1956 2-61146 2(b)(2) March 1, 1958 2-61146 2(b)(2) April 1, 1959 2-61146 2(b)(2) - 20 - Dated as of File Reference Exhibit No. ----------- -------------- ----------- June 1, 1961 2-61146 2(b)(2) September 1, 1969 2-34351 2(b)(2) May 1, 1970 2-37146 2(b)(2) September 1, 1970 2-38172 2(b)(2) June 1, 1971 2-40379 2(b)(2) August 1, 1972 2-44803 2(b)(2) September 1, 1973 2-48867 2(b)(2) May 15, 1978 2-66957 2(b)(4) February 1, 1980 2-66957 2(b)(5) April 15, 1980 2-66957 2(b)(6) June 15, 1980 2-68023 (b)(4)(b)(5) October 1, 1981 2-74059 (4)(d) October 15, 1981 2-75917 (4)(e) February 15, 1982 2-75917 (4)(e) July 1, 1982 2-89360 (4)(d) March 1, 1983 2-89360 (4)(e) March 1, 1984 2-89360 (4)(f) September 15, 1984 2-92918 (4)(d) September 27, 1984 33-2576 (4)(d) November 8, 1984 33-2576 (4)(d) December 1, 1984 33-2576 (4)(d) December 5, 1984 33-2576 (4)(e) January 30, 1985 33-2576 (4)(e) February 25, 1985 33-2576 (4)(e) July 1, 1985 33-2576 (4)(e) October 1, 1985 33-2576 (4)(e) January 15, 1986 33-8791 (4)(d) May 20, 1986 33-8791 (4)(d) June 3, 1986 33-8791 (4)(e) October 1, 1986 33-29827 (4)(d) July 15, 1989 33-34663 (4)(d) August 25, 1989 33-34663 (4)(d) February 15, 1991 33-39713 (4)(d) May 1, 1991 33-45751 (4)(d) May 15, 1991 33-45751 (4)(d) September 15, 1991 33-45751 (4)(d) April 1, 1992 33-48931 (4)(d) June 15, 1992 33-48931 (4)(d) September 15, 1992 33-48931 (4)(e) April 1, 1993 33-51139 (4)(d) June 15, 1993 33-51139 (4)(d) September 15, 1993 33-51139 (4)(d) November 15, 1993 1-2578 (4)(2) April 1, 1995 (A) (4)(2) May 1, 1995 (A) (4)(2) July 1, 1995 (A) (4)(2) - 21 - Exhibit Number - ------- 10-1 - Administration Agreement between the CAPCO Group dated as of September 14, 1967. (Registration No. 2-43102, Exhibit 5(c)(2).) 10-2 - Amendment No. 1 dated January 4, 1974 to Administration Agreement between the CAPCO Group dated as of September 14, 1967. (Registration No. 2-68906, Exhibit 5(c)(3).) 10-3 - Transmission Facilities Agreement between the CAPCO Group dated as of September 14, 1967. (Registration No. 2-43102, Exhibit 5(c)(3).) 10-4 - Amendment No. 1 dated as of January 1, 1993 to Transmission Facilities Agreement between the CAPCO Group dated as of September 14, 1967. (1993 Form 10-K, Exhibit 10-4.) 10-5 - Agreement for the Termination or Construction of Certain Agreements effective September 1, 1980 among the CAPCO Group. (Registration No. 2- 68906, Exhibit 10-4.) 10-6 - Amendment dated as of December 23, 1993 to Agreement for the Termination or Construction of Certain Agreements effective September 1, 1980 among the CAPCO Group. (1993 Form 10-K, Exhibit 10-6.) 10-7 - CAPCO Basic Operating Agreement, as amended September 1, 1980. (Registration No. 2-68906, Exhibit 10-5.) 10-8 - Amendment No. 1 dated August 1, 1981, and Amendment No. 2 dated September 1, 1982 to CAPCO Basic Operating Agreement, as amended September 1, 1980. (September 30, 1981 Form 10-Q, Exhibit 20-1 and 1982 Form 10-K, Exhibit 19-3, respectively.) 10-9 - Amendment No. 3 dated July 1, 1984 to CAPCO Basic Operating Agreement, as amended September 1, 1980. (1985 Form 10-K, Exhibit 10-7.) 10-10 - Basic Operating Agreement between the CAPCO Companies as amended October 1, 1991. (1991 Form 10-K, Exhibit 10-8.) - 22 - Exhibit Number - ------- 10-11 - Basic Operating Agreement between the CAPCO Companies as amended January 1, 1993. (1993 Form 10-K, Exhibit 10-11.) 10-12 - Memorandum of Agreement effective as of September 1, 1980 among the CAPCO Group. (1982 Form 10-K, Exhibit 19-2.) 10-13 - Operating Agreement for Beaver Valley Power Station Units Nos. 1 and 2 as Amended and Restated September 15, 1987, by and between the CAPCO Companies. (1987 Form 10-K, Exhibit 10- 15.) 10-14 - Construction Agreement with respect to Perry Plant between the CAPCO Group dated as of July 22, 1974. (Registration No. 2-52251 of Toledo Edison Company, Exhibit 5(yy).) 10-15 - Participation Agreement No. 1 relating to the financing of the development of certain coal mines, dated as of October 1, 1973, among Quarto Mining Company, the CAPCO Group, Energy Properties, Inc., General Electric Credit Corporation, the Loan Participants listed in Schedules A and B thereto, Central National Bank of Cleveland, as Owner Trustee, National City Bank, as Loan Trustee, and Owner Trustee, National City Bank, as Loan Trustee, and National City Bank, as Bond Trustee. (Registration No. 2-61146, Exhibit 5(e)(1).) 10-16 - Amendment No. 1 dated as of September 15, 1978 to Participation Agreement No. 1 dated as of October 1, 1973 among Quarto Mining Company, the CAPCO Group, Energy Properties, Inc., General Electric Credit Corporation, the Loan Participants listed in Schedules A and B thereto, Central National Bank of Cleveland as Owner Trustee, National City Bank as Loan Trustee and National City Bank as Bond Trustee. (Registration No. 2-68906 of Pennsylvania Power Company, Exhibit 5(e)(2).) 10-17 - Participation Agreement No. 2 relating to the financing of the development of certain coal mines, dated as of August 1, 1974, among Quarto Mining Company, the CAPCO Group, Energy Properties, Inc., General Electric Credit - 23 - Exhibit Number - ------- Corporation, the Loan Participants listed in Schedules A and B thereto, Central National Bank of Cleveland, as Owner Trustee, National City Bank, as Loan Trustee, and National City Bank, as Bond Trustee. (Registration No. 2-53059, Exhibit 5(h)(2).) 10-18 - Amendment No. 1 dated as of September 15, 1978 to Participation Agreement No. 2 dated as of August 1, 1974 among Quarto Mining Company, the CAPCO Group, Energy Properties, Inc., General Electric Credit Corporation, the Loan Participants listed in Schedules A and B thereto, Central National Bank of Cleveland as Owner Trustee, National City Bank as Loan Trustee and National City Bank as Bond Trustee. (Registration No. 2-68906 of Pennsylvania Power Company, Exhibit 5(e)(4).) 10-19 - Participation Agreement No. 3 dated as of September 15, 1978 among Quarto Mining Company, the CAPCO Companies, Energy Properties, Inc., General Electric Credit Corporation, the Loan Participants listed in Schedules A and B thereto, Central National Bank of Cleveland as Owner Trustee, and National City Bank as Loan Trustee and Bond Trustee. (Registration No. 2- 68906 of Pennsylvania Power Company, Exhibit 5(e)(5).) 10-20 - Participation Agreement No. 4 dated as of October 31, 1980 among Quarto Mining Company, the CAPCO Group, the Loan Participants listed in Schedule A thereto and National City Bank as Bond Trustee. (Registration No. 2- 68906 of Pennsylvania Power Company, Exhibit 10-16.) 10-21 - Participation Agreement dated as of May 1, 1986, among Quarto Mining Company, the CAPCO Companies, the Loan Participants thereto, and National City Bank as Bond Trustee. (1986 Form 10-K, Exhibit 10-22.) 10-22 - Participation Agreement No. 6 dated as of December 1, 1991 among Quarto Mining Company, The Cleveland Electric Illuminating Company, Duquesne Light Company, Ohio Edison Company, Pennsylvania Power Company, the Toledo Edison Company, the Loan Participants listed in - 24 - Exhibit Number - ------- Schedule A thereto, National City Bank, as Mortgage Bond Trustee and National City Bank, as Refunding Bond Trustee. (1991 Form 10-K, Exhibit 10-19.) 10-23 - Agreement entered into as of October 20, 1981 among the CAPCO Companies regarding the use of Quarto coal at Mansfield Units 1, 2 and 3. (1981 Form 10-K, Exhibit 20-1.) 10-24 - Restated Option Agreement dated as of May 1, 1983 by and between the North American Coal Corporation and the CAPCO Companies. (1983 Form 10-K, Exhibit 19-1.) 10-25 - Trust Indenture and Mortgage dated as of October 1, 1973 between Quarto Mining Company and National City Bank, as Bond Trustee, together with Guaranty dated as of October 1, 1973 with respect thereto by the CAPCO Group. (Registration No. 2-61146, Exhibit 5(e)(5).) 10-26 - Amendment No. 1 dated August 1, 1974 to Trust Indenture and Mortgage dated as of October 1, 1973 between Quarto Mining Company and National City Bank, as Bond Trustee, together with Amendment No. 1 dated August 1, 1974 to Guaranty dated as of October 1, 1973 with respect thereto by the CAPCO Group. (Registration No. 2-53059, Exhibit 5(h)(2).) 10-27 - Amendment No. 2 dated as of September 15, 1978 to the Trust Indenture and Mortgage dated as of October 1, 1973, as amended, between Quarto Mining Company and National City Bank, as Bond Trustee, together with Amendment No. 2 dated as of September 15, 1978 to Guaranty dated as of October 1, 1973 with respect to the CAPCO Group. (Registration No. 2-68906 of Pennsylvania Power Company, Exhibits 5(e)(11) and 5(e)(12).) 10-28 - Amendment No. 3 dated as of October 31, 1980, to Trust Indenture and Mortgage dated as of October 1, 1973, as amended between Quarto Mining Company and National City Bank as Bond Trustee. (Registration No. 2-68906 of Pennsylvania Power Company, Exhibit 10-16.) - 25 - Exhibit Number - ------- 10-29 - Amendment No. 4 dated as of July 1, 1985 to the Trust Indenture and Mortgage dated as of October 1, 1973, as amended between Quarto Mining Company and National City Bank as Bond Trustee. (1985 Form 10-K, Exhibit 10-28.) 10-30 - Amendment No. 5 dated as of May 1, 1986, to the Trust Indenture and Mortgage between Quarto and National City Bank as Bond Trustee. (1986 Form 10-K, Exhibit 10-30.) 10-31 - Amendment No. 6 dated as of December 1, 1991, to the Trust Indenture and Mortgage dated as of October 1, 1973, between Quarto Mining Company and National City Bank, as Bond Trustee. (1991 Form 10-K, Exhibit 10-28.) 10-32 - Trust Indenture dated as of December 1, 1991, between Quarto Mining Company and National City Bank, as Bond Trustee. (1991 Form 10-K, Exhibit 10-29.) 10-33 - Amendment No. 3 dated as of October 31, 1980 to the Bond Guaranty dated as of October 1, 1973, as amended, with respect to the CAPCO Group. (Registration No. 2- 68906 of Pennsylvania Power Company, Exhibit 10-16.) 10-34 - Amendment No. 4 dated as of July 1, 1985 to the Bond Guaranty dated as of October 1, 1973, as amended, by the CAPCO Companies to National City Bank as Bond Trustee. (1985 Form 10-K, Exhibit 10-30.) 10-35 - Amendment No. 5 dated as of May 1, 1986, to the Bond Guaranty by the CAPCO Companies to National City Bank as Bond Trustee. (1986 Form 10-K, Exhibit 10-33.) 10-36 - Amendment No. 6A dated as of December 1, 1991, to the Bond Guaranty dated as of October 1, 1973, by The Cleveland Electric Illuminating Company, Duquesne Light Company, Ohio Edison Company, Pennsylvania Power Company, the Toledo Edison Company to National City Bank, as Bond Trustee. (1991 Form 10-K, Exhibit 10-33.) 10-37 - Amendment No. 6B dated as of December 30, 1991, to the Bond Guaranty dated as of October 1, 1973 - 26 - Exhibit Number - ------- by The Cleveland Electric Illuminating Company, Duquesne Light Company, Ohio Edison Company, Pennsylvania Power Company, the Toledo Edison Company to National City Bank, as Bond Trustee. (1991 Form 10-K, Exhibit 10-34.) 10-38 - Bond Guaranty dated as of December 1, 1991, by The Cleveland Electric Illuminating Company, Duquesne Light Company, Ohio Edison Company, Pennsylvania Power Company, the Toledo Edison Company to National City Bank, as Bond Trustee. (1991 Form 10-K, Exhibit 10-35.) 10-39 - Open end Mortgage dated as of October 1, 1973 between Quarto Mining Company and the CAPCO Companies and Amendment No. 1 thereto, dated as of September 15, 1978. (Registration No. 2-68906 of Pennsylvania Power Company, Exhibit 10-23.) 10-40 - Repayment and Security Agreement and Assignment of Lease dated as of October 1, 1973 between Quarto Mining Company and Ohio Edison Company as Agent for the CAPCO Companies and Amendment No. 1 thereto, dated as of September 15, 1978. (1980 Form 10-K, Exhibit 20-2.) 10-41 - Restructuring Agreement dated as of April 1, 1985 among Quarto Mining Company, the Company and the other CAPCO Companies, Energy Properties, Inc., General Electric Credit Corporation, the Loan Participants signatories thereto, Central National Bank of Cleveland, as Owner Trustee and National City Bank as Loan Trustee and Bond Trustee. (1985 Form 10-K, Exhibit 10-33.) 10-42 - Unsecured Note Guaranty dated as of July 1, 1985 by the CAPCO Companies to General Electric Credit Corporation. (1985 Form 10-K, Exhibit 10- 34.) 10-43 - Memorandum of Understanding dated March 31, 1985 among the CAPCO Companies. (1985 Form 10-K, Exhibit 10-35.) (A)(C) 10-44 - Ohio Edison System Executive Supplemental Life Insurance Plan. - 27 - Exhibit Number - ------- (A)(C) 10-45 - Ohio Edison System Executive Incentive Compensation Plan. (A)(C) 10-46 - Ohio Edison System Restated and Amended Executive Deferred Compensation Plan. (A)(C) 10-47 - Ohio Edison System Restated and Amended Supplemental Executive Retirement Plan. (A)(C) 10-48 - Severance pay agreement between Ohio Edison Company and W. R. Holland. (A)(C) 10-49 - Severance pay agreement between Ohio Edison Company and H. P. Burg. (A)(C) 10-50 - Severance pay agreement between Ohio Edison Company and A. J. Alexander. (A)(C) 10-51 - Severance pay agreement between Ohio Edison Company and J. A. Gill. (D) 10-52 - Participation Agreement dated as of March 16, 1987 among Perry One Alpha Limited Partnership, as Owner Participant, the Original Loan Participants listed in Schedule 1 Hereto, as Original Loan Participants, PNPP Funding Corporation, as Funding Corporation, The First National Bank of Boston, as Owner Trustee, Irving Trust Company, as Indenture Trustee and Ohio Edison Company, as Lessee. (1986 Form 10-K, Exhibit 28-1.) (D) 10-53 - Amendment No. 1 dated as of September 1, 1987 to Participation Agreement dated as of March 16, 1987 among Perry One Alpha Limited Partnership, as Owner Participant, the Original Loan Participants listed in Schedule 1 thereto, as Original Loan Participants, PNPP Funding Corporation, as Funding Corporation, The First National Bank of Boston, as Owner Trustee, Irving Trust Company (now The Bank of New York), as Indenture Trustee, and Ohio Edison Company, as Lessee. (1991 Form 10-K, Exhibit 10-46.) (D) 10-54 - Amendment No. 3 dated as of May 16, 1988 to Participation Agreement dated as of March 16, 1987, as amended among Perry One Alpha Limited Partnership, as Owner Participant, PNPP Funding Corporation, The First National Bank of Boston, - 28 - Exhibit Number - ------- as Owner Trustee, Irving Trust Company, as Indenture Trustee, and Ohio Edison Company, as Lessee. (1992 Form 10-K, Exhibit 10-47.) (D) 10-55 - Amendment No. 4 dated as of November 1, 1991 to Participation Agreement dated as of March 16, 1987 among Perry One Alpha Limited Partnership, as Owner Participant, PNPP Funding Corporation, as Funding Corporation, PNPP II Funding Corporation, as New Funding Corporation, The First National Bank of Boston, as Owner Trustee, The Bank of New York, as Indenture Trustee and Ohio Edison Company, as Lessee. (1991 Form 10-K, Exhibit 10-47.) (D) 10-56 - Amendment No. 5 dated as of November 24, 1992 to Participation Agreement dated as of March 16, 1987, as amended, among Perry One Alpha Limited Partnership, as Owner Participant, PNPP Funding Corporation, as Funding Corporation, PNPPII Funding Corporation, as New Funding Corporation, The First National Bank of Boston, as Owner Trustee, The Bank of New York, as Indenture Trustee and Ohio Edison Company as Lessee. (1992 Form 10-K, Exhibit 10-49.) (D) 10-57 - Amendment No. 6 dated as of January 12, 1993 to Participation Agreement dated as of March 16, 1987 among Perry One Alpha Limited Partnership, as Owner Participant, PNPP Funding Corporation, as Funding Corporation, PNPP II Funding Corporation, as New Funding Corporation, The First National Bank of Boston, as Owner Trustee, The Bank of New York, as Indenture Trustee and Ohio Edison Company, as Lessee. (1992 Form 10-K, Exhibit 10-50.) (D) 10-58 - Amendment No. 7 dated as of October 12, 1994 to Participation Agreement dated as of March 16, 1987 as amended, among Perry One Alpha Limited Partnership, as Owner Participant, PNPP Funding Corporation, as Funding Corporation, PNPP II Funding Corporation, as New Funding Corporation, The First National Bank of Boston, as Owner Trustee, The Bank of New York, as Indenture Trustee and Ohio Edison Company, as Lessee. (1994 Form 10-K, Exhibit 10-54.) - 29 - Exhibit Number - ------- (D) 10-59 - Facility Lease dated as of March 16, 1987 between The First National Bank of Boston, as Owner Trustee, with Perry One Alpha Limited Partnership, Lessor, and Ohio Edison Company, Lessee. (1986 Form 10-K, Exhibit 28-2.) (D) 10-60 - Amendment No. 1 dated as of September 1, 1987 to Facility Lease dated as of March 16, 1987 between The First National Bank of Boston, as Owner Trustee, Lessor and Ohio Edison Company, Lessee. (1991 Form 10-K, Exhibit 10-49.) (D) 10-61 - Amendment No. 2 dated as of November 1, 1991, to Facility Lease dated as of March 16, 1987, between The First National Bank of Boston, as Owner Trustee, Lessor and Ohio Edison Company, Lessee. (1991 Form 10-K, Exhibit 10-50.) (D) 10-62 - Amendment No. 3 dated as of November 24, 1992 to Facility Lease dated as of March 16, 1987, as amended, between The First National Bank of Boston, as Owner Trustee, with Perry One Alpha Limited Partnership, as Owner Participant and Ohio Edison Company, as Lessee. (1992 Form 10-K, Exhibit 10-54.) (D) 10-63 - Amendment No. 4 dated as of January 12, 1993 to Facility Lease dated as of March 16, 1987 as amended, between, The First National Bank of Boston, as Owner Trustee, with Perry One Alpha Limited Partnership, as Owner Participant, and Ohio Edison Company, as Lessee. (1994 Form 10-K, Exhibit 10-59.) (D) 10-64 - Amendment No. 5 dated as of October 12, 1994 to Facility Lease dated as of March 16, 1987 as amended, between, The First National Bank of Boston, as Owner Trustee, with Perry One Alpha Limited Partnership, as Owner Participant, and Ohio Edison Company, as Lessee. (1994 Form 10-K, Exhibit 10-60.) (D) 10-65 - Letter Agreement dated as of March 19, 1987 between Ohio Edison Company, Lessee, and The First National Bank of Boston, as Owner Trustee under a Trust dated March 16, 1987 with Chase Manhattan Realty Leasing Corporation, required by Section 3(d) of the Facility Lease. (1986 Form 10-K, Exhibit 28-3.) - 30 - Exhibit Number - ------- (D) 10-66 - Ground Lease dated as of March 16, 1987 between Ohio Edison Company, Ground Lessor, and The First National Bank of Boston, as Owner Trustee under a Trust Agreement, dated as of March 16, 1987, with the Owner Participant, Tenant. (1986 Form 10-K, Exhibit 28-4.) (D) 10-67 - Trust Agreement dated as of March 16, 1987 between Perry One Alpha Limited Partnership, as Owner Participant, and The First National Bank of Boston. (1986 Form 10-K, Exhibit 28-5.) (D) 10-68 - Trust Indenture, Mortgage, Security Agreement and Assignment of Facility Lease dated as of March 16, 1987 between The First National Bank of Boston, as Owner Trustee under a Trust Agreement dated as of March 16, 1987 with Perry One Alpha Limited Partnership, and Irving Trust Company, as Indenture Trustee. (1986 Form 10-K, Exhibit 28-6.) (D) 10-69 - Supplemental Indenture No. 1 dated as of September 1, 1987 to Trust Indenture, Mortgage, Security Agreement and Assignment of Facility Lease dated as of March 16, 1987 between The First National Bank of Boston as Owner Trustee and Irving Trust Company (now The Bank of New York), as Indenture Trustee. (1991 Form 10-K, Exhibit 10-55.) (D) 10-70 - Supplemental Indenture No. 2 dated as of November 1, 1991 to Trust Indenture, Mortgage, Security Agreement and Assignment of Facility Lease dated as of March 16, 1987 between The First National Bank of Boston, as Owner Trustee and The Bank of New York, as Indenture Trustee. (1991 Form 10-K, Exhibit 10-56.) (D) 10-71 - Tax Indemnification Agreement dated as of March 16, 1987 between Perry One, Inc. and PARock Limited Partnership as General Partners and Ohio Edison Company, as Lessee. (1986 Form 10-K, Exhibit 28-7.) (D) 10-72 - Amendment No. 1 dated as of November 1, 1991 to Tax Indemnification Agreement dated as of March 16, 1987 between Perry One, Inc. and Parock Limited Partnership and Ohio Edison Company. (1991 Form 10-K, Exhibit 10-58.) - 31 - Exhibit Number - ------- (D) 10-73 - Amendment No. 2 dated as of January 12, 1993 to Tax Indemnification Agreement dated as of March 16, 1987 between Perry One, Inc. and Parock Limited Partnership and Ohio Edison Company. (1994 Form 10-K, Exhibit 10-69.) (D) 10-74 - Amendment No. 3 dated as of October 12, 1994 to Tax Indemnification Agreement dated as of March 16, 1987 between Perry One, Inc. and Parock Limited Partnership and Ohio Edison Company. (1994 Form 10-K, Exhibit 10-70.) (D) 10-75 - Partial Mortgage Release dated as of March 19, 1987 under the Indenture between Ohio Edison Company and Bankers Trust Company, as Trustee, dated as of the 1st day of August, 1930. (1986 Form 10-K, Exhibit 28-8.) (D) 10-76 - Assignment, Assumption and Further Agreement dated as of March 16, 1987 among The First National Bank of Boston, as Owner Trustee under a Trust Agreement, dated as of March 16, 1987, with Perry One Alpha Limited Partnership, The Cleveland Electric Illuminating Company, Duquesne Light Company, Ohio Edison Company, Pennsylvania Power Company and Toledo Edison Company. (1986 Form 10-K, Exhibit 28-9.) (D) 10-77 - Additional Support Agreement dated as of March 16, 1987 between The First National Bank of Boston, as Owner Trustee under a Trust Agreement, dated as of March 16, 1987, with Perry One Alpha Limited Partnership, and Ohio Edison Company. (1986 Form 10-K, Exhibit 28-10.) (D) 10-78 - Bill of Sale, Instrument of Transfer and Severance Agreement dated as of March 19, 1987 between Ohio Edison Company, Seller, and The First National Bank of Boston, as Owner Trustee under a Trust Agreement, dated as of March 16, 1987, with Perry One Alpha Limited Partnership. (1986 Form 10-K, Exhibit 28- 11.) (D) 10-79 - Easement dated as of March 16, 1987 from Ohio Edison Company, Grantor, to The First National Bank of Boston, as Owner Trustee under a Trust Agreement, dated as of March 16, 1987, with Perry One Alpha Limited Partnership, Grantee. (1986 Form 10-K, File Exhibit 28-12.) - 32 - Exhibit Number - ------- 10-80 - Participation Agreement dated as of March 16, 1987 among Security Pacific Capital Leasing Corporation, as Owner Participant, the Original Loan Participants listed in Schedule 1 Hereto, as Original Loan Participants, PNPP Funding Corporation, as Funding Corporation, The First National Bank of Boston, as Owner Trustee, Irving Trust Company, as Indenture Trustee and Ohio Edison Company, as Lessee. (1986 Form 10-K, as Exhibit 28-13.) 10-81 - Amendment No. 1 dated as of September 1, 1987 to Participation Agreement dated as of March 16, 1987 among Security Pacific Capital Leasing Corporation, as Owner Participant, The Original Loan Participants Listed in Schedule 1 thereto, as Original Loan Participants, PNPP Funding Corporation, as Funding Corporation, The First National Bank of Boston, as Owner Trustee, Irving Trust Company, as Indenture Trustee and Ohio Edison Company, as Lessee. (1991 Form 10-K, Exhibit 10-65.) 10-82 - Amendment No. 4 dated as of November 1, 1991, to Participation Agreement dated as of March 16, 1987 among Security Pacific Capital Leasing Corporation, as Owner Participant, PNPP Funding Corporation, as Funding Corporation, PNPP II Funding Corporation, as New Funding Corporation, The First National Bank of Boston, as Owner Trustee, The Bank of New York, as Indenture Trustee and Ohio Edison Company, as Lessee. (1991 Form 10-K, Exhibit 10-66.) 10-83 - Amendment No. 5 dated as of November 24, 1992 to Participation Agreement dated as of March 16, 1987 as amended among Security Pacific Capital Leasing Corporation, as Owner Participant, PNPP Funding Corporation, as Funding Corporation, PNPP II Funding Corporation, as New Funding Corporation, The First National Bank of Boston, as Owner Trustee, The Bank of New York, as Indenture Trustee and Ohio Edison Company, as Lessee. (1992 Form 10-K, Exhibit 10-71.) 10-84 - Amendment No. 6 dated as of January 12, 1993 to Participation Agreement dated as of March 16, 1987 as amended among Security Pacific Capital Leasing Corporation, as Owner Participant, PNPP - 33 - Exhibit Number - ------- Funding Corporation, as Funding Corporation, PNPP II Funding Corporation, as New Funding Corporation, The First National Bank of Boston, as Owner Trustee, The Bank of New York, as Indenture Trustee and Ohio Edison Company, as Lessee. (1994 Form 10-K, Exhibit 10-80.) 10-85 - Amendment No. 7 dated as of October 12, 1994 to Participation Agreement dated as of March 16, 1987 as amended among Security Pacific Capital Leasing Corporation, as Owner Participant, PNPP Funding Corporation, as Funding Corporation, PNPP II Funding Corporation, as New Funding Corporation, The First National Bank of Boston, as Owner Trustee, The Bank of New York, as Indenture Trustee and Ohio Edison Company, as Lessee. (1994 Form 10-K, Exhibit 10-81.) 10-86 - Facility Lease dated as of March 16, 1987 between The First National Bank of Boston, as Owner Trustee, with Security Pacific Capital Leasing Corporation, Lessor, and Ohio Edison Company, as Lessee. (1986 Form 10-K, Exhibit 28- 14.) 10-87 - Amendment No. 1 dated as of September 1, 1987 to Facility Lease dated as of March 16, 1987 between The First National Bank of Boston as Owner Trustee, Lessor and Ohio Edison Company, Lessee. (1991 Form 10-K, Exhibit 10-68.) 10-88 - Amendment No. 2 dated as of November 1, 1991 to Facility Lease dated as of March 16, 1987 between The First National Bank of Boston as Owner Trustee, Lessor and Ohio Edison Company, Lessee. (1991 Form 10-K, Exhibit 10-69.) 10-89 - Amendment No. 3 dated as of November 24, 1992 to Facility Lease dated as of March 16, 1987, as amended, between, The First National Bank of Boston, as Owner Trustee, with Security Pacific Capital Leasing Corporation, as Owner Participant and Ohio Edison Company, as Lessee. (1992 Form 10-K, Exhibit 10-75.) 10-90 - Amendment No. 4 dated as of January 12, 1993 to Facility Lease dated as of March 16, 1987 as amended between, The First National Bank of Boston, as Owner Trustee, with Security Pacific - 34 - Exhibit Number - ------- Capital Leasing Corporation, as Owner Participant, and Ohio Edison Company, as Lessee. (1992 Form 10-K, Exhibit 10-76.) 10-91 - Amendment No. 5 dated as of October 12, 1994 to Facility Lease dated as of March 16, 1987 as amended between, The First National Bank of Boston, as Owner Trustee, with Security Pacific Capital Leasing Corporation, as Owner Participant, and Ohio Edison Company, as Lessee. (1994 Form 10-K, Exhibit 10-87.) 10-92 - Letter Agreement dated as of March 19, 1987 between Ohio Edison Company, as Lessee, and The First National Bank of Boston, as Owner Trustee under a Trust, dated as of March 16, 1987, with Security Pacific Capital Leasing Corporation, required by Section 3(d) of the Facility Lease. (1986 Form 10-K, Exhibit 28-15.) 10-93 - Ground Lease dated as of March 16, 1987 between Ohio Edison Company, Ground Lessor, and The First National Bank of Boston, as Owner Trustee under a Trust Agreement, dated as of March 16, 1987, with Perry One Alpha Limited Partnership, Tenant. (1986 Form 10-K, Exhibit 28-16.) 10-94 - Trust Agreement dated as of March 16, 1987 between Security Pacific Capital Leasing Corporation, as Owner Participant, and The First National Bank of Boston. (1986 Form 10-K, Exhibit 28-17.) 10-95 - Trust Indenture, Mortgage, Security Agreement and Assignment of Facility Lease dated as of March 16, 1987 between The First National Bank of Boston, as Owner Trustee under a Trust Agreement, dated as of March 16, 1987, with Security Pacific Capital Leasing Corporation, and Irving Trust Company, as Indenture Trustee. (1986 Form 10-K, Exhibit 28-18.) 10-96 - Supplemental Indenture No. 1 dated as of September 1, 1987 to Trust Indenture, Mortgage, Security Agreement and Assignment of Facility Lease dated as of March 16, 1987 between The First National Bank of Boston, as Owner Trustee and Irving Trust Company (now The Bank of New York), as Indenture Trustee. (1991 Form 10-K, Exhibit 10-74.) - 35 - Exhibit Number - ------- 10-97 - Supplemental Indenture No. 2 dated as of November 1, 1991 to Trust Indenture, Mortgage, Security Agreement and Assignment of Facility Lease dated as of March 16, 1987 between The First National Bank of Boston, as Owner Trustee and The Bank of New York, as Indenture Trustee. (1991 Form 10-K, Exhibit 10-75.) 10-98 - Tax Indemnification Agreement dated as of March 16, 1987 between Security Pacific Capital Leasing Corporation, as Owner Participant, and Ohio Edison Company, as Lessee. (1986 Form 10-K, Exhibit 28-19.) 10-99 - Amendment No. 1 dated as of November 1, 1991 to Tax Indemnification Agreement dated as of March 16, 1987 between Security Pacific Capital Leasing Corporation and Ohio Edison Company. (1991 Form 10-K, Exhibit 10-77.) 10-100 - Amendment No. 2 dated as of January 12, 1993 to Tax Indemnification Agreement dated as of March 16, 1987 between Security Pacific Capital Leasing Corporation and Ohio Edison Company. (1994 Form 10-K, Exhibit 10-96.) 10-101 - Amendment No. 3 dated as of October 12, 1994 to Tax Indemnification Agreement dated as of March 16, 1987 between Security Pacific Capital Leasing Corporation and Ohio Edison Company. (1994 Form 10-K, Exhibit 10-97.) 10-102 - Assignment, Assumption and Further Agreement dated as of March 16, 1987 among The First National Bank of Boston, as Owner Trustee under a Trust Agreement, dated as of March 16, 1987, with Security Pacific Capital Leasing Corporation, The Cleveland Electric Illuminating Company, Duquesne Light Company, Ohio Edison Company, Pennsylvania Power Company and Toledo Edison Company. (1986 Form 10-K, Exhibit 28-20.) 10-103 - Additional Support Agreement dated as of March 16, 1987 between The First National Bank of Boston, as Owner Trustee under a Trust Agreement, dated as of March 16, 1987, with Security Pacific Capital Leasing Corporation, and Ohio Edison Company. (1986 Form 10-K, Exhibit 28-21.) - 36 - Exhibit Number - ------- 10-104 - Bill of Sale, Instrument of Transfer and Severance Agreement dated as of March 19, 1987 between Ohio Edison Company, Seller, and The First National Bank of Boston, as Owner Trustee under a Trust Agreement, dated as of March 16, 1987, with Security Pacific Capital Leasing Corporation, Buyer. (1986 Form 10-K, Exhibit 28- 22.) 10-105 - Easement dated as of March 16, 1987 from Ohio Edison Company, Grantor, to The First National Bank of Boston, as Owner Trustee under a Trust Agreement, dated as of March 16, 1987, with Security Pacific Capital Leasing Corporation, Grantee. (1986 Form 10-K, Exhibit 28-23.) 10-106 - Refinancing Agreement dated as of November 1, 1991 among Perry One Alpha Limited Partnership, as Owner Participant, PNPP Funding Corporation, as Funding Corporation, PNPP II Funding Corporation, as New Funding Corporation, The First National Bank of Boston, as Owner Trustee, The Bank of New York, as Indenture Trustee, The Bank of New York, as Collateral Trust Trustee, The Bank of New York, as New Collateral Trust Trustee and Ohio Edison Company, as Lessee. (1991 Form 10-K, Exhibit 10-82.) 10-107 - Refinancing Agreement dated as of November 1, 1991 among Security Pacific Leasing Corporation, as Owner Participant, PNPP Funding Corporation, as Funding Corporation, PNPP II Funding Corporation, as New Funding Corporation, The First National Bank of Boston, as Owner Trustee, The Bank of New York, as Indenture Trustee, The Bank of New York, as Collateral Trust Trustee, The Bank of New York, as New Collateral Trust Trustee and Ohio Edison Company, as Lessee. (1991 Form 10-K, Exhibit 10-83.) 10-108 - Ohio Edison Company Master Decommissioning Trust Agreement for Perry Nuclear Power Plant Unit One, Perry Nuclear Power Plant Unit Two, Beaver Valley Power Station Unit One and Beaver Valley Power Station Unit Two dated July 1, 1993. (1993 Form 10-K, Exhibit 10-94.) 10-109 - Nuclear Fuel Lease dated as of March 31, 1989, between OES Fuel, Incorporated, as Lessor, and - 37 - Exhibit Number - ------- Ohio Edison Company, as Lessee. (1989 Form 10-K, Exhibit 10-62.) 10-110 - Receivables Purchase Agreement dated as November 28, 1989, as amended and restated as of April 23, 1993, between OES Capital, Incorporated, Corporate Asset Funding Company, Inc. and Citicorp North America, Inc. (1994 Form 10-K, Exhibit 10-106.) 10-111 - Guarantee Agreement entered into by Ohio Edison Company dated as of January 17, 1991. (1990 Form 10-K, Exhibit 10-64). 10-112 - Transfer and Assignment Agreement among Ohio Edison Company and Chemical Bank, as trustee under the OE Power Contract Trust. (1990 Form 10-K, Exhibit 10-65). 10-113 - Renunciation of Payments and Assignment among Ohio Edison Company, Monongahela Power Company, West Penn Power Company, and the Potomac Edison Company dated as of January 4, 1991. (1990 Form 10-K, Exhibit 10-66). 10-114 - Transfer and Assignment Agreement dated May 20, 1994 among Ohio Edison Company and Chemical Bank, as trustee under the OE Power Contract Trust. (1994 Form 10-K, Exhibit 10-110.) 10-115 - Renunciation of Payments and Assignment among Ohio Edison Company, Monongahela Power Company, West Penn Power Company, and the Potomac Edison Company dated as of May 20, 1994. (1994 Form 10- K, Exhibit 10-111.) 10-116 - Transfer and Assignment Agreement dated October 12, 1994 among Ohio Edison Company and Chemical Bank, as trustee under the OE Power Contract Trust. (1994 Form 10-K, Exhibit 10- 112.) 10-117 - Renunciation of Payments and Assignment among Ohio Edison Company, Monongahela Power Company, West Penn Power Company, and the Potomac Edison Company dated as of October 12, 1994. (1994 Form 10-K, Exhibit 10-113.) - 38 - Exhibit Number - ------- (E) 10-118 - Participation Agreement dated as of September 15, 1987, among Beaver Valley Two Pi Limited Partnership, as Owner Participant, the Original Loan Participants listed in Schedule 1 Thereto, as Original Loan Participants, BVPS Funding Corporation, as Funding Corporation, The First National Bank of Boston, as Owner Trustee, Irving Trust Company, as Indenture Trustee and Ohio Edison Company, as Lessee. (1987 Form 10-K, Exhibit 28-1.) (E) 10-119 - Amendment No. 1 dated as of February 1, 1988, to Participation Agreement dated as of September 15, 1987, among Beaver Valley Two Pi Limited Partnership, as Owner Participant, the Original Loan Participants listed in Schedule 1 Thereto, as Original Loan Participants, BVPS Funding Corporation, as Funding Corporation, The First National Bank of Boston, as Owner Trustee, Irving Trust Company, as Indenture Trustee and Ohio Edison Company, as Lessee. (1987 Form 10-K, Exhibit 28-2.) (E) 10-120 - Amendment No. 3 dated as of March 16, 1988 to Participation Agreement dated as of September 15, 1987, as amended, among Beaver Valley Two Pi Limited Partnership, as Owner Participant, BVPS Funding Corporation, The First National Bank of Boston, as Owner Trustee, Irving Trust Company, as Indenture Trustee and Ohio Edison Company, as Lessee. (1992 Form 10-K, Exhibit 10-99.) (E) 10-121 - Amendment No. 4 dated as of November 5, 1992 to Participation Agreement dated as of September 15, 1987, as amended, among Beaver Valley Two Pi Limited Partnership, as Owner Participant, BVPS Funding Corporation, BVPS II Funding Corporation, The First National Bank of Boston, as Owner Trustee, The Bank of New York, as Indenture Trustee and Ohio Edison Company, as Lessee. (1992 Form 10-K, Exhibit 10-100.) (E) 10-122 - Amendment No. 5 dated as of September 30, 1994 to Participation Agreement dated as of September 15, 1987, as amended, among Beaver Valley Two Pi Limited Partnership, as Owner Participant, BVPS Funding Corporation, BVPS II Funding Corporation, The First National Bank of - 39 - Exhibit Number - ------- Boston, as Owner Trustee, The Bank of New York, as Indenture Trustee and Ohio Edison Company, as Lessee. (1994 Form 10-K, Exhibit 10-118.) (E) 10-123 - Facility Lease dated as of September 15, 1987, between The First National Bank of Boston, as Owner Trustee, with Beaver Valley Two Pi Limited Partnership, Lessor, and Ohio Edison Company, Lessee. (1987 Form 10-K, Exhibit 28-3.) (E) 10-124 - Amendment No. 1 dated as of February 1, 1988, to Facility Lease dated as of September 15, 1987, between The First National Bank of Boston, as Owner Trustee, with Beaver Valley Two Pi Limited Partnership, Lessor, and Ohio Edison Company, Lessee. (1987 Form 10-K, Exhibit 28-4.) (E) 10-125 - Amendment No. 2 dated as of November 5, 1992 to Facility Lease dated as of September 15, 1987, as amended, between The First National Bank of Boston, as Owner Trustee, with Beaver Valley Two Pi Limited Partnership, as Owner Participant, and Ohio Edison Company, as Lessee. (1992 Form 10-K, Exhibit 10-103.) (E) 10-126 - Amendment No. 3 dated as of September 30, 1994 to Facility Lease dated as of September 15, 1987, as amended, between The First National Bank of Boston, as Owner Trustee, with Beaver Valley Two Pi Limited Partnership, as Owner Participant, and Ohio Edison Company, as Lessee. (1994 Form 10-K, Exhibit 10-122.) (E) 10-127 - Ground Lease and Easement Agreement dated as of September 15, 1987, between Ohio Edison Company, Ground Lessor, and The First National Bank of Boston, as Owner Trustee under a Trust Agreement, dated as of September 15, 1987, with Beaver Valley Two Pi Limited Partnership, Tenant. (1987 Form 10-K, Exhibit 28- 5.) (E) 10-128 - Trust Agreement dated as of September 15, 1987, between Beaver Valley Two Pi Limited Partnership, as Owner Participant, and The First National Bank of Boston. (1987 Form 10-K, Exhibit 28-6.) (E) 10-129 - Trust Indenture, Mortgage, Security Agreement and Assignment of Facility Lease dated as of - 40 - Exhibit Number - ------- September 15, 1987, between The First National Bank of Boston, as Owner Trustee under a Trust Agreement dated as of September 15, 1987, with Beaver Valley Two Pi Limited Partnership, and Irving Trust Company, as Indenture Trustee. (1987 Form 10-K, Exhibit 28-7.) (E) 10-130 - Supplemental Indenture No. 1 dated as of February 1, 1988 to Trust Indenture, Mortgage, Security Agreement and Assignment of Facility Lease dated as of September 15, 1987 between The First National Bank of Boston, as Owner Trustee under a Trust Agreement dated as of September 15, 1987 with Beaver Valley Two Pi Limited Partnership and Irving Trust Company, as Indenture Trustee. (1987 Form 10-K, Exhibit 28- 8.) (E) 10-131 - Tax Indemnification Agreement dated as of September 15, 1987, between Beaver Valley Two Pi Inc. and PARock Limited Partnership as General Partners and Ohio Edison Company, as Lessee. (1987 Form 10-K, Exhibit 28-9.) (E) 10-132 - Amendment No. 1 dated as of November 5, 1992 to Tax Indemnification Agreement dated as of September 15, 1987, between Beaver Valley Two Pi Inc. and PARock Limited Partnership as General Partners and Ohio Edison Company, as Lessee. (1994 Form 10-K, Exhibit 10-128.) (E) 10-133 - Amendment No. 2 dated as of September 30, 1994 to Tax Indemnification Agreement dated as of September 15, 1987, between Beaver Valley Two Pi Inc. and PARock Limited Partnership as General Partners and Ohio Edison Company, as Lessee. (1994 Form 10-K, Exhibit 10-129.) (E) 10-134 - Tax Indemnification Agreement dated as of September 15, 1987, between HG Power Plant, Inc., as Limited Partner and Ohio Edison Company, as Lessee. (1987 Form 10-K, Exhibit 28-10.) (E) 10-135 - Amendment No. 1 dated as of November 5, 1992 to Tax Indemnification Agreement dated as of September 15, 1987, between HG Power Plant, Inc., as Limited Partner and Ohio Edison Company, as Lessee. (1994 Form 10-K, Exhibit 10- 131.) - 41 - Exhibit Number - ------- (E) 10-136 - Amendment No. 2 dated as of September 30, 1994 to Tax Indemnification Agreement dated as of September 15, 1987, between HG Power Plant, Inc., as Limited Partner and Ohio Edison Company, as Lessee. (1994 Form 10-K, Exhibit 10- 132.) (E) 10-137 - Assignment, Assumption and Further Agreement dated as of September 15, 1987, among The First National Bank of Boston, as Owner Trustee under a Trust Agreement, dated as of September 15, 1987, with Beaver Valley Two Pi Limited Partnership, The Cleveland Electric Illuminating Company, Duquesne Light Company, Ohio Edison Company, Pennsylvania Power Company and Toledo Edison Company. (1987 Form 10-K, Exhibit 28-11.) (E) 10-138 - Additional Support Agreement dated as of September 15, 1987, between The First National Bank of Boston, as Owner Trustee under a Trust Agreement, dated as of September 15, 1987, with Beaver Valley Two Pi Limited Partnership, and Ohio Edison Company. (1987 Form 10-K, Exhibit 28-12.) (F) 10-139 - Participation Agreement dated as of September 15, 1987, among Chrysler Consortium Corporation, as Owner Participant, the Original Loan Participants listed in Schedule 1 Thereto, as Original Loan Participants, BVPS Funding Corporation, as Funding Corporation, The First National Bank of Boston, as Owner Trustee, Irving Trust Company, as Indenture Trustee and Ohio Edison Company, as Lessee. (1987 Form 10-K, Exhibit 28-13.) (F) 10-140 - Amendment No. 1 dated as of February 1, 1988, to Participation Agreement dated as of September 15, 1987, among Chrysler Consortium Corporation, as Owner Participant, the Original Loan Participants listed in Schedule I Thereto, as Original Loan Participants, BVPS Funding Corporation, as Funding Corporation, The First National Bank of Boston, as Owner Trustee, Irving Trust Company, as Indenture Trustee, and Ohio Edison Company, as Lessee. (1987 Form 10-K, Exhibit 28-14.) - 42 - Exhibit Number - ------- (F) 10-141 - Amendment No. 3 dated as of March 16, 1988 to Participation Agreement dated as of September 15, 1987, as amended, among Chrysler Consortium Corporation, as Owner Participant, BVPS Funding Corporation, The First National Bank of Boston, as Owner Trustee, Irving Trust Company, as Indenture Trustee, and Ohio Edison Company, as Lessee. (1992 Form 10-K, Exhibit 10- 114.) (F) 10-142 - Amendment No. 4 dated as of November 5, 1992 to Participation Agreement dated as of September 15, 1987, as amended, among Chrysler Consortium Corporation, as Owner Participant, BVPS Funding Corporation, BVPS II Funding Corporation, The First National Bank of Boston, as Owner Trustee, The Bank of New York, as Indenture Trustee and Ohio Edison Company, as Lessee. (1992 Form 10-K, Exhibit 10-115.) (F) 10-143 - Amendment No. 5 dated as of January 12, 1993 to Participation Agreement dated as of September 15, 1987, as amended, among Chrysler Consortium Corporation, as Owner Participant, BVPS Funding Corporation, BVPS II Funding Corporation, The First National Bank of Boston, as Owner Trustee, The Bank of New York, as Indenture Trustee and Ohio Edison Company, as Lessee. (1994 Form 10-K, Exhibit 10-139.) (F) 10-144 - Amendment No. 6 dated as of September 30, 1994 to Participation Agreement dated as of September 15, 1987, as amended, among Chrysler Consortium Corporation, as Owner Participant, BVPS Funding Corporation, BVPS II Funding Corporation, The First National Bank of Boston, as Owner Trustee, The Bank of New York, as Indenture Trustee and Ohio Edison Company, as Lessee. (1994 Form 10-K, Exhibit 10-140.) (F) 10-145 - Facility Lease dated as of September 15, 1987, between The First National Bank of Boston, as Owner Trustee, with Chrysler Consortium Corporation, Lessor, and Ohio Edison Company, as Lessee. (1987 Form 10-K, Exhibit 28-15.) (F) 10-146 - Amendment No. 1 dated as of February 1, 1988, to Facility Lease dated as of September 15, 1987, between The First National Bank of Boston, as - 43 - Exhibit Number - ------- Owner Trustee, with Chrysler Consortium Corporation, Lessor, and Ohio Edison Company, Lessee. (1987 Form 10-K, Exhibit 28-16.) (F) 10-147 - Amendment No. 2 dated as of November 5, 1992 to Facility Lease dated as of September 15, 1987, as amended, between The First National Bank of Boston, as Owner Trustee, with Chrysler Consortium Corporation, as Owner Participant and Ohio Edison Company, as Lessee. (1992 Form 10-K, Exhibit 118.) (F) 10-148 - Amendment No. 3 dated as of January 12, 1993 to Facility Lease dated as of September 15, 1987, as amended, between The First National Bank of Boston, as Owner Trustee, with Chrysler Consortium Corporation, as Owner Participant, and Ohio Edison Company, as Lessee. (1992 Form 10-K, Exhibit 10-119.) (F) 10-149 - Amendment No. 4 dated as of September 30, 1994 to Facility Lease dated as of September 15, 1987, as amended, between The First National Bank of Boston, as Owner Trustee, with Chrysler Consortium Corporation, as Owner Participant, and Ohio Edison Company, as Lessee. (1994 Form 10-K, Exhibit 10-145.) (F) 10-150 - Ground Lease and Easement Agreement dated as of September 15, 1987, between Ohio Edison Company, Ground Lessor, and The First National Bank of Boston, as Owner Trustee under a Trust Agreement, dated as of September 15, 1987, with Chrysler Consortium Corporation, Tenant. (1987 Form 10-K, Exhibit 28-17.) (F) 10-151 - Trust Agreement dated as of September 15, 1987, between Chrysler Consortium Corporation, as Owner Participant, and The First National Bank of Boston. (1987 Form 10-K, Exhibit 28-18.) (F) 10-152 - Trust Indenture, Mortgage, Security Agreement and Assignment of Facility Lease dated as of September 15, 1987, between the First National Bank of Boston, as Owner Trustee under a Trust Agreement, dated as of September 15, 1987, with Chrysler Consortium Corporation and Irving Trust Company, as Indenture Trustee. (1987 Form 10-K, Exhibit 28-19.) - 44 - Exhibit Number - ------- (F) 10-153 - Supplemental Indenture No. 1 dated as of February 1, 1988 to Trust Indenture, Mortgage, Security Agreement and Assignment of Facility Lease dated as of September 15, 1987 between The First National Bank of Boston, as Owner Trustee under a Trust Agreement dated as of September 15, 1987 with Chrysler Consortium Corporation and Irving Trust Company, as Indenture Trustee. (1987 Form 10-K, Exhibit 28- 20.) (F) 10-154 - Tax Indemnification Agreement dated as of September 15, 1987, between Chrysler Consortium Corporation, as Owner Participant, and Ohio Edison Company, as Lessee. (1987 Form 10-K, Exhibit 28-21.) (F) 10-155 - Amendment No. 1 dated as of November 5, 1992 to Tax Indemnification Agreement dated as of September 15, 1987, between Chrysler Consortium Corporation, as Owner Participant, and Ohio Edison Company, as Lessee. (1994 Form 10-K, Exhibit 10-151.) (F) 10-156 - Amendment No. 2 dated as of January 12, 1993 to Tax Indemnification Agreement dated as of September 15, 1987, between Chrysler Consortium Corporation, as Owner Participant, and Ohio Edison Company, as Lessee. (1994 Form 10-K, Exhibit 10-152.) (F) 10-157 - Amendment No. 3 dated as of September 30, 1994 to Tax Indemnification Agreement dated as of September 15, 1987, between Chrysler Consortium Corporation, as Owner Participant, and Ohio Edison Company, as Lessee. (1994 Form 10-K, Exhibit 10-153.) (F) 10-158 - Assignment, Assumption and Further Agreement dated as of September 15, 1987, among The First National Bank of Boston, as Owner Trustee under a Trust Agreement, dated as of September 15, 1987, with Chrysler Consortium Corporation, The Cleveland Electric Illuminating Company, Duquesne Light Company, Ohio Edison Company, Pennsylvania Power Company, and Toledo Edison Company. (1987 Form 10-K, Exhibit 28-22.) - 45 - Exhibit Number - ------- (F) 10-159 - Additional Support Agreement dated as of September 15, 1987, between The First National Bank of Boston, as Owner Trustee under a Trust Agreement, dated as of September 15, 1987, with Chrysler Consortium Corporation, and Ohio Edison Company. (1987 Form 10-K, Exhibit 28-23.) 10-160 - Operating Agreement dated March 10, 1987 with respect to Perry Unit No. 1 between the CAPCO Companies. (1987 Form 10-K, Exhibit 28-24.) 10-161 - Operating Agreement for Bruce Mansfield Units Nos. 1, 2 and 3 dated as of June 1, 1976, and executed on September 15, 1987, by and between the CAPCO Companies. (1987 Form 10-K, Exhibit 28-25.) 10-162 - Operating Agreement for W. H. Sammis Unit No. 7 dated as of September 1, 1971 by and between the CAPCO Companies. (1987 Form 10-K, Exhibit 28- 26.) 10-163 - OE-APS Power Interchange Agreement dated March 18, 1987, by and among Ohio Edison Company and Pennsylvania Power Company, and Monongahela Power Company and West Penn Power Company and The Potomac Edison Company. (1987 Form 10-K, Exhibit 28-27.) 10-164 - OE-PEPCO Power Supply Agreement dated March 18, 1987, by and among Ohio Edison Company and Pennsylvania Power Company and Potomac Electric Power Company. (1987 Form 10-K, Exhibit 28-28.) 10-165 - Supplement No. 1 dated as of April 28, 1987, to the OE-PEPCO Power Supply Agreement dated March 18, 1987, by and among Ohio Edison Company, Pennsylvania Power Company, and Potomac Electric Power Company. (1987 Form 10-K, Exhibit 28-29.) 10-166 - APS-PEPCO Power Resale Agreement dated March 18, 1987, by and among Monongahela Power Company, West Penn Power Company, and The Potomac Edison Company and Potomac Electric Power Company. (1987 Form 10-K, Exhibit 28-30.) (A) 12 - Consolidated fixed charge ratios. - 46 - Exhibit Number - ------- (A) 13 - 1995 Annual Report to Stockholders. (Only those portions expressly incorporated by reference in this Form 10-K are to be deemed "filed" with the SEC.) (A) 21 - List of Subsidiaries of the Registrant at December 31, 1995. (A) 23 - Consent of Independent Public Accountants. (A) 27 - Financial Data Schedule. (A) Provided herein in electronic format as an exhibit. (B) Pursuant to paragraph (b)(4)(iii)(A) of Item 601 of Regulation S-K, the Company has not filed as an exhibit to this Form 10-K any instrument with respect to long-term debt if the total amount of securities authorized thereunder does not exceed 10% of the total assets of the Company and its subsidiaries on a consolidated basis, but hereby agrees to furnish to the SEC on request any such instruments. (C) Management contract or compensatory plan contract or arrangement filed pursuant to Item 601 of Regulation S-K. (D) Substantially similar documents have been entered into relating to three additional Owner Participants. (E) Substantially similar documents have been entered into relating to five additional Owner Participants. (F) Substantially similar documents have been entered into relating to two additional Owner Participants. Note: Reports of the Company on Forms 10-Q and 10-K are on file with the SEC under number 1-2578. Pursuant to Rule 14a - 3 (10) of the Securities Exchange Act of 1934, the Company will furnish any exhibit in this Report upon the payment of the Company's expenses in furnishing such exhibit. (b) Reports on Form 8-K The Company filed one report on Form 8-K since September 30, 1995. A report dated February 23, 1996, reported audited consolidated financial statements for the year ended December 31, 1995, and related matters. - 47 - REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders and Board of Directors of Ohio Edison Company: We have audited, in accordance with generally accepted auditing standards, the consolidated financial statements included in Ohio Edison Company's Annual Report to Stockholders incorporated by reference in this Form 10-K and have issued our report thereon dated February 8, 1996. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The schedule listed in Item 14 is the responsibility of the Company's management and is presented for the purpose of complying with the Securities and Exchange Commission's rules and is not part of the basic consolidated financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole. ARTHUR ANDERSEN LLP Cleveland, Ohio February 8, 1996 - 48 - SCHEDULE II OHIO EDISON COMPANY CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
Additions -------------------------- Charged Charged (Credited) (Credited) Beginning to to Other Ending Description Balance Income Accounts Deductions Balance ----------- --------- ---------- ---------- ---------- ------- (In Thousands) Year Ended December 31, 1995: Accumulated provision for uncollectible accounts $2,517 $5,236 $1,836 (a) $7,061 (b) $2,528 ====== ====== ====== ====== ====== Year Ended December 31, 1994: Accumulated provision for uncollectible accounts $6,907 $ (32)(c) $1,998 (a) $6,356 (b) $2,517 ====== ====== ====== ====== ====== Year Ended December 31, 1993: Accumulated provision for uncollectible accounts $6,432 $8,002 (d) $1,751 (a) $9,278 (b) $6,907 ====== ====== ====== ====== ====== - ---------------------------- (a) Represents recoveries and reinstatements of accounts previously written off. (b) Represents the write-off of accounts considered to be uncollectible. (c) Includes $4,136,000 reversal of bad debt expense due to PUCO authorization for automatic surcharge recovery. (d) Includes $2,291,000 related to the bankruptcy of a customer.
- 49 - SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. OHIO EDISON COMPANY BY /s/ W. R. Holland ----------------------------------------- W. R. Holland President and Chief Executive Officer Date: March 19, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated: /s/ W. R. Holland /s/ H. P. Burg - ----------------------------- ---------------------------------- W. R. Holland H. P. Burg President and Chief Senior Vice President and Executive Officer and Director Director (Principal (Principal Financial Officer Executive Officer) and Principal Accounting Officer) /s/ Donald C. Blasius /s/ Glenn H. Meadows - ----------------------------- ---------------------------------- Donald C. Blasius Glenn H. Meadows Director Director /s/ Robert H. Carlson /s/ Paul J. Powers - ----------------------------- ---------------------------------- Robert H. Carlson Paul J. Powers Director Director /s/ Robert M. Carter /s/ Charles W. Rainger - ----------------------------- ---------------------------------- Robert M. Carter Charles W. Rainger Director Director /s/ Carol A. Cartwright - ----------------------------- ---------------------------------- Carol A. Cartwright George M. Smart Director Director - 50 - /s/ R. L. Loughhead /s/ Jesse T. Williams, Sr. - ----------------------------- ---------------------------------- R. L. Loughhead Jesse T. Williams, Sr. Director Director /s/ Russell W. Maier - ----------------------------- Russell W. Maier Director Date: March 19, 1996 - 51 - EX-4 2 65TH SUPP INDENTURE 4/95 Conformed Copy ------------------------------------------------- OHIO EDISON COMPANY with BANKERS TRUST COMPANY, As Trustee _______________ Sixty-Fifth Supplemental Indenture Providing among other things for First Mortgage Bonds Guarantee Series of 1995 due 2015 _______________ Dated as of April 1, 1995 ------------------------------------------------------- SUPPLEMENTAL INDENTURE, dated as of April 1, 1995 between Ohio Edison Company, a corporation organized and existing under the laws of the State of Ohio (hereinafter called the "Company"), party of the first part, and Bankers Trust Company, a corporation organized and existing under the laws of the State of New York, as Trustee under the Indenture hereinafter referred to, party of the second part. Whereas, the Company has heretofore executed and delivered to Bankers Trust Company, as Trustee (hereinafter called the "Trustee"), a certain Indenture of Mortgage and Deed of Trust, dated as of August 1, 1930, to secure an issue of bonds of the Company, issued and to be issued in series, from time to time, in the manner and subject to the conditions set forth in the said Indenture; and the said Indenture has been supplemented by supplemental indentures, dated as of August 1, 1930, March 3, 1931, as of November 1, 1935, as of January 1, 1937, as of September 1, 1937, as of June 13, 1939, as of September 1, 1944, as of April 1, 1945, as of September 1, 1948, as of May 1, 1950, as of January 1, 1954, as of May 1, 1955, as of August 1, 1956, as of March 1, 1958, as of April 1, 1959, as of June 1, 1961, as of September 1, 1969, as of May 1, 1970, as of September 1, 1970, as of June 1, 1971, as of August 1, 1972, as of September 1, 1973, as of August 1, 1974, as of July 1, 1976, as of December 1, 1976, as of June 15, 1977, as of May 15, 1978, as of February 1, 1980, as of April 15, 1980, as of June 15, 1980, as of October 1, 1981, as of October 15, 1981, as of February 15, 1982, as of July 1, 1982, as of March 1, 1983, as of March 1, 1984, as of September 15, 1984, as of September 27, 1984, as of November 8, 1984, as of December 1, 1984, as of December 5, 1984, as of January 1, 1985, as of January 30, 1985, as of February 25, 1985, as of July 1, 1985, as of October 1, 1985, as of January 15, 1986, as of May 20, 1986, as of June 3, 1986, as of October 1, 1986, as of July 15, 1989, as of August 25, 1989, as of February 15, 1991, as of May 1, 1991, as of May 15, 1991, as of September 15, 1991, as of April 1, 1992, as of June 15, 1992, as of September 15, 1992, as of April 1, 1993, as of June 15, 1993, as of September 15, 1993 and as of November 15, 1993 respectively, which Indenture as so supplemented and to be hereby supplemented is hereinafter referred to as the "Indenture"; and Whereas, the Indenture provides for the issuance of bonds thereunder in one or more series, the form of each series of bonds and of the coupons to be attached to the coupon bonds, if any, to be substantially in the forms set forth therein with such insertions, omissions and variations as the Board of Directors of the Company may determine; and Whereas, the Company, by appropriate corporate action in conformity with the terms of the Indenture, has duly determined to create a new series of bonds under the Indenture, consisting of $40,000,000 in principal amount to be designated as "First Mortgage Bonds Guarantee Series of 1995 due 2015" (hereinafter sometimes referred to as the "bonds of Guarantee Series"), the bonds of which series are to bear interest at the rate of 6.75% per annum, are to mature July 1, 2015, and are to be substantially in the following form: [Form of Bond of Guarantee Series] This Bond is not transferable except to a successor trustee under the Trust Indenture, dated as of July 1, 1994, between the OHIO WATER DEVELOPMENT AUTHORITY and SOCIETY NATIONAL BANK, as Trustee, or in connection with the exercise of the rights and remedies of the holder hereof consequent upon a "default" as defined in the Mortgage referred to herein. OHIO EDISON COMPANY First Mortgage Bond Guarantee Series of 1995 Due 2015 Due July 1, 2015 $ No. Ohio Edison Company, a corporation of the State of Ohio (hereinafter called the Company), for value received, hereby promises to pay to or registered assigns, dollars at an office or agency of the Company in the Borough of Manhattan, The City of New York, N.Y. or in the City of Akron, Ohio, on July 1, 2015 in any coin or currency of the United States of America which at the time of payment is legal tender for public and private debts, and to pay at said offices or agencies to the registered owner hereof, in like coin or currency, interest thereon from the Initial Interest Accrual Date (hereinbelow defined) at the rate of six and seventy-five hundredths per centum per annum. Payments of principal of and interest on this bond shall be made at an office or agency of the Company in the Borough of Manhattan, The City of New York, N. Y. or in the City of Akron, Ohio. The provisions of this bond are continued on the reverse hereof and such continued provisions shall for all purposes have the same effect as though fully set forth at this place. This bond shall not become obligatory until Bankers Trust Company, the Trustee under the Mortgage referred to on the reverse hereof, or its successor thereunder, shall have authenticated the form of certificate endorsed hereon. - 2 - In witness whereof, Ohio Edison Company has caused this bond to be signed in its name by its President or a Vice President, by his signature or a facsimile thereof, and its corporate seal to be printed hereon, attested by its Secretary or an Assistant Secretary, by his signature or a facsimile thereof. Dated, , 199_ Ohio Edison Company, By____________________ Title: Attest: _________________________ Title: [form of trustee's authentication certificate] Trustee's Authentication Certificate This bond is one of the bonds of the series designated therein, described in the within-mentioned Mortgage. Bankers Trust Company, as Trustee, By_________________________ Authorized Officer - 3 - [Form of Bond of Guarantee Series] [Reverse] OHIO EDISON COMPANY First Mortgage Bond Guarantee Series of 1995 Due 2015 This bond is one of an issue of bonds of the Company, issuable in series, and is one of a series known as its First Mortgage Bonds of the series designated in its title, all issued and to be issued under and equally secured (except as to any sinking fund established in accordance with the provisions of the Mortgage hereinafter mentioned for the bonds of any particular series) by an Indenture of Mortgage and Deed of Trust, dated as of August 1, 1930, executed by the Company to Bankers Trust Company, as Trustee, as amended and supplemented by indentures supplemental thereto, to which Indenture as so amended and supplemented (herein referred to as the "Mortgage") reference is made for a description of the property mortgaged and pledged, the nature and extent of the security, the rights of the holders of the bonds in respect thereof and the terms and conditions upon which the bonds are secured. The bonds of this series shall be redeemed in whole, by payment of the principal amount thereof plus accrued interest thereon, if any, to the date fixed for redemption, upon receipt by the Trustee of a written advice from the trustee under the Trust Indenture (the "Revenue Bond Indenture") dated as of July 1, 1994, between Ohio Water Development Authority and Society National Bank, as trustee (such trustee and any successor trustee being hereinafter referred to as the "Revenue Bond Trustee"), securing $40,000,000 of Ohio Water Development Authority State of Ohio 6.75% Pollution Control Revenue Refunding Bonds, Series 1995 (Ohio Edison Company Project), stating that the principal amount of all the revenue bonds (the "Revenue Bonds") then outstanding under the Revenue Bond Indenture has been declared due and payable pursuant to the provisions of Section 9.02 of the Revenue Bond Indenture, specifying the date of the accelerated maturity of such Revenue Bonds and the date from which interest on the Revenue Bonds issued under the Revenue Bond Indenture has then accrued, stating such declaration of maturity has not been annulled and demanding payment of the principal amount hereof plus accrued interest hereon to the date fixed for such redemption. As provided in the supplemental indenture establishing the terms and provisions of the bonds of this series, the date fixed for such redemption shall be not earlier than the date specified in the aforesaid written advice as the date of the accelerated maturity of the Revenue Bonds then outstanding under the Revenue Bond Indenture and not later than - 4 - the 45th day after receipt by the Trustee of such advice, unless such 45th day is earlier than such date of accelerated maturity. The date fixed for such redemption shall be specified in a notice of redemption to be given not less than 30 days prior to the date so fixed for such redemption. Upon mailing of such notice of redemption, the date from which unpaid interest on the Revenue Bonds has then accrued (as specified by the Revenue Bond Trustee) shall become the initial interest accrual date (the "Initial Interest Accrual Date") with respect to the bonds of this series, and the date which is six months after the Initial Interest Accrual Date shall be the first interest payment date for the bonds of this series, provided, however, on any demand for payment of the principal amount hereof at maturity as a result of the principal of the Revenue Bonds becoming due and payable on the maturity date of the bonds of this series, the date from which unpaid interest on the Revenue Bonds has then accrued shall become the Initial Interest Accrual Date with respect to the bonds of this series, such date to be as stated in a written notice from the Revenue Bond Trustee to the Trustee. As provided in said supplemental indenture, the aforementioned notice of redemption shall become null and void for all purposes under said supplemental indenture and the Mortgage (including the fixing of the Initial Interest Accrual Date with respect to the bonds of this series) upon receipt by the Trustee of written notice from the Revenue Bond Trustee of the annulment of the acceleration of the maturity of the Revenue Bonds then outstanding under the Revenue Bond Indenture and of the rescission of the aforesaid written advice prior to the redemption date specified in such notice of redemption, and thereupon no redemption of the bonds of this series and no payment in respect thereof as specified in such notice of redemption shall be effected or required. But no such rescission shall extend to any subsequent written advice from the Revenue Bond Trustee or impair any right consequent on such subsequent written advice. Bonds of this series are not otherwise redeemable prior to their maturity. Notwithstanding the foregoing, the Company reserves the right, without any consent or other action by holders of the bonds of this series, to have the bonds of this series exchanged (the "Exchange") at any time in whole, but not in part, for other mortgage bonds (the "New Mortgage Bonds") of the Company (i) to be issued under a separate indenture of mortgage and deed of trust (the "New Mortgage") in an aggregate principal amount equal to the aggregate principal amount of bonds of this series then outstanding, (ii) containing provisions with respect to maturity, principal, interest, and premium, if any, and redemption corresponding to the bonds of this series, and (iii) otherwise satisfying the provisions of the Pledge Agreement dated as of July 1, 1994, as amended as of April 1, 1995, between the Company - 5 - and Society National Bank. The date fixed by the Company for any Exchange (the "Exchange Date") shall be specified in a notice of exchange to be given to the registered owner hereof not less than 30 days prior to the date so fixed for Exchange, which notice may be revoked by the Company at any time prior to the Exchange Date. Any such revocation shall not prevent the Company from exercising its right to effect the Exchange after appropriate notice at a later date. If the Company has not revoked its election to have the bonds of this series exchanged prior to the Exchange Date, on the Exchange Date the New Mortgage Bonds shall be delivered by the Company to the holders of the bonds of this series in exchange for the bonds of this series held by such holders and the bonds of this series shall cease to be outstanding and shall cease to accrue interest and shall represent only the right to receive a like principal amount of the New Mortgage Bonds. As more fully described in the supplemental indenture establishing the terms and provisions of the bonds of this series, the Company reserves the right, without any consent or other action by holders of the bonds of this series, to amend the Mortgage to provide (a) that the Mortgage, the rights and obligations of the Company and the rights of the bondholders may be modified with the consent of the holders of not less than 60% in principal amount of the bonds adversely affected; provided, however, that no modification shall (1) extend the time, or reduce the amount, of any payment on any bond, without the consent of the holder of each bond so affected, (2) permit the creation of any lien, not otherwise permitted, prior to or on a parity with the lien of the Mortgage, without the consent of the holders of all bonds then outstanding, or (3) reduce the above percentage of the principal amount of bonds the holders of which are required to approve any such modification without the consent of the holders of all bonds then outstanding and (b) that (i) additional bonds may be issued against 70% of the value of the property which forms the basis for such issuance and (ii) the charge against property subject to a prior lien which is used to effectuate the release of property under the Mortgage be similarly based. The principal hereof may be declared or may become due on the conditions, in the manner and at the time set forth in the Mortgage, upon the occurrence of a completed default as in the Mortgage provided. No recourse shall be had for the payment of the principal of or interest on this bond against any incorporator or any past, present or future subscriber to the capital stock, stockholder, officer or director of the Company or any predecessor or successor corporation, either directly or through the Company or any predecessor or successor corporation, under any rule of law, statute or constitution or by the enforcement of - 6 - any assessment or otherwise, all such liability of incorporators, subscribers, stockholders, officers and directors being released by the registered owner hereof by the acceptance of this bond and being likewise waived and released by the terms of the Mortgage. The bonds of this series are issuable only as registered bonds without coupons in denominations of $5,000 and authorized multiples thereof. Subject only to the restrictions contained in the Pledge Agreement dated as of July 1, 1994 between the Company and the Revenue Bond Trustee relating to bonds of this series, this bond is transferable as prescribed in the Mortgage by the registered owner hereof, in person or by attorney duly authorized, at an office or agency of the Company, in the Borough of Manhattan, The City of New York, N.Y. or in the City of Akron, Ohio, upon surrender and cancellation of this bond and thereupon a new registered bond or bonds of the same series for a like principal amount, in authorized denominations, will be issued to the transferee in exchange therefor, as provided in the Mortgage, and upon payment, if the Company shall require it, of the transfer charges therein prescribed. The Company and the Trustee may deem and treat the person in whose name this bond is registered as the absolute owner for the purpose of receiving payment of or on account of the principal and interest due hereon and for all other purposes. Registered bonds of this series shall be exchangeable at said offices or agencies of the Company for registered bonds of other authorized denominations having the same aggregate principal amount, in the manner and upon the conditions prescribed in the Mortgage. Notwithstanding any provision of the Mortgage, (a) neither the Company nor the Trustee shall be required to make transfers or exchanges of bonds of this series during the period between any interest payment date for such series and the record date next preceding such interest payment date, and (b) no charge shall be made upon any transfer or exchange of bonds of this series other than for any tax or taxes or other governmental charge required to be paid by the Company. [end of form of bond of Guarantee Series] and Whereas, Section 115 of the Indenture provides that the Company and the Trustee may, from time to time and at any time, enter into such indentures supplemental thereto as shall be deemed necessary or desirable for one or more purposes, including, among others, to describe and set forth the particular terms and the form of additional series of bonds to be issued under the Indenture, to add other limitations on the issue of bonds, withdrawal of cash or release of property, to add to the covenants and agreements of the Company for the protection of the holders of the bonds and of the mortgaged and pledged property, to supplement defective or inconsistent provisions contained in the Indenture, and for any other purpose not inconsistent with the terms of the Indenture; and - 7 - Whereas, all things necessary to make the bonds of Guarantee Series when authenticated by the Trustee and issued as in the Indenture provided, the valid, binding and legal obligations of the Company, entitled in all respects to the security of the Indenture, have been done and performed, and the creation, execution and delivery of this Supplemental Indenture have in all respects been duly authorized; and Whereas, the Company and Trustee deem it advisable to enter into this Supplemental Indenture for the purposes of describing the bonds of Guarantee Series and of establishing the terms and provisions thereof, confirming the mortgaging under the Indenture of additional property for the equal and proportionate benefit and security of the holders of all bonds at any time issued thereunder, amplifying the description of the property mortgaged, adding other limitations to the Indenture on the issue of bonds, withdrawal of cash or release of property, and adding to the covenants and agreements of the Company for the protection of the holders of bonds and of mortgaged and pledged property; Now, therefore, this supplemental indenture witnesseth: That Ohio Edison Company, in consideration of the premises and of one dollar to it duly paid by the Trustee at or before the ensealing and delivery of these presents, the receipt whereof is hereby acknowledged, and of the purchase and acceptance of the bonds issued or to be issued hereunder by the holders thereof, and in order to secure the payment both of the principal and interest of all bonds at any time issued and outstanding under the Indenture, according to their tenor and effect, and the performance of all the provisions of the Indenture and of said bonds, hath granted, bargained, sold, released, conveyed, assigned, transferred, pledged, set over and confirmed and by these presents doth grant, bargain, sell, release, convey, assign, transfer, pledge, set over and confirm unto Bankers Trust Company, as Trustee, and to its successor or successors in said trust, and to its and their assigns forever, all the properties of the Company described in Schedule A (which is identified by the signature of an officer of each party hereto at the end thereof) hereto annexed and hereby made a part hereof; Together with all and singular the tenements, hereditaments and appurtenances belonging or in any wise appertaining to the aforesaid property or any part thereof, with the reversion and reversions, remainder and remainders and (subject to the provisions of Article XI of the Indenture) the tolls, rents, revenues, issues, earnings, income, product and profits thereof, and all the estate, right, title and interest and claim whatsoever, at law as well as in equity, which the Company now has or may hereafter acquire in and to the aforesaid property and franchises and every part and parcel thereof. - 8 - The Company does hereby agree and does hereby confirm and reaffirm the agreement made by it in the Indenture, dated as of August 1, 1930, that all the property, rights and franchises acquired by the Company after the date of the Indenture, dated as of August 1, 1930 (except any hereinafter expressly excepted), shall be as fully embraced within the lien of the Indenture as if such property had been owned by the Company on the date of the Indenture, dated as of August 1, 1930 and was specifically described therein and conveyed thereby and does hereby confirm that the Company will not cause or consent to a partition, whether voluntary or through legal proceedings, of property, whether herein described or heretofore or hereafter acquired, in which its ownership shall be as a tenant in common except as permitted by and in conformity with the provisions of the Indenture and particularly of Article XI thereof. Provided that the following are not and are not intended to be now or hereafter granted, bargained, sold, released, conveyed, assigned, transferred, mortgaged, pledged, set over or confirmed hereunder and are hereby expressly excepted from the lien and operation of the Indenture, viz.: cash, shares of stock and obligations (including bonds, notes and other securities) not heretofore or hereafter specifically pledged, paid or deposited or delivered under the Indenture or covenanted so to be. To have and to hold all such properties, real, personal and mixed, mortgaged, pledged or conveyed by the Company as aforesaid, or intended so to be, unto the Trustee and its successors and assigns forever. In trust, nevertheless, upon the terms and trusts of the Indenture for those who shall hold the bonds and coupons issued and to be issued thereunder, or any of them, without preference, priority or distinction as to lien of any of said bonds and coupons over any others thereof by reason of priority in the time of the issue or negotiations thereof, or otherwise howsoever, subject, however, to the provisions in reference to extended, transferred or pledged coupons and claims for interest set forth in the Indenture (and subject to any sinking funds that may be hereafter created for the benefit of any particular series). Provided, however, and these presents are upon the condition that if the Company, its successors or assigns, shall pay or cause to be paid, the principal of and interest on said bonds, at the times and in the manner stipulated therein and herein, and shall keep, perform and observe all and singular the covenants and promises in said bonds and in the Indenture expressed to be kept, performed and observed by or on the part of the Company, then this Supplemental Indenture and the estate and rights hereby granted shall cease, determine and be void, otherwise to be and remain in full force and effect. - 9 - It is hereby covenanted, declared and agreed, by the Company, that all such bonds and coupons are to be issued, authenticated and delivered, and that all property subject or to become subject hereto is to be held, subject to the further covenants, conditions, uses and trusts in the Indenture set forth, and the parties hereto mutually agree as follows: Section 1. Bonds of Guarantee Series shall mature on July 1, 2015, and shall be designated as the Company's "First Mortgage Bonds Guarantee Series of 1995 due 2015." The bonds of Guarantee Series shall bear interest from the Initial Interest Accrual Date (as defined in the form of the bond hereinabove set forth) at the rate of six and seventy-five hundredths per centum per annum. Principal or redemption price of and interest on the bonds of Guarantee Series shall be payable in any coin or currency of the United States of America which at the time of payment is legal tender for public and private debts, at an office or agency of the Company in the Borough of Manhattan, The City of New York, N.Y. or in the City of Akron, Ohio. Definitive bonds of Guarantee Series may be issued, originally or otherwise, only as registered bonds, substantially in the form of bond hereinbefore recited, and in the denominations of $5,000 and authorized multiples thereof. Delivery of a bond of Guarantee Series to the Trustee for authentication shall be conclusive evidence that its serial number has been duly approved by the Company. The bonds of Guarantee Series shall be redeemable pursuant to the requirements of this Sixty-fifth Supplemental Indenture in whole, prior to maturity, upon notice given by mailing the same, postage pre-paid, at least thirty days and not more than forty-five days prior to the date fixed for redemption to each registered holder of a bond to be redeemed at the last address of such holder appearing on the registry books. The Trustee shall within five business days of receiving the written advice specified in the form of bond of Guarantee Series provided for herein mail a copy thereof to the Company stamped or otherwise marked to indicate the date of receipt by the Trustee. The Company shall fix a redemption date for the redemption so demanded and shall mail to the Trustee notice of such date at least 35 days prior thereto. Subject to the foregoing sentence, the redemption date so fixed may be any day not earlier than the date specified in the aforesaid written advice as the date of the accelerated maturity of the Revenue Bonds then outstanding under the Revenue Bond Indenture and not later than the 45th day after receipt by the Trustee of such advice, unless such 45th day is earlier than such date of accelerated maturity. If the Trustee does not receive such notice from the Company within 13 days after receipt by the Trustee of the aforesaid written advice, the redemption date shall be deemed fixed as the 45th day after such receipt. The Trustee shall mail notice of the redemption date to - 10 - the Revenue Bond Trustee not less than 30 days prior to such redemption date, provided, however, that the Trustee shall mail no such notice (and no redemption shall be made) if prior to the mailing of such notice the Trustee shall have received written notice from the Revenue Bond Trustee of the annulment of the acceleration of the maturity of the Revenue Bonds then outstanding under the Revenue Bond Indenture and of the rescission of the aforesaid written advice. The terms "Revenue Bond Trustee" and "Revenue Bond Indenture" and "Revenue Bonds" shall have the meanings specified in the form of bond of Guarantee Series provided for herein. Redemption of the bonds of Guarantee Series shall be at the principal amount thereof, plus accrued interest thereon to the date fixed for redemption and such amount shall become due and payable on the date fixed for such redemption. Anything in this paragraph contained to the contrary notwithstanding, if, after mailing notice of the date fixed for redemption but prior to such date, the Trustee shall have been advised in writing by the Revenue Bond Trustee that the acceleration of the maturity of the Revenue Bonds then outstanding under the Revenue Bond Indenture has been annulled and that the aforesaid written advice has been rescinded, the aforesaid written advice shall thereupon, without further act of the Trustee or the Company, be rescinded and become null and void for all purposes hereunder (including the fixing of the Initial Interest Accrual Date as provided in the form of bond of Guarantee Series provided for herein) and no redemption of the bonds of Guarantee Series and no payments in respect thereof as specified in the aforesaid written notice shall be effected or required. But no such rescission shall extend to any subsequent written advice from the Revenue Bond Trustee or impair any right consequent on such subsequent written advice. Section 2. Bonds of Guarantee Series shall be deemed to be paid and no longer outstanding under the Indenture to the extent that Revenue Bonds which are outstanding from time to time under the Revenue Bond Indenture are paid or deemed to be paid and are no longer outstanding and the Trustee has been notified to such effect by the Company. Section 3. Subject to the terms of the Pledge Agreement dated as of July 1, 1994 between the Company and the Revenue Bond Trustee relating to the bonds of Guarantee Series, bonds of Guarantee Series may be transferred by the registered owners thereof, in person or by attorney duly authorized, at an office or agency of the Company in the Borough of Manhattan, The City of New York, N. Y. or in the City of Akron, Ohio but only in the manner and upon the conditions prescribed in the Indenture and in the form of bond hereinbefore recited. Bonds of Guarantee Series shall be exchangeable for other registered bonds of the - 11 - same series, in the manner and upon the conditions prescribed in the Indenture, and in the form of bond hereinbefore recited, upon the surrender of such bonds at said offices or agencies of the Company. However, notwithstanding the provisions of Section 14 or 15 of the Indenture, no charge shall be made upon any transfer or exchange of bonds of said series other than for any tax or taxes or other governmental charge required to be paid by the Company. Section 4. The Company reserves the right, without any consent or other action by holders of the bonds of Guarantee Series, or any subsequent series of bonds, to amend the Indenture by inserting the following language as Section 115A immediately following current Section 115 of the Indenture: With the consent of the holders of not less than sixty per centum (60%) in principal amount of the bonds at the time outstanding or their attorneys-in-fact duly authorized, or, if the rights of the holders of one or more, but not all, series then outstanding are affected, the consent of the holders of not less than sixty per centum (60%) in aggregate principal amount of the bonds at the time outstanding of all affected series, taken together, and not any other series, the Company, when authorized by a resolution, and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture or modifying the rights and obligations of the Company and the rights of the holders of any of the bonds and coupons; provided, however, that no such supplemental indenture shall (1) extend the maturity of any of the bonds or reduce the rate or extend the time of payment of interest thereon, or reduce the amount of the principal thereof, or reduce any premium, payable on the redemption thereof or change the coin or currency in which any bond or interest thereon is payable, without the consent of the holder of each bond so affected, or (2) permit the creation of any lien, not otherwise permitted, prior to or on a parity with the lien of this Indenture, without the consent of the holders of all of the bonds then outstanding, or (3) reduce the aforesaid percentage of the principal amount of bonds the holders of which are required to approve any such supplemental indenture, without the consent of the holders of all the bonds then outstanding. For the purposes of this Section, bonds shall be deemed to be affected by a supplemental indenture if such supplemental indenture adversely affects or diminishes the right of holders thereof against the Company or against its property. - 12 - Upon the written request of the Company, accompanied by a resolution authorizing the execution of any such supplemental indenture, and upon the filing with the Trustee of evidence of the consent of bondholders as aforesaid (the instrument or instruments evidencing such consent to be dated within one year of such request), the Trustee shall join with the Company in the execution of such supplemental indenture unless such supplemental indenture affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion but shall not be obligated to enter into such supplemental indenture. The Trustee shall be entitled to receive and, subject to Section 102 of the Indenture and Article Five of the Seventh Supplemental Indenture, may rely upon an opinion of counsel as conclusive evidence that any such supplemental indenture is authorized or permitted by the provisions of this Section. It shall not be necessary for the consent of the bondholders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof. The Company and the Trustee, if they so elect, and either before or after such 60% or greater consent has been obtained, may require the holder of any bond consenting to the execution of any such supplemental indenture to submit his bond to the Trustee or to such bank, banker or trust company as may be designated by the Trustee for the purpose, for the notation thereon of the fact that the holder of such bond has consented to the execution of such supplemental indenture, and in such case such notation, in form satisfactory to the Trustee, shall be made upon all bonds so submitted, and such bonds bearing such notation shall forthwith be returned to the persons entitled thereto. All subsequent holders of bonds bearing such notation shall be deemed to have consented to the execution of such supplemental indenture, and consent, once given or deemed to be given, may not be withdrawn. Prior to the execution by the Company and the Trustee of any supplemental indenture pursuant to the provisions of this Section, the Company shall publish a notice, setting forth in general terms the substance of such supplemental indenture, at least once in one daily newspaper of general circulation in each city in which the principal of any of the bonds shall be payable, or, if all bonds outstanding shall be registered bonds without coupons or coupon bonds registered as to principal, such notice shall be sufficiently given if mailed, first class, postage prepaid, and registered if the Company so elects, to each - 13 - registered holder of bonds at the last address of such holder appearing on the registry books, such publication or mailing, as the case may be, to be made not less than thirty days prior to such execution. Any failure of the Company to give such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. Section 5. The Company reserves the right, without any consent or other action by the holders of the bonds of Guarantee Series, or any subsequent series of bonds, to amend the Indenture by deleting the phrase "sixty per centum (60%)" in Section 28 of the Indenture and substituting therefor the phrase "seventy per centum (70%)" and by deleting the phrase "One hundred sixty-six and two-thirds per cent. (166 2/3%)" in Sections 65 and 67 of the Indenture and substituting therefor the phrase "One hundred and forty-two and eighty-six hundredths per cent. (142.86%)". Section 6. Except as herein otherwise expressly provided, no duties, responsibilities or liabilities are assumed, or shall be construed to be assumed, by the Trustee by reason of this Supplemental Indenture; the Trustee shall not be responsible for the recitals herein or in the bonds (except the Trustee's authentication certificate), all of which are made by the Company solely; and this Supplemental Indenture is executed and accepted by the Trustee, subject to all the terms and conditions set forth in the Indenture, as fully to all intents and purposes as if the terms and conditions of the Indenture were herein set forth at length. Section 7. As supplemented by this Supplemental Indenture, the Indenture is in all respects ratified and confirmed, and the Indenture as herein defined, and this Supplemental Indenture, shall be read, taken and construed as one and the same instrument. Section 8. Nothing in this Supplemental Indenture contained shall or shall be construed to confer upon any person other than a holder of bonds issued under the Indenture, the Company and the Trustee any right or interest to avail himself of any benefit under any provision of the Indenture or of this Supplemental Indenture. Section 9. This Supplemental Indenture may be simultaneously executed in several counterparts and all such counterparts executed and delivered, each as an original, shall constitute but one and the same instrument. - 14 - In witness whereof, Ohio Edison Company, party of the first part hereto, and Bankers Trust Company, party of the second part hereto, have caused these presents to be executed in their respective names by their respective Presidents or one of their Vice Presidents or Assistant Vice Presidents and their respective seals to be hereunto affixed and attested by their respective Secretaries or one of their Assistant Secretaries or Assistant Treasurers, all as of the day and year first above written. Ohio Edison Company [Seal] By: /s/ H. P. Burg -------------------------- Title: Senior Vice President Attest: /s/ T. F. Struck, II ----------------------- Title: Assistant Treasurer and Assistant Secretary Signed, Sealed and Acknowledged on behalf of Ohio Edison Company in the presence of: /s/ Cynthia A. Kippes ----------------------- /s/ Janice K. Burgy ----------------------- Bankers Trust Company [Seal] By: /s/ Robert Caporale ----------------------- Title: Vice President Attest: /s/ Scott Thiel ------------------------- Title: Assistant Treasurer Signed, Sealed and Acknowledged on behalf of Bankers Trust Company in the presence of: /s/ Kerri O'Brien ---------------------- /s/ Michael Waters ---------------------- - 15 - State of Ohio ) : ss.: County of Summit ) On the 29th day of March, 1995, personally appeared before me, a Notary Public in and for the said County and State aforesaid, H. P. Burg and T. F. Struck, II, to me known and known to me to be a Senior Vice President and an Assistant Treasurer and Assistant Secretary, respectively, of Ohio Edison Company, the corporation which executed the foregoing instrument, and who severally acknowledged that they did sign and seal such instrument as such Senior Vice President and Assistant Treasurer and Assistant Secretary, respectively, of Ohio Edison Company, the same is their free act and deed and the free and corporate act and deed of said corporation. In witness whereof, I have hereunto set my hand and seal the 29th day of March, 1995. /s/ Debra L. Cordea ------------------------------- Debra L. Cordea, Notary Public Residence - Summit County State Wide Jurisdiction, Ohio My Commission Expires Nov. 20, 1999 [Seal] State of Ohio ) : ss.: County of Summit ) On the 29th day of March, 1995, before me personally came H. P. Burg, to me known, who, being by me duly sworn, did depose and say that he resides at 4311 Leewood Road, Stow, Ohio 44224; that he is a Senior Vice President of Ohio Edison Company, one of the corporations described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation, and that he signed his name thereto by like order. /s/ Debra L. Cordea -------------------------- Debra L. Cordea, Notary Public Residence - Summit County State Wide Jurisdiction, Ohio My Commission Expires Nov. 20, 1999 [Seal] - 16 - State of New York ) : ss.: County of New York ) On the 30th day of March, 1995, personally appeared before me, a Notary Public in and for the said County and State aforesaid, Robert Caporale and Scott Thiel, to me known and known to me to be a Vice President and Assistant Treasurer, respectively, of Bankers Trust Company, the corporation which executed the foregoing instrument, and who severally acknowledged that they did sign and seal such instrument as such Vice President and Assistant Treasurer for and on behalf of said corporation and that the same is their free act and deed and the free and corporate act and deed of said corporation. In witness whereof, I have hereunto set my hand and seal the 30th day of March, 1995. /s/ Sharon V. Alston -------------------------- SHARON V. ALSTON Notary Public, State of New York No. 31-4966275 Qualified in New York County My Commission Expires May 7, 1996 [Seal] State of New York ) : ss.: County of New York ) On the 30th day of March, 1995, before me personally came Robert Caporale, to me known, who, being by me duly sworn, did depose and say that he resides at 25 Lake Street, White Plains, New York 10603; that he is a Vice President of Bankers Trust Company, one of the parties described in and which executed the above instrument; that she knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation, and that she signed her name thereto by like authority. /s/ Sharon V. Alston --------------------------- SHARON V. ALSTON Notary Public, State of New York No. 31-4966275 Qualified in New York County My Commission Expires May 7, 1996 [Seal] - 17 - Bankers Trust Company hereby certifies that its precise name and address as Trustee hereunder are: Bankers Trust Company Four Albany Street Borough of Manhattan City, County and State of New York 10015 Bankers Trust Company By: /s/ Robert Caporale ---------------------------- Title: Vice President - 18 - SCHEDULE A Detailed Description of Additional Properties A. ELECTRIC TRANSMISSION LINES The following electric transmission lines of the Company, including the towers, poles, pole lines, wire, switch racks, insulators and other appurtenances, and equipment owned by the Company, and all other property of the Company, with all the Company's rights of way, easements, permits, privileges and consents, licenses and rights over or relating to the construction, maintenance or operation thereof, through, over, under or upon any public streets or highways or other lands, public or private: Lake Erie Division 1. Baumhart Loop: Single circuit wood pole construction extending from Structure #121 and #121A on the existing Edgewater-Shinrock line southerly, westerly, and northerly to Baumhart Substation, a distance of 0.11 mile, all being located in the City of Vermilion, Lorain County, Ohio. /s/ T. F. Struck, II, ---------------------------------- T. F. Struck, II, Assistant Treasurer and Assistant Secretary Ohio Edison Company /s/ Robert Caporale, ---------------------------- Robert Caporale, Vice President Bankers Trust Company - 19 - EX-4 3 66TH SUPP INDENTURE 5/95 [Conformed with Recordation Data] ---------------------------------------------------------------- OHIO EDISON COMPANY with BANKERS TRUST COMPANY, As Trustee _______________ Sixty-Sixth Supplemental Indenture Providing among other things for First Mortgage Bonds Guarantee Series I of 1995 due 2002 _______________ Dated as of May 1, 1995 ---------------------------------------------------------------- SUPPLEMENTAL INDENTURE, dated as of May 1, 1995 between Ohio Edison Company, a corporation organized and existing under the laws of the State of Ohio (hereinafter called the "Company"), party of the first part, and Bankers Trust Company, a corporation organized and existing under the laws of the State of New York, as Trustee under the Indenture hereinafter referred to, party of the second part. Whereas, the Company has heretofore executed and delivered to Bankers Trust Company, as Trustee (hereinafter called the "Trustee"), a certain Indenture of Mortgage and Deed of Trust, dated as of August 1, 1930, to secure an issue of bonds of the Company, issued and to be issued in series, from time to time, in the manner and subject to the conditions set forth in the said Indenture; and the said Indenture has been supplemented by supplemental indentures, dated as of August 1, 1930, March 3, 1931, as of November 1, 1935, as of January 1, 1937, as of September 1, 1937, as of June 13, 1939, as of September 1, 1944, as of April 1, 1945, as of September 1, 1948, as of May 1, 1950, as of January 1, 1954, as of May 1, 1955, as of August 1, 1956, as of March 1, 1958, as of April 1, 1959, as of June 1, 1961, as of September 1, 1969, as of May 1, 1970, as of September 1, 1970, as of June 1, 1971, as of August 1, 1972, as of September 1, 1973, as of August 1, 1974, as of July 1, 1976, as of December 1, 1976, as of June 15, 1977, as of May 15, 1978, as of February 1, 1980, as of April 15, 1980, as of June 15, 1980, as of October 1, 1981, as of October 15, 1981, as of February 15, 1982, as of July 1, 1982, as of March 1, 1983, as of March 1, 1984, as of September 15, 1984, as of September 27, 1984, as of November 8, 1984, as of December 1, 1984, as of December 5, 1984, as of January 1, 1985, as of January 30, 1985, as of February 25, 1985, as of July 1, 1985, as of October 1, 1985, as of January 15, 1986, as of May 20, 1986, as of June 3, 1986, as of October 1, 1986, as of July 15, 1989, as of August 25, 1989, as of February 15, 1991, as of May 1, 1991, as of May 15, 1991, as of September 15, 1991, as of April 1, 1992, as of June 15, 1992, as of September 15, 1992, as of April 1, 1993, as of June 15, 1993, as of September 15, 1993, as of November 15, 1993 and as of April 1, 1995, respectively, which Indenture as so supplemented and to be hereby supplemented is hereinafter referred to as the "Indenture"; and Whereas, the Indenture provides for the issuance of bonds thereunder in one or more series, the form of each series of bonds and of the coupons to be attached to the coupon bonds, if any, to be substantially in the forms set forth therein with such insertions, omissions and variations as the Board of Directors of the Company may determine; and Whereas, the Company, by appropriate corporate action in conformity with the terms of the Indenture, in accordance with the requirements of the Letter of Credit and Reimbursement Agreement dated as of May 12, 1995 among the Company, Deutsche Bank AG New York Branch, as Administrative Agent (the "Administrative Agent") and Issuing Bank, and the Lenders named therein (as the same may be amended from time to time, the "Reimbursement Agreement"), has duly determined to create a new series of bonds under the Indenture, consisting of $227,886,000.00 in principal amount to be designated as "First Mortgage Bonds Guarantee Series I of 1995 due 2002" (hereinafter sometimes referred to as the "bonds of Guarantee Series I"), the bonds of which series are to bear interest (which for the purposes hereof shall also include commissions, fees and other amounts (other than amounts payable as principal) due and owing under the Reimbursement Agreement) at the same rates and on the same dates as the Reimbursement Agreement provides for the accrual and payment of interest, fees, commissions and such other amounts are to mature on May 12, 2002, or, as provided herein, such later date as shall correspond to the latest Stated Termination Date (as defined in the Reimbursement Agreement) of any Letter of Credit (as defined in the Reimbursement Agreement) issued and outstanding under the Reimbursement Agreement, and are to be substantially in the following form: THIS BOND IS NOT TRANSFERABLE EXCEPT (X) TO A SUCCESSOR ADMINISTRATIVE AGENT UNDER A REIMBURSEMENT AGREEMENT, DATED AS OF MAY 12, 1995, AMONG THE OHIO EDISON COMPANY, THE ADMINISTRATIVE AGENT, THE ISSUING BANK AND THE LENDERS NAMED THEREIN AS THE SAME MAY BE AMENDED FROM TIME TO TIME, OR (Y) IN CONNECTION WITH THE EXERCISE OF THE RIGHTS AND REMEDIES OF THE HOLDER HEREOF CONSEQUENT UPON A "REIMBURSEMENT EVENT OF DEFAULT" AS DEFINED IN SUCH REIMBURSEMENT AGREEMENT REFERRED TO HEREIN. OHIO EDISON COMPANY First Mortgage Bond Guarantee Series I of 1995 Due 2002 Due May 12, 2002 No. Ohio Edison Company, a corporation of the State of Ohio (hereinafter called the Company), for value received, hereby promises to pay to Deutsche Bank AG New York Branch, as Administrative Agent under the Reimbursement Agreement hereinafter described, or registered assigns, dollars (reduced from time to time as hereinafter provided) at an office or agency of the Company in the Borough of Manhattan, The City of New York, N.Y. or in the City of Akron, Ohio, on the dates and in the amounts set forth in the Reimbursement Agreement for the payment of the principal of Advances (as defined in the Reimbursement Agreement) and the reimbursement of drawings under any Letter of Credit (as defined in the Reimbursement Agreement) and to pay interest on said sum as described on the reverse hereof, in any coin or currency of the United States of America - 2 - which at the time of payment is legal tender for public and private debts. Payments of principal of and interest on this bond shall be made at an office or agency of the Company in the Borough of Manhattan, The City of New York, N. Y. or in the City of Akron, Ohio. The provisions of this bond are continued on the reverse hereof and such continued provisions shall for all purposes have the same effect as though fully set forth at this place. This bond shall not become obligatory until Bankers Trust Company, the Trustee under the Mortgage referred to on the reverse hereof, or its successor thereunder, shall have authenticated the form of certificate endorsed hereon. - 3 - In witness whereof, Ohio Edison Company has caused this bond to be signed in its name by its President or a Vice President, by his signature or a facsimile thereof, and its corporate seal to be printed hereon, attested by its Secretary or an Assistant Secretary, by his signature or a facsimile thereof. Dated, ________ __, 199_ Ohio Edison Company, By____________________ Title: President Attest: _________________________ Title: Secretary Trustee's Authentication Certificate This bond is one of the bonds of the series designated therein, described in the within-mentioned Mortgage. Bankers Trust Company, as Trustee, By_________________________ Authorized Officer - 4 - OHIO EDISON COMPANY First Mortgage Bond Guarantee Series I of 1995 Due 2002 This bond is one of an issue of bonds of the Company, issuable in series, and is one of a series known as its First Mortgage Bonds of the series designated in its title, all issued and to be issued under and equally secured (except as to any sinking fund established in accordance with the provisions of the Mortgage hereinafter mentioned for the bonds of any particular series) by an Indenture of Mortgage and Deed of Trust, dated as of August 1, 1930, executed by the Company to Bankers Trust Company, as Trustee, as amended and supplemented by indentures supplemental thereto, to which Indenture as so amended and supplemented (herein referred to as the "Mortgage") reference is made for a description of the property mortgaged and pledged, the nature and extent of the security, the rights of the holders of the bonds in respect thereof and the terms and conditions upon which the bonds are secured. The bonds of this Series have been issued to Deutsche Bank AG New York Branch ("DBNY"), as Administrative Agent (including any successors as Administrative Agent under the Reimbursement Agreement, the "Administrative Agent") in connection with the execution and delivery by the Company of the Letter of Credit and Reimbursement Agreement dated as of May 12, 1995 among the Company, DBNY as Administrative Agent and Issuing Bank, and the Lenders named therein (as the same may be amended from time to time, the "Reimbursement Agreement"). The principal amount of this bond shall equal the Commitment or the Adjusted Commitment whichever is less (in each case as defined in the Reimbursement Agreement), under the Reimbursement Agreement. Except as hereinafter provided, interest (which for the purposes hereof shall also include commissions, fees and other amounts (other than amounts payable as principal) due and owing under the Reimbursement Agreement) on this bond accrues and is payable at the same rates and on the same dates as the Reimbursement Agreement provides for the accrual and payment of interest, fees, commissions and such other amounts. The obligation of the Company to make payments with respect to the principal and interest (calculated as set forth above) on the bonds of this Series whether at stated maturity, as a result of acceleration of maturity or upon mandatory redemption shall be fully or partially, as the case may be, satisfied and discharged to the extent that, at any time that any such payment shall become due, the Company shall have fully or partially paid the then due principal amount of any Advances or any unreimbursed - 5 - drawings under any Letter of Credit outstanding under the Reimbursement Agreement, or the then due interest on any thereof, or any fees, commissions or other amounts payable under the Reimbursement Agreement. The maturity date of bonds of this Series shall be extended automatically, without further written amendment or other action by either the Company or the Trustee, to correspond to the latest Stated Termination Date of any Letter of Credit, as the same may be extended pursuant to the Reimbursement Agreement, but in no event shall such maturity be extended beyond May 12, 2020. The bonds of this series shall be redeemed in whole, by payment of the principal amount thereof plus accrued interest (calculated as set forth above) thereon, if any, to the date fixed for redemption, upon receipt by the Trustee of a written advice from the Administrative Agent, stating that a Reimbursement Event of Default (as defined in the Reimbursement Agreement) has occurred pursuant to the provisions of Section 6.02 of the Reimbursement Agreement, specifying the date of the occurrence of such a Reimbursement Event of Default, stating such occurrence of a Reimbursement Event of Default has not been annulled and demanding payment of the principal amount hereof plus accrued interest (calculated as set forth above) hereon to the date fixed for such redemption. As provided in the supplemental indenture establishing the terms and provisions of the bonds of this series, the date fixed for such redemption shall be not earlier than the date specified in the aforesaid written advice as the date of the occurrence of a Reimbursement Event of Default and not later than the 45th day after receipt by the Trustee of such advice, unless such 45th day is earlier than the date of such declaration of a Reimbursement Event of Default. The date fixed for such redemption shall be specified in a notice of redemption to be given not less than 30 days prior to the date so fixed for such redemption. As provided in said supplemental indenture, the aforementioned notice of redemption shall become null and void for all purposes under said supplemental indenture and the Mortgage upon receipt by the Trustee of written notice from the Administrative Agent confirming that such Reimbursement Event of Default under the Reimbursement Agreement is no longer continuing prior to the redemption date specified in such notice of redemption, and thereupon no redemption of the bonds of this series and no payment in respect thereof as specified in such notice of redemption shall be effected or required. But no such rescission shall extend to any subsequent written advice from the Administrative Agent or impair any right consequent on such subsequent written advice. Bonds of this series are not otherwise redeemable prior to their maturity. - 6 - As more fully described in the supplemental indenture establishing the terms and provisions of the bonds of this series (the "Indenture Supplement"), the Company reserves the right, without any consent or other action by holders of the bonds of this series, to amend the Mortgage to provide (a) that the Mortgage, the rights and obligations of the Company and the rights of the bondholders may be modified with the consent of the holders of not less than 60% in principal amount of the bonds adversely affected; provided, however, that no modification shall (1) extend the time, or reduce the amount, of any payment on any bond, without the consent of the holder of each bond so affected, (2) permit the creation of any lien, not otherwise permitted, prior to or on a parity with the lien of the Mortgage, without the consent of the holders of all bonds then outstanding, or (3) reduce the above percentage of the principal amount of bonds the holders of which are required to approve any such modification without the consent of the holders of all bonds then outstanding and (b) that (i) additional bonds may be issued against 70% of the value of the property which forms the basis for such issuance and (ii) the charge against property subject to a prior lien which is used to effectuate the release of property under the Mortgage be similarly based. The principal hereof may be declared or may become due on the conditions, in the manner and at the time set forth in the Mortgage, upon the occurrence of a completed default as in the Mortgage provided. No recourse shall be had for the payment of the principal of or interest (calculated as set forth above) on this bond against any incorporator or any past, present or future subscriber to the capital stock, stockholder, officer or director of the Company or of any predecessor or successor corporation, either directly or through the Company or any predecessor or successor corporation, under any rule of law, statute or constitution or by the enforcement of any assessment or otherwise, all such liability of incorporators, subscribers, stockholders, officers and directors being released by the registered owner hereof by the acceptance of this bond and being likewise waived and released by the terms of the Mortgage. The bonds of this series are issuable only as registered bonds without coupons in denominations of $1,000 and authorized multiples thereof. Subject to the restrictions contained in the Reimbursement Agreement, this bond is transferable as prescribed in the Mortgage by the registered owner hereof, and exchangeable as set forth in the next sentence, in person or by attorney duly authorized, at an office or agency of the Company, in the Borough of Manhattan, The City of New York, N.Y. or in the City of Akron, Ohio, upon surrender and cancellation of this bond and thereupon a new registered bond or bonds of the same series for a like aggregate principal amount, - 7 - in authorized denominations, will be issued to the transferee in exchange therefor, as provided in the Mortgage, and upon payment, if the Company shall require it, of the transfer charges therein prescribed. In the event the maturity of bonds of this Series is extended in accordance with the provisions hereof and of the Indenture Supplement, as a result of the extension of the Stated Termination Date of any Letter of Credit, as the same may be extended pursuant to the Reimbursement Agreement, the holder hereof shall be entitled to exchange this bond for a bond or bonds stating such new maturity date. The Company and the Trustee may deem and treat the person in whose name this bond is registered as the absolute owner for the purpose of receiving payment of or on account of the principal and interest due hereon and for all other purposes. Registered bonds of this series shall be exchangeable at said offices or agencies of the Company for registered bonds of other authorized denominations having the same aggregate principal amount, in the manner and upon the conditions prescribed in the Mortgage. Notwithstanding any provision of the Mortgage, (a) neither the Company nor the Trustee shall be required to make transfers or exchanges of bonds of this series during the period between any interest payment date for such series and the record date next preceding such interest payment date, and (b) no charge shall be made upon any transfer or exchange of bonds of this series other than for any tax or taxes or other governmental charge required to be paid by the Company. [END OF BOND OF GUARANTEE SERIES I] and Whereas, Section 115 of the Indenture provides that the Company and the Trustee may, from time to time and at any time, enter into such indentures supplemental thereto as shall be deemed necessary or desirable for one or more purposes, including, among others, to describe and set forth the particular terms and the form of additional series of bonds to be issued under the Indenture, to add other limitations on the issue of bonds, withdrawal of cash or release of property, to add to the covenants and agreements of the Company for the protection of the holders of the bonds and of the mortgaged and pledged property, to supplement defective or inconsistent provisions contained in the Indenture, and for any other purpose not inconsistent with the terms of the Indenture; and Whereas, all things necessary to make the bonds of Guarantee Series I when authenticated by the Trustee and issued as in the Indenture provided, the valid, binding and legal obligations of the Company, entitled in all respects to the security of the Indenture, have been done and performed, and the creation, execution and delivery of this Supplemental Indenture have in all respects been duly authorized; and - 8 - Whereas, the Company and Trustee deem it advisable to enter into this Supplemental Indenture for the purposes of describing the bonds of Guarantee Series I and of establishing the terms and provisions thereof, confirming the mortgaging under the Indenture of additional property for the equal and proportionate benefit and security of the holders of all bonds at any time issued thereunder, amplifying the description of the property mortgaged, adding other limitations to the Indenture on the issue of bonds, withdrawal of cash or release of property, and adding to the covenants and agreements of the Company for the protection of the holders of bonds and of mortgaged and pledged property; Now, therefore, this supplemental indenture witnesseth: That Ohio Edison Company, in consideration of the premises and of one dollar to it duly paid by the Trustee at or before the ensealing and delivery of these presents, the receipt whereof is hereby acknowledged, and of the purchase and acceptance of the bonds issued or to be issued hereunder by the holders thereof, and in order to secure the payment both of the principal and interest of all bonds at any time issued and outstanding under the Indenture, according to their tenor and effect, and the performance of all the provisions of the Indenture and of said bonds, hath granted, bargained, sold, released, conveyed, assigned, transferred, pledged, set over and confirmed and by these presents doth grant, bargain, sell, release, convey, assign, transfer, pledge, set over and confirm unto Bankers Trust Company, as Trustee, and to its successor or successors in said trust, and to its and their assigns forever, all the properties of the Company described in Schedule A (which is identified by the signature of an officer of each party hereto at the end thereof) hereto annexed and hereby made a part hereof; Together with all and singular the tenements, hereditaments and appurtenances belonging or in any wise appertaining to the aforesaid property or any part thereof, with the reversion and reversions, remainder and remainders and (subject to the provisions of Article XI of the Indenture) the tolls, rents, revenues, issues, earnings, income, product and profits thereof, and all the estate, right, title and interest and claim whatsoever, at law as well as in equity, which the Company now has or may hereafter acquire in and to the aforesaid property and franchises and every part and parcel thereof. The Company does hereby agree and does hereby confirm and reaffirm the agreement made by it in the Indenture, dated as of August 1, 1930, that all the property, rights and franchises acquired by the Company after the date of the Indenture, dated as of August 1, 1930 (except any hereinafter expressly excepted), shall be as fully embraced within the lien of the Indenture as if such property had been owned by the Company on the date of the Indenture, dated as of August 1, 1930 and was specifically - 9 - described therein and conveyed thereby and does hereby confirm that the Company will not cause or consent to a partition, whether voluntary or through legal proceedings, of property, whether herein described or heretofore or hereafter acquired, in which its ownership shall be as a tenant in common except as permitted by and in conformity with the provisions of the Indenture and particularly of Article XI thereof. Provided that the following are not and are not intended to be now or hereafter granted, bargained, sold, released, conveyed, assigned, transferred, mortgaged, pledged, set over or confirmed hereunder and are hereby expressly excepted from the lien and operation of the Indenture, viz.: cash, shares of stock and obligations (including bonds, notes and other securities) not heretofore or hereafter specifically pledged, paid or deposited or delivered under the Indenture or covenanted so to be. To have and to hold all such properties, real, personal and mixed, mortgaged, pledged or conveyed by the Company as aforesaid, or intended so to be, unto the Trustee and its successors and assigns forever. In trust, nevertheless, upon the terms and trusts of the Indenture for those who shall hold the bonds and coupons issued and to be issued thereunder, or any of them, without preference, priority or distinction as to lien of any of said bonds and coupons over any others thereof by reason of priority in the time of the issue or negotiations thereof, or otherwise howsoever, subject, however, to the provisions in reference to extended, transferred or pledged coupons and claims for interest set forth in the Indenture (and subject to any sinking funds that may be hereafter created for the benefit of any particular series). Provided, however, and these presents are upon the condition that if the Company, its successors or assigns, shall pay or cause to be paid, the principal of and interest on said bonds, at the times and in the manner stipulated therein and herein, and shall keep, perform and observe all and singular the covenants and promises in said bonds and in the Indenture expressed to be kept, performed and observed by or on the part of the Company, then this Supplemental Indenture and the estate and rights hereby granted shall cease, determine and be void, otherwise to be and remain in full force and effect. It is hereby covenanted, declared and agreed, by the Company, that all such bonds and coupons are to be issued, authenticated and delivered, and that all property subject or to become subject hereto is to be held, subject to the further covenants, conditions, uses and trusts in the Indenture set forth, and the parties hereto mutually agree as follows: - 10 - Section 1. Bonds of Guarantee Series I shall mature on May 12, 2002, or such later date as shall correspond to the latest Stated Termination Date of any Letter of Credit, as the same may be extended pursuant to the Reimbursement Agreement, but in no event shall such maturity be extended beyond May 12, 2020, and shall be designated as the Company's "First Mortgage Bonds Guarantee Series I of 1995 due 2002." The bonds of Guarantee Series I shall bear interest (which for the purposes hereof shall also include commissions, fees and other amounts (other than amounts payable as principal) due and owing under the Reimbursement Agreement) at the same rates and on the same dates as the Reimbursement Agreement provides for the accrual and payment of interest, fees, commissions and such other amounts. Principal or redemption price of and interest on the bonds of Guarantee Series I shall be payable in any coin or currency of the United States of America which at the time of payment is legal tender for public and private debts, at an office or agency of the Company in the Borough of Manhattan, The City of New York, N.Y. or in the City of Akron, Ohio. Definitive bonds of Guarantee Series I may be issued, originally or otherwise, only as registered bonds, substantially in the form of bond hereinbefore recited, and in the denominations of $1,000 and authorized multiples thereof. Delivery of a bond of Guarantee Series I to the Trustee for authentication shall be conclusive evidence that its serial number has been duly approved by the Company. The bonds of Guarantee Series I shall be redeemable pursuant to the requirements of this Sixty-Sixth Supplemental Indenture in whole, prior to maturity, upon notice given by mailing the same, postage pre-paid, at least thirty days and not more than forty-five days prior to the date fixed for redemption to each registered holder of a bond to be redeemed at the last address of such holder appearing on the registry books. The Trustee shall within five business days of receiving the written advice specified in the form of bond of Guarantee Series I provided for herein mail a copy thereof to the Company stamped or otherwise marked to indicate the date of receipt by the Trustee. The Company shall fix a redemption date for the redemption so demanded and shall mail to the Trustee notice of such date at least 35 days prior thereto. Subject to the foregoing sentence, the redemption date so fixed may be any day not earlier than the date specified in the aforesaid written advice as the date of such occurrence of a Reimbursement Event of Default under the Reimbursement Agreement and not later than the 45th day after receipt by the Trustee of such advice, unless such 45th day is earlier than such date of occurrence of a Reimbursement Event of Default. If the Trustee does not receive such notice from the Company within 13 days after receipt by the Trustee of the aforesaid written advice, the redemption date shall be deemed fixed as the 45th day after such receipt. The Trustee shall mail - 11 - notice of the redemption date to the Administrative Agent not less than 30 days prior to such redemption date, provided, however, that the Trustee shall mail no such notice (and no redemption shall be made) if prior to the mailing of such notice the Trustee shall have received written notice from the Administrative Agent confirming that such Reimbursement Event of Default under the Reimbursement Agreement is no longer continuing. The terms "Administrative Agent" and "Reimbursement Agreement" shall have the meanings specified in the form of bond of Guarantee Series I provided for herein. Redemption of the bonds of Guarantee Series I shall be at the principal amount thereof, plus accrued interest thereon to the date fixed for redemption and such amount shall become due and payable on the date fixed for such redemption. Anything in this paragraph contained to the contrary notwithstanding, if, after mailing notice of the date fixed for redemption but prior to such date, the Trustee shall have been advised in writing by the Administrative Agent that such Reimbursement Event of Default under the Reimbursement Agreement is no longer continuing and that the aforesaid written advice has been rescinded, the aforesaid written advice shall thereupon, without further act of the Trustee or the Company, be rescinded and become null and void for all purposes hereunder and no redemption of the bonds of Guarantee Series I and no payments in respect thereof as specified in the aforesaid written notice shall be effected or required. But no such rescission shall extend to any subsequent written advice from the Administrative Agent or impair any right consequent on such subsequent written advice. Section 2. Bonds of Guarantee Series I shall be deemed to be paid and no longer outstanding under the Indenture to the extent that the Company's obligations with respect to the principal, interest, commissions, fees and other amounts payable under or in connection with the Reimbursement Agreement which are due from time to time under the Reimbursement Agreement are, and any Letter of Credit issued pursuant thereto is, no longer outstanding and the Trustee has been notified to such effect by the Company. Section 3. Subject to the terms of the Reimbursement Agreement dated as of May 12, 1995 between the Company and the Administrative Agent relating to the bonds of Guarantee Series I, bonds of Guarantee Series I may be transferred by the registered owners thereof, and exchanged as set forth in the next sentence, in person or by attorney duly authorized, at an office or agency of the Company in the Borough of Manhattan, The City of New York, N.Y. or in the City of Akron, Ohio but only in the manner and upon the conditions prescribed in the Indenture and in the form of bond hereinbefore recited. In the event the maturity of bonds of Guarantee Series I is extended in accordance with the provisions hereof and of the Indenture Supplement, as a result of the extension of the Stated Termination Date of any Letter of - 12 - Credit, as the same may be extended pursuant to the Reimbursement Agreement, the holder hereof shall be entitled to exchange this bond for a bond or bonds stating such new maturity date. Bonds of Guarantee Series I shall be exchangeable for other registered bonds of the same series, in the manner and upon the conditions prescribed in the Indenture, and in the form of bond hereinbefore recited, upon the surrender of such bonds at said offices or agencies of the Company. However, notwithstanding the provisions of Section 14 or 15 of the Indenture, no charge shall be made upon any transfer or exchange of bonds of said series other than for any tax or taxes or other governmental charge required to be paid by the Company. Section 4. Bonds of Guarantee Series I shall be considered and deemed to be "outstanding" for all purposes under the Mortgage in the full principal amount thereof, until the maturity thereof, regardless of whether any amounts have accrued thereunder or are then due and owing thereunder. Section 5. The Company reserves the right, without any consent or other action by holders of the bonds of Guarantee Series I, or any subsequent series of bonds, to amend the Indenture by inserting the following language as Section 115A immediately following current Section 115 of the Indenture: With the consent of the holders of not less than sixty per centum (60%) in principal amount of the bonds at the time outstanding or their attorneys-in-fact duly authorized, or, if the rights of the holders of one or more, but not all, series then outstanding are affected, the consent of the holders of not less than sixty per centum (60%) in aggregate principal amount of the bonds at the time outstanding of all affected series, taken together, and not any other series, the Company, when authorized by a resolution, and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture or modifying the rights and obligations of the Company and the rights of the holders of any of the bonds and coupons; provided, however, that no such supplemental indenture shall (1) extend the maturity of any of the bonds or reduce the rate or extend the time of payment of interest thereon, or reduce the amount of the principal thereof, or reduce any premium, payable on the redemption thereof or change the coin or currency in which any bond or interest thereon is payable, without the consent of the holder of each bond so affected, or (2) permit the creation of any lien, not otherwise permitted, prior to or on a parity with the lien of this Indenture, without the consent of the holders of all of the bonds then outstanding, or (3) reduce the aforesaid - 13 - percentage of the principal amount of bonds the holders of which are required to approve any such supplemental indenture, without the consent of the holders of all the bonds then outstanding. For the purposes of this Section, bonds shall be deemed to be affected by a supplemental indenture if such supplemental indenture adversely affects or diminishes the right of holders thereof against the Company or against its property. Upon the written request of the Company, accompanied by a resolution authorizing the execution of any such supplemental indenture, and upon the filing with the Trustee of evidence of the consent of bondholders as aforesaid (the instrument or instruments evidencing such consent to be dated within one year of such request), the Trustee shall join with the Company in the execution of such supplemental indenture unless such supplemental indenture affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion but shall not be obligated to enter into such supplemental indenture. The Trustee shall be entitled to receive and, subject to Section 102 of the Indenture and Article Five of the Seventh Supplemental Indenture, may rely upon an opinion of counsel as conclusive evidence that any such supplemental indenture is authorized or permitted by the provisions of this Section. It shall not be necessary for the consent of the bondholders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof. The Company and the Trustee, if they so elect, and either before or after such 60% or greater consent has been obtained, may require the holder of any bond consenting to the execution of any such supplemental indenture to submit his bond to the Trustee or to such bank, banker or trust company as may be designated by the Trustee for the purpose, for the notation thereon of the fact that the holder of such bond has consented to the execution of such supplemental indenture, and in such case such notation, in form satisfactory to the Trustee, shall be made upon all bonds so submitted, and such bonds bearing such notation shall forthwith be returned to the persons entitled thereto. All subsequent holders of bonds bearing such notation shall be deemed to have consented to the execution of such supplemental indenture, and consent, once given or deemed to be given, may not be withdrawn. - 14 - Prior to the execution by the Company and the Trustee of any supplemental indenture pursuant to the provisions of this Section, the Company shall publish a notice, setting forth in general terms the substance of such supplemental indenture, at least once in one daily newspaper of general circulation in each city in which the principal of any of the bonds shall be payable, or, if all bonds outstanding shall be registered bonds without coupons or coupon bonds registered as to principal, such notice shall be sufficiently given if mailed, first class, postage prepaid, and registered if the Company so elects, to each registered holder of bonds at the last address of such holder appearing on the registry books, such publication or mailing, as the case may be, to be made not less than thirty days prior to such execution. Any failure of the Company to give such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. Section 6. The Company reserves the right, without any consent or other action by the holders of the bonds of Guarantee Series I, or any subsequent series of bonds, to amend the Indenture by deleting the phrase "sixty per centum (60%)" in Section 28 of the Indenture and substituting therefor the phrase "seventy per centum (70%)" and by deleting the phrase "One hundred sixty-six and two-thirds per cent. (166 2/3%)" in Sections 65 and 67 of the Indenture and substituting therefor the phrase "One hundred and forty-two and eighty-six hundredths per cent. (142.86%)". Section 7. Except as herein otherwise expressly provided, no duties, responsibilities or liabilities are assumed, or shall be construed to be assumed, by the Trustee by reason of this Supplemental Indenture; the Trustee shall not be responsible for the recitals herein or in the bonds (except the Trustee's authentication certificate), all of which are made by the Company solely; and this Supplemental Indenture is executed and accepted by the Trustee, subject to all the terms and conditions set forth in the Indenture, as fully to all intents and purposes as if the terms and conditions of the Indenture were herein set forth at length. Section 8. As supplemented by this Supplemental Indenture, the Indenture is in all respects ratified and confirmed, and the Indenture as herein defined, and this Supplemental Indenture, shall be read, taken and construed as one and the same instrument. Section 9. Nothing in this Supplemental Indenture contained shall or shall be construed to confer upon any person other than a holder of bonds issued under the Indenture, the Company and the Trustee any right or interest to avail himself of - 15 - any benefit under any provision of the Indenture or of this Supplemental Indenture. Section 10. This Supplemental Indenture may be simultaneously executed in several counterparts and all such counterparts executed and delivered, each as an original, shall constitute but one and the same instrument. In witness whereof, Ohio Edison Company, party of the first part hereto, and Bankers Trust Company, party of the second part hereto, have caused these presents to be executed in their respective names by their respective Presidents or one of their Vice Presidents or Assistant Vice Presidents and their respective seals to be hereunto affixed and attested by their respective Secretaries or one of their Assistant Secretaries or Assistant Treasurers, all as of the day and year first above written. - 16 - Ohio Edison Company [Seal] By: /s/ H. P. Burg ----------------------------- Title: Senior Vice President Attest: /s/ T. F. Struck II ------------------------------ Title: Assistant Treasurer and Assistant Secretary Signed, Sealed and Acknowledged on behalf of Ohio Edison Company in the presence of: /s/ Cynthia A. Kippes ------------------------- Cynthia A. Kippes /s/ Janice K. Burgy ------------------------ Janice K. Burgy Bankers Trust Company [Seal] By: /s/ Robert Caporale ----------------------- Title: Vice President Attest: /s/ Scott Thiel --------------------------- Title: Assistant Treasurer Signed, Sealed and Acknowledged on behalf of Bankers Trust Company in the presence of: /s/ Kerri O'Brien ------------------------ Kerri O'Brien /s/ Michael Waters ----------------------------- Michael Waters - 17 - State of Ohio ) : ss.: County of Summit ) On the 5th day of May, 1995, personally appeared before me, a Notary Public in and for the said County and State aforesaid, H.P. Burg and T.F. Struck, II, to me known and known to me to be a Senior Vice President and an Assistant Treasurer and Assistant Secretary, respectively, of Ohio Edison Company, the corporation which executed the foregoing instrument, and who severally acknowledged that they did sign and seal such instrument as such Senior Vice President and Assistant Treasurer and Assistant Secretary, respectively, of Ohio Edison Company, the same is their free act and deed and the free and corporate act and deed of said corporation. In witness whereof, I have hereunto set my hand and seal the 5th day of May, 1995. /s/ Debra L. Cordea -------------------------------- Debra L. Cordea, Notary Public Residence - Summit County State Wide Jurisdiction, Ohio My Commission Expires Nov. 20, 1999 [Seal] State of Ohio ) : ss.: County of Summit ) On the 5th day of May, 1995, before me personally came H.P. Burg, to me known, who, being by me duly sworn, did depose and say that he resides at 4311 Leewood Road, Stow, Ohio 44224; that he is a Senior Vice President of Ohio Edison Company, one of the corporations described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation, and that he signed his name thereto by like order. /s/ Debra L. Cordea ------------------------------ Debra L. Cordea, Notary Public Residence - Summit County State Wide Jurisdiction, Ohio My Commission Expires Nov. 20, 1999 [Seal] - 18 - State of New York ) : ss.: County of New York) On the 11th day of May, 1995, personally appeared before me, a Notary Public in and for the said County and State aforesaid, Robert Caporale and Scott Thiel, to me known and known to me to be a Vice President and Assistant Treasurer, respectively, of Bankers Trust Company, the corporation which executed the foregoing instrument, and who severally acknowledged that they did sign and seal such instrument as such Vice President and Assistant Treasurer for and on behalf of said corporation and that the same is their free act and deed and the free and corporate act and deed of said corporation. In witness whereof, I have hereunto set my hand and seal the 11th day of May, 1995. /s/ Margaret Bereza -------------------------------- Notary Public, State of New York No. 31-5023900 Qualified in New York County Commission Expires 2/22/96 [Seal] State of New York ) : ss.: County of New York) On the 11th day of May, 1995, before me personally came Robert Caporale, to me known, who, being by me duly sworn, did depose and say that he resides at 25 Lake Street, White Plains, New York 10603; that he is a Vice President of Bankers Trust Company, one of the parties described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation, and that he signed his name thereto by like authority. /s/ Margaret Bereza -------------------------------- Notary Public, State of New York No. 31-5023900 Qualified in New York County Commission Expires 2/22/96 [Seal] - 19 - Bankers Trust Company hereby certifies that its precise name and address as Trustee hereunder are: Bankers Trust Company Four Albany Street Borough of Manhattan City, County and State of New York 10015 Bankers Trust Company By: /s/ Robert Caporale ------------------------ Title: Vice President - 20 - SCHEDULE A Detailed Description of Additional Properties A. ELECTRIC TRANSMISSION LINES The following electric transmission lines of the Company, including the towers, poles, pole lines, wire, switch racks, insulators and other appurtenances and equipment owned by the Company, and all other property of the Company, with all the Company's rights of way, easements, permits, privileges and consents, licenses and rights over or relating to the construction, maintenance or operation thereof, through, over, under or upon any public streets or highways or other lands, public or private: Mansfield Division 1. Ideal Electric Company Tap: Single circuit wood pole construction extending from structure #2 on the existing Bowman line southerly, easterly, southerly and westerly to Ideal Electric Company Substation, a distance of 1.15 miles, all being located in the City of Mansfield, Richland County, Ohio. /s/ T.F. Struck, II , ---------------------------------------- T.F. Struck, II, Assistant Treasurer and Assistant Secretary Ohio Edison Company /s/ Robert Caporale , --------------------------------------- Robert Caporale, Vice President Bankers Trust Company - 21 - RECORDING DATA Recorded ------------------ County Date Filed Volume Page ------ ---------- ------ ---- Ohio Ashland . . . . . . . . . 5-17-95 2 203 Ashtabula . . . . . . . . 5-17-95 81 3589 Belmont . . . . . . . . . 5-17-95 636 448 Carroll . . . . . . . . . 5-17-95 232 384 Champaign . . . . . . . . 5-17-95 161 192 Clark . . . . . . . . . . 5-17-95 363 43 Columbiana. . . . . . . . 5-17-95 477 99 Crawford. . . . . . . . . 5-17-95 494 417 Cuyahoga. . . . . . . . . 5-17-95 95-03701 15 Delaware. . . . . . . . . 5-17-95 776 531 Erie. . . . . . . . . . . 5-17-95 222 46 Fayette . . . . . . . . . 5-17-95 204 622 Franklin. . . . . . . . . 5-17-95 29088 I12 Geauga. . . . . . . . . . 5-17-95 1015 511 Greene. . . . . . . . . . 5-17-95 908 376 Harrison. . . . . . . . . 5-17-95 18 12 Holmes. . . . . . . . . . 5-17-95 218 650 Huron . . . . . . . . . . 5-17-95 494 759 Jefferson . . . . . . . . 5-17-95 164 156 Knox. . . . . . . . . . . 5-17-95 474 814 Lake. . . . . . . . . . . 5-17-95 1117 5 Lorain. . . . . . . . . . 5-17-95 241 963 Madison . . . . . . . . . 5-17-95 17 1177 Mahoning. . . . . . . . . 5-17-95 2544 211 Marion. . . . . . . . . . 5-17-95 278 352 Medina. . . . . . . . . . 5-17-95 1036 217 Monroe. . . . . . . . . . 5-17-95 13 281 Morrow. . . . . . . . . . 5-17-95 312 634 Noble . . . . . . . . . . 5-17-95 18 362 Ottawa. . . . . . . . . . 5-17-95 454 402 Portage . . . . . . . . . 5-17-95 25 488 Richland. . . . . . . . . 5-17-95 364 538 Sandusky. . . . . . . . . 5-17-95 478 55 Seneca. . . . . . . . . . 5-17-95 511 1 Stark . . . . . . . . . . 5-17-95 --- --- Summit. . . . . . . . . . 5-17-95 1926 510 Trumbull. . . . . . . . . 5-17-95 932 355 Tuscarawas. . . . . . . . 5-17-95 723 402 Union . . . . . . . . . . 5-17-95 10 49 Wayne . . . . . . . . . . 5-17-95 892 433 Wyandot . . . . . . . . . 5-17-95 210 468 West Virginia Hancock . . . . . . . . . 5-17-95 326 604 Marshall. . . . . . . . . 5-17-95 545 663 - 22 - Recorded ------------------ County Date Filed Volume Page ------ ---------- ------ ---- Marshall. . . . . . . . . 5-17-95 545 663 Pennsylvania Beaver. . . . . . . . . . 5-17-95 1368 333 Lawrence. . . . . . . . . 5-17-95 1207 565 Mercer. . . . . . . . . . 5-17-95 189 827 FINANCING STATEMENTS *Department of State, Commonwealth of Pennsylvania. . . . 5-17-95 File No. FMBLOC95 - ----------------------- *Filed with Prothonotary. - 23 - EX-4 4 67TH SUPP INDENTURE 7/95 _____________________________________________ OHIO EDISON COMPANY with BANKERS TRUST COMPANY, As Trustee _______________ SIXTY-SEVENTH SUPPLEMENTAL INDENTURE Providing among other things for First Mortgage Bonds Guarantee Series A of 1995 due 2020 _______________ Dated as of July 1, 1995 _____________________________________________ SUPPLEMENTAL INDENTURE, dated as of July 1, 1995 between Ohio Edison Company, a corporation organized and existing under the laws of the State of Ohio (hereinafter called the "Company"), party of the first part, and Bankers Trust Company, a corporation organized and existing under the laws of the State of New York, as Trustee under the Indenture hereinafter referred to, party of the second part. Whereas, the Company has heretofore executed and delivered to Bankers Trust Company, as Trustee (hereinafter called the "Trustee"), a certain Indenture of Mortgage and Deed of Trust, dated as of August 1, 1930, to secure an issue of bonds of the Company, issued and to be issued in series, from time to time, in the manner and subject to the conditions set forth in the said Indenture; and the said Indenture has been supplemented by supplemental indentures, dated as of August 1, 1930, March 3, 1931, as of November 1, 1935, as of January 1, 1937, as of September 1, 1937, as of June 13, 1939, as of September 1, 1944, as of April 1, 1945, as of September 1, 1948, as of May 1, 1950, as of January 1, 1954, as of May 1, 1955, as of August 1, 1956, as of March 1, 1958, as of April 1, 1959, as of June 1, 1961, as of September 1, 1969, as of May 1, 1970, as of September 1, 1970, as of June 1, 1971, as of August 1, 1972, as of September 1, 1973, as of August 1, 1974, as of July 1, 1976, as of December 1, 1976, as of June 15, 1977, as of May 15, 1978, as of February 1, 1980, as of April 15, 1980, as of June 15, 1980, as of October 1, 1981, as of October 15, 1981, as of February 15, 1982, as of July 1, 1982, as of March 1, 1983, as of March 1, 1984, as of September 15, 1984, as of September 27, 1984, as of November 8, 1984, as of December 1, 1984, as of December 5, 1984, as of January 1, 1985, as of January 30, 1985, as of February 25, 1985, as of July 1, 1985, as of October 1, 1985, as of January 15, 1986, as of May 20, 1986, as of June 3, 1986, as of October 1, 1986, as of July 15, 1989, as of August 25, 1989, as of February 15, 1991, as of May 1, 1991, as of May 15, 1991, as of September 15, 1991, as of April 1, 1992, as of June 15, 1992, as of September 15, 1992, as of April 1, 1993, as of June 15, 1993, as of September 15, 1993, as of November 15, 1993, as of April 1, 1995, and as of May 1, 1995, respectively, which Indenture as so supplemented and to be hereby supplemented is hereinafter referred to as the "Indenture"; and Whereas, the Indenture provides for the issuance of bonds thereunder in one or more series, the form of each series of bonds and of the coupons to be attached to the coupon bonds, if any, to be substantially in the forms set forth therein with such insertions, omissions and variations as the Board of Directors of the Company may determine; and Whereas, the Company, by appropriate corporate action in conformity with the terms of the Indenture, has duly determined to create a new series of bonds under the Indenture, consisting of $60,000,000 in principal amount to be designated as "First Mortgage Bonds Guarantee Series A of 1995 due 2020" (hereinafter sometimes referred to as the "bonds of Guarantee Series"), the bonds of which series are to bear interest at the rate of 7.05% per annum, are to mature October 1, 2020, and are to be substantially in the following form: [form of bond of Guarantee Series] This Bond is not transferable except to a successor trustee under the Trust Indenture, dated as of October 1, 1994, between the BEAVER COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY and SOCIETY NATIONAL BANK, as Trustee, or in connection with the exercise of the rights and remedies of the holder hereof consequent upon a "default" as defined in the Mortgage referred to herein. OHIO EDISON COMPANY First Mortgage Bond Guarantee Series A of 1995 Due 2020 Due October 1, 2020 $ No. Ohio Edison Company, a corporation of the State of Ohio (hereinafter called the Company), for value received, hereby promises to pay to or registered assigns, dollars at an office or agency of the Company in the Borough of Manhattan, The City of New York, N.Y. or in the City of Akron, Ohio, on October 1, 2020 in any coin or currency of the United States of America which at the time of payment is legal tender for public and private debts, and to pay at said offices or agencies to the registered owner hereof, in like coin or currency, interest thereon from the Initial Interest Accrual Date (hereinbelow defined) at the rate of seven and five one-hundredths per centum per annum. Payments of principal of and interest on this bond shall be made at an office or agency of the Company in the Borough of Manhattan, The City of New York, N. Y. or in the City of Akron, Ohio. The provisions of this bond are continued on the reverse hereof and such continued provisions shall for all purposes have the same effect as though fully set forth at this place. This bond shall not become obligatory until Bankers Trust Company, the Trustee under the Mortgage referred to on the reverse hereof, or its successor thereunder, shall have authenticated the form of certificate endorsed hereon. - 2 - In witness whereof, Ohio Edison Company has caused this bond to be signed in its name by its President or a Vice President, by his signature or a facsimile thereof, and its corporate seal to be printed hereon, attested by its Secretary or an Assistant Secretary, by his signature or a facsimile thereof. Dated, , 199_ Ohio Edison Company, By____________________ Title: President Attest: _________________________ Title: Secretary [form of trustee's authentication certificate] Trustee's Authentication Certificate This bond is one of the bonds of the series designated therein, described in the within-mentioned Mortgage. Bankers Trust Company, as Trustee, By_________________________ Authorized Officer - 3 - [form of bond of Guarantee Series] [Reverse] OHIO EDISON COMPANY First Mortgage Bond Guarantee Series A of 1995 Due 2020 This bond is one of an issue of bonds of the Company, issuable in series, and is one of a series known as its First Mortgage Bonds of the series designated in its title, all issued and to be issued under and equally secured (except as to any sinking fund established in accordance with the provisions of the Mortgage hereinafter mentioned for the bonds of any particular series) by an Indenture of Mortgage and Deed of Trust, dated as of August 1, 1930, executed by the Company to Bankers Trust Company, as Trustee, as amended and supplemented by indentures supplemental thereto, to which Indenture as so amended and supplemented (herein referred to as the "Mortgage") reference is made for a description of the property mortgaged and pledged, the nature and extent of the security, the rights of the holders of the bonds in respect thereof and the terms and conditions upon which the bonds are secured. The bonds of this series shall be redeemed in whole, by payment of the principal amount thereof plus accrued interest thereon, if any, to the date fixed for redemption, upon receipt by the Trustee of a written advice from the trustee under the Trust Indenture (the "Revenue Bond Indenture") dated as of October 1, 1994, between Beaver County Industrial Development Authority and Society National Bank, as trustee (such trustee and any successor trustee being hereinafter referred to as the "Revenue Bond Trustee"), securing $60,000,000 of Beaver County Industrial Development Authority Pollution Control Revenue Refunding Bonds, 7.05% 1995 Series A (Ohio Edison Company Beaver Valley Project), stating that the principal amount of all the revenue bonds (the "Revenue Bonds") then outstanding under the Revenue Bond Indenture has been declared due and payable pursuant to the provisions of Section 8.02 of the Revenue Bond Indenture, specifying the date of the accelerated maturity of such Revenue Bonds and the date from which interest on the Revenue Bonds issued under the Revenue Bond Indenture has then accrued, stating such declaration of maturity has not been annulled and demanding payment of the principal amount hereof plus accrued interest hereon to the date fixed for such redemption. As provided in the supplemental indenture establishing the terms and provisions of the bonds of this series, the date fixed for such redemption shall be not earlier than the date specified in the aforesaid written advice as the date of the accelerated maturity of the Revenue Bonds then outstanding under the Revenue Bond Indenture and not later than the 45th day after receipt by the Trustee of - 4 - such advice, unless such 45th day is earlier than such date of accelerated maturity. The date fixed for such redemption shall be specified in a notice of redemption to be given not less than 30 days prior to the date so fixed for such redemption. Upon mailing of such notice of redemption, the date from which unpaid interest on the Revenue Bonds has then accrued (as specified by the Revenue Bond Trustee) shall become the initial interest accrual date (the "Initial Interest Accrual Date") with respect to the bonds of this series, and the date which is six months after the Initial Interest Accrual Date shall be the first interest payment date for the bonds of this series, provided, however, on any demand for payment of the principal amount hereof at maturity as a result of the principal of the Revenue Bonds becoming due and payable on the maturity date of the bonds of this series, the date from which unpaid interest on the Revenue Bonds has then accrued shall become the Initial Interest Accrual Date with respect to the bonds of this series, such date to be as stated in a written notice from the Revenue Bond Trustee to the Trustee. As provided in said supplemental indenture, the aforementioned notice of redemption shall become null and void for all purposes under said supplemental indenture and the Mortgage (including the fixing of the Initial Interest Accrual Date with respect to the bonds of this series) upon receipt by the Trustee of written notice from the Revenue Bond Trustee of the annulment of the acceleration of the maturity of the Revenue Bonds then outstanding under the Revenue Bond Indenture and of the rescission of the aforesaid written advice prior to the redemption date specified in such notice of redemption, and thereupon no redemption of the bonds of this series and no payment in respect thereof as specified in such notice of redemption shall be effected or required. But no such rescission shall extend to any subsequent written advice from the Revenue Bond Trustee or impair any right consequent on such subsequent written advice. Bonds of this series are not otherwise redeemable prior to their maturity. Notwithstanding the foregoing, the Company reserves the right, without any consent or other action by holders of the bonds of this series, to have the bonds of this series exchanged (the "Exchange") at any time in whole, but not in part, for other mortgage bonds (the "New Mortgage Bonds") of the Company (i) to be issued under a separate indenture of mortgage and deed of trust (the "New Mortgage") in an aggregate principal amount equal to the aggregate principal amount of bonds of this series then outstanding, (ii) containing provisions with respect to maturity, principal, interest, and premium, if any, and redemption corresponding to the bonds of this series, and (iii) otherwise satisfying the provisions of the Pledge Agreement dated as of October 1, 1994, as amended as of July 1, 1995, between the Company and Society National Bank. The date fixed by the Company - 5 - for any Exchange (the "Exchange Date") shall be specified in a notice of exchange to be given to the registered owner hereof not less than 30 days prior to the date so fixed for Exchange, which notice may be revoked by the Company at any time prior to the Exchange Date. Any such revocation shall not prevent the Company from exercising its right to effect the Exchange after appropriate notice at a later date. If the Company has not revoked its election to have the bonds of this series exchanged prior to the Exchange Date, on the Exchange Date the New Mortgage Bonds shall be delivered by the Company to the holders of the bonds of this series in exchange for the bonds of this series held by such holders and the bonds of this series shall cease to be outstanding and shall cease to accrue interest and shall represent only the right to receive a like principal amount of the New Mortgage Bonds. As more fully described in the supplemental indenture establishing the terms and provisions of the bonds of this series, the Company reserves the right, without any consent or other action by holders of the bonds of this series, to amend the Mortgage to provide (a) that the Mortgage, the rights and obligations of the Company and the rights of the bondholders may be modified with the consent of the holders of not less than 60% in principal amount of the bonds adversely affected; provided, however, that no modification shall (1) extend the time, or reduce the amount, of any payment on any bond, without the consent of the holder of each bond so affected, (2) permit the creation of any lien, not otherwise permitted, prior to or on a parity with the lien of the Mortgage, without the consent of the holders of all bonds then outstanding, or (3) reduce the above percentage of the principal amount of bonds the holders of which are required to approve any such modification without the consent of the holders of all bonds then outstanding and (b) that (i) additional bonds may be issued against 70% of the value of the property which forms the basis for such issuance and (ii) the charge against property subject to a prior lien which is used to effectuate the release of property under the Mortgage be similarly based. The principal hereof may be declared or may become due on the conditions, in the manner and at the time set forth in the Mortgage, upon the occurrence of a completed default as in the Mortgage provided. No recourse shall be had for the payment of the principal of or interest on this bond against any incorporator or any past, present or future subscriber to the capital stock, stockholder, officer or director of the Company or any predecessor or successor corporation, either directly or through the Company or any predecessor or successor corporation, under any rule of law, statute or constitution or by the enforcement of - 6 - any assessment or otherwise, all such liability of incorporators, subscribers, stockholders, officers and directors being released by the registered owner hereof by the acceptance of this bond and being likewise waived and released by the terms of the Mortgage. The bonds of this series are issuable only as registered bonds without coupons in denominations of $5,000 and authorized multiples thereof. Subject only to the restrictions contained in the Pledge Agreement dated as of October 1, 1994, as amended as of July 1, 1995, between the Company and the Revenue Bond Trustee relating to bonds of this series, this bond is transferable as prescribed in the Mortgage by the registered owner hereof, in person or by attorney duly authorized, at an office or agency of the Company, in the Borough of Manhattan, The City of New York, N.Y. or in the City of Akron, Ohio, upon surrender and cancellation of this bond and thereupon a new registered bond or bonds of the same series for a like principal amount, in authorized denominations, will be issued to the transferee in exchange therefor, as provided in the Mortgage, and upon payment, if the Company shall require it, of the transfer charges therein prescribed. The Company and the Trustee may deem and treat the person in whose name this bond is registered as the absolute owner for the purpose of receiving payment of or on account of the principal and interest due hereon and for all other purposes. Registered bonds of this series shall be exchangeable at said offices or agencies of the Company for registered bonds of other authorized denominations having the same aggregate principal amount, in the manner and upon the conditions prescribed in the Mortgage. Notwithstanding any provision of the Mortgage, (a) neither the Company nor the Trustee shall be required to make transfers or exchanges of bonds of this series during the period between any interest payment date for such series and the record date next preceding such interest payment date, and (b) no charge shall be made upon any transfer or exchange of bonds of this series other than for any tax or taxes or other governmental charge required to be paid by the Company. [end of form of bond of Guarantee Series] and Whereas, Section 115 of the Indenture provides that the Company and the Trustee may, from time to time and at any time, enter into such indentures supplemental thereto as shall be deemed necessary or desirable for one or more purposes, including, among others, to describe and set forth the particular terms and the form of additional series of bonds to be issued under the Indenture, to add other limitations on the issue of bonds, withdrawal of cash or release of property, to add to the covenants and agreements of the Company for the protection of the holders of the bonds and of the mortgaged and pledged property, to supplement defective or inconsistent provisions contained in - 7 - the Indenture, and for any other purpose not inconsistent with the terms of the Indenture; and Whereas, all things necessary to make the bonds of Guarantee Series when authenticated by the Trustee and issued as in the Indenture provided, the valid, binding and legal obligations of the Company, entitled in all respects to the security of the Indenture, have been done and performed, and the creation, execution and delivery of this Supplemental Indenture have in all respects been duly authorized; and Whereas, the Company and Trustee deem it advisable to enter into this Supplemental Indenture for the purposes of describing the bonds of Guarantee Series and of establishing the terms and provisions thereof, confirming the mortgaging under the Indenture of additional property for the equal and proportionate benefit and security of the holders of all bonds at any time issued thereunder, amplifying the description of the property mortgaged, adding other limitations to the Indenture on the issue of bonds, withdrawal of cash or release of property, and adding to the covenants and agreements of the Company for the protection of the holders of bonds and of mortgaged and pledged property; Now, therefore, this supplemental indenture witnesseth: That Ohio Edison Company, in consideration of the premises and of one dollar to it duly paid by the Trustee at or before the ensealing and delivery of these presents, the receipt whereof is hereby acknowledged, and of the purchase and acceptance of the bonds issued or to be issued hereunder by the holders thereof, and in order to secure the payment both of the principal and interest of all bonds at any time issued and outstanding under the Indenture, according to their tenor and effect, and the performance of all the provisions of the Indenture and of said bonds, hath granted, bargained, sold, released, conveyed, assigned, transferred, pledged, set over and confirmed and by these presents doth grant, bargain, sell, release, convey, assign, transfer, pledge, set over and confirm unto Bankers Trust Company, as Trustee, and to its successor or successors in said trust, and to its and their assigns forever, all the properties of the Company described in Schedule A (which is identified by the signature of an officer of each party hereto at the end thereof) hereto annexed and hereby made a part hereof; Together with all and singular the tenements, hereditaments and appurtenances belonging or in any wise appertaining to the aforesaid property or any part thereof, with the reversion and reversions, remainder and remainders and (subject to the provisions of Article XI of the Indenture) the tolls, rents, revenues, issues, earnings, income, product and profits thereof, and all the estate, right, title and interest and claim whatsoever, at law as well as in equity, which the Company now has or may hereafter acquire in and to the aforesaid property and franchises and every part and parcel thereof. - 8 - The Company does hereby agree and does hereby confirm and reaffirm the agreement made by it in the Indenture, dated as of August 1, 1930, that all the property, rights and franchises acquired by the Company after the date of the Indenture, dated as of August 1, 1930 (except any hereinafter expressly excepted), shall be as fully embraced within the lien of the Indenture as if such property had been owned by the Company on the date of the Indenture, dated as of August 1, 1930, and was specifically described therein and conveyed thereby and does hereby confirm that the Company will not cause or consent to a partition, whether voluntary or through legal proceedings, of property, whether herein described or heretofore or hereafter acquired, in which its ownership shall be as a tenant in common except as permitted by and in conformity with the provisions of the Indenture and particularly of Article XI thereof. Provided that the following are not and are not intended to be now or hereafter granted, bargained, sold, released, conveyed, assigned, transferred, mortgaged, pledged, set over or confirmed hereunder and are hereby expressly excepted from the lien and operation of the Indenture, viz.: cash, shares of stock and obligations (including bonds, notes and other securities) not heretofore or hereafter specifically pledged, paid or deposited or delivered under the Indenture or covenanted so to be. To have and to hold all such properties, real, personal and mixed, mortgaged, pledged or conveyed by the Company as aforesaid, or intended so to be, unto the Trustee and its successors and assigns forever. In trust, nevertheless, upon the terms and trusts of the Indenture for those who shall hold the bonds and coupons issued and to be issued thereunder, or any of them, without preference, priority or distinction as to lien of any of said bonds and coupons over any others thereof by reason of priority in the time of the issue or negotiations thereof, or otherwise howsoever, subject, however, to the provisions in reference to extended, transferred or pledged coupons and claims for interest set forth in the Indenture (and subject to any sinking funds that may be hereafter created for the benefit of any particular series). Provided, however, and these presents are upon the condition that if the Company, its successors or assigns, shall pay or cause to be paid, the principal of and interest on said bonds, at the times and in the manner stipulated therein and herein, and shall keep, perform and observe all and singular the covenants and promises in said bonds and in the Indenture expressed to be kept, performed and observed by or on the part of the Company, then this Supplemental Indenture and the estate and rights hereby granted shall cease, determine and be void, otherwise to be and remain in full force and effect. - 9 - It is hereby covenanted, declared and agreed, by the Company, that all such bonds and coupons are to be issued, authenticated and delivered, and that all property subject or to become subject hereto is to be held, subject to the further covenants, conditions, uses and trusts in the Indenture set forth, and the parties hereto mutually agree as follows: Section 1. Bonds of Guarantee Series shall mature on October 1, 2020, and shall be designated as the Company's "First Mortgage Bonds Guarantee Series A of 1995 due 2020." The bonds of Guarantee Series shall bear interest from the Initial Interest Accrual Date (as defined in the form of the bond hereinabove set forth) at the rate of seven and five one-hundredths per centum per annum. Principal or redemption price of and interest on the bonds of Guarantee Series shall be payable in any coin or currency of the United States of America which at the time of payment is legal tender for public and private debts, at an office or agency of the Company in the Borough of Manhattan, The City of New York, N.Y. or in the City of Akron, Ohio. Definitive bonds of Guarantee Series may be issued, originally or otherwise, only as registered bonds, substantially in the form of bond hereinbefore recited, and in the denominations of $5,000 and authorized multiples thereof. Delivery of a bond of Guarantee Series to the Trustee for authentication shall be conclusive evidence that its serial number has been duly approved by the Company. The bonds of Guarantee Series shall be redeemable pursuant to the requirements of this Sixty-Seventh Supplemental Indenture in whole, prior to maturity, upon notice given by mailing the same, postage pre-paid, at least thirty days and not more than forty-five days prior to the date fixed for redemption to each registered holder of a bond to be redeemed at the last address of such holder appearing on the registry books. The Trustee shall within five business days of receiving the written advice specified in the form of bond of Guarantee Series provided for herein mail a copy thereof to the Company stamped or otherwise marked to indicate the date of receipt by the Trustee. The Company shall fix a redemption date for the redemption so demanded and shall mail to the Trustee notice of such date at least 35 days prior thereto. Subject to the foregoing sentence, the redemption date so fixed may be any day not earlier than the date specified in the aforesaid written advice as the date of the accelerated maturity of the Revenue Bonds then outstanding under the Revenue Bond Indenture and not later than the 45th day after receipt by the Trustee of such advice, unless such 45th day is earlier than such date of accelerated maturity. If the Trustee does not receive such notice from the Company within 13 days after receipt by the Trustee of the aforesaid written advice, the redemption date shall be deemed fixed as the 45th day after such receipt. The Trustee shall mail notice of the redemption date to - 10 - the Revenue Bond Trustee not less than 30 days prior to such redemption date, provided, however, that the Trustee shall mail no such notice (and no redemption shall be made) if prior to the mailing of such notice the Trustee shall have received written notice from the Revenue Bond Trustee of the annulment of the acceleration of the maturity of the Revenue Bonds then outstanding under the Revenue Bond Indenture and of the rescission of the aforesaid written advice. The terms "Revenue Bond Trustee" and "Revenue Bond Indenture" and "Revenue Bonds" shall have the meanings specified in the form of bond of Guarantee Series provided for herein. Redemption of the bonds of Guarantee Series shall be at the principal amount thereof, plus accrued interest thereon to the date fixed for redemption and such amount shall become due and payable on the date fixed for such redemption. Anything in this paragraph contained to the contrary notwithstanding, if, after mailing notice of the date fixed for redemption but prior to such date, the Trustee shall have been advised in writing by the Revenue Bond Trustee that the acceleration of the maturity of the Revenue Bonds then outstanding under the Revenue Bond Indenture has been annulled and that the aforesaid written advice has been rescinded, the aforesaid written advice shall thereupon, without further act of the Trustee or the Company, be rescinded and become null and void for all purposes hereunder (including the fixing of the Initial Interest Accrual Date as provided in the form of bond of Guarantee Series provided for herein) and no redemption of the bonds of Guarantee Series and no payments in respect thereof as specified in the aforesaid written notice shall be effected or required. But no such rescission shall extend to any subsequent written advice from the Revenue Bond Trustee or impair any right consequent on such subsequent written advice. Section 2. Bonds of Guarantee Series shall be deemed to be paid and no longer outstanding under the Indenture to the extent that Revenue Bonds which are outstanding from time to time under the Revenue Bond Indenture are paid or deemed to be paid and are no longer outstanding and the Trustee has been notified to such effect by the Company. Section 3. Subject to the terms of the Pledge Agreement dated as of October 1, 1994, as amended as of July 1, 1995, between the Company and the Revenue Bond Trustee relating to the bonds of Guarantee Series, bonds of Guarantee Series may be transferred by the registered owners thereof, in person or by attorney duly authorized, at an office or agency of the Company in the Borough of Manhattan, The City of New York, N.Y. or in the City of Akron, Ohio but only in the manner and upon the conditions prescribed in the Indenture and in the form of bond hereinbefore recited. Bonds of Guarantee Series shall be exchangeable for other registered bonds of the same series, in - 11 - the manner and upon the conditions prescribed in the Indenture, and in the form of bond hereinbefore recited, upon the surrender of such bonds at said offices or agencies of the Company. However, notwithstanding the provisions of Section 14 or 15 of the Indenture, no charge shall be made upon any transfer or exchange of bonds of said series other than for any tax or taxes or other governmental charge required to be paid by the Company. Section 4. The Company reserves the right, without any consent or other action by holders of the bonds of Guarantee Series, or any subsequent series of bonds, to amend the Indenture by inserting the following language as Section 115A immediately following current Section 115 of the Indenture: With the consent of the holders of not less than sixty per centum (60%) in principal amount of the bonds at the time outstanding or their attorneys-in-fact duly authorized, or, if the rights of the holders of one or more, but not all, series then outstanding are affected, the consent of the holders of not less than sixty per centum (60%) in aggregate principal amount of the bonds at the time outstanding of all affected series, taken together, and not any other series, the Company, when authorized by a resolution, and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture or modifying the rights and obligations of the Company and the rights of the holders of any of the bonds and coupons; provided, however, that no such supplemental indenture shall (1) extend the maturity of any of the bonds or reduce the rate or extend the time of payment of interest thereon, or reduce the amount of the principal thereof, or reduce any premium, payable on the redemption thereof or change the coin or currency in which any bond or interest thereon is payable, without the consent of the holder of each bond so affected, or (2) permit the creation of any lien, not otherwise permitted, prior to or on a parity with the lien of this Indenture, without the consent of the holders of all of the bonds then outstanding, or (3) reduce the aforesaid percentage of the principal amount of bonds the holders of which are required to approve any such supplemental indenture, without the consent of the holders of all the bonds then outstanding. For the purposes of this Section, bonds shall be deemed to be affected by a supplemental indenture if such supplemental indenture adversely affects or diminishes the right of holders thereof against the Company or against its property. - 12 - Upon the written request of the Company, accompanied by a resolution authorizing the execution of any such supplemental indenture, and upon the filing with the Trustee of evidence of the consent of bondholders as aforesaid (the instrument or instruments evidencing such consent to be dated within one year of such request), the Trustee shall join with the Company in the execution of such supplemental indenture unless such supplemental indenture affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion but shall not be obligated to enter into such supplemental indenture. The Trustee shall be entitled to receive and, subject to Section 102 of the Indenture and Article Five of the Seventh Supplemental Indenture, may rely upon an opinion of counsel as conclusive evidence that any such supplemental indenture is authorized or permitted by the provisions of this Section. It shall not be necessary for the consent of the bondholders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof. The Company and the Trustee, if they so elect, and either before or after such 60% or greater consent has been obtained, may require the holder of any bond consenting to the execution of any such supplemental indenture to submit his bond to the Trustee or to such bank, banker or trust company as may be designated by the Trustee for the purpose, for the notation thereon of the fact that the holder of such bond has consented to the execution of such supplemental indenture, and in such case such notation, in form satisfactory to the Trustee, shall be made upon all bonds so submitted, and such bonds bearing such notation shall forthwith be returned to the persons entitled thereto. All subsequent holders of bonds bearing such notation shall be deemed to have consented to the execution of such supplemental indenture, and consent, once given or deemed to be given, may not be withdrawn. Prior to the execution by the Company and the Trustee of any supplemental indenture pursuant to the provisions of this Section, the Company shall publish a notice, setting forth in general terms the substance of such supplemental indenture, at least once in one daily newspaper of general circulation in each city in which the principal of any of the bonds shall be payable, or, if all bonds outstanding shall be registered bonds without coupons or coupon bonds registered as to principal, such notice shall be sufficiently given if mailed, first class, postage prepaid, and registered if the Company so elects, to each - 13 - registered holder of bonds at the last address of such holder appearing on the registry books, such publication or mailing, as the case may be, to be made not less than thirty days prior to such execution. Any failure of the Company to give such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. Section 5. The Company reserves the right, without any consent or other action by the holders of the bonds of Guarantee Series, or any subsequent series of bonds, to amend the Indenture by deleting the phrase "sixty per centum (60%)" in Section 28 of the Indenture and substituting therefor the phrase "seventy per centum (70%)" and by deleting the phrase "One hundred sixty-six and two-thirds per cent. (166 2/3%)" in Sections 65 and 67 of the Indenture and substituting therefor the phrase "One hundred and forty-two and eighty-six hundredths per cent. (142.86%)". Section 6. Except as herein otherwise expressly provided, no duties, responsibilities or liabilities are assumed, or shall be construed to be assumed, by the Trustee by reason of this Supplemental Indenture; the Trustee shall not be responsible for the recitals herein or in the bonds (except the Trustee's authentication certificate), all of which are made by the Company solely; and this Supplemental Indenture is executed and accepted by the Trustee, subject to all the terms and conditions set forth in the Indenture, as fully to all intents and purposes as if the terms and conditions of the Indenture were herein set forth at length. Section 7. As supplemented by this Supplemental Indenture, the Indenture is in all respects ratified and confirmed, and the Indenture as herein defined, and this Supplemental Indenture, shall be read, taken and construed as one and the same instrument. Section 8. Nothing in this Supplemental Indenture contained shall or shall be construed to confer upon any person other than a holder of bonds issued under the Indenture, the Company and the Trustee any right or interest to avail himself of any benefit under any provision of the Indenture or of this Supplemental Indenture. Section 9. This Supplemental Indenture may be simultaneously executed in several counterparts and all such counterparts executed and delivered, each as an original, shall constitute but one and the same instrument. In witness whereof, Ohio Edison Company, party of the first part hereto, and Bankers Trust Company, party of the second part hereto, have caused these presents to be executed in their respective names by their respective Presidents or one of their - 14 - Vice Presidents or Assistant Vice Presidents and their respective seals to be hereunto affixed and attested by their respective Secretaries or one of their Assistant Secretaries or Assistant Treasurers, all as of the day and year first above written. Ohio Edison Company [Seal] By: /s/ John A. Gill ----------------------- John A. Gill Title: Vice President Attest: /s/ Theodore F. Struck, II ------------------------------- Theodore F. Struck, II Title: Assistant Treasurer and Assistant Secretary Signed, Sealed and Acknowledged on behalf of Ohio Edison Company in the presence of: /s/ Cynthia A. Kippes ------------------------- Cynthia A. Kippes /s/ Janice K. Burgy ------------------------- Janice K. Burgy Bankers Trust Company [Seal] By: /s/ Robert Caporale ---------------------- Robert Caporale Title: Vice President Attest: /s/ Scott Thiel --------------------------- Scott Thiel Title: Assistant Treasurer Signed, Sealed and Acknowledged on behalf of Bankers Trust Company in the presence of: /s/ Kerri O'Brien ---------------------- Kerri O'Brien /s/ Shafig Jadavji ------------------ Shafiq Jadavji - 15 - State of Ohio ) : ss.: County of Summit ) On the 3 rd day of July, 1995, personally appeared before me, a Notary Public in and for the said County and State aforesaid, J.A. Gill and T.F. Struck, II, to me known and known to me to be a Vice President and an Assistant Treasurer and Assistant Secretary, respectively, of Ohio Edison Company, the corporation which executed the foregoing instrument, and who severally acknowledged that they did sign and seal such instrument as such Vice President and Assistant Treasurer and Assistant Secretary, respectively, of Ohio Edison Company, the same is their free act and deed and the free and corporate act and deed of said corporation. In witness whereof, I have hereunto set my hand and seal the 3 rd day of July, 1995. /s/ Debra L. Cordea ------------------------------ Debra L. Cordea, Notary Public Residence - Summit County State Wide Jurisdiction, Ohio My Commission Expires Nov. 20, 1999 [Seal] State of Ohio ) : ss.: County of Summit ) On the 3 rd day of July, 1995, before me personally came J.A. Gill, to me known, who, being by me duly sworn, did depose and say that he resides at 123 Meadow Lane, Peninsula, Ohio 44264; that he is a Vice President of Ohio Edison Company, one of the corporations described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation, and that he signed his name thereto by like order. /s/ Debra L. Cordea ---------------------------- Debra L. Cordea, Notary Public Residence - Summit County State Wide Jurisdiction, Ohio My Commission Expires Nov. 20, 1999 [Seal] - 16 - State of New York ) : ss.: County of New York ) On the 6 th day of July, 1995, personally appeared before me, a Notary Public in and for the said County and State aforesaid, Robert Caporale and Scott Thiel, to me known and known to me to be a Vice President and Assistant Treasurer, respectively, of Bankers Trust Company, the corporation which executed the foregoing instrument, and who severally acknowledged that they did sign and seal such instrument as such Vice President and Assistant Treasurer for and on behalf of said corporation and that the same is their free act and deed and the free and corporate act and deed of said corporation. In witness whereof, I have hereunto set my hand and seal the 6 th day of July, 1995. /s/ Sharon V. Alston -------------------------- SHARON V. ALSTON Notary Public, State of New York No. 31-4966275 Qualified in New York County My Commission Expires May 7, 1996 [Seal] State of New York ) : ss.: County of New York ) On the 6 th day of July, 1995, before me personally came Robert Caporale, to me known, who, being by me duly sworn, did depose and say that he resides at 25 Lake Street, White Plains, New York 10603, that he is a Vice President of Bankers Trust Company, one of the parties described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation, and that he signed his name thereto by like authority. /s/ Sharon V. Alston -------------------------- SHARON V. ALSTON Notary Public, State of New York No. 31-4966275 Qualified in New York County My Commission Expires May 7, 1996 [Seal] - 17 - Bankers Trust Company hereby certifies that its precise name and address as Trustee hereunder are: Bankers Trust Company Four Albany Street Borough of Manhattan City, County and State of New York 10015 Bankers Trust Company By: /s/ Robert Caporale -------------------------------- Robert Caporale Title: Vice President - 18 - SCHEDULE A Detailed Description of Additional Properties A. ELECTRIC TRANSMISSION LINES The following electric transmission lines of the Company, including the towers, poles, pole lines, wire, switch racks, insulators and other appurtenances, and equipment owned by the Company, and all other property of the Company, with all the Company's rights of way, easements, permits, privileges and consents, licenses and rights over or relating to the construction, maintenance or operation thereof, through, over, under or upon any public streets or highways or other lands, public or private: Stark Division 1. Carmont Tap: Single circuit wood pole construction extending from Structure #4 on the existing Tiger line westerly, northwesterly, and westerly to Carmont Substation, a distance of 0.33 mile, all being located in the City of Massillon, Stark County, Ohio. /s/ T. F. Struck, II, --------------------------------- T.F. Struck, II, Assistant Treasurer and Assistant Secretary Ohio Edison Company /s/ Robert Caporale, --------------------------------- Robert Caporale, Vice President Bankers Trust Company - 19 - EX-10 5 10-44 EX SUPP LIFE INS OHIO EDISON SYSTEM EXECUTIVE SUPPLEMENTAL LIFE INSURANCE PLAN I. Purpose ------- The Executive Supplemental Life Insurance Plan ("the Plan") was established on January 1, 1988 as part of an integrated executive compensation program that is intended to attract, retain, and motivate certain key Executives who are in positions to make significant contributions to the operation and profitability of Ohio Edison Company and its subsidiary Pennsylvania Power Company (collectively, the "Company") for the benefit of stockholders and customers. The Plan is a means by which the Company assists the Executive in purchasing life insurance on the Executive's life that builds cash value at a low cost. II. Eligibility and Participation. ----------------------------- (A) Eligibility. The Compensation Committee of the ----------- Board of Directors of Ohio Edison Company may designate any Executive as eligible for this Plan and may change this eligibility provision as required to carry out the purpose of the Plan. (B) Participation. Upon an eligible Executive agreeing ------------- to participate in the Plan, the Company and the Executive will apply for and become joint owners and beneficiaries of a Universal Life insurance policy or policies (the "Policy") issued by an Insurance Company ("Insurer") as chosen by the Company on the Executive's life. The face amount of the Policy may be revised annually based upon changes in the Executive Policy Interest as determined in accordance with Article V and other factors which shall be determined by the Company. Upon issuance of the Policy by Insurer, Executive shall become a participant in the Plan. -2- III. Payment of Premiums on the Policy. --------------------------------- The Executive will pay that portion of the annual premium due on the Policy that is equal to the lower of the Insurer's lowest annual term rate or the PS-58 cost. The Company will pay the remainder of the premium in excess of yearly annual term cost paid by Executive. Any premium or portion thereof which is payable by Executive will be deducted from the cash compensation otherwise payable to Executive and Company will transmit that premium or portion, along with any premium or portion thereof payable by it, to Insurer on or before the premium due date. IV. Division of Ownership Rights. ---------------------------- (A) Participation in this Plan by Executive is intended to be of a limited and specific duration and shall cease upon completion of the vesting period specified in Paragraph (D) below. During Executive's participation in this Plan, both Company and Executive are owners of a specific and limited ownership interest in the Policy hereinafter referred to, respectively, as the "Company Policy Interest" and the "Executive Policy Interest." (B) (1) While Executive is living, Company's Policy Interest shall be in an amount equal to the total of premiums theretofore paid for the Policy by Company pursuant to Article III, reduced by the outstanding balance of any loans made to Company by Insurer. (2) Upon Executive's death, the Company's Policy Interest shall be determined in accordance with Article VI. (3) Company has the right to obtain a loan from Insurer and/or to withdraw from the cash value of the Policy to the extent of its Company Policy Interest. The right to withdraw from the cash value of the Policy may be exercised only at termination of Executive's participation in this Plan. -3- (C) (1) The Executive Policy Interest shall be equal to: (a) the cash surrender value of the Policy less the Company Policy Interest, while the Executive is living, and (b) The Executive's base salary as of the effective date of participation in this Plan, subject to revision annually in accordance with Article V of this Plan, upon the Executive's death. (2) The Executive may not obtain access to the Executive Policy Interest until after satisfaction of a vesting period (the "Executive Vesting Period"), described in the following paragraph. (D) (1) The Executive Vesting Period shall be satisfied at: (a) the later of the end of five years of Plan participation or participation in the Plan to age 65; (b) termination of employment with Company; or (c) termination of the Plan by the Company or by written notice of the Company to the Executive. A failure of the Company to pay its premiums when due under Article III shall be considered a termination of the Plan. (2) Upon completion of the Executive Vesting Period the Executive shall cease to be a participant in the Plan in accordance with Article VII. (E) (1) Executive will have all rights, options and privileges specified in the Policy other than those specifically reserved to Company pursuant to this Article IV, provided, however, during the term of this Plan Executive cannot borrow upon or withdraw from his interest in the Policy except as provided in Article VII. -4- (2) Nothing contained in this Plan will be construed as enabling Company to compel Executive to exercise any right, privilege or option in the Policy. V. Executive Policy interest Upon Death. ------------------------------------ (A) If Executive is age sixty-five (65) or older at the time of becoming a participant in this Plan, the Executive Policy Interest upon Executive's death, as determined herein above, will remain fixed until termination of participation in accordance with Article IV of this Plan. (B) If Executive is less than age sixty-five (65) at the time of entering into this Plan, the Executive Policy Interest upon Executive's death, as determined herein above, may be increased annually, effective each January 1, at Company's option, until Executive attains age sixty-five (65), or terminates employment with Company, whichever is earlier. The revised Executive Policy Interest may not exceed Executive's base salary as of September 1 of the year prior to the increase except that in no event may the Executive Policy Interest be decreased. VI. Rights to Repayment at Death. ---------------------------- (A) While Executive is participating in this Plan, Executive and Company as co-owners of the Policy shall have the right to name Executive's designated beneficiary and Company as the beneficiaries of the Policy. (B) In the event of Executive's death during participation in this Plan, the beneficiary designated by Executive to Insurer will be entitled to the Executive's Policy Interest. Company will be entitled to receive the remainder of the Policy proceeds. (C) within sixty (60) days after the death of Executive, Company will provide to Insurer a written statement indicating the amount of the Executive Policy Interest and the amount of any remaining Policy proceeds which the Company is entitled to receive and, if required by Insurer, a written release of the Executive's Policy Interest. -5- VII. Termination of Participation. ---------------------------- (A) Except in cases where the Company has expressly given its written consent that an Executive may continue to participate in the Plan beyond the termination of Executive's employment with the Company, upon satisfaction of the Executive Vesting Period as specified in Article IV, the Company will instruct the Insurer to pay to the Company an amount up to its Company Policy Interest. Upon such payment, no other amount will be due to Company under this Plan and Company will instruct the Insurer to release and transfer the Company's ownership interest in the Policy to Executive who will thereafter own the Policy free from the terms of this Plan. (B) In the event the Executive terminates participation in the Plan by written notice to the Company, or ceases to contribute Executive's portion of the annual premium, Executive shall forfeit all rights to any ownership interest in the Policy. Company shall then hold all rights to the Policy. VIII. Relationship with Insurer. ------------------------- Insurer is hereby authorized to take any action related to the Policy that it is instructed to take in a writing signed by Executive and by the Committee as designated in Article X. Provided Insurer acts in accordance with the written instructions given and pursuant to this Article VIII hereof, it shall have no further liability to Executive or to Company as a result of having complied with said instructions. IX. Irrevocable Assignment by Executive. ----------------------------------- By delivery to Company of a written notice, Executive may irrevocably assign all (but not less than all) of the rights and obligations of Executive hereunder. From and after such notice is delivered to Company, the Assignee of Executive shall succeed to all rights and obligations of Executive hereunder and such assignee shall automatically become subject to the terms of this Plan. Thereafter, Executive shall no longer be a participant under this Plan or have any rights or obligations hereunder. -6- X. Named Fiduciary. --------------- A Committee of three or more individuals appointed by the Chief Executive Officer of the Ohio Edison Company ("Committee") shall be designated as Fiduciary ("Named Fiduciary") until removal by the Chief Executive Officer. At least one member of the Committee shall be an employee of Pennsylvania Power Company. As Named Fiduciary, the Committee shall administer the Plan and will have the power and the duty to take all action and to make all decisions necessary or proper to carry out the Plan. The determination of the committee as to any question involving the general administration and interpretation of the Plan shall be final, conclusive, and binding. Any discretionary actions to be taken under the Plan by the Committee with respect to the classification of Employees, Executives, contributions or benefits shall be uniform in nature and applicable to all persons similarly situated. Without limiting the generality of the foregoing, the Committee shall have the following powers and duties: (a) To require any person to furnish such information as it may request for the purpose of the proper administration of the Plan as a condition to receiving any benefit under the Plan; (b) To make and enforce such rules and regulations and prescribe the use of such forms as it deems necessary for the efficient administration of the Plan; (c) To interpret the Plan and to resolve ambiguities, inconsistencies and omissions; (d) To decide all questions concerning the Plan and the eligibility of any Employee to participate in the Plan; and (e) To determine the amount of benefits which will be payable to any person in accordance with the provisions of the Plan. Committee may allocate to others certain aspects of the management and operation responsibilities of the Plan, including the employment of advisors and the delegation of any ministerial duties to qualified individuals. -7- XII. Claims Procedure. ---------------- (A) Claims for any benefits due under the Plan or upon surrender of the Policy shall be made in writing by Company, and the Executive or his designated beneficiary or beneficiaries, as the case may be, to the Committee which shall respond in writing as soon as practicable. The Committee shall retain such discretion in acting upon such claims consistent with Article X of this Plan. (B) In the event a claim is denied or disputed, the Committee shall, within a reasonable period of time after receipt of the claim, notify the Company, and the Executive or his designated beneficiary or beneficiaries, as the case may be, of such denial or dispute listing: (1) The reasons for the denial or dispute; with specific reference to the Plan provisions upon which the denial or dispute is based; (2) A description of any additional material or information necessary and an explanation of why it is necessary; and (3) An explanation of the Plan's claim review procedure. (C) Within ninety (90) days of denial or notice of claim under the Plan, a claimant may request that the claim be reviewed by the Committee. The claim or request shall be reviewed by the Committee, which may, but shall not be required to, grant the claimant a hearing. On review, the claimant may have representation, examine pertinent documents and submit issues and comments in writing. (D) The decision of the Committee on review shall normally be made within sixty (60) days. If an extension of time is required for a hearing or other special circumstances, the claimant shall be notified and the time limit shall be one hundred twenty (120) days. The decision shall be in writing and shall state the reasons and the relevant Plan provisions. All decisions on review shall be final and bind all parties concerned. -8- XII. Miscellaneous. ------------- (A) Not a Contract of Employment. The terms and ---------------------------- conditions of the Plan shall not be deemed to constitute a contract of employment between the Company and the Executive, and the Executive (or his beneficiary) shall have no rights against the Company except as may be otherwise provided specifically herein. Moreover, nothing in the Plan shall be deemed to give an Executive the right to be retained in the service of the Company or to interfere with the right of the Company to discipline or discharge him or her at any time. (B) Protective Provisions. An Executive shall cooperate --------------------- with the Company by furnishing any and all information requested by the Company in order to evaluate a claim or to facilitate the payment of benefits hereunder, and by taking such physical examinations as the Company may deem necessary and taking such other action as may be requested by the Company. (C) Captions. The captions of the articles, sections -------- and paragraphs of the Plan are for convenience only and shall not control or affect the meaning or construction of any of its provisions. (D) Governing Law. The provisions of the Plan shall be ------------- construed, administered, and enforced according to and governed by the laws (other than conflict of law provisions) of the state of Ohio, except to the extent such laws are superseded by ERISA. (E) Validity. In case any provision of the Plan shall be -------- illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining parts hereof, but the Plan shall be construed and enforced as if such illegal and invalid provision had never been included herein. (F) Mistaken Information. If any information upon which -------------------- an Executive's benefit under the Plan is misstated or otherwise mistaken, such benefit shall not be invalidated (unless upon the basis of the correct information the Executive would not be entitled to a benefit), but the amount of the benefit shall be adjusted to the proper amount and any overpayments shall be charged against future payments. -9- (G) Taxes and Expenses. Any taxes imposed on Plan ------------------ benefits shall be the sole responsibility of the Executive or his or her beneficiary. The Company shall deduct from Plan benefits any amounts required by applied law to be withheld. All Plan administration expenses incurred by the Company or Committee shall be borne by the Company. XIII. Amendment. --------- This Plan may be altered, amended or modified, including the addition of any extra Policy provisions, except that no such modification or amendment may eliminate or decrease the Executive Policy Interest accrued as of the date of any such amendment or modification. Any alteration, amendment or modification must be by a written instrument signed by Company and adopted pursuant to resolution of the Board of Directors of Company. XIV. Successors ---------- The provisions of this Plan shall bind and inure to. the benefit of the Company and its successors and assigns. The terms successors as used herein shall include any corporate or other business entity which shall, whether my merger, consolidation, purchase or otherwise acquire all or substantially all of the business and assets of the Company, and successors of any such corporation or other business entity. -10- IN WITNESS WHEREOF, and pursuant to resolution of the Board of Directors of the respective undersigned corporations, such corporations have caused this instrument to be executed by its duly authorized officers effective as of November 17, 1989. -- OHIO EDISON COMPANY By /s/ Justin T. Rogers, Jr. -------------------------------- (Signature) Justin T. Rogers, Jr. President ------------------------------- (Title) Witness: /s/ Thomas A. Kayuha ----------------------------- Thomas A. Kayuha Manager, Human Resources & Industrial Relations ----------------------------- (Title) PENNSYLVANIA POWER COMPANY By /s/ Justin T. Rogers, Jr. -------------------------------- (Signature) Justin T. Rogers, Jr. President ------------------------------- (Title) Witness: /s/ Thomas A. Kayuha ----------------------------- Thomas A. Kayuha Manager, Human Resources & Industrial Relations ----------------------------- (Title) EX-10 6 10-45 EX INCENT COMP PLAN Ohio Edison System 1996 Executive Incentive Compensation Plan Purpose: The purpose of the Executive Incentive Compensation - ------- Plan is to attract, retain and motivate key executives who are in positions to make significant contributions to the short-term and long-term operation and profitability of Ohio Edison System ("System") for the benefit of stockholders and customers. Performance goals and objectives are established to meet the System's strategic vision of becoming the best performing energy service company in the region and remain our customers' supplier of choice. The Plan consists of a 1996 Annual Incentive Program and a Long- Term Incentive Program for the period 1996 through 1999. General Eligibility: Executives in positions evaluated at a 1996 - ------------------- standard rate of $77,114 or higher. Executive positions have been grouped into five tiers for the purposes of establishing the appropriate proportion of base pay and incentive compensation in an executive's total pay package, allocating the total incentive opportunity between annual and long-term components, and assigning weights to the System financial goals, strategic/operational goals or functional/individual objectives in the Annual Incentive Program. (Attachment #1, Column A) Standard Rate: Estimated 1996 median electric utility base - ------------- salary levels are used to position the standard rates for executive positions (Attachment #1, Column B). The actual base salary for senior executives will be capped at 100% of the standard rate. Mid-level executives will be capped at 110% of standard rate. The principle is to ensure that any additional compensation is based upon 1996 annual and long-term incentive program results as described below. Pay Mix: The median electric utility pay mix is used to - ------- establish the proportion of an executive's total direct compensation that will be provided by base salary and the proportion that will be provided by incentives. This is used to establish a total target incentive award for each executive's position. As Attachment #1, Column C indicates, the principle is that more pay is put at risk as the level of the executive's position increases. For example, a larger portion of a senior executive's total direct compensation will be based on incentives than a mid-level executive's. - 2 - Allocation of Total Incentive: The total target incentive award - ----------------------------- for each executive position is allocated between 1996 annual and long-term incentive awards. As Attachment #1, Column D indicates, the principle is that the portion of an executive's total incentive award that is tied to long-term results increases with the level of an executive's position. For example, a larger portion of a senior executive's total award will be based on long-term results than a mid-level executive's. Annual Award Allocation: An executive's target 1996 annual award - ----------------------- is allocated into various categories of performance goals; namely, System financial goals, strategic or operational goals and functional or individual objectives. The percentage allocated to System financial goals is based on the nature and level of each executive's position responsibilities, as indicated by each executive's tier assignment. As Attachment #1, Column E indicates, the principle is that the portion of an executive's annual award that is tied directly to System financial results increases with the level of an executive's position. For example, a larger portion of a senior executive's annual award will be based on System financial results than a mid-level executive's. The remaining portion of the award will be based on the achievement of strategic/operational goals or functional/individual objectives on which the executive directly impacts and which will not be dependent on the achievement of the System financial goals. System financial goals and a menu of strategic and operational goals have been established for 1996. The System financial goals apply to all executives. For each executive, appropriate management may select strategic and operational goals from the menu and/or establish measurable functional or individual objectives that directly contribute to the achievement of the financial or strategic goals. Each goal or objective has a threshold, target and maximum level of achievement. The level of achievement of the System financial goals at or above the threshold level will generate a payout from 25% to 150% of the target award. The level of achievement of strategic or operational goals will generate a payout from 50% to 150% of target and the level of achievement of functional or individual objectives from 80% to 120% of target. The principle is that as the further a goal or objective is away from having a direct impact on System financial results, the consequences of achieving or not achieving the goal or objective is less. Consequently, there is a smaller payout spread between threshold and maximum. Results between threshold and target, and target and maximum, will be interpolated. Conversion of Long-Term Award into Phantom Stock Grant: - ------------------------------------------------------ Effective January 1, 1996, each executive's target long-term award was converted into an equivalent number of hypothetical shares of Ohio Edison common stock based on the average of the daily closing prices of the common stock during December 1995 and placed into a Common Stock Equivalent Account for four years. - 3 - During the 1996 through 1999 performance period, dividend equivalents will be converted into additional hypothetical shares based on the closing price on the date the dividends are paid. At the end of the four-year performance period, the executive's account will be valued based on the average of the daily closing prices during December 1999. As the Long-Term Award Table on Attachment #1 indicates, this value may be significantly adjusted upward or downward based upon the total shareholder return of the Ohio Edison common stock relative to the Edison Electric Institute's Index of 100 Investor-Owned Electric Utility Companies during this four-year period. Note that if the total shareholder return ranking is 61 or below, no long-term award will be paid. Award payouts between a ranking of 60 (50% payout) and 15 (150% payout) will be interpolated. The principle of this design is to strengthen the linkage between an executive's total compensation and the long-term creation of shareholder wealth. Attachment #2 and Attachment #3 are illustrations of an Annual Incentive Program and a Long-Term Incentive Program, respectively. Shareholder and Ratepayer Protection Measures: No 1996 annual - --------------------------------------------- incentive awards will be paid unless: Ohio Edison common stock dividends paid during 1996 are equal to or greater than $1.50 per share; total 1996 earnings are greater than dividends paid plus maximum annual awards from all incentive plans; and the rate freeze as contained in the 1995 Rate Reduction and Economic Development Program remains in effect. Special Provisions: The following special provisions pertain to - ------------------ award eligibility and calculations for an executive who is hired or promoted into the executive group during 1996, leaves employment due to retirement, death, disability, resignation or involuntary separation prior to December 31, 1999, or does not meet certain other requirements. 1996 Annual Incentive Program ----------------------------- Eligibility for 1996 Award (Payable March 1997) * Must perform the duties of his or her job for at least 1040 regular hours during the year. Thus, generally, a new hire into the executive group must be employed during the first half of 1996 to be eligible for an annual award. Likewise, a separation of employment due to retirement, death or disability generally must occur during the second half of 1996. If an executive is promoted internally into the executive group or reassigned to another position outside the executive group, all hours worked during the year are counted toward this criterion. - 4 - * Must be actively employed as of December 31, 1996, or have separated employment during 1996 due to retirement, disability or death. Thus an executive who voluntarily resigns or who is involuntarily separated is ineligible to receive a 1996 annual award. * Must receive or would have received a performance rating of at least Generally Meets Standards or New in Position. Thus an executive rated Does Not Meet Standards is ineligible to receive a 1996 annual award. * Must not have voluntarily resigned or been discharged for misconduct after December 31, 1996, but prior to the date that 1996 annual awards are paid in 1997, if any. Prorated Annual Award Calculation If an executive meets the above eligibility criteria and retires, separates employment due to disability or dies during 1996, his/her target annual award will be prorated based upon the number of months he or she worked. During 1996 if an executive changes his or her job within the executive group or is reassigned to another position outside the executive group, the executive's total annual award will be the sum of the prorated award earned at each position. 1996 Long-Term Incentive Program -------------------------------- Eligibility for Long-Term Incentive Award (Payable March 2000) * An executive who is hired or promoted into the executive group during 1996 will not be eligible for the 1996 Long-Term Incentive Program. * An executive must be actively employed as of the date long-term awards are paid in March 2000, or have separated employment due to retirement, disability or death between January 1, 1997 to the award payment date. Thus an executive who voluntarily resigns or who is involuntarily separated during this time frame will be ineligible to receive a long-term award from the 1996 program. Also, an executive who separates employment due to retirement, death or disability during 1996 will be ineligible to receive a long-term award from the 1996 program. Lastly, an executive must work at least one year in an executive group position during the four-year performance cycle to be eligible for a long- term award. - 5 - Prorated Long-Term Award Calculation If an executive meets the above eligibility criteria, his/her original long-term target award will be prorated based on the number of months worked in an executive group position during the 1996 to 1999 performance cycle. Deferral Option: An executive will be permitted to defer up to - --------------- 100% of his/her 1996 award less applicable taxes, if any, into the Executive Deferred Compensation Plan. In March 2000, any long-term award will be paid in cash unless the Long-Term Incentive Program is converted during the interim period to provide payout of actual Ohio Edison common stock. In either case, there will be no further deferral option for a long-term award. Administration: - -------------- Terms: For the purposes of this Plan, the term "System" as used in this summary refers to Ohio Edison System which includes Ohio Edison and Penn Power collectively. The term "Company" refers to Ohio Edison or Penn Power individually, as appropriate. Goal Establishment and Determination: The System establishes all goals and objectives and determines whether or not they have been achieved. Right to Modify or Terminate Plan: Ohio Edison reserves the right to modify provisions of this Plan or end this Plan at any time with or without notice. The Plan may change from year to year or even be discontinued in the future. If it is determined that significant unusual events occurred that impacted the System's reported earnings but do not truly reflect the achieved operating results of the System, then Ohio Edison may, in its sole discretion, increase or decrease the amount of any awards determined by this Plan or even determine that no awards will be paid. No Guarantee of Future Employment: Nothing in this Plan shall be construed as giving any participant the right to be retained in the employ of either Company, nor shall either Company be required, by virtue of the existence of this Plan, to maintain the employment of any participant through any specified date. No Funded Trust: All awards paid under this Plan shall at all times constitute general unsecured liabilities of either Company, payable out of its own general assets. In no event shall either Company be obliged to reserve any funds or assets to secure the payment of such amounts and nothing contained in the Plan shall confer upon any participant the right, title or interest of any assets of either Company. Administration: The Plan is administered by the Human Resources and Industrial Relations Department of Ohio Edison. Beneficiary Designation: Each executive may, at any time, designate one or more persons as the executive's primary or - 6 - contingent beneficiary(ies) to whom awards earned under this Plan shall be paid in the event of the executive's death prior to payment of such awards to the executive. In the absence of an effective beneficiary designation, or if all beneficiaries predecease the executive, the executive's designated beneficiary shall be the person in the first of the following classes in which there is a survivor: the executive's surviving spouse; the executive's estate. JAB\01-96 Attachment #1 Ohio Edison System 1996 Executive Incentive Compensation Plan
A B C D E Total Direct Compensation Allocation Pay Mix of Total Proportion of: Incentive Short-Term Allocation -------------- ------------- ---------------------------------- Total Corp. Strategic/ Functional/ Executive No. of 1996 Standard Incen- Long- Short- Financial Operational Individual Tier Executives Rate Range Base tive Term Term Goal(s) Goals ---- ---------- ------------- ---- ------ ----- ----- -------- ------------------------- I President 518.6 50% 50% 60% 40% 80% 20% and CEO II 4 213.8 - 237.7 65% 35% 60% 40% 60% 40% III 3 160.9 - 202.9 70% 30% 50% 50% 40% 60% IV 16 117.0 - 151.4 75% 25% 30% 70% 25% 75% V 97 77.1 - 113.1 80% 20% 15% 85% 15% 85% Short-Term Incentive Award Leverage 25-150% 50-150% 80-120% Long-Term Award Table --------------------- TSR Ranking % Earned ----------- -------- 1-15 150% 26* 125% 38* 100% * Examples of % earned 49* 75% interpolated between 60 50% 15th and 60th rankings. > 61 0% -
Attachment #2 Tier I Ohio Edison System 1996 Executive Incentive Compensation Plan Illustration of 1996 Annual Incentive Program for John Doe Payable March 1997 Tier: I Pay Mix: 50% Base Pay, 50% Incentives 1996 Standard Rate: $518,576 Target Total Incentive: $518,576 = ($518,576/.50 - $518,576) Target Annual Incentive: 40% x $518,576 = $207,430
=========================================================================== Weight Threshold Target Maximum - --------------------------------------------------------------------------- 80% System Financial Goals 25% 100% 150% - --------------------------------------------------------------------------- 1. Attain an E.P.S. of $2.00 $2.07 $2.30 at least $2.00. 40% $20,743 $82,972 $124,458 - --------------------------------------------------------------------------- 2. Generate shareholder cash flow(1) of at least $470 $470M $500M $600M million. 40% $20,743 $82,972 $124,458 - --------------------------------------------------------------------------- 20% Strategic/Operational Goals 50% 100% 150% - --------------------------------------------------------------------------- 3. A xx.x xx.x xx.x 10% $10,372 $20,743 $31,115 - --------------------------------------------------------------------------- 4. B xx.x xx.x xx.x 5% $5,186 $10,372 $15,557 - --------------------------------------------------------------------------- 5. C xx.x xx.x xx.x 5% $5,186 $10,372 $15,557 - --------------------------------------------------------------------------- Total 1996 Award Range 100% $0-$62,230 $207,430 $311,145 =========================================================================== (1) Shareholder cash flow is a measurement of financial reserves available to pay common stock dividends, reduce debt, and reinvest in our business. It is equal to revenue plus other income less the sum of: cash operating, maintenance and construction expenses; general and income taxes; interest expense; and preferred stock dividends. Special provisions apply when an individual enters or leaves the executive group for any reason during the performance period. JAB/01-23-96
Attachment #2 Tier II Ohio Edison System 1996 Executive Incentive Compensation Plan Illustration of 1996 Annual Incentive Program for John Doe Payable March 1997 Tier: II Pay Mix: 65% Base Pay, 35% Incentives 1996 Standard Rate: $237,729 Target Total Incentive: $128,008 = ($237,729/.65 - $237,729) Target Annual Incentive: 40% x $128,008 = $51,203
=========================================================================== Weight Threshold Target Maximum - --------------------------------------------------------------------------- 60% System Financial Goals 25% 100% 150% - --------------------------------------------------------------------------- 1. Attain an E.P.S. of $2.00 $2.07 $2.30 at least $2.00. 30% $3,840 $15,361 $23,041 - --------------------------------------------------------------------------- 2. Generate shareholder cash flow(1) of at least $470 $470M $500M $600M million. 30% $3,840 $15,361 $23,041 - --------------------------------------------------------------------------- 30% Strategic/Operational Goals 50% 100% 150% - --------------------------------------------------------------------------- 3. A xx.x xx.x xx.x 15% $3,840 $7,680 $11,521 - --------------------------------------------------------------------------- 4. B xx.x xx.x xx.x 15% $3,840 $7,680 $11,521 - --------------------------------------------------------------------------- 10% Functional/Individual Goals 80% 100% 120% - --------------------------------------------------------------------------- 5. C xx.x xx.x xx.x 5% $2,048 $2,560 $3,072 - --------------------------------------------------------------------------- 6. D xx.x xx.x xx.x 5% $2,048 $2,560 $3,072 - --------------------------------------------------------------------------- Total 1996 Award Range 100% $0-$19,457 $51,203 $75,268 =========================================================================== (1) Shareholder cash flow is a measurement of financial reserves available to pay common stock dividends, reduce debt, and reinvest in our business. It is equal to revenue plus other income less the sum of: cash operating, maintenance and construction expenses; general and income taxes; interest expense; and preferred stock dividends. Special provisions apply when an individual enters or leaves the executive group for any reason during the performance period. JAB/01-23-96
Attachment #2 Tier III Ohio Edison System 1996 Executive Incentive Compensation Plan Illustration of 1996 Annual Incentive Program for John Doe Payable March 1997 Tier: III Pay Mix: 70% Base Pay, 30% Incentives 1996 Standard Rate: $160,883 Target Total Incentive: $68,950 = ($160,883/.70 - $160,883) Target Annual Incentive: 50% x $68,950 = $34,475
=========================================================================== Weight Threshold Target Maximum - --------------------------------------------------------------------------- 40% System Financial Goals 25% 100% 150% - --------------------------------------------------------------------------- 1. Attain an E.P.S. of $2.00 $2.07 $2.30 at least $2.00. 20% $1,724 $6,895 $10,343 - --------------------------------------------------------------------------- 2. Generate shareholder cash flow(1) of at least $470 $470M $500M $600M million. 20% $1,724 $6,895 $10,343 - --------------------------------------------------------------------------- 40% Strategic/Operational Goals 50% 100% 150% - --------------------------------------------------------------------------- 3. A xx.x xx.x xx.x 20% $3,448 $6,895 $10,343 - --------------------------------------------------------------------------- 4. B xx.x xx.x xx.x 20% $3,448 $6,895 $10,343 - --------------------------------------------------------------------------- 20% Functional/Individual Goals 80% 100% 120% - --------------------------------------------------------------------------- 5. C xx.x xx.x xx.x 10% $2,758 $3,448 $4,137 - --------------------------------------------------------------------------- 6. D xx.x xx.x xx.x 10% $2,758 $3,448 $4,137 - --------------------------------------------------------------------------- Total 1996 Award Range 100% $0-$15,859 $34,475 $49,644 =========================================================================== (1) Shareholder cash flow is a measurement of financial reserves available to pay common stock dividends, reduce debt, and reinvest in our business. It is equal to revenue plus other income less the sum of: cash operating, maintenance and construction expenses; general and income taxes; interest expense; and preferred stock dividends. Special provisions apply when an individual enters or leaves the executive group for any reason during the performance period. JAB/01-23-96
Attachment #2 Tier IV Ohio Edison System 1996 Executive Incentive Compensation Plan Illustration of 1996 Annual Incentive Program for John Doe Payable March 1997 Tier: IV Pay Mix: 75% Base Pay, 25% Incentives 1996 Standard Rate: $130,082 Target Total Incentive: $43,361 = ($130,082/.75 - $130,082) Target Annual Incentive: 70% x $43,361 = $30,353
=========================================================================== Weight Threshold Target Maximum - --------------------------------------------------------------------------- 20% System Financial Goals 25% 100% 150% - --------------------------------------------------------------------------- 1. Attain an E.P.S. of $2.00 $2.07 $2.30 at least $2.00. 13% $986 $3,946 $5,919 - --------------------------------------------------------------------------- 2. Generate shareholder cash flow(1) of at least $470 $470M $500M $600M million. 12% $911 $3,642 $5,464 - --------------------------------------------------------------------------- 40% Strategic/Operational Goals 50% 100% 150% - --------------------------------------------------------------------------- 3. A xx.x xx.x xx.x 20% $3,035 $6,071 $9,106 - --------------------------------------------------------------------------- 4. B xx.x xx.x xx.x 20% $3,035 $6,071 $9,106 - --------------------------------------------------------------------------- 40% Functional/Individual Goals 80% 100% 120% - --------------------------------------------------------------------------- 5. C xx.x xx.x xx.x 20% $4,856 $6,071 $7,285 - --------------------------------------------------------------------------- 6. D xx.x xx.x xx.x 15% $3,642 $4,553 $5,464 - --------------------------------------------------------------------------- Total 1996 Award Range 100% $0-$16,467 $30,353 $42,342 =========================================================================== (1) Shareholder cash flow is a measurement of financial reserves available to pay common stock dividends, reduce debt, and reinvest in our business. It is equal to revenue plus other income less the sum of: cash operating, maintenance and construction expenses; general and income taxes; interest expense; and preferred stock dividends. Special provisions apply when an individual enters or leaves the executive group for any reason during the performance period. JAB/01-23-96
Attachment #2 Tier V Ohio Edison System 1996 Executive Incentive Compensation Plan Illustration of 1996 Annual Incentive Program for John Doe Payable March 1997 Tier: V Pay Mix: 80% Base Pay, 20% Incentives 1996 Standard Rate: $94,147 Target Total Incentive: $23,537 = ($94,147/.80 - $94,147) Target Annual Incentive: 85% x $23,537 = $20,006
=========================================================================== Weight Threshold Target Maximum - --------------------------------------------------------------------------- 15% System Financial Goals 25% 100% 150% - --------------------------------------------------------------------------- 1. Attain an E.P.S. of $2.00 $2.07 $2.30 at least $2.00. 8% $400 $1,600 $2,401 - --------------------------------------------------------------------------- 2. Generate shareholder cash flow(1) of at least $470 $470M $500M $600M million. 7% $350 $1,400 $2,101 - --------------------------------------------------------------------------- 50% Strategic/Operational Goals 50% 100% 150% - --------------------------------------------------------------------------- 3. A xx.x xx.x xx.x 25% $2,501 $5,002 $7,502 - --------------------------------------------------------------------------- 4. B xx.x xx.x xx.x 25% $2,501 $5,002 $7,502 - --------------------------------------------------------------------------- 35% Functional/Individual Goals 80% 100% 120% - --------------------------------------------------------------------------- 5. C xx.x xx.x xx.x 20% $3,201 $4,001 $4,801 - --------------------------------------------------------------------------- 6. D xx.x xx.x xx.x 15% $2,401 $3,001 $3,601 - --------------------------------------------------------------------------- Total 1996 Award Range 100% $0-$11,353 $20,006 $27,908 =========================================================================== (1) Shareholder cash flow is a measurement of financial reserves available to pay common stock dividends, reduce debt, and reinvest in our business. It is equal to revenue plus other income less the sum of: cash operating, maintenance and construction expenses; general and income taxes; interest expense; and preferred stock dividends. Special provisions apply when an individual enters or leaves the executive group for any reason during the performance period. JAB/01-23-96
Attachment #3 Tier I Ohio Edison System 1996 Executive Incentive Compensation Plan Illustration of 1996 Long-Term Incentive Program for John Doe Payable March 2000 Tier: I Pay Mix: 50% Base Pay, 50% Incentives 1996 Standard Rate: $518,576 Target Total Incentive: $518,576 = ($518,576/.50 - $518,576) Target Long-Term Incentive: 60% x $518,576 = $311,146 Phantom Stock Grant of 13,463.695 Shares @ $23.110/Share Mr. Doe's long-term award payable in 2000 will be based on the following factors: 1. The total shareholder return (TSR) of the Company's common stock during the period 1996 to 1999 relative to the EEI 100 Index. 2. Dividend equivalents credited to Mr. Doe's Common Stock Equivalent Account during this period. 3. The average of the closing prices of the Company's common stock during December 1999. The following table illustrates potential long-term award levels for Mr. Doe payable in 1999 at various percentile rankings of the total shareholder return of the Company's common stock relative to the EEI 100 Index during the 1996-1999 period. ================================================== TSR Ranking Award Payout** % Earned -------------------------------------------------- 1-15%ile $466,719 150% 26%ile* $388,933 125% 38%ile* $311,146 100% 49%ile* $233,360 75% 60%ile $155,573 50% 61-100%ile $0 0% -------------------------------------------------- * Examples of award payouts interpolated between the 15th and 60th rankings. ** For the purposes of illustration, assumes that no dividends are paid and that the Ohio Edison's common stock price does not appreciate during the four-year period. Special provisions apply when an individual enters or leaves the executive group for any reason during the performance period. JAB/01-23-96 Attachment #3 Tier II Ohio Edison System 1996 Executive Incentive Compensation Plan Illustration of 1996 Long-Term Incentive Program for John Doe Payable March 2000 Tier: II Pay Mix: 65% Base Pay, 35% Incentives 1996 Standard Rate: $237,729 Target Total Incentive: $128,008 = ($237,729/.65 - $237,729) Target Long-Term Incentive: 60% x $128,008 = $76,805 Phantom Stock Grant of 3,323.022 Shares @ $23.113/Share Mr. Doe's long-term award payable in 2000 will be based on the following factors: 1. The total shareholder return (TSR) of the Company's common stock during the period 1996 to 1999 relative to the EEI 100 Index. 2. Dividend equivalents credited to Mr. Doe's Common Stock Equivalent Account during this period. 3. The average of the closing prices of the Company's common stock during December 1999. The following table illustrates potential long-term award levels for Mr. Doe payable in 2000 at various percentile rankings of the total shareholder return of the Company's common stock relative to the EEI 100 Index during the 1996-1999 period. ================================================== TSR Ranking Award Payout** % Earned -------------------------------------------------- 1-15%ile $115,208 150% 26%ile* $96,006 125% 38%ile* $76,805 100% 49%ile* $57,604 75% 60%ile $38,403 50% 61-100%ile $0 0% -------------------------------------------------- * Examples of award payouts interpolated between the 15th and 60th rankings. ** For the purposes of illustration, assumes that no dividends are paid and that the Ohio Edison's common stock price does not appreciate during the four-year period. Special provisions apply when an individual enters or leaves the executive group for any reason during the performance period. JAB/01-23-96 Attachment #3 Tier III Ohio Edison System 1996 Executive Incentive Compensation Plan Illustration of 1996 Long-Term Incentive Program for John Doe Payable March 2000 Tier: III Pay Mix: 70% Base Pay, 30% Incentives 1996 Standard Rate: $160,883 Target Total Incentive: $68,950 = ($160,883/.70 - $160,883) Target Long-Term Incentive: 50% x $68,950 = $34,475 Phantom Stock Grant of 1,491.585 Shares @ $23.113/Share Mr. Doe's long-term award payable in 2000 will be based on the following factors: 1. The total shareholder return (TSR) of the Company's common stock during the period 1996 to 1999 relative to the EEI 100 Index. 2. Dividend equivalents credited to Mr. Doe's Common Stock Equivalent Account during this period. 3. The average of the closing prices of the Company's common stock during December 1999. The following table illustrates potential long-term award levels for Mr. Doe payable in 2000 at various percentile rankings of the total shareholder return of the Company's common stock relative to the EEI 100 Index during the 1996-1999 period. ================================================== TSR Ranking Award Payout** % Earned -------------------------------------------------- 1-15%ile $51,713 150% 26%ile* $43,094 125% 38%ile* $34,475 100% 49%ile* $25,856 75% 60%ile $17,238 50% 61-100%ile $0 0% -------------------------------------------------- * Examples of award payouts interpolated between the 15th and 60th rankings. ** For the purposes of illustration, assumes that no dividends are paid and that the Ohio Edison's common stock price does not appreciate during the four-year period. Special provisions apply when an individual enters or leaves the executive group for any reason during the performance period. JAB/01-23-96 Attachment #3 Tier IV Ohio Edison System 1996 Executive Incentive Compensation Plan Illustration of 1996 Long-Term Incentive Program for John Doe Payable March 2000 Tier: IV Pay Mix: 75% Base Pay, 25% Incentives 1996 Standard Rate: $130,082 Target Total Incentive: $43,361 = ($130,082/.75 - $130,082) Target Long-Term Incentive: 30% x $43,361 = $13,008 Phantom Stock Grant of 562.8 Shares @ $23.113/Share Mr. Doe's long-term award payable in 2000 will be based on the following factors: 1. The total shareholder return (TSR) of the Company's common stock during the period 1996 to 1999 relative to the EEI 100 Index. 2. Dividend equivalents credited to Mr. Doe's Common Stock Equivalent Account during this period. 3. The average of the closing prices of the Company's common stock during December 1999. The following table illustrates potential long-term award levels for Mr. Doe payable in 2000 at various percentile rankings of the total shareholder return of the Company's common stock relative to the EEI 100 Index during the 1996-1999 period. ================================================== TSR Ranking Award Payout** % Earned -------------------------------------------------- 1-15%ile $19,512 150% 26%ile* $16,260 125% 38%ile* $13,008 100% 49%ile* $9,756 75% 60%ile $6,504 50% 61-100%ile $0 0% -------------------------------------------------- * Examples of award payouts interpolated between the 15th and 60th rankings. ** For the purposes of illustration, assumes that no dividends are paid and that the Ohio Edison's common stock price does not appreciate during the four-year period. Special provisions apply when an individual enters or leaves the executive group for any reason during the performance period. JAB/01-23-96 Attachment #3 Tier V Ohio Edison System 1996 Executive Incentive Compensation Plan Illustration of 1996 Long-Term Incentive Program for John Doe Payable March 2000 Tier: V Pay Mix: 80% Base Pay, 20% Incentives 1996 Standard Rate: $94,147 Target Total Incentive: $23,537 = ($94,147/.80 - $94,147) Target Long-Term Incentive: 15% x $23,537 = $3,531 Phantom Stock Grant of 152.771 Shares @ $23.113/Share Mr. Doe's long-term award payable in 2000 will be based on the following factors: 1. The total shareholder return (TSR) of the Company's common stock during the period 1996 to 1999 relative to the EEI 100 Index. 2. Dividend equivalents credited to Mr. Doe's Common Stock Equivalent Account during this period. 3. The average of the closing prices of the Company's common stock during December 1999. The following table illustrates potential long-term award levels for Mr. Doe payable in 2000 at various percentile rankings of the total shareholder return of the Company's common stock relative to the EEI 100 Index during the 1996-1999 period. ================================================== TSR Ranking Award Payout** % Earned -------------------------------------------------- 1-15%ile $5,297 150% 26%ile* $4,414 125% 38%ile* $3,531 100% 49%ile* $2,648 75% 60%ile $1,766 50% 61-100%ile $0 0% -------------------------------------------------- * Examples of award payouts interpolated between the 15th and 60th rankings. ** For the purposes of illustration, assumes that no dividends are paid and that the Ohio Edison's common stock price does not appreciate during the four-year period. Special provisions apply when an individual enters or leaves the executive group for any reason during the performance period. JAB/01-23-96 EX-10 7 10-46 RESTATED EDCP OHIO EDISON SYSTEM EXECUTIVE DEFERRED COMPENSATION PLAN EFFECTIVE: September 29, 1985 for Ohio Edison Company September 28, 1985 for Pennsylvania Power Company Amended and Restated as of January 1, 1996 OHIO EDISON SYSTEM EXECUTIVE DEFERRED COMPENSATION PLAN ARTICLE I PURPOSE; EFFECTIVE DATE; COMPANY -------------------------------- 1.1 Purpose. The purpose of this Executive Deferred ------- Compensation Plan (the "Plan") is to provide current tax planning opportunities as well as supplemental funds for retirement, death, disability or other separation of employment for key executives of the Ohio Edison System. It is intended that the Plan will aid in retaining and attracting personnel of exceptional ability by providing such individuals with these benefits. 1.2 Effective Date. The Plan shall be effective the pay -------------- period beginning September 29, 1985, for Ohio Edison Company and September 28, 1985, for Pennsylvania Power Company. 1.3 Company. The Plan is adopted for the benefit of selected ------- employees of Ohio Edison Company and its wholly-owned subsidiary Pennsylvania Power Company (collectively, the "Company"). Actions by the Company with respect to the Plan shall be taken by the Chief Executive Officer of Ohio Edison Company (the "Chief Executive Officer") or other officers appointed by the Chief Executive Officer to approve or take such action. The Board of Directors of the Ohio Edison Company (the "Board") or the Compensation Committee of the Board (the "Compensation Committee") may make the Plan applicable to other corporations or other entities affiliated with or subsidiary to the Company. 1.4 Committee. "Committee" means the Administrative Committee --------- that shall administer this Plan as provided in Article VII. The Committee shall consist of three or more individuals appointed by the Chief Executive Officer with at least one member being an employee of Pennsylvania Power Company. ARTICLE II PARTICIPATION AND DEFERRAL COMMITMENTS -------------------------------------- 2.1 Eligibility and Participation. ----------------------------- (a) Eligibility. The Chief Executive ----------- Officer may designate any key executive as eligible to participate in the Plan. - 2 - (b) Participation. An individual who ------------- becomes eligible to participate in the Plan during a Deferral Period may elect to participate in the Plan by filing with the Committee a Participation Agreement in a form prescribed by the Committee during the period of November 15 through December 15 of the calendar year preceding the next following Deferral Period. (c) "Deferral Period" means a single --------------- calendar year inclusive of all pay periods paid in such calendar year for which a Participant has made a Salary or Annual Incentive Award Deferral Commitment. (d) "Participant" means any eligible individual who has elected to make deferrals under this Plan. 2.2 Form of Deferral; Minimum Deferral. A Participant may ---------------------------------- elect in the Participation Agreement the following Deferral Commitment: (a) Salary Deferral Commitment. A -------------------------- Participant may elect to defer a percentage of base salary for the Deferral Period. The amount to be deferred must not be less than 1 percent nor more than 25 percent of base salary. The commitment must be in increments of at least 1 percent of base salary. (b) Ohio Edison System Savings Plan ------------------------------- Exception. In addition to the --------- deferral permitted under (a) above, any Participant that is eligible to participate in the Ohio Edison System Savings Plan (the "Savings Plan") may elect to defer under this Plan that portion of base salary which could be deferred under the terms of the Savings Plan but for limits of the provisions of Sections 401(a)(17), 401(k)(3), 402(g)(1) and - 3- (5) of the Internal Revenue Code of 1986, as amended, which preclude such deferral under the Savings Plan. (c) Deferral Commitment for Annual ------------------------------ Incentive Award from Executive ------------------------------ Incentive Compensation Plan. --------------------------- Commencing with the 1995 Deferral Period, any Participant may elect to defer a percentage of his or her Annual Incentive Award payable the following calendar year. The amount to be deferred must not be less than 1 percent nor more than 100 percent of such award, less any taxes required to be withheld and applicable deductions. The commitment must be in increments of at least one percent. (d) Period of the Commitment. Once a ------------------------ Participant has made a Deferral Commitment, that Commitment shall remain in effect for that Deferral Period. It shall also remain in effect unless revoked or amended in writing by the Participant and delivered to the Committee no later than the period of November 15 through December 15 of the year preceding a subsequent Deferral Period. 2.3 Modification of Deferral Commitment. A Deferral ----------------------------------- Commitment shall be irrevocable, except that the Committee may permit a Participant to reduce or waive the remainder of the Deferral Commitment for a calendar year upon a finding, based upon uniform standards established by the Committee, that the Participant has suffered an unforeseen and sudden financial emergency. If the Committee grants a waiver in the Deferral Commitment, the Participant may not make any further deferrals under the Plan unless the Participant files a new Deferral Commitment in writing and delivers it to the Committee during the period November 15 through December 15 to be effective for the following calendar year. 2.4 Vesting of Retirement Account. A Participant shall be ----------------------------- 100 percent vested in all amounts credited to such Participant's Retirement Account. - 4 - ARTICLE III RETIREMENT ACCOUNT 3.1 Elective Deferred Compensation. The amount of salary ------------------------------ and Annual Incentive Award that a Participant elects to defer shall be withheld and credited to the Participant's Retirement Account. Any withholding of taxes or other amounts with respect to deferred compensation which is required by state, federal or local law shall be withheld to the extent possible from the Participant's nondeferred compensation, if any. 3.2 Type of Account. For a Participant in the active employ --------------- of the Company on or after January 1, 1996, a Retirement Account only shall be maintained solely for recordkeeping purposes. The deferred salary and deferred Annual Incentive Award shall be credited to such Account. For any participant who separated employment from the Company prior to January 1, 1996, with a vested "Separation Account" (as that term was defined under the Plan in effect at the time of such separation ("Prior Plan")) such Prior Plan and any references in this Plan to "Retirement Account" shall, for such Participants, mean "Separation Account." 3.3 Interest. The Retirement Account shall be -------- credited with Interest as follows: (a) Retirement Account Interest. The --------------------------- interest rate credited to a Retirement Account shall be the greater of: (i) The annual equivalent of the average of the Moody's Average Corporate Bond Yield Index for the 12 months of November through October preceding the Deferral Period as published by Moody's Investors Service, Inc. (or any successor thereto), or, if such index is no longer published, a substantially similar index selected by the Committee, plus two percentage points, or (ii) The annual equivalent of a 10 percent annual yield. - 5 - (b) "Member of Senior Management" means --------------------------- a Participant who is designated as a Member of Senior Management by the Chief Executive Officer in his or her sole discretion. (c) Retirement Account Interest; Senior ----------------------------------- Management Participants. ----------------------- The interest rate credited to a Retirement Account for a Participant who is designated as a Member of Senior Management (as defined in 3.3(b)) on January 1 of each year shall be the greater of: (i) The annual equivalent of the average of the Moody's Average Corporate Bond Yield Index for the 12 months of November through October preceding the Deferral Period as published by Moody's Investors Service, Inc. (or any successor thereto), or, if such index is no longer published, a substantially similar index selected by the Committee, plus four percentage points, or (ii) The annual equivalent of a 12 percent annual yield. 3.4 Determination of Account. Determination Dates shall be ------------------------ specified by the Committee. Each Participant's Retirement Account as of each Determination Date shall consist of the balance as of the immediately preceding Determination Date, plus the Participant's elective deferred compensation and interest credited, minus the amount of any distributions made, since the immediately preceding Determination Date. Interest credited shall be calculated as of each Determination Date based upon the average daily balance of the account since the preceding Determination Date. 3.5 Statement of Account. The Committee shall submit to -------------------- each Participant, after the close of each calendar year and at such other times as determined by the Committee, a statement setting forth the balance to the credit of the Retirement Account maintained for a Participant. - 6 - ARTICLE IV SUPPLEMENTAL PENSION BENEFIT ---------------------------- 4.1 Eligibility. For purposes of this Article IV only, ----------- effective January 1, 1996, a Participant means any employee who is eligible to participate in this Plan according to Section 2.1(a), irrespective of whether or not such employee has elected to participate in this Plan in accordance with Section 2.1(b). 4.2 Purpose. The Company maintains a tax-qualified defined ------- benefit pension plan known as the Ohio Edison System Pension Plan ("Pension Plan"). Benefits under the Pension Plan are based on the employee's non-deferred base salary earnings and are subject to limitations imposed by the Internal Revenue Code ("the Code"). It is intended that the benefit provided by this Article IV supplement a Participant's (or his or her Surviving Spouse or Provisional Payee as designated under the Pension Plan) reduction in his or her retirement income or vested pension benefit, as appropriate, from the Pension Plan as a result of a) electing deferrals under this Plan, or b) limitations imposed by Sections 401(a)(17) and Section 415 of the Code on Pension Plan earnings, or c) the exclusion of Annual Incentive Awards from Pension Plan earnings. 4.3 Supplemental Pension Benefit. At the time a Participant ---------------------------- separates employment for any reason and is entitled to a benefit under the Pension Plan, the Company shall pay to the Participant, his or her Surviving Spouse or Provisional Payee as designated by the Participant under the Pension Plan, a supplemental pension benefit from its general assets equal to the amount of the benefit that would have been payable under the Pension Plan, calculated without regard to the Participant's deferrals under the Plan, the limitations imposed by Sections 401(a)(17) and Section 415 of the Code on the Participant's Pension Plan earnings after January 1, 1996, or the exclusion of Annual Incentive Awards after January 1, 1996, from the Participant's Pension Plan earnings, less the benefit actually payable under the Pension Plan. Such supplemental pension benefit shall be nonforfeitable upon the date the Participant separates employment. - 7 - 4.5 Payment of Supplemental Pension Benefit. The --------------------------------------- supplemental pension benefit provided for in Section 4.3 shall be paid in the same form and manner over the same period as payments under the Pension Plan. ARTICLE V PLAN BENEFITS ------------- 5.1 Separation of Employment Benefit. The Company shall pay -------------------------------- a Plan benefit equal to the amount of the Participant's Retirement Account to each Participant who separates employment for any other reason other than death. 5.2 Death Benefit. Upon the death of a Participant, either ------------- before or after separation of employment, the Company shall pay to the Participant's Beneficiary an amount equal to the Participant's Retirement Account balance. 5.3 Form of Benefit Payment. ----------------------- (a) Retirement Benefit. For a Participant who ------------------ at the time of separation of employment is age 55 or over and is entitled to a benefit under the Pension Plan, the Retirement Account balance shall be paid as elected by the Participant in the Participation Agreement. However, the Participant may amend such election up to 90 days prior to the date of Retirement. Forms of benefit payment shall be: (i) A lump sum payment;and/or (ii) Monthly installments of principal and interest over a period of up to 180 months. The amount of the installment shall be redetermined January 1 of each year based upon the then current rate of Interest on Retirement Accounts, the remaining Retirement Account balance, and the remaining number of payment periods. - 8 - (iii) A Participant may irrevocably elect at least 90 days prior to the date of Retirement to defer commencement of payment of the Retirement Account to a later date. Payments from the Retirement Account must commence, however, no later than the first day of the month following the Participant's 70th birthday. (b) Disability Benefit. If a participant ------------------ separates employment at any age by reason of disability, the Retirement Account balance shall be paid as elected by the Participant in the Participation Agreement. "Disabled" means a disability such that a Participant would be entitled to receive a monthly disability pension payment under the Pension Plan. For the purposes of this provision, such a Participant need not have completed ten years of Eligibility Service, as defined by the Pension Plan, with the Company. However, the Participant may amend such election any time prior to Disability. Forms of benefit payments shall be the same as in Section 5.3(a) (i) and/or (ii). (c) Separation of Employment Benefit for Reasons Other ------------------------------------------------- than Retirement, Disability or Death. ------------------------------------ (i) For a Participant who at the time of separation from employment is under age 55 or who is not entitled to a benefit under the Pension Plan, the Retirement Account balance shall be paid in a lump sum following separation from employment. (d) Death Benefits. -------------- (i) If a Participant dies prior to separation of employment, the Retirement Account balance shall be paid to the Beneficiary as elected by the Participant in the Participation Agreement or Form of Benefit Payout, whichever is on file and controlling. The Participant may amend such election any time prior to death. Form of benefit payments shall be the same as in 5.3(a) (i) and/or (ii). - 9 - (ii) If a Participant dies after separation of employment due to Retirement or Disability, the Retirement Account balance shall continue to be paid to the Beneficiary in the form and manner elected by the Participant in the Participation Agreement or Form of Benefit Payout, whichever is on file and controlling. However, if the Participant elected to defer commencement of retirement benefits to a later date (pursuant to 5.3(a)(iii)) and dies prior to commencement of retirement benefit payments, the election to defer commencement of retirement benefit payments will become null and void and payments will commence immediately to the Beneficiary in the form and manner elected by the Participant. (e) Participant Call Provision. Notwithstanding the -------------------------- foregoing in Section 5.3 (a), (b), (c) and (d) above, a Participant (or the Participant's Beneficiary in case of the death of the Participant) at any time may request an accelerated distribution of his or her Retirement Account, subject to a 10% penalty. Such request must be made in writing in a form and manner specified by the Committee. The Company will distribute to the Participant or Beneficiary 90% of his or her Retirement Account balance as a lump sum within 63 days after the end of the month the Committee receives the request. Such distribution shall completely discharge the Committee and the Company from all liability with respect to the Participant's or Beneficiary's Retirement Account. Further, if the Participant is in the active employ of the Company, the Participant may not resume any further deferrals into the Plan until January 1 of the second calendar year following the calendar year in which the Participant receives such distribution. (f) Inservice Withdrawal Provision. Notwithstanding ------------------------------ the foregoing in Section 5.3 (a), (b), (c) and (d) above, a Participant who is in the active employ of the Company may request to withdraw a portion of his or her deferred salary and/or deferred Annual Incentive Awards credited to his or her Retirement Account for five or more calendar years, including interest credited on such amounts. Such request must be made in writing in a form and manner specified by the Committee and must specify the - 10 - amount to be withdrawn and the future date or dates to be paid which must be the first of a month in the second calendar year following the calendar year in which the request is made. The request will be irrevocable after December 31, of the calendar year in which it is made unless, prior to payment, the Participant separates employment or dies at which time the request will become null and void and the Participant's Retirement Account balance shall be paid as elected by the Participant in the Participation Agreement pursuant to Section 5.3 (a), (b), (c) or (d). 5.4 Withholding; Payroll Taxes. The Company shall withhold -------------------------- from payments made hereunder to the Participant or any Beneficiary, any amounts required by applicable law to be withheld. All Plan administration expenses incurred by the Company or Committee shall be borne by the Company. 5.5 Commencement of Payments. Payment shall commence at the ------------------------ discretion of the Committee, but not later than 63 days after the end of the month in which the Participant retires (or the later date if the Participant elects to defer commencement of payment under Section 5.3 (a) (iii)), dies, becomes disabled or otherwise separates employment with the Company. All payments shall be made as of the first day of the month. 5.6 Full Payment of Benefits. Notwithstanding any other ------------------------ provision of this Plan, all benefits shall be paid no later than 180 months following the date the Participant reaches age 70 or termination of service, whichever is later. 5.7 Payment to Guardian. If a Plan benefit is payable to a ------------------- minor or a person declared incompetent or to a person incapable of handling the disposition of property, the Committee may direct payment of such Plan benefit to the guardian, legal representative or person having the care and custody of such minor or incompetent person. The Committee may require proof of incompetency, minority, incapacity or guardianship as it may deem appropriate prior to distribution of the Plan benefit. Such distribution shall completely discharge the Committee and the Company from all liability with respect to such benefit. - 11 - ARTICLE VI BENEFICIARY DESIGNATION ----------------------- 6.1 Beneficiary Designation. Each Participant shall have ----------------------- the right, at any time, to designate one or more persons as the Participant's primary or contingent Beneficiary(ies) to whom benefits under this Plan, except benefits payable pursuant to Article IV, shall be paid in the event of the Participant's death prior to complete distribution to the Participant of the benefits due under the Plan. Unless stated otherwise in writing in the form provided by the Committee, the payments hereunder shall be paid in equal shares to surviving beneficiaries if more than one Beneficiary has been chosen. Each Beneficiary designation shall be in a written form prescribed by the Committee and will be effective only when filed with the Committee during the Participant's lifetime. If a Participant's compensation is community property, any Beneficiary designation shall be valid or effective only as permitted under applicable law. 6.2 Amendments. Any Beneficiary designation may be changed ---------- by a Participant without the consent of any designated Beneficiary by the filing of a new Beneficiary designation with the Committee. 6.3 No Beneficiary Designation or Death of Beneficiary. In -------------------------------------------------- the absence of an effective Beneficiary designation, or if all designated Beneficiaries predecease the Participant, the Participant's designated Beneficiary shall be the person in the first of the following classes in which there is a survivor: (a) The surviving spouse; (b) The Participant's estate; In the event of the death of a Beneficiary after payments commence but prior to the Beneficiary receiving all benefit payments hereunder, the remaining balance of the Beneficiary's portion of the Retirement Account shall be paid in a lump sum to the estate of the Beneficiary. 6.4 Effect of Payment. Payment to the Beneficiary (or to the ----------------- Beneficiary's estate) shall completely discharge the Company's obligations under this Plan. - 12 - ARTICLE VII ADMINISTRATION -------------- 7.1 Committee; Duties. This Plan shall be administered by ----------------- the Committee appointed in Section 1.4. Members of the Committee may be Participants under this Plan. However, no member of the Committee may participate in a review of his or her own claim under Article VIII. The Committee shall administer the Plan and will have the power and the duty to take all action and to make all decisions necessary or proper to carry out the Plan. The determination of the Committee as to any question involving the general administration and interpretation of the Plan shall be final, conclusive, and binding except as otherwise provided in Article VIII. A majority vote of the Committee members shall control any decision. Any discretionary actions to be taken under the Plan by the Committee with respect to the classification of Employees, Participants, contributions or benefits shall be uniform in nature and applicable to all persons similarly situated. Without limiting the generality of the foregoing, the Committee shall have the following discretionary authority, powers and duties: (a) To require any person to furnish such information as it may request for the purpose of the proper administration of the Plan as a condition to receiving any benefit under the Plan; (b) To make and enforce such rules and regulations and prescribe the use of such forms as it deems necessary for the efficient administration of the Plan; (c) To interpret the Plan and to resolve ambiguities, inconsistencies and omissions; (d) To decide all questions concerning the Plan and the eligibility of any Employee to participate in the Plan; and (e) To determine the amount of benefits which will be payable to any person in accordance with the provisions of the Plan. 7.2 Agents. In the administration of this Plan, the ------ Committee may, from time to time, employ agents and delegate to them such administrative duties as it sees fit, and may from time - 13 - to time consult with counsel, who may be counsel to the Company. 7.3 Indemnity of Committee. The Company shall indemnify and ---------------------- hold harmless the members of the Committee and the Compensation Committee against any and all claims, loss, damage, expense or liability arising from any action or failure to act with respect to this Plan, except in the case of intentional misconduct. ARTICLE VIII CLAIMS PROCEDURE ---------------- 8.1 Claim. Any person claiming a benefit, requesting an ----- interpretation or ruling under the Plan or requesting information under the Plan shall present the request in writing to the Committee, which shall respond in writing within 63 days after the end of the month in which the request was received. Payment of a claimed benefit shall also constitute a written response. 8.2 Denial of Claim. If the claim or request is denied, the --------------- written notice of denial shall state: (a) The reasons for denial, with specific reference to the Plan provisions on which the denial is based. (b) A description of any additional material or information required and an explanation of why it is necessary. (c) An explanation of the Plan's claim review procedure. For purposes of this Section 8.2, the failure by the Committee to deliver within the 63-day period notice of a written denial of claim shall constitute a written response of denial, unless the failure to correspond was the result of clerical or administrative error. 8.3 Review of Claim. Any person whose claim or request is --------------- denied or who has not received a response within 63 days after the end of the month in which the request was received, may request further review by notice given in writing to the Compensation Committee. The Compensation Committee may, but shall not be required to, grant the claimant a hearing. On review, the claimant - 14 - may have a representative examine pertinent documents and submit issues and comments in writing. 8.4 Final Decision. The decision on review shall normally -------------- be made within 60 days. If an extension of time is required for a hearing or other special circumstances, the claimant shall be notified and the time limit shall be 120 days. The decision shall be in writing and shall state the reasons and the relevant plan provisions. All decisions on review shall be final and bind all parties concerned. ARTICLE IX AMENDMENT AND TERMINATION OF PLAN --------------------------------- 9.1 Right to Amend. The Plan may be amended any time by -------------- action of the Board or the Compensation Committee or by a writing executed on behalf of the Board or Compensation Committee by the Company's duly elected officers, except that: (a) no amendment shall be effective to decrease or restrict any Participant's Retirement Account balance or Supplemental Pension Benefit accrued to that date, and (b) no amendment shall be effective to restrict the right of a Participant to elect to receive a lump sum form of benefit payment of his or her Retirement Account upon retirement, death, disability or separation of employment, and (c) no amendment to the definition of Retirement Account Interest in Section 3.3(a) and (c) shall decrease the interest rate credited to the Retirement Account balance of any Participant below the Moody's Average Corporate Bond Yield Index less one (1) percent,else the Retirement Account balance will be paid to all Participants within 60 days of such amendment. Such amendment shall be effective on the first day of the calendar year following such amendment, provided that all Participants are notified of such amendments no later than November 15 of the year in which such amendment occurs. 9.2 Right to Terminate. The Board or the Compensation ------------------ Committee of the Board may at any time terminate the Plan if, in its sole judgment, the tax, accounting or other effects of the continuance of the Plan, or potential payments thereunder, would - 15 - not be in the best interests of the Company. Such termination shall not adversely effect any Plan Participant's Retirement Account balance or accrued Supplemental Pension Benefit. The Company shall pay the Retirement Account balance to all Participants within 60 days after the effective date of the Plan termination. ARTICLE X MISCELLANEOUS ------------- 10.1 Unfunded Plan. This Plan is intended to be an unfunded ------------- plan for federal income tax purposes and for purposes of the Employee Retirement Income Security Act of 1974, as amended, maintained primarily to provide deferred compensation benefits for a select group of management employees or highly compensated employees. This Plan is not intended to create an investment contract, but to provide tax planning opportunities and retirement benefits to eligible individuals who have elected to participate in the Plan. Eligible individuals are select members of management who, by virtue of their position with the Company, have the ability to materially affect the Company's profitability and operations. 10.2 Unsecured General Creditor. Participants and their -------------------------- Beneficiaries, heirs, successors and assigns shall have no legal or equitable rights, interest or claims in any property or assets of Company. Any and all Company's assets shall be, and remain, the general, unpledged, unrestricted assets of Company. Company's obligation under the Plan shall be merely that of an unfunded and unsecured promise of Company to pay money in the future. 10.3 Obligations to Company. If a Participant becomes ---------------------- entitled to a benefit under the Plan and the Participant has outstanding any debt, obligation, or other liability representing an amount owing to the Company, then the Company may offset such amount owing to it or an affiliate against the amount of benefits otherwise distributable to the Participant or Beneficiary. Such determination shall be made by the Committee. 10.4 Nonassignability. Neither a Participant nor any other ---------------- person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey in advance of actual receipt the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are, expressly declared to be assignable and nontransferable. No part of the amounts payable shall, prior to - 16 - actual payment, be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, nor be transferable by operation of law in the event of a Participant's or any other person's bankruptcy or insolvency. 10.5 Not a Contract of Employment. The terms and conditions ---------------------------- of this Plan shall not be deemed to constitute a contract of employment between the Company and the Participant, and neither the Participant nor the Participant's Beneficiary shall have any rights against the Company except as may otherwise be specifically provided herein. Moreover, nothing in this Plan shall be deemed to give a Participant the right to be retained in the service of the Company or to interfere with the right of Company to discipline or discharge him or her at any time. 10.6 Protective Provisions. A Participant will cooperate --------------------- with the Company by furnishing any and all information requested by the Company, in order to facilitate the payment of benefits hereunder. 10.7 Captions. The captions of the articles, sections and -------- paragraphs of this Plan are for convenience only and shall not control or affect the meaning or construction of any of its provisions. 10.8 Governing Law. The provisions of this Plan shall be ------------- construed, administered, and enforced according to and governed by the laws (other than conflict of law provisions) of the state of Ohio, except to the extent such laws are superseded by ERISA. 10.9 Validity. In case any provision of this Plan shall be -------- held illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining parts hereof, but this Plan shall be construed and enforced as if such illegal and invalid provision had never been inserted herein. 10.10 Notice. Any notice or filing required or permitted to ------ be given to the Committee under the Plan shall be sufficient if in writing and hand delivered, or sent by registered or certified mail to any member of the Committee, or to the Statutory Agent of Ohio Edison Company. Notice to the Committee may be given to any member of the Committee and if mailed shall be addressed to the principal executive offices of Ohio Edison Company. Notice mailed to the Participant shall be sent to the address set out in the - 17 - Participant's most recent Participation Agreement or such other address as is given to the Committee by notice. Notices shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification. 10.11 Successors. The provisions of this Plan shall bind and ---------- inure to the benefit of the Company and its successors and assigns. The term successors as used herein shall include any corporate or other business entity which shall, whether by merger, consolidation, purchase or otherwise acquire all or substantially all of the business and assets of the Company, and successors of any such corporation or other business entity. IN WITNESS WHEREOF, and pursuant to resolution of the Board, the Company has caused this instrument to be executed by its duly authorized officers effective as of September 29, 1985, as amended and restated as of December 19, 1989, and as amended and restated as of January 1, 1996. FOR THE COMPANY By: /s/ W. R. Holland Date 11/1/95 --------------------------- --------- W. R. Holland President and Chief Executive Officer of Ohio Edison Company Chairman of the Board, Pennsylvania Power Company Witness: /s/ J. A. Gill ---------------------------- J. A. Gill Vice President, Administration EX-10 8 10-47 RESTATED SERP OHIO EDISON SYSTEM SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN EFFECTIVE September 29, 1985 Amended and Restated as of January 1, 1996 OHIO EDISON SYSTEM SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN I. Purpose ------- The Supplemental Executive Retirement Plan (the "Plan") is part of an integrated executive compensation program that is intended to attract, retain, and motivate key senior Executives who are in positions to make significant contributions to the operation and profitability of Ohio Edison Company and its wholly-owned subsidiary Pennsylvania Power Company (collectively, the "Company") for the benefit of stockholders and customers. The Board of Directors of Ohio Edison Company (the "Board") or the Compensation Committee of the Board (the "Compensation Committee") may make the Plan applicable to other corporations or other entities affiliated with or subsidiary to the Company. The Plan provides for the payment of supplemental retirement, death, and disability benefits to or in respect of key senior Executives designated by the Chief Executive Officer of the Ohio Edison Company (the "Chief Executive Officer"). The Chief Executive Officer shall appoint an Administrative Committee (the "Committee") to administer this Plan. The Committee shall consist of three or more individuals with at least one member being an employee of Pennsylvania Power Company. II. Type and Level of Benefits -------------------------- An Executive included in the Plan shall, subject to the terms and conditions set forth herein, be eligible to receive a supplemental benefit under the Plan after termination of employment due to retirement, death, disability or involuntary separation that is directly related to either: * the Executive's Highest Average Monthly Base Earnings which is defined as the average of the highest 12 consecutive full months of base salary earnings paid to the Executive in the 120 consecutive full months prior to termination of employment, including any salary deferred in the Ohio Edison System Executive Deferred Compensation Plan ("Deferred Plan") or the Ohio Edison System Savings Plan ("Savings Plan"), but excluding any incentive payments, or * the Executive's Highest Average Monthly Total Compensation which is defined as the average of the highest 36 consecutive full months of base salary earnings paid to the Executive in the 120 consecutive full months prior to termination of employment, including any - 2 - salary deferred into the Deferred Plan and Savings Plan. Highest Total Compensation shall also include any Annual Incentive Award from the Executive Incentive Compensation Plan either paid to the Executive or deferred into the Deferred Plan after January 1, 1996. For the purpose of this Plan, a "Month of Service" shall be a whole month of service based upon the Executive's service anniversary date with the Company. For the purposes of this Plan, Eligible Spouse shall mean the spouse to whom the Executive is married at the time payment of a supplemental benefit from the Plan commences and who is so designated, or deemed to have been designated in accordance with the Ohio Edison System Pension Plan ("Pension Plan"). A supplemental benefit under this Plan will be determined in accordance with and shall be nonforfeitable upon the date the Executive terminates employment under the conditions described in the following sections: A. Retirement Benefits ------------------- 1. An Executive retiring from the Company on or after age 55 will be entitled to receive, commencing at retirement, a monthly supplemental retirement benefit under the Plan equal to 65 percent of the Executive's Highest Average Monthly Base Earnings or 55 percent of the Executive's Highest Average Monthly Total Compensation, whichever is greater, multiplied by the number of Months of Service the Executive has with the Company up to a maximum of 60 months divided by 60, less: (a) The monthly primary Social Security benefit to which the Executive may be entitled at such retirement (or the projected age 62 benefit if retirement occurs prior to age 62), irrespective of whether the Executive actually receives such benefit at the time of retirement, and (b) The monthly early, normal or deferred retirement income benefit to which the Executive may be entitled at such retirement, under the Pension Plan, the monthly supplemental pension benefit under the Deferred Plan and the monthly benefit, or actuarial equivalent, under the tax qualified or nonqualified defined benefit pension plans of previous employers, all calculated with the - 3 - following assumptions based on the Executive's marital status at the time of such retirement: 1) In the case of a married Executive in the form of a 50 percent joint and survivor annuity. 2) In the case of an unmarried Executive, in the form of a single life annuity. For an Executive who retires less than age 65, the net dollar amount above shall be further reduced by one-fourth (1/4) of one percent for each month the commencement of benefits under this Plan precedes the month the Executive attains age 65. 2. After commencement of supplemental retirement benefits to the Executive, such payments shall continue in monthly installments thereafter ending with a payment for the month in which such Executive's death occurs. At death, benefits under Section II (C) (2) may be paid to the Executive's surviving Eligible Spouse. B. Disability Benefits ------------------- 1. An Executive who becomes disabled while employed by the Company will be entitled to receive, commencing at the time the Executive's employment terminates by reason of disability, a monthly supplemental disability benefit under the Plan equal to 65 percent of the Executive's Highest Base Earnings or 55% of the Executive's Highest Total Compensation, whichever is greater, divided by twelve (12), multiplied by the number of Months of Service the Executive has with the Company up to a maximum of 60 months divided by 60, less: (a) The monthly Social Security disability benefit to which the Executive may become entitled due to such disability. (b) The monthly disability pension payment under the Pension Plan, the monthly benefit provided by the Long-Term Disability Plan of the Company and the monthly disability or pension benefits, or actuarial equivalent, from plans of previous employers to which the Executive may be entitled at termination of employment. - 4 - "Disabled" means a disability such that an Executive would be entitled to receive a monthly disability payment under the Pension Plan, except for the purposes of this provision an Executive need not have completed ten (10) Years of Eligibility Service, as defined by the Pension Plan, with the Company. 2. After commencement of supplemental disability benefits to the Executive, such payments shall continue in monthly installments thereafter ending with a payment in the month in which the Executive attains age 65 or retires from the Company, dies, or is no longer disabled, whichever first occurs. Upon retirement, benefits under Section II (A) may be paid. At death, benefits under Section II (C) (1) may be paid to the Executive's surviving Eligible Spouse. C. Death Benefits -------------- 1. If an Executive, including an Executive receiving a supplemental disability benefit under the Plan, dies prior to retiring from the Company, the Executive's surviving Eligible Spouse shall be entitled to receive commencing in the month following the Executive's death, a monthly supplemental surviving spouse benefit under the Plan equal to 50 percent of the monthly supplemental retirement benefit, calculated in accordance with Section II (A), which the Executive would have received had he or she retired in the month of death, except that if the Executive dies prior to attaining age 55, such monthly supplemental retirement benefit will be calculated as if the Executive had attained age 55 and retired on the date of his or her death. The surviving spouse benefit payment shall be paid in monthly installments thereafter ending with a payment for the month in which such surviving Eligible Spouse's death occurs, or for a period of 180 payments less the number of supplemental disability payments the Executive had received, whichever first occurs. 2. After retiring from the Company the Executive dies and has received less than 180 monthly supplemental retirement and/or supplemental disability payments under the Plan, then the Executive's surviving Eligible Spouse shall be entitled to receive a monthly supplemental surviving spouse benefit under - 5 - the Plan equal to 50 percent of the supplemental retirement benefit which the deceased Executive was receiving on the day before his or her death. This monthly supplemental surviving spouse benefit paymentshall commence in the month following the Executive's death and shall be paid in monthly installments thereafter ending with a payment for the month in which such surviving Eligible Spouse's death occurs, or for a period of 180 payments less the number of supplemental retirement and/or supplemental disability payments the Executive had received, whichever first occurs. D. Involuntary Separation Benefits ------------------------------- 1. If an Executive is involuntarily separated prior to age 55 due to the closing of a facility, corporate restructuring, reduction in the work force, or job elimination then the Executive will be entitled to receive, beginning at age 55, a supplemental retirement benefit under the Plan calculated in accordance with Section II (A). If the Executive dies prior to or after commencement of his or her supplemental retirement benefit, then the Executive's surviving Eligible Spouse shall be entitled to commence a monthly supplemental surviving spouse benefit under the Plan calculated in accordance with Section II (C). Such supplemental benefits will be calculated using the number of Months of Service the Executive had with the Company at separation of employment. However, the Executive will not be eligible for a supplemental retirement benefit beginning at age 55 if the separation is due to any other reason including but not limited to: voluntary resignation; discharge for misconduct or poor job performance; failure to return from a leave of absence; or as a result of a merger or acquisition of the Company or any of its assets and the Executive's employment with the acquiring or merging company is continued and the Executive does not suffer unemployment. III. Unfunded Plan ------------- The Plan shall be unfunded. The Plan is intended to benefit key senior Executives who are considered within a select group of management or highly compensated employees within the meaning of the Employee Retirement Income Security Act of 1974, as amended. The Chief Executive Officer reserves the right to restrict participation to such Executives. - 6 - Neither an Executive nor any other person shall have any right to transfer, pledge, or otherwise encumber, in advance of actual receipt, any amounts payable hereunder. No part of the amounts payable shall, prior to actual payment, be subject to seizure or sequestration for the payment of any debts, judgments, alimony, or separate maintenance owed by an Executive or any other person, nor be transferable by operation of law in the event of an Executive's or any other person's bankruptcy or insolvency. IV. Administration -------------- This Plan will be administered by and under the direction of the Committee. Members of the Committee may be participants in this Plan. However, no member of the Committee may participate in a review of his or her own claim under Article V. The Committee shall administer the Plan and will have the power and the duty to take all action and to make all decisions necessary or proper to carry out the Plan. The determination of the Committee as to any question involving the general administration and interpretation of the Plan shall be final, conclusive, and binding except as otherwise provided in Section V. A majority vote of the Committee members shall control any decision. Any discretionary actions to be taken under the Plan by the Committee with respect to the Executives' contributions or benefits shall be uniform in nature and applicable to all persons similarly situated. Without limiting the generality of the foregoing, the Committee shall have the following discretionary authority, powers and duties: A. To require any person to furnish such information as it may request for the purpose of the proper administration of the Plan as a condition to receiving any benefit under the Plan; B. To make and enforce such rules and regulations and prescribe the use of such forms as it deems necessary for the efficient administration of the Plan; C. To interpret the Plan and to resolve ambiguities, inconsistencies and omissions; D. To decide all questions concerning the Plan and the eligibility of any Employee to participate in the Plan; and E. To determine the amount of benefits which will be payable to any person in accordance with the provisions of the Plan. F. In the administration of this Plan, the Committee may, from time to time, employ agents and delegate to them such administrative duties as it sees fit, and may from time to time consult with counsel, who may be counsel to the Company. - 7 - The Company shall indemnify and hold harmless members of the Committee and the Compensation Committee against any and all claims, loss, damage, expense or liability arising from any action or failure to act with respect to this Plan, except in the case of intentional misconduct. V. Claims Procedure ---------------- A. Claim. Any person claiming a benefit, requesting an ----- interpretation or ruling under the Plan, or requesting information under the Plan shall present the request in writing to the Committee, which shall respond in writing as soon as practicable, but no more than 63 days after the end of the month the request is received. Payment of a claimed benefit shall also constitute a written response. B. Denial of Claim. If the claim or request is denied, the --------------- written notice of denial shall state: 1. The reason for denial, with specific reference to the provision on which the denial is based. 2. A description of any additional material or information required and an explanation of why it is necessary. 3. An explanation of the Plan's claim review procedure. For the purposes of this Section, the failure by the Committee to deliver within the 63-day period notice of a written denial of claim shall constitute a written response of denial, unless the failure to correspond was the result of clerical or administrative error. C. Review of Claim. Any person whose claim or request is --------------- denied or who has not received a response within 63 days after the end of the month in which the request was received may request review by notice given in writing to the Compensation Committee. The claim or request shall be reviewed by the Compensation Committee who may, but shall not be required to, grant the claimant a hearing. On review, the claimant may have representation, examine pertinent documents, and submit issues and comments in writing. - 8 - D. Final Decision. The decision on review shall normally be -------------- made within 60 days. If an extension of time is required for a hearing or other special circumstances, the claimant shall be notified and the time limit shall be 120 days. The decision shall be in writing and shall state the reason and the relevant plan provisions. All decisions on review shall be final and bind all parties concerned. VI. Miscellaneous ------------- A. Obligations to Company. If an Executive or the ---------------------- Executive's surviving Eligible Spouse becomes entitled to a benefit under the Plan and the Executive has outstanding any debt, obligation, or other liability representing an amount owing to the Company, then the Company may offset such amount owing to it or an affiliate against the amount of benefits otherwise distributable. The determination of the amount and duration of the offset shall be made by the Committee. B. Not a Contract of Employment. The terms and conditions ---------------------------- of the Plan shall not be deemed to constitute a contract of employment between the Company and the Executive, and the Executive (or his or her surviving Eligible Spouse) shall have no rights against the Company except as may be otherwise provided specifically herein. Moreover, nothing in the Plan shall be deemed to give an Executive the right to be retained in the service of the Company or to interfere with the right of the Company to discipline or discharge him or her at any time. C. Protective Provisions. An Executive shall cooperate with --------------------- the Company by furnishing any and all information requested by the Company in order to evaluate a claim or to facilitate the payment of benefits hereunder, and by taking such physical examinations as the Company may deem necessary and taking such other action as may be requested by the Company. D. Captions. The captions of the articles, sections and -------- paragraphs of the Plan are for convenience only and shall not control or affect the meaning or construction of any of its provisions. - 9 - E. Governing Law. The provisions of the Plan shall be ------------- construed, administered, and enforced according to and governed by the laws (other than conflict of law provisions) of the state of Ohio, except to the extent such laws are superseded by ERISA. F. Validity. In case any provision of the Plan shall be -------- illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining parts hereof, but the Plan shall be construed and enforced as if such illegal and invalid provision had never been included herein. G. Mistaken Information. If any information upon which an -------------------- Executive's benefit under the Plan is misstated or otherwise mistaken, such benefit shall not be invalidated (unless upon the basis of the correct information the Executive would not be entitled to a benefit), but the amount of the benefit shall be adjusted to the proper amount and any overpayments shall be charged against future payments. H. Taxes and Expenses. Any taxes imposed on Plan benefits ------------------ shall be the sole responsibility of the Executive or surviving Eligible Spouse. The Company shall deduct from Plan benefits any amounts required by applied law to be withheld. All Plan administration expenses incurred by the Company or Committee shall be borne by the Company. VII. Effective Date, Termination, and Amendment ------------------------------------------ The effective date of the Plan shall be September 29, 1985. The effective date of participation of an Executive in this Plan shall be determined by the Chief Executive Officer. The Plan may be terminated at any time and amended from time to time by action of the Board or the Compensation Committee or by a writing executed on behalf of the Board or the Compensation Committee by the Company's duly authorized officers, provided that neither termination nor any amendment of the Plan may, without the written approval of a participating Executive or surviving Eligible Spouse, reduce or terminate any accrued benefit. VIII. Successors ---------- The provisions of this Plan shall bind and inure to the benefit of the Company and its successors and assigns. The term successors as used herein shall include any corporate or other business entity which shall, whether by merger, consolidation, - 10 - purchase or otherwise acquire all or substantially all of the business and assets of the Company, and successors of any such corporation or other business entity. IN WITNESS WHEREOF, and pursuant to resolution of the Board, the Company has caused this instrument to be executed by its duly authorized officers effective as of September 29, 1985, amended and restated on December 19, 1989, and as amended and restated effective January 1, 1996. FOR THE COMPANY By: /s/ W. R. Holland Date 11/1/95 --------------------------------- ------- W. R. Holland President and Chief Executive Officer of Ohio Edison Company Chairman of the Board, Pennsylvania Power Company Witness: /s/ J. A. Gill -------------------------------- J. A. Gill Vice President, Administration EX-10 9 10-48 SEV PAY HOLLAND February 22, 1995 Mr. Willard R. Holland 161 E. Fairlawn Blvd. Akron, Ohio 44313 Dear Mr. Holland: The purpose of this letter is two-fold. First, the Board of Directors (the "Board") of Ohio Edison Company (the "Company") recognizes that when it hired you effective September 1, 1991, you were required to forfeit many of the benefits associated with your years of service with your prior employer. Therefore, in order to induce you to join the Company, the Board authorized the Company to recognize up to 25 years of your prior years of service for purposes of the Company's benefit programs, with the exception of the Company's tax-qualified defined benefit and defined contribution retirement plans. This letter confirms that with respect to the Company's other on-going benefit programs, as well as the Special Severance Agreement described below, your service with the Company is equal to your actual years of service commencing with your date of hire plus 25. Second, the Board also recognizes that, as is the case with many publicly held corporations, there always exists the possibility of a change of control of the Company. This possibility and the uncertainty it creates may result in the loss or distraction of members of management of the Company and its subsidiaries to the detriment of the Company and its shareholders. The Board considers the establishment, maintenance, and continuity of a sound and vital management to be essential to protecting and enhancing the best interests of the Company and its shareholders. The Board also believes that when a change of control is perceived as imminent, or is occurring, the Board should be able to receive and rely on disinterested advice from management regarding the best interests of the Company and its shareholders without concern that members of management might be distracted or concerned by the personal uncertainties and risks created by their perception of an imminent or occurring change of control. Accordingly, the Board has determined that appropriate steps should be taken to assure the Company of the continued employment and attention and dedication to duty of certain members of management of the Company and to ensure the availability of their disinterested advice, notwithstanding the possibility, threat or occurrence of a change of control. Therefore, in order to fulfill the above purposes, the Board has designated you as eligible for severance benefits as set forth below. Special Severance Agreement --------------------------- i. Offer ----- In order to induce you to remain in the employ of the Company and to provide continued services to the Company now and in the event that a Change of Control is imminent or occurring, this letter agreement (the "Agreement") sets forth severance benefits which the Company offers to pay to you in the event of a termination of your employment (in the manner described in Section 5 below) subsequent to a Change of Control of the Company (as defined in Section 4 below). ii. Operation --------- This Agreement shall be effective immediately upon its execution but anything in this Agreement to the contrary notwithstanding, neither this Agreement nor any of its provisions shall be operative unless and until there has been a Change of Control while you are still an employee of the Company, nor shall this Agreement govern or affect your employment relationship with the Company except as explicitly set forth herein. Upon a Change of Control, if you are still employed by the Company, this Agreement and all of its provisions shall become operative immediately. If your employment relationship with the Company is terminated before a Change of Control, you shall have no rights or obligations under this Agreement. 3. Term ---- (a) Term of Agreement: The term of this ----------------- Agreement shall commence immediately upon the date hereof and continue until December 31, 1997. (b) One-Year Evergreen Provision: Subject to ---------------------------- subsection (c) below, this Agreement shall be reviewed annually by the Board at a regular meeting held between October 1 and December 31 of each year. At such yearly review, the Board shall consider whether or not to extend the term of this Agreement for an additional year. Unless the Board affirmatively votes not to extend this Agreement, the term of this Agreement shall be 2 extended for a period of one year from the previous termination date. In the event the Board votes not to extend this Agreement, the termination date of this Agreement shall be the later of December 31, 1997 or thirty-six full calendar months from December 31st of the year in which this Agreement was last extended. (c) Subsection (b) above notwithstanding, upon the occurrence of a Change of Control, this Agreement shall be automatically extended for a period of thirty-six full calendar months commencing on the date of such Change of Control. At the end of such thirty-six month period, this Agreement shall terminate. 4. Change of Control ----------------- For the purpose of this Agreement, a "Change of Control" shall mean: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% (25% if such Person proposes any individual for election to the Board or any member of the Board is the representative of such Person) or more of either (i) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company (excluding an acquisition by virtue of the exercise of a conversion privilege), (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (iv) any acquisition by any corporation pursuant to a reorganization, merger or consolidation, if, following such reorganization, merger or consolidation, the conditions described in clauses (i), (ii) and (iii) of subsection (c) of this Section 4 are satisfied; or (b) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such 3 individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Approval by the shareholders of the Company of a reorganization, merger or consolidation, in each case, unless, following such reorganization, merger or consolidation, (i) more than 75% of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such reorganization, merger or consolidation in substantially the same proportions as their ownership, immediately prior to such reorganization, merger or consolidation, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding the Company, any employee benefit plan (or related trust) of the Company or such corporation resulting from such reorganization, merger or consolidation and any Person beneficially owning, immediately prior to such reorganization, merger or consolidation, directly or indirectly, 25% or more of the Outstanding Company Common stock or Outstanding Voting Securities, as the case may be) beneficially owns, directly or indirectly, 25% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation or the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors and (iii) at least a majority of the members of the board of directors of the corporation resulting from such reorganization, merger or consolidation were members of the Incumbent Board at the time of the execution of the initial agreement providing for such reorganization, merger or consolidation; or (d) Approval by the shareholders of the Company of (i) a complete liquidation or dissolution of the Company or (ii) the sale or other disposition of all or substantially all of the assets of the Company, other than to a corporation, with respect to which following such sale or other disposition, (A) more than 75% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then 4 beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such sale or other disposition in substantially the same proportion as their ownership, immediately prior to such sale or other disposition, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding the Company and any employee benefit plan (or related trust) of the Company or such corporation and any Person beneficially owning, immediately prior to such sale or other disposition, directly or indirectly, 25% or more of the Outstanding Company Common Stock or Outstanding Company Voting Securities, as the case may be) beneficially owns, directly or indirectly, 25% or more of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors and (C) at least a majority of the members of the board of directors of such corporation were members of the Incumbent Board at the time of the execution of the initial agreement or action of the Board providing for such sale or other disposition of assets of the Company. 5. Termination ----------- (a) Termination Following Change of Control: --------------------------------------- If, within a period of thirty-six full calendar months after a Change of Control (as defined above) of the Company, you are discharged without Cause or resign for Good Reason (as defined below), you shall be entitled to the benefits provided by this Agreement as set forth in Section 6 below. (b) Good Reason: If any of the following events ----------- occurs without your express consent and within thirty-six full calendar months after a Change of Control, you may voluntarily terminate your employment within 30 days of the occurrence of such event and be entitled to the severance benefits set forth in Section 6 below: (1) The Company assigns any duties to you which are inconsistent with your position, duties, offices, titles, status (including membership on the Board of Directors) responsibilities or reporting requirements in effect immediately prior to a Change of Control, or your removal from or any failure to re- elect you to any of such positions or offices, except in connection with termination of your employment for Cause, Disability, Death or Normal Retirement, or by you other than for Good Reason, or; 5 (2) Changes to your base salary are inconsistent with your annual performance review and the salary program applicable to other senior executives of the Company; or (3) The Company discontinues any bonus or other compensation plans or any other benefit, stock ownership plan, stock purchase plan, stock option plan, life insurance plan, health plan, disability plan or similar plan (as the same existed immediately prior to the Change of Control) in which you participated or were eligible to participate in immediately prior to the Change of Control and in lieu thereof does not make available plans providing at least comparable benefits; or (4) The Company takes action which adversely affects your participation in, or eligibility for, or materially reduces your benefits otherwise earned or payable under, any of the plans described in (3) above (unless such action is required by law), or which deprives you of any material fringe benefit enjoyed by you immediately prior to the Change of Control, or fails to provide you with the number of paid vacation days to which you were entitled in accordance with normal vacation policy immediately prior to the Change of Control; or (5) The Company requires you to be based at any office or location other than one within a 50 mile radius of the office or location at which you were based immediately prior to the Change of Control; (except for required travel on the Company's business to an extent substantially consistent with your business travel obligations as they existed at the time of a Change of Control of the Company); or, in the event you consent to being based anywhere more than fifty miles from such location, the failure by the Company to pay (or reimburse you for) all reasonable moving expenses incurred by you relating to a change of your principal residence in connection with such relocation and to indemnify you against any loss (defined as the difference between the actual sale price of such residence after the deduction of all real estate brokerage charges and related selling expenses) and the higher of (1) your aggregate investment in such residence or (2) the fair market value of such residence (as determined by a real estate appraiser designated by you and reasonably satisfactory to the Company) realized upon the sale of such residence in connection with any such change of residence; or 6 (6) The Company's requiring you to perform duties or services which necessitate absence overnight from your place of residence, because of travel involving the business or affairs of the Company, to a degree not substantially consistent with the extent of such absence necessitated by such travel during the period of twelve months immediately preceding a Change of Control of the Company; or (7) The Company purports to terminate your employment otherwise than as expressly permitted by this Agreement; or (8) The Company fails to comply with and satisfy Section 9 below, provided that such successor has received at least ten days prior written notice from the Company or from you of the requirements of Section 9 below. You shall have the sole right to determine, in good faith, whether any of the above events has occurred. (c) Cause: Cause shall mean: conviction of a ----- felony or crime involving an act of moral turpitude, dishonesty, or misfeasance. (d) Notice of Termination: Any termination by --------------------- the Company for Cause, or by you for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 11 hereof. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the Date of Termination. (e) Date of Termination: "Date of Termination" ------------------- means (1) if your employment is terminated by the Company for Cause or without Cause, or by you for Good Reason or other than for Good Reason, the date of receipt by the other of the Notice of Termination, and (2) if your employment is terminated by reason of Death, Disability or Normal Retirement (as defined below), the Date of Termination shall be the date of your death, the date of receipt of your Notice of Termination, or the first of the month following the month you reach the normal retirement age for employees in your position, respectively. 7 (f) Normal Retirement: If your employment is ----------------- terminated due to normal retirement, you shall not be entitled to severance benefits under this Agreement, regardless of the occurrence of a Change of Control. A termination by normal retirement shall have occurred where your termination is caused by the fact that you have reached normal retirement age for employees in your position. (g) Termination for Cause: If subsequent to a --------------------- Change of Control, your employment is terminated by the Company for Cause, the Company shall pay you your full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, and you shall also receive all accrued or vested benefits of any kind to which you are, or would otherwise have been, entitled throughout the Date of Termination (as defined in subsection (e) of this Section 5), and the Company shall thereupon have no further obligation to you under this Agreement. (h) Disability or Death: If termination of your ------------------- employment results from your Disability or death, you shall not be entitled to severance benefits under this Agreement, regardless of the occurrence of a Change of Control. You or your designated beneficiary, in the case of your death, shall receive all accrued or vested benefits of any kind to which you are, or would otherwise have been, entitled through the Date of Termination, and the Company shall thereupon have no further obligation to you under this Agreement. "Disability" shall mean, for the purposes of this Agreement, your total and permanent disability such that you would be entitled to receive Disability Retirement Income under the Company's qualified pension plans, except for purposes of this provision you need not have completed ten (10) years of service with the Company, followed by the Company giving you thirty days written notice of its intention to terminate your employment by reason thereof, and your failure because of your Disability to resume the full-time performance of your duties within such period of thirty days and thereafter perform the same for a period of two consecutive months. 6. Severance Benefits ------------------ If, within a period of thirty-six full calendar months after a Change of Control of the Company, you are discharged without Cause or resign for Good Reason, the following shall be applicable: 8 (a) The Company shall pay to you within ten business days following the Date of Termination a lump sum severance benefit, payable in cash, the amounts determined as provided below: (1) Your full base salary through the Date of Termination at the rate in effect at the time Notice of Termination, is given. (2) In lieu of further salary payments to you for periods subsequent to the Date of Termination, an amount equal to 2.99 multiplied by the sum of your annual base salary at the rate in effect as of the Date of Termination (or, if higher, at the rate in effect as of the time of the Change of Control) plus the average annual short-term incentive amount awarded to you under the Ohio Edison System Executive Incentive Compensation Plan ("Executive Incentive Plan") for the three years immediately preceding the year during which the Date of Termination occurs whether or not fully paid. (b) For purposes of the Executive Incentive Plan, you shall be considered to have retired and will be paid the pro rata portion of your short-term incentive award earned, if any, and any long-term deferred incentive awards earned, if any, per the terms of the plan. (c) For purposes of determining the amount of benefits you may continue after the Date of Termination under the Company's group health and life insurance plans, you shall be considered as having retired at your current age or age 55, whichever is greater, and your current years of service calculated as if you are age 55, whichever is greater. (d) For purposes of the Ohio Edison System Executive Deferred Compensation Plan ("Deferred Compensation Plan"), you shall be considered to have retired at age 62, entitling you to the full amount of your Retirement Account, if any, payable in accordance with the terms of the Deferred Compensation Plan. (e) For purposes of calculating your benefit under the Ohio Edison System Supplemental Executive Retirement Plan ("SERP"), you shall be considered as having retired from the Company at your current age or age 55, whichever is greater, and your current years of service or 5 years of service, whichever is greater. Your benefit under the SERP will commence on the first of the month following the Date of Termination as follows: 9 (1) If, on the Date of Termination, you are less than age 55, your monthly benefit from the SERP shall be calculated in accordance with the terms of the SERP except that (a) until you reach age 55, such SERP benefit shall be offset by any compensation earned by you from a subsequent employer as provided in paragraph (j) below; (b) at age 55, such SERP benefit shall only be offset by the monthly amounts to which you will be entitled at age 55 from the Company's tax-qualified pension plan, the supplementary pension make-up benefit under the Deferred Compensation Plan and/or the tax- qualified pension plan of any previous employers (collectively, "Pension Income"), irrespective of whether you receive such benefits at that time; and, (c) at age 62 such SERP benefit shall be offset only by Pension Income and the monthly primary Social Security Benefit to which you will be entitled at age 62, irrespective of whether you receive such benefits at that time; (2) If, on the Date of Termination, you are at least age 55 but less than age 62, your monthly benefit from the SERP shall be calculated in accordance with the terms of the SERP, except that (a) until you reach age 62, such SERP benefit shall be offset only by your Pension Income, irrespective of whether you receive such benefits at that time; and (b) at age 62 such SERP benefit shall be offset only by Pension Income and the monthly primary Social Security benefit to which you will be entitled at age 62, irrespective of whether you receive such benefits at that time; (3) If, on the Date of Termination, you are at least age 62,your monthly benefit from the SERP shall be calculated and offset in accordance with the terms of the SERP. (f) For purposes of the Executive Supplemental Life Plan ("ESLP"), you may continue to participate as if you retired from the Company prior to age 65 in accordance with the terms of the ESLP, irrespective of your age at the Date of Termination. (g) In the event that because of their relationship to you, members of your family or other individuals are covered by any plan, program, or arrangement described in subsection (b) above immediately prior to the Date of Termination, the provisions set forth in subsection (b) shall apply equally to require the continued coverage of such persons; provided, however, that if under the terms of any such plan, program or arrangement, any such person would have ceased to be eligible for coverage during the period in which the Company is 10 obligated to continue coverage for you, nothing set forth herein shall obligate the Company to continue to provide coverage which would have ceased even if you had remained an employee of the Company. (h) The Company shall enable you to purchase the automobile, if any, which the Company was providing for your use at the time Notice of Termination was given at the wholesale value of such automobile at such time. (i) Other Benefits Payable: The severance ---------------------- benefits described in Subsections (a), (b), (c), (d), (e), (f), (g) and (h) above shall be payable in addition to, and not in lieu of, all other accrued or vested or earned but deferred compensation, rights, options or other benefits which may be owed to you following your discharge or resignation (and are not contingent on any Change of Control preceding such termination), including but not limited to, accrued and/or banked vacation, amounts or benefits payable, if any, under any bonus or other compensation plans, stock option plan, stock ownership plan, stock purchase plan, life insurance plan, health plan, disability plan or similar plan. (j) Payment Obligations: Other than as set forth ------------------- in the Deferred Compensation Plan or the SERP, upon a Change of Control the Company's obligations to pay the severance benefits or make any other payments described in this Section 6 shall not be affected by any set-off, counterclaim, recoupment, defense or other right which the Company or any of its subsidiaries may have against the Executive or anyone else. If you are less than age 55 at the time of your discharge without Cause or your resignation for Good Reason, then, commencing 24 months after the Date of Termination, you shall be required to seek employment elsewhere and thereby mitigate the amount of SERP benefit payable under Paragraph (d)(1). You shall not be required to accept a position other than as a senior executive of an entity comparable in size to the Company and having duties, responsibilities and authority substantially similar in scope and nature to your position with the Company immediately prior to the Date of Termination. Upon obtaining such employment, you shall promptly notify the Company of the compensation and benefits you received or will receive from such new employer and of any changes therein. (k) Legal Fees and Expenses: Subject to and ----------------------- contingent upon the occurrence of a Change of Control the Company agrees to pay promptly as incurred, to the full extent permitted by law, all legal fees and expenses which you may reasonably thereafter incur as a result of any contest, litigation or 11 arbitration (regardless of the outcome thereof) by the Company, you or others of the validity or enforceability of, or liability under, any provision of this Agreement, the Deferred Compensation Plan, or the SERP (including any contest by you about the amount of any payment pursuant to this Agreement, the Deferred Compensation Plan or the SERP), plus in each case interest on any delayed payment at the rate of 150% of the Prime Rate as published in the Wall Street Journal in the Money Rates Table on the business day immediately preceding the conclusion of any such contest, litigation or arbitration. (l) Certain Additional Payments by the Company: ------------------------------------------ (1) Anything in this Agreement to the contrary notwithstanding, in the event that the Executive becomes entitled to severance benefits under this Section 6 hereof, the Deferred Compensation Plan, the SERP or otherwise, and it shall be determined that any payment or distribution by the Company to or for the benefit of the Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement, the Deferred Compensation Plan, the SERP or otherwise (a "Payment"), would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including any Excise Tax, imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (2) All determinations required to be made under this subsection (i), including whether a Gross-Up Payment is required and the amount of such Gross-Up Payment, shall be made in good faith by the Company which shall provide detailed supporting calculations to the Executive within 15 business days of the date of termination of the Executive's employment, if applicable, or such earlier time as is requested by the Company. If the Company determines that no Excise Tax is payable by the Executive, it shall furnish the Executive with an opinion of counsel that he has substantial authority not to report any Excise Tax on his federal income tax return. Except as hereinafter provided, any determination by the Company shall be 12 binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Company hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Executive is required to make a payment of any Excise Tax, the Company shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. 7. Assignability ------------- This Agreement is binding on and is for the benefit of the parties hereto and their respective successors, heirs, executors, administrators and other legal representatives. Neither this Agreement nor any right or obligation hereunder may be assigned by the Company (except to any subsidiary or affiliate) or by you. 8. Non-Competition --------------- If subsequent to a Change of Control of the Company you should for Good Reason terminate your employment, then for a period of two years after the Date of Termination, you shall not on your own account without the consent of the Company, or as a shareholder, employee, officer, director, consultant or otherwise, engage directly or indirectly in any business or enterprise which is in competition with the Company. For all purposes of this agreement the words "competition with the Company" shall mean the provision of gas and/or electric services on a retail and wholesale basis in the State of Ohio and in any other state contiguous to the State of Ohio; provided, however, that nothing herein contained shall prevent you from purchasing and holding for investment less than 5% of the shares of any corporation the shares of which are regularly traded either on a national securities exchange or in the over-the-counter market. 9. Successor --------- The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. 13 As used in this Agreement, "Company" shall mean the company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. Failure of the Company to obtain such agreement prior to the effectiveness of such succession shall be a breach of this Agreement and shall entitle you to compensation from the Company in the same amount and on the same terms as you would be entitled hereunder if you terminated your employment for Good Reason, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. This agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amounts would still be payable to you hereunder if you had continued to live, all such amounts, unless otherwise provided herein, shall be paid to such beneficiary or beneficiaries as you shall have designated by written notice delivered to the Company prior to your death or, failing such written notice, to your estate. 10. Amendment; Waiver ----------------- This Agreement may be amended only by an instrument in writing signed by the parties hereto, and any provision hereof may be waived only by an instrument in writing signed by the party or parties against whom or which enforcement of such waiver is sought. The failure of either party hereto at any time to require the performance by the other party hereto of any provision hereof shall in no way affect the full right to require such performance at any time thereafter, nor shall the waiver by either party hereto of a breach of any provision hereof be taken or held to be a waiver of any succeeding breach of such provision or a waiver of the provision itself or a waiver of any other provision of this Agreement. 11. Notices ------- All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to you: --------- Willard R. Holland 161 E. Fairlawn Blvd. Akron, Ohio 44313 14 If to the Company: ----------------- Secretary Ohio Edison Company 76 South Main Street Akron, Ohio 44308 or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. 12. Validity -------- The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect, nor shall the invalidity or unenforceability of a portion of any provision of this Agreement affect the validity or enforceability of the balance of such provision. If any provision of this Agreement, or portion thereof is so broad, in scope or duration, as to be unenforceable, such provision or portion thereof shall be interpreted to be only so broad as is enforceable. 13. Withholding ----------- The Company may withhold from any amounts payable under this Agreement such Federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation. 14. Entire Agreement ---------------- This Agreement contains the entire understanding of the Company and you with respect to the subject matter hereof. 15. Applicable Law -------------- This Agreement shall be governed by and construed in accordance with the substantive internal law and not the conflict of law provisions of the State of Ohio. If the terms of the foregoing Agreement are acceptable to you, please sign and return to the Company the enclosed copy of this Agreement whereupon this Agreement shall become a valid and legally binding contract between you and the Company. 15 Very truly yours, OHIO EDISON COMPANY By: /s/ H. Peter Burg --------------------------- H. Peter Burg Accepted and Agreed as of the date first above written: /s/ Willard R. Holland --------------------------- Willard R. Holland 19866 16 EX-10 10 10-49 SEV PAY BURG February 22, 1995 Mr. H. Peter Burg 3331 Saratoga Blvd. Stow, Ohio 44224 Special Severance Agreement --------------------------- Dear Mr. Burg: The Board of Directors (the "Board") of Ohio Edison Company (the "Company") recognizes that, as is the case with many publicly held corporations, there always exists the possibility of a change of control of the Company. This possibility and the uncertainty it creates may result in the loss or distraction of members of management of the Company and its subsidiaries to the detriment of the Company and its shareholders. The Board considers the establishment, maintenance, and continuity of a sound and vital management to be essential to protecting and enhancing the best interests of the Company and its shareholders. The Board also believes that when a change of control is perceived as imminent, or is occurring, the Board should be able to receive and rely on disinterested advice from management regarding the best interests of the Company and its shareholders without concern that members of management might be distracted or concerned by the personal uncertainties and risks created by their perception of an imminent or occurring change of control. Accordingly, the Board has determined that appropriate steps should be taken to assure the Company of the continued employment and attention and dedication to duty of certain members of management of the Company and to ensure the availability of their disinterested advice, notwithstanding the possibility, threat or occurrence of a change of control. Therefore, in order to fulfill the above purposes, the Board has designated you as eligible for severance benefits as set forth below. i. Offer ----- In order to induce you to remain in the employ of the Company and to provide continued services to the Company now and in the event that a Change of Control is imminent or occurring, this letter agreement (the "Agreement") sets forth severance benefits which the Company offers to pay to you in the event of a termination of your employment (in the manner described in Section 5 below) subsequent to a Change of Control of the Company (as defined in Section 4 below). ii. Operation --------- This Agreement shall be effective immediately upon its execution but anything in this Agreement to the contrary notwithstanding, neither this Agreement nor any of its provisions shall be operative unless and until there has been a Change of Control while you are still an employee of the Company, nor shall this Agreement govern or affect your employment relationship with the Company except as explicitly set forth herein. Upon a Change of Control, if you are still employed by the Company, this Agreement and all of its provisions shall become operative immediately. If your employment relationship with the Company is terminated before a Change of Control, you shall have no rights or obligations under this Agreement. 3. Term ---- (a) Term of Agreement: The term of this ----------------- Agreement shall commence immediately upon the date hereof and continue until December 31, 1997. (b) One-Year Evergreen Provision: Subject to ---------------------------- subsection (c) below, this Agreement shall be reviewed annually by the Board at a regular meeting held between October 1 and December 31 of each year. At such yearly review, the Board shall consider whether or not to extend the term of this Agreement for an additional year. Unless the Board affirmatively votes not to extend this Agreement, the term of this Agreement shall be extended for a period of one year from the previous termination date. In the event the Board votes not to extend this Agreement, the termination date of this Agreement shall be the later of December 31, 1997 or thirty-six full calendar months from December 31st of the year in which this Agreement was last extended. (c) Subsection (b) above notwithstanding, upon the occurrence of a Change of Control, this Agreement shall be automatically extended for a period of thirty-six full calendar months commencing on the date of such Change of Control. At the end of such thirty-six month period, this Agreement shall terminate. 4. Change of Control ----------------- For the purpose of this Agreement, a "Change of Control" shall mean: 2 (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% (25% if such Person proposes any individual for election to the Board or any member of the Board is the representative of such Person) or more of either (i) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company (excluding an acquisition by virtue of the exercise of a conversion privilege), (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (iv) any acquisition by any corporation pursuant to a reorganization, merger or consolidation, if, following such reorganization, merger or consolidation, the conditions described in clauses (i), (ii) and (iii) of subsection (c) of this Section 4 are satisfied; or (b) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Approval by the shareholders of the Company of a reorganization, merger or consolidation, in each case, unless, following such reorganization, merger or consolidation, (i) more than 75% of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities 3 immediately prior to such reorganization, merger or consolidation in substantially the same proportions as their ownership, immediately prior to such reorganization, merger or consolidation, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding the Company, any employee benefit plan (or related trust) of the Company or such corporation resulting from such reorganization, merger or consolidation and any Person beneficially owning, immediately prior to such reorganization, merger or consolidation, directly or indirectly, 25% or more of the Outstanding Company Common stock or Outstanding Voting Securities, as the case may be) beneficially owns, directly or indirectly, 25% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation or the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors and (iii) at least a majority of the members of the board of directors of the corporation resulting from such reorganization, merger or consolidation were members of the Incumbent Board at the time of the execution of the initial agreement providing for such reorganization, merger or consolidation; or (d) Approval by the shareholders of the Company of (i) a complete liquidation or dissolution of the Company or (ii) the sale or other disposition of all or substantially all of the assets of the Company, other than to a corporation, with respect to which following such sale or other disposition, (A) more than 75% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such sale or other disposition in substantially the same proportion as their ownership, immediately prior to such sale or other disposition, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding the Company and any employee benefit plan (or related trust) of the Company or such corporation and any Person beneficially owning, immediately prior to such sale or other disposition, directly or indirectly, 25% or more of the Outstanding Company Common Stock or Outstanding Company Voting Securities, as the case may be) beneficially owns, directly or indirectly, 25% or more of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors and (C) at least a majority of the members of the board 4 of directors of such corporation were members of the Incumbent Board at the time of the execution of the initial agreement or action of the Board providing for such sale or other disposition of assets of the Company. 5. Termination ----------- (a) Termination Following Change of Control: --------------------------------------- If, within a period of thirty-six full calendar months after a Change of Control (as defined above) of the Company, you are discharged without Cause or resign for Good Reason (as defined below), you shall be entitled to the benefits provided by this Agreement as set forth in Section 6 below. (b) Good Reason: If any of the following events ----------- occurs without your express consent and within thirty-six full calendar months after a Change of Control, you may voluntarily terminate your employment within 30 days of the occurrence of such event and be entitled to the severance benefits set forth in Section 6 below: (1) The Company assigns any duties to you which are inconsistent with your position, duties, offices, titles, status (including membership on the Board of Directors) responsibilities or reporting requirements in effect immediately prior to a Change of Control, or your removal from or any failure to re- elect you to any of such positions or offices, except in connection with termination of your employment for Cause, Disability, Death or Normal Retirement, or by you other than for Good Reason, or; (2) Changes to your base salary are inconsistent with your annual performance review and the salary program applicable to other senior executives of the Company; or (3) The Company discontinues any bonus or other compensation plans or any other benefit, stock ownership plan, stock purchase plan, stock option plan, life insurance plan, health plan, disability plan or similar plan (as the same existed immediately prior to the Change of Control) in which you participated or were eligible to participate in immediately prior to the Change of Control and in lieu thereof does not make available plans providing at least comparable benefits; or 5 (4) The Company takes action which adversely affects your participation in, or eligibility for, or materially reduces your benefits otherwise earned or payable under, any of the plans described in (3) above (unless such action is required by law), or which deprives you of any material fringe benefit enjoyed by you immediately prior to the Change of Control, or fails to provide you with the number of paid vacation days to which you were entitled in accordance with normal vacation policy immediately prior to the Change of Control; or (5) The Company requires you to be based at any office or location other than one within a 50 mile radius of the office or location at which you were based immediately prior to the Change of Control; (except for required travel on the Company's business to an extent substantially consistent with your business travel obligations as they existed at the time of a Change of Control of the Company); or, in the event you consent to being based anywhere more than fifty miles from such location, the failure by the Company to pay (or reimburse you for) all reasonable moving expenses incurred by you relating to a change of your principal residence in connection with such relocation and to indemnify you against any loss (defined as the difference between the actual sale price of such residence after the deduction of all real estate brokerage charges and related selling expenses) and the higher of (1) your aggregate investment in such residence or (2) the fair market value of such residence (as determined by a real estate appraiser designated by you and reasonably satisfactory to the Company) realized upon the sale of such residence in connection with any such change of residence; or (6) The Company's requiring you to perform duties or services which necessitate absence overnight from your place of residence, because of travel involving the business or affairs of the Company, to a degree not substantially consistent with the extent of such absence necessitated by such travel during the period of twelve months immediately preceding a Change of Control of the Company; or (7) The Company purports to terminate your employment otherwise than as expressly permitted by this Agreement; or 6 (8) The Company fails to comply with and satisfy Section 9 below, provided that such successor has received at least ten days prior written notice from the Company or from you of the requirements of Section 9 below. You shall have the sole right to determine, in good faith, whether any of the above events has occurred. (c) Cause: Cause shall mean: conviction of a ----- felony or crime involving an act of moral turpitude, dishonesty, or misfeasance. (d) Notice of Termination: Any termination by --------------------- the Company for Cause, or by you for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 11 hereof. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the Date of Termination. (e) Date of Termination: "Date of Termination" ------------------- means (1) if your employment is terminated by the Company for Cause or without Cause, or by you for Good Reason or other than for Good Reason, the date of receipt by the other of the Notice of Termination, and (2) if your employment is terminated by reason of Death, Disability or Normal Retirement (as defined below), the Date of Termination shall be the date of your death, the date of receipt of your Notice of Termination, or the first of the month following the month you reach the normal retirement age for employees in your position, respectively. (f) Normal Retirement: If your employment is ----------------- terminated due to normal retirement, you shall not be entitled to severance benefits under this Agreement, regardless of the occurrence of a Change of Control. A termination by normal retirement shall have occurred where your termination is caused by the fact that you have reached normal retirement age for employees in your position. (g) Termination for Cause: If subsequent to a --------------------- Change of Control, your employment is terminated by the Company for Cause, the Company shall pay you your full base salary 7 through the Date of Termination at the rate in effect at the time Notice of Termination is given, and you shall also receive all accrued or vested benefits of any kind to which you are, or would otherwise have been, entitled throughout the Date of Termination (as defined in subsection (e) of this Section 5), and the Company shall thereupon have no further obligation to you under this Agreement. (h) Disability or Death: If termination of ------------------- your employment results from your Disability or death, you shall not be entitled to severance benefits under this Agreement, regardless of the occurrence of a Change of Control. You or your designated beneficiary, in the case of your death, shall receive all accrued or vested benefits of any kind to which you are, or would otherwise have been, entitled through the Date of Termination, and the Company shall thereupon have no further obligation to you under this Agreement. "Disability" shall mean, for the purposes of this Agreement, your total and permanent disability such that you would be entitled to receive Disability Retirement Income under the Company's qualified pension plans, except for purposes of this provision you need not have completed ten (10) years of service with the Company, followed by the Company giving you thirty days written notice of its intention to terminate your employment by reason thereof, and your failure because of your Disability to resume the full-time performance of your duties within such period of thirty days and thereafter perform the same for a period of two consecutive months. 6. Severance Benefits ------------------ If, within a period of thirty-six full calendar months after a Change of Control of the Company, you are discharged without Cause or resign for Good Reason, the following shall be applicable: (a) The Company shall pay to you within ten business days following the Date of Termination a lump sum severance benefit, payable in cash, the amounts determined as provided below: (1) Your full base salary through the Date of Termination at the rate in effect at the time Notice of Termination, is given. (2) In lieu of further salary payments to you for periods subsequent to the Date of Termination, an amount equal to 2.99 multiplied by the sum of your annual base salary at the rate in effect as of the Date of Termination (or, if higher, at the rate in effect as 8 of the time of the Change of Control) plus the average annual short-term incentive amount awarded to you under the Ohio Edison System Executive Incentive Compensation Plan ("Executive Incentive Plan") for the three years immediately preceding the year during which the Date of Termination occurs whether or not fully paid. (b) For purposes of the Executive Incentive Plan, you shall be considered to have retired and will be paid the pro rata portion of your short-term incentive award earned, if any, and any long-term deferred incentive awards earned, if any, per the terms of the plan. (c) For purposes of determining the amount of benefits you may continue after the Date of Termination under the Company's group health and life insurance plans, you shall be considered as having retired at your current age or age 55, whichever is greater, and your current years of service calculated as if you are age 55, whichever is greater. (d) For purposes of the Ohio Edison System Executive Deferred Compensation Plan ("Deferred Compensation Plan"), you shall be considered to have retired at age 62, entitling you to the full amount of your Retirement Account, if any, payable in accordance with the terms of the Deferred Compensation Plan. (e) For purposes of calculating your benefit under the Ohio Edison System Supplemental Executive Retirement Plan ("SERP"), you shall be considered as having retired from the Company at your current age or age 55, whichever is greater, and your current years of service or 5 years of service, whichever is greater. Your benefit under the SERP will commence on the first of the month following the Date of Termination as follows: (1) If, on the Date of Termination, you are less than age 55, your monthly benefit from the SERP shall be calculated in accordance with the terms of the SERP except that (a) until you reach age 55, such SERP benefit shall be offset by any compensation earned by you from a subsequent employer as provided in paragraph (j) below; (b) at age 55, such SERP benefit shall only be offset by the monthly amounts to which you will be entitled at age 55 from the Company's tax-qualified pension plan, the supplementary pension make-up benefit under the Deferred Compensation Plan and/or the tax- qualified pension plan of any previous employers (collectively, "Pension Income"), irrespective of whether you receive such benefits at that time; and, (c) at age 62 such SERP benefit shall be offset only by Pension Income and the monthly primary Social Security Benefit to which you will be entitled at age 62, 9 irrespective of whether you receive such benefits at that time; (2) If, on the Date of Termination, you are at least age 55 but less than age 62, your monthly benefit from the SERP shall be calculated in accordance with the terms of the SERP, except that (a) until you reach age 62, such SERP benefit shall be offset only by your Pension Income, irrespective of whether you receive such benefits at that time; and (b) at age 62 such SERP benefit shall be offset only by Pension Income and the monthly primary Social Security benefit to which you will be entitled at age 62, irrespective of whether you receive such benefits at that time; (3) If, on the Date of Termination, you are at least age 62, your monthly benefit from the SERP shall be calculated and offset in accordance with the terms of the SERP. (f) For purposes of the Executive Supplemental Life Plan ("ESLP"), you may continue to participate as if you retired from the Company prior to age 65 in accordance with the terms of the ESLP, irrespective of your age at the Date of Termination. (g) In the event that because of their relationship to you, members of your family or other individuals are covered by any plan, program, or arrangement described in subsection (b) above immediately prior to the Date of Termination, the provisions set forth in subsection (b) shall apply equally to require the continued coverage of such persons; provided, however, that if under the terms of any such plan, program or arrangement, any such person would have ceased to be eligible for coverage during the period in which the Company is obligated to continue coverage for you, nothing set forth herein shall obligate the Company to continue to provide coverage which would have ceased even if you had remained an employee of the Company. (h) The Company shall enable you to purchase the automobile, if any, which the Company was providing for your use at the time Notice of Termination was given at the wholesale value of such automobile at such time. (i) Other Benefits Payable: The severance ---------------------- benefits described in Subsections (a), (b), (c), (d), (e), (f), (g) and (h) above shall be payable in addition to, and not in lieu of, all other accrued or vested or earned but deferred compensation, rights, options or other benefits which may be owed to you following your discharge or resignation (and are not 10 contingent on any Change of Control preceding such termination), including but not limited to, accrued and/or banked vacation, amounts or benefits payable, if any, under any bonus or other compensation plans, stock option plan, stock ownership plan, stock purchase plan, life insurance plan, health plan, disability plan or similar plan. (j) Payment Obligations: Other than as set forth ------------------- in the Deferred Compensation Plan or the SERP, upon a Change of Control the Company's obligations to pay the severance benefits or make any other payments described in this Section 6 shall not be affected by any set-off, counterclaim, recoupment, defense or other right which the Company or any of its subsidiaries may have against the Executive or anyone else. If you are less than age 55 at the time of your discharge without Cause or your resignation for Good Reason, then, commencing 24 months after the Date of Termination, you shall be required to seek employment elsewhere and thereby mitigate the amount of SERP benefit payable under Paragraph (d)(1). You shall not be required to accept a position other than as a senior executive of an entity comparable in size to the Company and having duties, responsibilities and authority substantially similar in scope and nature to your position with the Company immediately prior to the Date of Termination. Upon obtaining such employment, you shall promptly notify the Company of the compensation and benefits you received or will receive from such new employer and of any changes therein. (k) Legal Fees and Expenses: Subject to and ----------------------- contingent upon the occurrence of a Change of Control the Company agrees to pay promptly as incurred, to the full extent permitted by law, all legal fees and expenses which you may reasonably thereafter incur as a result of any contest, litigation or arbitration (regardless of the outcome thereof) by the Company, you or others of the validity or enforceability of, or liability under, any provision of this Agreement, the Deferred Compensation Plan, or the SERP (including any contest by you about the amount of any payment pursuant to this Agreement, the Deferred Compensation Plan or the SERP), plus in each case interest on any delayed payment at the rate of 150% of the Prime Rate as published in the Wall Street Journal in the Money Rates Table on the business day immediately preceding the conclusion of any such contest, litigation or arbitration. (l) Certain Additional Payments by the Company: ------------------------------------------ (1) Anything in this Agreement to the contrary notwithstanding, in the event that the Executive becomes entitled to severance benefits under this Section 6 hereof, the Deferred Compensation Plan, 11 the SERP or otherwise, and it shall be determined that any payment or distribution by the Company to or for the benefit of the Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement, the Deferred Compensation Plan, the SERP or otherwise (a "Payment"), would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including any Excise Tax, imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (2) All determinations required to be made under this subsection (i), including whether a Gross-Up Payment is required and the amount of such Gross-Up Payment, shall be made in good faith by the Company which shall provide detailed supporting calculations to the Executive within 15 business days of the date of termination of the Executive's employment, if applicable, or such earlier time as is requested by the Company. If the Company determines that no Excise Tax is payable by the Executive, it shall furnish the Executive with an opinion of counsel that he has substantial authority not to report any Excise Tax on his federal income tax return. Except as hereinafter provided, any determination by the Company shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Company hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Executive is required to make a payment of any Excise Tax, the Company shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. 12 7. Assignability ------------- This Agreement is binding on and is for the benefit of the parties hereto and their respective successors, heirs, executors, administrators and other legal representatives. Neither this Agreement nor any right or obligation hereunder may be assigned by the Company (except to any subsidiary or affiliate) or by you. 8. Non-Competition --------------- If subsequent to a Change of Control of the Company you should for Good Reason terminate your employment, then for a period of two years after the Date of Termination, you shall not on your own account without the consent of the Company, or as a shareholder, employee, officer, director, consultant or otherwise, engage directly or indirectly in any business or enterprise which is in competition with the Company. For all purposes of this agreement the words "competition with the Company" shall mean the provision of gas and/or electric services on a retail and wholesale basis in the State of Ohio and in any other state contiguous to the State of Ohio; provided, however, that nothing herein contained shall prevent you from purchasing and holding for investment less than 5% of the shares of any corporation the shares of which are regularly traded either on a national securities exchange or in the over-the-counter market. 9. Successor --------- The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. Failure of the Company to obtain such agreement prior to the effectiveness of such succession shall be a breach of this Agreement and shall entitle you to compensation from the Company in the same amount and on the same terms as you would be entitled hereunder if you terminated your employment for Good Reason, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. 13 This agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amounts would still be payable to you hereunder if you had continued to live, all such amounts, unless otherwise provided herein, shall be paid to such beneficiary or beneficiaries as you shall have designated by written notice delivered to the Company prior to your death or, failing such written notice, to your estate. 10. Amendment; Waiver ----------------- This Agreement may be amended only by an instrument in writing signed by the parties hereto, and any provision hereof may be waived only by an instrument in writing signed by the party or parties against whom or which enforcement of such waiver is sought. The failure of either party hereto at any time to require the performance by the other party hereto of any provision hereof shall in no way affect the full right to require such performance at any time thereafter, nor shall the waiver by either party hereto of a breach of any provision hereof be taken or held to be a waiver of any succeeding breach of such provision or a waiver of the provision itself or a waiver of any other provision of this Agreement. 11. Notices ------- All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to you: --------- H. Peter Burg 3331 Saratoga Blvd. Stow, Ohio 44224 If to the Company: ----------------- Secretary Ohio Edison Company 76 South Main Street Akron, Ohio 44308 or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. 14 12. Validity -------- The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect, nor shall the invalidity or unenforceability of a portion of any provision of this Agreement affect the validity or enforceability of the balance of such provision. If any provision of this Agreement, or portion thereof is so broad, in scope or duration, as to be unenforceable, such provision or portion thereof shall be interpreted to be only so broad as is enforceable. 13. Withholding ----------- The Company may withhold from any amounts payable under this Agreement such Federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation. 14. Entire Agreement ---------------- This Agreement contains the entire understanding of the Company and you with respect to the subject matter hereof. 15. Applicable Law -------------- This Agreement shall be governed by and construed in accordance with the substantive internal law and not the conflict of law provisions of the State of Ohio. If the terms of the foregoing Agreement are acceptable to you, please sign and return to the Company the enclosed copy of this Agreement whereupon this Agreement shall become a valid and legally binding contract between you and the Company. Very truly yours, OHIO EDISON COMPANY By: /s/Willard R. Holland ------------------------- Willard R. Holland Accepted and Agreed as of the date first above written: /s/ H. Peter Burg ---------------------------- H. Peter Burg 15 EX-10 11 10-50 SEV PAY ALEXANDER February 22, 1995 Mr. Anthony J. Alexander 3926 Troon Drive Uniontown, Ohio 44685 Special Severance Agreement --------------------------- Dear Mr. Alexander: The Board of Directors (the "Board") of Ohio Edison Company (the "Company") recognizes that, as is the case with many publicly held corporations, there always exists the possibility of a change of control of the Company. This possibility and the uncertainty it creates may result in the loss or distraction of members of management of the Company and its subsidiaries to the detriment of the Company and its shareholders. The Board considers the establishment, maintenance, and continuity of a sound and vital management to be essential to protecting and enhancing the best interests of the Company and its shareholders. The Board also believes that when a change of control is perceived as imminent, or is occurring, the Board should be able to receive and rely on disinterested advice from management regarding the best interests of the Company and its shareholders without concern that members of management might be distracted or concerned by the personal uncertainties and risks created by their perception of an imminent or occurring change of control. Accordingly, the Board has determined that appropriate steps should be taken to assure the Company of the continued employment and attention and dedication to duty of certain members of management of the Company and to ensure the availability of their disinterested advice, notwithstanding the possibility, threat or occurrence of a change of control. Therefore, in order to fulfill the above purposes, the Board has designated you as eligible for severance benefits as set forth below. i. Offer ----- In order to induce you to remain in the employ of the Company and to provide continued services to the Company now and in the event that a Change of Control is imminent or occurring, this letter agreement (the "Agreement") sets forth severance benefits which the Company offers to pay to you in the event of a termination of your employment (in the manner described in Section 5 below) subsequent to a Change of Control of the Company (as defined in Section 4 below). ii. Operation --------- This Agreement shall be effective immediately upon its execution but anything in this Agreement to the contrary notwithstanding, neither this Agreement nor any of its provisions shall be operative unless and until there has been a Change of Control while you are still an employee of the Company, nor shall this Agreement govern or affect your employment relationship with the Company except as explicitly set forth herein. Upon a Change of Control, if you are still employed by the Company, this Agreement and all of its provisions shall become operative immediately. If your employment relationship with the Company is terminated before a Change of Control, you shall have no rights or obligations under this Agreement. 3. Term ---- (a) Term of Agreement: The term of this ----------------- Agreement shall commence immediately upon the date hereof and continue until December 31, 1997. (b) One-Year Evergreen Provision: Subject to ---------------------------- subsection (c) below, this Agreement shall be reviewed annually by the Board at a regular meeting held between October 1 and December 31 of each year. At such yearly review, the Board shall consider whether or not to extend the term of this Agreement for an additional year. Unless the Board affirmatively votes not to extend this Agreement, the term of this Agreement shall be extended for a period of one year from the previous termination date. In the event the Board votes not to extend this Agreement, the termination date of this Agreement shall be the later of December 31, 1997 or thirty-six full calendar months from December 31st of the year in which this Agreement was last extended. (c) Subsection (b) above notwithstanding, upon the occurrence of a Change of Control, this Agreement shall be automatically extended for a period of thirty-six full calendar months commencing on the date of such Change of Control. At the end of such thirty-six month period, this Agreement shall terminate. 4. Change of Control ----------------- For the purpose of this Agreement, a "Change of Control" shall mean: 2 (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% (25% if such Person proposes any individual for election to the Board or any member of the Board is the representative of such Person) or more of either (i) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company (excluding an acquisition by virtue of the exercise of a conversion privilege), (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (iv) any acquisition by any corporation pursuant to a reorganization, merger or consolidation, if, following such reorganization, merger or consolidation, the conditions described in clauses (i), (ii) and (iii) of subsection (c) of this Section 4 are satisfied; or (b) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Approval by the shareholders of the Company of a reorganization, merger or consolidation, in each case, unless, following such reorganization, merger or consolidation, (i) more than 75% of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities 3 immediately prior to such reorganization, merger or consolidation in substantially the same proportions as their ownership, immediately prior to such reorganization, merger or consolidation, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding the Company, any employee benefit plan (or related trust) of the Company or such corporation resulting from such reorganization, merger or consolidation and any Person beneficially owning, immediately prior to such reorganization, merger or consolidation, directly or indirectly, 25% or more of the Outstanding Company Common stock or Outstanding Voting Securities, as the case may be) beneficially owns, directly or indirectly, 25% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation or the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors and (iii) at least a majority of the members of the board of directors of the corporation resulting from such reorganization, merger or consolidation were members of the Incumbent Board at the time of the execution of the initial agreement providing for such reorganization, merger or consolidation; or (d) Approval by the shareholders of the Company of (i) a complete liquidation or dissolution of the Company or (ii) the sale or other disposition of all or substantially all of the assets of the Company, other than to a corporation, with respect to which following such sale or other disposition, (A) more than 75% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such sale or other disposition in substantially the same proportion as their ownership, immediately prior to such sale or other disposition, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding the Company and any employee benefit plan (or related trust) of the Company or such corporation and any Person beneficially owning, immediately prior to such sale or other disposition, directly or indirectly, 25% or more of the Outstanding Company Common Stock or Outstanding Company Voting Securities, as the case may be) beneficially owns, directly or indirectly, 25% or more of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors and (C) at least a majority of the members of the board 4 of directors of such corporation were members of the Incumbent Board at the time of the execution of the initial agreement or action of the Board providing for such sale or other disposition of assets of the Company. 5. Termination ----------- (a) Termination Following Change of Control: --------------------------------------- If, within a period of thirty-six full calendar months after a Change of Control (as defined above) of the Company, you are discharged without Cause or resign for Good Reason (as defined below), you shall be entitled to the benefits provided by this Agreement as set forth in Section 6 below. (b) Good Reason: If any of the following events ----------- occurs without your express consent and within thirty-six full calendar months after a Change of Control, you may voluntarily terminate your employment within 30 days of the occurrence of such event and be entitled to the severance benefits set forth in Section 6 below: (1) The Company assigns any duties to you which are inconsistent with your position, duties, offices, titles, status (including membership on the Board of Directors) responsibilities or reporting requirements in effect immediately prior to a Change of Control, or your removal from or any failure to re- elect you to any of such positions or offices, except in connection with termination of your employment for Cause, Disability, Death or Normal Retirement, or by you other than for Good Reason, or; (2) Changes to your base salary are inconsistent with your annual performance review and the salary program applicable to other senior executives of the Company; or (3) The Company discontinues any bonus or other compensation plans or any other benefit, stock ownership plan, stock purchase plan, stock option plan, life insurance plan, health plan, disability plan or similar plan (as the same existed immediately prior to the Change of Control) in which you participated or were eligible to participate in immediately prior to the Change of Control and in lieu thereof does not make available plans providing at least comparable benefits; or 5 (4) The Company takes action which adversely affects your participation in, or eligibility for, or materially reduces your benefits otherwise earned or payable under, any of the plans described in (3) above (unless such action is required by law), or which deprives you of any material fringe benefit enjoyed by you immediately prior to the Change of Control, or fails to provide you with the number of paid vacation days to which you were entitled in accordance with normal vacation policy immediately prior to the Change of Control; or (5) The Company requires you to be based at any office or location other than one within a 50 mile radius of the office or location at which you were based immediately prior to the Change of Control; (except for required travel on the Company's business to an extent substantially consistent with your business travel obligations as they existed at the time of a Change of Control of the Company); or, in the event you consent to being based anywhere more than fifty miles from such location, the failure by the Company to pay (or reimburse you for) all reasonable moving expenses incurred by you relating to a change of your principal residence in connection with such relocation and to indemnify you against any loss (defined as the difference between the actual sale price of such residence after the deduction of all real estate brokerage charges and related selling expenses) and the higher of (1) your aggregate investment in such residence or (2) the fair market value of such residence (as determined by a real estate appraiser designated by you and reasonably satisfactory to the Company) realized upon the sale of such residence in connection with any such change of residence; or (6) The Company's requiring you to perform duties or services which necessitate absence overnight from your place of residence, because of travel involving the business or affairs of the Company, to a degree not substantially consistent with the extent of such absence necessitated by such travel during the period of twelve months immediately preceding a Change of Control of the Company; or (7) The Company purports to terminate your employment otherwise than as expressly permitted by this Agreement; or 6 (8) The Company fails to comply with and satisfy Section 9 below, provided that such successor has received at least ten days prior written notice from the Company or from you of the requirements of Section 9 below. You shall have the sole right to determine, in good faith, whether any of the above events has occurred. (c) Cause: Cause shall mean: conviction of a ----- felony or crime involving an act of moral turpitude, dishonesty, or misfeasance. (d) Notice of Termination: Any termination by --------------------- the Company for Cause, or by you for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 11 hereof. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the Date of Termination. (e) Date of Termination: "Date of Termination" ------------------- means (1) if your employment is terminated by the Company for Cause or without Cause, or by you for Good Reason or other than for Good Reason, the date of receipt by the other of the Notice of Termination, and (2) if your employment is terminated by reason of Death, Disability or Normal Retirement (as defined below), the Date of Termination shall be the date of your death, the date of receipt of your Notice of Termination, or the first of the month following the month you reach the normal retirement age for employees in your position, respectively. (f) Normal Retirement: If your employment is ----------------- terminated due to normal retirement, you shall not be entitled to severance benefits under this Agreement, regardless of the occurrence of a Change of Control. A termination by normal retirement shall have occurred where your termination is caused by the fact that you have reached normal retirement age for employees in your position. (g) Termination for Cause: If subsequent to a --------------------- Change of Control, your employment is terminated by the Company for Cause, the Company shall pay you your full base salary 7 through the Date of Termination at the rate in effect at the time Notice of Termination is given, and you shall also receive all accrued or vested benefits of any kind to which you are, or would otherwise have been, entitled throughout the Date of Termination (as defined in subsection (e) of this Section 5), and the Company shall thereupon have no further obligation to you under this Agreement. (h) Disability or Death: If termination of ------------------- your employment results from your Disability or death, you shall not be entitled to severance benefits under this Agreement, regardless of the occurrence of a Change of Control. You or your designated beneficiary, in the case of your death, shall receive all accrued or vested benefits of any kind to which you are, or would otherwise have been, entitled through the Date of Termination, and the Company shall thereupon have no further obligation to you under this Agreement. "Disability" shall mean, for the purposes of this Agreement, your total and permanent disability such that you would be entitled to receive Disability Retirement Income under the Company's qualified pension plans, except for purposes of this provision you need not have completed ten (10) years of service with the Company, followed by the Company giving you thirty days written notice of its intention to terminate your employment by reason thereof, and your failure because of your Disability to resume the full-time performance of your duties within such period of thirty days and thereafter perform the same for a period of two consecutive months. 6. Severance Benefits ------------------ If, within a period of thirty-six full calendar months after a Change of Control of the Company, you are discharged without Cause or resign for Good Reason, the following shall be applicable: (a) The Company shall pay to you within ten business days following the Date of Termination a lump sum severance benefit, payable in cash, the amounts determined as provided below: (1) Your full base salary through the Date of Termination at the rate in effect at the time Notice of Termination, is given. (2) In lieu of further salary payments to you for periods subsequent to the Date of Termination, an amount equal to 2.99 multiplied by the sum of your annual base salary at the rate in effect as of the Date of Termination (or, if higher, at the rate in effect as 8 of the time of the Change of Control) plus the average annual short-term incentive amount awarded to you under the Ohio Edison System Executive Incentive Compensation Plan ("Executive Incentive Plan") for the three years immediately preceding the year during which the Date of Termination occurs whether or not fully paid. (b) For purposes of the Executive Incentive Plan, you shall be considered to have retired and will be paid the pro rata portion of your short-term incentive award earned, if any, and any long-term deferred incentive awards earned, if any, per the terms of the plan. (c) For purposes of determining the amount of benefits you may continue after the Date of Termination under the Company's group health and life insurance plans, you shall be considered as having retired at your current age or age 55, whichever is greater, and your current years of service calculated as if you are age 55, whichever is greater. (d) For purposes of the Ohio Edison System Executive Deferred Compensation Plan ("Deferred Compensation Plan"), you shall be considered to have retired at age 62, entitling you to the full amount of your Retirement Account, if any, payable in accordance with the terms of the Deferred Compensation Plan. (e) For purposes of calculating your benefit under the Ohio Edison System Supplemental Executive Retirement Plan ("SERP"), you shall be considered as having retired from the Company at your current age or age 55, whichever is greater, and your current years of service or 5 years of service, whichever is greater. Your benefit under the SERP will commence on the first of the month following the Date of Termination as follows: (1) If, on the Date of Termination, you are less than age 55, your monthly benefit from the SERP shall be calculated in accordance with the terms of the SERP except that (a) until you reach age 55, such SERP benefit shall be offset by any compensation earned by you from a subsequent employer as provided in paragraph (j) below; (b) at age 55, such SERP benefit shall only be offset by the monthly amounts to which you will be entitled at age 55 from the Company's tax-qualified pension plan, the supplementary pension make-up benefit under the Deferred Compensation Plan and/or the tax- qualified pension plan of any previous employers (collectively, "Pension Income"), irrespective of whether you receive such benefits at that time; and, (c) at age 62 such SERP benefit shall be offset only by Pension Income and the monthly primary Social Security Benefit to which you will be entitled at age 62, 9 irrespective of whether you receive such benefits at that time; (2) If, on the Date of Termination, you are at least age 55 but less than age 62, your monthly benefit from the SERP shall be calculated in accordance with the terms of the SERP, except that (a) until you reach age 62, such SERP benefit shall be offset only by your Pension Income, irrespective of whether you receive such benefits at that time; and (b) at age 62 such SERP benefit shall be offset only by Pension Income and the monthly primary Social Security benefit to which you will be entitled at age 62, irrespective of whether you receive such benefits at that time; (3) If, on the Date of Termination, you are at least age 62, your monthly benefit from the SERP shall be calculated and offset in accordance with the terms of the SERP. (f) For purposes of the Executive Supplemental Life Plan ("ESLP"), you may continue to participate as if you retired from the Company prior to age 65 in accordance with the terms of the ESLP, irrespective of your age at the Date of Termination. (g) In the event that because of their relationship to you, members of your family or other individuals are covered by any plan, program, or arrangement described in subsection (b) above immediately prior to the Date of Termination, the provisions set forth in subsection (b) shall apply equally to require the continued coverage of such persons; provided, however, that if under the terms of any such plan, program or arrangement, any such person would have ceased to be eligible for coverage during the period in which the Company is obligated to continue coverage for you, nothing set forth herein shall obligate the Company to continue to provide coverage which would have ceased even if you had remained an employee of the Company. (h) The Company shall enable you to purchase the automobile, if any, which the Company was providing for your use at the time Notice of Termination was given at the wholesale value of such automobile at such time. (i) Other Benefits Payable: The severance ---------------------- benefits described in Subsections (a), (b), (c), (d), (e), (f), (g) and (h) above shall be payable in addition to, and not in lieu of, all other accrued or vested or earned but deferred compensation, rights, options or other benefits which may be owed to you following your discharge or resignation (and are not 10 contingent on any Change of Control preceding such termination), including but not limited to, accrued and/or banked vacation, amounts or benefits payable, if any, under any bonus or other compensation plans, stock option plan, stock ownership plan, stock purchase plan, life insurance plan, health plan, disability plan or similar plan. (j) Payment Obligations: Other than as set forth ------------------- in the Deferred Compensation Plan or the SERP, upon a Change of Control the Company's obligations to pay the severance benefits or make any other payments described in this Section 6 shall not be affected by any set-off, counterclaim, recoupment, defense or other right which the Company or any of its subsidiaries may have against the Executive or anyone else. If you are less than age 55 at the time of your discharge without Cause or your resignation for Good Reason, then, commencing 24 months after the Date of Termination, you shall be required to seek employment elsewhere and thereby mitigate the amount of SERP benefit payable under Paragraph (d)(1). You shall not be required to accept a position other than as a senior executive of an entity comparable in size to the Company and having duties, responsibilities and authority substantially similar in scope and nature to your position with the Company immediately prior to the Date of Termination. Upon obtaining such employment, you shall promptly notify the Company of the compensation and benefits you received or will receive from such new employer and of any changes therein. (k) Legal Fees and Expenses: Subject to and ----------------------- contingent upon the occurrence of a Change of Control the Company agrees to pay promptly as incurred, to the full extent permitted by law, all legal fees and expenses which you may reasonably thereafter incur as a result of any contest, litigation or arbitration (regardless of the outcome thereof) by the Company, you or others of the validity or enforceability of, or liability under, any provision of this Agreement, the Deferred Compensation Plan, or the SERP (including any contest by you about the amount of any payment pursuant to this Agreement, the Deferred Compensation Plan or the SERP), plus in each case interest on any delayed payment at the rate of 150% of the Prime Rate as published in the Wall Street Journal in the Money Rates Table on the business day immediately preceding the conclusion of any such contest, litigation or arbitration. (l) Certain Additional Payments by the Company: ------------------------------------------ (1) Anything in this Agreement to the contrary notwithstanding, in the event that the Executive becomes entitled to severance benefits under this Section 6 hereof, the Deferred Compensation Plan, 11 the SERP or otherwise, and it shall be determined that any payment or distribution by the Company to or for the benefit of the Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement, the Deferred Compensation Plan, the SERP or otherwise (a "Payment"), would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including any Excise Tax, imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (2) All determinations required to be made under this subsection (i), including whether a Gross-Up Payment is required and the amount of such Gross-Up Payment, shall be made in good faith by the Company which shall provide detailed supporting calculations to the Executive within 15 business days of the date of termination of the Executive's employment, if applicable, or such earlier time as is requested by the Company. If the Company determines that no Excise Tax is payable by the Executive, it shall furnish the Executive with an opinion of counsel that he has substantial authority not to report any Excise Tax on his federal income tax return. Except as hereinafter provided, any determination by the Company shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Company hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Executive is required to make a payment of any Excise Tax, the Company shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. 12 7. Assignability ------------- This Agreement is binding on and is for the benefit of the parties hereto and their respective successors, heirs, executors, administrators and other legal representatives. Neither this Agreement nor any right or obligation hereunder may be assigned by the Company (except to any subsidiary or affiliate) or by you. 8. Non-Competition --------------- If subsequent to a Change of Control of the Company you should for Good Reason terminate your employment, then for a period of two years after the Date of Termination, you shall not on your own account without the consent of the Company, or as a shareholder, employee, officer, director, consultant or otherwise, engage directly or indirectly in any business or enterprise which is in competition with the Company. For all purposes of this agreement the words "competition with the Company" shall mean the provision of gas and/or electric services on a retail and wholesale basis in the State of Ohio and in any other state contiguous to the State of Ohio; provided, however, that nothing herein contained shall prevent you from purchasing and holding for investment less than 5% of the shares of any corporation the shares of which are regularly traded either on a national securities exchange or in the over-the-counter market. 9. Successor --------- The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. Failure of the Company to obtain such agreement prior to the effectiveness of such succession shall be a breach of this Agreement and shall entitle you to compensation from the Company in the same amount and on the same terms as you would be entitled hereunder if you terminated your employment for Good Reason, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. 13 This agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amounts would still be payable to you hereunder if you had continued to live, all such amounts, unless otherwise provided herein, shall be paid to such beneficiary or beneficiaries as you shall have designated by written notice delivered to the Company prior to your death or, failing such written notice, to your estate. 10. Amendment; Waiver ----------------- This Agreement may be amended only by an instrument in writing signed by the parties hereto, and any provision hereof may be waived only by an instrument in writing signed by the party or parties against whom or which enforcement of such waiver is sought. The failure of either party hereto at any time to require the performance by the other party hereto of any provision hereof shall in no way affect the full right to require such performance at any time thereafter, nor shall the waiver by either party hereto of a breach of any provision hereof be taken or held to be a waiver of any succeeding breach of such provision or a waiver of the provision itself or a waiver of any other provision of this Agreement. 11. Notices ------- All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to you: --------- Anthony J. Alexander 3926 Troon Drive Uniontown, Ohio 44685 If to the Company: ----------------- Secretary Ohio Edison Company 76 South Main Street Akron, Ohio 44308 or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. 14 12. Validity -------- The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect, nor shall the invalidity or unenforceability of a portion of any provision of this Agreement affect the validity or enforceability of the balance of such provision. If any provision of this Agreement, or portion thereof is so broad, in scope or duration, as to be unenforceable, such provision or portion thereof shall be interpreted to be only so broad as is enforceable. 13. Withholding ----------- The Company may withhold from any amounts payable under this Agreement such Federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation. 14. Entire Agreement ---------------- This Agreement contains the entire understanding of the Company and you with respect to the subject matter hereof. 15. Applicable Law -------------- This Agreement shall be governed by and construed in accordance with the substantive internal law and not the conflict of law provisions of the State of Ohio. If the terms of the foregoing Agreement are acceptable to you, please sign and return to the Company the enclosed copy of this Agreement whereupon this Agreement shall become a valid and legally binding contract between you and the Company. Very truly yours, OHIO EDISON COMPANY By: /s/Willard R. Holland ------------------------- Willard R. Holland Accepted and Agreed as of the date first above written: /s/ Anthony J. Alexander ---------------------------- Anthony J. Alexander 15 EX-10 12 10-51 SEV PAY GILL February 22, 1995 Mr. John A. Gill 123 Meadow Lane Peninsula, Ohio 44264 Special Severance Agreement --------------------------- Dear Mr. Gill: The Board of Directors (the "Board") of Ohio Edison Company (the "Company") recognizes that, as is the case with many publicly held corporations, there always exists the possibility of a change of control of the Company. This possibility and the uncertainty it creates may result in the loss or distraction of members of management of the Company and its subsidiaries to the detriment of the Company and its shareholders. The Board considers the establishment, maintenance, and continuity of a sound and vital management to be essential to protecting and enhancing the best interests of the Company and its shareholders. The Board also believes that when a change of control is perceived as imminent, or is occurring, the Board should be able to receive and rely on disinterested advice from management regarding the best interests of the Company and its shareholders without concern that members of management might be distracted or concerned by the personal uncertainties and risks created by their perception of an imminent or occurring change of control. Accordingly, the Board has determined that appropriate steps should be taken to assure the Company of the continued employment and attention and dedication to duty of certain members of management of the Company and to ensure the availability of their disinterested advice, notwithstanding the possibility, threat or occurrence of a change of control. Therefore, in order to fulfill the above purposes, the Board has designated you as eligible for severance benefits as set forth below. i. Offer ----- In order to induce you to remain in the employ of the Company and to provide continued services to the Company now and in the event that a Change of Control is imminent or occurring, this letter agreement (the "Agreement") sets forth severance benefits which the Company offers to pay to you in the event of a termination of your employment (in the manner described in Section 5 below) subsequent to a Change of Control of the Company (as defined in Section 4 below). ii. Operation --------- This Agreement shall be effective immediately upon its execution but anything in this Agreement to the contrary notwithstanding, neither this Agreement nor any of its provisions shall be operative unless and until there has been a Change of Control while you are still an employee of the Company, nor shall this Agreement govern or affect your employment relationship with the Company except as explicitly set forth herein. Upon a Change of Control, if you are still employed by the Company, this Agreement and all of its provisions shall become operative immediately. If your employment relationship with the Company is terminated before a Change of Control, you shall have no rights or obligations under this Agreement. 3. Term ---- (a) Term of Agreement: The term of this ----------------- Agreement shall commence immediately upon the date hereof and continue until December 31, 1997. (b) One-Year Evergreen Provision: Subject to ---------------------------- subsection (c) below, this Agreement shall be reviewed annually by the Board at a regular meeting held between October 1 and December 31 of each year. At such yearly review, the Board shall consider whether or not to extend the term of this Agreement for an additional year. Unless the Board affirmatively votes not to extend this Agreement, the term of this Agreement shall be extended for a period of one year from the previous termination date. In the event the Board votes not to extend this Agreement, the termination date of this Agreement shall be the later of December 31, 1997 or thirty-six full calendar months from December 31st of the year in which this Agreement was last extended. (c) Subsection (b) above notwithstanding, upon the occurrence of a Change of Control, this Agreement shall be automatically extended for a period of thirty-six full calendar months commencing on the date of such Change of Control. At the end of such thirty-six month period, this Agreement shall terminate. 4. Change of Control ----------------- For the purpose of this Agreement, a "Change of Control" shall mean: 2 (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% (25% if such Person proposes any individual for election to the Board or any member of the Board is the representative of such Person) or more of either (i) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company (excluding an acquisition by virtue of the exercise of a conversion privilege), (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (iv) any acquisition by any corporation pursuant to a reorganization, merger or consolidation, if, following such reorganization, merger or consolidation, the conditions described in clauses (i), (ii) and (iii) of subsection (c) of this Section 4 are satisfied; or (b) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Approval by the shareholders of the Company of a reorganization, merger or consolidation, in each case, unless, following such reorganization, merger or consolidation, (i) more than 75% of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities 3 immediately prior to such reorganization, merger or consolidation in substantially the same proportions as their ownership, immediately prior to such reorganization, merger or consolidation, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding the Company, any employee benefit plan (or related trust) of the Company or such corporation resulting from such reorganization, merger or consolidation and any Person beneficially owning, immediately prior to such reorganization, merger or consolidation, directly or indirectly, 25% or more of the Outstanding Company Common stock or Outstanding Voting Securities, as the case may be) beneficially owns, directly or indirectly, 25% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation or the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors and (iii) at least a majority of the members of the board of directors of the corporation resulting from such reorganization, merger or consolidation were members of the Incumbent Board at the time of the execution of the initial agreement providing for such reorganization, merger or consolidation; or (d) Approval by the shareholders of the Company of (i) a complete liquidation or dissolution of the Company or (ii) the sale or other disposition of all or substantially all of the assets of the Company, other than to a corporation, with respect to which following such sale or other disposition, (A) more than 75% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such sale or other disposition in substantially the same proportion as their ownership, immediately prior to such sale or other disposition, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding the Company and any employee benefit plan (or related trust) of the Company or such corporation and any Person beneficially owning, immediately prior to such sale or other disposition, directly or indirectly, 25% or more of the Outstanding Company Common Stock or Outstanding Company Voting Securities, as the case may be) beneficially owns, directly or indirectly, 25% or more of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors and (C) at least a majority of the members of the board 4 of directors of such corporation were members of the Incumbent Board at the time of the execution of the initial agreement or action of the Board providing for such sale or other disposition of assets of the Company. 5. Termination ----------- (a) Termination Following Change of Control: --------------------------------------- If, within a period of thirty-six full calendar months after a Change of Control (as defined above) of the Company, you are discharged without Cause or resign for Good Reason (as defined below), you shall be entitled to the benefits provided by this Agreement as set forth in Section 6 below. (b) Good Reason: If any of the following events ----------- occurs without your express consent and within thirty-six full calendar months after a Change of Control, you may voluntarily terminate your employment within 30 days of the occurrence of such event and be entitled to the severance benefits set forth in Section 6 below: (1) The Company assigns any duties to you which are inconsistent with your position, duties, offices, titles, status (including membership on the Board of Directors) responsibilities or reporting requirements in effect immediately prior to a Change of Control, or your removal from or any failure to re- elect you to any of such positions or offices, except in connection with termination of your employment for Cause, Disability, Death or Normal Retirement, or by you other than for Good Reason, or; (2) Changes to your base salary are inconsistent with your annual performance review and the salary program applicable to other senior executives of the Company; or (3) The Company discontinues any bonus or other compensation plans or any other benefit, stock ownership plan, stock purchase plan, stock option plan, life insurance plan, health plan, disability plan or similar plan (as the same existed immediately prior to the Change of Control) in which you participated or were eligible to participate in immediately prior to the Change of Control and in lieu thereof does not make available plans providing at least comparable benefits; or 5 (4) The Company takes action which adversely affects your participation in, or eligibility for, or materially reduces your benefits otherwise earned or payable under, any of the plans described in (3) above (unless such action is required by law), or which deprives you of any material fringe benefit enjoyed by you immediately prior to the Change of Control, or fails to provide you with the number of paid vacation days to which you were entitled in accordance with normal vacation policy immediately prior to the Change of Control; or (5) The Company requires you to be based at any office or location other than one within a 50 mile radius of the office or location at which you were based immediately prior to the Change of Control; (except for required travel on the Company's business to an extent substantially consistent with your business travel obligations as they existed at the time of a Change of Control of the Company); or, in the event you consent to being based anywhere more than fifty miles from such location, the failure by the Company to pay (or reimburse you for) all reasonable moving expenses incurred by you relating to a change of your principal residence in connection with such relocation and to indemnify you against any loss (defined as the difference between the actual sale price of such residence after the deduction of all real estate brokerage charges and related selling expenses) and the higher of (1) your aggregate investment in such residence or (2) the fair market value of such residence (as determined by a real estate appraiser designated by you and reasonably satisfactory to the Company) realized upon the sale of such residence in connection with any such change of residence; or (6) The Company's requiring you to perform duties or services which necessitate absence overnight from your place of residence, because of travel involving the business or affairs of the Company, to a degree not substantially consistent with the extent of such absence necessitated by such travel during the period of twelve months immediately preceding a Change of Control of the Company; or (7) The Company purports to terminate your employment otherwise than as expressly permitted by this Agreement; or 6 (8) The Company fails to comply with and satisfy Section 9 below, provided that such successor has received at least ten days prior written notice from the Company or from you of the requirements of Section 9 below. You shall have the sole right to determine, in good faith, whether any of the above events has occurred. (c) Cause: Cause shall mean: conviction of a ----- felony or crime involving an act of moral turpitude, dishonesty, or misfeasance. (d) Notice of Termination: Any termination by --------------------- the Company for Cause, or by you for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 11 hereof. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the Date of Termination. (e) Date of Termination: "Date of Termination" ------------------- means (1) if your employment is terminated by the Company for Cause or without Cause, or by you for Good Reason or other than for Good Reason, the date of receipt by the other of the Notice of Termination, and (2) if your employment is terminated by reason of Death, Disability or Normal Retirement (as defined below), the Date of Termination shall be the date of your death, the date of receipt of your Notice of Termination, or the first of the month following the month you reach the normal retirement age for employees in your position, respectively. (f) Normal Retirement: If your employment is ----------------- terminated due to normal retirement, you shall not be entitled to severance benefits under this Agreement, regardless of the occurrence of a Change of Control. A termination by normal retirement shall have occurred where your termination is caused by the fact that you have reached normal retirement age for employees in your position. (g) Termination for Cause: If subsequent to a --------------------- Change of Control, your employment is terminated by the Company for Cause, the Company shall pay you your full base salary 7 through the Date of Termination at the rate in effect at the time Notice of Termination is given, and you shall also receive all accrued or vested benefits of any kind to which you are, or would otherwise have been, entitled throughout the Date of Termination (as defined in subsection (e) of this Section 5), and the Company shall thereupon have no further obligation to you under this Agreement. (h) Disability or Death: If termination of ------------------- your employment results from your Disability or death, you shall not be entitled to severance benefits under this Agreement, regardless of the occurrence of a Change of Control. You or your designated beneficiary, in the case of your death, shall receive all accrued or vested benefits of any kind to which you are, or would otherwise have been, entitled through the Date of Termination, and the Company shall thereupon have no further obligation to you under this Agreement. "Disability" shall mean, for the purposes of this Agreement, your total and permanent disability such that you would be entitled to receive Disability Retirement Income under the Company's qualified pension plans, except for purposes of this provision you need not have completed ten (10) years of service with the Company, followed by the Company giving you thirty days written notice of its intention to terminate your employment by reason thereof, and your failure because of your Disability to resume the full-time performance of your duties within such period of thirty days and thereafter perform the same for a period of two consecutive months. 6. Severance Benefits ------------------ If, within a period of thirty-six full calendar months after a Change of Control of the Company, you are discharged without Cause or resign for Good Reason, the following shall be applicable: (a) The Company shall pay to you within ten business days following the Date of Termination a lump sum severance benefit, payable in cash, the amounts determined as provided below: (1) Your full base salary through the Date of Termination at the rate in effect at the time Notice of Termination, is given. (2) In lieu of further salary payments to you for periods subsequent to the Date of Termination, an amount equal to 2.99 multiplied by the sum of your annual base salary at the rate in effect as of the Date of Termination (or, if higher, at the rate in effect as 8 of the time of the Change of Control) plus the average annual short-term incentive amount awarded to you under the Ohio Edison System Executive Incentive Compensation Plan ("Executive Incentive Plan") for the three years immediately preceding the year during which the Date of Termination occurs whether or not fully paid. (b) For purposes of the Executive Incentive Plan, you shall be considered to have retired and will be paid the pro rata portion of your short-term incentive award earned, if any, and any long-term deferred incentive awards earned, if any, per the terms of the plan. (c) For purposes of determining the amount of benefits you may continue after the Date of Termination under the Company's group health and life insurance plans, you shall be considered as having retired at your current age or age 55, whichever is greater, and your current years of service calculated as if you are age 55, whichever is greater. (d) For purposes of the Ohio Edison System Executive Deferred Compensation Plan ("Deferred Compensation Plan"), you shall be considered to have retired at age 62, entitling you to the full amount of your Retirement Account, if any, payable in accordance with the terms of the Deferred Compensation Plan. (e) For purposes of calculating your benefit under the Ohio Edison System Supplemental Executive Retirement Plan ("SERP"), you shall be considered as having retired from the Company at your current age or age 55, whichever is greater, and your current years of service or 5 years of service, whichever is greater. Your benefit under the SERP will commence on the first of the month following the Date of Termination as follows: (1) If, on the Date of Termination, you are less than age 55, your monthly benefit from the SERP shall be calculated in accordance with the terms of the SERP except that (a) until you reach age 55, such SERP benefit shall be offset by any compensation earned by you from a subsequent employer as provided in paragraph (j) below; (b) at age 55, such SERP benefit shall only be offset by the monthly amounts to which you will be entitled at age 55 from the Company's tax-qualified pension plan, the supplementary pension make-up benefit under the Deferred Compensation Plan and/or the tax- qualified pension plan of any previous employers (collectively, "Pension Income"), irrespective of whether you receive such benefits at that time; and, (c) at age 62 such SERP benefit shall be offset only by Pension Income and the monthly primary Social Security Benefit to which you will be entitled at age 62, 9 irrespective of whether you receive such benefits at that time; (2) If, on the Date of Termination, you are at least age 55 but less than age 62, your monthly benefit from the SERP shall be calculated in accordance with the terms of the SERP, except that (a) until you reach age 62, such SERP benefit shall be offset only by your Pension Income, irrespective of whether you receive such benefits at that time; and (b) at age 62 such SERP benefit shall be offset only by Pension Income and the monthly primary Social Security benefit to which you will be entitled at age 62, irrespective of whether you receive such benefits at that time; (3) If, on the Date of Termination, you are at least age 62, your monthly benefit from the SERP shall be calculated and offset in accordance with the terms of the SERP. (f) For purposes of the Executive Supplemental Life Plan ("ESLP"), you may continue to participate as if you retired from the Company prior to age 65 in accordance with the terms of the ESLP, irrespective of your age at the Date of Termination. (g) In the event that because of their relationship to you, members of your family or other individuals are covered by any plan, program, or arrangement described in subsection (b) above immediately prior to the Date of Termination, the provisions set forth in subsection (b) shall apply equally to require the continued coverage of such persons; provided, however, that if under the terms of any such plan, program or arrangement, any such person would have ceased to be eligible for coverage during the period in which the Company is obligated to continue coverage for you, nothing set forth herein shall obligate the Company to continue to provide coverage which would have ceased even if you had remained an employee of the Company. (h) The Company shall enable you to purchase the automobile, if any, which the Company was providing for your use at the time Notice of Termination was given at the wholesale value of such automobile at such time. (i) Other Benefits Payable: The severance ---------------------- benefits described in Subsections (a), (b), (c), (d), (e), (f), (g) and (h) above shall be payable in addition to, and not in lieu of, all other accrued or vested or earned but deferred compensation, rights, options or other benefits which may be owed to you following your discharge or resignation (and are not 10 contingent on any Change of Control preceding such termination), including but not limited to, accrued and/or banked vacation, amounts or benefits payable, if any, under any bonus or other compensation plans, stock option plan, stock ownership plan, stock purchase plan, life insurance plan, health plan, disability plan or similar plan. (j) Payment Obligations: Other than as set forth ------------------- in the Deferred Compensation Plan or the SERP, upon a Change of Control the Company's obligations to pay the severance benefits or make any other payments described in this Section 6 shall not be affected by any set-off, counterclaim, recoupment, defense or other right which the Company or any of its subsidiaries may have against the Executive or anyone else. If you are less than age 55 at the time of your discharge without Cause or your resignation for Good Reason, then, commencing 24 months after the Date of Termination, you shall be required to seek employment elsewhere and thereby mitigate the amount of SERP benefit payable under Paragraph (d)(1). You shall not be required to accept a position other than as a senior executive of an entity comparable in size to the Company and having duties, responsibilities and authority substantially similar in scope and nature to your position with the Company immediately prior to the Date of Termination. Upon obtaining such employment, you shall promptly notify the Company of the compensation and benefits you received or will receive from such new employer and of any changes therein. (k) Legal Fees and Expenses: Subject to and ----------------------- contingent upon the occurrence of a Change of Control the Company agrees to pay promptly as incurred, to the full extent permitted by law, all legal fees and expenses which you may reasonably thereafter incur as a result of any contest, litigation or arbitration (regardless of the outcome thereof) by the Company, you or others of the validity or enforceability of, or liability under, any provision of this Agreement, the Deferred Compensation Plan, or the SERP (including any contest by you about the amount of any payment pursuant to this Agreement, the Deferred Compensation Plan or the SERP), plus in each case interest on any delayed payment at the rate of 150% of the Prime Rate as published in the Wall Street Journal in the Money Rates Table on the business day immediately preceding the conclusion of any such contest, litigation or arbitration. (l) Certain Additional Payments by the Company: ------------------------------------------ (1) Anything in this Agreement to the contrary notwithstanding, in the event that the Executive becomes entitled to severance benefits under this Section 6 hereof, the Deferred Compensation Plan, 11 the SERP or otherwise, and it shall be determined that any payment or distribution by the Company to or for the benefit of the Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement, the Deferred Compensation Plan, the SERP or otherwise (a "Payment"), would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including any Excise Tax, imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (2) All determinations required to be made under this subsection (i), including whether a Gross-Up Payment is required and the amount of such Gross-Up Payment, shall be made in good faith by the Company which shall provide detailed supporting calculations to the Executive within 15 business days of the date of termination of the Executive's employment, if applicable, or such earlier time as is requested by the Company. If the Company determines that no Excise Tax is payable by the Executive, it shall furnish the Executive with an opinion of counsel that he has substantial authority not to report any Excise Tax on his federal income tax return. Except as hereinafter provided, any determination by the Company shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Company hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Executive is required to make a payment of any Excise Tax, the Company shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. 12 7. Assignability ------------- This Agreement is binding on and is for the benefit of the parties hereto and their respective successors, heirs, executors, administrators and other legal representatives. Neither this Agreement nor any right or obligation hereunder may be assigned by the Company (except to any subsidiary or affiliate) or by you. 8. Non-Competition --------------- If subsequent to a Change of Control of the Company you should for Good Reason terminate your employment, then for a period of two years after the Date of Termination, you shall not on your own account without the consent of the Company, or as a shareholder, employee, officer, director, consultant or otherwise, engage directly or indirectly in any business or enterprise which is in competition with the Company. For all purposes of this agreement the words "competition with the Company" shall mean the provision of gas and/or electric services on a retail and wholesale basis in the State of Ohio and in any other state contiguous to the State of Ohio; provided, however, that nothing herein contained shall prevent you from purchasing and holding for investment less than 5% of the shares of any corporation the shares of which are regularly traded either on a national securities exchange or in the over-the-counter market. 9. Successor --------- The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. Failure of the Company to obtain such agreement prior to the effectiveness of such succession shall be a breach of this Agreement and shall entitle you to compensation from the Company in the same amount and on the same terms as you would be entitled hereunder if you terminated your employment for Good Reason, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. 13 This agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amounts would still be payable to you hereunder if you had continued to live, all such amounts, unless otherwise provided herein, shall be paid to such beneficiary or beneficiaries as you shall have designated by written notice delivered to the Company prior to your death or, failing such written notice, to your estate. 10. Amendment; Waiver ----------------- This Agreement may be amended only by an instrument in writing signed by the parties hereto, and any provision hereof may be waived only by an instrument in writing signed by the party or parties against whom or which enforcement of such waiver is sought. The failure of either party hereto at any time to require the performance by the other party hereto of any provision hereof shall in no way affect the full right to require such performance at any time thereafter, nor shall the waiver by either party hereto of a breach of any provision hereof be taken or held to be a waiver of any succeeding breach of such provision or a waiver of the provision itself or a waiver of any other provision of this Agreement. 11. Notices ------- All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to you: --------- John A. Gill 123 Meadow Lane Peninsula, Ohio 44264 If to the Company: ----------------- Secretary Ohio Edison Company 76 South Main Street Akron, Ohio 44308 or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. 14 12. Validity -------- The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect, nor shall the invalidity or unenforceability of a portion of any provision of this Agreement affect the validity or enforceability of the balance of such provision. If any provision of this Agreement, or portion thereof is so broad, in scope or duration, as to be unenforceable, such provision or portion thereof shall be interpreted to be only so broad as is enforceable. 13. Withholding ----------- The Company may withhold from any amounts payable under this Agreement such Federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation. 14. Entire Agreement ---------------- This Agreement contains the entire understanding of the Company and you with respect to the subject matter hereof. 15. Applicable Law -------------- This Agreement shall be governed by and construed in accordance with the substantive internal law and not the conflict of law provisions of the State of Ohio. If the terms of the foregoing Agreement are acceptable to you, please sign and return to the Company the enclosed copy of this Agreement whereupon this Agreement shall become a valid and legally binding contract between you and the Company. Very truly yours, OHIO EDISON COMPANY By: /s/Willard R. Holland ------------------------- Willard R. Holland Accepted and Agreed as of the date first above written: /s/ John a. Gill ---------------------------- John A. Gill 15 EX-12 13 CONSOL FIXED CHARGE RATIO EXHIBIT 12 Page 1 OHIO EDISON COMPANY CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
Year Ended December 31, --------------------------------------------------- 1991 1992 1993 1994 1995 ---- ---- ---- ---- ---- (Dollars in Thousands) EARNINGS AS DEFINED IN REGULATION S-K: Income before extraordinary items $264,823 $276,986 $ 24,523 $303,531 $317,241 Interest and other charges, before reduction for amounts capitalized 324,017 296,292 285,169 283,849 273,719 Provision for income taxes 173,725 147,407 32,431 188,886 199,307 Interest element of rentals charged to income (a) 125,777 117,224 104,700 108,463 111,534 -------- -------- --------- -------- -------- Earnings as defined $888,342 $837,909 $446,823 $884,729 $901,801 ======== ======== ========= ======== ======== FIXED CHARGES AS DEFINED IN REGULATION S-K: Interest on long-term debt $288,599 $275,835 $262,861 $259,554 $243,570 Other interest expense 27,696 13,958 16,445 18,931 22,944 Subsidiaries' preferred stock dividend requirements 7,722 6,499 5,863 5,364 7,205 Adjustment to subsidiaries' preferred stock dividends to state on a pre-income tax basis 5,018 3,420 7,659 3,294 2,956 Interest element of rentals charged to income (a) 125,777 117,224 104,700 108,463 111,534 -------- -------- -------- -------- -------- Fixed charges as defined $454,812 $416,936 $397,528 $395,606 $388,209 ======== ======== ======== ======== ======== CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES (b) 1.95 2.01 1.12 2.24 2.32 ==== ==== ==== ==== ==== - ---------------------- (a) Includes the interest element of rentals where determinable plus 1/3 of rental expense where no readily defined interest element can be determined. (b) These ratios exclude fixed charges applicable to the guarantee of the debt of a coal supplier aggregating $13,298,000, $9,762,000, $8,565,000, $7,424,000 and $6,315,000 for each of the five years ended December 31, 1995, respectively.
- 1 - EXHIBIT 12 Page 2 OHIO EDISON COMPANY CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES PLUS PREFERRED AND PREFERENCE STOCK DIVIDEND REQUIREMENTS (PRE-INCOME TAX BASIS)
Year Ended December 31, --------------------------------------------------- 1991 1992 1993 1994 1995 ---- ---- ---- ---- ---- (Dollars in Thousands) EARNINGS AS DEFINED IN REGULATION S-K: Income before extraordinary items $264,823 $276,986 $ 24,523 $303,531 $317,241 Add- Interest and other charges, before reduction for amounts capitalized 324,017 296,292 285,169 283,849 273,719 Provision for income taxes 173,725 147,407 32,431 188,886 199,307 Interest element of rentals charged to income (a) 125,777 117,224 104,700 108,463 111,534 -------- -------- -------- -------- -------- Earnings as defined $888,342 $837,909 $446,823 $884,729 $901,801 ======== ======== ======== ======== ======== FIXED CHARGES AS DEFINED IN REGULATION S-K PLUS PREFERRED AND PREFERENCE STOCK DIVIDEND REQUIREMENTS (PRE-INCOME TAX BASIS): Interest on long-term debt $288,599 $275,835 $262,861 $259,554 $243,570 Other interest expense 27,696 13,958 16,445 18,931 22,944 Preferred and preference stock dividend requirements 32,476 30,425 29,570 27,043 29,699 Adjustment to preferred and preference stock dividends to state on a pre-income tax basis 20,887 15,854 38,265 16,444 16,745 Interest element of rentals charged to income (a) 125,777 117,224 104,700 108,463 111,534 -------- -------- -------- -------- -------- Fixed charges as defined plus preferred and preference stock dividend requirements (pre-income tax basis) $495,435 $453,296 $451,841 $430,435 $424,492 ======== ======== ======== ======== ======== CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES PLUS PREFERRED AND PREFERENCE STOCK DIVIDEND REQUIREMENTS (PRE-INCOME TAX BASIS) (b) 1.79 1.85 0.99(c) 2.06 2.12 ==== ==== ==== ==== ==== - ----------------------- (a) Includes the interest element of rentals where determinable plus 1/3 of rental expense where no readily defined interest element can be determined. (b) These ratios exclude fixed charges applicable to the guarantee of the debt of a coal supplier aggregating $13,298,000, $9,762,000, $8,565,000, $7,424,000 and $6,315,000 for each of the five years ended December 31, 1995, respectively. (c) Earnings as defined were deficient in 1993 by $5,018,000 to cover fixed charges plus preferred stock dividend requirements (pre-income tax basis).
- 2 - EX-13 14 95 OE ANNUAL REPORT OHIO EDISON COMPANY SELECTED FINANCIAL DATA
1995 1994 1993 1992 1991 - ------------------------------------------------------------------------------------------------------------ (In thousands, except per share amounts) Operating Revenues $2,465,846 $2,368,191 $2,369,940 $2,332,378 $2,358,946 -------------------------------------------------------------- Operating Income $566,618 $557,254 $525,330 $522,115 $550,452 -------------------------------------------------------------- Net Income $317,241 $303,531 $ 82,724 $276,986 $264,823 -------------------------------------------------------------- Earnings on Common Stock $294,747 $281,852 $ 59,017 $253,060 $240,069 -------------------------------------------------------------- Earnings per Share of Common Stock $2.05 $1.97 $0.39 $1.70 $1.60 Dividends Declared per Share of Common Stock $1.50 $1.50 $1.50 $1.50 $1.50 -------------------------------------------------------------- Total Assets $8,823,934 $8,993,964 $8,918,267 $7,830,026 $7,812,345 -------------------------------------------------------------- Capitalization at December 31: Common Stockholders' Equity $2,407,871 $2,317,197 $2,243,292 $2,408,164 $2,371,946 Preferred and Preference Stock: Not Subject to Mandatory Redemption 211,870 328,240 328,240 354,240 354,240 Subject to Mandatory Redemption 160,000 40,000 45,500 59,862 65,582 Long-Term Debt 2,786,256 3,166,593 3,039,263 3,121,647 3,243,167 -------------------------------------------------------------- Total Capitalization $5,565,997 $5,852,030 $5,656,295 $5,943,913 $6,034,935 -------------------------------------------------------------- COMMON STOCK DATA The Company's Common Stock is listed on the New York and Chicago stock exchanges and is traded on other registered exchanges. PRICE RANGE OF COMMON STOCK 1995 1994 - ------------------------------------------------------------------------------------------- First Quarter High-Low 21-1/2 18-1/2 22-3/4 18-7/8 ------------------------------------ Second Quarter High-Low 22-5/8 19-3/4 19-1/4 16-1/2 ------------------------------------ Third Quarter High-Low 22-7/8 21-1/4 19-5/8 17-1/2 ------------------------------------ Fourth Quarter High-Low 23-3/4 22-1/4 19-1/4 17-7/8 ------------------------------------ Yearly High-Low 23-3/4 18-1/2 22-3/4 16-1/2 ------------------------------------ Prices are based on reports published in The Wall Street Journal for New York Stock Exchange ----------------------- Composite Transactions. CLASSIFICATION OF HOLDERS OF COMMON STOCK AS OF DECEMBER 31, 1995 Holders of Record Shares Held - --------------------------------------------------------------------------------------------- Number % Number % - --------------------------------------------------------------------------------------------- Individuals 112,643 82.35 50,036,860 32.79 Fiduciaries 22,503 16.45 9,503,345 6.23 Nominees 47 .04 91,491,883 59.97 All Others 1,590 1.16 1,537,349 1.01 ------------------------------------------------- Total 136,783 100.00 152,569,437 100.00 ------------------------------------------------- As of January 31, 1996, there were 136,828 holders of 152,569,437 shares of the Company's Common Stock. Quarterly dividends of 37.5 cents per share were paid on the Company's Common Stock during 1995 and 1994. Information regarding retained earnings available for payment of cash dividends is given in Note 5A.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS We continued making significant progress in 1995 as our Company prepares for the rapidly changing environment within the electric utility industry. The most significant event during the year was the approval by the Public Utilities Commission of Ohio (PUCO) of the Company's Rate Reduction and Economic Development Plan (Regulatory Plan). The Regulatory Plan is designed to enhance and accelerate economic development within the Company's service area and to assure our customers of long-term competitive pricing for energy services. The Regulatory Plan, which went into effect November 1, 1995, freezes base electric rates until January 1, 2006, at which time base rates will be reduced by $300,000,000, or approximately 20 percent below current levels, on an annual basis. During the ten-year rate-freeze period, which will remain in effect unless certain significant events occur, transition rate credits will be implemented for customers served under the General Service-Large rates (primarily industrial customers). Also, the monthly customer charge will be reduced for customers served under the General Service-Secondary and Residential rates. Combined, these transition rate credits are expected to reduce operating revenues by approximately $600,000,000 during the ten-year period. A major component of the Regulatory Plan is our commitment to reduce fixed costs during the ten-year period. The PUCO ordered the Company to recognize additional depreciation expense related to our generating assets and additional amortization of regulatory assets during the ten-year Regulatory Plan period of at least $2,000,000,000 more than the amount that would have been recognized if the Regulatory Plan were not in effect. The Regulatory Plan includes a cap (based upon the most recent common equity return authorized for the Company by the PUCO) on the amount the Company may earn applicable to its common stockholders in any calendar year during the Regulatory Plan period. If the cap is exceeded, the excess will be credited to our customers in a future period. The Companies achieved record operating revenues in 1995, a 4.0% increase over the previous record set in 1993. The increased revenues, in combination with our aggressive cost-control efforts, raised earnings on common stock to $2.05 per share in 1995 from $1.97 a year earlier. The 1993 amount of $.39 was adversely affected by nonrecurring charges of $1.43 per share, - 2 - which included a $276,578,000 after-tax write-off of Perry Unit 2, the expected resolution of fuel cost recovery issues in Pennsylvania and certain costs associated with the Performance Initiatives program. The effect of the 1993 write-off was partially offset by a $58,201,000 credit from the cumulative effect of a change in accounting to accrue metered but unbilled revenue (see Note 2). Operation and maintenance expenses were up by 2.5 percent in 1995, mostly due to incremental fuel and purchased power costs incurred to meet the increased demand from our customers. With our revenues increasing at a higher rate than our variable costs, we were able to achieve record operating income for the second consecutive year. A review of the work we do was an integral part of Performance Initiatives which began in 1993 and continues as a part of our Corporate Strategy program. Efficiencies continue to be identified that have resulted in further opportunities for restructuring. In 1995, we reduced our work force by 293 employees following the shutdown of several old generating units and the restructuring of our generation and transmission group. We expect these actions to result in annual savings of approximately $18,000,000. Also, using economic value added-based justification for capital spending contributed to a $67,000,000 reduction in our construction expenditures in 1995 compared to our base year of 1993. For the third straight year, the Companies achieved record retail kilowatt- hour sales. The following table summarizes the sources of changes in operating revenues for 1995 and 1994 as compared to the previous year: 1995 1994 (In millions) Increased retail kilowatt-hour sales $105.1 $ 2.4 Reduced average retail electric price (23.3) (3.1) Sales to utilities 16.6 2.2 Other (0.7) (3.2) ----- ------ Net Increase (Decrease) $ 97.7 $ (1.7) ====== ====== An improving local economy and increased weather-related demand during the second half of 1995 helped us achieve record retail sales of 26.4 billion kilowatt-hours. Our customer base continues to grow with more than 12,300 new retail customers added in 1995, after gaining approximately 13,100 customers the previous year. Residential sales increased 4.2% in 1995 after falling slightly the previous year. Commercial sales rose 3.9% during the year, which follows a 1.4% gain in 1994. A 6.8% increase in industrial sales resulted, in part, from the - 3 - resumption of operations by two major customers that had reduced operations in 1994. Excluding sales to these customers, industrial sales were 3.8% higher than last year's level. We began supplying 300 megawatts of power to another utility in the second quarter of 1995 under a short-term contract that expired at the end of 1995. This contract was the principal cause for an 18.2% increase in sales to other utilities in 1995, which followed an 18.2% decrease the previous year. We have signed short-term contracts with other utilities in 1996 to replace the expired 1995 contract. As a result of all of these factors, total kilowatt-hour sales were up 7.5% compared with sales in 1994, which were down 3.9% from 1993. Because of higher kilowatt-hour sales, we spent 5.6% more on fuel and purchased power in 1995. During the same period, our nuclear expenses fell 4.9% compared to the previous year--nuclear expenses were higher in 1994 mainly due to corrective maintenance work at the Perry Plant. Expenses associated with scheduled maintenance outages at our fossil-fueled generating units contributed to a 4.6% increase in other operating costs during 1995, compared to last year. Other operating costs were down significantly in 1994 from the previous year due to a one-time $39,000,000 charge in 1993 related to Performance Initiatives. That charge consisted of $9,000,000 for obsolete materials and supplies and $30,000,000 estimated for costs of early retirement programs offered to qualifying employees resulting from strategies identified in the Performance Initiatives program. Higher depreciation charges in 1995 resulted mainly from $27,000,000 of additional nuclear depreciation authorized under our Regulatory Plan discussed earlier. A higher level of depreciable utility plant and an increase in the accrual for nuclear decommissioning costs also contributed to the increase. The change between 1995 and 1994 in the amortization of net regulatory assets was due to increased amortization of deferred nuclear costs and the discontinuation of deferral accounting for postretirement benefits, also in accordance with the Regulatory Plan. Penn Power provided an $8,728,000 reserve for deferred postretirement benefit costs in 1994, which was responsible for the majority of the change in net amortization of regulatory assets compared to 1993. Overall, interest costs were lower in 1995 than in 1994. Interest on long-term debt decreased due to refinancing and redemption of higher-cost debt. Other interest expense increased compared to last year due primarily to higher levels of short-term borrowing. We also discontinued deferring nuclear unit interest in the second half of 1995, consistent with our Regulatory Plan. Preferred and preference stock dividend requirements in 1995 include approximately $2,300,000 for premiums paid on preferred stock redemptions. - 4 - CAPITAL RESOURCES AND LIQUIDITY We have significantly improved our financial position over the past five years. Cash generated from operations was 62% higher in 1995 than it was in 1990 due to higher revenues and aggressive cost controls. By the end of 1995, we were serving about 60,000 more customers than we were five years ago, with approximately 2,000 fewer employees. As a result, our customer/employee ratio has improved significantly over the past five years, standing at 228 customers per employee at the end of 1995, compared to 152 at the end of 1990. In addition, capital expenditures have dropped substantially during that period. Expenditures in 1995 were approximately 28% lower than they were in 1990, and annual depreciation charges have exceeded property additions since the end of 1987. In fact, our projections for the next five years indicate that annual depreciation charges will exceed construction program expenditures by at least two to three times because of our reduced capital requirements, coupled with the additional depreciation in accordance with the Regulatory Plan. Over the past five years, we have aggressively taken advantage of opportunities in the financial markets to reduce our embedded capital costs. Through refinancing activities, we have reduced the average cost of outstanding debt from 9.28% at the end of 1990 to 8.00% at the end of 1995. Also, the cost of outstanding preferred and preference stock was reduced from 8.59% at the end of 1990 to 7.59% at the end of 1995. We have improved our financial position as a result of these actions. For example, we have enhanced our fixed charge coverage ratios and the percentage of common equity to total capitalization. Our SEC ratio of earnings to fixed charges improved to 2.32 at the end of 1995 from 1.97 at the end of 1990. The Company's indenture ratio, which is used to determine the ability to issue first mortgage bonds, improved from 4.79 at the end of 1990 to 5.78 at the end of 1995. Over the same period, the charter ratio, a measure of our ability to issue preferred stock, improved from 1.87 to 2.31, and, our common equity percentage of capitalization (excluding the Employee Stock Ownership Plan Trust adjustment) rose from approximately 42% at the end of 1990 to about 45% at the end of 1995. At the end of 1995, we had the capability to issue $1,466,000,000 principal amount of first mortgage bonds and $1,673,000,000 of preferred stock (assuming no additional debt was issued). However, our cash requirements in 1996 for operations and scheduled debt maturities are expected to be met without issuing additional securities. During 1995, we reduced our total debt by approximately $285,000,000. We expect to pay off over $1,300,000,000 of debt over the next five years with internal cash, including $264,000,000 in 1996. - 5 - We had about $30,000,000 of cash and temporary investments and $120,000,000 of short-term indebtedness on December 31, 1995. Through OES Fuel credit facilities, we had the capability to borrow approximately $128,000,000 as of the end of 1995. We also had $52,000,000 of unused short-term bank lines of credit, and $50,000,000 of bank facilities that provide for borrowings on a short-term basis at the banks' discretion. Our capital spending for the period 1996-2000 is expected to be about $650,000,000 (excluding nuclear fuel), of which approximately $160,000,000 applies to 1996. This spending level is more than $400,000,000 lower than actual capital outlays over the past five years. Investments for additional nuclear fuel during the 1996-2000 period are estimated to be approximately $180,000,000, of which about $29,000,000 applies to 1996. During the same periods, our nuclear fuel investments are expected to be reduced by approximately $191,000,000 and $39,000,000, respectively, as the nuclear fuel is consumed. Also, we have operating lease commitments of approximately $594,000,000 for the 1996-2000 period, of which approximately $108,000,000 relates to 1996. We recover the cost of nuclear fuel consumed and operating leases through our electric rates. Reference is made to Note 1 for a discussion of regulatory assets. In accordance with the Regulatory Plan, the Company's rates include recovery of all regulatory assets and authorizes the Company to accelerate amortization of those regulatory assets over the next ten years. One of Penn Power's former municipal customers signed a contract with another energy supplier in November. Penn Power and the former customer are in dispute over Penn Power's proposed transmission rate. Both parties have filed proposals with the Federal Energy Regulatory Commission requesting it to establish final terms. No ruling has yet been issued. Sales to this municipality were approximately $1,500,000 in 1995. OUTLOOK Many competitive challenges lie ahead as the electric utility industry becomes less regulated and more energy suppliers enter the marketplace. Retail wheeling, which would allow retail customers to purchase electricity from other energy producers, could be one of those challenges, if legislators choose to move in that direction. The Company's Regulatory Plan provides the foundation to position us to meet those challenges by significantly reducing fixed costs and lowering rates to a more competitive level. For the Regulatory Plan to succeed, it is imperative that we build on the success of our Performance - 6 - Initiatives and Corporate Strategy programs and continue to find ways to increase revenues, reduce costs and enhance shareholder value. In December 1995, we announced that we will offer a voluntary retirement program to 174 eligible union-represented employees beginning March 1, 1996. The program is expected to produce annual savings of up to $7,900,000. Also, in January 1996, employees at the Bruce Mansfield Plant were informed of future staff reductions that will affect approximately 105 bargaining unit employees and 35 management and administrative/office employees. The reduction is expected to occur between February 15, 1996, and April 1, 1996. This work force reduction is the result of continuing efforts to make the plant's costs more competitive. Effective operation of the nuclear facilities we jointly own will also help us meet these competitive challenges. In 1995, we increased our annual funding of the decommissioning obligation. As discussed in Note 1, the Financial Accounting Standards Board (FASB) is reviewing the accounting for decommissioning costs regarding the recognition, measurement and classification of decommissioning costs in the financial statements of electric utilities. The FASB issued its proposed accounting standard in February 1996. The Clean Air Act Amendments of 1990, discussed in Note 7, require additional emission reductions by 2000. We are pursuing cost-effective compliance strategies for meeting those requirements. Through our Performance Initiatives and Corporate Strategy programs, we have identified substantial savings that will better position us to successfully compete in the future. We continue to identify opportunities for revenue enhancement and cost reduction. Also, our Regulatory Plan provides more regulatory assurance that we will collect our fixed costs and minimizes the risk of not recovering some portion of our assets from our customers. Our focus is to exceed customers' service expectations by providing superior value and high-quality products and services at competitive prices in order to maximize the value of our shareholders' investment in the Company. - 7 - OHIO EDISON COMPANY CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31, 1995 1994 1993 - ------------------------------------------------------------------------------------ (In thousands, except per share amounts) OPERATING REVENUES $2,465,846 $2,368,191 $2,369,940 ---------- ---------- ---------- OPERATING EXPENSES AND TAXES: Fuel and purchased power 465,483 440,936 456,494 Nuclear operating costs 289,717 304,716 290,321 Other operating costs 446,967 427,133 474,241 ---------- ---------- ---------- Total operation and maintenance expenses 1,202,167 1,172,785 1,221,056 Provision for depreciation 256,085 220,502 217,980 General taxes 243,179 237,020 245,554 Amortization of net regulatory assets 5,825 (884) (6,753) Income taxes 191,972 181,514 166,773 ---------- ---------- ---------- Total operating expenses and taxes 1,899,228 1,810,937 1,844,610 ---------- ---------- ---------- OPERATING INCOME 566,618 557,254 525,330 ---------- ---------- ---------- OTHER INCOME AND EXPENSE: Perry Unit 2 termination (Note 3) -- -- (390,835) Income tax benefit from Perry Unit 2 termination -- -- 142,092 Other 14,424 16,459 19,921 ---------- ---------- ---------- Total other income (expense) 14,424 16,459 (228,822) ---------- ---------- ---------- TOTAL INCOME 581,042 573,713 296,508 ---------- ---------- ---------- NET INTEREST AND OTHER CHARGES: Interest on long-term debt 243,570 259,554 262,861 Deferred nuclear unit interest (4,250) (8,511) (8,518) Allowance for borrowed funds used during construction and capitalized interest (5,668) (5,156) (4,666) Other interest expense 22,944 18,931 16,445 Subsidiaries' preferred stock dividend requirements 7,205 5,364 5,863 ---------- ---------- ---------- Net interest and other charges 263,801 270,182 271,985 ---------- ---------- ---------- INCOME BEFORE CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING 317,241 303,531 24,523 Cumulative effect to January 1, 1993, of a change in accounting for unbilled revenues (net of income taxes of $33,632,000) (Note 2) -- -- 58,201 ---------- ---------- ---------- NET INCOME 317,241 303,531 82,724 PREFERRED AND PREFERENCE STOCK DIVIDEND REQUIREMENTS 22,494 21,679 23,707 ---------- ---------- ---------- EARNINGS ON COMMON STOCK $ 294,747 $ 281,852 $ 59,017 ========== ========== ========== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 143,692 143,237 152,569 ========== ========== ========== EARNINGS PER SHARE OF COMMON STOCK: Before cumulative effect of a change in accounting $2.05 $1.97 $ .01 Cumulative effect to January 1, 1993, of a change in accounting for unbilled revenues (Note 2) -- -- .38 ----- ----- ----- EARNINGS PER SHARE OF COMMON STOCK $2.05 $1.97 $ .39 ===== ===== ===== DIVIDENDS DECLARED PER SHARE OF COMMON STOCK $1.50 $1.50 $1.50 ===== ===== ===== The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
- 8 - OHIO EDISON COMPANY CONSOLIDATED BALANCE SHEETS
At December 31, 1995 1994 - -------------------------------------------------------------------------------------------------------- (In thousands) ASSETS UTILITY PLANT: In service, at original cost $8,556,722 $8,518,050 Less--Accumulated provision for depreciation 3,051,148 2,910,587 ---------- ---------- 5,505,574 5,607,463 ---------- ---------- Construction work in progress-- Electric plant 150,262 174,970 Nuclear fuel 39,613 52,470 ---------- ---------- 189,875 227,440 ---------- ---------- 5,695,449 5,834,903 ---------- ---------- OTHER PROPERTY AND INVESTMENTS: Letter of credit collateralization (Note 4) 277,763 277,763 Other 252,005 197,546 ---------- ---------- 529,768 475,309 ---------- ---------- CURRENT ASSETS: Cash and cash equivalents 29,830 23,291 Receivables-- Customers (less accumulated provisions of $2,528,000 and $2,517,000, respectively, for uncollectible accounts) 274,692 254,515 Other 54,988 54,713 Materials and supplies, at average cost-- Owned 68,829 122,337 Under consignment 41,080 -- Prepayments 82,257 71,836 ---------- ---------- 551,676 526,692 ---------- ---------- DEFERRED CHARGES: Regulatory assets 1,786,543 1,898,875 Unamortized sale and leaseback costs 103,091 106,883 Property taxes 104,071 106,458 Other 53,336 44,844 ---------- ---------- 2,047,041 2,157,060 ---------- ---------- $8,823,934 $8,993,964 ========== =========== - 9 - CAPITALIZATION AND LIABILITIES CAPITALIZATION (See Consolidated Statements of Capitalization): Common stockholders' equity $2,407,871 $2,317,197 Preferred stock-- Not subject to mandatory redemption 160,965 277,335 Subject to mandatory redemption 25,000 25,000 Preferred stock of consolidated subsidiary-- Not subject to mandatory redemption 50,905 50,905 Subject to mandatory redemption 15,000 15,000 Company obligated mandatorily redeemable preferred securities of subsidiary trust holding solely Company subordinated debentures 120,000 -- Long-term debt 2,786,256 3,166,593 ---------- ---------- 5,565,997 5,852,030 ---------- ---------- CURRENT LIABILITIES: Currently payable long-term debt 376,716 227,496 Short-term borrowings (Note 6) 119,965 174,642 Accounts payable 100,536 100,884 Accrued taxes 131,432 140,629 Accrued interest 57,462 65,743 Other 196,482 152,856 ---------- ---------- 982,593 862,250 ---------- ---------- DEFERRED CREDITS: Accumulated deferred income taxes 1,772,434 1,799,324 Accumulated deferred investment tax credits 213,876 223,827 Other 289,034 256,533 ---------- ---------- 2,275,344 2,279,684 ---------- ---------- COMMITMENTS, GUARANTEES AND CONTINGENCIES (Notes 4 and 7) ---------- ---------- $8,823,934 $8,993,964 ========== ========== The accompanying Notes to Consolidated Financial Statements are an integral part of these balance sheets.
- 10 - OHIO EDISON COMPANY CONSOLIDATED STATEMENTS OF CAPITALIZATION
At December 31, 1995 1994 - --------------------------------------------------------------------------------------------------------------------------- (In thousands, except per share amounts) COMMON STOCKHOLDERS' EQUITY: Common stock, $9 par value, authorized 175,000,000 shares- 152,569,437 shares outstanding $1,373,125 $1,373,125 Other paid-in capital 726,307 724,848 Retained earnings (Note 5A) 471,095 389,600 Unallocated employee stock ownership plan common stock- 8,663,575 and 9,076,489 shares, respectively (Note 5B) (162,656) (170,376) ---------- ---------- Total common stockholders' equity 2,407,871 2,317,197 ---------- ---------- Number of Shares Optional Outstanding Redemption Price ------------------ --------------------- 1995 1994 Per Share Aggregate ------ ------ --------- --------- PREFERRED STOCK (Note 5C): Cumulative, $100 par value- Authorized 6,000,000 shares Not Subject to Mandatory Redemption: 3.90% 152,510 152,510 $103.63 $15,804 15,251 15,251 4.40% 176,280 176,280 108.00 19,038 17,628 17,628 4.44% 136,560 136,560 103.50 14,134 13,656 13,656 4.56% 144,300 144,300 103.38 14,917 14,430 14,430 7.24% -- 363,700 -- -- -- 36,370 7.36% -- 350,000 -- -- -- 35,000 8.20% -- 450,000 -- -- -- 45,000 --------- --------- ------- ---------- ---------- 609,650 1,773,350 63,893 60,965 177,335 Cumulative, $25 par value- Authorized 8,000,000 shares Not Subject to Mandatory Redemption: 7.75% 4,000,000 4,000,000 100,000 100,000 --------- --------- ---------- ---------- Total not subject to mandatory redemption 4,609,650 5,773,350 $63,893 160,965 277,335 ========= ========= ======= ---------- ---------- Cumulative, $100 par value- Subject to Mandatory Redemption (Note 5D): 8.45% 250,000 250,000 25,000 25,000 ========= ========= ----------- ---------- - 11 - PREFERRED STOCK OF CONSOLIDATED SUBSIDIARY (Note 5C): Pennsylvania Power Company Cumulative, $100 par value- Authorized 1,200,000 shares Not Subject to Mandatory Redemption: 4.24% 40,000 40,000 $103.13 $ 4,125 4,000 4,000 4.25% 41,049 41,049 105.00 4,310 4,105 4,105 4.64% 60,000 60,000 102.98 6,179 6,000 6,000 7.64% 60,000 60,000 101.42 6,085 6,000 6,000 7.75% 250,000 250,000 -- -- 25,000 25,000 8.00% 58,000 58,000 102.07 5,920 5,800 5,800 --------- --------- ------- ---------- ---------- Total not subject to mandatory redemption 509,049 509,049 $26,619 50,905 50,905 ========= ========= ======= ---------- ---------- Subject to Mandatory Redemption (Note 5D): 7.625% 150,000 150,000 15,000 15,000 ========= ========= ---------- ---------- Company Obligated Mandatorily Redeemable Preferred Securities of Subsidiary Trust Holding Solely Company Subordinated Debentures (Note 5E): Cumulative, $25 par value- Authorized 4,800,000 shares Subject to Mandatory Redemption: 9.00% 4,800,000 -- 120,000 -- ========= ========= ---------- ----------
- 12 - OHIO EDISON COMPANY CONSOLIDATED STATEMENTS OF CAPITALIZATION (Con't.)
At December 31, 1995 1994 1995 1994 1995 1994 - -------------------------------------------------------------------------------------------------------------------------- (In thousands) LONG-TERM DEBT (Note 5F): First mortgage bonds: Ohio Edison Company- Pennsylvania Power Company- 12.740% due 1995 -- 30,000 9.000% due 1996 50,000 50,000 8.500% due 1996 150,000 150,000 9.740% due 1999-2019 20,000 20,000 8.750% due 1998 150,000 150,000 7.500% due 2003 40,000 40,000 6.875% due 1999 150,000 150,000 6.375% due 2004 50,000 50,000 6.375% due 2000 80,000 80,000 6.625% due 2004 20,000 20,000 7.375% due 2002 120,000 120,000 8.500% due 2022 27,250 50,000 7.500% due 2002 34,265 34,265 7.625% due 2023 19,500 40,000 ------- ------- 8.250% due 2002 125,000 125,000 8.625% due 2003 150,000 150,000 6.875% due 2005 80,000 80,000 9.750% due 2019 35,300 35,300 8.750% due 2022 94,210 100,000 7.625% due 2023 75,000 75,000 7.875% due 2023 100,000 100,000 ---------- ---------- Total first mortgage bonds 1,343,775 1,379,565 226,750 270,000 1,570,525 1,649,565 ---------- ---------- ------- ------- ---------- ---------- Secured notes: Ohio Edison Company Pennsylvania Power Company- 8.380% due 1996 16,464 53,718 4.750% due 1998 850 850 7.930% due 2002 69,579 77,997 6.080% due 2000 23,000 23,000 7.680% due 2005 200,000 200,000 5.400% due 2013 1,000 1,000 6.750% due 2015 40,000 -- 8.125% due 2015 -- 14,250 10.500% due 2015 -- 60,000 5.400% due 2017 10,600 10,600 10.625% due 2015 -- 40,000 7.150% due 2017 17,925 17,925 7.450% due 2016 47,725 47,725 5.900% due 2018 16,800 16,800 7.100% due 2018 26,000 26,000 8.100% due 2018 10,300 10,300 7.050% due 2020 60,000 -- 8.100% due 2020 5,200 5,200 7.000% due 2021 69,500 69,500 7.150% due 2021 14,482 14,482 7.150% due 2021 443 443 6.150% due 2023 12,700 12,700 7.625% due 2023 50,000 50,000 6.450% due 2027 14,500 14,500 8.100% due 2023 30,000 30,000 5.450% due 2028 6,950 6,950 7.750% due 2024 108,000 108,000 6.000% due 2028 14,250 -- 5.625% due 2029 50,000 50,000 5.950% due 2029 238 238 ------- ------- 5.950% due 2029 56,212 56,212 5.450% due 2033 14,800 14,800 ---------- ---------- 838,723 884,395 148,795 148,795 987,518 1,033,190 ---------- ---------- ------- ------- OES Fuel- 6.08% weighted average interest rate 97,162 124,984 ---------- ---------- Total secured notes 1,084,680 1,158,174 ---------- ---------- Unsecured notes: Ohio Edison Company- 9.440% due 1995 -- 75,000 7.430% due 1997 100,000 100,000 8.635% due 1997 50,000 50,000 4.900% due 2012 50,000 50,000 4.250% due 2014 50,000 50,000 3.450% due 2015 50,000 50,000 4.400% due 2018 56,000 56,000 4.750% due 2018 57,100 57,100 4.300% due 2032 53,400 53,400 ---------- ---------- Total unsecured notes 466,500 541,500 ---------- ---------- Capital lease obligations (Note 4) 48,221 54,180 ---------- ---------- Net unamortized discount on debt (6,954) (9,330) ---------- ---------- Long-term debt due within one year (376,716) (227,496) ---------- ---------- Total long-term debt 2,786,256 3,166,593 ---------- ---------- TOTAL CAPITALIZATION $5,565,997 $5,852,030 ============================================================================================================================ The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
- 13 - OHIO EDISON COMPANY CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
For the Years Ended December 31, 1995 1994 1993 - --------------------------------------------------------------------------------------------------- (In thousands) Balance at beginning of year $389,600 $322,821 $490,564 Net income 317,241 303,531 82,724 Tax benefit from ESOP dividends - - 5,256 -------- -------- -------- 706,841 626,352 578,544 - -------------------------------------------------------------------------------------------------- Cash dividends on preferred and preference stock 20,234 21,926 23,275 Cash dividends on common stock 215,512 214,826 228,855 Premium on redemption of preferred stock - - 3,593 -------- -------- -------- 235,746 236,752 255,723 -------- -------- -------- Balance at end of year (Note 5A) $471,095 $389,600 $322,821 - -------------------------------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF CAPITAL STOCK AND OTHER PAID-IN CAPITAL Preferred and Preference Stock --------------------------------------------- Not Subject to Subject to Common Stock Unallocated Mandatory Redemption Mandatory Redemption --------------------------------- -------------------- -------------------- Other ESOP Par or Par or Number Par Paid-In Common Number Stated Number Stated of Shares Value Capital Stock of Shares Value of Shares Value --------- ----- ------- ----------- --------- ------ --------- ------ (Dollars in thousands) Balance, January 1, 1993 152,569,437 $1,373,125 $731,793 $(187,318) 3,542,399 $354,240 592,016 $ 64,062 Allocation of ESOP Shares 6,799 Sale of 7.75% Class A Preferred Stock (3,361) 4,000,000 100,000 Sale of 7.75% Preferred Stock (345) 250,000 25,000 Redemptions-- $102.50 Series (216) (5,400) (5,400) 8.24% Series (45,000) (4,500) 8.48% Series (6) (80,000) (8,000) 8.64% Series (400,000) (40,000) 9.12% Series (450,000) (45,000) 9.16% Series (80,000) (8,000) 11.00% Series (8,000) (800) 11.50% Series (60,000) (6,000) 13.00% Series (10,000) (1,000) - ---------------------------------------------------------------------------------------------------------------------------- Balance, December 31, 1993 152,569,437 1,373,125 727,865 (180,519) 6,782,399 378,240 463,616 46,362 Minimum liability for unfunded retirement benefits (3,053) Allocation of ESOP Shares 36 10,143 Redemptions-- Market Auction Series (500,000) (50,000) 11.00% Series (3,616) (362) 13.00% Series (60,000) (6,000) - ---------------------------------------------------------------------------------------------------------------------------- Balance, December 31, 1994 152,569,437 1,373,125 724,848 (170,376) 6,282,399 328,240 400,000 40,000 Minimum liability for unfunded retirement benefits 2,446 Allocation of ESOP Shares 1,274 7,720 Sale of 9% Preferred Stock 4,800,000 120,000 Redemptions-- 7.24% Series (720) (363,700) (36,370) 7.36% Series (609) (350,000) (35,000) 8.20% Series (932) (450,000) (45,000) - ---------------------------------------------------------------------------------------------------------------------------- Balance, December 31, 1995 152,569,437 $1,373,125 $726,307 $(162,656) 5,118,699 $211,870 5,200,000 $160,000 ============================================================================================================================ The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
- 14 - OHIO EDISON COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1995 1994 1993 - ------------------------------------------------------------------------------------------------ (In thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $317,241 $303,531 $ 82,724 Adjustments to reconcile net income to net cash from operating activities: Provision for depreciation 256,085 220,502 217,980 Nuclear fuel and lease amortization 70,849 72,141 59,858 Deferred income taxes, net 53,395 21,156 (26,233) Investment tax credits, net (9,951) (8,036) (8,345) Allowance for equity funds used during construction - (5,277) (4,257) Deferred fuel costs, net 3,916 (2,656) (1,078) Perry Unit 2 termination - - 390,835 Cumulative effect of a change in accounting for unbilled revenues - - (58,201) Receivables (20,452) 32,113 (1,962) Materials and supplies 12,428 6,865 41,467 Accounts payable 3,545 (18,261) 9,823 Other 66,158 72,986 20,272 -------- -------- -------- Net cash provided from operating activities 753,214 695,064 722,883 -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: New Financing-- Preferred stock 120,000 - 121,294 Long-term debt 254,365 434,759 765,358 Short-term borrowings, net - 70,516 - Redemptions and Repayments-- Preferred and preference stock 117,528 56,362 122,502 Long-term debt 499,276 483,347 773,128 Short-term borrowings, net 54,677 - 47,445 Dividend Payments-- Common stock 217,192 216,782 224,943 Preferred and preference stock 20,623 21,483 20,926 -------- -------- -------- Net cash used for financing activities 534,931 272,699 302,292 -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Property additions 198,103 258,249 256,746 Letter of credit collateralization deposit - 277,763 - Other 13,641 22,752 18,367 -------- -------- -------- Net cash used for investing activities 211,744 558,764 275,113 -------- -------- -------- Net increase (decrease) in cash and cash equivalents 6,539 (136,399) 145,478 Cash and cash equivalents at beginning of year 23,291 159,690 14,212 -------- -------- -------- Cash and cash equivalents at end of year $ 29,830 $ 23,291 $159,690 ======== ======== ======== SUPPLEMENTAL CASH FLOWS INFORMATION: Cash Paid During the Year-- Interest (net of amounts capitalized) $254,789 $267,319 $262,410 Income taxes 178,643 143,202 94,272 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
- 15 - OHIO EDISON COMPANY CONSOLIDATED STATEMENTS OF TAXES
For the Years Ended December 31, 1995 1994 1993 (In thousands) GENERAL TAXES: Real and personal property $ 118,707 $ 113,484 $ 124,709 State gross receipts 100,591 100,996 97,348 Social security and unemployment 15,787 14,822 15,626 Other 8,094 7,718 7,871 ---------- ---------- ---------- Total general taxes $ 243,179 $ 237,020 $ 245,554 ========== ========== ========== PROVISION FOR INCOME TAXES: Currently payable- Federal $ 145,511 $ 161,219 $ 61,920 State 10,352 14,547 5,544 ---------- ---------- ---------- 155,863 175,766 67,464 ---------- ---------- ---------- Deferred, net- Federal 50,631 20,796 489 State 2,764 360 6,455 ---------- ---------- ---------- 53,395 21,156 6,944 ---------- ---------- ---------- Investment tax credit amortization (9,951) (8,036) (8,345) ---------- ---------- ---------- Total provision for income taxes $ 199,307 $ 188,886 $ 66,063 ========== ========== ========== INCOME STATEMENT CLASSIFICATION OF PROVISION FOR INCOME TAXES: Operating income $ 191,972 $ 181,514 $ 166,773 Other income 7,335 7,372 (134,342) Cumulative effect of a change in accounting -- -- 33,632 ---------- ---------- ---------- Total provision for income taxes $ 199,307 $ 188,886 $ 66,063 ========== ========== ========== RECONCILIATION OF FEDERAL INCOME TAX EXPENSE AT STATUTORY RATE TO TOTAL PROVISION FOR INCOME TAXES: Book income before provision for income taxes $ 516,548 $ 492,417 $ 148,787 ========== ========== ========== Federal income tax expense at statutory rate $ 180,792 $ 172,346 $ 52,075 Increases (reductions) in taxes resulting from- Amortization of investment tax credits (9,951) (8,036) (8,345) State income taxes net of federal income tax benefit 8,525 9,690 7,799 Amortization of tax regulatory assets 19,690 14,503 15,412 Other, net 251 383 (878) ---------- ---------- ---------- Total provision for income taxes $ 199,307 $ 188,886 $ 66,063 ========== ========== ========== ACCUMULATED DEFERRED INCOME TAXES AT DECEMBER 31: Property basis differences $1,047,387 $1,024,737 $ 972,501 Allowance for equity funds used during construction 263,465 278,172 282,525 Deferred nuclear expense 271,114 277,951 283,134 Customer receivables for future income taxes 204,978 237,826 244,540 Deferred sale and leaseback costs 82,381 87,068 90,878 Unamortized investment tax credits (77,777) (82,491) (85,459) Other (19,114) (23,939) 10,432 ---------- ---------- ---------- Net deferred income tax liability $1,772,434 $1,799,324 $1,798,551 ========== ========== ========== The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
- 16 - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: The consolidated financial statements include Ohio Edison Company (Company) and its wholly owned subsidiaries. Pennsylvania Power Company (Penn Power) is the Company's principal subsidiary. All significant intercompany transactions have been eliminated. The Company and Penn Power (Companies) follow the accounting policies and practices prescribed by the Public Utilities Commission of Ohio (PUCO), the Pennsylvania Public Utility Commission (PPUC) and the Federal Energy Regulatory Commission (FERC). The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses during the reporting period. REVENUES- The Companies' principal business is providing electric service to customers in central and northeastern Ohio and western Pennsylvania. The Companies' retail customers are metered on a cycle basis. Revenue is recognized for unbilled electric service through the end of the year (see Note 2). Receivables from customers include sales to residential, commercial and industrial customers located in the Companies' service area and sales to wholesale customers. There was no material concentration of receivables at December 31, 1995 or 1994, with respect to any particular segment of the Companies' customers. REGULATORY PLAN- In the second half of 1995 the PUCO approved the Company's Rate Reduction and Economic Development Plan (Regulatory Plan). As part of the Regulatory Plan, transition rate credits were implemented for customers on November 1, 1995, which are expected to reduce operating revenues by approximately $600,000,000 during the Regulatory Plan period, which expires December 31, 2005. The Regulatory Plan also established a revised fuel recovery rate formula, which eliminated the automatic pass-through of fuel costs to the Company's retail customers. Under the revised formula the fuel recovery rate will be adjusted based upon annual changes in the Gross Domestic Product Implicit Price Deflator. All of the Company's regulatory assets are now being recovered under provisions of the Regulatory Plan. In addition, the PUCO ordered the Company to recognize additional depreciation expense related to its generating assets and additional amortization of regulatory assets during the ten-year Regulatory Plan period of at least $2,000,000,000 more than the amount that would have been recognized if the Regulatory Plan were not in effect. These additional amounts are being recovered through current - 17 - rates. Among other provisions, the Regulatory Plan also limits the Company's annual earnings on common stock; any amounts otherwise earned in excess of the limitation would be credited to the Company's retail customers in a future period. MATERIALS AND SUPPLIES- The Companies recover fuel-related costs not otherwise included in base rates from retail customers through separate energy rates. Penn Power defers the difference between actual fuel-related costs incurred and the amounts currently recovered from customers, with any over or under collection from customers included as an adjustment to a subsequent energy rate. The Company followed this practice until July 1, 1995, at which time current period deferral for over or under collections ceased in accordance with the Regulatory Plan. In 1995, the Company sold substantially all of its materials and supplies, except for those located at generating units not operated by the Company. No gain or loss resulted from this transaction. The buyer now provides all of the Company's materials and supplies under a consignment arrangement. In accordance with Statement of Financial Accounting Standards (SFAS) No. 49, "Accounting for Product Financing Arrangements," the materials and supplies continue to be reflected as assets on the Consolidated Balance Sheet even though the supplier owns the material. UTILITY PLANT AND DEPRECIATION- Utility plant reflects the original cost of construction, including payroll and related costs such as taxes, employee benefits, administrative and general costs and financing costs (allowance for funds used during construction). The Companies provide for depreciation on a straight-line basis at various rates over the estimated lives of property included in plant in service. The annual composite rate for electric plant was approximately 3.0% in 1995, 1994 and 1993. In addition to the straight-line depreciation recognized in 1995, the Company also recognized $27,000,000 of additional depreciation in accordance with the Regulatory Plan. Annual depreciation expense includes approximately $7,600,000 for future decommissioning costs applicable to the Companies' ownership and leasehold interests in three nuclear generating units. The Companies' share of the future obligation to decommission these units is approximately $399,000,000 in current dollars and (using a 2.8% escalation rate) approximately $865,000,000 in future dollars. The estimated obligation (based on site-specific studies) and the escalation rate were developed using information obtained from consultants. Payments for decommissioning are expected to begin in 2016, when actual decommissioning work begins. The Companies have recovered approximately $55,000,000 for decommissioning through their electric rates from customers through December 31, 1995; such amounts are reflected in the reserve for - 18 - depreciation on the Consolidated Balance Sheet. If the actual costs of decommissioning the units exceed the funds accumulated from investing amounts recovered from customers, the Companies expect that additional amount will be recoverable from their customers. The Companies have approximately $65,100,000 invested in external decommissioning trust funds as of December 31, 1995. Earnings on these funds are reinvested with a corresponding increase to the depreciation reserve. The Companies have also recognized an estimated liability of approximately $18,000,000 related to decontamination and decommissioning of nuclear enrichment facilities operated by the United States Department of Energy (DOE), as required by the Energy Policy Act of 1992. The Companies recover these costs through their respective energy rates. The Financial Accounting Standards Board (FASB) is reviewing the accounting for nuclear decommissioning costs. If current electric utility industry accounting practices for decommissioning are changed: (1) annual provisions for decommissioning could increase; (2) the full estimated cost for decommissioning could be recorded as a liability rather than as accumulated depreciation; and (3) income from the external decommissioning trusts could be reported as investment income. The FASB issued its proposed accounting standard in February 1996. COMMON OWNERSHIP OF GENERATING FACILITIES- The Companies and other Central Area Power Coordination Group (CAPCO) companies own, as tenants in common, various power generating facilities. Each of the companies is obligated to pay a share of the costs associated with any jointly owned facility in the same proportion as its interest. The Companies' portions of operating expenses associated with jointly owned facilities are included in the corresponding operating expenses on the Consolidated Statements of Income. The amounts reflected on the Consolidated Balance Sheet under utility plant at December 31, 1995, include the following: Companies' Utility Accumulated Construction Ownership/ Plant Provision for Work in Leasehold Generating Units in Service Depreciation Progress Interest - ------------------------------------------------------------------- (In thousands) W.H. Sammis #7 $ 303,700 $ 89,900 $ 1,700 68.80% Bruce Mansfield #1, #2 and #3 777,500 336,500 3,600 50.68% Beaver Valley #1 and #2 1,849,900 606,600 3,600 47.11% Perry #1 1,624,500 356,000 9,600 35.24% - ------------------------------------------------------------------- Total $4,555,600 $1,389,000 $18,500 - ------------------------------------------------------------------- - 19 - NUCLEAR FUEL- Nuclear fuel is recorded at original cost, which includes material, enrichment, fabrication and interest costs incurred prior to reactor load. The Companies amortize the cost of nuclear fuel based on the rate of consumption. The Companies' electric rates include amounts for the future disposal of spent nuclear fuel based upon the formula used to compute payments to the DOE. INCOME TAXES- Details of the total provision for income taxes are shown on the Consolidated Statements of Taxes. Deferred income taxes result from timing differences in the recognition of revenues and expenses for tax and accounting purposes. Investment tax credits, which were deferred when utilized, are being amortized over the recovery period of the related property. The liability method is used to account for deferred income taxes. Deferred income tax liabilities related to tax and accounting basis differences are recognized at the statutory income tax rates in effect when the liabilities are expected to be paid. RETIREMENT BENEFITS- The Companies' trusteed, noncontributory defined benefit pension plan covers almost all full-time employees. Upon retirement, employees receive a monthly pension based on length of service and compensation. The Companies use the projected unit credit method for funding purposes and were not required to make pension contributions during the three years ended December 31, 1995. The following sets forth the funded status of the plan and amounts recognized on the Consolidated Balance Sheets as of December 31: 1995 1994 - ------------------------------------------------------------------ (In thousands) Actuarial present value of benefit obligations: Vested benefits $546,936 $483,850 Nonnvested benefits 36,548 27,312 - ------------------------------------------------------------------ Accumulated benefit obligation $583,484 $511,162 ================================================================== Plan assets at fair value $857,961 $719,310 Actuarial present value of projected benefit obligation 685,180 593,931 - ------------------------------------------------------------------ Plan assets in excess of projected benefit obligation 172,781 125,379 Unrecognized net loss (gain) (43,564) 8,868 Unrecognized prior service cost 24,704 12,755 Unrecognized net transition asset (41,830) (49,775) - ------------------------------------------------------------------ Net pension asset $112,091 $ 97,227 ================================================================= - 20 - The assets of the plan consist primarily of common stocks, United States government bonds and corporate bonds. Net pension costs for the three years ended December 31, 1995, were computed as follows: 1995 1994 1993 - ------------------------------------------------------------------- (In thousands) Service cost-benefits earned during the period $ 12,794 $ 15,159 $ 13,171 Interest on projected benefit obligation 48,135 45,299 42,723 Return on plan assets (194,465) 8,344 (97,849) Net deferral (amortization) 118,672 (89,324) 14,954 Voluntary early retirement program expense - 37,299 6,014 - ------------------------------------------------------------------ Net pension cost $ (14,864) $ 16,777 $(20,987) ================================================================== The assumed discount rate used in determining the actuarial present value of the projected benefit obligation was 7.5% in 1995 and 1993, and 8.5% in 1994. The assumed rate of increase in future compensation levels used to measure this obligation was 4.5% in each year. Expected long-term rates of return on plan assets were assumed to be 10% in 1995 and 1994 and 11% in 1993. The Companies provide a minimum amount of noncontributory life insurance to retired employees in addition to optional contributory insurance. Health care benefits, which include certain employee deductibles and copayments, are also available to retired employees, their dependents and, under certain circumstances, their survivors. The Companies pay insurance premiums to cover a portion of these benefits in excess of set limits; all amounts up to the limits are paid by the Companies. The Companies recognize the expected cost of providing other postretirement benefits to employees and their beneficiaries and covered dependents from the time employees are hired until they become eligible to receive those benefits. The following sets forth the funded status of the plan and amounts recognized on the Consolidated Balance Sheets as of December 31: 1995 1994 - ----------------------------------------------------------------- (In thousands) Accumulated postretirement benefit obligation allocation: Retirees $148,169 $165,386 Fully eligible active plan participants 12,578 12,381 Other active plan participants 77,550 77,599 -------- -------- Accumulated postretirement benefit obligation 238,297 255,366 Plan assets at fair value 1,269 - - ------------------------------------------------------------------ Accumulated postretirement benefit obligation in excess of plan assets 237,028 255,366 Unrecognized transition obligation (152,263) (183,196) Unrecognized net loss (17,038) (23,425) - ------------------------------------------------------------------ Net postretirement benefit liability $ 67,727 $ 48,745 ================================================================== - 21 - Net periodic postretirement benefit costs for the three years ended December 31, 1995, were computed as follows: 1995 1994 1993 - ------------------------------------------------------------------- (In thousands) Service cost-benefits attributed to the period $ 4,499 $ 4,865 $ 3,929 Interest cost on accumulated benefit obligation 21,073 19,332 18,039 Amortization of transition obligation 10,178 10,178 10,178 Amortization of loss 110 787 - Voluntary early retirement program expense - 2,815 1,533 ------- ------- ------- Net periodic postretirement benefit cost 35,860 37,977 33,679 ================================================================== The health care trend rate assumption is 6.0% in the first year gradually decreasing to 4.0% for the year 2008 and later. The discount rates used to compute the accumulated postretirement benefit obligation were 7.5% in 1995 and 1993, and 8.5% in 1994. An increase in the health care trend rate assumption by one percentage point in all years would increase the accumulated postretirement benefit obligation by approximately $29,400,000 and the aggregate annual service and interest costs by approximately $3,500,000. The Company deferred postretirement benefits until the Regulatory Plan became effective. The costs are no longer being deferred and are currently being recovered through rates along with the deferred amounts. EARNINGS PER SHARE OF COMMON STOCK- The American Institute of Certified Public Accountants issued its Statement of Position 93-6 (SOP) in late 1993, which changed generally accepted accounting principles relating to employee stock ownership plans (ESOP) for shares purchased after December 31, 1992. The Company's ESOP shares were purchased prior to that date, but the Company elected to adopt the SOP effective January 1, 1994. This change in accounting reduced net income by approximately $8,700,000 in 1994; the net effect to earnings per common share resulting from this change was an increase of six cents after eliminating unallocated ESOP shares from the computation. - 22 - SUPPLEMENTAL CASH FLOWS INFORMATION- All temporary cash investments purchased with an initial maturity of three months or less are reported as cash equivalents on the Consolidated Balance Sheets. The Companies reflect temporary cash investments at cost, which approximates their market value. Noncash financing and investing activities included capital lease transactions amounting to $1,017,000, $3,613,000 and $1,487,000 for the years 1995, 1994 and 1993, respectively. Commercial paper transactions of OES Fuel (a wholly owned subsidiary of the Company) have initial maturity periods of three months or less, and accordingly are reported net within financing activities under long-term debt and are reflected as long-term debt on the Consolidated Balance Sheets (see Note 5F). All borrowings with initial maturities of less than one year are defined as financial instruments under generally accepted accounting principles and are reported on the Consolidated Balance Sheets at cost, which approximates their fair market value. The following sets forth the approximate fair value and related carrying amounts of all other long-term debt, preferred stock subject to mandatory redemption and investments other than cash and cash equivalents as of December 31: 1995 1994 ------------------ ----------------- Carrying Fair Carrying Fair Value Value Value Value -------- ----- -------- ----- (In Millions) Long-term debt $3,025 $3,152 $3,224 $3,062 Preferred stock $ 160 $ 163 $ 40 $ 38 Investments other than cash and cash equivalents $ 353 $ 394 $ 320 $ 317 The fair values of long-term debt and preferred stock reflect the present value of the cash outflows relating to those securities based on the current call price, the yield to maturity or the yield to call, as deemed appropriate at the end of each respective year. The yields assumed were based on securities with similar characteristics offered by a corporation with credit ratings similar to the Companies' ratings. The fair value of investments other than cash and cash equivalents represent cost (which approximates fair value) or the present value of the cash inflows based on the yield to maturity. The yields assumed were based on financial instruments with similar characteristics and terms. Investments other than cash and cash equivalents consist primarily of decommissioning trust investments of approximately $65,100,000 and a letter of credit collateral deposit of $277,763,000. Unrealized gains and losses applicable to the decommissioning trust have been recognized in the trust investment with a corresponding offset to the reserve for depreciation. The collateral deposit is in the held-to- - 23 - maturity category with a maturity date of July 15, 2004. The fair value of the deposit at December 31, 1995, was $318,383,000. The Companies have no securities held for trading purposes. REGULATORY ASSETS- The Companies recognize, as regulatory assets, costs which the FERC, PUCO and PPUC have authorized for recovery from customers in future periods. Without such authorization, the costs would have been charged to income as incurred. All regulatory assets are being recovered from customers under the Company's Regulatory Plan. Penn Power's rates currently exclude approximately $61,000,000 of deferred costs. Based on the Company's Regulatory Plan and Penn Power's expected rate treatment based on PPUC precedent, it is improbable that the Companies will be required to terminate application of SFAS No. 71 "Accounting for the Effects of Certain Types of Regulation" in the foreseeable future. Regulatory assets on the Consolidated Balance Sheets are comprised of the following: 1995 1994 - ------------------------------------------------------------------- (In thousands) Nuclear unit expenses $ 758,434 $ 771,538 Customer receivables for future income taxes 559,660 639,592 Sale and leaseback costs 231,435 242,033 Loss on reacquired debt 96,738 99,384 Employee postretirement benefit costs 32,397 27,055 Uncollectible customer accounts 32,540 44,368 Perry Unit 2 termination 39,639 38,066 DOE decommissioning and decontamination costs 19,310 21,170 Other 16,390 15,669 - ------------------------------------------------------------------- Total $1,786,543 $1,898,875 =================================================================== 2. CHANGE IN ACCOUNTING FOR UNBILLED REVENUES: On January 1, 1993, the Companies changed their accounting policies to recognize revenue relating to metered sales which remain unbilled at the end of the accounting period. This change was made to more closely match the Companies' revenues with the costs of services provided. The cumulative effect to January 1, 1993, was $58,201,000 (net of $33,632,000 of income taxes) or $.38 per share. 3. PERRY UNIT 2 TERMINATION: In December 1993, the Companies announced that they would not participate in further construction of Perry Unit 2 and abandoned Perry Unit 2 as a possible electric generating plant. The Company determined - 24 - that recovery from customers of its Perry Unit 2 investment was improbable, resulting in a $366,377,000 write-off of its investment in 1993. Penn Power expects its Perry Unit 2 investment to be recoverable from its retail customers based on Section 520 of the Pennsylvania Public Utility Code. Due to the anticipated delay in commencement of recovery and taking into account the expected rate treatment, Penn Power recognized an impairment to its Perry Unit 2 investment of $24,458,000 in 1993. As a result, net income for the year ended December 31, 1993, was reduced by $248,743,000 ($1.63 per share of common stock). 4. LEASES: The Companies lease a portion of their nuclear generating facilities, certain transmission facilities, office space and other property and equipment under cancelable and noncancelable leases. The Company sold portions of its ownership interests in Perry Unit 1 and Beaver Valley Unit 2 and entered into operating leases on the portions sold for basic lease terms of approximately 29 years. During the terms of the leases the Company continues to be responsible, to the extent of its combined ownership and leasehold interest, for costs associated with the units including construction expenditures, operation and maintenance expenses, insurance, nuclear fuel, property taxes and decommissioning. The basic rental payments are adjusted when applicable federal tax law changes. The Company has the right, at the end of the respective basic lease terms, to renew the leases for up to two years. The Company also has the right to purchase the facilities at the expiration of the basic lease term or renewal term (if elected) at a price equal to the fair market value of the facilities. OES Finance, Incorporated (OES Finance), a wholly owned subsidiary of the Company, was established in 1994 for the sole purpose of maintaining deposits pledged as collateral to secure reimbursement obligations relating to certain letters of credit supporting the Company's obligations to lessors under the Beaver Valley Unit 2 sale and leaseback arrangements. The deposits pledged to the financial institution providing those letters of credit are the sole property of OES Finance. In the event of liquidation, OES Finance, as a separate corporate entity, would have to satisfy its obligations to creditors before any of its assets could be made available to the Company as sole owner of OES Finance common stock. Consistent with the regulatory treatment, the rental payments for capital and operating leases are charged to operating expenses on the Consolidated Statements of Income. Such costs for the three years ended December 31, 1995, are summarized as follows: 1995 1994 1993 - ------------------------------------------------------------------- (In thousands) Operating leases Interest element $104,551 $100,980 $ 96,804 Other 13,896 14,530 15,418 Capital leases Interest element 6,983 7,483 7,896 Other 6,636 6,960 6,843 - ------------------------------------------------------------------- Total rental payments $132,066 $129,953 $126,961 =================================================================== - 25 - The future minimum lease payments as of December 31, 1995, are: Capital Operating Leases Leases - ------------------------------------------------------------------- (In thousands) 1996 $ 15,425 $ 108,495 1997 13,916 113,873 1998 12,678 120,779 1999 11,216 125,630 2000 9,888 124,887 Years thereafter 94,228 2,237,913 - ------------------------------------------------------------------- Total minimum lease payments 157,351 $2,831,577 ========== Executory costs 40,527 - ------------------------------------------- Net minimum lease payments 116,824 Interest portion 68,603 - ------------------------------------------- Present value of net minimum lease payments 48,221 Less current portion 5,741 - ------------------------------------------- Noncurrent portion $ 42,480 =========================================== 5. CAPITALIZATION: (A) RETAINED EARNINGS- Under the Company's first mortgage indenture, the Company's consolidated retained earnings unrestricted for payment of cash dividends on the Company's common stock were $404,276,000 at December 31, 1995. (B) EMPLOYEE STOCK OWNERSHIP PLAN- The Companies fund the matching contribution for their 401(k) savings plan through an ESOP Trust. All full-time employees eligible for participation in the 401(k) savings plan are covered by the ESOP. The ESOP borrowed $200,000,000 from the Company and acquired 10,654,114 shares of the Company's common stock on the open market. Dividends on ESOP shares are used to service the debt. Shares are released from the ESOP on a pro- rata basis as debt service payments are made. In 1995, 1994 and 1993, 412,914 shares, 532,250 shares and 369,956 shares, respectively, were - 26 - allocated to employees with the corresponding expense recognized based on the shares allocated method. The fair value of 8,663,575 shares unallocated as of December 31, 1995, was approximately $203,594,000. Total ESOP-related compensation expense was calculated as follows: - ------------------------------------------------------------------- 1995 1994 1993 - ------------------------------------------------------------------- (In thousands) Base compensation $ 8,994 $10,179 $ 6,799 Interest on ESOP debt - - 19,985 Dividends on common stock held by the ESOP and used to service debt (2,503) (1,966) (15,944) Interest earned by the ESOP - - (275) - ----------------------------------------------------------------- Total expense $ 6,491 $ 8,213 $10,565 ================================================================= (C) PREFERRED STOCK- Penn Power's 7.625% and 7.75% series of preferred stock have restrictions which prevent early redemption prior to October 1997 and July 2003, respectively. The Company's 8.45% series of preferred stock has no optional redemption provision, and its 7.75% series is not redeemable before April 1998. All other preferred stock may be redeemed by the Companies in whole, or in part, with 30-60 days' notice. (D) PREFERRED STOCK SUBJECT TO MANDATORY REDEMPTION- The Company's 8.45% series of preferred stock has an annual sinking fund requirement for 50,000 shares beginning on September 16, 1997. Penn Power's 7.625% series has an annual sinking fund requirement for 7,500 shares beginning on October 1, 2002. The Companies' preferred shares are retired at $100 per share plus accrued dividends. Sinking fund requirements for the next five years are $5,000,000 in each year from 1997 through 2000. (E) COMPANY OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF SUBSIDIARY TRUST HOLDING SOLELY COMPANY SUBORDINATED DEBENTURES- Ohio Edison Financing Trust, a wholly owned subsidiary of the Company, was established in 1995 and issued $120,000,000 of 9% Cumulative Trust Preferred Capital Securities. The Company purchased all of the Trust's Common Securities and simultaneously issued to the Trust $123,711,350 principal amount of 9% Junior Subordinated Debentures due 2025 in exchange for the proceeds that the Trust received from its sale of Preferred and Common Securities. The sole assets of the Trust are the Subordinated Debentures whose interest and other payment dates coincide - 27 - with the distribution and other payment dates on the Trust Securities. Under certain circumstances the Subordinated Debentures could be distributed to the holders of the outstanding Trust Securities in the event the Trust is liquidated. The Subordinated Debentures may be optionally redeemed beginning December 31, 2000, by the Company at a redemption price of $25 per Subordinated Debenture plus accrued interest, in which event the Trust Securities will be redeemed on a pro-rata basis at $25 per share plus accumulated distributions. The Company's obligations under the Subordinated Debentures along with the related Indenture, amended and restated Trust Agreement, Guarantee Agreement and the Agreement for expenses and liabilities constitute a full and unconditional guarantee by the Company of payments due on the Preferred Securities. (F)LONG-TERM DEBT- The first mortgage indentures and their supplements, which secure all of the Companies' first mortgage bonds, serve as direct first mortgage liens on substantially all property and franchises, other than specifically excepted property, owned by the Companies. Based on the amount of bonds authenticated by the Trustee through December 31, 1995, the Company's annual sinking and improvement fund requirement for all bonds issued under the mortgage amounts to $30,056,000. The Company expects to deposit funds in 1996 that will be withdrawn upon the surrender for cancellation of a like principal amount of bonds, which are specifically authenticated for such purposes against unfunded property additions or against previously retired bonds. This method can result in minor increases in the amount of the annual sinking fund requirement. Sinking fund requirements for first mortgage bonds and maturing long-term debt (excluding capital leases) for the next five years are: - ---------------------------------------------------------------- 1996 $370,975,000 1997 369,261,000 1998 258,683,000 1999 162,036,000 2000 116,473,000 - ---------------------------------------------------------------- Amounts shown above for 1996 include $38,300,000 of first mortgage bonds optionally redeemed in January 1996. The Companies' obligations to repay certain pollution control revenue bonds are secured by several series of first mortgage bonds and, in some cases, by subordinate liens on the related pollution control facilities. Certain pollution control revenue bonds are entitled to the benefit of irrevocable bank letters of credit of $338,831,000. To the extent that drawings are made under those letters of credit to pay principal of, or interest on, the pollution control revenue bonds, the - 28 - Company is entitled to a credit against its obligation to repay those bonds. The Company pays annual fees of 0.55% to 0.875% of the amounts of the letters of credit to the issuing banks and is obligated to reimburse the banks for any drawings thereunder. Nuclear fuel purchases are financed through the issuance of OES Fuel commercial paper and loans, both of which are supported by a $225,000,000 long-term bank credit agreement which expires March 31, 1998. Accordingly, the commercial paper and loans are reflected as long-term debt on the Consolidated Balance Sheets. OES Fuel must pay an annual facility fee of 0.1875% on the total line of credit and an annual commitment fee of 0.0625% on any unused amount. 6. SHORT-TERM BORROWINGS AND BANK LINES OF CREDIT: Short-term borrowings outstanding at December 31, 1995, represent debt of OES Capital, Incorporated (OES Capital), a wholly owned subsidiary of the Company. Those borrowings are secured by customer accounts receivable. OES Capital can borrow up to $120,000,000 under a receivables financing agreement at rates based on certain bank commercial paper. OES Capital is required to pay an annual fee of 0.41% on the amount of the entire finance limit. The receivables financing agreement expires April 23, 1996. The Company plans to negotiate an extension to this agreement. The Companies have lines of credit with domestic banks that provide for borrowings of up to $52,000,000 under various interest rate options. Short-term borrowings may be made under these lines of credit on the Companies' unsecured notes. To assure the availability of these lines, the Companies are required to pay annual commitment fees that vary from 0.22% to 0.50%. These lines expire at various times during 1996. The weighted average interest rates on short-term borrowings outstanding at December 31, 1995 and 1994, were 5.67% and 5.76%, respectively. 7. COMMITMENTS, GUARANTEES AND CONTINGENCIES: CONSTRUCTION PROGRAM- The Companies' current forecasts reflect expenditures of approximately $650,000,000 for property additions and improvements from 1996-2000, of which approximately $160,000,000 is applicable to 1996. Investments for additional nuclear fuel during the 1996-2000 period are estimated to be approximately $180,000,000, of which approximately $29,000,000 applies to 1996. During the same periods, the Companies' nuclear fuel investments are expected to be reduced by approximately $191,000,000 and $39,000,000, respectively, as the nuclear fuel is consumed. NUCLEAR INSURANCE- The Price-Anderson Act limits the public liability relative to a single incident at a nuclear power plant to $8,920,000,000. The amount - 29 - is covered by a combination of private insurance and an industry retrospective rating plan. Based on their present ownership and leasehold interests in the Beaver Valley Station and the Perry Plant, the Companies' maximum potential assessment under the industry retrospective rating plan (assuming the other CAPCO companies were to contribute their proportionate share of any assessments under the retrospective rating plan) would be $102,800,000 per incident but not more than $13,000,000 in any one year for each incident. The Companies are also insured as to their respective interests in the Beaver Valley Station and the Perry Plant under policies issued to the operating company for each plant. Under these policies, up to $2,750,000,000 is provided for property damage and decontamination and decommissioning costs. The Companies have also obtained approximately $414,000,000 of insurance coverage for replacement power costs for their respective interests in Perry and Beaver Valley. Under these policies, the Companies can be assessed a maximum of approximately $17,400,000 for incidents at any covered nuclear facility occurring during a policy year which are in excess of accumulated funds available to the insurer for paying losses. The Companies intend to maintain insurance against nuclear risks as described above as long as it is available. To the extent that replacement power, property damage, decontamination, decommissioning, repair and replacement costs and other such costs arising from a nuclear incident at any of the Companies' plants exceed the policy limits of the insurance in effect with respect to that plant, to the extent a nuclear incident is determined not to be covered by the Companies' insurance policies, or to the extent such insurance becomes unavailable in the future, the Companies would remain at risk for such costs. GUARANTEES- The Companies, together with the other CAPCO companies, have each severally guaranteed certain debt and lease obligations in connection with a coal supply contract for the Bruce Mansfield Plant. As of December 31, 1995, the Companies' shares of the guarantees (which approximate fair market value) were $72,851,000. The price under the coal supply contract, which includes certain minimum payments, has been determined to be sufficient to satisfy the debt and lease obligations. The Companies' total payments under the coal supply contract were $120,015,000, $99,774,000 and $114,572,000 during 1995, 1994 and 1993, respectively. Under the coal supply contract, the Companies' minimum payments in each year during the period 1996 through 1999 are approximately $35,000,000. ENVIRONMENTAL MATTERS- Various federal, state and local authorities regulate the Companies with regard to air and water quality and other environmental matters. The Companies have estimated additional capital expenditures for environmental compliance of approximately $17,000,000, which is included in the construction forecast provided under "Construction Program" for 1996 through 2000. - 30 - The Companies are in compliance with the sulfur dioxide (SO2) and nitrogen oxides (NOx) reduction requirements for 1995 under the Clean Air Act Amendments of 1990. SO2 reductions for the years 1995 through 1999 are being achieved by burning lower-sulfur fuel, generating more electricity from lower-emitting plants, and/or purchasing emission allowances. Plans for complying with reductions required for the year 2000 and thereafter have not been finalized. The Environmental Protection Agency (EPA) is conducting additional studies which could indicate the need for additional NOx reductions from the Companies' Pennsylvania facilities by the year 2003. The cost of such reductions, if required, may be substantial. The Companies continue to evaluate their compliance plans and other compliance options. The Companies are required to meet federally approved SO2 regulations. Violations of such regulations can result in shutdown of the generating unit involved and/or civil or criminal penalties of up to $25,000 for each day the unit is in violation. The EPA has an interim enforcement policy for SO2 regulations in Ohio that allows for compliance based on a 30-day averaging period. The EPA has proposed regulations that could change the interim enforcement policy, including the method of determining compliance with emission limits. The Companies cannot predict what action the EPA may take in the future with respect to proposed regulations or the interim enforcement policy. Legislative, administrative and judicial actions will continue to change the way that the Companies must operate in order to comply with environmental laws and regulations. With respect to any such changes and to the environmental matters described above, the Companies expect that any resulting additional capital costs which may be required, as well as any required increase in operating costs, would ultimately be recovered from their customers. - 31 - 8. SUMMARY OF QUARTERLY FINANCIAL DATA (UNAUDITED): The following summarizes certain consolidated operating results by quarter for 1995 and 1994. March 31, June 30, September 30, December 31, Three Months Ended 1995 1995 1995 1995 - ------------------------------------------------------------------- (In thousands, except per share amounts) Operating Revenues $587,734 $593,838 $667,013 $617,261 Operating Expenses and Taxes 453,921 454,424 508,024 482,859 - ------------------------------------------------------------------- Operating Income 133,813 139,414 158,989 134,402 Other Income 2,997 3,829 1,190 6,408 Net Interest and Other Charges 65,214 66,192 67,127 65,268 - ------------------------------------------------------------------- Net Income $ 71,596 $ 77,051 $ 93,052 $ 75,542 - ------------------------------------------------------------------- Earnings on Common Stock $ 66,237 $ 71,514 $ 87,703 $ 69,293 - ------------------------------------------------------------------- Earnings per Share of Common Stock $.46 $.50 $.61 $.48 - ------------------------------------------------------------------- March 31, June 30, September 30, December 31, Three Months Ended 1994 1994 1994 1994 - ------------------------------------------------------------------- (In thousands, except per share amounts) Operating Revenues $601,248 $585,428 $614,390 $567,125 Operating Expenses and Taxes 468,850 447,353 462,573 432,161 - ------------------------------------------------------------------- Operating Income 132,398 138,075 151,817 134,964 Other Income 2,255 3,534 5,032 5,638 Net Interest and Other Charges 66,723 67,569 68,624 67,266 - ------------------------------------------------------------------- Net Income $ 67,930 $ 74,040 $ 88,225 $ 73,336 - ------------------------------------------------------------------- Earnings on Common Stock $ 62,329 $ 68,681 $ 82,869 $ 67,973 - ------------------------------------------------------------------- Earnings per Share of Common Stock $.44 $.48 $.58 $.47 - ------------------------------------------------------------------- - 32 - Report of Independent Public Accountants To the Stockholders and Board of Directors of Ohio Edison Company: We have audited the accompanying consolidated balance sheets and consolidated statements of capitalization of Ohio Edison Company (an Ohio corporation) and subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of income, retained earnings, capital stock and other paid-in capital, cash flows and taxes for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Ohio Edison Company and subsidiaries as of December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. As discussed in Note 2 to the consolidated financial statements, effective January 1, 1993, the Company changed its method of accounting for unbilled revenues. ARTHUR ANDERSEN LLP Cleveland, Ohio February 8, 1996 - 33 - EX-21 15 LIST OF SUBSIDIARIES EXHIBIT 21 LIST OF SUBSIDIARIES OF THE REGISTRANT AT DECEMBER 31, 1995 Pennsylvania Power Company - Incorporated in Pennsylvania OES Fuel, Incorporated - Incorporated in Ohio OES Capital, Incorporated - Incorporated in Ohio OES Finance, Incorporated - Incorporated in Ohio OES Nuclear, Incorporated - Incorporated in Ohio Ohio Edison Financing Trust - Incorporated in Delaware Statement of Differences ------------------------ Exhibit Number 21, List of Subsidiaries of the Registrant at December 31, 1995, is not included in the printed document. EX-23 16 CONSENT OF INDEP PUBLIC ACCT EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports included or incorporated by reference in this Form 8-K, into the Company's previously filed Registration Statements, File No. 33-49135, No. 33-49259, No. 33-49413 and No. 33-51139. ARTHUR ANDERSEN LLP Cleveland, Ohio February 23, 1996 EX-27 17
OPUR1 (Amounts in 1,000's, except earnings per share) Income tax expense includes $7,335,000 related to other income. 12-MOS DEC-31-1995 DEC-31-1995 PER-BOOK 5,695,449 529,768 551,676 2,047,041 0 8,823,934 1,373,125 563,651 471,095 2,407,871 160,000 211,870 2,786,256 0 0 119,965 370,975 0 0 5,741 2,761,256 8,823,934 2,465,846 199,307 1,707,256 1,899,228 566,618 14,424 581,042 263,801 317,241 22,494 294,747 215,512 243,570 753,214 2.05 2.05
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